< Previous page
Next page >

After the attacks of Sept. 11, 2001, the demand for training from military and law enforcement filled Blackwater's ranges and classrooms.

Blackwater's most lucrative line of business wouldn't be at the training center in the Eastern North Carolina town of Moyock, but overseas. It was the brainchild of a former CIA employee, Jamie Smith.

While working at Blackwater before Sept. 11, Smith had suggested that Blackwater go into guarding businessmen or government officials. Prince was initially skeptical, but warmed to the idea after the attacks on New York and the Pentagon.

Prince contacted Alvin "Buzzy" Krongard, the No. 2 official at the CIA. Krongard had known Prince since at least 1999, when Krongard's son, a Navy SEAL, had trained at Blackwater, according to Clark. Krongard had visited Blackwater and shot at the firing ranges, Clark said. (In October, Krongard stepped down from Blackwater's board of advisers because his brother, Howard Krongard, was the State Department inspector general responsible for investigating Blackwater. Howard Krongard later resigned.)

The CIA was stretched thin in the aftermath of Sept. 11 and the invasion of Afghanistan. Blackwater landed a sole-source, no-bid contract to provide security at CIA stations in Afghanistan.

When Blackwater won the contract, the company had no one to staff it. Smith advertised for security contractors in The Washington Post, according to author Robert Young Pelton. Smith led the security team when it arrived in the early spring of 2002.

The contract was not a big one; it called for 16 Blackwater security personnel, plus dozens of Afghan guards hired locally. But it was profitable, a Blackwater budget spreadsheet shows. Blackwater expected a 26 percent profit on the job.

Most important, the contract was a start, a foot in the door of what would expand into a billion-dollar industry once the U.S. invaded Iraq.

The invasion created a huge demand for private security in Iraq. Secretary of Defense Donald H. Rumsfeld sent about half the troops recommended by his Army chief of staff. There weren't enough soldiers to secure the country, let alone protect U.S. diplomats and civilian workers.

In August 2003, Blackwater won a $27 million sole-source contract to guard Paul Bremer, the head of the Coalition Provisional Authority and probably the top assassination target of insurgents. The contract called for helicopters to fly Bremer around Iraq. Blackwater was well positioned for that; the company had bought a Florida aviation company four months earlier.

Peter Singer, an expert on private military contractors, said this was typical of Blackwater's business savvy.

"They are very good and very savvy at identifying market needs and pushing hard to enter into those markets, even before clients have recognized the need," Singer said.

$1 billion in contracts

The private security business turned Blackwater into a heavyweight government contractor; the company went from $204,911 in government contracts in fiscal 2000 to $593 million in 2006, an average annual growth rate of 277 percent. Blackwater went from having 16 guards in Afghanistan to more than 850 personnel in Iraq.

By the end of 2006, Blackwater had received more than $1 billion in government contracts. That doesn't include classified contracts, including providing security at CIA sites overseas.

The CIA contracts are lucrative, according to a document Blackwater filed in a federal lawsuit.

Blackwater had a contract since 2003 to protect a CIA site in Pakistan, the document said. "The profit potential is high (25%+margin)," because of the classified nature of the budgets and the knowledge gained from past performance on existing contracts.

< Previous page
Next page >

Get $150+ in coupons in every Sunday N&O. Click here for convenient home delivery.