The Top Ten War Profiteers of 2004
The Center for Corporate Policy
Friday 31 December 2004
1. AEGIS: In June, the Pentagon’s Program Management Office in Iraq awarded a $293 million contract to coordinate security operations among thousands of private contractors 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.
2. BEARING POINT: 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 AID’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.
3. BECHTEL: Schools, hospitals, bridges, airports, water treatment plants, power plants, railroad, irrigation, electricity, etc. Bechtel was literally tasked with repairing much of Iraq’s infrastructure, 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.
Although Bechtel is not entirely to blame, the company has yet to meet virtually any of the major deadlines in its original contract. According to a June GAO report, “electrical service in the country as a while has not shown a marked improvement over the immediate postwar levels of May 2003 and has worsened in some governorates.”
4. 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 U.S. taxpayers, that is: Until July 2003, the company was paid $25,000 per month by the U.S. State Department to support the INC.
5. 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 U.S. 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.
6. CUSTER BATTLES: 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.
7. HALLIBURTON: In December Congressman Waxman (D-CA), announced 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 5-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.
8. LOCKHEED MARTIN: 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 helping Donald Rumsfeld’s global warfare system (called the Global Information Grid), a new integrated tech-heavy system that the company promises will change transform the nature of war. In fact, the large defense conglomerate’s sophistication in areas as diverse as space systems, aeronautics and information and technology 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.
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 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, Donald Rumsfeld appointed him to a blue-ribbon panel studying 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.
Not only are Lockheed executives commonly represented on the Pentagon various advisory boards, but the company is also tied into various security think tanks, including neoconservative networks. 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.
9. LORAL SATELLITE: In the buildup to the war the Pentagon bought up access to numerous commercial satellites to bolster its own orbiting space fleet. U.S. armed forces needed the extra spaced-based capacity to be able to guide its many missiles and transmit huge amounts of data to planes (including unmanned Predator drones flown remotely by pilots who may be halfway around the world), guide missiles and troops on the ground.
Industry experts say the war on terror literally saved some satellite operators from bankruptcy. The Pentagon “is hovering 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. 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.
10. QUALCOMM: 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 district includes Qualcomm’s headquarters. 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 technology.
”Hundreds of thousands of American jobs depend on the success of U.S.-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.