Blackwater: the wages of Rummy

You may be all caught up on Blackwater developments, but I’ve been distracted, so par’n me while I sort out the latest.

As you may know, Karen DeYoung’s Sunday Washington Post front-pager, detailing how Blackwater came to be the State Department’s dominant protector in Iraq, stashes its biggest news about halfway down:

When the U.S. military invaded and occupied Iraq in early 2003, there was no question who would be in charge of security for the official civilians pouring in to remake the country. Under an executive order signed by Bush, the Coalition Provisional Authority and its head, L. Paul Bremer, reported directly to then-Defense Secretary Donald H. Rumsfeld. But as U.S. troops became preoccupied with a growing insurgency, the Pentagon hired Blackwater to provide protection for Bremer and other civilians.

The next year, as the United States prepared to return sovereignty to the Iraqis and the State Department began planning an embassy in Baghdad, Rumsfeld lost a bid to retain control over the full U.S. effort, including billions of dollars in reconstruction funds. A new executive order, signed in January 2004, gave State authority over all but military operations. Rumsfeld’s revenge, at least in the view of many State officials, was to withdraw all but minimal assistance for diplomatic security.

Incredible what that superannuated snot-nosed-brat of a SecDef is still doing to us, isn’t it? Interdepartmental revenge — that’s some value, some motivator, when lives, money, and consequences of huge dimensions are at stake.

Well, we can cuss all we want, but the fact remains: as much as anything else, Rummy’s Revenge cut Blackwater loose on Iraq — on wherever American diplomats travel in Baghdad and Hilla, at least — and did so to the tune of $1,221.62 a day per “protective security specialist” (according to a 2005 State Department report that DeYoung found). DynCorp handles northern Iraq and Triple Canopy the south, but Blackwater soaks up most of the $520 million that State shells out on personal-security contractors in-country each year.

DeYoung’s story crams in more interesting other details than I have time to recount — many of them demonstrating State’s utter dependence on Blackwater — so read it if you haven’t already. One thing it doesn’t answer, though (as TPM’s Spencer Ackerman also noticed), is quite how upstart Blackwater — in business only 10 years now — has managed so quickly to overtake the industry giants DynCorp and Triple Canopy, and not only in Iraq. Pretty hard to believe that the web of über-Gooper connections Erik Prince fell into from the womb has naught to do with it. (For more on that web, see this, this, and certainly this.)

Okay, that was Sunday’s worth. Yesterday, the big development (as reported by Spencer Ackerman at TPM) had to do with a 13-page letter (pdf) that House Oversight Committee chair Henry Waxman sent to Erik Prince. Quite the billy-doo, this. It accuses Blackwater of hiding (by calling its security guards ”independent contractors”) “tens of millions of dollars, if not more” in Social Security, Medicare, and retirement taxes. In the letter, Waxman labels “deplorable” the financial settlement Blackwater gave one former such “independent contractor.” As Spencer explains,

The settlement required that the ex-guard not disclose a March 2007 IRS ruling that Blackwater’s tax records were out of whack; and the guard was specifically prevented from disclosing that to any “politician” or “public official.” …

The IRS ruling concerned one particular case. But Waxman said its logic “would appear to apply to your entire workforce in Iraq and Afghanistan.” Extrapolating from the one case, the Democratic committee staff calculated that Blackwater avoided paying $15.5 million in Social Security and Medicare taxes, $15.8 million in federal income tax withholding, and $500,000 in unemployment taxes from the start of its last contract, in May 2006, through the receipt of the IRS ruling in March. It’s an “unanswered question,” Waxman wrote, whether Blackwater has continued to avoid paying these taxes after the IRS ruling. If so, then Blackwater would have evaded an additional $18 million through September.

When Spencer requested Blackwater’s response, spokeswoman Anne Tyrrell (whose job I do not covet) replied within minutes:

… The U.S. Small Business Administration has determined in an official finding applying “the criteria used by the IRS for Federal income tax purpose,” that “Blackwater security contractors are not employees.” …

But that claim didn’t even outlast a phone call (from Spencer to the SBA):

SBA spokeswoman Christine Mangi says that SBA did make such a determination — on November 2, 2006. But it was in reference to a dispute about who was a company employee on a project to provide services to Navy vessels in Guam, not Iraq. The ruling, she says, “was for this particular procurement,” not an SBA finding about Blackwater personnel in general, contrary to the suggestion of Blackwater’s response to Waxman.

Furthermore, Mangi explains, the IRS hardly has to defer to the SBA determination about who’s an independent contractor and who’s an employee. “Our findings are for the sole purposes of our small business contracting programs and, to the best of our knowledge, carry no legal weight outside of our programs,” she says.

And that brings us to today. As the New York Times reports, ’twas a hot one for Condi Rice and her contractors:

A pair of new reports have delivered sharply critical judgments about the State Department’s performance in overseeing work done by the private companies that the government relies on increasingly in Iraq and Afghanistan to carry out delicate security work and other missions.

A State Department review of its own security practices in Iraq assails the department for poor coordination, communication, oversight and accountability involving armed security companies like Blackwater USA, according to people who have been briefed on the report. In addition to Blackwater, the State Department’s two other security contractors in Iraq are DynCorp International and Triple Canopy.

At the same time, a government audit expected to be released Tuesday says that records documenting the work of DynCorp, the State Department’s largest contractor, are in such disarray that the department cannot say “specifically what it received” for most of the $1.2 billion it has paid the company since 2004 to train the police officers in Iraq. …

[I]n presenting its recommendations to Ms. Rice in a 45-minute briefing on Monday, the four-member panel found serious fault with virtually every aspect of the department’s security practices, especially in and around Baghdad, where Blackwater has responsibility. [emph. mine]

The details of this one, I guarandamnteeya, will make you scream — like the $1.8 million X-ray scanner that DynCorp bought but never used, and the $387,000 it spent “to house company officials in hotels rather than in existing living facilities.” Stuart W. Bowen Jr., who heads the Office of the Special Inspector General for Iraq Reconstruction, called DynCorp’s police training contract “the weakest-staffed, most poorly overseen large-scale program in Iraq” — as State owned that it needs “three to five years” to reconcile fully its payments under the contract (well, only its first two years, 2004-6). Condi has all of two people assigned to oversee DynCorp; as Stuart Bowen said, “when you put two people on the ground to manage a billion dollars, that’s pretty weak.” He found $29 million in DynCorp overcharges (a separate review by the Defense Contracting Audit Agency found that it had billed for $162,869 of labor hours “for which it did not pay its workers”).

By tonight, Condi was moving fast. According to Agence France Presse, quoting her director of management policy, Patrick Kennedy, “The secretary has … decided to move ahead with the recommendations that are within her purview to act on immediately.” These include:

* clarified rules of engagement,
* better coordination between State Department staff and the Pentagon (Kennedy said radios compatible with US military frequencies were being shipped out to State security officers),
* the Baghdad Embassy’s establishment of a “joint incident review board” to examine all past incidents involving deadly force against Iraqi civilians, and
* every contractors’ vehicle ferrying members of the department around Iraq having an identification number painted clearly on its rear.

The AP says she’s additionally ordered that State

* set up panels of security officials and others to look into each shooting or other use of deadly force by private guards and organize rapid response teams to investigate shooting incidents,
* require contractors to have Arabic speakers on hand, and
* bring in Steve Browning, a senior career diplomat (now U.S. Ambassador to Uganda), to oversee Iraq security operations.

Quite a mess awaits Amb. Browning, and I can just imagine his pleasure in the assignment.

I’m sure it’s nothing like Don Rumsfeld’s upon learning that he’d be Bush’s SecDef, with the whole U.S. military and any number of countries to play with until they went smash.

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