Who Says Obama’s Bad for Business?

by , August 30, 2011

President Obama’s critics like to say he’s anti-business, and that he doesn’t understand, nor even like, the military. He is a Democrat, after all, so how could he?

Well, we can say that’s fundamentally not true with only two words: Blackwater Worldwide.

If Blackwater, the private security services company now known as Xe Services, which has been one of the biggest recipients of U.S. taxpayer money flowing through the private armed security industry since 9/11, is a metaphor for Obama’s handling of greed, guns and cash flow to war contractors, then we can say neither the military nor business has much to complain about.

Should we be surprised? Candidate Obama curried favor with government watchdogs when he declared in 2007 that, “we cannot win a fight for hearts and minds when we outsource critical missions to unaccountable contractors,” and introduced the Security Contractor Accountability Act the same year. But when asked on the 2008 presidential campaign trail, he said if elected, he would “not rule out” using private security outfits like Blackwater in the war zone. This was just one month after Blackwater security guards were accused of killing 17 unarmed Iraqi civilians in cold blood in Nisour Square (charges against four guards are still pending in federal court).

Apparently, Obama never intended to equate “unaccountable” with “Blackwater” nor any of its myriad manifestations. That’s evident in the number of contracts — covert and otherwise — they’ve received since Obama became president.

As for any old feelings he might have had against relying on contractors to fight overseas, it seems the military has well convinced Obama otherwise. Turns out that he, like his predecessor, would rather make Faustian bargains with the war profiteers than admit the military is too stretched to fight our interventions alone. The president’s even upped the ante: spreading the already strained military to 120 different countries across the globe, no doubt with the help of private security, training, systems support, and “intelligence services.”

Not surprisingly, the number of private contractors remains strong under this administration — 174,000 DoD contractors (.pdf) in the U.S. Central Command area of operations as of May (including Iraq and Afghanistan), compared to 214,000 uniformed personnel in the region. This also includes more than 28,000 armed guards, according to members of congress who just authored a clearly idealistic bill to stop the practice of outsourcing in the war zone altogether.

These totals do not include the private guards used by the State Department in both countries. The numbers in that case, are supposed to go up dramatically as Foggy Bottom is now spending $3 billion to build a force of 5,100 hired guns to protect its interests in Iraq.

All this under Obama, who once warned against privatizing war without the proper controls, and is accused, quite ironically, for pursuing anti-business, “socialistic” policies that are destroying America’s free market ideals.

Meanwhile, he’s been rewarding the bad behavior he once railed against, plain and simple. Example: according to a report released in February, the Pentagon paid out over $285 billion to hundreds of contractors who had been convicted of, fined for, or settled out a charge of defrauding the government relating to DoD contracts from 2007-2009. That’s just two years out of a 10-year, unending war.

Blackwater has successfully tested these very limits. Its own lapses include killing civilians, fraud, peddling illegal weapons, and ignoring federal laws. Last year the company had to pay millions in fines for breaking the law. But thanks to the State Department and the Pentagon, Blackwater/Xe has continued to draw millions in lucrative security, intelligence and other contracts ever since.

Erik Prince

The latest evidence of this was reported via press release by USTC Holdings, LCC on Aug. 17. USTC Holdings is an investor consortium with ties to Blackwater founder Erik Prince. The group bought Xe, with its 30 subsidiaries and affiliates, from Prince late last year, and now operates, among everything else, the massive U.S. Training Center Inc., once known as the Blackwater Lodge and Training Center located in North Carolina. Former Blackwater operatives and officials still populate the North Carolina facility and the entire Xe universe, according to reports.

According to the press release and a subsequent report by CNN, the training center was awarded a $17.6 million contract from the Department of Defense to provide “all-source intelligence analyst support” in “public and restricted domains” to U.S. and coalition forces involved in fighting the Afghan drug war.

“Not only does this specific Department of Defense contract focus on combining intelligence skills with criminal investigative abilities, but it also allows the company to create products that can help detect narcoterrorist activities,” exhorted CNN executive producer Suzanne Kelly.

In other words, spies, in places our forces and presumably the military or CIA cannot go. While Blackwater/Xe has been in Afghanistan from the start, and has worked on counter-narcotics contracts in Afghanistan before, they’re not exactly known for their “criminal investigative abilities” leading one source to suggest that USTC has been hired as a “bucket shop” to hire move warm bodies into the right places for the DoD.

Not bad for a company whose reputation has made it synonymous with post- 9/11 war profiteering and corruption. If the last year for the reanimated Blackwater is any indication, the free market for mercenaries and hired spooks is quite safe, so Obama should get credit where it is due.

Blackwater Was Never in Danger

Last August, “Xe” agreed to pay $42 million in fines to settle out of court “hundreds of violations” and to avoid criminal prosecution for charges involving exporting illegal weapons to Afghanistan and illegally engaging with foreign governments over weapons and military training. At the time, two guards were also facing charges for the murder of two Afghans (later convicted of involuntary manslaughter), five former Blackwater officers — including its ex-president — were under indictment for weapons and obstruction, and an investigation into whether Blackwater officials had tried to bribe the Iraqi government was still ongoing.

In addition, two former employees who filed a whistle-blower lawsuit against Blackwater alleging that the company overbilled the government more than $123 million on its $1 billion contract to provide security to Iraq and Afghanistan, are now heading to court in Virginia.

Blackwater’s dark reputation, including accusations over the last decade of swaggering arrogance, intimidating the local population, shooting first and asking questions later — even cocaine and steroid use among the guards in Iraq — led to a ban from the Iraqi government in 2009, a name change the same year and the eventual flight of Erik Prince to his current home and base of operations in the United Arab Emirates in August 2010.

But it’s nearly September 2011, and the sons of Blackwater are still striving, thriving and beating out the competition.

After the ban in Iraq — a clear signal that Blackwater was probably radioactive in Muslim countries with which the U.S. is supposed to be cooperating, Xe was awarded a $120 million contract to provide security services to diplomats in Afghanistan.

That was announced in June 2010. The same month, The Washington Post reported that the CIA had hired Xe for $100 million to guard its facilities “in Afghanistan and elsewhere,” leaving security big shots Triple Canopy and Dyncorp on the losing end of the bid competition.

In October 2010, Spencer Ackerman at Wired’s Danger Room reported that “International Development Solutions IDS,” USTC’s “joint venture with Kaseman,” another defense contracting outfit, had won a piece of a new five-year Worldwide Personal Protective Services contract issued by the State Department and worth up to $10 billion. One guesses the audit in 2009 declaring that Blackwater owed the State Department $55 million in overpayments because the company hadn’t fulfilled its requirements in the old WPPS contract, had already been forgiven.

“Apparently, there is no misdeed so big that it can keep guns-for-hire from working for the government. And this is despite a 2008 campaign pledge from Secretary of State Hillary Clinton to ban the company from federal contracts,” wrote Ackerman at the time.

Apparently so. Xe was finally sold to USTC Holdings in December 2010. Empowered by the fig leaf that distanced them from Prince, who had already moved to Abu Dhabi, USTC Holdings’ officials boasted to Ackerman in January that it had already acquired an $84 million deal to protect the U.S. consulate in Jerusalem. Ackerman headlined his piece simply, “Despite Denials, Blackwater Still Works for the U.S.”

In March, the State Department quietly tussled with Afghan President Hamid Karzai over a directive he had issued banning all commercial security contractors from the country. According to The Guardian, Blackwater/Xe was eventually put on a list of contractors who could stay for another year, at least.

According to a list seen by The Guardian, 11 companies operating in Afghanistan that have a good reputation with government officials will enjoy favored status in taking over contracts.

Xe Services, formerly known as Blackwater, is included in that group despite being banned in Iraq and notorious for its activities in Afghanistan.

In May, a lineup of former military intelligence and Blackwater operatives calling themselves Jellyfish, stood positioned to break into the lucrative private-sector intelligence business. Tapping into their combined international surveillance and covert ops skills to provide “a worldwide intelligence network of contacts, ready to collect data on global hot spots that Jellyfish can pitch to deep-pocketed clients,” Jellyfish’s reps said they were not ashamed about their Blackwater ties.

In fact they seem to be banking on them, telling reporters at the May launch that Jellyfish will train in network security, as well as “physical security.”

They’re not the only ones unafraid of the Blackwater taint (if there even is one). Also in May, former Bush administration Attorney General John Ashcroft (you know, the one who asked for, and got, all of the enhanced law enforcement and surveillance measures otherwise known as the PATRIOT Act passed through congress within days after the 9/11 terror attacks) signed on as an “independent director” for Xe Services, heading its new “subcommittee on governance,” to “maximize governance, compliance and accountability.”

So it all begins — and ends — with a company’s surrogacy in Washington. Blackwater, now Xe, has always had the best, thanks to Prince’s family foothold in Republican politics — Christian conservative politics to be exact. It’s bought Blackwater not only the contracts it desired, but time, and seeming absolution. Else you wouldn’t hear someone like Ashcroft saying this about his new affiliation: “This is a company with a strong history of service to its country, and a reputation of best-in-class offerings to its public and private customers.”

We can hear Prince laughing all the way from Abu Dhabi. For someone who the papers suggested was fleeing in disgrace, he’s doing pretty well for himself there, too. According to The New York Times, Prince is behind a $529 million deal to put together a private army for Sheik Mohamed bin Zayed al-Nahyan, the crown prince of Abu Dhabi. The 51 percent-UAE Emirati company that’s reportedly running the show, Reflex Responses, insists that Prince has nothing to do with the nascent mercenary force, nor the company itself, but at least five sources, including former employees, confirmed that the Prince, a former Navy SEAL, is driving it.

According to NYT’s May report, Prince is already putting together the 800-man army of mostly foreign commandos from places like Colombia and South Africa, and has hired his old buddies and former weapons and Special Operation specialists from all over the spectrum like the lead in some steroidal Arnold Schwarzenegger film.

Oh, and Prince refuses to hire Muslims for the fighting, says NYT, warning that Muslims can’t be counted on to kill other Muslims. Only faceless, nameless sellswords can be counted on to kill Muslims — if that is what they are being paid to do.

And that brings us back to the beginning, back to losing hearts and minds with unaccountable contractors. Take a look at any poll, in any place we’ve touched, or anywhere in the Arab world — approval numbers for the U.S. have plummeted since Obama took office in 2008 — and it will tell you a story.

No matter, if there was ever a leaner, hungrier example of the unaccountable free market in action it is the private business of war, with Erik Prince one of the most successful of all independent procurers. And Obama one serious Sugar Daddy.

See, this Democrat is not so bad for business after all. Isn’t that what really matters?

Read more by Kelley B. Vlahos