Clark, the Four-Star Businessman
General Parlayed Stature Into Big Income Boost as Lobbyist and Consultant
By Ben White and R. Jeffrey Smith
Washington Post Staff Writers
Thursday, January 29, 2004; Page A01
Wesley K. Clark could not keep quiet for long. The meeting with Vice President Cheney on July 16, 2002, had started with casual banter. But the retired four-star general quickly cut off the chitchat, grasping his chair and sliding it next to Cheney's.
"Mr. Vice President, we know you only have a short time, and we have some very important matters to discuss," Clark said, according to a person who attended the session. "So if you don't mind, I'd like to just jump into the meeting." Cheney nodded, and Clark raced through a 10-minute summation of what Acxiom, a Little Rock firm that collects and sorts detailed consumer data on virtually every American, could do to aid the war on terrorism.
Cheney digested the presentation, which focused on verifying the identities of airline passengers, then peppered Clark and Acxiom lead executive Charles D. Morgan with questions about how to use the data without infringing on consumer privacy rules.
Seven months later, Acxiom won a Department of Homeland Security subcontract to help create CAPPS II, a passenger-screening database considered one of the largest surveillance programs ever devised. The government has delayed implementing CAPPS II, in part because of privacy concerns, but the contract was Clark's biggest success in his brief career as a Washington lobbyist.
Clark's lobbying was one of many business activities that, by his account, boosted his income almost 20-fold in the 42 months between his resignation from the Army and the start of his presidential campaign last September. An examination of those activities, including interviews with business associates and a review of public and private documents, shows that although Clark spent only 51/2 years of his adult life in Washington, he made some of the money in a time-honored way in the capital -- by trading on his name.
In earning post-retirement income totaling at least $2.4 million, moreover, Clark was helped most of all by consulting arrangements with two politically connected investment banking firms, Goldman Sachs in New York and Stephens Inc. in Little Rock. His association with Goldman brought him more than $1 million, including stock benefits accrued since he announced his candidacy.
Clark campaign officials say the money is a mark of his talents and the well-deserved fruit of 34 years' service in relatively low-paying military posts. Some of his opponents in the campaign for the Democratic presidential nomination have criticized him for following a well-trod path to private enrichment through powerful connections to government officials in Washington.
Even with two bank accounts holding $500,000 to $1 million each on Dec. 15, according to financial disclosures made by Clark's campaign, his declared assets of $2.6 million to $6 million are less than those held by rivals Sens. John Edwards (N.C.) and John F. Kerry (Mass.). Edwards and Kerry, respectively, have declared assets of $8.7 million to $36.5 million and $198.7 million to $839 million, according to the Center for Public Integrity, a nonprofit watchdog group. Former Vermont governor Howard Dean has declared assets of $2.1 million to $5 million.
Also, unlike many other retiring senior military officers, Clark did not immediately go to work for a large defense contractor; instead, he preferred smaller firms specializing in technology. In addition, he earned more than $1 million by giving speeches and appearing as a military commentator on CNN. In 2002, his military retirement pay was $85,909.
But part of Clark's wealth did derive from his ability to open Washington doors for private clients. In addition to meeting Cheney, for example, Clark helped Acxiom get in the door at the Justice Department, the Department of Transportation, the Transportation Security Administration and FinCEN, a Treasury Department agency responsible for financial intelligence. The firm was awarded the subcontract by Lockheed Martin Corp. in competitive bidding.
"He clearly gave us access that it would have been difficult for us to get otherwise," Acxiom chief Morgan said in an interview. Kevin S. Kellems, a Cheney spokesman, said he had no comment on the Cheney-Clark meeting.
'Am Enclosing a Resume'
Clark's retirement from the Army was not entirely on his terms : Defense Secretary William S. Cohen, who had repeatedly clashed with Clark over the Kosovo war and other matters, asked him to leave his job early to make way for another officer. Several months afterward, Clark penned a job-seeking note to Colin L. Powell, who was then a member of the board at AOL.
"Really appreciated your time and the very useful insights," read the note, a copy of which was obtained by The Washington Post. "Am enclosing a resume which could be used -- would appreciate anything you could do. All of us who worked for you have high hopes for your future in public service in government."
The résumé described his professional objective as a "top-level corporate position that will fully employ the leadership, management and negotiating skills developed and refined as a senior United States Army officer."
It also listed some unusual accomplishments: leading 100,000 personnel in a multibillion-dollar European war, helping to settle the conflict in Bosnia, expanding the Army's land holdings in the California desert, and helping to draft a presidential directive on foreign policy coordination. A spokesman for Powell declined to comment on Clark's letter; Clark's campaign officials said they were unaware of any assistance provided by Powell.
Clark's first major connection to the business world grew out of conversations with Vernon Weaver, a former ambassador to the European Union and executive at Stephens, which is one of the largest investment banks outside New York and has strong ties to Washington. The firm's Web site lists assets totaling more than $313 million.
Weaver, impressed with Clark's work in Europe, recruited him to join Stephens, according to an official at the firm, first in the Washington office and then in Little Rock, Clark's hometown. From June 2000 through March 2003, Stephens was Clark's professional base, providing him with income of $200,000 to $500,000 per year, according to his tax returns. It also gave him a perch for exploring a run for the U.S. Senate seat being vacated by Arkansas Democrat David Pryor.
But Clark's entry into investment banking coincided with the bursting of the high-technology bubble, the Sept. 11, 2001, terrorist attacks, and a collapse in the market for new public stock offerings. As a result, Clark brought no lucrative deals to Stephens during his three-year tenure, company officials said.
"People here felt he was very knowledgeable and expert in technologies relating to his military career, and we were looking for investment opportunities in that sector," said Frank Thomas, a Stephens executive. "But he could not have come into the investment banking world at a worse time."
Another Stephens executive, who spoke on the condition of anonymity, said Clark was not a "rainmaker" but was learning the business and could have become one if he had not chosen to run for president. "It's not fair to evaluate an investment banker in two years," the official said. "No one is successful in two years."
Thomas said that when Clark began giving more paid speeches and appearing more often on television in 2002, he became distracted from his work at Stephens. Clark's growing criticisms of the Bush administration, and his emergence as a possible Democratic presidential candidate, also made things uncomfortable for the firm.
Warren A. Stephens, the investment bank's chief executive, is a major backer of President Bush, having raised at least $200,000 for the reelection campaign. Stephens made it clear to Clark that he could not stay at the firm and plan a run for the Democratic nomination. Clark left in March 2003, saying he needed to focus on his work for CNN.
Clark's connection to Goldman Sachs is more difficult to trace. John A. Thain, the firm's former president and chief operating officer and current chief executive of the New York Stock Exchange, confirmed through a spokesman that he introduced Clark to others at the firm but said he could not recall how he first met Clark. Clark's campaign staff said Goldman Sachs was one of several firms that contacted him after he left NATO.
A former partner at the firm said that Clark, in interviews with top executives, demonstrated an impressive knowledge of Eastern Europe. As a result, Goldman Sachs turned to him for advice in August 2001 after joining with other investors to acquire majority ownership in Messer Griesheim, a German firm that makes industrial gases at plants throughout Europe.
Goldman Sachs hired Clark as a consultant and appointed him, with two of its executives, to Messer's board. Clark toured some of the company's operations, reporting back on management practices and staff morale. "He was a terrific contributor," said Barry Volpert, who ran Goldman Sachs's private equity operations for Europe.
Clark was paid $555,000 in consulting fees for his 21/2 years on the board, Clark aides said. Goldman Sachs also arranged for him to acquire stock in Messer worth more than $500,000, through a low-interest loan by Messer that Goldman Sachs purchased the same day it was made. The terms ensured that Clark bore no financial risk.
Loans by publicly traded corporations to their board members have been assailed by critics of the governance practices that played a role in the stock market decline of the late 1990s and were outlawed by the Sarbanes-Oxley Act in 2002. Bush received such a loan while serving as a director of the Harken Energy Corp. in the mid-1980s.
But the law does not affect privately held firms, such as Messer, in which publicly traded companies hold a stake, Goldman Sachs spokesman Lucas van Praag said. No one has alleged that Clark did anything wrong in accepting the loan to buy the Messer stock.
The investment brought Clark a windfall. Goldman Sachs's stake in Messer was sold last week to a French firm at a 160 percent profit, a transaction in which company officials say Clark played little or no role. But Clark -- who sold his stock on Jan. 1, when he left the Messer board, several months after beginning his race for president -- is permitted under his original stock-purchase deal with Messer to share in Goldman's profit.
Once the transaction is completed, Clark stands to gain roughly $1 million from a stock investment made with no funds of his own, sources familiar with the deal say. Two Clark campaign officials confirmed the benefit but said they were unsure of the amount.
'We Contacted Wes'
Beyond Messer, Clark's corporate affiliations generally reflect his fascination with new technologies, particularly those with military or domestic security applications. He served as a board member or adviser to, among others, a pharmaceutical start-up developing vaccines against biological weapons, an engineering firm making next-generation electric motors and a telecommunications company developing wireless tools for tactical military operations.
Clark had modest success helping these firms make contacts in the federal government and the military. He had less success helping them find investors. In two cases, for Annapolis-based pharmaceutical firm PharmAthene Inc., and Dulles-based engineering company WaveCrest Laboratories, Clark tried and failed to get Stephens to invest.
He enjoyed much more success with Acxiom, the Little Rock database company.
Clark initially turned down an offer, made just after he left the military, to serve on Acxiom's board. But after the 2001 terrorist attacks, he agreed to tell government officials about the firm's capabilities without charge.
"We were doing some work with the FBI . . . and we contacted Wes again to get his ideas on how best we could help," said Acxiom chief Morgan. After the initial shock of the attacks, Clark and Acxiom saw the opportunity to make money, Clark as a lobbyist for the firm and Acxiom as a federal security contractor.
Clark registered as a self-employed lobbyist for the firm in January 2002. In May of that year he registered as a lobbyist for Acxiom on behalf of SCL LLC, an entity created to keep Clark's work for Acxiom separate from his work for Stephens. He was a lobbyist for Acxiom through Sept. 17 of last year, earning just under $500,000 total for his work, according to lobbying disclosures.
In a debate in New Hampshire, Clark said he was motivated by a conviction that "their technology will improve our security." Clark added, "I was insistent that we do so with a firm grip on the privacy issues." Morgan agreed that in board meetings and private conversations, Clark was fixated on making the best use of Acxiom's data without violating people's privacy.
"The last thing Wes wanted to see happen was for the information to be improperly used," Morgan said. "He was heavily engaged on the issue. He was interested in how to maintain separate repositories of data, walls between data sources, that could be linked on demand when authorized."
Clark also joined the boards of half a dozen other firms either seeking or holding military contracts, including WaveCrest, a start-up developing electric propulsion systems.
WaveCrest won a contract to sell electric bicycles to the Pentagon after Clark joined the firm, but WaveCrest spokesman Tom McMahon said Clark was not involved in lobbying for the contract. Instead, he provided strategic advice on product development and marketing, McMahon said.
Clark received about $200,000 in director and consulting fees, as well as "member shares" in the firm. Those shares currently have no value because WaveCrest is not publicly traded. Should the firm go public, the shares could increase in value, but McMahon said the company has no immediate plans for an initial public offering. Clark left the WaveCrest board in October but has continued to extol the company's technology on the campaign trail.
Clark also served on the board of Entrust, a Dallas area Internet security firm, from January 2002 through October of last year, earning about $77,000 in director's fees. An Entrust regulatory filing last March showed that Clark owned about $70,000 worth of Entrust stock and 32,000 stock options, 24,000 of which currently have no value.
Clark was also a director at Sirva Inc., parent company of Allied Van Lines and North American Van Lines, which help move military personnel. He earned about $81,396 in director's fees, according to his financial disclosure, and owns shares worth $250,000 to $500,000. Sirva went public in November.
Jim Trainor, vice president of communications for Sirva, declined to say what Clark did to earn his director's fees or to address Clark's stock holdings in the company.
Clark also served as a consultant to the wireless technology firm Time Domain, in which he holds a small stake that currently has no value. Ralph Petroff, the firm's chief executive, said Clark was valuable as an adviser not only on possible military products but also on products for the commercial market.
"He was one of the first buyers of the Apple Newton," one of the first personal digital assistants, Petroff said. "The guy is really into new technology. . . . He was able to predict better than many industry analysts the deployment of wireless networks in the commercial world."
Researcher Lucy Shackelford contributed to this report.
© 2004 The Washington Post Company