Speaker 1: Department of Cerberus. Deputy Defense Secretary Stephen Feinberg wants America's
Speaker 1: war machine to get cozier with companies. The private equity
Speaker 1: firm he co founded is building a constellation of next
Speaker 1: generation businesses to answer the call by Caleb Melby read
Speaker 1: aloud by Mark Leedorf. Late last year, Deputy Secretary of
Speaker 1: Defense Stephen Feinberg walked on stage at the National War
Speaker 1: College in Washington and announced that the military was overhauling
Speaker 1: how it buys weapons. It was a rare public appearance
Speaker 1: for Feinberg, a billionaire financial engineer who eschews the limelight
Speaker 1: as much as his boss, former Fox News host Pete Hegseth,
Speaker 1: embraces it. Speaking haltingly, Feinberg warned that America's adversaries have
Speaker 1: never been stronger and that the Pentagon wasn't keeping up.
Speaker 1: We do things in a very old manner, a slow manner,
Speaker 1: a bureaucratic manner, and we must change.
Speaker 2: That, Feinberg said.
Speaker 1: He put private businesses that sell to the government on
Speaker 1: notice two. The contractors who are willing to change with
Speaker 1: us will prosper and grow, he said. Those who don't
Speaker 1: and resist it will be gone. The new initiative included
Speaker 1: the creation of an Economic Defense Unit, or EDU, reporting
Speaker 1: to Feinberg that would accelerate the production of weapons, bolster
Speaker 1: domestic supply chains, and counter China's economic power. Before entering
Speaker 1: government last year, Feinberg was the co chief executive officer
Speaker 1: of Cerberus Capital Management, a private equity firm he co
Speaker 1: founded that has seventy billion dollars of assets under management,
Speaker 1: including investments in Albertson's supermarkets and dozens of other companies.
Speaker 2: In function and design, the.
Speaker 1: EDU looked a lot like Cerberus. There was good reason
Speaker 1: for that. In Weinberg's first weeks in office, Pentagon staff
Speaker 1: were dispatched to the company's New York headquarters, where they
Speaker 1: met with executives overseeing investments in defense related businesses with
Speaker 1: the goal of learning how the Pentagon could better engage
Speaker 1: private investors. According to a person familiar with the conversations
Speaker 1: who wasn't authorized to speak about them, in January, an
Speaker 1: opinion piece in The Hill highlighted key details about how
Speaker 1: the EDU would accomplish its mission, months before Finberg's own
Speaker 1: memo on the topic. The author, Paul Miller, had recently
Speaker 1: left Cerberus, where he'd helped oversee the firm's investments in
Speaker 1: national security businesses. The edu, Miller wrote, would avoid bureaucracy
Speaker 1: and move capital rapidly like a private equity partner. George Kalatidis,
Speaker 1: one of four Cerberus veterans Finberg had brought into the Pentagon,
Speaker 1: was selected to run the new office. Another, David Lorch,
Speaker 1: was tapped to lead the Office of Strategic Capital OSC,
Speaker 1: which has a two hundred billion dollar lending budget. In
Speaker 1: Feinberg's assent to the number two job at the Pentagon,
Speaker 1: former Cerberus executives have gained remarkable access to the largest
Speaker 1: US government agency that presents potential conflicts. Unlike any the
Speaker 1: Defense Department has seen. In an administration teaming with billionaires
Speaker 1: and rife with crypto enrichment, stock trading in companies interacting
Speaker 1: with the government, and public transactions that benefit the president's suns,
Speaker 1: Feinberg has quietly achieved something different in personnel, priorities and policy.
Speaker 1: He has remade the Pentagon with its one trillion dollar
Speaker 1: budget in Cerberus's image. Those changes have implications for American
Speaker 1: industry and national security that will be felt for years
Speaker 1: to come, and as Feinberg shakes up how the military
Speaker 1: does business. Cerberus and Tracker Capital, Management, of venture capital
Speaker 1: firm he founded, are building next generation national security businesses
Speaker 1: poised to profit in a new era of warfare. This
Speaker 1: isn't Cerberus's first attempt to become a business partner for
Speaker 1: America's war machine. As recently as twenty nineteen, it was
Speaker 1: the twenty fifth largest defense contractor, with one point nine
Speaker 1: billion dollars in awards, according to an annual government list
Speaker 1: of the top one hundred. As one of its companies,
Speaker 1: which built barracks and trained police in Afghanistan, went sideways,
Speaker 1: the flow of money dwindled in twenty twenty, when Cerberus
Speaker 1: sold the company Dine Corp International for an undisclosed amount.
Speaker 1: Its revenue from the Defense Department collapsed to six hundred
Speaker 1: and twenty five million dollars. It remained below five hundred
Speaker 1: million dollars a year through twenty twenty four, the last
Speaker 1: year for which such data is available. Cerberus's pivot from
Speaker 1: investing in big contractors to more cutting edge technologies began
Speaker 1: during Donald Trump's first administration, when Feinberg chaired the President's
Speaker 1: Intelligence Advisory Board and received top secret briefings that increased
Speaker 1: his alarm about China. Although most of Cerberus's assets are
Speaker 1: still in non defense companies, the private equity firm and
Speaker 1: Tracker went on a buying spree starting in twenty eighteen,
Speaker 1: acquiring or investing in more than two dozen national security businesses.
Speaker 1: An examination of company documents and public filings shows one
Speaker 1: tests hypersonic weapons, another installs undersea communications cables, a third
Speaker 1: manages a strategic shipyard in the Pacific. Five have been
Speaker 1: selected to bid on Trump's Golden Dome missile shield initiative.
Speaker 1: A tiny start up Feinberg championed before taking office below
Speaker 1: the radar of most telecommunications analysts, has been integrated into
Speaker 1: efforts encouraged by the Defense Department to build a six
Speaker 1: G wireless network that could be worth billions of dollars.
Speaker 1: While Feinberg has said he has divested his stakes in
Speaker 1: Cerberus and Tracker, his published ethics agreement reserved the right
Speaker 1: to place those assets in trusts for his adult children.
Speaker 1: The Feinberg trusts planned to donate incentive fees received from
Speaker 1: Cerberus funds to charities benefiting US veterans. According to a
Speaker 1: trustee in his filings, Feinberg has left open the possibility
Speaker 1: that he could return to the company, saying he would
Speaker 1: consult with ethics officials before repurchasing any assets. Feinberg declined
Speaker 1: requests for an interview. Sean Parnell, the chief Pentagon spokesman,
Speaker 1: said Feinberg follows all federal laws and avoids any conflict
Speaker 1: of interest. Deputy Secretary of War Steve Feinberg is a
Speaker 1: man of integrity who has conducted himself ethically throughout his
Speaker 1: entire career and has had a generational impact on the
Speaker 1: Department of War, he said. Throughout his entire professional journey,
Speaker 1: including his service as Deputy Secretary of War, he has
Speaker 1: maintained an impeccable record of public trust, entirely free from
Speaker 1: any conflict of interest. He has been successful in his
Speaker 1: career before serving in government, during his service, and will
Speaker 1: continue to be successful after he decides to move on.
Speaker 1: A spokesman for Cerberus said Feinberg divested his stake in
Speaker 1: Cerberus and any funds it manages, and is not involved
Speaker 1: in the operations of Cerberus or its portfolio companies in
Speaker 1: any way. The company has taken proactive steps to establish
Speaker 1: a comprehensive compliance program designed to address any potential or
Speaker 1: perceived conflicts. The spokesman said, including protocols prohibiting contact concerning
Speaker 1: service investments with mister Feinberg and Cerber's alumni serving at
Speaker 1: the department. Tracker Capital didn't respond to requests for comment.
Speaker 1: The question of whether what's good for Feinberg and Cerberus
Speaker 1: is good for the military is being tested as the
Speaker 1: Pentagon deploys more capital than ever. Although he's now managing
Speaker 1: taxpayer dollars, Feinberg has brought a Wall Street appetite for risk.
Speaker 1: His team has negotiated deals to buy equity stakes in
Speaker 1: companies and is exploring lease back arrangements to build housing
Speaker 1: and data centers on military bases. People familiar with his
Speaker 1: thinking say he'll consider the Pentagon's investments a success if
Speaker 1: one in five succeed, in line with the world of
Speaker 1: venture capital, where money is invested across startups and a
Speaker 1: few winners can more than make up for failures. Defense
Speaker 1: industry executives and government employees praised Feinberg for his willingness
Speaker 1: to challenge the military's long standing deficiencies. The Pentagon has
Speaker 1: had trouble tracking how it spends money, failing every financial
Speaker 1: audit it is conducted in the past decade. It remains
Speaker 1: dependent on a handful of large corporations such as Lockheed
Speaker 1: Martin and Boeing, and key projects frequently come in behind
Speaker 1: schedule or over budget. Feinberg's team has pushed what it
Speaker 1: calls an acquisition transformation strategy across all the military services
Speaker 1: to make the process faster, more flexible, and contingent on
Speaker 1: rigorous benchmarks. The effort has ushered new companies, including startups,
Speaker 1: into the Pentagon's contracting base, but the Cerberus deal makers
Speaker 1: he's brought into the Pentagon have sidelined acquisition experts and
Speaker 1: are unfamiliar with the nuts and bolts of government processes,
Speaker 1: according to half a dozen current and former officials interviewed
Speaker 1: by Bloomberg BusinessWeek who ask not to be named for
Speaker 1: fear of retribution. That's led to some rushed deals with
Speaker 1: inadequate due diligence and bets on unproven technologies. One early
Speaker 1: winner was Vulcan Elements, a producer of highly specialized commercial
Speaker 1: magnets backed by a company in which Donald Trump Junior
Speaker 1: is an investor. Former Cerberus executives now serve as Feinberg's
Speaker 1: deputy chief of staff and as heads of both the
Speaker 1: EDU and the OSC Cerberus, meanwhile, has a history of
Speaker 1: hiring leaders close to the government. In twenty twenty three,
Speaker 1: it added the former CEO of in q Tel, the
Speaker 1: nonprofit venture capital firm created by the CIA, and the
Speaker 1: highest ranking officer in the Space Force. Since Finberg joined
Speaker 1: the government, Cerberus has recruited the first US Ambassador for
Speaker 1: cybersecurity and the former acting director of the National Security Agency.
Speaker 1: Feinberg's allies in government and business wave away concerns that
Speaker 1: his time in the Pentagon might be a boon for Cerberus,
Speaker 1: saying he's a patriot who's losing money to be there.
Speaker 1: But Eileen Applebaum, co director of the Center for Economic
Speaker 1: and Policy Research, who's testified before Congress about Cerberus, says
Speaker 1: it isn't that simple. Cerberus looks out for itself. She says,
Speaker 1: whatever is happening, whatever it's doing, they're thinking about how
Speaker 1: they make money and come out on top. Feinberg has
Speaker 1: been fascinated with the military since at least as far
Speaker 1: back as his days at Princeton University, where he captained
Speaker 1: the tennis team and enrolled in the Army Reserve Officers
Speaker 1: Training Corps. He co founded Cerberus in nineteen ninety two,
Speaker 1: naming it after the multi headed dog in Greek mythology
Speaker 1: that guards the underworld. The firm's core businesses are in
Speaker 1: private credit and real estate, but over time Feinberg directed
Speaker 1: his company's expansion into the business of war, leading hours
Speaker 1: long meetings about even small defense adjacent businesses and recruiting
Speaker 1: executives from the CIA and the military. Now sixty six,
Speaker 1: Feinberg is worth four point four billion dollars according to
Speaker 1: the Bloomberg Billionaire's Index. But as he built that fortune,
Speaker 1: he was always hunting for a bargain. One former employee
Speaker 1: recalls him getting excited about buying four suits for the
Speaker 1: price of three at jose Bank, the men's clothing store.
Speaker 1: It's like your aunt who brags about the deal she
Speaker 1: got on Jeanes at TJ Max, says the employee. It's
Speaker 1: not about the genes, it's about the pursuit of a
Speaker 1: good deal. Other Cerberus alumni talk about the pool his
Speaker 1: wife requested at his modest ranch house in Stamford, Connecticut.
Speaker 1: Feinberg took a week off to dig it himself before
Speaker 1: giving up after one day and hiring a contractor. He's
Speaker 1: since upgraded to Fancier Diggs. These tales of a finance
Speaker 1: titan devoted to making money while also being uncomfortable spending
Speaker 1: it underpin the respect he gets from former employees, even
Speaker 1: liberal ones, who describe him as a Rockefeller Republican with
Speaker 1: a sense of nobless obliege and a patriotic streak. Many
Speaker 1: recall Cerberus holiday parties where festivities were halted so the
Speaker 1: national anthem.
Speaker 2: Could be played.
Speaker 1: Over the years, Feinberg has constructed an anti publicity shield
Speaker 1: as effective as any missile defense system. He once told investors.
Speaker 1: The New York Times reported that if anyone at Cerberus
Speaker 1: has his picture in the paper and a picture of
Speaker 1: his apartment, we will do more than fire that person.
Speaker 2: We will kill him.
Speaker 1: That aversion to transparency has permeated the Defense Department, which
Speaker 1: has stripped credentials from reporters who refuse to submit their
Speaker 1: stories to the agency prior to publication. Investigations of leaks
Speaker 1: led to the suspension and eventual firing of Feinberg's first
Speaker 1: chief of staff, though there was no finding of wrongdoing.
Speaker 1: Feinberg has played a key role in everything from the
Speaker 1: Pentagon's push for its largest budget ever to overseeing its
Speaker 1: artificial intelligence initiative, but except for his speech on acquisition reform.
Speaker 1: He's let others handle the public conversation while.
Speaker 2: He works behind the scenes.
Speaker 1: You can't see the black hole, but you know it's
Speaker 1: there because the planets around it wobble, says one former
Speaker 1: Defense Department employee, describing Feinberg's management style. Behind that veil,
Speaker 1: Feinberg's team of former Serberus executives has been focused on
Speaker 1: reshaping how the Pentagon interacts with private businesses. Feinberg believes
Speaker 1: Chinese companies are dominant in strategic industries as a result
Speaker 1: of government backing, and he doesn't think US companies can
Speaker 1: outrun them without their own government support. People familiar with
Speaker 1: his thinking say a conviction that's led the Pentagon to
Speaker 1: take ownership stakes in at least six companies, including Vulcan Elements,
Speaker 1: Rare Earth's producer MP Materials, and rocket motor maker L
Speaker 1: three Harris Technologies. His primary tools for drawing government and
Speaker 1: business closer are the Economic Defense Unit and the Office
Speaker 1: of Strategic Capital, which was created during the Biden administration
Speaker 1: to make loans to companies that can help secure domestic
Speaker 1: supply chains. Under Trump, the office's lending capacity has ballooned
Speaker 1: to two hundred billion dollars, which Feinberg's team wants to
Speaker 1: deploy over three years. Feinberg's arrival at the Pentagon was
Speaker 1: met with excitement he'd done his research. Current and former
Speaker 1: staff say his deal making expertise was sorely needed and
Speaker 1: he was considered a more serious person than Hegsev, but
Speaker 1: that good will began to fade when he spurned closer
Speaker 1: collaboration with other government agencies, hired more Cerberus staff, and
Speaker 1: came to rely on them over the department's career employees.
Speaker 2: The people say.
Speaker 1: While a formal application process still exists, they say the
Speaker 1: Cerberus alumni prefer to source their own deals, relying on
Speaker 1: their personal networks to find them. That, coupled with the
Speaker 1: massive budget increase, is creating a bottleneck that's keeping money
Speaker 1: from moving, the people say. By contrast, Cerberus has more
Speaker 1: than one hundred and twenty managing directors to handle assets
Speaker 1: equal to one third of the OSC's lending budget, and
Speaker 1: without the aggressive timeline to deploy the cash. To ease
Speaker 1: the backlog, Feinberg's team hired thirty investment bankers. The pitch
Speaker 1: to potential employees made clear how the job would ultimately
Speaker 1: pay off. According to a head hunting presentation put together
Speaker 1: by recruitment firm hydrichen Struggles International on the Pentagon's behalf,
Speaker 1: your exit opportunities will be exceptional, including the potential to
Speaker 1: launch a new fund with members of this team, The
Speaker 1: document says you will gain access to fundraising channels that
Speaker 1: include royal families and foreign sovereign contacts. Feinberg's rush to
Speaker 1: rebuild a domestic supply chain for their critical minerals used
Speaker 1: in making components essential for warfare has led to some
Speaker 1: sloppy deal making that's exposed fissures in the Trump administration
Speaker 1: about how to tackle the problem. In November, the OSC
Speaker 1: announced an eighty million dollar loan to re Element Technologies,
Speaker 1: a rare earth's processor in Indiana, as part of a
Speaker 1: larger one point four billion dollar venture into magnet manufacturing,
Speaker 1: but the memorandum of intent was signed before due diligence
Speaker 1: had been completed. Since then, Pentagon officials vetting the company
Speaker 1: have raised red flags about its financial soundness and its
Speaker 1: ability to scale up its technology.
Speaker 2: Bloomberg News has reported.
Speaker 1: At the time of the announcement, John Gallagher was Feinberg's
Speaker 1: lead man.
Speaker 2: For critical minerals deals.
Speaker 1: A West Point graduate and thirty year U. S. Army veteran,
Speaker 1: Gallagher is among Finberg's most trusted lieutenants. Before entering government,
Speaker 1: he'd been on Trump's transition team and served as Feinberg's
Speaker 1: assistant when he chaired the Intelligence Advisory Board during the
Speaker 1: first Trump administration. He'd worked as a managing director at
Speaker 1: both Tracker and Cerberus Supply Chain Fund, a two point
Speaker 1: five billion dollar vehicle that counts cutters in Saudi Arabia's
Speaker 1: sovereign wealth funds among its backers. According to three people
Speaker 1: familiar with the investments, who asked not to be identified
Speaker 1: because they weren't authorized to speak about the financing, Gallagher's
Speaker 1: expertise lay in understanding what the government needed and thinking
Speaker 1: about how to provide it. According to former Serberus employees,
Speaker 1: deal making was not his primary focus. The same month
Speaker 1: the deal was announced, Lorch was named director of the OSSE.
Speaker 1: A mid level deal maker at the Supply Chain Fund,
Speaker 1: Lorch was known for being able to keep Feinberg's long hours.
Speaker 1: He was also viewed by former colleague as cautious. Lorch
Speaker 1: wants to know exactly what the outcome will be. In
Speaker 1: five years, says one former employee who worked with him
Speaker 1: at Cerber's. You can't price risk that way. Soon there
Speaker 1: were signs that the OSSE was rethinking how it approached
Speaker 1: risk too. Earlier this year, the office sent out two
Speaker 1: requests for proposals, according to documents reviewed by BusinessWeek, One
Speaker 1: asked potential contractors for assistance in monitoring a portfolio of
Speaker 1: forty to fifty deals. The other sought help redeveloping the
Speaker 1: office's probability of default risk rating model. Lorch's team at
Speaker 1: the OSSE gave the re Element deal a deeper look.
Speaker 1: By May, it was on the rocks. It turned out
Speaker 1: the company's CEO, Mark Jensen, had an ally in the
Speaker 1: White House. When Bloomberg News reported that the Pentagon was
Speaker 1: reevaluating the re Element loan, Trump trade advisor Peter Navarro,
Speaker 1: who'd been pushing to make critical minerals investments, blasted Feinberg's team.
Speaker 1: He said they had no experience and how to manage
Speaker 1: a crisis at warp speed, and accuse the os of
Speaker 1: subjecting companies to overburdensome reviews. Two months later, when the
Speaker 1: Economic Defense Unit announced a twenty five million dollar investment
Speaker 1: in the company, Lorch's Office of Strategic Capital was not
Speaker 1: named in the release. Parnell, depending on spokesman declined to
Speaker 1: answer questions about re Element, Gallagher, Lorch, Navarro, and re
Speaker 1: Element didn't respond to requests for comment. Creating a domestic
Speaker 1: critical minerals industry would be trying under the best of circumstances,
Speaker 1: but the US off short its supply chain for decades,
Speaker 1: meaning it's not only the rocks that are in short supply,
Speaker 1: but also the refining capacity and expertise. Feinberg's team has
Speaker 1: made targeted equity investments and loans because that's what they
Speaker 1: know how to do, but it isn't clear that the
Speaker 1: strategy of trying to out China China can succeed. One
Speaker 1: former defense official says it would be easier to guarantee
Speaker 1: loans underwritten by large US banks, gaining acts to their
Speaker 1: underwriting and due diligence departments. It's extraordinarily susceptible to partisan manipulation,
Speaker 1: as with the Pentagon's backing of vulcan elements. The official
Speaker 1: says of Feinberg's strategy state directed capitalism with a whiff
Speaker 1: of feudalism. There are favorable terms and conditions going out
Speaker 1: to industries and actors who are nominally aligned with the party.
Speaker 1: We'll be right back with Department of Cerberus. Welcome back
Speaker 1: to Department of Cerberus. At his confirmation hearing last year,
Speaker 1: Feinberg touted his experience operating defense contractors in our DoD companies.
Speaker 2: Which we have bought over the years.
Speaker 1: Certainly we were insiders, but I also have an outside
Speaker 1: perspective to bring, he said. He offered his career in
Speaker 1: corporate turnarounds as a reason why he would be able
Speaker 1: to help the Pentagon improve its efficiency, cost structure, and operations.
Speaker 2: This is in my.
Speaker 1: Wheelhouse, hopefully, he told members of the Senate, while noting
Speaker 1: that I have certainly made my share of mistakes. Some
Speaker 1: of those mistakes involved companies with defense contracts. In two
Speaker 1: thousand and six, Feinberg led Cerberus on a gun buying spree.
Speaker 1: It acquired thirteen firearms brands, including Remington and Bushmaster, to
Speaker 1: form Freedom Group, which became the largest US gun and
Speaker 1: ammunition maker by revenue. A major customer the Army, which
Speaker 1: bought Remington M twenty four sniper rifles by the thousands.
Speaker 1: Cerberus filed to take the company public in two thousand
Speaker 1: and nine, but domestic gun sales dropped, and Remington was
Speaker 1: haunted by claims that its rifles fired without the trigger
Speaker 1: being pulled. A CNBC documentary revealed that the Marine Corps
Speaker 1: Elite Sniper Training School had found the guns misfired as
Speaker 1: often as twice every twenty rounds, posing a safety hazard.
Speaker 1: Settlements with civilian users kept the outcome of the claims
Speaker 1: from public view, and Remington said at the time that
Speaker 1: its guns were safe, trusted, and reliable. The initial public
Speaker 1: offering never happened. Then, in twenty twelve, a Bushmaster was
Speaker 1: used to massacre twenty children and six adults at Sandy
Speaker 1: Hook Elementary School in Connecticut, a few miles from where
Speaker 1: Finberg's father lived. Four days later, Feinberg put Freedom up
Speaker 1: for sale, but few buyers wanted to touch the company
Speaker 1: even after its which the name back to Remington. Cerberus
Speaker 1: ultimately told investors they could sell their shares to the gunmaker.
Speaker 1: Inventory piled up and Remington's bonds plummeted. In twenty eighteen,
Speaker 1: the company, which first sold rifles to the US military
Speaker 1: in eighteen forty five, filed for bankruptcy. Cerberus's attempted turnaround
Speaker 1: of Dyne Corp in twenty ten also ended badly. At
Speaker 1: the time of the purchase, Dnecorp was the largest US
Speaker 1: contractor in Afghanistan, training police and building garrisons. The government
Speaker 1: had accused Dyne Corp of overcharging the State Department for
Speaker 1: its services in Iraq. A member of the Bipartisan Commission
Speaker 1: on Wartime Contracting said dine Corp's billing it maybe the
Speaker 1: single most outrageous example of how contractors received billions of
Speaker 1: dollars in the Iraq War without even basic documentation. The
Speaker 1: dispute was resolved last year without a determination of liability,
Speaker 1: when Dyne Corp agreed to pay a twenty one million
Speaker 1: dollars settlement. Feinberg shuffled through Diyne Corp CEOs, going through
Speaker 1: four in little more than a year, but his turnaround
Speaker 1: artists were unable to write the ship and Dyne Corp
Speaker 1: was sold for an undisclosed amount in twenty twenty. Four
Speaker 1: years later, Cerberus jumped back into the military services business,
Speaker 1: acquiring M one Support Services, which had scooped up a
Speaker 1: major dine Corp contract. M One, run by several dine
Speaker 1: Corp executives, was awarded nine hundred million dollars for servicing
Speaker 1: military aircraft. In twenty twenty four, federal data show it
Speaker 1: became Cerberus's largest Defense Department contractor by publicly available revenue.
Speaker 1: Cerberus also owns Tier One Group, a military and law
Speaker 1: enforcement training company with a complex in arkhan Saw that
Speaker 1: offers urban sniper courses and a thirty acre model of
Speaker 1: a village where troops engage in mock combat. Four Saudis
Speaker 1: who participated in the twenty eighteen killing of Washington Post
Speaker 1: journalist Jamal Koshoji, also trained there. The Cerberus spokesman said
Speaker 1: the State Department vets all foreign partners trained by Tier One,
Speaker 1: and that Cerberus and Tier One condemned the murder and
Speaker 1: ceased all contracts with Saudi Arabia. Tier One was started
Speaker 1: in two thousand and six by Steve Reikert, a former
Speaker 1: Marine who secured an investment from Cerberus after guiding Feinberg
Speaker 1: at a land navigation training session at Marine Corps Base
Speaker 1: Camp Lejune in North Carolina. In a twenty twenty blog
Speaker 1: post about a client he calls SF, who worked in
Speaker 1: capital management in New York, Rykert described how he grabbed
Speaker 1: SF by the collar to get him out of the
Speaker 1: way of a poisonous cottonmouth snake. That would have been
Speaker 1: a hard one to explain to my command, Riiker wrote.
Speaker 1: When Paul Allen, the billionaire co founder of Microsoft, died
Speaker 1: in twenty eighteen, there was something inside his twenty six
Speaker 1: billion dollar estate that Feinberg wanted. It wasn't the Seattle Seahawks,
Speaker 1: which Allan owned, or his collection of French Impressionist paintings. Instead,
Speaker 1: it was the world's largest aircraft, with a wingspan longer
Speaker 1: than a football field, Stashed in a hangar in California's
Speaker 1: Mojave Desert. The Rock, a twin fuselage behemoth that incorporated
Speaker 1: parts from two Boeing seven forty sevens, was designed to
Speaker 1: carry air launch to orbit rockets and satellites. Allan died
Speaker 1: before he ever got to see the Rock fly, and
Speaker 1: without access to Alan's fortune, the company that built it, Stradalaunch,
Speaker 1: didn't see a future. It announced plans to cease operations
Speaker 1: and put its assets up for sale. Allan's estate listed
Speaker 1: the company for four hundred million dollars, but drew no
Speaker 1: serious interest from fellow space pioneers Elon Musk or Jeff Bezos. Feinberg,
Speaker 1: who chaired Trump's Intelligence Advisory Board at the time, would
Speaker 1: have been aware of Mountain concerned about hypersonic weapons, highly
Speaker 1: maneuverable missiles that can change course while traveling a mile
Speaker 1: a second, making it nearly impossible to target or intercept.
Speaker 1: China unveiled one in October twenty nineteen. The US was
Speaker 1: far from developing a competing weapon, but before Strata Launch
Speaker 1: was put up for sale, it had been developing testing
Speaker 1: technology that could help the US catch up. Feinberg saw
Speaker 1: an opportunity. In a deal that wasn't announced, Cerberus acquired
Speaker 1: the company. The rock was retrofitted with a test bed
Speaker 1: between its twin fuselages that could be used to assess
Speaker 1: hypersonic technology. By late twenty twenty one, Strata Launch had
Speaker 1: secured funding from the Pentagon and partnerships with government contractors.
Speaker 1: Company records obtained by BusinessWeek show the biggest opportunity, according
Speaker 1: to the documents, a potential contract to develop a hypersonic
Speaker 1: propulsion system offered by the Defense Advanced Research Projects Agency,
Speaker 1: better known as DARBA. The company estimated it could be
Speaker 1: worth while one hundred million dollars. Stratolaunch couldn't undertake that
Speaker 1: task on its own, so it partnered with Aerojet Rocket Dyne,
Speaker 1: a maker of solid rocket motors. According to the documents,
Speaker 1: Aerojet was the only supplier of missile propulsion systems not
Speaker 1: owned by one of the biggest contracting firms. After a
Speaker 1: takeover attempt by Lockheed Martin in twenty twenty two was
Speaker 1: blocked by the Federal Trade Commission, it was acquired by
Speaker 1: L three Harris, becoming the aerospace company's rocket motor division.
Speaker 1: An L three Harris spokeswoman said in an email that
Speaker 1: the company regularly engages with a range of space and
Speaker 1: missile companies to explore how we might support potential solutions,
Speaker 1: and that the partnership with Stratolaunch didn't result in a contract,
Speaker 1: but Feinberg's fascination with hypersonics would follow him into office.
Speaker 1: In his Senate confirmation testimony, he mentioned the technology five times,
Speaker 1: saying the US was under invested. If our enemy can
Speaker 1: carry nuclear capability on things faster than ours, he said,
Speaker 1: it is a big problem. In January, the OSC announced
Speaker 1: its first deal with the weapons maker since Feinberg took office,
Speaker 1: a one billion dollar equity investment in L three Harris.
Speaker 1: The funding is intended to help EL three Harris spin
Speaker 1: off Aerojet Rocketdyne into a separate, publicly traded entity that
Speaker 1: would give the government a stake in a rocket motor
Speaker 1: company that has partnered with Cerberus's Strata Launch. Parnell, the
Speaker 1: Pentagon spokesman, declined to comment about how Stradlanch's relationship with
Speaker 1: Aerojet was handled during the L three Harris transaction. Byron Callen,
Speaker 1: a managing partner at Capital Alpha Partners, published a note
Speaker 1: questioning why Lockheed or RTX didn't get funding given that
Speaker 1: their missile interceptors and weapons are the primary customers in
Speaker 1: this segment. And then there was the question of what
Speaker 1: would happen to the government's stake in a public offering
Speaker 1: or sale. How will conflicts of interest be avoided?
Speaker 2: Callen asked.
Speaker 1: Callen's concerns were echoed by others closer to the military.
Speaker 1: One goal of equity investments is to broaden the base
Speaker 1: of companies that work with the government, but the strategy
Speaker 1: could have the opposite effect, warping partnerships and subcontracting relationships
Speaker 1: around what military leaders are calling national champions. One former
Speaker 1: Air Force officer who wasn't authorized to discuss the deal
Speaker 1: called it collaboration pressure. Meanwhile, Strata Launch's star is rising.
Speaker 1: Six months after Feinberg arrived at the Pentagon, the Department
Speaker 1: issued a ninety million dollar contract to the company.
Speaker 2: For air launched flight tests.
Speaker 1: The money was granted through what is known as other
Speaker 1: Transaction Authority, a less onerous contracting process designed to ease
Speaker 1: startup's entry into the Defense department ecosystem. The deal helped
Speaker 1: boost Stratlaunch's flight bookings, according to a Cerberus insider familiar
Speaker 1: with the transaction. The same month, the Pentagon took a
Speaker 1: stake in L three Harris. Stradlaunch announced its first investment
Speaker 1: since the Cerberus acquisition, a significant capital investment from Elliott
Speaker 1: Investment Management, the private equity firm run by Republican donor
Speaker 1: Paul Singer. Feinberg's team doesn't dispute the effects of their
Speaker 1: deal making. Edu head Cleatides, a Cerberus managing director before
Speaker 1: becoming Remington CEO in twenty twelve, recently shared a LinkedIn
Speaker 1: post by a mining executive. Sovereign backing is now a
Speaker 1: competitive variable, the executive wrote. Companies with US equity participation
Speaker 1: or debt guarantees will have easier access to off take
Speaker 1: agreements permitting support and follow on institutional capital. Projects without
Speaker 1: state alignment will face higher hurdles regardless.
Speaker 2: Of grade or jurisdiction.
Speaker 1: Feinberg has traveled along road to the upper echelons of
Speaker 1: the Trump administration. His journey began a decade ago when
Speaker 1: he and his wife donated about two point two million
Speaker 1: dollars to Trump affiliated groups in the twenty sixteen presidential race.
Speaker 1: Trump named him to his Board of Economic Advisors and Wide,
Speaker 1: giving him an opportunity to serve the administration in a
Speaker 1: now national security role. Former Cerberus employees say he had
Speaker 1: long expressed interest in being appointed Director of National Intelligence,
Speaker 1: but an actual job took years to materialize. One hang
Speaker 1: up was Feinberg's desire to keep his stake in Cerberus.
Speaker 1: Divestment was a harder task for him than for other billionaires.
Speaker 1: Many of Cerberus's competitors have gone public, not Cerberus. Feinberg,
Speaker 1: as one internal management agreement puts, it, shall have the
Speaker 1: full and complete authority to make all decisions relating to
Speaker 1: the operation and management of the firm. The agreement also
Speaker 1: stated that his salary and bonus would continue until his death,
Speaker 1: at which point it would go to his successors or
Speaker 1: his estate. Former Cerberus employees recall working late into the
Speaker 1: night to get his affairs in order, only for Trump
Speaker 1: to state at a February twenty seventeen press conference that
Speaker 1: he didn't think he'd need the billionaires services after all.
Speaker 1: A solution came in twenty eighteen when Trump asked Feinberg
Speaker 1: to head his Intelligence Advisory Board, a group that includes
Speaker 1: members of the private sector. He wouldn't have to divest
Speaker 1: his holdings. The board was a good fit for Feinberg,
Speaker 1: who's long been fascinated by spycraft. It gave him access
Speaker 1: to top secret intelligence and high ranking spies, among them
Speaker 1: David Rush, a CIA officer arrested this year after hoarding
Speaker 1: about three hundred gold bars worth forty million dollars at
Speaker 1: his Virginia home. The New York Times reported in June
Speaker 1: that Feinberg asked to work more closely with Rush on
Speaker 1: a Chinese spying effort. A Pentagon spokesman told the paper
Speaker 1: that Feinberg hadn't endorsed Rush for any career position. Feinberg's
Speaker 1: stint on the board alarmed him, according to a person
Speaker 1: advising him at the time, Amorphous threats posed by America's adversaries.
Speaker 1: Things he'd heard about secondhand suddenly became concrete. Feinberg accelerated
Speaker 1: his intelligence and national security investing. In twenty eighteen, his
Speaker 1: nonprofit Tracking Foundation, which he seated with one hundred and
Speaker 1: thirty million dollars, donated five million dollars to in Qtel,
Speaker 1: the venture capital firm tied to the CIA. A few
Speaker 1: years later, he went to in Qtel's office for a
Speaker 1: presentation on a new technology. According to a person familiar
Speaker 1: with the meeting, that sparked another revelation. The person says
Speaker 1: the real opportunities for investors lay not in services companies
Speaker 1: and arms purveyers, but in highly specialized technologies where early
Speaker 1: movers would be able to fend off competitors. Tracker Capital
Speaker 1: placed bets on drones, AI, intelligence analysis, semiconductors, space thrusters,
Speaker 1: and more, and in twenty twenty three, Feinberg hired former
Speaker 1: in q Tel CEO Chris Darby to launch a venture arm,
Speaker 1: Cerberus Ventures, which invested in DNA engineering, quantum computing parts,
Speaker 1: and refrigerator systems to cool quantum systems, plus a company
Speaker 1: with plans to build a web browser for the national
Speaker 1: security community with Cerberus Ventures. We're redefining national security, Darby's
Speaker 1: said at the Milken Institute conference in May twenty twenty four.
Speaker 1: I believe energy assurance is national security, not just for
Speaker 1: the United States, but for all countries. I think food
Speaker 1: security is national security. I think productivity and safety are
Speaker 1: national security. During Feinberg's nomination hearing, Tennessee Republican Senator Bill
Speaker 1: Haggerty told a story about his time serving as ambassador
Speaker 1: to Japan during Trump's first administration. Haggerty had learned Chinese
Speaker 1: shipbuilders were eyeing a defunct shipyard in Subic Bay, a
Speaker 1: strategically important port in the Philippines once the site of
Speaker 1: the largest US overseas military installation. Government agencies were unable
Speaker 1: to act, Haggerty said, so he turned to the next
Speaker 1: best thing, Steve Feinberg and Cerberus. Cerberus acquired the yard
Speaker 1: in twenty twenty two. If Stephen's team had not stepped
Speaker 1: up to solve the problem, the Chinese Communist Party today
Speaker 1: would likely possess a vital piece of strategic infrastructure in
Speaker 1: the South China Sea.
Speaker 2: Haggarty said at the hearing whether that wager.
Speaker 1: Would turn out to be an active, patriotic goodwill, a
Speaker 1: financial home run, or both depended largely on what the
Speaker 1: US military plan to do so. When discussion of an
Speaker 1: investment in Subic Bay came up at a meeting early
Speaker 1: in Feinberg's tenure at the Pentagon, it posed a dilemma.
Speaker 1: According to two people familiar with the meeting, Department staff
Speaker 1: suggested discussions take place at a venue where Feinberg wasn't present.
Speaker 1: Feinberg nodded an assent, according to one of the people.
Speaker 1: Since then, Subic Bay has become a focus of the
Speaker 1: Pentagon's efforts to counter China. At a conference in May,
Speaker 1: Kolotides said controlling ports was a key part of the
Speaker 1: Pentagon's break it strategy to limit China's mobility, likening it
Speaker 1: to tactics used by the British Empire. Cerberus has leased
Speaker 1: the shipyard and is seeking to acquire more land. Trump
Speaker 1: has promoted plans for a nearby munitions plant, and in
Speaker 1: August Cerberus announced that the Korea Development Bank has plans
Speaker 1: to facilitate investments in suppor court of Cerberus's broader maritime
Speaker 1: strategy as part of the South Korean government's plans to
Speaker 1: make American shipbuilding great again. No investments have been announced.
Speaker 1: Frank Bruno, Cerberus's CEO, thanked the White House and heralded
Speaker 1: South Korea's bold commitment to MASGA. Taken together, the developments
Speaker 1: inextricably link Cerberus to the US military's resurgence in the Pacific.
Speaker 1: At a ceremony celebrating the partnership in September, South Korea's
Speaker 1: ambassador to the Philippines heralded a deal that married his
Speaker 1: country's shipbuilding strength with Filipino skilled laborers. The US, he said,
Speaker 1: provides financial strength through Cerberus. Among Cerberus's tenants at Subic
Speaker 1: Bay is SubCom, another Cerberus company. In April, Cerberus announced
Speaker 1: it had restructured its deal with SubCom, which manufactures and
Speaker 1: lays undersea fiber optic cables for major US tech firms
Speaker 1: and the federal government. The deal allowed Cerberus managed funds
Speaker 1: to boost their controlling stake and hold it for longer.
Speaker 1: Cerberus bought the company in twenty eighteen for about three
Speaker 1: hundred and fifty million dollars. The new transaction valued at
Speaker 1: five hundred and fifty percent higher at two point three
Speaker 1: billion dollars. SubCom, the only US based undersea cable company,
Speaker 1: is a major provider to the Pentagon. Many government contracts
Speaker 1: aren't public. The information is withheld for national security reasons.
Speaker 1: But as the Trump administration becomes more wary of foreign
Speaker 1: governments and companies, Subcom's home base advantage is more important
Speaker 1: than ever, says Sunil Tagare, who has run subse cable
Speaker 1: companies since the nineteen nineties and is now CEO of
Speaker 1: California based Open Cables, which isn't a direct competitor. They
Speaker 1: are most likely making a killing on their DoD contracts.
Speaker 1: A SubCom spokesman said in an emailed statement that it
Speaker 1: competes for government work on a non exclusive basis through
Speaker 1: established procurement processes, and that it is first and foremost
Speaker 1: a commercial company. Making money. Has remained front and center
Speaker 1: at Cerberus. When he was still at the company, Feinberg
Speaker 1: told potential investors that the Supply Chain Fund's strategy of
Speaker 1: building a more muscular national security state wasn't just good
Speaker 1: for America, but also for business. Two former Cerberus employees
Speaker 1: say Darby has said the same. Make no mistake. Steve
Speaker 1: wants IRR and Moic Darby told the twenty twenty four
Speaker 1: Milkin attendees using the abbreviations for internal rate of return
Speaker 1: and multiple on investment capital. That has not changed. One
Speaker 1: of Finberg's interests when he was running Cerberus was countering
Speaker 1: Chinese dominance in the telecommunications industry. As part of that strategy,
Speaker 1: Cerberus invested in a small startup called Oran Development, which
Speaker 1: was building new technology that would allow US communications companies
Speaker 1: to be less reliant on hardware built overseas. Those were
Speaker 1: big ambitions for a company that recently had only sixteen
Speaker 1: employees listed on linked In, most of them based in India.
Speaker 1: It was such a new kit on the block that
Speaker 1: industry analysts BusinessWeek interviewed had never heard of it. Ed Gubbins,
Speaker 1: principal analyst at research firm Global Data, pointed to a
Speaker 1: press release from shortly after Trump won re election as
Speaker 1: some of the earliest evidence of the company's existence. That
Speaker 1: announcement stirred a bit of a mystery because it was
Speaker 1: hard to find references to orin online, Gubbins wrote in
Speaker 1: a note to clients last year. But four days after
Speaker 1: Feinberg's appointment was confirmed, the investment was looking prescient. In
Speaker 1: Nvidia announced it was leading a consortium developing a six
Speaker 1: G network that would seamlessly connect hundreds of billions of phones, sensors, cameras, robots,
Speaker 1: and autonomous vehicles. The creation of such a network had
Speaker 1: become a priority of the Defense Department, which believes an
Speaker 1: AI native network could enhance its ability to track low
Speaker 1: flying drones, surveill borders, and address other issues, and it
Speaker 1: was an opportunity to make US companies not check nineese
Speaker 1: ones the future of wireless communications. Among Nvidia's partners are
Speaker 1: t Mobile, Cisco, Booz, Allen Hamilton, and Oran Oran CEO
Speaker 1: Vas Gudledana, who'd managed teams at telecommunications companies, says he
Speaker 1: pitched Feinberg in twenty twenty three. Existing networks were inefficient
Speaker 1: and run on proprietary hardware that made supply chains vulnerable.
Speaker 1: According to company slides Goodladana provided to BusinessWeek, information gathered
Speaker 1: from cell towers had to go to data centers to
Speaker 1: be processed. Oran offered a future where AI powered analysis
Speaker 1: would be conducted at the cell towers themselves, which would
Speaker 1: remain operational during outages. The company says its technology is
Speaker 1: purpose built for the US government and national security. He
Speaker 1: immediately got it, Gudladana says of Feinberg's reaction, he said,
Speaker 1: let's build this. Following an investment from Cerberus's supply chain fund,
Speaker 1: executives got the company an audience within Nvidia formed a syndicate,
Speaker 1: not in a bad way, but in a good way,
Speaker 1: Goodladanna says. Asked about the meeting with Oran, a spokesperson
Speaker 1: for Nvidia said the company is proud to work with
Speaker 1: a US led ecosystem racing to build open, secure communication systems.
Speaker 1: The US government has supported the development of the technology
Speaker 1: since twenty twenty three, when the Biden administration allocated one
Speaker 1: point five billion dollars through the Chips Act. That funding
Speaker 1: was routed through the National Telecommunications and Information Administration, but
Speaker 1: Congressional Republicans rescinded the funding in Trump's One Big, Beautiful
Speaker 1: Bill and allocated new money for the effort to Feinberg's
Speaker 1: Defense Department, run out of an office called Future g
Speaker 1: Goodladana says, Oran has held meetings with the Department of
Speaker 1: Homeland Security to discuss how its technology might be used
Speaker 1: to surveil the US Mexico border. He sees a twenty
Speaker 1: billion dollar market opportunity where governments can use the technology
Speaker 1: for surveillance and defense, and coffee shops and fast food
Speaker 1: restaurants can use it to push CO customers a coupon
Speaker 1: when they're close by, but the path to those billions
Speaker 1: goes through the Pentagon, he says. Future g and the
Speaker 1: Department of War are supporting us and helping us in
Speaker 1: many ways, says Goodledanna, We know everyone on that team.
Speaker 1: In March, the company announced it raised forty five million
Speaker 1: dollars from investors, including many of its sixty partners, turning
Speaker 1: Cerberus's investment into another winner.