The employee who revealed information about the National Security Agency's spying programs worked for Booz Allen which is a large government contractor that employs 25,000 people. It is primarily owned by the Carlyle Group which is a private equity firm that owns a variety of government contracting firms. This article provides some information about the extent to which government contractors are used to perform government work for profit. It also provides a glimpse into the ways in which private equity firms work. The Carlyle Group paid $1 billion to acquire its share of Booz Allen. It controls Booz Allen and it quickly recovered its investment by funneling dividends, which are taxed at a lower rate than ordinary income, to itself. The value of the publically held Booz Allen has also increased since it was acquired by The Carlyle Group. The Carlyle investors have realized a gain of $3 billion on their $1 billion investment and they got their initial investment back quickly from dividends. This is a pretty typical pattern in the private equity business. Booz Allen was able to return profits to Carlyle in the form of dividends. Private equity firms are not dependent upon profits, however, for their flow of dividends. They often use the borrowing power of the acquired company, or its pension funds, to provide dividends.
Most of us have heard about the military industrial complex in which the Defense Department and its military contractors have a share interest in growth. It looks as if we also have an intelligence industrial complex in which the intelligence agencies and its contractors have a common interest in growth. Both of these complexes benefit from rising public concerns about national security.
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