In mid-September, two-dozen law enforcement groups, mostly from the San Francisco Bay Area, gathered for an annual event that organizers billed as the single largest homeland security training exercise of its kind in the United States.

The meeting, known as Urban Shield, was held in Dublin, Calif., 20 miles southeast of Oakland, and featured tactical teams dressed in SWAT helmets and boots participating in real-world scenarios as a test of their ability to handle a hostage crisis, prison riot, aircraft takeover and other emergency situations. Drills included the use of a full-size FedEx jetliner, an Amtrak train and a Navy ship.

Local volunteers lent a realistic feel by acting as victims and hostages. Manufacturers specializing in police equipment paid for “platinum” and “silver” sponsorship titles in exchange for the right to display their corporate logos and schmooze with potential clients—Taser, firearms-maker Sig Sauer, the private security and logistics firm Blackwater Worldwide and various distributors of safety and first-response equipment.

On Urban Shield’s website, Greg Ahern, sheriff of the East Bay county of Alameda, singled out one supporter in particular for a “generous contribution” the company made that led it to being designated Urban Shield’s chief sponsor: British defense giant BAE Systems.

But BAE’s presence at Urban Shield 2008 isn’t what landed it in the news recently. Two weeks after the event, the U.S. Justice Department announced that a BAE subsidiary known as Armor Holdings Products agreed to a $30 million settlement over claims that it knowingly manufactured and sold defective bullet-proof vests.

“This settlement will help ensure that first responders receive the highest quality ballistic protection,” Gregory Katsas, as assistant attorney general, said in a statement when the settlement was announced Oct. 7.

A BAE spokeswoman did not return a call from CIR seeking comment, but the company in press accounts has denied wrongdoing and asserted that it settled the case merely to avoid costly litigation.

Justice officials had alleged that Armor Holdings was aware the vests contained so-called Zylon materials that “quickly degraded over time and were not suitable for ballistic use.” The federal government purchased vests from Armor Holdings in addition to reimbursing state and local law-enforcement agencies for them through a Justice Department grant program.

A component of the vests that contained Zylon was produced by two other companies, which then supplied it to Armor Holdings. Those providers, Fortune 500 company Honeywell and the Japanese firm Toyobo, were sued by the Justice Department this year and last year respectively. The cases are ongoing. Justice officials also sued three additional companies linked to the Zylon body-armor industry in cases that netted more than $16 million in settlements.

As part of the latest settlement, which was arranged without a lawsuit being filed, Armor Holdings agreed to cooperate in a multi-agency probe of the vests that today involves participation from 11 federal offices including criminal investigators from the Army and Air Force, the FBI, Defense Department auditors and the Department of Homeland Security’s Inspector General.

The Zylon case joins another encounter BAE had with the Justice Department last year. Since June of 2007, officials there have been investigating whether payments made to members of the Saudi royal family amid the multibillion-dollar sale of fighter jets amounted to illegal bribery.

Armor Holdings stopped selling vests containing Zylon in 2005 before BAE bought the company for $4.5 billion two years later. But the British newspaper Financial Times reported Oct. 8 that the settlement “could result in embarrassment for the UK company, which has made Armor’s acquisition a central plank of its drive to establish itself in the US defense sector.”

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In 2006, before the United States awarded it a major vehicle purchase, BAE Systems was the tenth largest company doing business with the federal government, earning $4.5 billion in contracts during that year alone, according to the Project on Government Oversight. The Armor Holdings settlement pales next to the subsidiary’s $2.3 billion in 2006 sales, let alone the impact on parent BAE, which that same year earned $24 billion in revenues.

In fact, it was another division of Armor Holdings that beefed up BAE’s U.S. defense portfolio. Armor Holdings was already a major player in manufacturing newer model Mine Resistant Ambush Protected [MRAP] vehicles—heavily armored four-and-six wheelers jacked high off the ground with enormous tires. The acquisition by BAE occurred just as the Defense Department, battered by a ceaseless stream of roadside bombs and ambushes in Iraq and Afghanistan, greatly expanded its demand for them. The new partners thus were recently awarded $2.2 billion by the Army and Marine Corps to build 3,500 of the vehicles, according to BAE corporate filings.

“Politically, the US is now starting the run-up to the next presidential election in November 2008,” the company told investors in its last annual report released in late March of this year. “Both parties remain supportive of national security and consequently, whatever the outcome, support for defense spending is expected to remain robust.”

BAE’s sponsorship of Urban Shield makes clear that the company is particularly eager to forge greater relationships with law enforcement and homeland security professionals in the United States as Congress continues to make preparing local police for national security threats a major spending priority. Lawmakers this fiscal year appropriated $2 billion more for homeland security and emergency preparedness grants to local governments than President Bush originally requested in his budget.

“My understanding is that they’re interested in getting into the field of homeland security,” Ahern, the Urban Shield coordinator and sheriff of Alameda County, said of BAE in a CIR interview. “Because Urban Shield is a tactical exercise, they wanted to be a part of it.”

Indeed, BAE recently boasted in a press release that it supplied police in Denver and St. Paul with equipment and training used to quell disturbances by political demonstrators at the Democratic and Republican national conventions. The gear included riot-control suits, flex-cuff restraints, “hard-knuckle gloves,” gas masks, helmets and utility belts. The two cities had received $50 million each in special grants from the Justice Department to cover security preparations.

“We take pride in helping ensure that the American men and women who work to protect our citizens and communities are properly equipped and efficiently trained for crowd control situations,” BAE division president Scott O’Brien said in the statement.

In September, the company made another major announcement that it had purchased for $986 million the British intelligence consultancy Detica, which specializes in analyzing large volumes of data, also known as data mining, for anti-terrorism and homeland security purposes. BAE specifically wants to utilize Detica’s capabilities in the United States, a press release stated.

As for Sheriff Ahern and Urban Shield, he said the event gives law enforcement professionals a chance to field-test equipment being offered by manufacturers so they can decide for themselves how reliable it is. Ahern is still negotiating with BAE over how much the company will pay for its sponsorship of the event. He said it could range in value from $25,000 to $100,000. He also said BAE offers more than just bullet-proof vests.

“BAE is a very reputable company and they have tactical equipment that they believe is very good for law enforcement.”

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G.W. Schulz is a reporter for Reveal, covering security, privacy, technology and criminal justice. Since joining The Center for Investigative Reporting in 2008, he's reported stories for NPR, KQED,, The Dallas Morning News, the Chicago Tribune, the San Francisco Chronicle, Mother Jones and more. Prior to that, he wrote for the San Francisco Bay Guardian and was an early contributor to The Chauncey Bailey Project, which won a Tom Renner Award from Investigative Reporters and Editors in 2008. Schulz also has won awards from the California Newspaper Publishers Association and the Society of Professional Journalists’ Northern California Chapter. He graduated from the University of Kansas and is based in Austin, Texas.