The predator, page 3

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.

NEXT: The predator, page 4

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