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."

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 motherjones.com/greystone), 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.

In his recent Capitol Hill appearance, Erik Prince played down his foreign recruiting.
In his recent Capitol Hill appearance, Erik Prince played down his foreign recruiting.
Photo: Reuters/Larry Downing

IN ADDITION TO prospecting for international contracts, Greystone has become Prince's primary recruiter of foreign military muscle. On its website, the company says its operators are drawn "from the best militaries throughout the world" and represent "numerous nationalities." Its reliance on foreign recruits, it claims, is a matter of "cultural sensitivity" and "awareness." What the PR materials don't say is that Greystone, along with other security companies, likely outsources its work overseas for the same reason many other businesses do—it brings down costs and helps bypass bothersome regulations. "They're going to pay these people a lot less, and they're not going to respect the same type of employee and labor rights that U.S. nationals would require," says Erica Razook, an Amnesty International lawyer whose work focuses on private-security contractors.

Consider the case of Greystone subcontractor ID Systems. Incorporated in Panama and headquartered in a nondescript office complex in Bogotá, Colombia, the company in 2005 placed newspaper ads that drew men with military experience—a plentiful commodity in a country torn by civil war and terrorized by guerrillas and paramilitaries. According to one ID Systems recruit, a former Colombian army officer who asked to remain anonymous, he and at least 30 other men were promised $4,000 per month to do security work for Blackwater in Iraq. They went through a quick refresher course in firearms and hand-to-hand combat at the Colombian army's cavalry school in northern Bogotá, he said; among the instructors were several Americans, all ex-U.S. military working for Greystone. Afterward, the recruits returned home to wait for the call to Iraq.

It came late one evening in June 2006. The men assembled at ID Systems' offices, where they were met by Gonzalo Adolfo Guevara, a former Colombian army captain who had overseen their recruitment. He handed them contracts and told them to be at the airport in four hours. They were told they would be making not $4,000 but $2,700 per month—still not bad in Colombia, where some workers only earn that much in a year. But the actual contract, which some of them didn't read until after they were airborne, provided for just $1,000 per month, or $34 per day.

On arriving in Baghdad, the men were issued weapons and introduced to Blackwater and Greystone managers. Bitterness turned to anger when they discovered that their pay was about one-fourth that of the Romanians they were replacing. They composed a letter to managers at ID Systems, Greystone, and Blackwater demanding either a raise or a ticket back to Colombia. The companies stonewalled, and it wasn't until three months later, after reports of the dispute had appeared in Semana, Colombia's largest newsmagazine, that the men were finally sent home. (Chris Taylor says there was no impropriety: "Before every single one of those professionals were deployed, they understood there was a change in the contract. Those who went understood perfectly what they were signing.") According to the former recruit, ID Systems continues to supply personnel to Greystone. But Guevara, the man who deceived the recruits about their wages, is no longer involved—he was shot and left to die outside a Bogotá bakery last May.

IT WAS NEITHER GUEVARA nor Erik Prince who pioneered the idea of hiring foreign soldiers to do the business of the U.S. government. That took the imagination of a Chilean American businessman named José Miguel Pizarro. "Pizarro opened the door," says José Luis Gómez del Prado, a former diplomat who heads the UN Working Group on the use of mercenaries; it's thanks to Pizarro that recruiting ex-soldiers from Latin America has become "a big business."

Born in California and raised in Santiago, Pizarro served ten years as an officer in the Chilean army and another three as a Marine Corps translator attached to the U.S. Southern Command. By March 2003, he was heading a small defense-consulting firm in suburban Washington, D.C. Pizarro was connected and well spoken. He was also telegenic, and as the U.S. stormed toward Iraq he was hired as an on-air military analyst with cnn en Español, the network's Spanish-language affiliate. It was there, in the cafeteria between shows, that he befriended a former U.S. general, also working as an analyst, who helped him hatch the idea of renting former Chilean soldiers to American private security companies. "He explained to me how the opportunity to do business in the Middle East was growing, that there was a need for private, professional security forces in Iraq," Pizarro recalls. "I started showing up in the cafeteria with pen and paper, taking notes, taking names. It took me several weeks to form the idea."

Before long, Pizarro was cold-calling security contractors to pitch his commandos. It wasn't an easy sell. "No one in any of the firms would even return his calls," says one industry expert Pizarro turned to for advice. Pizarro recalls his first meeting with Blackwater president Gary Jackson: "He told me, 'This is a respectable company, and we're going into a war zone. I need professional commandos, not peasants with rifles.'"

Not easily discouraged, Pizarro scored an appointment with Prince, who signed on for an initial batch of recruits to add to Blackwater's security operations in Iraq. Pizarro left the meeting starstruck with his first paying customer. "He's my hero," Pizarro says. "He's a patriot, a great Christian, and has the balls that 250 million Americans would love to have."

Back in Santiago, Pizarro formed a new company called Grupo Táctico—incorporated in Uruguay to sidestep Chilean laws prohibiting paramilitary activity—and posted an ad in a Chilean newspaper offering recruits $3,000 per month. More than a thousand men sent résumés, including some active-duty Chilean soldiers. Blackwater reps traveled to Chile to review the applicants, and by February 2004, Pizarro and about 75 of his top recruits—most of them former Chilean special forces, marine commandos, and paratroopers—were brought to Blackwater's compound in Moyock for training. Within weeks, they flew to Iraq, where they found themselves working alongside a veritable United Nations of security contractors: Nepalese and Indian Gurkhas, South Africans, and Eastern Europeans, to name a few. They became known as the "Black Penguins" because of the distinctive figures they cut on foot patrol, weighed down by weapons and flak jackets. Pizarro took to the term and designed a shoulder patch for his recruits: a penguin with an M-4 carbine across its chest.

TO FIND THEIR DISCOUNT SOLDIERS, Blackwater, Greystone, and their competitors have built recruitment networks reaching deep into the paramilitary milieus of the Third World. It works like this: Blackwater, for example, will win a U.S. government contract; it will then subcontract with itself—that is, with Greystone—to do the job. From there, Greystone looks to its network of international affiliates, firms like Pizarro's Grupo Táctico in Chile or ID Systems in Colombia, which maintain informal relationships with what are known in the trade as "briefcase recruiters"—individuals with connections to the local paramilitary scene. These men find the recruits and funnel them back up the chain until, finally, they are deployed alongside U.S. forces in Iraq. The practice also serves as a convenient firewall, shielding U.S.-based companies from direct liability for the actions of their subcontractors. "If a court is looking at these issues, where the contract is signed is a factor," explains Amnesty's Razook. "There is a lot there that would take it out of a U.S. court's control."

Briefcase recruiting is a little-known niche of the private security business that has attracted some less-than-savory characters. Take Julio (a.k.a. "George") Nayor, a Cuban American currently serving an 11-year sentence at a federal prison in Miami for drug trafficking. A one-time associate of Colombian drug lord Pablo Escobar, Nayor escaped arrest in the United States in the early 1990s and fled, by means of a fake passport and various false identities, to San Salvador. There he reportedly opened a gym and several restaurants including one he named Karaoke George, which was adjacent to an upscale shopping mall.

In late 2004, Nayor placed newspaper ads seeking men to work on contract in Iraq for an unspecified U.S. security firm; recruits were to meet him at the karaoke bar. According to a Washington Post reporter who witnessed the scene, men lined up outside for weeks. "This is the future of global security," Nayor bragged to the reporter, adding that he'd already accepted 300 Salvadorans and expected to sign up many more, including veterans of the 380-man contingent that the Salvadoran government had contributed to the Coalition of the Willing. As soldiers in Iraq, they had earned a monthly salary of $280; as hired guns, they expected to make as much as $2,400.

Nayor disappeared as quickly as he had emerged, but nine months later many of the men who had interviewed with him were contacted by capros, a new company headed by two high-ranking Salvadoran military officers that, according to a Salvadoran newspaper, was recruiting for Greystone. In December 2005, Greystone representatives visited El Salvador to review the recruits, although it's unclear whether they were ever sent to Iraq. Some of the men later told the Salvadoran press that the company had encouraged them to rack up credit-card purchases in preparation for their deployment, then failed to reimburse them.

Nayor's own career as a briefcase recruiter was cut short in September 2006 by his arrest for allegedly plotting to assassinate El Salvador's president by shooting down his helicopter with a shoulder-fired missile. He was subsequently extradited to the United States to face some of his old drug charges.

By then, Greystone's search for contractors had expanded far beyond Latin America. In 2005, a Croatian newspaper reported that Greystone had dispatched a man named Marko Radielovic, who once worked for the aid group Mercy Corps, to perform a "feasibility study" on hiring former Croatian soldiers and police. The following year, the Filipino press reported that a company called Satelles Solutions had applied to lease land (about 25 acres) within the former U.S. Navy base at Subic Bay. Satelles was a Greystone front; its Filipino "owners" included a former high-ranking general and an attorney at a major law firm that specialized in advising foreign investors. Each held a few pennies' worth of Satelles stock, while Greystone controlled the rest.

The firm had been courting the Filipino government for some time; seven of its embassy employees were invited to Greystone's unveiling ceremony in Washington, the largest contingent by far of any foreign embassy. Greystone, according to Filipino news reports, hoped to build a jungle-survival training facility capable of processing up to 1,000 trainees a week. "It was merely a place to be able to provide training to customers in that part of the world," says Chris Taylor; it wasn't about creating a "third-country-national offensive force." Nevertheless, after Filipino legislators called for an investigation, the company withdrew its application.

FOR A WHILE, it seemed to José Miguel Pizarro as if the private security boom might never end. Following Erik Prince's example, he began to diversify—launching a Chilean business intelligence firm catering to the defense industry, and a security company that, like Blackwater, could provide guards, police and military trainers, and even bomb-sniffing dogs. He also took on a new client, Virginia-based Triple Canopy. But then, as quickly as his star had risen, it fell as both Greystone and Triple Canopy canceled his contracts. Pizarro blames corporate intrigue—Blackwater didn't like his doing business with the competition, he claims—but the true reason may be far simpler. At the height of his operation, Pizarro charged a monthly fee of $4,500 per recruit, of which his men received $3,200. Recruits from other Latin American countries, meanwhile, were willing to deploy to Iraq for as little as $700 per month. "You can get five Colombian rifles for one Chilean," Pizarro says. "Do the math."

In January 2006, the last of his 1,157 Chilean commandos left Iraq. By the time Erik Prince testified before the House oversight committee last October, he acted as though he didn't remember Pizarro: "He might have been a vendor to us," he ventured when Rep. Jan Schakowsky (D-Ill.) asked him point-blank.

But if Prince has lost all memory of the Chilean recruiter, Pizarro hasn't forgotten his role model. Having focused of late on the strategic-consulting side of his business, he says he remains prepared to muster more than 1,200 Chilean commandos for deployment anywhere in the world. "Privatization of certain security services is a long-term trend with historical consequences," he says. "The entire future of private military companies is being redesigned as we speak."

Indeed, the private security industry could be heading toward a shake-up—though not necessarily in the way Pizarro would like. Many of the new players could suffer the fate of any startup, disappearing or being swallowed by larger firms. "The problem these guys have is that they're not very profitable," says Larry Johnson, a former cia officer who works as a consultant for Special Forces. Johnson, who's part of an investment group that was offered a crack at purchasing Triple Canopy when it went up for sale last year, says the firm clears, at most, 5 percent on about $170 million in annual revenue. "They're like a dollar wind machine," he says. "Dollars come in and dollars go out, but I don't see how they stay in business doing that."

Prince and his diversified group of companies, though, are positioned to endure. The Greystone model doesn't depend on America's wars: Whether the future of the business lies in what the industry calls "peace and stability" work or in providing "proactive" strike forces to private clients, some element of the Prince network is in a position to deliver. "They're soldiers of fortune," says the security director of a well-known humanitarian NGO. "Today they are willing to do the bidding of the United States, because the United States is willing to pay them. Who are they willing to work for tomorrow?"


A chart detailing the corporate structure of the Prince Group.