ARMS AND THE MAN
By the Virtual-Lancaster Team

Lancaster & Wyre's Conservative parliamentary candidate, former Member of the Scottish Parliament Ben Wallace might give the impression of being a down to earth sort of chap, and comes across as some sort of country gentleman when seen canvassing in town.

In actual fact, as well as being a former Army captain he's worked in an advertising agency and as a ski instructor. More importantly, he is still EU & Overseas Director for QinetiQ (pronounced kinetic) - a defence company involved heavily in servicing the war in Iraq.

QinetiQ, Europe's largest research and technology organisation, was formed out of what has been described as the "rushed" part-privatisation of the Ministry of Defence's military research arm, the Defence Evaluation and Research Agency (DERA) in 2002.
Private Eye (No. 1130, 15-28 April 2005) reports the sale left UK taxpayers with £100m in liabilities. Ben Wallace's fellow Tory, then shadow defence spokesman Gerald Howarth, described the sale as "a poor deal for taxpayers".

On privatisation, QinetiQ employed 12,000 people over some 80 sites, including some of Britain's best scientists. Now, 4,000 job cuts later, Private Eye and the Sunday Times report a full sale could raise as much as £1 billion, with mega-payouts to the remaining employees who own 13 per cent of the shares.

The MoD still owns 51 per cent of the company, which made a profit of £57 million in 2004 from a £795 million turnover. However, QinetiQ is part-owned by the controversial US private equity group, Carlyle, the fund also known as the 'Ex-Presidents Club' because of the number of former world leaders it has employed, including President Bush's father and former Tory Prime Minister John Major.

Debt-free QinetiQ now works in a range of defence and security fields. About 80 per cent of its work is still for the British government (which will retain a golden share to prevent an unwelcome foreign takeover if it is sold), but the opportunities for expansion and profit from arms trade technologies and their civil applications are immense.

As it has for its American backers, global terror has been good for QinetiQ's business. "QinetiQ plays an important part in the war on terrorism," it proclaims in publicity for the company on the World Security Index web site. "We are ideally placed to help government authorities and private companies address the numerous security challenges faced in many environments, ranging from Aviation and Maritime Security to Corporate and IT Security, Law Enforcement, Resilience and Defence."

Indeed they are: in fact, many of QinetiQ's directors still work for the Ministry of Defence, surely making it very easy for them to gain the ear of government ministers.

"Our security solutions are based on four fundamental principles," the company explains. "Saving life, protecting property, preserving forensic evidence and returning life to normal as soon as possible, and are designed to limit risk, minimise impact and increase the profitability of your business."

Its recent defence contracts include a £2.5 million contract for the supply and ongoing support of its LOKI torpedo countermeasures to the Royal Norwegian Navy; and a £5.5 million contract from BAE SYSTEMS to deliver key elements of the Tornado F3 "FSP programme" for the UK MOD. It is actively involved in electronics, space and nanotechnology research.

Westar, a company QinetiQ bought outright last year, was recently awarded a Prime Contractor Blanket Purchase Agreement for the US Army with a potential value of more than $500 million.

QinetiQ 's possible sell-off, perhaps later this year, is likely to be worth more than double the firm's valuation when it was part sold to Carlyle and QinetiQ staff. Although the government has insisted that any profits raised from selling ex-Ministry of Defence property will be clawed back, outside that, QinetiQ is free to make as much money for its shareholders as it likes. There is no indication the MoD or indeed, taxpayers, will profit in any way from the sale.

The Carlyle Group - who have played a major role in promoting the invasions of Afghanistan and Iraq - stand to gain around £150m from the sale. Private Eye reported that top directors like chief executive Sir John Chisholm will see huge jumps in the value of the shares awarded to them as a way of aligning their personal interests with Carlyle's. Ben Wallace has asked us to point out that he is not a shareholder and will not be gaining financially or in any other way from the company's floatation.

The scale of the likely rewards calls into question the price paid for the shares in the first place. No other country has ever sold off its defence laboratories. (There are even growing concerns some British scientists may sell their secrets to unfriendly powers as a result of all the changes).

Government approval for the sale is still required, but QinetiQ is taking no chances. Private Eye reports executives were out in force to schmooze MoD officials at the PPP/PFI Global Defence Conference at the Paris Intercontinental in March, where they hosted a cocktail reception for the influential civil servants and defence procurement minister Lord Bach. As some of QinetiQ's non-executive directors work at the MoD, that must surely help open a few doors, although of course there is no suggestion from us of any impropriety.

One of Ben Wallace’s stated goals if he becomes an MP is to “beat the 'bullies' we often meet in life! e.g the Corporate and bureaucratic systems.”

He’s already well placed to make a start.

QinetiQ
Cody Technology Park, Ively Road, Farnborough, Hampshire, GU14 0LX, UK.

The Role of QinetiQ This 2003 government document outlines the Company's position on some of the key issues

QinetiQ Executives in the News

+ Dame Pauline Neville-Jones: Chairman
Also a BBC Governor, Neville-Jones earned £133,000 in 2003 as chairman of QinetiQ. Neville-Jones owns £50,000 worth of shares in QinetiQ which are held through the Carlyle Group.
Neville-Jones played a pivotal role in how the BBC covered the Iraq war and the David Kelly affair and was blamed personally by former-director general Greg Dyke for his sacking.
The Guardian reported last October that she took an unusually active role in the Kelly affair, criticising Andrew Gilligan's reporting and also expressing unease about Kelly's expertise.
(Source: The Guardian/Companies House)
Read more..

+ Sir John Chisholm
Chief Executive
Current salary: £467,000
Sunday Times interview, 27 March
Last year Chisholm helped Treasury chief secretary Paul Boateng launch an initiative to "reduce barriers to commercialisation in the public sector".