Tuesday, August 25, 2009

Michael Chertoff on His New Firm

Homeland Security Today
June 1, 2009
interview with David Silverberg

April 28, 2009

Offices of Covington & Burling, Washington, DC.

Q: Tell me about The Chertoff Group.

We just opened our doors in the last couple of weeks. There are six principals. We’re in the process of negotiating to add two or three senior staff people to fill out our roster. We may bring in an additional principal or two in the not-too-distant future.

But right now it’s myself as chairman and founding principal, Mike Hayden, Paul Schneider who was, as you know, my deputy before that was head of acquisition for NSA and the Navy in the Clinton administration, Admiral Jay Cohen, who was head of technology and before that head of technology for the Navy, and Charlie Allen, of course, who was our head of intelligence and before that was pretty much head of everything you could be for the CIA and was head of national collections. Finally, Chad Sweet, who was my chief of staff, a former Goldman Sachs banker and before that a government person, is our chief operating officer. A person who is hands-on and chief of operations.

The idea is that we wanted to bring together a really unparalleled team of experienced homeland security architects and people who could look at the issue of homeland security as broadly as possible, including the intelligence side, the acquisition side, the technology side, the policy side and the operations side. And among the six of us we pretty much have all of those things in DHS, in DoD, and the Department of Justice, law enforcement and finally, in the intelligence community. So we have pretty much every element of homeland security covered.

Q: Who are your potential clients?

Let me take a step back and ask: What is homeland security? We in the government and those who have spent a lot of time on this do have a clear vision of what homeland security is and we understand it’s not the same as defense, it’s not the same as law enforcement, although it partakes of elements of those as well as things that are neither.

What you find when you get out into the private sector, and I found this pretty rapidly after I left, is that there’s a lot of uncertainty in the private sector about what homeland security is. In fact, there’s a lot of uncertainty in foreign governments about what homeland security is. They know they need it but they’re not quite sure what the doctrine is, how it differs from defense. Well, we know that you’re not going to treat every homeland security problem like a military problem because you’re not going to use the military to police your own country.

At the same time, the nature of the issues that you deal with are broader than just police issues or emergency responder issues. There’s an obvious need to fill the gap and cover a system of homeland security in a way that is end to end that is not covered by the defense community or the law enforcement community when they’re [consulted?]

So that was really the felt need and perception and my experience talking to people in the hundred days that I’ve been out has been to confirm for me that the people feel the need to have clear doctrine and an understanding of what the nature of homeland security is and we haven’t got that in the private sector and they’re looking to get that.

What that translates into in a concrete level is a number of different opportunities. One is the opportunity of people who want to invest in homeland security, whether they are people in the defense space or people who are in business in general and they’re not quite sure how to evaluate the investments. There are many great opportunities out there, many great technologies but picking an isolated technology doesn’t tell you how it fits into the system or whether it’s a value or not. Some technologies may be great but they may not perform a [?] function.

As many of the principal architects of homeland security and the doctrine we have a pretty good feel for how to look at problems end to end and then to anticipate problems where there may be technologies that fit into that problem solution in a way that’s not just throwing technology at an issue but fits into an integrated scheme to accomplish a mission. So, working with investors, defense contractors and others who either want to organically grow into homeland security or want to make acquisitions, I think we’ve got a really unique value and perspective that we can add in terms of how things fit in terms of an overarching strategy.

On the other side of the spectrum, obviously, there are also those who worry about their own security, whether corporations, state and local governments, international entities, even including some foreign governments and they want to understand: How do they protect themselves, whether against physical threats, cyber threats or a combination of the two. It can be against all kinds of hazards, not just against terrorism. It can be transnational crime, it can be disasters, it can be swine flu. And so where we, again, have a special perspective, is because we understand the entire 360 perspective, the kinds of threats you face and how you respond to them. I think we have the opportunity to advise people on those kinds of challenges.

I was talking to someone today, a potential client, about how they look at setting up their business, a particular global business. There are certain obvious things they need to think about but there are certain things that aren’t obvious and often people who are experts in particular areas focus on the threat to the area of their expertise, but no one stands back and looks at the entire enterprise and says: “You know, you’re looking at this, but you’re not looking at this.”

For example, in the area of cyber: People might think about how they’re protecting against a network intrusion but they’re not thinking about a physical failure, whether it’s a natural disaster or some kind of physical attack. So again, because of the breadth of our experience and skill set in the area, I think we bring a special perspective to those kinds of problems.

Q: Do you have a client roster already?

We have some clients who—I’m not going to publicly disclose—but we’re working with clients on both the acquisition or entry-to-the-marketplace side, and the protection side.

Q: Can you say how many?

I don’t want to say.

Q: Are you incorporated?

We’re incorporated, we moved into our new space about a week ago, we’re actually, our website is being built, we’re about to get our new phones, and a special phone, lines, and we just got our service for our electronic communications. So we’re launched and we’re ready to move down the runway.

Q: Whom do you consider your competition?

There are a lot of people with experience and people tend to orient themselves in different ways. There’s a very fine firm, for example, who work in the area of law enforcement consulting and there’s a little overlap. There are a number of firms that do political risk and we are going to do some of that and again, there’s going to be some overlap. There are some firms that do some defense and again, there will be some overlap.

I think what’s a little unusual about us is the number of people and the range of skill sets in one place. When we thought about setting this up, I didn’t want to be just a former secretary of homeland security, a former Department of Justice [official] adding a couple of staff. But I thought that there would be real value of complementing my experience with the experience of leaders in the area of intelligence, cybersecurity, acquisition technology because there are people who …some of our principals are deep in some areas, some are deep in other areas but among us we cover the waterfront about as well as anybody that I’m aware.

But there’s a lot of fine firms out there and we look forward into entering into the space.

Q: Did you think of joining an existing firm like Ridge or Cohen?

I thought about joining an existing firm but it was kind of interesting and exciting to think about forming a firm of my own and recruiting principals and being able to devise a firm culture from the ground up. And the culture that we have is one that is—without getting into the details—in terms of the way we’re organized and in terms of compensation, is focused on a team effort. The idea is to bring multiple perspectives and skills to problems and to work collaboratively. That’s kind of how we did it at the department when I was there. I think it’s the wave of the future in terms of modern businesses and I think it gives us a much more rewarding experience from a personal standpoint but also creates a better client experience because the client knows that everybody’s committed to producing the result.

We’re also not a highly leveraged firm. We’re not looking to have a few principals and then a huge team of junior people. We’re more like—I describe this as a cylinder. We have a pretty high number of principals relative to the size of where the firm is going to be because we’re really looking to add intellectual capital, not to just grind out a lot of paperwork or just to churn hours but to come in and provide high-value, focused advice based on experience with staff support but not with the staff overwhelming what the principals are doing.

Q: Tell me about your transition back to the private sector?

We’re sitting in my law firm now so the second piece of what I’m doing is senior “of counsel” at Covington & Burling. The one thing we can’t do in my consulting practice is practice law.

It’s been, really, an enjoyable transition for me. I was in private life and the private sector for eight years between the time that I left government in 1994 and when I came back in 2001 and I’ve always enjoyed working with clients and the different kinds of client problems and challenges. And, of course, in this new endeavor I actually built a business, which is exciting. So although, obviously, the people I worked with at DHS were terrific and I miss a lot of the great experiences I had with them, it’s been a fascinating experience to make the transition into being an entrepreneur. And, taking a lot of skills and experiences, which I and my colleagues were able to hone over the last four years and translate those to benefit—on the private side—which I think also benefits the country, to be honest.

Q: Any one particular thing that you miss about being out of office?

Well, I used to be able to cut through the White House to be able to get from 17th Street over to 14th Street and I can’t do that any more—I can’t do it in my car.

Less facetiously, it was a great privilege serving the country. We got to work on enormously consequential things with really bright, committed people and I treasure that experience. I did it for four years and considering the prior four years, I really did it for eight years of public service; I’ve spent most of my life in public service.

I’m a believer that turnover is a good thing. It’s good for the individual because you get to recharge your batteries and it’s good for the government because you get fresh perspectives. So, from my perspective, I felt fulfilled in my four years as Cabinet secretary and I was in the right place to move on to do something else.

Q: What do you see as the upcoming trends in homeland security and industry and the way business is done?

What you’re seeing in the last three, four months is that we have not seen an end to history or an end to homeland security and there’s people taking the position: “Oh, we haven’t been attacked, time to move on.”

Well, first of all, the terrorism threat remains real. Pakistan is certainly experiencing a certain amount of disorder in the border areas and has worsened recently and it’s still back and forth and in the balance. That, of course, has very serious implications for homeland security in terms of expanding the safe havens for terrorism. We’ve seen piracy in Somalia and in the Indian Ocean. That’s not terrorism but it’s kind of a kissing-cousin to terrorism and it reminds you that, once again, ungoverned spaces create problems. We’ve seen the violence in Mexico, which is posing a real problem to the government of that country. I was talking about that the last couple of years in my tenure in DHS; we put together a response plan, a contingency plan and that has remained as urgent an issue as ever. We put together an extended pandemic flu plan and—what do you know?—in the last week we’ve seen a pandemic flu become a potential issue to be dealt with. And of course, other challenges: Transnational criminal activity, we’re getting into hurricane season. All these remain.

People think we’re in an economic crisis and therefore we can ignore homeland security, allowing themselves the luxury of believing that you only have to deal with one problem at a time. In fact, problems tend to come in waves and they tend to reinforce each other. For example, as this flu process moves forward, is it going to have an impact on the economy? How do we deal with that so as to minimize the impact on the economy? You don’t have of luxury of saying: “I’m going to deal with one issue or the other issue.”

I think that security remains urgent, I think that the flu outbreak is reminding businesses again of the importance of planning, planning for resiliency, planning for what do you do if people in fact stay home either voluntarily or because they’re told to stay home to minimize their travel or their attendance in crowded places and managing these issues is much easier if you have a plan and you’ve worked with a plan.

So, I get asked the question sometimes: “Don’t you think that people are not going to want invest in homeland security because it doesn’t go to the bottom line?” Nothing wipes out the bottom line more quickly than a disaster, whether it’s an act of terror or a significant criminal event, a cyber attack, or an actual disaster or a medical disaster. So it’s like putting your money in the bank and getting an insurance policy. If you want protect your assets, which I think goes very much to the bottom line, you’ve got to make sure you have your security protected.

I’m pleased that the department is continuing to move forward on many initiatives that we got underway, as of today—which is April 28th—it looks like the planning that was done with respect to pandemic flu is paying off in the way the government has responded. Obviously, we have to see how that moves forward. I think it’s important to support Mexico, which the administration is doing and I’m pleased to see that. So, in many respects there is good progress that my successor is making in building on what we’ve done at the department.

I’m particularly gratified that St. Elizabeth’s has got funded, now the department is going to get a headquarters that will make it easier to manage a large enterprise.


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