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What Blackwater Founder Erik Prince Learned About the Business of War


What Blackwater Founder Erik Prince Learned About the Business of War

Photograph by Mark Peckmezian

(Clarifies Matthew Devost’s institutional affiliation and restores a quote shortened during editing, both in paragraph 15.)

Erik Prince is not whining, he wants that clear. “However much I had to put up with, in terms of the assault from all sides, from the lawyers and the bureaucrats, pales in comparison to guys who lost their lives, who were maimed, either active-duty military or contractors,” he says. “I’m just providing a cautionary tale to the next guy dumb enough to run to the sound of the alarm bell. Because the government can drop you on a dime and leave you hanging.” For Prince, who in less than a decade took an obscure military training facility, Blackwater USA, and transformed it, with government contracts, into a billion-dollar company before selling it in late 2010, even score-settling is a public service.

In a dark suit and white, open-collar shirt, Prince is sitting warily in a hotel suite above New York’s Times Square. For years he’s been rumored to be working on a memoir about Blackwater (now called Academi), a name linked in the public imagination with the killings of dozens of Iraqis and Afghans. Now, Civilian Warriors: The Inside Story of Blackwater and the Unsung Heroes of the War on Terror, is published, and Prince is busy promoting it. A private person, he submits to an interview with the enthusiasm of a dog in a shower. And yet he’s been waiting for this, too—to make the case for himself and his company and place the blame where he believes it belongs: “If I could send a message back to my younger self, it would be: Do not work for the State Department at all.”

At 44, Prince has always striven to be the sort of person who runs to the alarm. At Hillsdale College in Michigan, he joined the local volunteer fire department, becoming a rescue diver. It was grim work. The emergency calls were usually for snowmobilers who had gone through thin ice, and they never lasted long enough to be revived. Still, he found it thrilling: stepping through a hole into inky water, accompanied only by the hiss of his own breath.

As Prince was growing up in the conservative, proudly Dutch town of Holland, Mich., Edgar Prince, his father, built a billion-dollar fortune making auto parts. When Erik graduated from college, however, he signed up for the U.S. Navy, survived the brutal attrition of Hell Week, and joined SEAL Team 8. In the spring of 1995, when Erik was 25, his father died of a heart attack, and a year later Erik’s wife, Joan, was diagnosed with breast cancer—she would live with it for seven years before succumbing. Erik left the service to tend to his family and his father’s estate. The family sold Prince Automotive, and Erik went into business for himself, building a private military training ground in the backwoods of North Carolina.

The business catered to law enforcement and the military—post-Cold War cuts had reduced training capacity—but struggled to find clients for its first couple of years. After Sept. 11, however, Prince and Blackwater went from training soldiers to finding them work, deploying thousands of vets to guard and transport American diplomats, aid workers, politicians, and CIA case officers through two wars. Forty-one Blackwater contractors eventually died in the line of duty. None of the U.S. State Department officials they were guarding were killed or seriously injured. While running the company, Prince says, he did covert intelligence work for the CIA.

Civilian Warriors is an angry book, and some of Prince’s contentions have made immediate headlines: He argues that ill-conceived State Department regulations led to Blackwater’s many firefights in Iraq; he has accused former CIA Director Leon Panetta of blowing his cover as an intelligence asset; and he contends that, had Blackwater still been providing security for America’s diplomats, Chris Stevens, the ambassador killed in Benghazi, would be alive today.

And yet, Civilian Warriors is not just a rant about government incompetence. It’s also the tale of how Prince founded, ran, and then lost his company. Like many a Silicon Valley entrepreneur, Prince never saw Blackwater as simply a moneymaking venture. He wanted it to prove two things he strongly believed in: the dynamism of the private sector, and that some of the world’s most frustrating problems—piracy, warlords, genocide—could be solved by small groups of highly trained men with guns.
 
 
Blackwater got into the security business almost by chance. After the attacks of Sept. 11, Prince writes, he applied to the CIA’s National Clandestine Service but was turned down for a lack of field experience—he had seen little action in his five years in the SEALs. Soon thereafter, though, the CIA asked his company for help, and they developed a close relationship. (Prince’s book was vetted by the CIA.) The agency’s executive director, Alvin Bernard “Buzzy” Krongard, had heard of Blackwater—his son, a SEAL, had trained there. Krongard, uneasy about some of the local guards at the facilities the agency was setting up in Afghanistan, asked Prince if Blackwater could supply some men to do the job, drawing on its growing Rolodex of special forces veterans. That contract, fulfilled in days, was the first of many.

Incorporated in 2002, Blackwater’s security arm soon began supplying guards to other parts of the government. Crucially, two Blackwater contractors were attached to the U.S. Army team protecting Paul Bremer, the American diplomat who from May 2003 to June 2004 ran Iraq as the head of the Coalition Provisional Authority. One of the two was Frank Gallagher, a former Force Reconnaissance marine who had once run security for Henry Kissinger. When the Pentagon decided to contract out the whole detail in August 2003, he became its leader. Seven days later, Blackwater had found 34 more guys—former Army Rangers and special forces, Force Recon marines, SEALs, and SWAT team officers—promised them $600 a day, and flown them into Baghdad. Gallagher had a single day to train his team, and then they were in the field.

They learned as they went, Gallagher says. They’d send teams to scout locations for Bremer’s visits, but doing so too early, they realized, tipped off the insurgents, so they started doing them only hours in advance. Gallagher had to figure out how to coordinate the armored Suburbans on the ground with the three agile “Little Bird” McDonnell Douglas helicopters Prince sent over to provide the convoy with aerial cover and reconnaissance. There was a lot of turnover. “I fired a lot of guys,” Gallagher recalls. “They were either physically weak or psychologically weak, and some guys were just flat terrified. They would show up, and after 24 hours they would say, ‘I’ve got to get out of here, I can’t do this.’”

By the most basic criterion, however, the detail was a success: Bremer survived. “They did a terrific, first-rate job,” Bremer says today. “We had a number of attempts on my life that they got me through.”

Civilian Warriors opens with one: An improvised explosive device blew out the window of Bremer’s armored SUV and crippled a trailing Humvee before insurgents opened fire with AK-47s. Nevertheless, the convoy managed to make it to safety with no one hurt. The account is drawn in large part from an article Gallagher wrote for Security Driver Magazine. In Prince’s version, however, there’s one addition: The Little Birds unload their guns on the enemy. Gallagher insists that didn’t happen, and the addition bugs him. “The incident was exciting enough; there’s no reason to embellish it,” he says. For him, there’s a larger principle at stake: Gallagher points out with pride that the members of the Bremer detail didn’t fire a single shot during the whole year the ambassador was under their care, something Bremer himself corroborates. Claims of Blackwater contractors firing on civilians only began to pile up later.

Success with Bremer brought more work. Iraq and Afghanistan were full of private security companies. Some, such as Triple Canopy and DynCorp, drew from the same special operations community that Blackwater did; others were smaller and less professional. Blackwater earned a reputation as a company that would take the most difficult assignments and could fill contracts fast. “Blackwater was willing to go into places other people weren’t, and figure out ways to go in fast and in force, and they could bring a lot of resources to bear,” says John Poncy, the former chief executive officer of SOC-SMG, a competitor.

Blackwater’s speed was partly structural, says Fred Roitz, the executive vice president in charge of contracting at Blackwater from 2004 until its sale in 2010. “Our decision-making cycle was shorter than a major corporation; we didn’t really have a bureaucracy.” Partly, too, Blackwater’s momentum came directly from Prince. As the company’s sole owner, he was willing to make big bets with his money—buying the Little Birds, for example, and then self-insuring them when no one else would.

The culture of the place was confident and impatient, and the men who ran the company were mostly, like Prince, former SEALs. “That SEAL mentality of ‘let’s just get this done’ highly contributed to the early success of the company,” says Matthew Devost, who worked alongside Blackwater executives for three years after Prince bought Devost’s company, the Terrorism Research Center, in 2006. “I mean, writing some of those contracts for providing PSDs [personal security details] in a war zone, it’d never been done before, yet he had teams of lawyers, and they said, ‘Let’s get this done, we’ll figure it out as we go along’ and ‘Let’s get 200 people on the ground before other companies could even meet with their lawyers.’” When Bremer left and turned power over to the new Iraqi government, Blackwater got the contract to provide security to all of the State Department’s personnel in Baghdad; State security contracts would eventually pay Blackwater almost a billion dollars.

 

In 2003, Prince bought an air cargo company called Aviation Worldwide Services and got a $34.8 million contract to run transport and cargo flights in Afghanistan for the American military. The training facility in Moyock, N.C., continued to make money—its shoot houses and driving tracks were filled with contractors headed overseas to be Blackwater bodyguards, but also with sailors and soldiers, marines and police officers, border agents and gun enthusiasts. The CIA remained a client of Prince’s, working either through Blackwater or shell companies he set up. He hired Cofer Black, Rob Richer, and Enrique Prado, three former high-ranking CIA officials, bought the Terrorism Research Center and a small strategy firm, and in 2007 combined the new hires and acquisitions into Total Intelligence Solutions, with Devost as its president and catering to the security needs of Fortune 500 companies.

The growth vindicated Prince’s faith in the power of private enterprise. Prince is religious—he converted from the Dutch Reformed Church of his childhood to Catholicism in college—but the thing he is really evangelical about is libertarianism. “Some of the most dedicated, most passionate people I’ve ever met have been part of the United States armed forces,” he writes. “But I also know that where the Pentagon needs a hundred men to get a job done, a private company can do it with ten.” To make his point, he cites the time his planes resupplied soldiers from the 82nd Airborne Division in the middle of a firefight in the mountains of Afghanistan, when the Air Force wouldn’t. Or the time, in those same mountains, when a Blackwater team found a stranded helicopter carrying three U.S. senators—Joe Biden, Chuck Hagel, and John Kerry—before the Army did. Being small and private allowed the company to take risks that military commanders wouldn’t.

Not all of the risks worked out. On March 31, 2004, four Blackwater contractors shepherding a truck convoy through the Iraqi city of Fallujah were ambushed and killed, and their bodies mutilated in front of television cameras. The Bush administration responded by sending in the Marines not once but twice, in some of the bloodiest fighting of the war. In January 2005 the families of the contractors sued Blackwater for damages, claiming it sent the team out undermanned, unprepared, and without the contractually required arms and armor. Prince argues that little could have saved the men in the ambush they ran into and that the decision to proceed rested with the team leader on the ground, not company executives (the case finally concluded in January 2012, with the company paying a total of $635,000, according to the Virginian-Pilot). Still, he concedes that Blackwater, eager to prove itself, agreed to start guarding the convoys before the contract’s official start, knowing that meant the tactical vehicles and heavy machine guns it had been promised by its contracting partner might not yet have arrived. “Blackwater’s men always said yes first,” Prince writes. “We would figure out the details as we went.”
 
 
The company’s rapid expansion soon led to other problems. Iraq was getting more violent, and the insurgents were getting more sophisticated. Reports of civilian shootings by both soldiers and private contractors increased. Some contractors there believe that Blackwater’s latest recruits made matters worse. Bart Kohler, a former marine and firearms instructor, was a Blackwater team leader in Iraq and had known the men who died in Fallujah. “Quite frankly some of the guys who were coming down had never been in combat armed, in the military, or possibly never even in a police force,” he recalls. As Blackwater won more and more contracts in Afghanistan and Iraq, he says, “they were just having to fill slots with bodies. I didn’t go to Wharton or anything like that, but I think they had a real problem managing their growth.”

Even as Iraq spun out of control, Prince, flush with cash, expanded Blackwater into manufacturing. In 2006 he created a unit under Bill Mathews, a Blackwater executive vice president and a lawyer, to make an armored vehicle for the U.S. military. Some 100 employees were hired to produce the 15-ton truck, called the Grizzly. Another team built a prototype of a surveillance blimp. Blackwater bought a 183-foot oceanographic research ship and outfitted it to carry helicopters and rigid-hulled inflatable boats. The original plan was for it to be a training vessel, but the company decided to market it to shipping lines, complete with a team of former SEALs, as a counterpiracy solution. Frustrated by the inability of United Nations peacekeepers to bring order to places such as Darfur, Prince tried to interest the State Department in a 1,700-contractor “peacekeeping package,” complete with its own air force, naval component, and combat arm. “Relief with teeth,” he called it.

“Look, every innocent loss of life is tragic. There was a lot of enemy fire that came back at the guys that day”

Some Blackwater executives worried that experiments such as the Grizzly were a costly indulgence and a distraction. As they saw it, Prince’s weakness for high-risk, high-tech solutions, what Devost calls his “Bruce Wayne complex,” led the company down unprofitable paths. “If it flew, if it shot, if it could fly and shoot, that’s where he wanted to be,” says one former Blackwater executive who spoke on the condition of anonymity. More mundane possibilities tended to get ignored. “There was enough cash in the business to start a cyber arm,” the executive says, or a branch providing intelligence analysts to the federal government. “These were butts-in-seats jobs that make money, that at the time were very profitable. We didn’t even think about them. We couldn’t get our minds away from the tactical stuff.”

Mathews, who served with Prince in the SEALs, dismisses such criticism as sniping. Still, he says, Blackwater President Gary Jackson “had done everything he could to persuade Erik not to try to build trucks, and neither one of us were crazy about doing it. But Erik comes from Michigan, he comes from a manufacturing background. It was one of those things that we did because he wanted to do it.”

None of these projects panned out, and Prince estimates he spent $100 million on them. He’s not regretful; that’s the price of innovation, he says: “My dad built his business by providing products he figured the customers would want.” Edgar Prince invented the original lighted mirror sun visor for Cadillac. “That’s what I was trying to do.” He concedes that growth brought some bad hires—no company, he points out, is free of them—but he argues that he was quick to fire those who violated company policies. Once too often, however, it was too late.

Nisour Square in Baghdad on Sept. 16, 2007Photograph by Khalid Mohammed/AP PhotoNisour Square in Baghdad on Sept. 16, 2007

On Christmas Eve 2006 a Blackwater firearms technician named Andrew Moonen allegedly shot and killed a bodyguard for the Iraqi vice president after drinking heavily. Blackwater swiftly fired him, but he was never charged with a crime. On Sept. 16, 2007, Blackwater contractors stopping traffic for a State Department convoy in Baghdad’s Nisour Square opened fire in a crowded rotary. Some of the contractors reported taking incoming fire, and some did not; multiple investigations conducted afterward were not conclusive. But innocent people had been killed—the Iraqi government put the death toll at 17—and the massacre galvanized Iraqi anger at contractors, who were widely seen in the country as imperious and trigger-happy. Manslaughter charges brought by the U.S. Department of Justice against some of the contractors were thrown out in 2009 by a U.S. district judge because the case had been built on testimony given in exchange for immunity. Two years later, the decision was overturned. This October, federal prosecutors brought new manslaughter charges against four of the guards.

Asked about Nisour Square, Prince stands by his contractors. “Look, every innocent loss of life is tragic,” he says. “There was a lot of enemy fire that came back at the guys that day.” He points to the fact that investigators found a .30-caliber round embedded in one of the Blackwater trucks.

Nisour was the beginning of the end for Blackwater. The Iraqi government made expelling the company a condition of negotiating the terms under which the U.S. military would continue to operate in the country. The State Department, bowing to Iraqi pressure, dropped Blackwater in favor of Triple Canopy. With the loss of that contract, half of Blackwater’s revenue disappeared.

Lawyers who brought lawsuits against Blackwater on behalf of the Nisour Square families and congressmen like California Democrat Henry Waxman who took on the company are among the targets of Prince’s book. But the biggest villain is the State Department. He argues that much of what the public objected to about Blackwater was mandated by State. “Each of the companies, whether it’s DynCorp, Triple Canopy, or whatever, would basically be a force provider. The State Department would tell them where to go, what mission to do, what the rules of engagement were, and all the rest,” he says. Whereas Blackwater, Prince says, would have preferred to do its work in a lower-profile way—with beat-up vehicles that blended in on the streets of Baghdad—State required that its diplomats travel in conspicuous convoys of polished SUVs. Even worse, in Prince’s eyes, after Nisour Square, the State Department didn’t publicly defend the company.

David Isenberg, an author who has written extensively on the private military industry, has some sympathy for Prince’s argument. “Anybody who has ever watched the State Department understands quite well that there was a sort of hypocrisy with regard to the contractors,” he says. “Officially it was, ‘Follow all the rules, respect host country sentiments.’ But at the end of the day, what they privately told Prince and Blackwater was, ‘Just do what you have to do.’” James “Steve” Rogers, the former State official in charge of all PSD contracts, wouldn’t comment on Blackwater, saying the department had discouraged him from doing so. He does say, “I think the world of Erik. We always got along very well.”
 
 
By early 2009, Blackwater faced a blizzard of lawsuits, criminal charges, and investigations from federal agencies ranging from the Internal Revenue Service to the Bureau of Alcohol, Tobacco, Firearms and Explosives. In an attempt at damage control, the name of the company was changed to Xe, the abbreviation for xenon, an inert gas. In August 2010 the company agreed to a $42 million settlement with the State Department for hundreds of export-control violations. The offenses ranged from the seemingly trivial, such as training Canadians without filing proper paperwork, to the more substantial—losing 113 weapons in Iraq. The sheer number of violations suggested a company not paying close attention to the law. The Nisour lawsuits were settled in 2010 and 2012. The jury in a whistle-blower fraud case ruled for the company in August 2011, and the prosecution of several executives for weapons violations collapsed earlier this year, resulting in misdemeanor charges.

In December 2010, Prince sold the company to a group of investors. Earlier that year he had sold the aviation arm for $200 million. Prince’s original investment in Blackwater, back in 1998, was $6 million. While former executives believe he recouped that many times over, Prince insists that his profits were minimal. “The terms of the sale were confidential,” he says. “But it was sold for less than the business was worth in 2002.” The new company, Academi, has tried to distance itself from Blackwater: Among other things, it trumpets the awards it’s won for compliance with federal regulations.

In a profile in the January 2010 issue of Vanity Fair, Prince lashed out at Panetta and the congressional Democrats he suspected of disclosing his work for the CIA. The story detailed the work he had done for the agency: most controversial, overseeing a contractor black ops program to find, capture, and, if necessary, kill terrorists. Soon after the story was published, the New York Times reported that Blackwater was losing its secret contract to load bombs onto CIA drones in Pakistan and Afghanistan. Because Civilian Warriors was vetted by the CIA’s Publications Review Board, none of this appears in the book, except in a short afterword written by the military historian Max Boot.

These days, Prince’s day job is running the Frontier Resource Group, a fund that invests in natural resources in Africa. Divorced from his second wife, he lives with the four children from his first marriage in Abu Dhabi. (His three younger children live with their mother.) He returns regularly to Virginia, where he has an estate.

While in the United Arab Emirates, Prince has been linked to the Puntland Maritime Police Force, a paramilitary force trained by South African advisers to fight piracy—the UN investigated whether the program violated the Somalian arms embargo—and a company called Reflex Responses, or R2, that created an army of foreign soldiers for the Emirates. According to a former R2 employee, Prince helped start the company as an intelligence-gathering operation hosted by the UAE but actually serving the U.S. government. Prince’s involvement, the former employee says, has waned as the UAE government has gradually turned it from an intelligence network into a local military contractor. Asked about both projects, Prince says they are things on which he served as a consultant. “I give people ideas on how to solve intractable problems,” he says. “I’ll leave it at that.”

As for Blackwater, all he retains of the company he founded is the trademark. Over the years he has worked on a few licensing projects. There are Blackwater-branded knives and a Blackwater pellet gun. There’s even a first-person shooter video game. It’s designed so that players cannot shoot civilians.

With Michael Riley
Bennett_190
Bennett is a staff writer for Bloomberg Businessweek in New York.

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