WASHINGTON — The Iraq war helped bring record earnings to St. Louis-based defense contractor Engineered Support Systems Inc., and new financial data show that the firm's war-related profits have trickled down to a familiar family name -- Bush.
William H.T. "Bucky" Bush, uncle of the president and youngest brother of former President George H.W. Bush, cashed in ESSI stock options last month with a net value of nearly half a million dollars.
For The Record
Los Angeles Times Friday February 25, 2005 Home Edition Main News Part A Page 2 National Desk 1 inches; 33 words Type of Material: Correction
Bush uncle -- An article in Wednesday's Section A about the Tunner aircraft loading system said it was named after a former Air Force major general. William H. Tunner was a lieutenant general.
"Uncle Bucky," as he is known to the president, is on the board of the company, which supplies armor and other materials to U.S. troops. The company's stock prices have soared to record heights since before the invasion, benefiting in part from contracts to rapidly refit fleets of military vehicles with extra armor.
William Bush exercised options on 8,438 shares of company stock Jan. 18, according to reports filed with the U.S. Securities and Exchange Commission. He acknowledged in an interview that the transaction was worth about $450,000.
In an earnings report issued Tuesday, the firm disclosed that net earnings for the first quarter ending Jan. 31 reached a record $20.6 million, while quarterly revenue hit $233.5 million, up 20% from a year ago. As a result, the company boosted its projected annual revenue to between $990 million and $1 billion.
William Bush, 66, a onetime St. Louis bank executive and head of an investment firm, joined the board in 2000, eight months before his nephew won the White House.
The president's uncle said in an interview that he never used his family connections to help the company win contracts.
"I don't make any calls to the 202 area code," he said, referring to the long-distance dialing code for Washington.
He also said he sought legal advice before accepting appointment to the ESSI board to be certain there would be no problems.
Dan Kreher, vice president of industrial relations for ESSI, said Bush was one of several people added to the company board about five years ago, and that he was selected because he had "a long history of involvement in the local business community. We've known him for a long time."
"Having a Bush doesn't hurt," said Kreher, who acknowledged that the company was routinely engaged in Washington lobbying efforts. But, he said, Democrats, including a party fundraiser, also serve on the panel.
"It certainly doesn't hurt to have people who know who to talk to," Kreher said, adding that the president's uncle played no role in winning the firm's government contracts.
Some of the firm's Defense Department work has included no-bid, sole-source contracts, including a $48.8-million deal to refurbish military trailers.
Other Iraq-related contracts won by the firm include an $18-million pact awarded early last year under which a Maryland-based subsidiary was picked to provide communications support services to the Coalition Provisional Authority.
In March 2003, in announcing the U.S. Army's purchase of $19-million worth of its protective shelters for chemical and biological weapons, then-ESSI Chairman and Chief Executive Michael Shanahan stated: "The potential threat of our troops facing a chemical or biological attack during the current conflict in Iraq remains very real."
Other company contracts have raised questions.
Last week, Defense Department officials disclosed that ESSI contracts issued in 2002 with a cumulative value of $158 million had been referred to the Pentagon inspector general's office for investigation. The contracts were supervised by a former Defense official who was sentenced to prison for improperly aiding another contractor, Boeing Co.
Pentagon Acting Undersecretary Michael Wynne said he had referred the contracts "that appear to have anomalies in them." Wynne and his aides would not elaborate on those anomalies. Other contracts referred for review included pacts with Accenture (formerly called Andersen Consulting), Boeing and Lockheed Martin.
In a briefing with stock analysts Tuesday, Gerald A. Potthoff, ESSI president, played down the significance of the probe, stating that the company contracts were under review simply because they were awarded on a sole-source basis.
He said he was confident it would "have no effect" on the company and that the probe was focused on the actions of government officials, not ESSI.
"We will cooperate fully," he added.
The ESSI contracts now being reviewed by the inspector general came in a series of awards by the U.S. Air Force for a piece of equipment known as a Tunner.
Named after a former Air Force major general, the Tunner is in wide use by the Air Force to swiftly load and unload large military transport aircraft. It can handle 60,000 pounds of cargo at a time.
The Tunner has also proven a valuable workhorse for ESSI, accounting for the bulk of a $35.1-million or 20% boost in its revenues in ESSI's heavy military division in 2002.