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Cash, Contractors and Corruption: The ugly side

February 1, 2010

If American taxpayers want to know why the Iraq war is so divisive, they should pay attention to this case on Blackwater. The allegations are that the private military contractor, Blackwater, bribed Iraqi officials in order to hold onto their lucrative contracts (worth hundreds of millions of dollars) in the aftermath of the disastrous civilian shooting where Blackwater employees killed 17 people in Nisour Square, Baghdad.

The Justice Department is investigating whether officials of Blackwater Worldwide tried to bribe Iraqi government officials in hopes of retaining the firm’s security work in Iraq after a deadly shooting episode in 2007, according to current and former government officials.

The inquiry is the latest fallout from the shooting in Nisour Square in Baghdad, which left 17 Iraqis dead and stoked bitter resentment against the United States. Full story.

At the time, the Iraqi government was furious with Blackwater. It decided to revoke its license to operate and understandably wanted the firm kicked out of the country. The Iraqi public viewed the incident as a massacre. But here’s the funny thing, “Blackwater was able to keep its State Department contract in Iraq for nearly two years without obtaining the operating license Iraqi officials had said would be required.” Hmmmmm…… you have to wonder at the change of heart, especially given the massive public outrage that Iraqi politicians faced about this issue.

The investigation, which was confirmed by three current and former officials speaking on condition of anonymity, follows a report in The New York Times in November that top executives at Blackwater had authorized secret payments of about $1 million to Iraqi officials to buy their support after the shooting. The newspaper account said it could not determine whether any bribes were actually paid or identify Iraqi officials who might have received the money….

According to the document, as described by the two government officials, the Blackwater official said the firm had hired the lawyer hoping that the lawyer’s close ties to top Iraqi officials, including Prime Minister Nuri Kamal al-Maliki, would help Blackwater obtain a license to continue operating in Iraq.

So we know that Blackwater had authorized bribes to Iraqi officials. The question is whether they actually carried out their plan. It looks very suspicious that the firm would have been allowed to stay on in the face of such an atrocious incident and so much public hatred.

Now it is possible that Iraqi politicians felt that they had no practical alternatives to Blackwater given that the US military was so heavily reliant on them. Since Iraqi security itself depended on the US military, then kicking out Blackwater might have been akin to shooting yourself in the foot. It is certainly possible that Iraqi officials allowed them to stick around for that reason.

But I have to say, from this vantage point, and in light of other investigations (e.g., the FBI) into Blackwater, the company looks guilty as charged. The Iraqi lawyer, Jaafar al-Mousawi (Saddam’s prosecutor), hired by Blackwater to conduct negotiations with the families said that:

… 40 families received a total of about $800,000… he believed that Blackwater hoped the compensation would help “moisten the situation with the Iraqi government to get the license.”

But he said that he was unaware of any efforts by Blackwater executives to bribe Iraqi officials, and that news reports misinterpreted the purpose of the victims’ fund as intended bribes.

Nonetheless, we get contradictory evidence from other sources:

Several former Blackwater employees, however, had told The Times that Blackwater’s president at the time, Gary Jackson, authorized about $1 million for payments to Iraqi officials, with only a small portion intended for victims. While the documents apparently do not offer proof that Blackwater paid off any Iraqi officials, the American officials who have reviewed them say they suggest that officials at the United States Embassy in Baghdad were concerned enough about Blackwater’s plans to issue the warning to the company….

In interviews, former Blackwater officials described how the company over the years sent millions of dollars in cash into Iraq, usually carried by hand in paper bags, and kept few records of the transfers.

Some of the former employees told the prosecutors that they could not identify the recipients of the money, while others have said the money went to bribe Iraqi officials, according to current and former government officials and outside lawyers familiar with the matter.

There are many problems inherent in this situation.

Problem #1. You’ve got private contractors doing things that are really the domain of government– this is being done because Americans don’t want to hear about the loss of soldiers’ lives. Instead, it’s easier for the public to fool itself into thinking that the number of casualties from this war is much lower than it really is.

Problem #2. There is no accountability. This has been reiterated time and again about private security companies.  They are basically a law unto themselves and they have been set up this way on purpose.

Of course, this is a problem that has broader repercussions. In a situation like this one, where Blackwater employees are allowed to get away with what the Iraqis would consider to be cold-blooded murder, you can expect ripple effects not only US-Iraqi relations, but in broader Western-Muslim relations. Imagine the reaction on the Arab Street to these killings. Now imagine the reaction when the Blackwater guards who had been charged with manslaughter had their charges dismissed. You can see why conspiracy theories abound. It is no wonder that Samuel Huntington’s Clash of Civilizations argument has resonance when you consider incidents like these and their cumulative effect on the Muslim identity.

But let’s put aside problems 1 & 2. The use of private security companies is an issue that has been discussed plenty. Instead, consider two more immediate problems.

Problem #3. Prosecuting bribery is tough. The problem is that you need to prove intent. This is very hard to do. And since the State Department is still employing Blackwater, it does not seem like their sketchy policies have posed a problem.

Securing convictions under the federal antibribery statute, called the Foreign Corrupt Practices Act, is often difficult. Steven Tyrrell, who until December ran the Justice Department’s fraud section, said that there was seldom a paper trail of the illegal transactions and that prosecutors usually had to rely on whistle-blowers inside a company to testify about bribery payments.

Problem #4. Corruption is the norm in post-conflict situations like Iraq and Afghanistan and American contractors are doing no favours to the American taxpayer (who is the one actually paying the bills for these bribes) OR the Iraqi state. In my dissertation, I argue that in situations like this, you end up with an extremely powerful extralegal group (Blackwater in this case) who are able to bribe their way out of every situation and retain their influence in the country as long as there is economic motivation for them to do so.

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