Heathgate, General Atomics and Neal Blue
Here is a short video from ABC TV's 'Hungry Beasts' program about Neal Blue, chair and CEO of General Atomics. GA owns Heathgate Resources which operates the Beverley uranium mine in SA.
From Hungry Beasts:
Earlier this year (2009) the Australian Financial Review published their ‘Covert Power’ List featuring the major string-pullers in Australia – big guns like Therese Rein. If you’ve ever wondered who has the real covert power in Australia, you might be interested in reclusive American billionaire Neal Blue. Neal is CEO and Chairman of US arms manufacturer General Atomics, and the man behind Australia’s newest uranium mine, [Beverley] Four Mile.
Former officer hired to spy
Richard Baker and Nick McKenzie, The Age, October 17, 2008
THE owners of Australia's biggest uranium mines paid a former undercover Victoria Police officer to infiltrate environment and Aboriginal groups in Melbourne.
The former police intelligence unit officer, known as Mehmet, was hired by North Ltd — before its takeover by Rio Tinto in late 2000 — and US nuclear and defence giant General Atomics to spy on Friends of the Earth, Jabiluka Action Group, Nuclear Free Australia, radio station 3CR and radical Melbourne bookstore Barricade Books.
Mehmet first infiltrated the Jabiluka Action Group and Friends of the Earth in 1998 as part of an undercover police operation. It is not known why police chose to infiltrate and monitor the groups, though both were involved in anti-uranium protests.
After leaving the police in late 1999 to set up his own security company, Universal Axiom, Mehmet retained his covert police persona as a Kurdish migrant concerned about indigenous and mining issues.
He was able to stay inside the groups and provide information to the mining companies about campaigns being planned against their respective uranium mining operations until his cover was blown in mid-2001, when Friends of the Earth received an anonymous phone call warning about Mehmet's true identity.
Deputy Police Commissioner Simon Overland told The Age it was a breach of the Police Regulations Act for an officer to use a covert identity after leaving the force or to use information gathered in the course of official duties for private gain.
"It's a criminal offence and we would take that very seriously. We have prosecuted people in the past and we will continue to do so when they do that," he said.
Mr Overland also acknowledged some covert operations by Victoria Police in the late 1990s were not as accountable as they should have been.
"It is pretty much a matter of public record that there were issues with the way activities in this area operated in the past," Mr Overland said. "But I do make the point that it is eight years ago … I want to make it very clear that that is not the way we do business now."
Friends of the Earth spokesman Cam Walker said there was no justification for police infiltration of the group in the late 1990s, especially as it was already holding regular meetings with the police intelligence unit at the time to discuss its campaigns.
Mr Walker said it was unethical for mining companies to pay the former undercover officer to continue to spy on groups opposed to uranium mining.
"It is inappropriate on so many levels. We are a membership-based community group," Mr Walker said. "We are no risk of violence against the police or the companies. We see this as a criminal act, particularly as the guy came to be here in the first place as a police officer."
Former North Ltd executives have confirmed the engagement of Mehmet's company, Universal Axiom, as well as two other corporate intelligence firms, British-owned Control Risks Group and a Melbourne firm headed by another former undercover Victoria Police officer.
"We were facing a very strong, active protest outside our Melbourne headquarters because of Jabiluka and we needed security advice to protect our staff," a former company executive said.
"We were also facing a takeover and we had to take steps to ensure the security of our internal information and boardroom discussions."
It is believed only a handful of North Ltd executives were aware of the engagement of Mehmet, who was first hired to assess the quality of information supplied by other private intelligence firms.
A spokesman for Rio Tinto, which acquired North Ltd in late 2000, said the company was not aware of North Ltd's engagement of security consultants.
"We hire security companies and consultants to support our operations worldwide," the Rio Tinto spokesman said. "However, the purpose of these contracts is solely for the protection of the group's assets and personnel, it is completely defensive. These services are not used for infiltration of competitors or anyone else."
US company General Atomics and its Australian subsidiary, Heathgate Resources, declined to answer questions about Mehmet, who also provided personal protection to visiting General Atomics executives.
A Heathgate spokeswoman said the company was privately owned and had a policy of not responding to media questions.
Peter Garrett's U Sky Mining
Chain Reaction #107, November 2009, www.foe.org.au
And some have sailed from a distant shore
And the company takes what the company wants
And nothing's as precious, as a hole in the ground
-- Midnight Oil, Blue Sky Mining
Federal environment minister Peter Garrett justified his July 14 decision to approve in situ leach (ISL) uranium mining at Beverley Four Mile in South Australia with the claim that he had "set the bar to the highest level" and was applying "world's best practice" environmental standards.
Thus Garrett added another chapter to the history of spin surrounding ISL mining. He has not insisted on rehabilitation of polluted groundwater at Beverley Four Mile. Moreover, he did not insist on an Environmental Impact Statement from the mining proponents but allowed a lower level of assessment, a Public Environment Report. On both counts, Garrett failed to live up to his own rhetoric.
ISL mining involves pumping an acidic solution into an aquifer, dissolving uranium and other heavy metals and pumping the solution back to the surface. After the uranium has been separated, liquid waste – containing radionuclides, heavy metals and acid – is simply dumped in the aquifer.
Proponents of ISL mining claim that 'attenuation' will occur over time − that the groundwater will return to its pre-mining state. However there is considerable scientific uncertainty about the future of ISL-polluted groundwater and uncertainty about the timeframe for attenuation if it does occur. A 2003 Senate References and Legislation Committee report recommended that "mines utilising the ISL technique should be subject to strict regulation, including prohibition of discharge of radioactive liquid mine waste to groundwater". Garrett has rejected that Senate Committee recommendation.
Geoscience Australia has been commissioned by the federal government to carry out a review of ISL mining. Its draft guidelines include consideration of alternatives to dumping liquid waste in groundwater − specifically, it mentions the option of "evaporation to solid residues and disposal on site (or at a low level radioactive waste
repository)". Garrett had the draft report from Geoscience Australia before making his decision but still chose to allow liquid waste to be dumped in groundwater.
Following the 2003 Senate inquiry, The SA Labor government commissioned a study by scientists from the CSIRO and the Australian Nuclear Science and Technology Organisation. The study had all the hallmarks of a whitewash yet still acknowledged that attenuation is "not proven" and could only cite a period of "several years to decades" for it to occur. Yet the companies proposing to use ISL mining at Beverley Four Mile want to absolve themselves of any future responsibility for the site just seven years after they have finished mining.
ISL uranium mining is used at the Beverley uranium mine (10 kms from Beverley Four Mile) and it is the mining method proposed for Beverley Four Mile, Oban and Honeymoon. The future of ISL mining is plain to see − short-lived mines leaving a lasting legacy of polluted aquifers.
In addition to the pollution of groundwater, surface spills and leaks are a common feature of ISL mining. The SA Department of Primary Industry and Resources lists 59 spills at the Beverley mine from 1998-2007.
The horrendous environmental legacy of ISL mining in former Soviet and eastern European states is dismissed by ISL proponents as being a result of Soviet-era mismanagement and neglect. But the same problems are evident in Australia: captured bureaucracies; slack regulation; Orwellian doublespeak (e.g. 'world's best practice'); secrecy (for example, the Australian Conservation Foundation had to appeal to the SA Ombudsman to get Heathgate to release crucial information about the Beverley mine, such as the Groundwater Monitoring Summary); and questionable corporate practices (for example, Heathgate employed a private investigator in the late 1990s who attempted to infiltrate Friends of the Earth).
Adnyamathanha Traditional Owners
Garrett noted that there is an agreement between the mining proponents and the Adnyamathanha Traditional Lands Association in relation to Beverley Four Mile. But he knows that the agreement falls a long way short of free, prior and informed consent. Traditional Owners have no right of veto under SA or federal legislation.
In a July 15 statement, Adnyamathanha Elders Enice Marsh and Geraldine Anderson called on Garrett to reverse his decision at least until the completion of an investigation being conducted by the SA government into long-standing Aboriginal heritage concerns raised by Adnyamathanha Traditional Owners.
Enice Marsh said:
Adnyamathanha Elders wrote to [SA Aboriginal Affairs Minister Jay Weatherill] weeks ago raising our concerns, and he promised to do an investigation into the Four Mile proposal. His jobs is to make sure heritage laws are followed. If he won't use his powers he should be sacked. ...
"We have no decision making power under Native Title, we have been forced into signing a Native Title Mining Agreement that gives us royalty compensation. If we refused to sign it the proponent has the right to take the matter to the ERD [Environment, Resources and Development] Court and cut us out of the process altogether. Aboriginal people have no rights under Native Title to protect out heritage. Look at what's already happened and how people have just given in to the pressures. ...
"What more can we do to protect our land from being raped by mining companies that are allowed to pollute the water and carve up the waterways, even contaminate the soil with radioactive waste? The general public need to know what is going on and ordinary people need to take action to stop the abuse of our environment."
In addition to their battle with state and federal governments and mining companies, some Adnyamathanha Elders are battling within their own community. They have formed an Elders Group as a separate forum from the Adnyamathanha Traditional Lands Association. According to Enice Marsh: "There have been many attempts over the past 10 years to try and bring greater accountability to what's happening in Native Title, and to stop the ongoing assault on our Yarta (country). Many of us have tried with very little resources, limited understanding of the legal system and environmental laws, and despite a mountain of bullying, lies and deceit from mining companies, lawyers, and self-inflated thugs in our own community who dare to call themselves 'leaders'."
Even those Adnyamathanha custodians who supported the agreement to mine Beverley Four Mile seem unimpressed with the process. Vince Coulthard, chair of the Adnyamathanha Traditional Land Association, told ABC radio on July 17: "Well I think people have come to the understanding that if they didn't support it, it's going to happen in any case so the best thing to do is to negotiate an agreement."
Traditional Owner Geraldine Anderson said: "This Labor Government is saying sorry to the Stolen Generation, on the other hand they're taking the way of destroying our sites and taking our identity away. So when's this going to stop?"
If and when the abuse stops, it will be despite and not because of Peter Garrett. Presumably Garrett is prepared to sell out on long-held principles in the pursuit of broader political goals. He ought to have asked Adnyamathanha custodians if they are willing to be sacrificed in the pursuit of his goals and ambitions.
The Four Mile lease is owned by Quasar Resources (an affiliate of Heathgate Resources) and Alliance Craton Explorer, and the mine will be operated by Heathgate Resources (an affiliate of US weapons and nuclear energy corporation General Atomics).
The Sydney Morning Herald reported on July 16 that James Neal Blue, a "colourful but reclusive billionaire", is a director of Quasar Resources and chair of General Atomics. Blue first came to prominence in the 1980s as a self-described "enthusiastic supporter" of US involvement in the covert war against the Nicaraguan government.
The Beverley Four Mile deposit is estimated at 30,000 tonnes of uranium. Used in power reactors, that amount of uranium would produce 4,500 tonnes of high-level nuclear waste (in the form of spent nuclear fuel) and enough plutonium to build 4,500 nuclear weapons.
The major customer for the uranium is likely to be the US, a nuclear weapons state which has no intention of fulfilling its binding disarmament obligations under the Nuclear Non-Proliferation Treaty and which has for many years blocked progress on the Comprehensive Test Ban Treaty and the proposed Fissile Material Cut-Off Treaty.
By Barney Gimbel, writer
October 31, 2008
Neal Blue, CEO of defense contractor General Atomics, has transformed the way the U.S. military fights wars. But it is his take-no-prisoners approach to business that has made him infamous.
(Fortune Magazine) -- It's hard to pin down exactly when Neal Blue decided to start building weapons. It was probably in the early 1980s, around the time he bought much of Telluride, Colo., but before he began mining uranium and sometime after he gave up growing cocoa and bananas in the Nicaraguan jungle.
Back then Blue was a Denver oilman and real estate investor who happened to spend a lot of time thinking about how to defeat communists. He was particularly interested in seeing the overthrow of the Soviet-backed Sandinistas, who had recently seized control of Nicaragua. He had known the Somozas, the ousted ruling family, from his cocoa and banana days, and, well, he hated Reds.
Crippling the regime, Blue figured, was simple: just send GPS-equipped unmanned planes on kamikaze missions to blow up the country's gasoline storage tanks. "You could launch them from behind the line of sight," he recalls matter-of-factly, "so you would have total deniability."
Blue pauses, leans back in his white-leather swivel chair, and quickly adds that he had nothing to do with any of the Reagan-era operations there - nor, of course, did he launch his own attack. We are sitting in his small, sunny office near San Diego, not far from the Navy's so-called Top Gun Academy.
Behind him unfolds a rambling campus of 1950s-futuristic buildings, home to General Atomics Technologies Corp., parent of one of the most important defense companies in the world and the centerpiece of Blue's privately held - and secretive - business empire. Over the course of his five-decade career he's built a sprawling global business that spans four continents and enriched his family. But he has also made enemies and infuriated customers.
Blue is one of the last of the old-school industrialists, a breed that is all but extinct in professionally managed, post-Sarbanes-Oxley corporate America - a modern-day Howard Hughes (minus that whole starlet-dating, obsessive-handwashing part).
Through a combination of entrepreneurial instincts, bold legal maneuvers, and all-out bullying, Blue and his younger brother, Linden, have assembled assets worth billions of dollars (it's all private, so no outsider knows exactly how much), including an environmental cleanup firm in Germany, extensive uranium mines in Australia, real estate in Colorado, substantial oil and gas interests in Canada, and an airplane de-icing company in Iowa.
But General Atomics is best known for manufacturing one of the most important tools in modern warfare: the Predator, an unmanned spy plane that commanders in Iraq and Afghanistan credit with helping them fight insurgents. (The Pentagon recently announced that the Predator would increasingly take over the hunt for Osama bin Laden.)
"I once asked Neal how he does it," says Harold Agnew, the former director of Los Alamos Scientific Laboratory, who sits on GA's board. "And he said, 'My golden rule is to always buy straw hats in the winter.'"
Blue is a razor-sharp businessman, and interviews with dozens of Blue's associates and sparring partners suggest that he will do anything to maximize profit - even if it means violating agreements. And while some who have locked horns with him simply shrug their shoulders and move on, a few have taken him to court for breach of contract, fraud, and racketeering.
Blue admits to breaking contracts but won't comment on the rest. In Telluride, not far from where he grew up, the town even seized much of his land after a bitter fight with residents.
"I have used his house there periodically," says David Goldberg, Blue's friend and longtime business advisor, "and I have always advised my guests never to sit on the porch for fear of being 'duly rewarded' by the passing populace." (Translation: Duck and cover.)
Neal Blue is 73 years old but could easily pass for 50, thanks to his boyish face and fit build. Although shy in public, he's a good storyteller and speaks with authority about everything from John Locke to nuclear physics. Conversations can easily turn into often mind-bending monologues that last hours - a phenomenon some of his employees call "Blue-speak."
Blue's father was a real estate investor, and his mother the first woman to be Colorado's treasurer. He was a born opportunist. One high school friend remembers that during a public-speaking class he unabashedly played to the teacher's Catholic faith: When Blue was to practice giving an award, he presented a national championship trophy to the University of Notre Dame. When he had to talk about great architecture, he picked the Vatican.
"Everyone in the class would just roll their eyes," says Norman Augustine, former chairman of Lockheed Martin, who grew up with him in Denver. "But Neal got an A, and the rest of us didn't. That was vintage Blue."
It was also vintage Blue, friends say, to finance a road trip from France to India with his Yale buddies by selling articles to the New York Times and persuading Chrysler to donate a Dodge station wagon.
Blue outdid himself the following summer when he and Linden decided to fly a small plane over the Andes Mountains. It didn't matter that they didn't yet know how to fly. "Those were just details," Blue says with a wry smile.
That exploit, which was featured on the cover of Life magazine in 1957, laid the groundwork for the Blue brothers' future. After hearing that cocoa farming was a way to make money quickly, the brothers arranged financing to buy a slice of Nicaraguan jungle on the Caribbean coast, built an airstrip, and started planting.
While that venture failed, they had more success investing in sugar plantations, petroleum, and real estate. Neal was always looking for those straw hats. One morning in mid-1985 he read in the Wall Street Journal that Chevron (CVX, Fortune 500) was looking to sell some of the assets of newly acquired Gulf Oil. Sensing a bargain, he called Goldberg, his trusted advisor.
Soon Goldberg and the Blues flew to San Diego to look at an odd research entity that came with Gulf Oil. Founded as the nuclear think tank for General Dynamics (GD, Fortune 500), the unit, called General Atomics, had lost direction after being sold and resold to various oil companies. It built small nuclear reactors and pioneered a gas-cooled reactor for power generation - a technological coup but a commercial failure. The company also ran the country's largest fusion reactor.
"Neal was exceedingly unimpressed by it," says Goldberg. "But he was smart enough to spot it as a terrific real estate opportunity.... And he was smart enough to realize it might even be a place where he could do something with his ideas of transforming military doctrine."
Blue has long believed that when it comes to innovation, the military is almost always wrong. The armed forces are always buying overpriced technology designed for the last war. During his first days at General Atomics in 1986, Blue gathered the company's employees and laid out his vision: General Atomics would be remade in the image of the Hughes Aircraft Corp., back when its founder was still running it.
And like Howard Hughes, who often used his companies as vehicles for pursuing his obsessions, Blue soon announced that the company would begin research on his pet project: unmanned aerial vehicles. The company's employees, mostly engineers and nuclear physicists, were shocked.
Blue had originally conceived the aircraft as kamikaze strike weapons or as cheap cruise missiles, but after the Pentagon put out a call for an unmanned surveillance plane in 1993, Blue changed his mind. To execute his vision, he hired Tom Cassidy, a retired Navy admiral and commander of the service's elite Top Gun Academy. (When the producers of the Tom Cruise movie needed a gruff admiral for a bit part, they cast him.)
Cassidy's team stuck to off-the-shelf parts, using cameras made for traffic helicopters and a Bombardier engine originally designed for snowmobiles. He named it the Predator.
Air Force officials were initially unmoved: After all, many of them were former pilots - and no pilot has ever picked up a girl in a bar by bragging he flew a remote-controlled plane. More important, the Air Force was sinking hundreds of millions into a next-generation fighter jet, the F-22.
But the Predator was cheap (the original Predator cost a mere $10 million per plane) and scarily effective at providing intelligence. It was quiet and could fly for a full day at 25,000 feet, recording and relaying real-time video to commanders on the ground. Current versions even shoot Hellfire missiles.
Although the first Predator was launched during the mid-1990s Balkans conflict, it wasn't until the wars in Iraq and Afghanistan that military commanders integrated it into their arsenals.
"It is difficult," says Dyke Weatherington, the Pentagon's deputy director of unmanned warfare, "for us to keep up with the demand for these from the field."
While GA refuses to disclose its revenue or profits, the aeronautics business, which operates as a separate company, has sold more than $2.4 billion worth of drones and other equipment to the U.S. military in the past decade.
There are many sides of Neal Blue. There is the charming side he shows to reporters - military innovator, gutsy entrepreneur, and learned scholar. And there is the relentless side known only to his customers and the people who survive working for him.
ConverDyn, a uranium-processing subsidiary that GA co-owns with industrial giant Honeywell, recently sued Blue (that's right, his own company sued him) and described his business practices as "fraudulent, malicious, and willful and wanton."
This and other related lawsuits highlight Blue's unique blend of questionable conduct and business foresight. He got into the sugar business in the early 1970s before it hit its all-time high. He invested in natural gas when prices were controlled, and he minted money after it was deregulated.
And he recognized that uranium was a commodity that was so "out" that it had to be "in" one day. During the 1980s he bought tracts of land in the Australian outback when mining uranium there was banned. He gambled that a new administration would rewrite the laws to his advantage, then patiently waited a decade to be proven right.
In 2001, when Blue started producing the radioactive metal, it sold for approximately $8 a pound on the spot market. Three years later the price had about doubled, but Blue was locked into long-term contracts to sell much of the metal to utilities at close to 2001 prices.
Realizing the company was losing a tremendous opportunity, his subordinates allegedly devised a plan. An internal memo prepared by General Atomics' uranium subsidiary, Heathgate, in March 2004, recommended canceling or restructuring the contracts. The memo presented four options for backing out of the various deals, ranging from an intentional failure to deliver to allowing the subsidiary to file for bankruptcy.
Blue's company chose a controversial middle ground. It would approach customers and ask for concessions, saying its cost of production was higher than expected and that the mine was producing less than it had anticipated. Some customers were handed documents confirming those assertions and suggesting that if the contracts weren't renegotiated, Heathgate would have to file for bankruptcy.
What the companies weren't told was that, according to former employees, Blue had allegedly directed the company to increase its costs. Plus the company couldn't immediately go broke, since GA had agreed to continue providing Heathgate financial assistance - another fact conveniently left out of reports to customers.
Many of Blue's longtime employees saw this as tantamount to railroading customers. Two of Heathgate's Australian directors, Mark Chalmers and David Brunt, were so worried about the legality of what they were doing that they consulted an outside attorney. That lawyer advised them that implementing the plan could be considered a "conspiracy to defraud and the commission of at least one criminal offense by each director, which would be very difficult to defend." Soon Chalmers and Brunt were no longer employed by Heathgate.
Most customers agreed to renegotiate. But as the price of uranium continued to skyrocket - it had reached over $40 by early 2006 - Heathgate again told its customers that it was experiencing higher than expected production costs, lower than anticipated volumes, and did not have enough uranium to fulfill its orders.
The lawsuits allege that these contentions were grossly exaggerated. That year, Blue's executives told Chicago-based Exelon (EXC, Fortune 500), a $19-billion-a-year utility, that Heathgate would not deliver any uranium unless Exelon released them from the rest of the contracts. When the company refused, Heathgate and GA informed it that they would make no more deliveries. Exelon sued.
But Blue figured that didn't matter. He says the most they could sue him for was the "maximum liquidated price," or the amount of uranium times the price in the contract. In the meantime he could sell that disputed metal on the spot market for prices that peaked last year at nearly $140 a pound.
Exelon's lawsuit against General Atomics' parent company was settled in the spring for about $41 million, according to Exelon's SEC filings. The amount Blue made selling that same uranium on the spot market? More than $200 million, by some estimates.
While Blue won't discuss the specifics of the case - the settlement agreement is confidential - he doesn't seem concerned by the allegations in the lawsuits. In fact, he is utterly unrepentant.
"If you're a profit-center manager, you look at what are your contractual obligations," Blue says. "It's not your obligation to give as much as possible from your company to someone else.... It made more sense to, in essence, just pay the fine."
One afternoon this past summer, Blue pulled up in his brand-new silver Volkswagen outside one of his company's manufacturing facilities north of San Diego. It was 85 degrees, and he was wearing a short-sleeved blue dress shirt and dark-gray pants. Inside the warehouse were row upon row of remote cockpits for Predators.
From takeoff to landing, the Predator can be controlled with a joystick by a pilot sitting in a trailer thousands of miles away. But the original Predator "cockpit" looked more like a computer console than the deck of a fighter jet.
The new prototype Blue was here to inspect aimed to fix that. Indeed, it looked like a cross between a high-end videogame and the multimillion-dollar simulator airlines use to train pilots. But the system was buggy, and the video was so jittery that it hurt your eyes to look at it.
Blue's face dropped. "This shouldn't be like this," he snapped at a young programmer who was demonstrating the machine. His voice rose. "This is totally unacceptable. Wouldn't you agree? What is your problem? Why can't you get this stuff right?"
The pressure of GA's success - and the challenges Blue is facing in his other operations - may be taking a toll. The aeronautics business has grown so fast that it has apparently experienced production problems.
Northrop Grumman (NOC, Fortune 500) recently beat it out for a $1.6 billion contract to produce drones for the Navy. According to a recent report by the Government Accountability Office, the Navy had "substantial doubt" that the company would deliver the drones as promised. The Predator maker says the GAO report references "select instances of past performances," and it has since increased resources and staffing.
"That's just part of the capitalist world, which has provided so much to so many," Blue says. "But I suppose the fundamental essence of our portfolio, aside from some measure of economic balance, is 'Okay, how do you make a difference?' And in my case, it is in developing transformational technologies that could change the world. The rest of all this doesn't really matter."
It is a prime example of Blue-speak - a measured but completely unremorseful response that belies the sharp elbows and strong-arm tactics Blue often uses to achieve his goals. And it is perfectly in keeping with his stubbornly old-fashioned brand of doing business.
As Howard Hughes said, "Once you do consent to some such concession, you can never cancel it and put things back the way they were." He didn't have an heir, but Neal Blue sure comes close.
Arms maker behind uranium mine settled fraudulent pricing case
Nick O'Malley and Ben Cubby
Sydney Morning Herald
30 Jul 2009
THE arms manufacturer that received approval through an Australian subsidiary for a new uranium mine in central Australia this month was sued for fraudulently hiking uranium prices and manipulating costs at a neighbouring mine.
Neal Blue, owner and chairman of General Atomics, was accused in the proceedings of instructing executives at his Australian subsidiary, Heathgate Resources, to prepare false reports for customers, telling them costs at Heathgate's Beverley uranium mine were higher than anticipated, and production lower.
The strategy was allegedly calculated to break contracts with US companies buying Australian uranium from Mr Blue's company at low, fixed prices. According to court documents, the plan was hatched in 2004 when world uranium prices spiralled, as nuclear power came to be seen as a way of achieving greenhouse gas cuts.
Those companies that did not agree to allow Heathgate to break its contracts and increase prices were allegedly told Heathgate would file for bankruptcy. Mr Blue contested the claims and the proceedings were eventually settled.
Mr Blue was not available to speak to the Herald, but when questioned about the case by Fortune magazine last year said: "If you're a profit-centre manager, you look at what are your contractual obligations. It's not your obligation to give as much as possible from your company to someone else ... It made more sense to, in essence, just pay the fine."
The Illinois District Court case was settled last year. One of General Atomics's customers, Exelon, received $US41 million from the company. It is estimated Mr Blue made $US200 million by breaking the contracts and selling uranium on the spot market as commodity prices rose.
As Mr Blue's strategy unfolded, two Heathgate directors, Mark Chalmers and David Brunt, were so concerned they hired a lawyer who advised "the plan could be considered a 'conspiracy to defraud and the commission of at least one criminal offence by each director, which would be very difficult to defend'."
Soon after, the men's relationship with Heathgate ended. Today they are respectively managing director and director with Uranium Equities. Neither would comment for this story.
The Resources Minister, Martin Ferguson, and the Environment Minister, Peter Garrett, who approved the Four Mile uranium mine, were unavailable for comment yesterday.
General Atomics is best known for making the Predator drones playing an increasing role in wars in Afghanistan and Iraq, but it also has interests in uranium processing and mining.
Four Mile mine will be owned by a General Atomics subsidiary, Quasar Resources, and an Australian-owned minerals explorer, Alliance Resources.
The company with the right contacts
Sydney Morning Herald
30 Jul 2009
GENERAL ATOMICS, the company behind the nation's newest uranium mine, has been patiently lobbying Australian politicians for more than a decade to encourage it to allow mining, to develop nuclear reactors and buy high-tech weapons.
The company has ferried members of the US Congress, their families and aides to Australia for high-level talks. It has paid for Labor MPs to travel to the United States to see its weapons and nuclear reactors first-hand, as well as hosting taxpayer funded trips.
In 1999, a federal Labor opposition frontbencher, Martyn Evans, was flown to the US for a four-day visit to the General Atomics headquarters in San Diego. This was at the expense of Heathgate Resources, the General Atomics subsidiary that operates the Beverley Uranium Mine in South Australia.
To put its case for more mines and more weapons in Canberra, the company uses Hawker Britton, a lobbying firm that includes many former ALP staffers and MPs.
But among the biggest supporters of uranium mining expansion is the South Australian Premier, Mike Rann, who was on the Greenpeace executive that launched the Rainbow Warrior protest ship to try to block French nuclear weapons tests in 1972.
Mr Rann, who also chaired the Nuclear Hazards Committee of the ALP in the early 1980s when the party was opposed to uranium mining, now believes that modern mining techniques are safe enough. He travelled to Dallas to meet Mr Blue last year and said on his return that he was an "unashamed supporter" of uranium mining.
In 2006 the South Australian Treasurer, Kevin Foley, spent $120,000 travelling the US to meet leading arms manufacturers including General Atomics, but it was apparently not his first visit. The previous year he told South Australia's Parliament that he had already visited Mr Blue.
"I have visited the Beverley mine and, recently, in San Diego I met Mr Neal Blue, the chairman of General Atomics – an outstanding company that is producing uranium oxide from the Beverley mine. I only hope that further deposits of uranium can be found. The sooner we can find it, dig it up and get it out of the country, the better," he said.
Also in 2006, General Atomics flew a group from the US Congress to Australia, accompanied by company executives, to persuade the Federal Government to buy the company's Predator unmanned aircraft. The colourful group included a retired US Navy admiral, Tom Cassidy, a former pilot who had a cameo role in the Tom Cruise film Top Gun.
A report by the US Centre for Public Integrity found the trip cost $US184,000, and established that General Atomics was the biggest corporate sponsor of travel for US Congress officials since 2000.
The members of the US Congress on the Australia trip denied attempting to boost General Atomics sales on the trip, saying it focused on strengthening military ties and discussion on the war against terrorism. The Australian Defence Force tested a General Atomics robot surveillance aircraft that year.
As well as its interest in unmanned spy planes, General Atomics has employed human spies. Last year it was caught hiring a former undercover police officer turned private investigator to infiltrate Australian environment groups and report on their actions. The former officer was posing as a Kurdish refugee and feeding information back to General Atomics.
Digging dirt with a sledgehammer
Nick O'Malley and Ben Cubby
Sydney Morning Herald
30 Jul 2009
The weapons manufacturer who converted Labor's staunchest opponents to nuclear development has a controversial past, writes Nick O'Malley and Ben Cubby.
As a rule, Neal Blue's employees - past or present - don't like to talk about the boss. Not on record, anyway. Off the record, the same words keep coming up when they describe him. They say the man behind Australia's newest uranium mine is brilliant and tough, private and autocratic. They say he is ruthless.
"Look at Telluride," says one former associate. "That's who Neal Blue is."
Telluride is a ski town of astonishing beauty in the Rocky Mountains. In 1983 Blue, then making his first fortune in real estate, bought the valley floor beneath Telluride and, in 1998, moved to subdivide it and build mansions. Many objected and convinced the county to protect the land. After a string of legal battles a court decided that if Blue was paid $US50 million the county could keep its rolling green meadow.
The tight-knit community rallied to raise the money. Married couples cancelled honeymoons and donated their savings, sports teams passed the hat around, children sold lemonade. The county met the fund-raisers dollar for dollar and wealthy benefactors, including the actress Daryl Hannah, kicked in the last few millions. With days to spare the money was raised and the campaigners celebrated.
Blue wasn't bowed. He turned to the state legislature, which introduced a retrospective law preventing the county from resuming the land. A judge found the law unconstitutional and Blue fought that too, in the Colorado Supreme Court. He lost.
After 25 years had passed and about $US60 million was spent in compensation and legal fees, the valley floor was saved, but the town of Telluride was divided and its budget blown.
One of the campaigners was bewildered by Blue's ferocity. A judge involved in mediation told her the residents never understood that to Blue the issue was not the money but winning.
"That's what I'm saying," a former associate told the Herald. "He's just an asshole."
The battle for Telluride reveals much about Blue. It demonstrates his willingness to invest over the long term on long shots. His golden rule is said to be "always buy straw hats in winter". There is ruthlessness too, and tenacity. And the tale suggests that to Blue, now 74, the law is a weapon to be wielded.
Such single-mindedness emerged during the battle over a Blue-owned uranium processing plant on an Indian reservation in Oklahoma.
After a series of radioactive spills a nine-legged frog was discovered outside the yellowcake factory.
A government investigation eventually established the company had known for years that radioactive material was leaking and that radioactivity in water around the plant was at levels 35,000 times higher than US federal laws permitted.
After a toxic gas leak in 1992 it was finally closed. A clean-up of the site should finish by 2012.
Blue and his younger brother and business partner, Linden, first came to public notice in a picture on the cover of Life magazine in 1957. The two high school graduates are crammed into the tiny cockpit of the light aircraft they had just piloted over the Andes.
The same cover carries the headline "Soviet inroads in Arab world". This too is part of the Blue story.
Last year Blue, who would not be interviewed for this story, told Fortune magazine how in the 1980s he first thought of using pilotless aircraft as weapons. The fervent anti-communist figured remote control light aircraft could be used to blow up oil pipelines to cripple the Soviet-backed Sandinista regime in Nicaragua.
Those idle thoughts bore fruit. In 1986 Blue bought General Atomics, the research arm of a larger nuclear power company.Just a decade later the company's Predator drone aircraft were in the air over the Balkans and the company was on its way to earning Pentagon contracts worth hundreds of millions of dollars.
As General Atomics grew, Blue kept an eye on Australia. One of his former employees recalls that in the late 1980s Blue was sure the future was nuclear and Australia was going to be a key part of it.
He went about buying pastoral leases sitting on uranium deposits in South Australia and the Northern Territory, gambling that bans on uranium would one day be lifted.
He was right. In 1990 Blue established Heathgate Resources to operate the new Beverley uranium mine, near Lake Frome in South Australia.
The South Australian Government has recorded 59 spills of radioactive material on the surface at the site, though none are considered serious and the company has not breached its licence conditions. Because the mine does little surface damage there is no requirement it decontaminate the site when mining ceases.
The environmental impact assessment for Blue's nearby Four Mile mine, approved this month by the federal Environment Minister, Peter Garrett, similarly carries no such requirement.
General Atomics and Blue did run into trouble over the sale of its Australian yellowcake overseas, however. Exelon Generation, a US energy company, sued General Atomics for allegedly lifting its uranium prices and preparing false reports for customers. The case settled last year.
Blue was unrepentant, telling one journalist it made more sense to pay a fine than lose more money using less confrontational practices.
"He did teach me one thing, though," says a former associate. "Given the will, and the way, and a sledgehammer, you can achieve almost anything."
As his uranium interests in Central Australia began to realise their potential, another Blue company was locked in combat over the rich oil and gas fields of the Timor Gap. Blue had acquired the company Oceanic, which claimed to have secured the rights to the resources from Portuguese Timor in 1974.
Once Indonesia's occupation ended it sought - and failed - to resume those rights.
In 2004 Blue took on the successful bidder, ConocoPhillips, the Timor Sea Designated Authority and the Indonesian Government-owned resources giant Pertamina, demanding $30 billion in damages. Oceanic claimed the then East Timor prime minister, Mari Alkatiri, and other Fretilin members of parliament had been bribed.
In May last year a judge in Houston, Texas, dismissed the last claims, declaring that "Oceanic asserts abstract operative facts – bribery, hostility, causation, and damage. It supports the abstractions with over 50 pages of trivia."
An appeal by Oceanic is continuing.
One man who will speak about Blue is Geoff McKee, a petroleum engineer whom Blue hired to work on the Timor Gap bid. McKee remembers Blue as a charming dinner companion and a warm father to his two sons – both now in business with him – and as a genius.
"If Alkatiri had gone with Blue they [East Timor] would have an LPG plant with a pipeline to Australia up and running by now."
McKee believes that Blue's dogged pursuit of the lawsuit was driven in part by Alkatiri's refusal to meet him. "He is used to powerful people taking his calls," McKee says.