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Blackwater's World of Warcraft

Need a private-label armored vehicle? A detachment of Chilean infantrymen? A special forces "engagement team"? Erik Prince's expanding global private army is at your service—and the war in Iraq was just the beginning.

WHEN BLACKWATER founder Erik Prince took his seat before the House Committee on Oversight and Government Reform last October, in the midst of a firestorm over the killing of 17 civilians in Baghdad by his contractors the previous month, the 38-year-old was at the helm of a fast-growing global business—and had the confidence to match. Sporting a neatly pressed suit and a fresh military-style haircut that evoked his service as a Navy SEAL, Prince had been prepped by crisis-management specialists from the Beltway PR firm Burson-Marsteller, and throughout the tense four-hour hearing he leaned back frequently to confer with his lawyer. A private man who seldom gives interviews, he nevertheless seemed at ease in a room filled with politicians, cameras, and reporters. He extolled his men's professionalism—"I believe we acted appropriately at all times"—and bristled at the term most commonly used to describe his line of work. "The Oxford dictionary defines a mercenary as a professional soldier working for a foreign government," he said. "We have Americans working for America, protecting Americans."

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The truth is a bit more complex. As profit margins in the private security industry have narrowed—Blackwater clears just 10 percent on its primary State Department contract, Prince testified—the CEO has increasingly looked beyond American shores. More and more of his foot soldiers now come from Third World countries, and his corporate network is aggressively pitching for business from foreign governments. (It has already trained naval commandos in Azerbaijan and has been hired to train special forces troops in Jordan.) In his most ambitious moments, Prince has set out a vision in which his companies would act as for-profit peacekeepers, working with the United Nations and other international organizations in conflict areas around the world. Even Blackwater's marketing materials are infused with the imagery of global humanitarianism; one of the company's recent ads shows a tiny malnourished infant being spoon-fed and proclaims the company's intention to "provide hope to those who still live in desperate times."

Yet the most important vehicle for Prince's global aspirations isn't Blackwater proper, but Greystone Limited, a company he quietly founded in 2004 as his firm's "international affiliate." According to Chris Taylor, a former Marine Recon soldier who until May was Blackwater's vice president for strategic initiatives, Prince sought to build a new brand. "Blackwater has a sexy name and people pay attention to it," Taylor says, and sometimes that high profile "may not fit the proposed mission." In particular, he says, "international opportunities" were to be "looked at through Greystone."

Nearly all of the 20 or more companies Prince has launched or acquired over the years are U.S. based. Greystone, however, was incorporated in the Caribbean tax haven of Barbados, although it is managed from Blackwater's headquarters in Moyock, North Carolina. (The Barbados address and phone number listed in the federal government's contractor database trace back to a firm that specializes in shielding corporate revenues from U.S. tax authorities.) "As far as I know, they were the same company with different names," notes a contractor who worked for Blackwater in Iraq.

Unlike Blackwater, Greystone has managed to stay almost entirely out of public view, and it remains a mystery even to industry insiders. Doug Brooks, president of the International Peace Operations Association, a trade group of which Greystone was a member until late last year, couldn't say what the company does. (Blackwater pulled out of the group last October after the IPOA launched an investigation into its conduct; Greystone followed suit in November.) Neither could R.J. Hillhouse, a political scientist and private-security expert who follows the industry closely. Even a spokesman for the State Department's Bureau of Diplomatic Security, which has issued contracts to Blackwater on which Greystone works as a subcontractor, admits he has never heard of the company.

Despite—or perhaps because of—its close-to-the-vest MO, the company has built up a certain mystique. One contractor we spoke to said he was present when Greystone managers arrived to claim their office space at Blackwater's Baghdad headquarters. They were a different breed from the "yee-haw cowboys" that filled Blackwater's ranks, and their tattoos indicated backgrounds in elite military units like Marine Recon, the Navy SEALs, and the Green Berets. "They didn't talk to the other Americans," he said, let alone foreigners. "They had different bodies, different mentalities, and used different language. They had a different professional attitude."

Greystone's managing director is a 40-year-old ex-SEAL named Christopher Burgess, who first met Prince while the pair was in training for the Navy's elite unit. Burgess rarely grants interviews, but he agreed to answer some of our questions in writing. Asked why Greystone had chosen to incorporate in Barbados, he responded that the country "is a well known business center with established business practices and banking systems."

Tax benefits aside, at least one industry observer has suggested that offshoring Blackwater's sister company may have been an attempt to skirt strict regulations on the export of military services. Burgess disputes the notion. Greystone, he said, seeks "State Department licensure for all security services overseas," and complies with "other trade controls and restrictions." Taylor admits that taxes were a factor, but says the primary goal was to better position Greystone for international contracts. "It's a matter of focus and efficiency," he says. "I don't think it obfuscates anything."

THE SCION of a prominent and politically connected Michigan family, Erik Prince followed in his father's entrepreneurial footsteps. Edgar Prince was a billionaire auto-parts maker who provided seed money for conservative activist Gary Bauer's Family Research Council. After his father's death in 1995, Prince combined his inherited wealth and Special Forces background to launch Blackwater.

The company's original business goal was modest—training state and local cops to be better marksmen. But then came the wars in Afghanistan and Iraq, and with them a bonanza for the private security industry. Since then, Prince's holding company, Prince Group LLC, has come to include numerous ventures. Among them are Presidential Airways, an air-charter and cargo-transport firm; Pelagian, a maritime security operation with its own 153-foot vessel, helipad-equipped and outfitted for training and disaster response; and defense projects to make high-tech armaments such as mine-resistant armored vehicles and surveillance blimps. In February 2007, Prince rounded out his operations with Total Intelligence Solutions, a "one-stop" intelligence and risk consultancy for the private sector staffed by former CIA officials.

The total of the Prince Group's federal contracts, some of which are classified, is hard to ascertain. But according to government records, Blackwater alone pulled in close to $600 million in fiscal year 2006—an impressive figure considering its annual take from government work was well under $1 million prior to 9/11. Its checks come from a host of agencies, including the departments of State, Defense, and Homeland Security, and the CIA, which, a European Parliament investigation alleges, has hired Prince's air-charter company to transport terrorist suspects to secret interrogation sites. (Blackwater denies any involvement in rendition flights.)

The Prince business model calls to mind an earlier generation of private security companies typified by South Africa-based Executive Outcomes and U.K.-based Sandline International. Through the 1990s, these companies deployed private armies for the embattled regimes of countries such as Angola and Sierra Leone, waging war against rebels allegedly in exchange for diamond and oil concessions. Although both are now defunct, their alumni remain among the industry elite; Tim Spicer, Sandline's former ceo, now runs Aegis Defence Services, which contracts with the Pentagon to coordinate security for all reconstruction projects in Iraq. And as Executive Outcomes founder Eeben Barlow wrote in a memoir released in South Africa last year, the main difference between his company and those now working in Iraq "under the guise of security companies" may simply be that Blackwater et al. have government backing. "After we had blazed the path for military consultancy and advisory work," he wrote, "companies realised that the military market was an open playing field."

NONE, PERHAPS, realized it more than Greystone, which has set out to meld government and corporate business into a seamless global web. In February 2005, the company was inaugurated at an exclusive event at the Ritz-Carlton Hotel in Washington, D.C. There, a carefully selected coterie of foreign dignitaries and international businessmen strode past armored vehicles conspicuously parked near the entrance. Inside, they browsed tables stocked with military-grade weapons and equipment, including uniforms, boots, knives, and gas masks, according to one invited guest. The keynote speaker was Cofer Black, the former State Department and CIA official who, as head of the Agency's Counterterrorist Center, famously promised after 9/11 to deliver Osama bin Laden's head to the White House in a box of dry ice. Just two weeks before the Ritz-Carlton shindig, Black (now chairman of Total Intelligence Solutions) had joined a parade of officials leaving government service to work for Prince. In his speech, he urged attendees to consider our "changing world," the "far different threats" America faces, and the "creative solutions and approaches" required to deal with them.

Black's rhetoric closely echoed Greystone's promotional materials. "In today's grey world," reads one of the company's pamphlets, "the solutions to your security concerns are no longer as simple as black and white." Greystone offers clients full protective details staffed by special operations, law enforcement, and intelligence personnel "for any threat scenario around the world." It is prepared to train indigenous forces "in developing a capability to conduct defensive and offensive small group operations." Greystone contractors can stage mock "red team" attacks on secure installations to identify potential vulnerabilities. The company will work "in support of national security objectives as well as private interests" and is prepared to deploy "proactive engagement teams"—suggestive of offensive forces, not just security guards. Prince's companies maintain a small fleet of aircraft, including Little Bird helicopters, commonly used in Special Forces operations, and CASA-212s, rugged turboprops with high-mounted wings for moving cargo or up to 28 passengers. Blackwater also has sought to acquire at least one Embraer Super Tucano fighter—a lightweight plane used by several Latin American governments for counterinsurgency, pilot training, and monitoring. In an early promotional video (see, Greystone operators, some wearing black ski masks, are shown doing everything from handing out food to refugees and protecting diplomats to jumping out of airplanes, running cars off the road, and landing strike teams on Iraqi rooftops—all to a synthesized drum-and-bass soundtrack.

"They have the ability to do whatever tickles your pickle," says one private-security contractor. "They have services literally from A to Z. Aviation. Special operations. Rescue. Ransom. You name it. If you got the money, they got the honey. You can hire 17 James Bonds with Arnold Schwarzenegger in charge, or you can knock on the same door and tell them, 'I'm a Kuwaiti businessman and would like protection for my convoys between Kuwait City and Baghdad, but I only have half a million dollars a month.' Greystone will take the contract, and they'll hire grunts."

In addition to being a regular subcontractor for Blackwater in Iraq, Burgess said Greystone has also been hired directly by "foreign governments and private sector clients to provide static security, K-9 support, [vulnerability] assessments, aviation maintenance and management, and training." He wouldn't specify clients or countries of operation "due to operational security concerns," except to say Greystone has worked "in various Middle Eastern countries."

The company has also registered with the UN's procurement division, theoretically allowing it to compete for international peacekeeping contracts; speaking at a 2006 conference in Amman, Jordan, Black suggested that Blackwater could rapidly dispatch a brigade-size force to, say, Darfur. Taylor, the former Blackwater VP, says: "You just can't deny the capability that Erik Prince has developed to assuage human suffering around the world."

So far, though, the world seems disinclined to take advantage of Greystone's capabilities: In late December, after we asked a UN official about the company's presence in the organization's procurement database, Greystone and Presidential Airways were removed from the list; a UN source told us it was a temporary move pending an investigation into "ethical" concerns. For its part, Blackwater has tried to crack the African market with a bid to train South Sudanese security forces long engaged in battle with the country's Islamic regime, although a company spokeswoman says it has no current contracts to do so. Writing in the Lebanese daily An-Nahar late last year, Sudan's ambassador to Lebanon said that Blackwater had sought permission to enter Sudan under "a different name"—Greystone.

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