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Blackwater mixes business glitz with military grit

Monday, July 28, 2008

MOYOCK, N.C. -- Erik Prince gets his guests to the runway seconds before the turboprop's approach. The financiers hop out of his black Chevy Suburban and gawk as the pilots drop a pair of packages that float to within feet of their target -- just as they might on a mission for Blackwater Worldwide in the Afghan backcountry.

His audience is captivated by the show, but the Blackwater founder and chief executive officer focuses on a seemingly minor detail: the parachutes.

"They're made out of the same stuff sandbags are made out of," Prince tells the group in hurried, staccato sentences. "They are truly disposable. The normal parachutes you put a human out under are much more expensive. With these, you can use them, repack them. It's very cheap."

Then it's back in the Suburban -- a "sub" in Blackwater talk -- as Prince speeds the investors off to their next stop on the tour of Blackwater's campus in the North Carolina swamplands. This is life at Prince's Blackwater: the glitz of business, the grit of military.

In that mix, critics see Blackwater as a company that recklessly abuses the gears of war to make a buck.

Prince and his devoted team view themselves as a military support staff that helps the government save a buck through an obsessive commitment to identifying and fixing inefficiencies in operations and training.

"You can't paint with one broad brush that absolutely applies across this whole place," said Bill Mathews, the company's executive vice president. "This is sort of the quintessential veteran-owned, -operated and -managed company. Almost everybody is a former U.S. serviceman."

$1 billion in revenue

Their work is hardly charity. The scion of a Michigan family that made a fortune in the auto parts business, Prince is pushing his company to reach $1 billion in revenues annually by 2010. To get there, he's decided to scale back the work -- private security contracting -- that at first drove the company's growth but later made Blackwater one of the most caustic brand names in history.

Prince and another former Navy SEAL founded Blackwater a decade ago, sensing an opportunity to provide training for the SEALs based in nearby Virginia Beach, Va., and for law enforcement officers and others in the military.

The company only started booming after the bombing of USS Cole and the Sept. 11 attacks, and president Gary Jackson said the government later approached Blackwater about providing private security. Prince and his team were able to fill a Rolodex with thousands of contractors who were willing to stand in harm's way to protect diplomats at a time when the military was fighting wars across two countries.

"There are only two business development people for this huge company," Mathews said. "It's because, typically, there's something that needs to be done that nobody else can really get done at the time -- other than the military, and they're too busy. So, they ask us."

At one point, Jackson said, security contracting was 50 percent of Blackwater's business. The company has fans among those they protect, including U.S. Ambassador to Iraq Ryan Crocker, and guards have never lost anyone under their protection.

But the work has also earned Blackwater a legion of detractors. The company's workers were involved in two of the defining moments of the Iraq war -- the grisly slaying of four Blackwater contractors in 2004 in Fallujah, and a September 2007 shooting at a crowded Baghdad intersection that killed 17 Iraqis -- triggering congressional hearings and investigations from more than a dozen federal agencies.

Changing for the future

Prince, who for years guarded himself and his business from public scrutiny, has been more open since the Iraq shooting, allowing reporters to scope out operations and probe executives about the direction of the company -- all in an attempt to save the Blackwater brand he launched a decade ago.

As part of that, the company last week, Blackwater plans to scale back its contracting work to a fraction of its business, worried that the cost of doing the work hurts the business's bottom line.

By tapping the expertise of its veterans -- from ex-SEALs to former Coast Guard officers to FBI agents -- Blackwater instead sees a future in using its mobility and flexibility to seek out and quickly fill other gaps that present themselves.

"There's always been gaps. The military can't be all things to all people all the time," Prince said while standing on a gleaming Blackwater logo in the airy lobby of his company headquarters. "There are always going to be some pieces that the private sector can help in."

When Prince noticed a shortage of U.S. combat medics, he developed a school and program to train his own. They practice rescues and vehicle extractions across on Blackwater's campus, and Prince is now looking for customers who want to hire medics as contractors.

In the days after Hurricane Katrina, Prince sent a crew and Blackwater's newest helicopter to New Orleans, where they reported pulling 128 people to safety. They started work without a client, but had plenty of government and private sector business within days.

No bureaucracy. No congressional studies. No appropriation needed.

"It's not about how can we make the most profit off this business," said Seamus Flatley, the director for special programs at Blackwater affiliate Presidential Airways. "It's going in and solving a problem and getting out as quick as possible."

Executives see the most untapped potential in places that need air support. Blackwater started gobbling up agile EADS CASA C-212s aircraft after noticing the military was struggling to reach remote runways in places like Afghanistan. Its fleet is now 58 strong -- from helicopters to cargo planes to fighters -- with each craft tracked on enormous flat-screen TVs back at headquarters, where executives can watch Prince fly down the East Coast or keep an eye on contractors as they buzz up the Tigris River on a return to Baghdad's Green Zone.

"It's an airline," Jackson said. "The only difference between it and a commercial airline: It's profitable."

But not too profitable, Blackwater executives caution. Jackson said the company was able to operate eight aircraft in Afghanistan for a year, providing 7 million pounds of cargo to the most outlying of troops, for less than what it would have cost the government to buy a new C-27 cargo plane.

Though Blackwater has been investigated by nearly every federal agency that could think to care about the business, the company remains a favorite among its clients who use the facility to learn new techniques.

"All the instructors we know are the most professional that there are," Sgt. David Aderhold of the Dekalb County, Ga., Sheriff's Office said while sweating through drills at a Blackwater gun range. "It's never entered our mind to send somebody somewhere else besides here at Blackwater."

And there's no doubt that Prince and his team know their clients. Blackwater recruiter James Overton is working on packing a Microsoft Xbox video-game console, modem, TV projector and "Guitar Hero" video game into a kit that can be kicked out of a Blackwater cargo plane and dropped to troops in Afghanistan.

"When I was in Baghdad, we'd bring soldiers over to our camp over there, and we'd play this thing for hours on end," Overton said. "Every (military) place I've ever been to overseas, they've got like backgammon and Parcheesi and chess, and they're all gathering dust. But this is the stuff they play at home. And any semblance of home we can give them is best."


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