Blackwater survives rough time

Amid investigations and lawsuits, military contractor gets new business and grows.

Blackwater was all over the news last fall, and the news wasn't good. The North Carolina company created a diplomatic crisis when its guards killed 17 Iraqi civilians in a Baghdad square.

The Iraqi government promised to evict the company from Iraq. Blackwater's reclusive owner, Erik Prince, was called to Congress to testify; afterward, he began a public relations blitz of the national media. He even appeared on "60 Minutes."

Today the trouble has subsided. Last month, the State Department renewed its contract with Blackwater to provide security in Iraq. It's still in Afghanistan for the military. In the fall, Blackwater won a new contract for $92 million to fly soldiers and cargo around Afghanistan, Pakistan, Kyrgyzstan and Uzbekistan for the military. It was one of five companies picked to support the Pentagon's Counter Narcoterrorism Technology Program, a five-year contract worth up to $15 billion.

As the company grows, so do its headaches: a persistent congressional investigation, several high-profile lawsuits and a federal weapons investigation. Still, Blackwater is thriving because of its aggressive and entrepreneurial business culture and a strong network of Republican connections. The company has hired extensively from the top levels of the CIA, Defense Department and State Department, and it named the former No. 2 official at the CIA to its board of advisors.

"Their connections certainly help a lot," said Peter Singer, an expert on military contractors at the Brookings Institution. "But they may be a vulnerability in the future, if the regime changes in Washington."

This is a company that barely existed at the start of the decade; Blackwater grew from $204,000 in federal contracts in 2000 to almost $600 million in 2006. Its rise is a case study in business timing and the power of financial and political capital to take advantage of a new market.

Started by two SEALs

Blackwater Lodge and Training Center was the brainchild of Al Clark, a Navy SEAL and instructor. Dissatisfied with the Navy's rented training grounds, Clark told colleagues he would open his own when he left the service. Clark hooked up with Erik Prince, a young Navy SEAL who shared his interest in training. Clark didn't know it at the time, but Prince was an heir to a billion-dollar auto-parts fortune.

In 1997, when the two broke ground on Blackwater Lodge and Training Center in Currituck and Camden counties, the timing was good. The military had closed and consolidated bases after the Cold War and neglected training facilities. Blackwater built the largest shooting facility in the country, with indoor ranges, mock urban landscapes, a 1,200-yard firing range, driving tracks and a lake for naval training. Blackwater boasted it could design any sort of training a client might want.

The location was excellent, within four hours of the Pentagon, Fort Bragg and Camp Lejeune. The country's biggest naval base was less than an hour away in Norfolk, Va. Despite the steady stream of business, Blackwater wasn't making money. Clark recalled how Prince summoned him to his office on Christmas Eve 1999 and said, "I want this place profitable tomorrow."

Clark said his relations with Prince went downhill when Prince complained that he was training the students so well that no one would come back for more training.

Clark left Blackwater in the summer of 2000. Business was growing steadily, Clark said, but the company wasn't making a profit.

"There are two people who put Blackwater on the map," Clark said -- "Al Clark and Osama bin Laden."