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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.

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.

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