Monday, October 15, 2007

USA, Inc. - Blackwater

For obvious reasons, the location of the headquarters of Blackwater USA isn't well-publicized. Officially, the only public trace of the world's largest private military training facility is a post office box in Moyock, North Carolina, an unremarkable rib-shack pit-stop on the way to the Outer Banks.

But the place isn't hard to find. From Washington, D.C., head south. As soon as you cross the state line, follow the sound of gunfire until you find an armed compound half the size of Manhattan. Which is not to say the place sticks out--it's just very, very big. Blackwater is a company most Americans first heard of when four of its contractors were murdered in Falluja, Iraq, in March 2004, and their bodies desecrated on camera. It is the most prominent of the private security contractors in Iraq. You might think of the North Carolina facility as Blackwater's Fort Benning or Quantico.

Still largely subsumed by the swampland it occupies, the compound is mostly au naturel except for odd aircraft lying around. The company name sounds mysterious, but it's just the name of the region. If you dig a few feet underground, the hole will quickly fill with the thick, dark peat water just under the surface. The only building of any real size houses the company's brand new 60,000-square-foot corporate offices, a low profile building with a massive stone entryway that blends into the surroundings nicely. (The massive double-door handles made from .50 caliber machine gun barrels get noticed, however.) In fact, the company logo--a target sight superimposed over a bear claw--isn't entirely figurative. Black bears--at least one of which tops 800 pounds--roam freely all over the property.

Of course, running into a bear is probably the least of your safety concerns at Blackwater. Firing ranges abound on the property. For years, the company's bread and butter was its multimillion-dollar business designing and manufacturing targets and shooting ranges. From its original product--a patented, reactive, reinforced steel target--the company now makes everything from modular, endlessly configurable "shoothouses," with doors and rooms that simulate urban combat, to concrete, reinforced shipping containers that can be set up anywhere in the world as self-contained ranges. (A personal favorite is the "Dueling Tree"--an upright stand with three targets on each side. Hit the target and it gets knocked over to your opponent's side where he can knock it back. The first shooter with all six targets on his side loses. Think of it as tetherball with guns.)

But we're only scratching the surface. Though the company is less than ten years old, it's already become the alpha and omega of military outsourcing. The target systems remain a multimillion-dollar business, but now the corporate flagship is just one part of a very large fleet. Indeed, it would be hard to understate Blackwater's capabilities:

* A burgeoning logistics operation that can deliver 100- or 200-ton self-contained humanitarian relief response packages faster than the Red Cross.

* A Florida aviation division with 26 different platforms, from helicopter gunships to a massive Boeing 767. The company even has a Zeppelin.

* The country's largest tactical driving track, with multi-surface, multi-elevation positive and negative cambered turns, a skid pad, and a ram pad for drivers learning how to escape ambushes.

* A 20-acre manmade lake with shipping containers that have been mocked up with ship rails and portholes, floating on pontoons, used to teach how to board a hostile ship.

* A K-9 training facility that currently has 80 dog teams deployed around the world. Ever wondered how to rappel down the side of nine stacked shipping containers with a bomb-sniffing German shepherd dog strapped to your chest? Blackwater can teach you.

* A 1,200-yard-long firing range for sniper training.

* A sizable private armory. The one gun locker I saw contained close to 100 9mm handguns--mostly military issue Beretta M9s, law enforcement favorite Austrian Glocks, and Sig Sauers.

* An armored vehicle still in development called the Grizzly; the prototype's angular steel plates are ferocious-looking. The suspension is being built by one of Black water's North Carolina neighbors--Dennis Anderson, monster truck champion and the man responsible for the "Grave Digger" (the ne plus ultra of monster trucks).

And there's much, much more. Sitting in his second-story office with expansive views of the grounds, Black water vice president for strategic initiatives and former recon Marine Chris Taylor makes a sound business case for the Blackwater facility. "One of the single greatest factors that makes us who we are today is, one, we are always complete, correct, and on time with our services and, two, this facility--this is the greatest barrier to entry in the market of doing training and security operations; nobody else has this." Taylor continues: "To build this facility today--$40 or $50 million, and nobody's got that kind of coin. Nobody wants to invest that, especially if you are going into a market where there already is a big dog."

Still, at a certain point touring their facilities, the immensity of the place seems like, well, overkill. Of all the curiosities littered throughout the gargantuan property, it's hard not to be taken aback by "R U Ready High"--a firing range modeled after a high school, as well as an old school bus used for training in tactical hostage situations.

Taylor patiently explains that the company built it immediately after Columbine and that local police forces and SWAT teams often have woefully inadequate training for such situations even to this day. Sure enough, shortly after my tour of the facilities, there were two school hostage situations within days of each other, again in Colorado and in Pennsylvania. Neither ended well.

It may seem callous that Blackwater is making a buck preparing police to deal with such horrific events. But somebody has to be in the business of worst case scenarios. It's not their fault that everywhere--from Colorado to Iraq--business is so good.

While Blackwater's training and logistics operations might be the heart of their operation, that's not the reason the company is on the verge of becoming a household name. Among its initial government contracts was one for antiterrorist training in the wake of the USS Cole bombing. A single marksman could have taken out the approaching bomb-laden boat, but most soldiers on deck weren't even carrying loaded weapons at the time. Recognizing a major weakness, the Navy awarded an "urgent and compelling need" contract to Blackwater to train 20,000 sailors in force protection. The company still executes that contract to this day. And from that start, it gradually expanded its roster of services available to the military. Enter the war on terror, and the military began looking for something beyond training and support services--actual manpower.

Blackwater is now one of the largest and most respected suppliers of "private military contractors" in Iraq. The company has carried out high-profile assignments--such as their exclusive contract to guard Ambassador L. Paul Bremer when he was the top U.S. civilian in Iraq--whose performance by a private company would once have been unthinkable.

The company's work in Iraq has not been without incident. The four American contractors killed in Falluja in March 2004 were providing transport security for a Kuwaiti food service company under a Blackwater Security Consulting contract. Their bodies were dragged through the streets and the disfigured corpses were eventually strung from a bridge with an electrical cord. The families of the four men--one of them a revered former SEAL instructor--are suing Blackwater, alleging that they were rushed out on the mission without adequate preparation or protection.

Aside from providing one of the most demoralizing images of the war, the killing of the four Blackwater employees did two major things. It was the catalyst for the Battle of Falluja, a brutal but ultimately successful attempt to reclaim the city from insurgents, which resulted in 83 additional U.S. troops killed in action. And it drew national attention to the use of private contractors--"mercenaries" to their more vehement detractors--in Iraq.

In the first Gulf war, the ratio of private contractors to military personnel was one to sixty. This time it's approaching one to one. The Washington Post last week reported that the Pentagon counts about 100,000 contractors in Iraq. Private contractors are being used to supply everything from pizzas to porta-potties; still the decidedly larger ratio is no doubt the result of the 20,000 or so serving in a quasi-military role--almost three times the number of British military forces currently in Iraq.

Blackwater objects to the use of the m-word for its employees, preferring the term "private military contractors." For one thing, "mercenary" is not accurate. Private military contractors in Iraq do not execute offensive operations--they only provide security, and their rules of engagement are to use proportionate force only when attacked. Nonetheless, private military contractors in Iraq are known for their aggressive behavior. Retired Marine colonel Thomas X. Hammes is a vocal critic of Black water, having seen them guarding Bremer. "The problem is, in protecting the principal they had to be very aggressive, and each time they went out, they had to offend locals, forcing them to the side of the road, being overpowering and intimidating, at times running vehicles off the road, making enemies each time they went out," Hammes said in a PBS interview. However, Hammes noted, "Black water's an extraordinarily professional organization, and they were doing exactly what they were tasked to do."

In fact, Blackwater objects to its personnel being tarred as mercenaries mainly because they regard it as an assault on their character and their professionalism. "We're in nine different countries," says Chris Taylor, "probably have about 2,300 people deployed today, another 21,000 in our database, and these are people the majority of whom have already had a career in public service, either military or law enforcement, who are honorably discharged, who have any number of medals for heroism. Yet we still have to face critics who say everybody is a mercenary--they're only out for a buck."

Blackwater insists the money is exaggerated. "The thing that gets all the attention is that it's a business, a going concern. But there are nowhere near the profits that everybody thinks," Taylor says. They are quite serious about the moral importance of their work, a message that starts at the top. Blackwater CEO Erik Prince, the company's founder, "believes to his core that this is his life's work," says Taylor. "If you're not willing to drink the Blackwater Kool-aid and be committed to supporting humane democracy around the world, then there's probably a better place" to go work, "because that's all we do."

Though his military career was brief, as a former Navy SEAL platoon commander, Prince is no dilettante. He attended officer candidate school after finishing college in 1992, and the next year he joined SEAL Team 8 based out of Norfolk. Prince eventually deployed to Haiti, the Middle East, and Bosnia, among other assignments. He is blond, and ridiculously all-American looking. His posture is ramrod straight, and his clipped sentences are true to his martial roots. At only 38, he remains in impeccable shape and looks as ready to step onto the battlefield as into a boardroom.

He hardly fits the soldier of fortune archetype. He is a staunch Christian--his father helped James Dobson found Focus on the Family--and his politically conservative views are well known in Washington, where Prince supports a number of religious and right-leaning causes. He attended Hillsdale College in Michigan, a font of conservative ideology, where he is remembered for being the first undergraduate at the small liberal arts school to serve on the local volunteer fire department. (The only book on the shelf in the boardroom of Blackwater's Northern Virginia offices is a copy of the eminent conservative historian Paul Johnson's A History Of The American People.)

Nobody can say Prince is in it for the money, either. His father Edgar started a small die-cast shop in Holland, Michigan, in 1965. Along the way he patented the now-ubiquitous lighted vanity mirror in automobile visors; a year after his 1995 death, the family company sold for over $1 billion, an enormous inheritance for Erik and his sisters.

The next year Erik left the Navy and founded Blackwater. It was the end of the Cold War. The Clinton administration and Congress had been eagerly downsizing military facilities and training--much to the consternation of many officers, Prince included. Prince knew there would be a market for the kind of training Blackwater would provide; his initial purchase of 6,000 acres in Moyock does not suggest his vision for the company was modest. (It's currently 7,500 acres; the company has plans to relocate the Florida aviation division to North Carolina near its headquarters, as well as open training facilities in California and the Philippines.)

Regardless of his inheritance, Prince's subsequent shepherding of Blackwater has proved him as adept a businessman as his father. And there you have it. Erik Prince--mercenary mogul and liberal America's worst nightmare. Not only can he buy and sell you, he can kill you before you even know he's in the room.

For a conservative like Prince, you can't make the world a better place without harnessing the power of free markets. He sounds more like an MBA than a mercenary. Prince believes that an entrepreneurial spirit and the military go naturally together: "This goes back to our corporate mantra: We're trying to do for the national security apparatus what Fed Ex did for the postal service," Prince says. "They did many of the same services that the Postal Service did, better, cheaper, smarter, and faster by innovating, [which] the private sector can do much more effectively."

Of all the charges leveled at Blackwater, one of the most damning is that they are war profiteers. And it's a charge the company is eager to defend against, especially in light of the fact that it has been awarded numerous FBI and other no-bid "urgent and compelling need" contracts by the government, the terms of which are often shrouded in secrecy.

Blackwater prides itself on its cost-effectiveness. "The DoD has lots of great people trapped in it. They are trapped in between stratified layers of bureaucracy that destroy innovation and efficiency. The private sector can do many of those things, whether it's training or logistics or airlift--a lot of those kinds of peripheral issues. And we do it in a market-based manner and drive those efficiencies. So when they say 'Ah, we need about 100 guys to do that job,' we say, 'Actually, you only need about 10 to do that job,'" Prince explains.

Proving cost-effectiveness is nearly impossible as there are no comprehensive data on private military contractors and institutional savings. "It is not clear that outsourcing always saves money," Brookings Institution scholar Peter Singer states in his book Corporate Warriors: The Rise of the Privatized Military Industry. In fact, as Singer pointed out in a cover story in Foreign Affairs, military contracts are seldom set up to achieve cost-effectiveness. "Too often, the 'cost plus' arrangement has become the default form for all contracts. But this setup, in effect, gives companies more profit if they spend more. When combined with inadequate oversight, it creates a system ripe for inefficiency and abuse," Singer says.

Blackwater's position on expensive military contracts seems to be that they didn't start the fire. It seems that stratified layers of bureaucracy in military contracts are found both within and outside the DoD. A cursory examination of the circumstances surrounding Blackwater's infamous Falluja casualties shows why. On the surface, it looked like a simple contract to protect a Kuwaiti food service company transporting food and kitchen supplies. But as outlined in journalist Robert Young Pelton's thorough new book Licensed to Kill: Hired Guns in the War on Terror, here's how the financial arrangement really worked.

Blackwater was contracted to provide transport security for Regency Hotel and Hospitality. The Kuwaiti food service company itself was a subcontractor of a German company, Eurest Support Services. ESS in turn was a subcontractor of Kellogg, Brown and Root, which is itself a subsidiary of Halliburton. KBR has an exclusive $7.2 billion contract with the military for managing the Logistics Civil Augmentation Program, or LOGCAP, which handles global support functions for the military, e.g., food. How much anyone gets paid at any point along this long and winding paper trail is unknown, as KBR considers all LOGCAP billing confidential, something each of its subcontractors must agree to in writing. Violation of this privacy clause is punishable by $250,000 in fines. However, it can be safely assumed that at each level of subcontracting, the companies mark up their costs, bloating the price to the taxpayer. These massive contracts are easier for the government to manage than multiple smaller ones. Prince says that's a problem.

"One of the best ways the U.S. government overall, particularly the DOD, can get better value for the taxpayers is by improving the training, standards, and competence of their own contracting officers," he says. "When you go to sell to a Fortune 500 company, their purchasing officer knows more about your process than you do--they really drill down; they know the best value and they expect execution complete, correct, and on time. With government contracting officers that's not always the case; that's seldom the case. There's a lot more shortcomings that are allowed that go unpunished."

So if private military contractors are considered cost effective, that's no doubt partly because they're being graded on a curve set by the Department of Defense--home of the $200 hammer and $500 toilet seat. Black water has earned $505 million in publicly identifiable contracts since 2000--it's no wonder private military contractors jokingly refer to themselves as the "Coalition of the Billing."

As for the individual contractors on the ground, pay varies, but $600-$700 a day would not be out of line for a qualified armed guard, and higher figures are commonplace, depending on qualifications and experience. The good pay is a bit of a joke within the industry. Circulating on the message boards and email lists of contractors for some time has been this tongue-in-cheek but nonetheless revealing "Contractor's Creed": I care not for ribbons and awards for valor. I do this job for the opportunity to kill the enemies of my country, and to finally get that boat I've always wanted. In any combat zone, I will always locate the swimming pool, beer, and women, because I can. I will deploy on my terms, and if it ever gets too stupid, I will simply find another company that pays me more.

Despite the ethical perils inherent in such work, Prince insists not just that the future of warfare depends on private companies driving market efficiencies, but that this is the way of the world. "I would go back to a deeper view of history. The idea of private contractors doing this kind of work is not a recent phenomenon," he says. He can rattle off any number of examples of mercenaries being used throughout history--many of whom were beloved figures in U.S. history, from Revolutionary hero Lafayette to the Flying Tigers in World War II.

That may be the "deeper view" of history--but it glosses over the recent history of mercenaries, which is horrifying. Blackwater is trying to emerge as a credible and ethical company in an industry with a reputation of being anything but. Most notorious in this respect is Executive Outcomes, a mercenary company that started in South Africa in 1989, drawing personnel from the remnants of the outgoing apartheid regime's shady military and internal intelligence operations.

Clients included Texaco and DeBeers, but Executive Outcomes wasn't exactly discriminating about whose money it took. In 1996, one of EO's principals, Simon Mann, a former SAS officer and heir to a substantial brewing fortune, created a subsidiary called Sandline. Mann recruited a former lieutenant colonel in the Scots Guards, Tim Spicer, to head up the operation. Creating a subsidiary with a different name was also an attempt in part to remove the stink that Executive Outcomes had acquired in its seven years of existence. It was Spicer and Mann who came up with the term Private Military Company and began rebranding mercenaries in earnest.

Sandline's first big contract came in January 1997--$36 million from the government of Papua New Guinea, to help it regain control of a copper mine that had been seized by rebels. This did not go well; Spicer was arrested as soon as Sandline forces attempted to enter the country and freed only after the British government intervened. Public outcry over Sandline's contract very nearly destabilized the Papuan government, forcing the prime minister to resign.

If Spicer and Mann were chastened by the incident, they didn't show it. By 1998 Sandline was embroiled in a much bigger scandal--allegedly violating a U.N. arms embargo in Sierra Leone on behalf of an Indian client accused of embezzling millions from a Thai bank. Executive Outcomes dissolved in 1999 in response to anti-mercenary legislation introduced in South Africa, but Sandline operated until 2004.

Sandline's closing in 2004 was not incidental. That same year, Mann was sentenced to seven years' imprisonment in Zimbabwe. He had been arrested along with a planeload of mercenaries and former EO and Sandline colleagues en route to foment a coup in Equatorial Guinea, a tiny despotic country in the armpit of Africa that happens to have substantial oil reserves off the coast.

Mann's failed coup made a huge splash internationally, in part because one of the people allegedly bankrolling the operation was Mark Thatcher, son of the former British prime minister. Weirder still, the coup attempt was likely inspired by Frederick Forsyth's 1974 bestseller The Dogs of War, about a band of mercenaries who attempt to overthrow the government of a fictional African country clearly modeled after Equatorial Guinea. As if that weren't enough, it is quite credibly reputed that Forsyth himself bankrolled an unsuccessful 1972 coup attempt in the same country with funds from his first novel, The Day of the Jackal, and that Forsyth's real-life exploits were the basis of his allegedly fictional Dogs of War published two years later. The pièce de résistance to this whole saga? Forsyth is one of a small number of private investors in the current business venture of Mann's good friend and former business partner, Tim Spicer.

While Mann began rotting in jail, Spicer was busy positioning himself and his new company, Aegis Defense Services. Despite the fact that he was called in for questioning by the British government and suspected of being involved in some capacity with Mann's 2004 coup attempt, in May of that year Aegis was awarded a $293 million contract from the U.S. government to provide security for the Army Corps of Engineers and the Iraq Project and Contracting Office, the two U.S. agencies most directly responsible for Iraqi reconstruction. This despite the fact that the company had no previous experience in Iraq and clearly didn't have the resources to fulfill the contract. The contract is shrouded in controversy; as head of security for the Project Management Office (precursor to the Project and Contracting Office), British Brigadier General Tony Hunter-Choat wrote the terms of the contract. Hunter-Choat and Spicer were contemporaries in the British military and are known to have worked together previously in the Balkans. Another British general, James Ellery, who worked with Hunter-Choat at the Project Management Office and on the contract specifications, now works for Aegis.

The Aegis contract got the attention of Congress, and eventually the Pentagon admitted that its contracting officer was completely unaware of Spicer's background. Aegis's first DOD audit in 2005 was damning, including the charge that the company was trying to ramp up so fast to meet the contract requirements they were hiring poorly vetted Iraqis and giving them passes to the Green Zone. The company also came under scrutiny when videos of Aegis contractors indiscriminately firing at civilian cars surfaced on the Internet. Despite this, Aegis is carrying out extensive contracting operations in Iraq to this day.

The larger question for Erik Prince and Blackwater has to be: How to remove the stink that clings to their industry? How can they convince the world that they are "committed to supporting humane democracy" when everyone else in their industry has been eager to sell it out? With a Democratic Congress and talk of withdrawal from Iraq, most private military contractors are wondering what's next.

Blackwater thinks it has the answer. "I just got back from Darfur," says Chris Taylor, the vice president for strategic initiatives. "I called Erik on my sat phone and said, 'I was in Juba; there's 300 U.N. vehicles in a motor pool, there's any number of NGOs driving within a one-mile radius within Juba, and nothing's getting done. The only time you see people in their vehicles is when they were going to the tent cities, because there's a bar in every tent city."

Prince and other key Blackwater leaders have also visited war-torn Darfur. While there may be other private military contractors that are larger, most of them support and conduct operations through a patchwork of subcontracts. By contrast, Blackwater can offer every conceivable service its people might need, so when they go into an area their resources are entirely self-contained, making them ideally suited to humanitarian work in difficult conditions--they have the resources to provide both supplies and security with military precision. "We're not big outsourcers, which is kind of ironic because we play a big role in the outsourcing market. The more layers of subcontracting, the harder it is for you to get a straight answer and get something corrected," Taylor says.

Blackwater vice-chairman Cofer Black, a former FBI agent and State Department coordinator for counterterrorism, made waves at a conference in Amman, Jordan, earlier this year saying the company is ready to provide brigade-size forces (1,500-3,000 soldiers) for peacekeeping missions around the world. Reflecting on his experience in Darfur, Taylor says the solution to the situation is obvious. "I'm not really good at math but it seems like a pretty simple equation to solve. Get more people, skilled people, in there. Even in Darfur today, [there are only] 7,000 African Union troops in a place the size of France," Taylor says. "So why not send us?"

Well, for one thing, the humanitarian world has seen the ravages of mercenary activities in Africa for decades, and they have reason to be suspicious. Even Sandline hid behind the excuse of humanitarian work. When it was shuttered in 2004, the official reason given was that, owing to a lack of governmental support, "the ability of Sandline to make a positive difference in countries where there is widespread brutality and genocidal behaviour is materially diminished."

Blackwater insists it is different. Prince and Black water have been involved in charities on the margins of the humanitarian world for some time now. But the resistance is fierce. "Cofer and I have been speaking about our ability to help in Darfur ad infinitum, and that just pisses off the humanitarian world," Taylor says. "They have problems with private security companies, not because of performance but because they think that in some cases it removes their ability to cross borders, to talk to both sides, to be neutral. And that's great, but the age-old question--is neutrality greater than saving one more life? What's the marginal utility on one more life?"

It would also require the humanitarian world to come to terms with one of its greatest failings. Time and again humanitarian efforts are foiled and set back because of the inability to provide the security that enables relief efforts to go forward in dangerous areas.

Currently the U.N. Department of Peacekeeping Operations has an annual budget of $7 billion, to say nothing of the billions in private charities and foreign aid pouring in to the world's worst places. Even those suspicious of Blackwater's motives must realize it makes good business sense that they would be interested in the work. Why chase after shady corporate clients when the mother lode is in helping people?

It's true there may be no good way to calculate the marginal utility of one more life. But just in case the world needs them, in the swamps of North Carolina, a few thousand rough men stand ready--for a price.

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