A Game of Risk
A Game of Risk
By CHARLOTTE EAGAR, London, Evening Standard 31/3/06
Walking into the Chinese restaurant in the Green Zone, the fortified American citadel of central Baghdad, with Dave (a legendary ex-parachute regiment Regimental Sergeant Major running one of the leading private security companies in Iraq) is like being taken to a Hollywood restaurant with Robert De Niro. Every man at every table (and they are nearly all men) wants to say hello and be his friend. 'This is the biggest military reunion of all time,' said another ex-para who shared a house with Dave, with a fridge full of nothing but beer and women's gymnastics on the TV. ' Everyone who was in Dave's platoon in the Falklands who's not dead is here.' This was Baghdad 18 months ago, when the private security bonanza was at its height.
Corporate Watch recently produced a report on the British companies that had made fortunes out of Iraq and, unsurprisingly, five of the top ten were private security companies. The others were mainly involved in reconstruction or finance: the oil engineering giant AMEC with its £500 million contracts; HSBC, the third largest financial institution in the world, which bought 70 per cent of the new Iraqi Dar es Salaam Investment Bank, which has assets of $91.1 million; and Cummins UK, the world's largest supplier of diesel engines, which has £25.8 million worth of contracts in Iraq.
'Somebody had to rebuild Iraq. It doesn't matter whether you think the invasion was right or wrong,' said Andy Bearpark, an ex-diplomat, formerly one of the highest British officials in the Coalition Provisional Authority in Baghdad, who has now set up the British Association of Private Security Companies.
'Iraq is a broken country: it's not just the war; they had 25 years of Saddam and a completely skewed economy,' said Gavin Mayhew, who runs Olive, the first private security company into Iraq.
'They need outside help, technical and physical.
Companies have to get people in there, they need to know the risks are acceptable. We help companies work in remote and insecure locations.' These firms are the private security companies' clients: after the fall of Baghdad in 2003, the Americans disbanded the Iraqi army and police forces but failed to replace them with coalition troops. In the security vacuum, the foreign companies, aid agencies and diplomats who arrived to help spend the $18.4 billion put aside to rebuild Iraq had to employ people to guard pipelines, offices, building sites, and be a heavily armed taxi service driving their employees from meeting to meeting.
The result was a gold rush for ex-soldiers; men who had been working as plumbers or long-distance lorry drivers were suddenly making £600 a day tax free. A year after the war, Donald Rumsfeld, the American Secretary for Defence, said in a letter to the House Armed Services Committee that there were some 20,000 expats working for private security firms in Iraq: two and half times the number of British troops stationed there.
More significantly, it was also a bonanza for those who set up the companies. There were the private military company veterans, such as the ex-SAS and Guards officer Alastair Morrison, who had set up Defence Systems Limited back in the Eighties, and his former comrade-inarms, Richard Bethell, Lord Westbury, but the market also suddenly became flooded with new names such as Global, or Diligence. Even Control Risks and Kroll, two of the aristocrats of the corporate risk evaluation world, climbed aboard.
'We want to get the country going again,' said Sir Jeremy Greenstock, Britain's former Ambassador to the UN and, for the first year after the end of the war, the highest British official in Iraq. 'We want to see business carrying on in Iraq. Those making money there at the moment are taking considerable risks and they deserve to be reasonably well paid.' Olive points out that it is hardly money for old rope. The overheads of manning such operations the insurance, guns, ammunition are enormous.
Heyrick Bond Gunning, who set up DHL's office in Baghdad, flying in on the first civilian plane into Iraq the day the war was over, points out that foreign companies also give work to Iraqis: he employed 45 by the end of his first year. 'These were university graduates who would otherwise be sitting at home with nothing to do,' he said. Olive also employs 500 Iraqis as drivers and cooks, as well as security guards.
Some security guards are cowboys; recently a video was shown on the net, allegedly of guys working for Aegis, Lieutenant Colonel Tim Spicer's company, taking pot shots at Iraqi cars.
The American firm Custer Battles, which had the contract to guard Baghdad airport, was recently fined $10 million in a US court for incompetence; others were set up and manned by men who suddenly saw an opportunity to commute their years in the special forces, the SAS or Marines into fortunes, while reliving the adrenaline fuelled years of their youth.
There are those who feel it is morally wrong for a nation to wage war then outsource manning the peace to men who are just in it for the money. It may be, as Iraq wobbles into civil war, that this particular gold rush is coming to an end.
As one security firm warlord said: 'Things are getting a bit cheeky out there. If people think it's too dangerous to be there, we have to go to.'
That doesn't mean security companies will lose out. Many are diversifying, like Olive, into training camps, or marine protection or due diligence.
'It's the major growth area of the next 30 years,' said an industry expert who didn't want to be named. 'With globalisation, you can't just drill for oil in Alaska; you've got to be in the Malacca Straits and Kazakhstan, too, and you need security,' he said, giving a vision of private armies guarding topsecret oil wells. 'There are hard-eyed men making millions who never dreamed of that kind of money.'
Lt Col Tim Spicer OBE
Aegis, £246 million
The most notorious of all the private security barons, the twice-married Spicer is now worth tens of millions and sitting pretty in a large house in Belgravia, with a villa in the South of France, after his company, Aegis, won a $430 million contract in 2004 to coordinate all the private security companies (PSCs) in Iraq, much to the rage of American security giant Dimecorp, which challenged the contract in Congress and lost.
Until Aegis arrived, the various competing PSCs in Iraq had no formal way of sharing intelligence. Aegis, which is based in the totalitarian splendour of Saddam's former palace, but has offices dotted all over Iraq, provides a network between the PSCs and the military, so if one convoy is attacked, it can radio in its position, rescue will be on its way and other companies will be informed of the problem. Sources in Iraq point out that Spicer has hardly banked all the dough he employs several hundred people in Iraq, all of whom are on danger money.
A Falklands veteran and former officer in the Scots Guards, Spicer, who also was General Sir Michael Rose's press spokesman in Sarajevo in 1994, first came to prominence when his then private military company, Sandline, hired by the government of Papua New Guinea to guard a copper mine, was caught in the middle of a coup. Spicer spent over two weeks in jail, but later successfully sued the new Papua New Guinea government for his Pounds 20 million fee.
Major [General] Jeremy Phipps
Aegis, £200,000 pa
The flamboyant Phipps is now running Aegis operations in Iraq, a place where he will be surrounded by old friends.
When he was in the SAS, Phipps was the officer commanding on the ground during the Iranian Embassy siege.
Brought up on the shores of Loch Fyne, in Argyll, where his stepfather was Sir Fitzroy Maclean, one of the founders of the SAS and the man on whom James Bond was allegedly based, Phipps had a party trick for impressing local children of jumping backwards out of first-floor windows in full evening dress.
Phipps, whose own father, Alan, died heroically during a raid on the Greek island of Leros during the Second World War, went on to be Director of UK Special Forces between 1989 and 1993. He left the army in 1997, and became a director of Control Risks Group.
He achieved notoriety when, as head of security at the Jockey Club, he was recorded calling other Jockey Club members, who included Prince Philip and the American Ambassador, 'f***ing ignorant'.
His family are much grander than their wallets (his grandfather was Lord Lovat), and he will be glad of his £200,000 salary from Aegis.
Alastair Morrison OBE
Kroll Security International Ltd
The former SAS major and ex-Guards officer is one of the founding fathers of the British private security industry. After winning the MC for storming a hijacked Lufthansa plane in Mogadishu in 1977, with German GSG-9 special forces, Morrison founded Defence Systems Limited (DSL) with the Steed-like Patrick Grayson, now partner of the corporate investigators GPW.
Their first assignment, as private military consultants, was to leap out of helicopters to storm the 'American embassy' as stunt men in the 1982 Lewis Collins-SAS vehicle Who Dares Wins.
Morrison ran DSL, working with former Scots Guards officer Richard Bethell (now Lord Westbury), for over 15 years. In 1997, a senior member of DSL's staff, Major General Stephen Carr-Smith, explained that the company's clients included 'petrochemical companies, mining or mineral extraction companies and their subsidiaries, multinationals, banks, embassies, non-governmental organisations, national and international organisations those people who operate in a very dodgy, hostile type of environment'.
DSL provided counterinsurgency training for security forces in Sri Lanka, Papua New Guinea and Mozambique. It was sold out to Armor Group in 1997, and Morrison soon left. In 2003, he went on to the board of Erinys, another security company based in Iraq. He left Erinys in 2004, after he had approached Kroll, the international corporate investigation giant, with an offer to found its private security wing, in which he has a great deal of equity. Kroll, which has several hundred ex-SAS and paras working in Iraq, has large contracts to guard USAID as well as construction firms.
One of its offices is based in the villa of a Ba'ath party princess, complete with a swimming pool and thanks to a local Kroll warlord a varied rifle collection.
Morrison will be making several million from his equity in Kroll Security International.
Sir Malcolm Rifkind
Chairman, Armor Group
When David Cameron became leader of the Tory party, Rifkind apparently begged to become Shadow Foreign Secretary, but was told by Cameron that his chairmanship of Armor Group, another private security giant, constituted a conflict of interest. Armor Group, which employs standard plainclothes ex-SAS, paras and Marines, and navy-blue uniformed gun-toting Gurkhas, does work in Iraq ranging from intelligence gathering to mine clearing, and guarding oil and gas fields.
Some of its 500 Gurkhas are on a £1.5 million contract to guard the British Embassy in Baghdad and other Foreign Office buildings. It has been awarded £11.4 million worth of contracts in Iraq in total.
It also provides protection for the Baghdad HQ and transport depots of the American construction giant Bechtel and KBR, the American company (part of Halliburton) that provides all the logistical backup and food for the American forces in Iraq and was fined in 2000 for overcharging for doing the same thing in the Balkans.
Armor Group makes loud noises about private security companies being more publicly accountable, and wants to expand the remit of the British Security Industry Authority to include firms working overseas in order to cut down on the cowboy factor.
Armor Group bought out Alastair Morrison's DSL in 1997 and was named one of American business magazine Fortune's top 100 fastest-growing companies in 1999 and 2000. In November 2003, the part of Armor Group working in Iraq was sold out to Armor Group International Ltd, a new company 'owned by private investors led by Granville Baird Capital Partners and certain members of the Services Division'.
Unlike other security firms, Armor Group is not dependent on Iraq. As well as the London and American head offices, there are ten offices in Africa, five offices in Eurasia, four offices in South America and two in the Far East.
Other directors of Armor Group include Jerry Hoffman and Stephen Kappes, both of whom were formerly in the CIA.
Erinys, £86 million
This former British Guards officer established Erinys in 2002 with Sean Cleary, a South African who was an official in the apartheid era. When Cleary resigned in October 2003, Garratt recruited his old friend Alastair Morrison, who later moved on to Kroll.
Erinys, whose operation on the ground in Iraq was run by a former SAS sergeant, won an $80 million contract to guard oil installations.
At one point it had 16,000 men under arms, the vast majority of whom were Iraqis they had equipped and trained, although, at about $4 a day, the locals are on about a two-hundreth of the pay the expats receive. Garratt was very clever about hiring consultants in Iraq, who included Salem Chalabi, nephew of the nowdisgraced American political hope Ahmed Chalabi, and many of their 14,000 Iraqi workforce were recruited from the Iraqi Free Forces, the Chalabi faction's loyal militia. The rest tend to be South African, with rather dodgy records.
When Francois Strydom, working for SASI, a US subcontractor to Erinys in Iraq, was killed, he turned out to have been a member of Koevoet, a counterinsurgency arm of the South African army, with a brutal record in Namibia.
Another former South African policeman, Deon Gouws, turned out to have received an amnesty application after admitting to 40 to 60 bombings of political activists' homes under apartheid. After this, Erinys stopped using SASI because of its poor employment records.
General Sir Michael Rose
Control Risks Group
Non-executive director of Control Risks, which has numerous contracts in Iraq, including one to guard British Foreign Office personnel, Rose was head of the SAS from 1979 to 1982, and later the UN general in Bosnia during the siege of Sarajevo.
Control Risks is one of the aristocrats of this world, and has a large board of directors taken from the military, intelligence and business. It started in kidnap and ransom negotiations back in the Seventies, and then mutated into corporate investigation and private security.
Its Baghdad office was run by a former spook with previous kidnap and ransom experience in South America, who would serve Earl Grey tea on a verandah surrounded by sandbags, as various former members of the RUC and the SAS padded by. Eighty per cent of CRG's revenue now comes from Iraq, and its income has almost trebled.
Hart is just the latest security venture for this former Scots Guards and SAS officer.
Richard Bethell, now 6th Baron Westbury, is one of the grandees of the business, along with Alastair Morrison. He worked with him in Defence Systems Limited from the early Eighties. Nicknamed 'Tarzan', because of his long blond locks, Bethell set up the Bermuda-based Hart in 1999, after Alastair Morrison and he sold Defence Systems Limited to Armor Group in
An old chum of Tim Spicer, Richard Bethell fought with Spicer in the Scots Guards during the Falklands conflict, where Bethell commanded the reconnaissance mission at Mount Tumbledown.
Born in 1950, Bethell comes from a family that enjoy taking risks. Westbury was brought up at Knapton Hall, in North Yorkshire, where his father was Lord Lieutenant and PR for Moet & Chandon.
His father won the VC in the Second World War, and his grandfather, an Egyptologist, was at the opening of Tutankhamen's tomb with Howard Carter in 1922; he later he committed suicide by jumping from a building, and left a note that read: 'I really cannot stand any more horrors and hardly see what good I am going to do here, so I am making my exit,' leading people to think he had fallen victim to the 'curse of the pharaohs'.
Hart recruits largely from South African former special forces, a fact that came to light when Gray Banfield, an ex-member of South Africa's elite Project Barnacle, was killed in Iraq in April 2004.
After 9/11, Westbury set up another company, Global Marine Security Systems, to protect oil and gas tankers against terrorists and pirates.
THE NEW BOYS ON THE BLOCK
David St George Olive
In a remarkably prescient move, the patrician St George brothers founded the Dubai- and Belgravia-based Olive in May 2001. A former Grenadier, Chris St George saw a niche in the market, and brought in his brother David, a businessman rather than a soldier.
The St Georges, who were brought up in the raffish racing world near Newmarket, are the sons of the late Charles St George, a Lloyd's underwriter and friend of Lester Piggott. They now spend their lives commuting between Dubai and Belgravia.
Like many other security companies, Olive is based in Baghdad's heavily fortified Green Zone, where it has reconstructed a regimental mess; men with surprisingly large biceps drink beer on a roof terrace, watch tracer fire while swapping stories about flying to Australia to see the Rugby World Cup, buying Porsche Boxsters, and other ways to spend the pay that stacks up while they're in Iraq (about £100,000 a year untaxed, with four months' holiday).
Harry Legge-Bourke, the former Welsh Guards officer and brother of Prince William's nanny Tiggy, helped set up Olive but never had any equity in the business. He has now left to set up his own security company but may well have missed the boat. As well as contracts in Iraq to provide security for reconstruction firms, aid agencies, and oil firms, Olive has diversified and has a large training base in America; they also do security in less lethal places, such as post-Katrina reconstruction in New Orleans; Olive also went into Banda Aceh after the tsunami.
Heyrick Bond Gunning
Another former British army officer, 34-year-old Bond Gunning was headhunted from a City bank to set up the DHL office in Iraq, much to the irritation of his new fiancee, Anna.
His DHL Antonov plane, piloted by chain-smoking Bulgarians clad only in their underpants because of the heat, was the first civilian flight into Baghdad the day the war ground to a halt. During his year convincing the American military of the need to have pretzels and cheese dips DHL-ed from home, as well as helicopter parts DHL-ed to them in two days rather than wait the three months their own delivery system took, he also had to run to the rescue when a DHL plane was hit by a missile as it was taking off. Luckily the pilot managed to bring the plane down safely.
He took DHL's presence in Iraq from $0 to $50 million in a year and his quirky book, Baghdad Business School: the challenges of a war zone start up, is tipped be made into a film.
Heyrick, who now works for a private security firm he can't name, is married to Anna and spoke to ES while on holiday in the Turks and Caicos islands.
Global Risk Strategies, £15.4 million+
Spicer apart, Perl, in his late thirties, is the man most private security lords envy. Damian, now based in Dubai, has made a fortune out of the company he started from his bedroom in West London. He flew into Kabul the day after the liberation in 2001, offering to guard the American embassy, and Global grew from there. As well as a booming business in Afghanistan, he now employs over 2,000 people in Iraq.
Any visitor to Baghdad can't fail to spot Global's sand-uniform and guntoting Gurkha guards at almost every checkpoint in the capital. As well as guarding humanitarian aid and reconstruction projects in aviation, oil and banking, Global ran Baghdad airport, and the checkpoints at the gates to various American camps. The company, based in Hampton, Middlesex, has now grown too big for Damian's bedroom and largely operates out of Dubai (for tax reasons, and because Dubai is the Saigon of Iraq, where private security contractors go to get drunk and pick up air hostesses) but still has very low overheads Perl only employs nine permanent staff.
Global also won a $27 million contract in 2004 to distribute the new Iraqi currency. Describing himself as a British Marine, Perl puts his former brothers-in-arms' backs up because, although he did pass the officer course, he resigned his commission and never actually served in the Marines. He is also much richer than most of them will ever even dream of being.