Bush Family Cashes In
January 16, 2003
By Margie Burns
William H.T. ("Bucky") Bush, an uncle of George W. Bush,
is on the Board of Directors of a company which will benefit
substantially from war with Iraq, according to financial analysts.
The company, Engineered Support Systems, is based in St. Louis.
William H.T. Bush was also a major Bush donor and campaign
Astute business articles have boosted the company's stock
this fall. As Russ Mitchell, writing in Smart Money, put it:
"War may not be healthy for children and
other living things (not in the short run, anyway), but
it's healthy for military stocks, right? It depends on what
you mean by health. Consider Engineered Support Systems,
which makes biological and chemical filtering and decontamination
equipment, among other things.
Hundreds of stocks bombed to record lows, but
Engineered Support was one of few to fly the other way,
hitting a record high of $61.25 on Sept. 16. The closer
the U.S. gets to war in Iraq, the better things look for
the St. Louis, Mo., company. Its specialty is military logistics
and support; it makes stuff that helps the services get
supplies from here to there in a hurry. No doubt, investors
are especially excited by the company's chemical and biological
decontamination and filtration systems."
Kiplinger Newsletter concurs:
"If the election results and the President's
sentiment toward Iraq are any indication, the federal coffers
will open wide when it comes to military spending. In all
likelihood, spending on defense equipment and troops will
get a boost, and that's good news for Engineered Support
Engineered Support is actually a holding company
for six subsidiaries that supply the U.S. military with
everything from tanks and decontamination equipment to plastic
faucets built to regulation."
And in its Sept. 16, 2002, edition, CNN/Money Magazine calls
Engineered Support Systems one of "seven defense stocks
that fund managers like." A fund manager names it one of two
companies that "would gain the most from a war from Iraq."
The $283 million company has three segments: Light Military
Support Equipment, Heavy Military Support Equipment and Electronics
and Automation Systems. Long-term contracts are "substantially
all" with the U.S. government, according to the company.
Obviously, the Bush connection helps. Defense Department
databases list Engineered Support Systems 54th in the Department
of Defense's top 100 contractors for fiscal 2001 (up from
62nd for 2000). The company received over $297.5 million in
military contracts in 2001, including $120.5 million from
Since 2000, following the presidential election and 9/11,
the company's federal contracts have gone up, its revenues
have gone up, and its stock price has gone up. Net revenues
for the first nine months of 2002, when the company acquired
two new subsidiaries in Northern Virginia, increased to $289.7
The possibility of a war with Iraq provides a further boost.
As Mitchell sums up: "Any ground war in Iraq will benefit
Engineered Support. Not in the short run - the military pretty
much has what it needs. But attrition will force quicker replacement
cycles, and hence more sales for the company.
"And Engineered Support's recently acquired Radian subsidiary,
which designed security systems for the Pentagon, just won
a $53 million Army contract. Analysts say the Radian division
is poised for strong growth, not just for the military, but
also for `homeland security' and corporations."
Christmas came early for some people. There's always a grinch,
though. The company plans to relocate some operations, and
will shut down two factories in Blue Ash, Ohio, and Olivette,
Missouri, this year. Sen. Jean Carnahan, D-Mo., also has lost
her job. She helped Engineered Support Systems acquire a $10
million federal contract for "chemical and biological
protective shelters" in 2001, but Team Bush went all out to
defeat her anyway, and succeeded.
In 2000, the Stockholm International Peace Research Institute
listed Engineered Support Systems 83rd in the world's top
100 largest arms-producing companies. Interestingly, the company
also exhibited that year at the giant international arms fair
held last June in Paris, "Eurosatory 2000." Its name
can also be found in the U.S. Department of Commerce list
of exhibitors, among 55 U.S. military firms in a gargantuan
display of military wares - sponsored and supported by the
U.S. Department of Commerce, the U.S. Department of Defense
and the American Embassy in Paris.
Over a hundred countries attended the fair, which was thronged
with international arms dealers and weapons middlemen. It
is not known what steps the firms take to prevent arms from
falling into the wrong hands, including Iraq and countries
dealing with Iraq.
The White House proposal to halve taxes on capital gains
will further boost this stock. Furthermore, Engineered Support
Systems gives abundant stock options to its non-executive
consultants; an August stock registration for options was
followed by another after the November congressional elections.
The company has not responded to repeated telephone and e-mail
requests for comment.