WASHINGTON -- Donald Rumsfeld declared war on the Pentagon
bureaucracy on a quiet, sunny Monday seven months into his tenure as
secretary of defense. Never known for his tact, Rumsfeld
delivered his battle cry
to a room full of Pentagon bureaucrats, who stared back at him in
stunned silence. Few in the media took note of the speech, delivered on
Sept. 10, 2001.
Over the next 24 months, Rumsfeld waged his war on bureaucracy by
outsourcing thousands of functions performed by the Defense Department
to private contractors -- and nowhere more so than in Iraq. From its
earliest planning stages in 2002 to its sputtering conclusion a decade
later, the Iraq War was a public-private partnership.
The U.S. government supplied troops and assembled an international
"coalition of the willing." The private sector provided a shadow army of
hundreds of thousands of contractors, who supplied Americans on the
front lines with everything from meals, laundry and housing, to drivers,
translators, bodyguards and garbage collectors.
The massive outsourcing of the Iraq War marked a new phase in
America's military industrial complex. Iraq was not the U.S.
government's war alone. It was a joint venture, orchestrated with an
unspoken understanding that the private sector was the U.S. government's
most important ally.
Many of the private contractors in Iraq performed their duties
admirably, but the story of the war is riddled with allegations of
contractor fraud and abuse. They range from tales of U.S. defense and
oil conglomerates overbilling the government, to companies sending
unqualified employees to the now-infamous Abu Ghraib prison, to the most
troubling allegations of contractors having murdered Iraqi
noncombatants.
Until recently, many of the war's most controversial, and well-paid,
U.S. contractors faced relatively few repercussions for their conduct in
Iraq. During the war, they operated outside Iraqi jurisdiction, thanks
to a rule implemented by the Coalition Provisional Authority, known as
Order 17. Some companies relied further on secret indemnity agreements
with the federal government, which protected them from future liability
in the U.S.
But a handful of court rulings in the past two years have put
big-name Iraq War contractors on the defensive against allegations of
torture, fraud, negligence and extrajudicial killings. Faced with a
shrinking U.S. war budget and unpredictable trial courts, some companies
have chosen to settle these claims for millions of dollars. Others have
left the country or dissolved their businesses. Some have done both.
Still more lawsuits are now playing out in court. They are writing
an important chapter in the effort to understand what really happened in
Iraq.
COALITION OF THE BILLING
It's hard to overstate the influence of private contractors on the
Iraq War. Starting in 2006, contractors' employees in Iraq outnumbered
U.S. troops, a previously unthinkable situation for the American
military. By the end of 2008, at the height of the war, there were about
180,000 contractors' employees in the country, providing both military
and reconstruction services, and
146,000 U.S. troops.
Contractors helped the U.S. government avoid implementing a draft by
keeping troop levels artificially low. But they came with a high price
tag. Between 2003 and 2008, Congress estimated that the United States
had spent
$100 billion on contractors in Iraq, or one dollar out of every five spent on the Iraq War at the time. Today, assuming a conservative estimate of
$800 billion spent on the war, at least $160 billion has likely ended up in the coffers of private contractors.
The ties between members of the George W. Bush administration and
leaders of some of the nation's biggest oil and defense contractors have
been
well documented, most notably the future Vice President Dick Cheney's lucrative tenure as CEO of oil services giant Halliburton.
As the Bush administration ramped up its case for war against Iraq in
late 2002, Halliburton was the only contractor invited to submit a
proposal to restore Iraq's oil infrastructure following a U.S. invasion.
Ten years ago this month, Cheney's former company was quietly
awarded a $7 billion contract for the restoration work.
Over the next three years, Pentagon reports found that Halliburton charged the federal government
nearly $2 billion
in "unsupported costs." Many of these questionable expenses came via
Halliburton's subsidiary, KBR, the largest military logistics supplier
of the Iraq War. One former KBR employee, Linda Warren,
described to Vanity Fair
how KBR's laundry service billed the government $75 per bag of laundry
washed, but paid an Iraqi subcontractor just $12 per bag to wash it.
Concerned about potential liability for KBR's Iraq deeds, Halliburton
finally spun off the subsidiary in 2007, the same year it
moved its corporate headquarters and its CEO, Cheney protege David Lesar, to Dubai. The move raised eyebrows across the industry and the federal government.
Among Iraq War contractors, KBR stands out for both the size of its contracts --
$31.7 billion between 2001 and 2008 -- and the scope of its legal issues. In July 2012, the company finally won the dismissal of a
wrongful death lawsuit
filed by the family of a soldier electrocuted in Iraq in 2008. The
judge ruled that the situation involved decisions made by both the U.S.
military and KBR, and that the court did not have jurisdiction to
question the military's decisions in the matter.
In November 2012, however, a jury found KBR
guilty of negligence
in the poisoning of eight soldiers in Iraq who were exposed to highly
toxic chemicals. The company is appealing the decision. That same month,
the Justice Department alleged in a lawsuit that KBR and a
subcontractor
knowingly overbilled the government for housing constructed in the early days of the Iraq War.
These cases are just a sample of what KBR currently faces in court.
But legal problems aren't the company's only setback. The post-war drop
in demand for its services helped
drive down KBR's profits
by nearly two-thirds in 2012, prompting CEO William Utt to explain to
Wall Street that "2012 was, overall, a disappointing year for KBR."
Utt's salary for that year was
$7.9 million.
THE DOMINO EFFECT
In many cases, the close working relationships between contractors
and U.S. personnel during the Iraq War have exacerbated the difficulty
for the government in prosecuting contractors who violated U.S. laws or
for alleged victims of contractor malfeasance in seeking redress. In
February 2013, the Justice Department was forced to drop
15 felony indictments
against employees of the private security firm formerly known as
Blackwater after attorneys offered persuasive evidence in court that
Blackwater had been working as a de facto arm of the CIA when the
alleged violations occurred.
Blackwater, which changed its name to Xe Services in 2009 and then to
Academi in 2011, is one of the most controversial of the Iraq War
contractors. It was hired at the start of the war to provide diplomatic
protection services. By 2005, Blackwater's contract had ballooned to
more than $1 billion, as the company provided armed security guards for
thousands of U.S. diplomats and other contractors in Iraq.
As security in Iraq grew more tenuous, Blackwater employees developed
a reputation for being quick on the trigger. In 2007, they shot and
killed 17 Iraqi civilians in a crowded square. A report issued by
congressional Democrats that year found that Blackwater employees had
fired first in more than 75 percent of nearly 200 incidents involving
Iraqi casualties.
At the time, Blackwater CEO Erik Prince defended his people before Congress, but in 2010, after the firm was
effectively shut out of a lucrative government contract to train Afghan police forces, Blackwater quietly agreed to pay
$42 million to settle hundreds of charges that its employees violated export controls.
In late December 2010, Prince sold the firm to a group of investors for
around $200 million.
Court records revealed that a few months before the sale, Prince, a man
who for years had described his private army as a patriotic endeavor,
had moved his family to Abu Dhabi, not far from where Lesar, the
Halliburton CEO, lives in Dubai.
In Abu Dhabi, Prince founded a new security firm, Reflex Responses, which quickly secured a contract worth more than
half a billion dollars from the United Arab Emirates' rulers. Last year, he entered into
business with a group of Chinese investors seeking natural resources in Africa.
Like Blackwater, two other firms, L-3 Services and CACI, are still in
the process of settling claims related to Iraq War incidents --
specifically, allegations that their employees participated in the abuse
of detainees at Abu Ghraib prison in late 2003. Both companies provided
translators for the U.S. military, and
former prisoners at Abu Ghraib allege
that L-3 and CACI employees took part in the torture that exploded into
an international scandal when photos appeared online in 2004.
Until November 2012, the two cases from Abu Ghraib had been held up
for years over questions of whether non-citizens could sue a private
U.S. company for abuse suffered while in U.S. government custody
overseas. But in a surprise move that wasn't noted until January 2013,
the parent company of L-3 Services settled the allegations in November,
agreeing to pay victims
more than $5 million. The remaining case against CACI is scheduled to go to trial this summer.
As millions of citizens in Iraq and the United States pause this week
to remember the enormous costs of the war -- in human life, treasure
and global security -- the legal victories and fines levied against
contractors years later will likely offer little solace. The reality is
that for the small group of shareholders and executives at companies
like Blackwater and Halliburton, the past decade was a perfect storm of
opportunity, suitability and connections.
Should the American people want to know what investigators discovered
about abuse and fraud by Iraq War contractors, they will have a chance
to find out -- in 2031. That's when the results of a three-year study by
the Commission on Wartime Contracting in Iraq and Afghanistan will be
unsealed from the National Archives. The 240-page
congressionally mandated report, delivered in 2011, details how the U.S. government misspent between $31 billion and $60 billion on the war's contractors.
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