One Utah

You might have read that President Bush’s new budget would bring total proposed spending in Iraq to $683 billion through 2009– exceeding the total cost of the 13-year Vietnam War, adjusted for inflation. How is that possible?

Part of the answer came in yesterday’s hearing before the House Government Reform Committee, chaired by Rep. Henry Waxman. Despite extensive stonewalling by the Department of Defense and defense contractors, Waxman seems to be making some progress exposing years of war profiteering. One of his targets is Blackwater USA, a private security company founded and owned by reclusive billionaire Erik Prince, a former Navy SEAL with Republican connections. The secretive firm made headlines when four Blackwater employees were ambushed and gruesomely killed in Fallujah in March 2004, causing a crisis that led to two major battles for the city. Last month, two Blackwater helicopters were shot down over Baghdad and five employees died.

Under rules established by the Coalition Provisional Authority in 2003, Blackwater USA has been operating outside the reach of both U.S. and Iraqi law. Until yesterday, Congress has been told that the Department of Defense doesn’t even know who they’re working for. As reported by the Associated Press: “Several times last year, Pentagon officials told inquiring lawmakers they could find no evidence of the Blackwater contract. Blackwater did not respond to several requests for comment.”

The reason why Blackwater’s subcontract may be illegal is because Waxman’s hearing established that Halliburton subsidiary Kellogg, Brown and Root (KBR) was required to use US military security only, and neither KBR nor any subsidiary ever asked for US military security. These facts had been previously covered up.

Another startling revelation was that the Army doesn’t even know how many security subcontractors are operating in Iraq. Robert Pelton, who is writing a book about Blackwater, attended today’s hearing:

The official army spokesperson almost seemed put off when the panel bluntly told her to go find out and get back to the committee with in a week. My guess ain’t gonna happen. The GAO and the DoD can’t even agree on a number (between 60,000 and 100,000) and all parties flatly admit: no one knows how many contractors there are in Iraq.

Blackwater made the fatal mistake of sending a sweaty nervous lawyer who did his best to fend off the slings and arrows but the notable lack of executives from Blackwater was plain to see. Waxman has threatened to issue subpoenas and my guess the first one is going to Moyock and Tysons’ Corner (the HQ’s of Blackwater)

Here’s how the Blackwater subcontract with KBR worked, according to an October 2004 article in The News & Observer, a North Carolina newspaper that has investigated Blackwater USA:

Blackwater added a 36 percent markup, plus its overhead costs, and sent the bill to a Kuwaiti company that ordinarily runs hotels. That company, Regency Hotel, tacked on its costs for buying vehicles and weapons and a profit and sent an invoice to a German food services company called ESS that cooked meals for the troops. ESS added its costs and profit and sent its bill to Halliburton, which also added overhead and a profit and presented the final bill to the Pentagon.

Halliburton has an open-ended “cost-plus” contract to supply the U.S. military. Cost-plus means the federal government pays Halliburton all its expenses — its costs — plus 2 percent profit on top. The higher the expenses, the more profit for Halliburton. There has been very little accounting to determine if contractors have been padding costs.

UPDATE: Robert Pelton has a post on Iraqslogger about the open secret that security contractors in Iraq have a license to kill.

This entry was posted Thursday, February 8th, 2007 at 8:06 am and is filed under Federal Budget, Iraq, Political Corruption, This Blog, War. Both comments and pings are currently closed.