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The 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 fund-raiser.

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 Systems.

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 the Army.

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 million.

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.

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