Newswire - Malden Mills Sees Flow of Federal Funding

Millsmoney

The Eagle-Tribune

Bryan McGonigle

Boston University Washington News Service

Dec. 12

WASHINGTON, Dec. 12 – Eleven years ago, Malden Mills was engulfed in one of the worst fires in Massachusetts history, which devastated the Merrimack valley textile manufacturer and led the company into bankruptcy.

But in recent years, Malden Mills has been awash in a stream of federal funds and military contracts, making it a leading developer of combat gear and helping the Merrimack Valley economy.

Malden Mills, which produces Polartec fabrics for clothing worn by U.S. troops, has received about $58 million in earmarks from defense appropriations bills since 2002.

“Congressional funding gets the product to the field,” Malden Mills spokesman David
Costello, of Marblehead, said.

Pipeline for Polartec

Costello was the company’s business manager until 2003 and
continues to serve as its manager of government business. He is a lobbyist with ADS
Ventures in Boston, the firm that represents Malden Mills in Washington.

“We couldn’t follow [product development] all the way through,” Costello said. “I couldn’t sell the jacket. I had to sell the fabric. I wanted to follow the whole process, and what I do now enables me to do that.”

Malden Mills paid ADS Ventures $90,000 last year, according to the company’s lobbying reports.

The Department of Defense creates a list each year of products the military needs, called  unfunded requirements, and Costello goes to Congress to get funding for development of those products, he said.

“What we’re doing is very client-focused,” Costello said. “We only work on things that
are supported by the Department of Defense. We really think it’s
important to be lined up with their needs.”

For example, the military is trying to find new ways to deal with improvised explosive
devices. Polyester melts into skin and drips when hit with extreme heat, so Malden Mills
is developing a fabric that will withstand heat and pressure unleashed by such an
explosion, Costello said. That project is being tested in the field with Marines.

“We’re not making a joint strike fighter here, but we’re making something that impacts the soldier every day,” Costello said. “Our goal is focused on the war fighter and trying to improve their comfort and safety in the field.”

Out of the Ashes, Into the Budget

Federal money has taken the company a long way since December 1995, when a fire destroyed three of the nine buildings on Malden Mills’ 29-acre complex. Aaron Feuerstein, who owned the company at the time, gained national attention when he decided to keep paying his idled workers through the rebuilding process

But the company lost business while the new plant was being built, and it amassed a $140 million debt. So the company’s leaders – in an effort to keep alive the legacy started by Feuerstein’s grandfather in 1907 – decided to take their business to Uncle Sam.

Malden Mills, working with Natick Labs, began designing fabrics for U.S. troops in Bosnia in 1998.

“The products they had were extremely bulky, took up a lot of room in their backpacks and were not very effective,” Costello said.

The company filed for bankruptcy in 2001 but continued to research and develop new fabrics for the military. In 2003, Malden Mills emerged from bankruptcy and Feuerstein relinquished control of the company to a group of creditors led by GE Capital. Feuerstein remained chairman and president but stepped down as CEO.

The company’s sales rose eight percent last year to between $180 and $190 million, and military contracts account for 15 percent of total sales, Costello said.

Under a Marine contract this year, Malden Mills will supply the fabric for 317,644 combat desert jackets over the next five years and receive $10 million.

“Operating in some of the most unforgiving regions of the world, our service men and women need the best possible equipment and technology,” Sen. Edward Kennedy, D-Mass., said. “The work of
[Natick Labs] and the quality products of Malden Mills, have led to the continuing development of better and better protective clothing and equipment for our troops.”

Earmarks, however, have been a focus in the debate over ethics in Congress in recent years. Earmarks are money for a specific interest that is added to a Congressional spending bill outside of the usual appropriations process. Critics refer to them as “pork” and say the earmarks are used to boost a lawmaker’s image in his or her district at the expense of an already enormous budget.

One district’s gift, another district’s pork

In 1994, there were 4,126 earmarks on appropriations bills, according to the Congressional Research Service. In 2005, there were 15,877 earmarks. Funding for earmarks has increased from $23 billion in 1994 to $64 billion in 2006, and $30 billion of that increase was in this past year alone.

Defense earmarks have more than doubled since Sept. 11, 2001. For fiscal year 2006, the number of congressional earmarks on defense appropriations bills was 2,847 with a total value of more than $9.4 billion.

Winslow Wheeler, director of the Straus Military Reform Project at the Center for Defense Information, said defense earmarks have become an enormous problem because there is no independent examination of them.

“Evaluation is the issue,” Wheeler said. “The earmark needs not just to be described. It needs to be evaluated by an entity that does not receive money from federal government or defense contractors.”

Wheeler said earmarks like those that Kennedy and Rep. Marty Meehan, D-Mass., deliver to Malden Mills may make them heroes in Massachusetts, but those earmarks also give Massachusetts an unfair advantage.

“When Congressman Meehan wants to stuff in fleece liners for the Army, he should be happy that the Army is getting the best available, so let’s compete other states against his manufacturer and get the military the lowest price,” Wheeler said. “He is dead set against doing that because he wants to bring the money to his district.”

Meehan disagreed, saying that there is already a competitive process for Malden Mills’ fabrics and the earmarks.

“The materials have been tested by the services over the years,” Meehan said. “And based on those tests and based on best available fabrics, [the military] put out request for proposals from various companies.”

Meehan is an outspoken advocate of overhauling the rules for both earmarks and lobbying, having introduced legislation in 2004 and 2005. Neither of those bills passed, but earlier this month, he vowed to once again push the issues on the first day of the Democratic-controlled 110th Congress in January.

“I believe there should be a transparency in earmarks, but it’s not an effort to eliminate earmarks altogether,” Meehan said. “The process should be legitimate. This should not be something that’s done in secret, in a way that gets around the process that debates these things openly.”

Meehan added that giving Malden Mills defense earmarks was a rigorous process that took several years of testing and military scrutiny.

“Anyone who would criticize the Malden Mills earmarks would be someone who did not have a clue as to the process by which Malden Mills garments have qualified for the unfunded requirement list and the testing that has gone on,” Meehan said.

From the Federal Well to the Local Pail

Joseph Bevilacqua, president of the Merrimack Valley Chamber of Commerce, said congressional funding has helped the north of Boston community on many levels.

“Malden Mills has been a tremendous asset to the Merrimack Valley area,” he said. “There have been earmarks in the past, for every state, that I didn’t think were justified. But an earmark set aside to employ people and keep the economy moving is a good thing.”

Malden Mills employs 1,000 people, most of them at the Lawrence plant and about 40 at the company’s Hudson, N.H., facility.

“Those employees shop at local stores, eat at local restaurants, pay rent, taxes, and
that money goes into the community,” Bevilacqua said.

Put into perspective, the almost $58 million in earmarks to Malden Mills over five years represents $11,600 a year per employee at the company.

Malden Mills is only one of several Massachusetts companies seeing a financial boost in the war on terror. Defense contracts awarded annually to Massachusetts increased from $5.3 billion in 2001 to $8.3 billion in 2005, according to the Department of Defense.

Malden Mills’ Washington cash flow is relatively small compared to Raytheon in Andover, which has received more than $300 million in product orders in the past three months as part of ongoing contracts of more than $600 million to support the Patriot missile system. Raytheon's defense contracts increased from $6.3 billion to more than $9 billion from 2001 to 2005, according to the Department of Defense.

 But Wheeler said that earmarking should not be used as a means for boosting local economies.

“[The earmark] is going to help somebody’s economy somewhere,” Wheeler said. “I don’t know why the people of Massachusetts should be privileged over Minnesota.”

Meehan said that no matter how much Massachusetts gets in earmarks, when it comes to military supplies, quality trumps geography every time.

“I would never, ever advocate products that weren’t the best products, no matter where they’re made,” Meehan said.

He did acknowledge the benefits, however, to having ties to a district supplying those products.

“This is a win-win situation for me, because [the military] wants it and it happens to be manufactured in my district,” he said.

Bevilacqua commended local members of Congress for getting funding from Washington for Malden Mills and said that if the funding keeps one of the nation’s oldest manufacturing companies alive, then it’s worth the investment.

“If a manufacturer is doing well in the Merrimack Valley, it’s doing well in the United
States,” he said.

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