From Kurdistan to K Street

II. Amman, London

I first learned about Michaels' meeting with the CIA while sitting in a frigid apartment in Amman in January. I was there meeting with a string of Middle Eastern operators who had had dealings with Michaels over the years. In the Casablanca that is Amman these days—a trade hub full of Iraqis, Jordanians, Americans, Lebanese, Israelis, and wealthy Gulf investors seeking opportunities in postwar Iraq—Michaels emerged as an enigmatic figure: part business hustler, part agent, via Yatom, of a covert foreign policy agenda. In either role, he was larger than life. "I argued with the [Le Royal] hotel to get him a good foreigner rate," one Jordanian associate told me. "Then I come by later, and he's moved to the fanciest suite in the hotel."

For men like Michaels, Amman was a gateway to business opportunities in Iraq. One Michaels/Yatom joint venture, Kudo AG (short for Kurdish Development Organization), registered in Switzerland, won a major contract to serve as the Kurdish government's general contractor for the $300 million project to rebuild Irbil's Hawler International Airport. According to an associate familiar with Michaels' Kurdish ventures, the deal was structured such that Kudo (a joint venture between Michaels and Yatom and their Kurdish associate representing one of Kurdistan's two ruling parties) was to get paid 20 percent of every contract awarded in the airport project. Though it's not clear how much Kudo was ultimately paid, that ratio would have made its contract worth roughly $60 million. (Michaels declined to comment for this story.)

Michaels also won a smaller contract with the Kurdish Minister of Interior to provide counterterrorism training and equipment; in 2004, Michaels brought several dozen Israeli ex-security officials as well as bomb-sniffing dogs, secure communications equipment, and other military gear into a camp in northern Iraq. The traffic did not go unnoticed by Turkey, which was alarmed by any hint of possible Western support for Kurdish separatism; after Israeli media reported evidence of the activities, Michaels' crew was forced to beat a hasty retreat from Iraq. The Israeli presence in Kurdistan even blipped on the radar of US intelligence agencies, which in 2004 apparently got reports that Iranian agents planned to target Israeli and US personnel operating in northern Iraq. One Pentagon official, Larry Franklin, caught sharing Iran information with Washington hawks, got recruited by the FBI for a July 2004 sting operation, in which he was directed to tell an AIPAC official about the alleged threat to Israelis operating in northern Iraq; later Franklin pled guilty to leaking classified information and was sentenced to 12 years in prison.

For their part, Israeli authorities vowed to investigate the training activity. (Israeli nationals are not allowed to enter Iraq without explicit permission or deal in defense equipment without a Defense Ministry license, according to Israeli government spokesmen.) The probes have since been closed with no charges brought. Perhaps that's because, as Haaretz correspondent Yossi Melman recently reported, a former senior Israeli Defense Ministry official had given Yatom verbal permission for the Kurdish activities—just as the official was leaving his post to go into the private defense business himself.

The irony, according to a close business associate of Michaels', is that for all the trouble the training deal caused when it was exposed, Michaels was desperate to get out of the security business. "Shlomi looks like a special forces guy," the associate said. "That shit oozes from him. But he wanted to change his identity. If he could change himself to a college professor with glasses and a tweed jacket, he would do in three seconds.

"What he wanted was very, very simple," the associate added. "He wanted to become a billionaire, and he wanted to do it in Kurdistan. That is the real Shlomi Michaels. That training thing—he threw that in just to get the other projects."

"During all of the time I spent with Shlomi, he was extremely consistent in his desire to pursue infrastructure development projects, perhaps hold a position on the board of a bank and pursue other business of that nature," Russell Wilson, a former senior staffer for the House international relations committee, who helped advise the Kurds on Washington representation and who has had a long business association with Michaels, told me. "People assume because he was former special forces that security was his thing. This was not the case."

Regarding Michaels' dossier, Wilson said only, "I believe that as a result of his foreign travels he came across that information and felt obligated to pass it on."

Double standards seem to be everywhere in Amman. Alliances are made and just as quickly dissolved; the legal strictures of the West run up against the realities of the Middle East and postwar Iraq, where kickbacks and contract skimming in partnership with top officials are standard practice. Some associates walked away from the Kudo deal concerned that it was too opaque and might violate US law by providing a share of Kurdish government contracts to relatives of the same officials awarding those contracts. But if such a close relationship with the Kurdish leadership worried some, it was part of the attraction for others. Kurdistan is one of the few places in the world with known significant unclaimed oil and gas reserves; in the scramble for contracts to develop them, energy operators have been willing to pay millions of dollars for the right introductions.

After a day's worth of interviews, I got to my Amman hotel room and found a message that Michaels was in London that very weekend. This time he was meeting with a clutch of international oil and security men seeking to tap his and Yatom's Kurdish connections. The résumés of those in attendance, as I was able to piece them together over several months, read like the cast of characters for a thriller. There was Steve Lowden, previously the CEO of Suntera Resources, a subsidiary of a Russian energy company, Itera. (Itera is reportedly under FBI investigation in the United States for alleged organized crime ties and attempted corruption of US officials. Among those reportedly under investigation is former Congressman Curt Weldon [R-Pa.].) There was a Geneva-based private security official, Abraham Golan, who specializes in providing security for energy clients in Africa. Yatom, then a member of the Israeli Knesset prohibited from using his position to benefit himself, did not attend the meeting with the oilmen. But Yatom joined Michaels, Golan and his wife, and Wilson, as well as an Israeli real estate tycoon, and the tycoon's young escort for a night out afterward, at an elite members-only London gaming club.