Tornado Alley (PROG)

[easymoney101]

Having fun with CaterAir

By Margie Burns
Online Journal Contributing Writer

October 20, 2004—In July 2003, the founder of the Carlyle Group, David Rubenstein, chatted with company investors and made several tape-recorded comments about a former director at one Carlyle subsidiary. The subsidiary was an ill-fated airline-food company named CaterAir, and the former director was one George W. Bush:

"But when we were putting the board together, somebody came to me and said, look there is a guy who would like to be on the board. He's kind of down on his luck a bit. Needs a job. Needs a board position. Needs some board positions. Could you put him on the board? Pay him a salary and he'll be a good board member and be a loyal vote for the management and so forth."

"I said well we're not usually in that business. But okay, let me meet the guy. I met the guy. I said I don't think he adds that much value. We'll put him on the board because—you know—we'll do a favor for this guy; he's done a favor for us. We put him on the board and spent three years. Came to all the meetings. Told a lot of jokes. Not that many clean ones. And after a while I kind of said to him, after about three years—you know, I'm not sure this is really for you. Maybe you should do something else. Because I don't think you're adding that much value to the board. You don't know that much about the company."

"And I said, thanks—didn't think I'd ever see him again. His name is George W. Bush. He became President of the United States. So you know if you said to me, name 25 million people who would maybe be President of the United States, he wouldn't have been in that category. So you never know. Anyway, I haven't been invited to the White House for any things."
(Audio is at www.pacifica.org/programs/dn/030703.html among other sites.)

CaterAir was founded in 1989, spun off from Marriott Corporation by a private investors' group including Bush supporters Daniel J. Altobello and Frederic V. Malek. From its beginning, its outlook was poor, "airline food" jokes aside. Marriott let the airline catering division go because it was suffering from thin profits and uncertainties in the airline industry. The Carlyle Group, where George H. W. Bush soon joined the board after leaving the White House in 1993, gave George W. Bush the directorship at CaterAir in 1990. Bush left the board in 1994 to run for governor of Texas. The following is a partial chronology of CaterAir's bumpy career during that interim:

February 1990: CaterAir restructures its long term debt, withdrawing an earlier filing with the SEC for $110 million and going after $40 million more. Eastern Airlines, which went bankrupt, was one of CaterAir's earlier clients.

May 1990: Merrill Lynch, the large brokerage firm with ties to the Bush clan itself, shops $250 million in refinancing for CaterAir, characterized in the business press as a high-risk, high-yield junk bond.

August 1990: CaterAir completes its refinancing with a bridge loan. Following the collapse of the junk bond market, two senior Merrill Lynch executives who led the company's foray into junk bonds resign. Bridge loans like the one to CaterAir are expected to become fewer.

December 1990: CaterAir awards a contract to a California company to develop "a robotics system for its in-flight catering operations" including wrapping food.

March 1991: Carlyle Group persuades Saudi Arabia's Prince al-Walid bin Talal to spend a half-billion purchasing part of America's largest banking company, Citicorp, earning a commission. David Rubenstein says of Carlyle's CaterAir purchase, "Despite the fact that the airline business is in trouble, the company is worth an enormous amount more than what we paid for it." Malek is quoted by NYTimes as saying, "I thought George W. Bush could make a contribution to CaterAir."

December 1991: CaterAir freezes or rolls back wages on most of its 20,000 employees, in spite of winning 66 new contracts in 1991. Contracts with 48 air carriers in 28 cities include Virgin Atlantic at Boston's Logan, All Nippon at JFK in New York, and Aerolineas Argentinas at Miami's airport.

June 1992: CaterAir among other companies campaigns against a bill in the California state senate to tax airline food, saying the tax will hurt their ability to employ workers.

August 1992: CaterAir says it is not restructuring its debt in spite of flat sales. Its joint ventures include Russia's Aeroflot, the former national airline of the Soviet Union, operating a kitchen that caters to all flights through Moscow.

August 1992: a former Marriott official pleads guilty to embezzling $1.4 million over 14 years, using fraudulent invoices from several vendors, including CaterAir.

October 1992: Carlyle buys part of General Dynamics Corporation, part of a two-year process of becoming one of the nation's largest military contractors. Carlyle also completes purchase of a Washington, DC, radio station and two stations in Virginia; is said looking to buy more stations after FCC expansion of allowable number of stations in a market to 18 for one owner, up from 12.

December 1992: an article in the Journal of the American Medical Association describes an outbreak of illness suffered by passengers including several Minnesota Vikings back in 1989. Federal and state epidemiologists trace the problem to Marriott food handlers who did not wash their hands. Shigellosis, from bacteria found in human feces, confirmed or probable in about 240 cases of passenger illness. This division became CaterAir.

December 1992: CaterAir's St. Croix facility is closed down by the Food & Drug Administration (FDA) for five days, until it cleans up its kitchen and complies with FDA sanitation regulations. The St. Croix is given a poor 57 percent rating and classified "Not Approved." Problems identified include "rodent pellets on a tray of salad plates" and elsewhere; "live flies throughout the kitchen"; "cockroaches on the kitchen floor and tray assembling room"; "old food and grease encrusted on the stove and food storage shelves"; etc.

January 1993: George H. W. Bush leaves office.

April 1993: CaterAir is now the nation's largest airline caterer.

May 1993: George W. Bush resigns from CaterAir. The FDA's magazine, FDA Consumer, publishes an article about its five-day closing down of the St. Croix catering operation back in December, titled "Caterer Cleans Up, Flies Right."

July 1993: company sells an Orlando, FL, property for $3.4 million.

August 1993: CaterAir files with the SEC to sell another $230 million in notes.

November 1993: company announces it will relocate its corporate headquarters to Bethesda, Md., from Potomac, Md.. Bush resigns from board of Harken Energy.

June 1994: at a Chief Executive Roundtable, CaterAir International's Altobello discusses his company's "passport for success" program, said to recognize employees who provide exceptional service.

September 1994: Governor Ann Richards' reelection campaign runs an ad criticizing GWBush's business experience, saying that companies where Bush served lost a combined $371.6 million. The campaign publishes a handout titled The Bottom Line: The Business Career of George W. Bush. While the companies lost $371 million, the campaign says, Bush made $1.3 million. CaterAir lost $285.1 million during Bush's stint on board; Bush received $75,000. The Bush campaign responds within hours, complaining about Richards' "personal attacks."

September 1994: Daniel Altobello says Bush cannot be held responsible for losses at the company.

October 1994: business experts, unnamed, defend Bush on grounds that his company role was limited to attending quarterly meetings.

August 1995: Carlyle's purchase of CaterAir is described as a "disaster."

February 2001: George W. Bush, now president [sic], signals willingness to get involved in airline mechanics union negotiations with Northwest Airlines. A former president of Northwest is Frederic Malek, who put Bush on CaterAir's board; Malek is still a major Northwest shareholder.

September 2001: an Alexandria, Va., man named Mohammad Abdi is arrested by authorities because his name and phone number are found scrawled on a DC map left in the hijackers' car at Dulles Airport. Abdi's former jobs include a stint at CaterAir, at National Airport, in 1993. In Abdi's pocket is a newspaper clipping about Algerian terrorist Ahmed Ressam, arrested in 1999.

October 2001: Mohammad Abdi is indicted by a federal grand jury on 12 counts of forgery unrelated to 9/11. Authorities remain suspicious after finding his name and phone number in the blue Toyota rented to alleged 9/11 hijacker Nawaf Al-Hazmi, left at Dulles; another phone number found in the car belongs to a man who admits being acquainted with one of the hijackers. Abdi's work for CaterAir, back in 1993, was at Reagan National Airport.

January 2002: Abdi is sentenced to four months for forgery.
We report, you decide: who is mainly responsible for the airlines' laxity on 9/11 and other dates? The minimum-wage-paid, ill-trained "screeners" and their ilk? Or the overpaid and underperforming "managers" who spent decades lobbying for every conceivable tax break, government giveaway, and executive privilege, while simultaneously resisting every possible improvement in security, safety, and even cleanliness?

The conclusion is almost inescapable that if some managers had spent one-tenth the energy trying to prevent terrorism that they have spent trying to prevent unions, 9/11 would never have happened. Come to think of it, they could also have spent less time having fun and more time providing good service at reasonable cost.

Margie Burns, a freelance writer in the Washington, DC, area, can be reached at [e-mail].
http://www.onlinejournal.com/Special_Reports/102004Burns/102004burns.html