Daniel Gross: The Homeland Security Bubble

Is the War on Terror a bad investment?
By Daniel Gross
Posted Wednesday, June 1, 2005, at 4:24 AM PT

If you wanted to invent a bogus-sounding Washington company, the kind of ominous corporation that belongs in a subplot for next year's 24, you couldn't come up with a name—or a business plan—better than that of Fortress America Acquisition Corp. Fortress America is a scheme by a bipartisan group of Washington insiders, including a Rhodes scholar turned professional basketball player turned congressman, a former senator, and an offshore investment company with ties to the former head of the Central Intelligence Agency, to capitalize on the nation's fear of terror. Fortress America Acquisition Corp. is striving to be a kind of mini-Carlyle Group. (Carlyle has pioneered the art of transforming former government officials with connections to defense and national security into businessmen.) But Fortress America is a backward step in access capitalism. Rather than seeking to raise cash from smart money as Carlyle does, it's going after the dumbest money out there: people who are willing to write blank checks to a company that lacks meaningful assets, a track record, or a well-articulated business plan. As it forthrightly acknowledges in its prospectus, Fortress America is a classic "blank-check" company. A group of investors has set up a shell company with virtually no assets or operations. They will hold an IPO to gain the cash or currency needed to go buy companies.