Historically the smallest of the Successor States, the Capellan Confederation has nevertheless been a thorn in the side of Houses Davion and Marik for the past 600 years.

           The official birth of the Capellan Confederation occurred in July 2367 when Franco Liao managed to draw the 5 squabbling Capellan states together by offering himself as a compromise candidate for Prime Minister of the Capellan Commonality. Franco then managed to consolidate power for himself and his heirs by playing on the fears of each member state. The Family Liao has managed to maintain a hold on power in the Capellan Confederation in this way for almost 700 years, with but two exceptions.

          During the Succession Wars, and especially during the 4th Succession War, the Capellan Confederation took a massive pounding from Davion and Marik forces. During the 4th Succession War, the commonalities of Tikonov and Sarna were swallowed whole by the Federated Suns, and the Commonality of St. Ives seceded to become the St. Ives Compact. These events drove then-Chancellor Maximilian Liao to insanity. His daughter Romano took over the reins of power, and proceeded to remake the Capellan Confederation completely. Industry was nationalized, the military was remolded into a solid corps of soldiers that were more fanatical than even those of the Draconis Combine, and a reign of terror ensued as Romano purged everyone whom she felt was an enemy of the State.

          The Fourth Succession War left the Capellan Confederation in ruins. Not only had it lost half its star systems, including most of its economic and industrial centers, but what little remained was defended by a military fragmented by the unconquerable forces of the Federated Suns. Piling misery upon misery was the departure of Lady Candace Liao, a woman forced to choose between her beloved father and homeland and her love for Justin Xiang Allard, a man who was a deep agent for the Federated Suns.

          Is it any wonder that the Chancellor went quietly mad? Reports from sources within the Confederation make it plain that in the final weeks of the war Maximilian Liao lost touch almost totally with reality. Most days he stood for hours over a map of his shrunken realm, pushing about scraps of paper representing 'Mech regiments long since destroyed while he mumbled about torturing Prince Davion after his troops had captured New Avalon.

          Seeing the sad state of affairs, Lady Romano Liao assumed unofficial control of the Confederation. Quickly assessing the damage to the Confederation, she began just as quickly to reconstruct it. High on her list of priorities was regrouping the shattered Capellan military. She rebuilt units that had sustained heavy casualties during the war, and set about hiring mercenaries to replace destroyed units. She also rewarded McCarron's Armored Cavalry for its exceptional service by making it a Regular unit receiving hazard pay for regular duty.

          Before Romano could go any further in reorganizing the Capellan Confederation, the realm was attacked on two fronts by the recently allied Duchy of Andurien and Magistracy of Canopus. The Andurien forces attacked the Capellan world of Betelgeuse, location of one of only four working BattleMech factories left in the Confederation. Forces from the Magistracy struck at the Capellan worlds nearest it, such as New Roland and Andarmax, intending to carve a pathway of star systems linking the Canopian and Andurien realms. The Canopian forces encountered only light resistance, but Betelgeuse refused to give way under the Andurien attacks.

          In March 3032, the Capellans mounted a major counteroffensive. Aided by the feared McCarron's Armored Cavalry, the Liao forces defeated the Anduriens with major victories on Primus and Prix, while House Daidachi and Kincade's Rangers meted out the same to the Canopians at Drozan. The ferocity of House Daidachi was so effective against the Canopians that troops began to flee the battlefield at first sign of the warriors. The Anduriens were not as easily bullied, but with their allies in rout, they could not withstand the pressure from the seasoned Armored Cavalry. By 3035, the Capellans had won back all their worlds.

          After the devastation and demoralization of the Fourth Succession War, the Capellan military needed a lift, and it got one. Though the combined forces of the Duchy of Andurien and the Magistracy of Canopus were not the most fearsome military machine in the Inner Sphere, neither were the remnants of the Capellan armed forces. When the Capellans started to win back their worlds, they took heart and began to fight more fiercely. When the war ended, the Capellan military grew stronger in subtle ways. The success of House Daidachi encouraged recruits to join Daidachi and the other warrior houses. Even Hiritsu, LuSann, and Ijori, which were wiped out in the Fourth Succession War, rebuilt from warriors already in the training program and continued to attract new recruits.

          Chancellor Maximilian Liao reportedly committed suicide on April 21, 3036. Though the circumstances of his death by poisoning have never been explained fully, Lady Romano is probably being accused unfairly because I know she felt genuine love for our father.

          With pomp and ceremony bordering on the garish, Romano Liao became the 30th Chancellor of the Capellan Confederation on May 12, 3036. Not one to waste time, the new Chancellor quickly began to purge the Maskirovka, the Capellan secret service. Lord Tsen Shang was appointed the new Director of the Maskirovka, and his first order was death to any person known to have dealt with Justin Xiang Allard or Alexi Malenkov, the Davion agents responsible for crippling the Confederation war effort. The bodies of those so executed were impaled on the spiked fences outside the palace as a warning to traitors. Among the many unfortunates was Chandra Ling, the Maskirovka's Director under Maximilian. The rest of the Maskirovka's agents on Sian were interrogated to test their loyalty. Those who survived and convinced Tsen Shang of their loyalty were sent from Sian to conduct similar inquisitions among the Maskirovka on other worlds.

          Soon after her coronation, Chancellor Romano Liao received a visit from a representative of the House of the Setting Sun, a loose organization of professional killers. Lady Romano, who had used assassination as a political tactic on several occasions, probably had used the services of the Setting Sun in the past. From this meeting sprang a growing alliance between the new Chancellor and the hired killers. She placed several Setting Sun members in positions of authority in the Maskirovka and the Capellan military. In the last 15 years, a number of assassinations have been carried out in other realms to further Liao political goals, though the killers have always been members of other groups, like the Paladins, that have no apparent connection to the House of the Setting Sun. The Thugee cult, which uses assassination as a tool and which counted Romano Liao as a member when she was in her 20s, apparently does have a loose affiliation with the House of the Setting Sun.

          Chancellor Liao is the unchallenged leader of the Confederation, with strong support from Tsen Shang, the Capellan military, and the Thugee cult. Since becoming Director of the Maskirovka in 3036, Lord Tsen Shang has supported every whim of the Chancellor with a fervor that is as cruel as it is thorough.

          The Capellan military has been expanded and strengthened, and the self-respect it gained by fending off Andurien and the Magistracy of Canopus has translated into great loyalty to Chancellor Romano Liao.

          The growing Thugee cult is the Chancellor's most unpredictable form of support. Long considered a band of fanatics too extreme to attract widespread support, the Thugees have gained respect and strength under Romano Liao's Chancellorship. The group's dogma emphasizes individual advancement by any means necessary, with little regard for human life. Cultists learn to help each other at the expense of the rest of mankind, though they know full well that this alliance of convenience can dissolve if another cult member stands in the way.

          My remaining friends in Sian say that Lady Romano suffers from periods of extreme paranoia. During these spells, she regularly accuses everyone, even Lord Shang, of plotting to kill her. I attribute this behavior to the influence the Thugees have had on my sister's life. Because she does not hesitate to have a rival assassinated, she probably assumes that others view her as just such a target. With the only direct Liao heirs in exile or nearing adulthood, she may have reason to be fearful of her own children.

          Whatever the cause of her bouts of paranoia, they have a marked effect on her personality. She becomes single-minded in her determination to eliminate the perceived threat. This often works for the benefit of the Capellan Confederation, though the Chancellor's heartlessness and precision of action frighten those around her. Though outsiders are appalled at the cruelty of actions such as killing all the palace servants, no other spy will ever attain the kind of high position that my husband did as long as Romano is Chancellor. I shudder to think what fate may have in store for many old friends who are still subject to my sister's wrath.

          What may have been a genuine love between my sister and Lord Shang has long since degenerated into a relationship of convenience and fear.

          Of the two, it is Lord Shang who suffers most in the bargain. Though the post of Director of the Maskirovka gives him great personal power when away from the Chancellor's side, Lady Romano demands that he be constantly near her. This is as much for the comfort it brings as for her fear that Tsen is plotting to kill her when not at her beck and call. The Chancellor sometimes shows affection toward Tsen, calling him "dear one" and "my pillar." When under the spell of paranoia, however, she treats him abominably. He often must carry out absurd commands, including implanting identification transmitters into the skulls of all the palace servants. Though she often insults him publicly and accuses him of plotting against her, Shang endures the abuse. Perhaps he still loves her.

          Chancellor Romano has two children, Sun Tzu Liao, born on August 9, 3031, and Kali Liao, born on May 1, 3033. The paternity of the two children is uncertain. Lord Shang is the most likely sire, but the Chancellor takes other lovers during her spells of paranoia, often to spite him.

          The omnipresent Thuggees and the terror spread by activities of the House of the Setting Sun ensure that there is no open opposition to Chancellor Romano. On two occasions, Capellan worlds near the Periphery attempted to secede from the Confederation and join the Taurian Concordat. There was no Capellan military response to either incident; instead, the eight members of the rebellious High Council of Rollis disappeared almost simultaneously in 3033, and the self-appointed Supreme Commander Piet Fontana was killed by a laser shot in the back shortly after he proclaimed Larsha's independence. Capellan military units now garrison those worlds, but they are to guard against external threats, not a rebellious populace.

          Despite the fearsome consequences of opposing the Chancellor, there exists an underground devoted to deposing her. Leading the movement is my brother, Lord Tormana Liao. Though he has lived as a guest of Prince Davion and Archon Steiner for more than 20 years, he has kept closely informed on events in the Confederation. Through the use of MIIO operatives and members of my Security Intelligence Service operating in the Confederation, Tormana has sent messages to the Capellan underground, encouraging them to resist Chancellor Liao's policies and to aid anyone opposed to her government.

          The shattered Capellan military made a remarkable recovery after the Fourth Succession War. Heartened by successes against Andurien and Canopus, it has been growing stronger ever since. The loss of military academies, industry, and population has slowed this recovery, but the improved performance of the Capellan troops has made the realm a more credible military power than it was when the troops of Prince Hanse Davion danced across the realm on the backs of fallen Capellan 'Mechs.

          With at least the illusion of potency, the Capellan Confederation has been able to hire ever more mercenaries, though the economy and the people have borne the immense cost. The Confederation's borders now appear to be well- defended, and the Capellan military appears to be capable of launching an attack on any neighbor foolish enough to take it lightly. Thus my St. Ives Compact, lying vulnerable to a Capellan offensive, was forced to invite Federated Commonwealth warriors to help guard against my sister's designs and preparations.

          There are only four BattleMech factories in the Capellan Confederation, located at Ares, Grand Base, Sian, and Betelgeuse. The loss of so many worlds to the Federated Suns in the Fourth War also led to shortages of vital parts for 'Mechs and other weapons. This forced the four 'Mech factories and other major weapons factories to shut down until the Capellan government could build the necessary secondary factories. It was not until 3036 that all four 'Mech factories were producing again.

          The largest facility, the newest Earthwerks Limited plant on Grand Base, suffered the most because of the loss of the home plant on Tikonov. Though it was the last to reopen, it has resumed its position as the most important facility in the Capellan Confederation under government management. Lord Tsen Shang took an active role in getting the plant back in production, and it is rumored that its highest executives are Maskirovka agents who have personal loyalty to him.

          What few consumer goods were being manufactured in the Confederation before the Fourth Succession War are just a memory now. All current manufactured products must have some military application. Items such as books and foods not approved for military use are considered decadent and subject to seizure and the owner arrested. Despite the risk, there is a growing black market in these items.

          In 3040, Chancellor Romano seized all privately owned lands and industries. The rationale was that centralized governmental control would rid the economy of the frivolous duplication of items and competition between companies. Strictly regulated by the Ministry of Development, the economy of the Confederation has been so tightly bound by laws and regulations that most observers expect it to collapse within a decade.

          Inter-realm trade is rare. Because of the long history of hatred between the Capellans and their Federated Suns and Free Worlds League neighbors, trade with them has been prohibited; only the bravest traders dare try to slip across the borders. Only trade with the Draconis Combine is legal, but the distances involved and the need to cross enemy territory make a journey fraught with danger.

          The average Capellan citizen seems worse off now than before the Fourth Succession War. Added to the economic bleakness is the social oppressiveness that considers the age of twelve years to be ideal for beginning military training.

          I must admit that it was difficult to write this report. I may no longer be a citizen of the Capellan Confederation, yet a part of me hesitates to reveal how terrible life in the Confederation has become and that the blame for it must fall on my sister, Chancellor Romano Liao.

          Though many would wish it otherwise, Chancellor Romano is the head of a government that she holds firmly in her grip. With her intelligence agency, military, and a growing state religion of self-interest, she inspires support for her rule through fear, if nothing else.

          Possible ways that Chancellor Romano might fall from power are a total collapse of the realm's economy, invasion by either the Federated Commonwealth or the Free Worlds League, or assassination. It is even possible that the underground may one day grow into a popular movement strong enough to overthrow the tyranny of my sister and free the oppressed people of my former homeland.

          Things have eased somewhat since Romano's son Sun-Tzu took over as Chancellor of the Capellan Confederation after his mother's assassination by his aunt Candace Liao, who avenged the death of her husband at the hands of one of Romano's assassins. Sun-Tzu is currently engaged to marry Isis Marik, daughter of Thomas Marik, Captain-General of the Free Worlds League. Whether the marriage will give Sun-Tzu control of the Free Worlds League or whether it will even produce an alliance on the order of the Federated Commonwealth remains to be seen.

           Perhaps the most important single event for the Confederation in the years after 3056 was the death in that year of Joshua Marik, heir to the Free Worlds League's Captain-General Thomas Marik. For years the young heir had remained at the Federated Commonwealth's New Avalon Insitute of Science for treatment of his leukemia, an arrangement that had prevented Thomas Marik from launching any type of military action against the Federated Commonwealth. When the heir died, Prince Victor Steiner-Davion inserted a double in the boy's place. Capellan Chancellor Sun-Tzu Liao learned of this deception through an agent planted in the NAIS the following year, and proposed to Thomas Marik a joint Marik-Liao invasion of the Sarna March that would simultaneously punish Steiner-Davion for his treachery and recapture former Marik and Liao worlds. Finally, Chancellor Sun-Tzu had the chance he had waited so long for.

          In 3057, Marik and Liao forces invaded the Sarna March. The Liao invaders quickly captured many former Liao worlds, aided by Marik-backed mercenaries. Marik forces enjoyed wide success as well, taking several former Free Worlds League planets. Almost immediately, Katrina Steiner-Davion announced the formation of the new Lyran Alliance, declared Lyran neutrality in the invasion, and called for all Lyran military units to withdraw from Federated Commonwealth possessions in the March. Marik took advantage of this development to settle for a separate peace with Katrina.

          Unfortunately, this left the Confederation unable to continue its conquests, and the Capellan offensive stalled. Unable to capture further worlds through military means, the Chancellor has continued funneling supplies to his Zhanzheng de guang guerillas on the remaining planets of the now-christened Chaos March. These terrorist forces have enjoyed inconsistent levels of success on various planets, but the Chancellor hopes his luck will change.

          The Confederation desperately needs mercenary troops for various types of missions. Chancellor Sun-Tzu Liao's invasion force shattered the Sarna March, but he needs more troops to finish the job he started. The Capellan state also needs units to beef up its borders with the Federated Commonwealth and the newly independent states of the Chaos March, particularly the Sarna Supremacy.