Senators Elizabeth Warren, Richard Blumenthal, and Ro Khanna are asking important questions about private equity investments in the defense sector.
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As three national legislators demand accountability for a $200 billion private equity invasion of America’s defense industrial base, a pattern of insider deals, leveraged ruin, and foreign exposure is reshaping who really controls the U.S. military machine.
This week, Senators Elizabeth Warren and Richard Blumenthal, together with Representative Ro Khanna , sent a letter to Secretary of Defense Pete Hegseth that reads less like a polite congressional inquiry and more like a prosecutorial brief. The document runs through a catalog of financial conflicts, leveraged bankruptcies, opaque foreign ownership, and potential insider trading that, taken together, paint a portrait of an American defense establishment that has been quietly handed over to the same private equity firms that gutted hospitals, piled debt onto retailers, and extracted billions from companies before leaving their carcasses in bankruptcy court.
Representative Ro Khanna
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The difference, the senators argue, is that this time the companies aren’t selling furniture or running urgent care clinics. They’re manufacturing fighter jet parts, providing satellite communications for the Air Force, guarding U.S. embassies in hostile countries, and servicing weapons systems that troops depend on in active combat. When private equity extracts value and exits, those things don’t just go dark — they become vulnerabilities.
The numbers driving the senators’ alarm are staggering. By mid-October 2025, private equity and venture capital firms had already deployed a record $17.7 billion into defense-related deals, shattering previous records with the year still running. In just the first 11 weeks of 2025, deal volume in aerospace and defense reached $4.27 billion — nearly matching all of 2024 combined. Over two decades, PE firms have acquired more than 1,500 defense contractors. At the same time, companies that go through leveraged buyouts are ten times more likely to enter bankruptcy than peers that haven’t been taken private.
Highlights of Private Equity in the Defense Sector
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The Financial Fragility Trap
The business logic of a leveraged buyout is simple and, in most industries, morally neutral: borrow heavily to buy a company, cut costs, improve margins, and sell within a few years at a profit. The debt is the engine; the timeline is the constraint. But that engine runs on the assumption that when things go wrong, the only thing at stake is money.
In defense, that assumption fails. A peer-reviewed study in Cambridge University Press’s Business and Politics journal found that PE-backed defense contractors are significantly more likely to enter bankruptcy than those without private equity involvement. The consequences play out in ways that no bankruptcy judge can easily remedy.
When Intelsat — acquired by a PE consortium including BC Partners and Silver Lake — filed for Chapter 11 in 2020, the U.S. Air Force Assistant Secretary for Acquisition warned that adversaries “could seek to take advantage of Intelsat’s unstable position.” The company was providing critical military satellite services at the time. When Air Methods, acquired via leveraged buyout by American Securities in 2017, filed for bankruptcy in 2023 to eliminate $1.7 billion in debt from the original deal, the company was operating from 275 military bases in 47 states. When Constellis — formerly Blackwater, acquired by Apollo Global Management — nearly collapsed under $1 billion in debt in December 2019, it held contracts to guard U.S. embassies in more than 30 countries.
Then there is TransDigm. Originally formed through a leveraged buyout, TransDigm built a strategy explicitly designed to generate “private equity-like returns.” A 2019 DoD Inspector General audit found the company charging extreme profit margins — including a 9,400% markup on a half-inch metal pin. One company official reportedly described the practice as “like taking candy from a baby.” TransDigm has continued its acquisitions-and-pricing model. Nobody has stopped it.
Who Actually Owns These Firms?
The structural flaw that most concerns the senators is what researchers call the “sub-surface space” of limited partner ownership. When a private equity fund acquires a defense company, the ultimate owners are not the PE firm itself but its limited partners: pension funds, university endowments, family offices, and sovereign wealth funds. These investors are not required to be publicly disclosed. CFIUS, the government body that reviews foreign investment in sensitive U.S. companies, does not systematically scrutinize LP stakes in PE funds.
The Foundation for Defense of Democracies has flagged this gap explicitly: Chinese entities can and do invest as limited partners in U.S.-based VC and PE firms, and those investments fall entirely beneath CFIUS’s radar. The nonpartisan watchdog Global Financial Integrity confirmed that Russian and Chinese interests have sought access to sensitive U.S. technology and innovation through private investment vehicles.
Gulf sovereign wealth funds compound the picture. Abu Dhabi’s Mubadala deployed $16.6 billion in the United States in 2024 — 57% of its total capital — through deep partnerships with Apollo, Ares, Carlyle, Goldman Sachs, and KKR. All five have significant defense-adjacent holdings. Mubadala’s private credit portfolio alone totals $20 billion channeled through those same five firms. The UAE is a treaty partner. It is also simultaneously deepening technology ties with China. The current administration has signaled it intends to apply less scrutiny to such transactions through CFIUS, not more.
Foreign Sovereign Wealth Fund Exposure to US Private Equity (Selected, 2024)
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The Insider Problem: When the Sellers Work at the Pentagon
The Warren-Blumenthal-Khanna letter gains its sharpest edge not only from some of the structural risks of private equity ownership, but more from the documented conflicts of interest inside the administration now inviting $200 billion in private capital into the defense sector. The pattern that emerges across multiple congressional investigations and independent reporting is not subtle.
Key Officials and Their Documented Conflicts
Key Officials and Their Documented Conflicts
Public sources
In March 2026, the Department of Defense provided a written response to Senators Warren and Blumenthal confirming that there are no effective processes in place to prevent conflicts of interest involving the Trump family and the awarding of defense contracts. The DoD response prompted an immediate follow-up letter from the senators pressing Hegseth to explain the failure.
TRUMP FAMILY-LINKED COMPANIES: DOCUMENTED PENTAGON AWARDS, 2025–2026
Trump Family Links
Public Sources
What Warren, Blumenthal, and Khanna Are Asking For
The senators’ May 2026 letter to Hegseth is, at its core, a demand that the Pentagon impose the same scrutiny on its financiers that it imposes on its engineers. The specific reforms they and allied researchers are calling for include:
- Mandatory LP disclosure for any PE fund holding DoD contracts — requiring identification of all limited partners above a 5% ownership threshold.
- Extension of CFIUS review to cover LP stakes in funds with defense portfolio companies, closing the gap that lets Chinese and foreign sovereign entities slip through the back door.
- Leverage caps prohibiting PE-backed firms holding classified DoD contracts from carrying debt above a defined debt-to-EBITDA ratio.
- Anti-consolidation rules in critical subsectors where the DoD relies on fewer than five suppliers.
- Mandatory conflict-of-interest firewalls extending to family members of senior DoD officials — preventing companies in which their relatives hold financial stakes from receiving contracts while those officials are in office.
PROPOSED REFORMS — ASSESSED IMPLEMENTATION URGENCY
Warren, Blumenthal, and Khanna
The Stakes
The Warren-Blumenthal-Khanna letter arrives at a moment when the administration is actively accelerating private capital’s role in defense, not slowing it. The Pentagon’s $1 billion “Drone Dominance” program, announced in December 2025, simultaneously created a huge new market for domestic drone companies and banned foreign-made drones — a policy move that, by remarkable coincidence, opened a lucrative opportunity for companies in which the president’s sons held financial stakes.
Whether any individual transaction crosses a legal line is, ultimately, a question for prosecutors and courts. But the senators’ letter makes a different and more urgent argument: that even where no law has been broken, the structure of the arrangement is corrosive. An adversary doesn’t need to hack into a weapons program. It can buy a limited partnership stake in the fund that owns the company that makes the components. A president’s son doesn’t need to call a contracting officer. He just needs to interview the people who become contracting officers, and then invest in the companies that call those offices.
The letter is a demand that the Pentagon notice what has been built around it — and decide whether to govern it.
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