“We believe Mr. Bout can be suspended pending a hearing, for which he will probably not show,” a senior State contracting official wrote. “After not showing at the hearing he can be debarred.” The suspension was a temporary measure, but proponents felt it would throw an immediate wrench into Defense contracts with the Russian and prevent him from obtaining any new work. “With the discovery that an apparent Bout company has contracted with a U.S. government agency, there is now an urgent need to ensure that Bout and his associated entities are put on the excluded parties list,” one official wrote in a June 15 memo.9
“It was the best we could do at the moment to show we backed up our words,” a State official explained later. “The idea was if you could ban ten Bout companies, even if you knew there were twenty or thirty out there that couldn’t be immediately named, at least we’d have the ten on the federal registry and that would force DoD’s hand. You could say these firms are now ineligible and you would advise every government agency to be diligent about even hiring the other unnamed firms.”10 There was another reason to go after Bout’s firms by debarment. The United Nations’ Liberian assets freeze would only target Bout personally, and even if Morgner’s OFAC team followed suit, his interlocking corporate structure and scattered air fleet would remain untouched. There was talk that the UN Liberian sanctions might be toughened further later, but with the United Nations, there were no guarantees.
Still, other State officials preferred to let the OFAC lead the way, warning that any other effort would run into legal thickets. Bout’s existing Defense contracts could not be legally terminated by the “excluded parties” suspension, one State skeptic warned, and he would have to be “bought out,” perhaps at a cost of millions more. Other departments also weighed in with doubts. Treasury’s team did not want to jeopardize their plans to freeze Bout’s assets later in the year—they worried aloud that if State moved prematurely, Bout would recognize the government’s next step, hide his bank accounts, and further conceal his companies. And intelligence officials raised concerns that a frontal effort to sever Bout’s contracts might put a damper on useful business relationships with other figures with questionable backgrounds. “The CIA people were worried about what it might mean for other bad apples they worked with,” said one State participant in the discussions. “We’d heard about the rumors of Bout working with our intelligence people, but they didn’t allude to that at all. They were simply asking what would be the effect if we did this to him—would it chill future attempts to use bad actors on our side?”11
Deputy Secretary of State Lincoln P. Bloomfield Jr. settled the debate on June 29. Bloomfield preferred to stick with the pending Treasury assets freeze on Bout. “OFAC sanctions are the most far reaching and have the broadest effect of any of the possible sanctions that can be taken,” he wrote. Treasury planned to expand on its sanctions against Bout by targeting “associated companies” in the late summer of 2004, Bloomfield said. But in the interim, Bloomfield agreed that State would publish a Federal Register notice after Bout was personally sanctioned, listing “certain front companies he is suspected of using.” Both moves would “prevent American companies and the federal and state governments from contracting with Bout” until the sanctions kicked in, Bloomfield said.12
Nearly a month later, on July 22, Andreas Morgner’s two years of gathering string finally paid off. Flexing his authority under the International Economic Emergency Powers Act, President Bush signed an OFAC action that officially quarantined Viktor Bout as a “special designated person.” The OFAC action against “Viktor Anatolijevitch Bout” branded him as a “businessman, dealer and transporter of weapons and minerals.” It listed the usual set of aliases: Butt, Bont, Butte, Boutov, and Vitali Sergitov. Bout and Liberian dictator Charles Taylor were now among twenty-eight associates and relatives facing a permanent assets freeze and a ban on doing business with Americans. Finally, after nearly a decade of intelligence-gathering, ambitious plans, promised action, and repeated setbacks, the United States had finally taken legal steps against Bout. Condemning the arms deals that “perpetuate the Liberian conflict and fuel and exacerbate other conflicts throughout West Africa,” Bush directed that “any contribution or provision of funds, goods or services” would be “blocked pursuant to this order.”13
Yet knowingly or unknowingly, even in the face of a presidential order, the U.S. government continued doing business with Bout’s shifting corporate entities. A little more than two weeks later, on August 7, an Aerocom Ilyushin Il-76 was loaded with pallets crammed with Kalashnikovs from storehouses at the U.S. Army’s Task Force Eagle base at Tuzla, Bosnia, and then flew southeast, toward Baghdad. The Defense Department would not easily wean itself away from the efficient services provided by the Bout organization.
The military’s dependence on the Bout network appeared almost comically hapless, but basic organizational lapses and structural flaws lay at the heart of the Pentagon’s continued use of Bout’s planes. In the fever-pitch run-up to the Iraq war, the Defense Department’s hiring procedures did not provide adequate scrutiny of lower-level subcontractors—and Defense officials had failed to compile a wide-ranging watch list of suspect companies for their military contracting experts.
To former U.S. officials who had been instrumental in pursuing Bout, the Pentagon’s heavy use of Bout’s supply flights was prime evidence of the Bush administration’s paltry postwar planning. When the full dimensions of the military’s use of hundreds of Bout flights emerged in a Los Angeles Times story in December 2004, Lee Wolosky’s voice tightened in outrage. “It befuddles the mind that the Pentagon would continue to work with an organization that both the Clinton and Bush White Houses actively fought to dismantle,” he said. The Pentagon’s continued use of Bout’s planes, Wolosky said, “speaks to the lack of an integrated watch list and the application of that watch list. It speaks to a lack of communication within the government. That a major criminal organization can do this—that means something is wrong.”14
“It’s an obscenity,” said former NSC deputy Gayle Smith. “It’s contrary to a smart war against terror. Even if you needed a cut-out (to transport supplies) why would you go to the one on the bottom of the pile, with the most blood on his hands? Because he worked fastest and cheapest? What’s the trade-off? Where’s the morality there? I thought we were in this war to promote democratic ideals? Is that what Viktor Bout represents?”
The Pentagon’s contracting officials were hobbled from the start, one knowledgeable State Department official said, because they were only able to rule out from Iraq contracts companies that had been named in the past on the General Service Administration’s (GSA’s) list of businesses permanently debarred from government work. But even though Bout was sought under an Interpol criminal warrant and other U.S. agencies had built massive files on his arms operations, military contractors had no access to those materials—and at least officially, were obligated to heed only the GSA list.
But the State Department’s quick moves in June 2004 to warn its own contractors off from hiring Bout planes showed how far agencies could bend the rules. “This was the big piece of the problem with the DoD hiring process,” said the State official. “My office was screaming about DoD, not only about Bout, but with all sorts of shady companies that were coming over the transom. We began seeing cases as soon as the war with Iraq started, but with the press of war, we never got to flag them.”15
A similar case that also came back to haunt the Pentagon was its 2005 purchase of $29 million in weapons for the Iraqi army from a Chinese-owned company under federal indictment in California for smuggling AK-47s into the United States. Despite checks into the firm’s background by the U.S. Army’s Tank-Automotive and Armaments Command, the Chinese firm, Poly Technologies, had not been banned from doing business by the GSA. The company was hired, even though federal agents had seized two thousand of the firm’s AK-47s in 1996 as they were smuggled into the country—the largest haul of contraband automatic we
apons in U.S. history. “We have done everything we can think of to save DoD from itself,” the State official said.16
Senior military logistics planners defended their vetting system, saying that the hiring of Bout’s network was an anomaly, occurring only because the decisions were made so far down in the contracting chain—his firms were unwittingly chosen by private contractors, not the military’s own contracting officials. Still, military officials supposedly checked out many of the subcontractors brought on by big reconstructions firms working in Iraq. Former air force general John W. Handy, who headed the U.S. Transportation Command (Transcom) and was senior planner for the military’s airlift into Iraq, said that any civilian air cargo firms hired by Transcom were “scrubbed six ways from Sunday.”
Most of the contracting decisions that led to the Bout organization’s work in Iraq, Handy said, were made separately by U.S. Army, Marine, Army Corps of Engineers, and CPA officials—and most likely involved military contracting officials for each of those services working under the U.S. Central Command. Handy’s Air Mobility Command handled its own logistics decisions, providing tactical airlift for the war operations—which relied mostly on the air force’s C-130s and other cargo planes and only occasionally hired civilian carriers. “The army corps and other services would likely have each cut their own contracts,” Handy said. “It would be a sizable task to run down all the contracts that were let. You’d have to go down a real rabbit hole to find that out.” When reports of Bout’s contracts surfaced in May 2004, Handy ordered his aides “to send the dogs out” to learn if his command had hired Bout planes. “To my knowledge, we never found a contract.”
But the Air Mobility Command (AMC), which operated under Transcom, had indeed hired Irbis as a third-tier subcontractor through FedEx. An AMC spokesman explained the command had an “off the shelf” contract using FedEx’s commercial service at a discounted price. FedEx, in turn, hired Falcon Express Cargo Airlines in Dubai. A FedEx official in Dubai explained that Falcon was hired to move military supplies into Iraq and used Irbis and other UAE air firms “either as subcontractors or plane-by-plane leasers.” Despite Irbis’s normal fee of $60,000, the firm made only $22,000 per round-trip because of FedEx’s reduced-fee schedule. But Irbis planes were allowed to fill up with cargoes from other firms if there was still space left over, the FedEx official said—allowing Bout’s flagship to boost the profits for many of its FedEx flights. FedEx never received warnings from U.S. officials about Bout’s air firms or other UAE companies flying into Iraq. “The U.S. never sent anything to us,” the FedEx official said.17
Irbis’s flights for Federal Express lasted about a year, from August 2003 until late August 2004, when the air force was suddenly informed by Defense logistics officials that there was a problem with their third-tier UAE air contractor. For months, Irbis planes in Baghdad had been refueling with aviation fuel provided by the U.S. Air Force. Using its alter ego Air Bas, Bout’s company had secured special cards in March 2004 from the Defense Energy Support Center (DESC) to fuel up at air force pumps. Through August, DESC spokesman Jack Hooper confirmed, Irbis planes used 494,881 gallons of fuel in Baghdad—until their fuel cards were suddenly suspended. On July 8, the Pentagon’s fueling center had contacted Air Bas with a routine request for more information “to clarify which U.S. government agency you have charter agreements with.” When the UAE firm did not respond for weeks, the DESC cut off its fuel. Similarly, the air force cut off British Gulf International because of its silence.
Soon after Defense fuel officials revoked Irbis’s fuel card, the firm’s flights for the air force came under new scrutiny. Armed with details of Treasury’s assets freeze against Bout, the air force general counsel’s office pressed the Air Mobility Command for information about its dealings with Air Bas, British Gulf, and Falcon Express. On September 14, under prodding from the lawyers, the air force warned FedEx that “it may be in violation of legal prohibitions” for hiring Bout. FedEx wasted no time, moving quickly to terminate its Irbis flights. The air force, a spokesman said, “does not anticipate any future involvement of this nature.”18
The air force’s rapid response contrasted with the sluggish reaction of the U.S. Army and it affiliated commands. Unlike the air force’s single third-party contract with Irbis, the Sharjah air firm had been hired to work for the army under numerous separate subcontracts. According to Hooper, there was evidence that Irbis had at least one direct contract with the army. But army officials showed little inclination to look into their relationships with Bout, let alone sever them. Nancy Ray, an army spokeswoman, insisted in December 2004 that “we have no record of any contracts with this company.” Ray said it would be pointless to even try to search for the contracts in army records. “We’re talking about tens of thousands of contracts,” she said. And she dismissed the idea that the army bore any responsibility for its subcontractors. “You contract with your prime and then the prime has responsibility for dealing with subcontractors. That’s law, not policy.”
But at the ground level, army personnel intimate with contracting decisions complained that the process was rife with chaos. Army Reserve captain Cameron Sellers, who preceded Chris Walker as clearance officer at Baghdad International Airport, also had worked as a civil affairs liaison with army contractors in Iraq. What Sellers saw close up was a “disaster in the making.” In case after case, army contractors simply hired large American outfits they were familiar with, but failed to check out the subcontractors that were brought on by the larger firms. Too often, Sellers said, the big contractors relied on local cargo agents and freight forwarders in the Persian Gulf, taking their recommendations on faith. “There would be instances where I would go to these companies and say why did you hire these subcontractors? And over and over, the contractors would say: ‘What? I didn’t approve these people.’ They had no idea who they hired.”
Corruption and favoritism also may have swayed American contractors’ decisions to award Baghdad routes to Bout-network companies. An executive who worked for one international air chartering operation said his firm had won a competitive bid to staff Baghdad flights for a major American defense contractor in summer 2004, but was suddenly displaced by another global charter firm that regularly hired Bout-network air firms for Iraq work. His company protested to the American corporation’s hiring officials and to RAMCC, but to no avail. “I’m not critical of the military. Most of them are above-board,” the exasperated executive said. “The Defense contractors at the top of the process were oblivious, I’m sure. But what does it say about the American operation that they’re willing to let their contractors pay more to have Bout fly for them?”19
The contracting lapses raised questions of internal security as well. At Baghdad International Airport, Sellers said, he ended up operating blindly, deprived of crucial security information, because Defense planners as well as other agencies failed to prepare for the possibility that air firms with criminal backgrounds might attempt to win contracts and gain access to vital American installations. “The interagency people needed to put dedicated personnel on this,” Sellers said. “Instead, the military people on the ground got left holding the bag. If we had known who we were doing business with, we would have said right from the start that we’re not going to accept any flights coming out of Sharjah. Period.”
But if changes needed to be made at the Pentagon, there was only silence at the top. For months after Wisconsin senator Feingold had asked Paul Wolfowitz about Bout’s work in Iraq, the assistant defense secretary kept silent. Feingold tried again in November 2004 and again heard nothing. Nine months passed before a letter from the Pentagon finally arrived at Feingold’s office.
Finally replying on January 31, 2005, Wolfowitz acknowledged that “both the U.S. Army and the Coalition Provisional Authority did conduct business with companies that, in turn, subcontracted work to second-tier providers who leased aircraft owned by companies associated with Mr. Bout.” Wolfowitz wrote that while Defense off
icials were “aware of a few companies that are connected to Mr. Bout, most notably Air Bas and Jet Line, we suspect that Mr. Bout has other companies or enterprises unknown to the government.” Defense officials, he wrote, were complying with the Treasury sanctions and were reviewing “our contracts to ensure that we do not allow Mr. Bout or any other proscribed individual to perform our contracts.” But Wolfowitz went on to insist that “we are not aware of any prime contracts or subcontracts with the Department of Defense that involve Mr. Bout.”20
On February 9, an Irbis flight from Sharjah touched down at the airport in Mosul.
Several times a week through the fall of 2004 and into 2005, Sharjah International Airport’s Web-based Flight Information Services board logged the arrivals and departures of Irbis planes as they shuttled between the UAE and Baghdad.
There were more flights to Mosul, as well as runs into Balad carrying KBR personnel. Irbis planes were landing with regularity in Kabul and at Bagram Air Base in Afghanistan, also staffing flights for KBR. On October 26, 2004, the Sharjah board even showed an Irbis flight due to arrive from Fort Leonard Wood, Missouri, where the U.S. Army bases its training academies for army Corps of Engineers, military police, and chemical warfare teams. Plane dispatchers at Fort Leonard Wood/Forney Airport who oversaw civilian flights were puzzled by the Sharjah listing, insisting they had no record of the Irbis plane. But the aircraft could have come and gone as a military flight without their knowledge, one dispatcher admitted.21
Merchant of Death: Money, Guns, Planes, and the Man Who Makes War Possible Page 29