Chronogram - Blood Money
The Top Ten War Profiteers of 2004
By the Center for Corporate Policy
At the start of the Iraq war, Andrew Natsios of USAID proclaimed that the reconstruction of Iraq would look like a modern-day Marshall plan. The grand designs of the Bush administration, however, have made a handful of companies serious money.
This list was compiled by the Center for Corporate Policy, a non-profit, non-partisan public interest organization working to curb corporate abuses and make corporations publicly accountable. More information is available at www.corporatepolicy.org.
In June, the Pentagon's Program Management Office in Iraq awarded a $293 million contract to coordinate security operations among thousands of private military contractors (PMCs) to Aegis, a UK firm whose founder was once investigated for illegal arms smuggling. An inquiry by the British parliament into Sandline, Aegis head Tim Spicer's former firm, determined that the company had shipped guns to Sierra Leone in 1998 in violation of a UN arms embargo. Sandline's position was that it had approval from the British government, although British ministers were cleared by the inquiry. Spicer resigned from Sandline in 2000 and incorporated Aegis in 2002.
A protest brought by rival PMC bidder Dyncorp after its bid was deemed unacceptable by the Army, was dismissed by the General Accounting Office, which concluded that Dyncorp "lacked standing to challenge the integrity of the awardee (Aegis)." Critics say that's just the problem. US and international law have failed to address the role of PMCs in Iraq, resulting in a near-total lack of accountability that epitomizes what's wrong with the corporate takeover of Iraq. PMCs fall outside the Military Code of Justice and possibly cannot be prosecuted by Iraq's own laws, due to CPA order #17, which says foreign contractors, including private security firms, are granted full immunity from Iraq's laws, even if they injure or kill an innocent party.
Critics find it ironic that Bearing Point, the former consulting division of KPMG, received a $240 million contract in 2003 to help develop Iraq's "competitive private sector," since it had a hand in the development of the contract itself. According to a March 22 report by USAID's assistant inspector general Bruce Crandlemire, "Bearing Point's extensive involvement in the development of the Iraq economic reform program creates the appearance of unfair competitive advantage in the contract award process."
Bearing Point spent five months helping USAID write the job specifications and even sent some employees to Iraq to begin work before the contract was awarded, while its competitors had only a week to read the specifications and submit their own bids after final revisions were made. "No company who writes the specs for a contract should get the contract," says Keith Ashdown, the vice president of Washington, DC-based Taxpayers for Common Sense.
Neither Crandlemire nor other critics claim BearingPoint broke the law. But the company's ties to the Bush administration (according to the Center for Responsive Politics, BearingPoint employees gave $117,000 to the 2000 and 2004 Bush election campaigns, more than any other Iraq contractor) is an example of "crony contracting" that undermines the legitimacy of those who might claim to be working to establish competitive markets in the "newly liberated" country.
Bechtel was literally tasked with repairing much of Iraq's infrastructure—schools, hospitals, bridges, airports, water treatment plants, power plants, railroad, irrigation, electricity, etc.—a job that was critical to winning hearts and minds after the war. To accomplish this, the company hired over 90 Iraqi subcontractors for at least 100 jobs. Most of these subcontracts involved rote maintenance and repair work, however, and for sophisticated work requiring considerable hands-on knowledge of the country's infrastructure, the company bypassed Iraqi engineers and managers.
The company has yet to meet virtually any of the major deadlines in its original contract. In October, according to USAID, the CPA had restored only 4,400 MW (mega-watts) of electrical generating capacity target, falling short of its goal of 6,000 MW by end of June (USAID's goal was 9,000 MW, a level that existed in the country before the first gulf war). According to a June GAO report, "electrical service in the country as a whole has not shown a marked improvement over the immediate postwar levels of May 2003 and has worsened in some governorates."
Bechtel is not entirely to blame, as some of the delay is obviously due to the difficulties of getting employees and materials safely to project sites. [Editor's note: Not to mention the tens of thousands of new electrical appliances shipped into an import-starved post-sanction Iraq, the potential impact of which was not included in the original electrical capacity generating goals.]
BKSH & associates
Chairman Charlie Black is an old Bush family friend and prominent Republican lobbyist whose firm is affiliated with Burson Marsteller, the global public relations giant. Black was a key player in the Bush/Cheney 2000 campaign and together with his wife raised $100,000 for this year's reelection campaign.
BKSH clients with contracts in Iraq include Fluor International (whose ex-chair Phillip Carroll was tapped to head Iraq's oil ministry after the war, and whose board includes the wife of James Woolsey, the ex-CIA chief who was sent by Paul Wolfowitz before the war to convince European leaders of Saddam Hussein's ties to al-Qaeda). Fluor has won joint contracts worth up to $1.6 billion.
Another client is Cummins Engine, which has managed to sell its power generators thanks to the country's broken infrastructure.
Most prominent among BKSH's clients, however, is the Iraqi National Congress, whose leader Ahmed Chalabi was called the "George Washington of Iraq" by certain Pentagon neoconservatives before his fall from grace. BKSH's K. Riva Levinson was hired to handle the INC's U.S. public relations strategy in 1999. Hired by US taxpayers, that is: Until July 2003, the company was paid $25,000 per month by the US State Department to support the INC.
CACI and Titan
Although members of the military police face certain prosecution for the horrific treatment of prisoners at the Abu Ghraib prison, so far the corporate contractors have avoided any charges. Maj. Gen. Antonio Taguba reported in an internal Army report that two CACI employees "were either directly or indirectly responsible" for abuses at the prison, including the use of dogs to threaten detainees and forced sexual abuse and other threats of violence. Another internal Army report suggested that Steven Stefanowicz, one of 27 CACI interrogators working for the Army in Iraq, "clearly knew [that] his instructions" to soldiers interrogating Iraqi prisoners "equated to physical abuse."
"Titan's role in Iraq is to serve as translators and interpreters for the US Army," company CEO Gene Ray said, implying that news reports had inaccurately implied the employees' involvement in torture. "The company's contract is for linguists, not interrogators." But according to Joseph A. Neurauter, a GSA suspension and debarment official, CACI's role in designing its own Abu Ghraib contract "continues to be an open issue and a potential conflict of interest."
Nevertheless, the GSA and other agencies conducting their own investigations have yet to find a reason to suspend the company from any new contracts. As a result, in August the Army gave CACI another $15 million no-bid contract to continue providing interrogation services for intelligence gathering in Iraq; In September, the Army awarded Titan a contract worth up to $400 million for additional translators.
At the end of September, the Defense Department suspended Custer Battles (the name comes from the company's two principle founders—Michael Battles and Scott Custer) and 13 associated individuals and affiliated corporations from all federal contracts for fraudulent billing practices involving the use of sham corporations set up in Lebanon and the Cayman Islands. The CPA caught the company after it left a spreadsheet behind at a meeting with CPA employees. The spreadsheet revealed that the company had marked up certain expenses associated with a currency exchange contract by 162 percent.
Robert Isakson, a company employee, drew attention to the problem by filing a false claims action against the company. Isakson also alleged that Custer's "war profiteering...contributed to the deaths of at least four Custer Battles employees."
In a prepared statement, company attorneys suggested that the government's decision to not participate in Isakson's case is evidence that the charges are baseless, and that "the individuals [involved] filed this claim solely as a last ditch effort to achieve a competitive edge over CB."
The suspension was the first for any company in association with its work in Iraq. The FBI and the Pentagon inspector general's Defense Criminal Investigative Services are both conducting ongoing investigations.
In December Congressman Waxman (D-CA), an-nounced that "a growing list of concern's about Halliburton's performance" on contracts that total $10.8 billion have led to multiple criminal investigations into overcharging and kickbacks. In nine different reports, government auditors have found "widespread, systemic problems with almost every aspect of Halliburton's work in Iraq, from cost estimation and billing systems to cost control and subcontract management." Six former employees have come forward, corroborating the auditors' concerns.
Another "H-bomb" dropped just before the election, when a top contracting official responsible for ensuring that the Army Corps of Engineers follows competitive contracting rules accused top Pentagon officials of improperly favoring Halliburton in an early-contract before the occupation. Bunnatine Greenhouse says that when the Pentagon awarded the company a five-year oil-related contract worth up to $7 billion, it pressured her to withdraw her objections, actions that she said were unprecedented in her experience.
Halliburton spokesperson Beverly Scippa says that while she cannot comment on the allegations until specific charges are filed, any suggestion that the company's involvement made it difficult for other companies to fairly compete are "absolutely untrue," pointing to a earlier GAO report that found that Halliburton/KBR was "the only contractor DOD had determined was in a position to provide the services within the required time frame given prewar planning requirements."
But others, including Waxman, believe that Greenhouse's version of events corroborates existing evidence that the contracting process was biased toward Vice President Dick Cheney's old company. Pentagon officials referred the matter to the Pentagon's inspector general, a move that critics say effectively buried the issue.
(For more information about Halliburton, visit www.HalliburtonWatch.org)
Lockheed Martin remains the king among war profiteers, raking in $21.9 billion in Pentagon contracts in 2003 alone. With satellites and planes, missiles and IT systems, the company has profited from just about every phase of the war except for the reconstruction. The company's stock has tripled since 2000 to just over $60.
Lockheed is also helping Donald Rumsfeld develop a new tech-heavy integrated global warfare system that the company promises will transform the nature of war. In fact, the large defense conglomerate's sophistication in areas as diverse as space systems, aeronautics, and IT will allow it to play a leading role in the development of new weapons systems for decades to come, including a planned highly-secure military Internet, a spaced-based missile defense system, and next-generation warplanes such as the F-22 (currently in production) and the Joint Strike Fighter F-35.
When it comes to defense policy, Lockheed's network of influence is virtually unmatched. E.C. Aldridge Jr., the former undersecretary of defense for acquisitions and procurement, gave final approval to begin building the F-35 in 2001, a decision potentially worth $200 billion to the company. Although he soon left the Pentagon to join Lockheed's board, Aldridge continues to straddle the public-private divide: Rumsfeld appointed him to a blue-ribbon panel to study advanced weapons systems.
Former Lockheed lobbyists and employees include the current secretary of the Navy, Gordon England, secretary of transportation Norm Mineta (a former Lockheed vice president) and Stephen J. Hadley, Bush's proposed successor to Condoleeza Rice as his next national security advisor.
Lockheed is not only represented on various Pentagon advisory boards, but is also tied to various influential think tanks. For example, Lockheed VP Bruce Jackson (who helped draft the Republican foreign policy platform in 2000) is a key player at the neo-conservative planning bastion known as the Project for a New American Century.
In the buildup to the war the Pentagon bought up access to numerous commercial satellites to bolster its own orbiting space fleet. US armed forces needed the extra spaced-based capacity to be able to transmit huge amounts of data to planes (including unmanned Predator drones flown remotely by pilots who may be halfway around the world), and guided missiles and troops on the ground.
Industry experts say the war on terror literally saved some satellite operators from bankruptcy. The Pentagon "is hoovering up all the available capacity" to supplement its three orbiting satellite fleets, Richard DalBello, president of the Satellite Industry Association explained to the Washington Post in 2003. The industry's other customers—broadcast networks competing for satellite time—were left to scramble for the remaining bandwidth.
Loral Space & Communications Chairman Bernard L. Schwartz is very tight with the neoconservative hawks in the Bush administration's foreign policy ranks, and is the principal funder of Blueprint, the newsletter of the Democratic Leadership Council.
In the end, the profits from the war in Iraq didn't end up being as huge for the industry as expected, and certainly weren't enough to compensate for a sharp downturn in the commercial market. But more help may be on its way. The Pentagon announced in November that it would create a new global Intranet for the military that would take two decades and hundreds of billions of dollars to build. Satellites, of course, will play a key part in that integrated global weapons system.
Two CPA officials resigned this year after claiming they were pressured by John Shaw, the deputy undersecretary of defense for technology security to change an Iraqi police radio contract to favor Qualcomm's patented cellular technology, a move that critics say was intended to lock the technology in as the standard for the entire country.
Iraq's cellular market is potentially worth hundreds of millions of dollars in annual revenues for the company, and potentially much more should it establish a standard for the region. Shaw's efforts to override contracting officials delayed an emergency radio contract, depriving Iraqi police officers, firefighters, ambulance drivers and border guards of a joint communications system for months.
Shaw says he was urged to push Qualcomm's technology by Rep. Darrell E. Issa, a Republican whose San Diego County constituency includes numerous Qualcomm employees. Issa, who received $5,000 in campaign contributions from Qualcomm employees from 2003 to 2004, sits on the House Small Business Committee, and previously tried to help the company by sponsoring a bill that would have required the military to use its CDMA (code division multiple access) technology.
"Hundreds of thousands of American jobs depend on the success of US-developed wireless technologies like CDMA," Issa claimed in a letter to Donald Rumsfeld. But the Pentagon doesn't seem to be buying the argument. The DoD's inspector general has asked the FBI to investigate Shaw's activities.
(For an excellent, in-depth investigation of Qualcomm see Michael Scherer, "Crossing the Lines," Mother Jones, Sept./Oct. 2004)