Blackwater: The Rise of the World's Most Powerful Mercenary Army

by Jeremy Scahill

  Some of the most bizarre stories about Schmitz’s time at the Pentagon stem from what colleagues described as his “obsession” with Baron Von Steuben, the mercenary who fought in the Revolutionary War.112 Von Steuben reportedly fled Germany after learning that he was going to be tried for homosexual activities and was welcomed by George Washington in America as a key military trainer—one of several mercenaries who fought the British. Soon after Schmitz was appointed to his post at the Pentagon, according to the Los Angeles Times:

  He spent three months personally redesigning the inspector general’s seal to include the Von Steuben family motto, “Always under the protection of the Almighty.” He dictated the number of stars, laurel leaves and colors of the seal. He also asked for a new eagle, saying that the one featured on the old seal “looked like a chicken,” current and former officials said. In July 2004, he escorted Henning Von Steuben, a German journalist and head of the Von Steuben Family Assn., to a U.S. Marine Corps event. He also feted Von Steuben at an $800 meal allegedly paid for by public funds, according to [Sen.] Grassley, and hired Von Steuben’s son to work as an unpaid intern in the inspector general’s office, a former Defense official said. He also called off a $200,000 trip to attend a ceremony at a Von Steuben statue . . . in Germany after Grassley questioned it.113

  “[Schmitz] was consumed with all things German and all things Von Steuben,” a former Defense official told the Los Angeles Times’s T. Christian Miller. “He was obsessed.”114 Schmitz also peppered many of his official speeches as Inspector General with references to Von Steuben, referring to him in almost messianic ways. “We all rely on his precedent and his wisdom to provide a compass for leadership within the Pentagon—to help find our way when things appear convoluted and distorted, as often is the case in large bureaucratic organizations, particularly in the heat of battle,” Schmitz said in a May 2004 speech at a dedication ceremony for a Von Steuben monument in New Jersey.115 In Iraq, Schmitz said in June 2004, “We must stay the course and stand behind our troops. For my part, I have deployed my very best ‘Von Steubens’ on the ground in Iraq to help train their new Inspectors General as champions of integrity and engines of positive change in each of the new Iraqi ministries.”116

  It didn’t take long for Schmitz to be called to accounts by lawmakers of various political stripes and the critical in-depth investigative reporting of Miller in the Los Angeles Times. Perhaps the most serious heat Schmitz faced for his role in several scandals came from a powerful Republican—Senator Grassley. One centered on Rumsfeld aide John “Jack” Shaw, Deputy Undersecretary of Defense. A diehard, highly partisan Republican operative who had worked in every GOP administration going back to Gerald Ford, Shaw was put in charge of Iraq’s telecommunications system by the White House once the occupation got under way, despite the fact that “he had no background in either defense contracting or telecommunications,” wrote Miller.117 Whistleblowers from the U.S.-led Coalition Provisional Authority in Iraq charged that Shaw attempted to use his position to steer lucrative contracts to corporate cronies, according to the Los Angeles Times.118 Shaw worked behind the scenes with powerful Republican lawmakers in an effort to redirect lucrative mobile phone network contracts in Iraq to businesses run by people with whom Shaw had a personal relationship, according to Miller.119

  In 2003, Schmitz, in his capacity as Inspector General, signed an agreement with Shaw that gave him investigative authority, which Shaw allegedly used to press for the redirection of the telecommunications contracts to his friends.120 “In one case, Shaw disguised himself as an employee of Halliburton Co. and gained access to a port in southern Iraq after he was denied entry by the U.S. military,” Miller reported, citing Pentagon officials. “In another, he criticized a competition sponsored by the U.S.-led Coalition Provisional Authority to award cell phone licenses in Iraq. In both cases, Shaw urged government officials to fix the alleged problems by directing multimillion-dollar contracts to companies linked to his friends, without competitive bidding, according to the Pentagon sources and documents. In the case of the port, the clients of a lobbyist friend won a no-bid contract for dredging.”121

  When the whistleblowers’ allegations about Shaw came before Schmitz, rather than investigating the case himself, he sent it to the FBI, citing a potential conflict of interest because Schmitz had deputized Shaw. “It’s a safe bet you can bury something at the FBI, because they won’t have time to look at it,” a Pentagon official told Miller.122 “The [FBI] was far more interested in terrorism than in official corruption,” Miller observed in his book Blood Money. “Schmitz’s own senior investigators objected to the transfer, seeing the decision as a calculated move to help a fellow political appointee. Predictably, the FBI investigation never went anywhere, and it was eventually dropped.”123

  After Shaw’s suspected corruption was revealed by the LA Times, Schmitz personally helped draft a Pentagon press release that sought to exonerate Shaw.124 “The allegations were examined by DoD IG criminal investigators in Baghdad and a criminal investigation was never opened,” the Pentagon release, dated August 10, 2004, read. “Shaw is not now, nor has he ever been, under investigation by the DoD IG.”125 The press release referred journalists to the FBI for further information. According to Miller’s reporting, Schmitz deputy Chuck Beardall e-mailed his boss, saying the press release was “dead wrong and needs to be removed ASAP. Failure to do so reflects poorly on the DOD’s and our integrity.”126 Schmitz, according to Miller, “told an assistant, Gregg Bauer, that he was inclined to ‘let the sleeping dog lie.’ ‘We did the right thing by recommending a less-inclined-to-misinterpretation’ version of the press release, Schmitz wrote in an e-mail response.”127 In a subsequent letter to Rumsfeld, Senator Grassley wrote, “What I find most disturbing about this situation is the alleged involvement of the IG, Mr. Schmitz, in this matter. First there is a paper trail that appears to show that Mr. Schmitz was personally and directly involved in crafting the language in this press release. And second, I understand that Mr. Schmitz was repeatedly warned by his own staff ‘to take it down’ because it was ‘patently false.’ Even the FBI weighed in on that score, I am told.”128 Grassley told Rumsfeld that after he informed Schmitz of his intention to investigate him and requested access to Schmitz’s files on the matter, “I have been informed unofficially by sources within the IG’s office that ‘all papers related to Shaw and the other matter were stamped law enforcement sensitive to prevent my access.’”129 Grassley also accused Schmitz of thwarting an investigation of a senior military official who Grassley believed may have lied under oath.130 For his part, Shaw denied any wrongdoing and claimed allegations against him were a “smear campaign.”131

  During his time at the Pentagon, Schmitz spoke publicly and passionately about the scourge of human trafficking, focusing in particular on sex trafficking—a pet issue of the Christian right and the Bush administration. In September 2004, Schmitz presented to the House Armed Services Committee a paper he wrote called “Inspecting Sex Slavery through the Fog of Moral Relativism.” 132 In it, he declared, “Moral relativism is an enemy of the United States Constitution” and “The President of the United States has identified 21st Century sex slavery as ‘a special evil’ under ‘a moral law that stands above men and nations.’” Schmitz said, “Ostensible consent by the parties to immoral practices such as prostitution and sex slavery ought never to be an excuse for turning a blind eye,” concluding, “Even as we confront the new asymmetric enemies of the 21st Century, those of us who take an oath to defend the Constitution of the United States (and similar principle-based legal authorities) should recognize, confront, and suppress sexual slavery and other ‘dissolute and immoral practices’ whenever and wherever they raise their ugly heads through the fog of moral relativism—‘so help [us] God.’”133

  But while Schmitz railed against moral relativism and sex slavery, he simultaneously was accused of failing to investigate serious allegations of human trafficking by Iraq contractor
s, including KBR, which had thirty-five thousand “third country nationals” working in Iraq.134 In a groundbreaking investigation, “Pipeline to Peril,” Cam Simpson of the Chicago Tribune documented how twelve Nepalese citizens were sent into Iraq in August 2004 and subsequently abducted and executed.135 The paper revealed how “some subcontractors and a chain of human brokers allegedly engaged in the same kinds of abuses routinely condemned by the State Department as human trafficking.”136 The Tribune also “found evidence that subcontractors and brokers routinely seized workers’ passports, deceived them about their safety or contract terms and, in at least one case, allegedly tried to force terrified men into Iraq under the threat of cutting off their food and water,” and that KBR and the military “allowed subcontractors to employ workers from countries that had banned the deployment of their citizens to Iraq, meaning thousands were trafficked through illicit channels.”137

  According to the Chicago Tribune: “Separate records also show that similar allegations had been raised in September 2004 with Joseph Schmitz, who was then the Department of Defense inspector general. Schmitz did not respond in any detail until nearly a year later, saying in an Aug. 25, 2005, letter to Rep. Christopher Smith, R-N.J., that there was a ‘list of corrective measures’ ordered by coalition military officials in Iraq following ‘a preliminary inquiry’ into the allegations. The letter did not mention passport seizures or violations of U.S. laws against human trafficking, but said living conditions ‘required further attention’ and that officials were ‘monitoring the status of corrections’ purportedly under way.”138 Hardly the “moral relativist,” “special evil” condemnation, apparently reserved by Schmitz and his allies for more “immoral” crimes.

  One of the greatest scandals involving Schmitz began in May 2003, when the Pentagon agreed to lease one hundred military tanker planes in a controversial deal with Boeing worth a whopping $30 billion.139 Almost immediately, the unusual arrangement—the largest such lease in U.S. history—was blasted by government watchdog groups as “wasteful corporate welfare,” as it boosted the struggling aerospace business.140 Republican Senator John McCain slammed the deal as “a textbook case of bad procurement policy and favoritism to a single defense contractor.”141 McCain alleged that analyses by the General Accounting Office showed that it would be exponentially cheaper for the government to modernize existing tankers, rather than leasing additional ones from Boeing at several times the cost.142 “I have never seen the security and fiduciary responsibilities of the federal government quite so nakedly subordinated to the interests of one defense manufacturer,” McCain said.143 In winning the controversial deal, Boeing reportedly had a string of powerful backers, among them House Speaker Dennis Hastert, a key ally of the White House and of senior White House aides Karl Rove and Andy Card. “What was unusual about Boeing’s lobbying was that it gained complete access to all divisions of government from the president down, to having the key leadership of the House and Senate and dozens of lawmakers pushing their wares on the deal,” said Keith Ashdown, director of Taxpayers for Common Sense.144 According to the Financial Times, “Boeing also invested $20 million last year in a defence-related venture capital fund run by Richard Perle . . . [who] co-authored an editorial in The Wall Street Journal in August supporting the deal. He did not disclose the Boeing investment.”145

  The contract was approved by President Bush’s chief weapons buyer at the Pentagon, Edward C. “Pete” Aldridge Jr.,146 who just happened to be the former president of McDonnell Douglas Electronic Systems, which later became part of Boeing.147 Aldridge approved the deal on his last day at the Pentagon before taking a job with weapons manufacturer Lockheed Martin.148 The deal would soon go down as “the most significant defense procurement mismanagement in contemporary history,” in the words of the Senate Armed Services Committee Chair, Republican John Warner,149 resulting in a cancellation of the contract, amid widespread allegations of cronyism. Former Air Force procurement officer Darleen Druyun went to prison, as did a Boeing representative, while Air Force Secretary James Roche resigned.150

  Ultimately, the case ended up on Joseph Schmitz’s desk at the Pentagon for investigation. In June 2005, Schmitz released a 257-page report on the scandal, which critics charged concealed the possible role of senior White House officials in the deal—the report contained forty-five deletions of references to White House officials.151 In fact, Schmitz had actually given the report to the White House for review before its release, where it appeared to have been scrubbed of possibly damning information.152 In a letter to Schmitz, Republican Senator Grassley wrote, “By excluding pertinent evidence from the final report, certain potential targets were shielded from possible accountability.” Grassley added that Pentagon officials “may have been acting in response to guidance and advice from the senior White House officials, whose names were redacted from the final report on your orders; those officials are not held accountable.”153

  Schmitz did not include the comments of Rumsfeld or Wolfowitz because, Schmitz said, they hadn’t said anything “relevant.” If so, asserted the Washington Post editorial board, “investigators must not have asked the right questions. To offer just one example: Mr. Roche recounted that Mr. Rumsfeld called him in July 2003 to discuss his then-pending nomination to be secretary of the Army and ‘specifically stated that he did not want me to budge on the tanker lease proposal.’”154 In a transcript of Schmitz’s office’s interview with Rumsfeld, obtained by the Washington Post, investigators asked the Defense Secretary whether he had approved the Boeing tanker lease despite widespread violations of Pentagon and government-wide procurement rules. “I don’t remember approving it,” Rumsfeld said. “But I certainly don’t remember not approving it, if you will.”155 Investigators then asked Rumsfeld about the fact that in 2002 President Bush asked his Chief of Staff, Andy Card, to intervene in the Pentagon negotiations with Boeing (a major Bush contributor). “I have been told,” Rumsfeld said, “that discussions with the President are privileged, and with his immediate staff.”156 The Post said much of the rest of the discussion was blacked out on the transcript. None of Rumsfeld’s comments were included in Schmitz’s report.157

  What’s more, Schmitz’s team did not interview anyone outside the Defense Department, despite the well-documented involvement of several high-profile lawmakers, administration officials, and the President himself.158 Schmitz also failed to interview Edward Aldridge, the Pentagon official who approved the deal. His report noted that Aldridge failed to get proper approvals before moving forward with the deal, but said the approvals were in place anyway. In a Senate hearing on the scandal after the report was released, McCain said to Schmitz, “So, Mr. Aldridge basically lied,” to which Schmitz replied, “We know generally that . . . he and others within the Air Force and [the Office of the Secretary of Defense] were trying to treat the appropriations language as if it had waived a whole bunch of legal requirements.” 159 McCain was incredulous. “Don’t you think it would have been important to have his testimony?” he asked Schmitz. “My staff couldn’t reach him,” Schmitz eventually asserted, saying he had sent him a registered letter and left him some voice mails. “You couldn’t get a hold of him through Lockheed Martin?” asked a stunned McCain. Despite his subpoena power, Schmitz never used it to compel Aldridge to be interviewed. “I don’t think it’s a mystery,” Senator John Warner told Schmitz. “He’s on the board of a major defense contractor, it seems to me he’s locatable.” In fact, it is very difficult to imagine Schmitz could not reach him at Lockheed Martin. Schmitz’s brother, John P. Schmitz, former deputy counsel for George H. W. Bush, served as a registered lobbyist for Lockheed Martin from July 2002 until January 2005,160 overlapping the Boeing deal and probe. He served on a team of two to three lobbyists from Mayer, Brown, Rowe & Maw, which was paid at least $445,000 during that time.161 There is nothing, however, to suggest that John P. Schmitz had any direct connection to the tanker deal or to Aldridge.

  In the end, Senator Grassley to
ld Joseph Schmitz that his handling of the scandal “raises questions about your independence” as Inspector General.162 Ashdown of Taxpayers for Common Sense said, “We now know that at the highest levels of the Pentagon and the White House, the wheels were greased to direct billions in corporate welfare to the Boeing Company.”163 But, he added, because of “the inspector general’s reluctance to grill the secretary of defense” and “overzealous redactions . . . we are now left with more questions than answers.”

  With his office embroiled in multiple scandals, Schmitz served his official notice in June 2005 that he was recusing himself from Blackwater-related issues because he was in talks with the company about possible employment. The brief memo did not reveal what led to the disclosure or his dealings with Blackwater, but it came exactly a year after Schmitz returned from a nine-day trip to Baghdad, where he worked with Blackwater’s prized client Paul Bremer on establishing a network of twenty-nine inspectors general (with Schmitz’s “very best Von Steubens”) for Iraqi ministries ahead of the “handover” of sovereignty.164 To some observers, having these two officials develop a system of oversight for a “new” Iraqi government would be like asking two foxes to decide how the chicken coop should be protected.

  In November 2004, Schmitz gave Bremer the Joseph H. Sherick Award, given to an individual “who contributes to the mission of the inspector general.” 165 Schmitz said he gave Bremer the award because he was “a man of vision and a man of principle.”166 In accepting the award, Bremer said, “I felt from the time I got [to Iraq] how important it was, given the history of corruption under Saddam Hussein . . . to try to get this concept of trust in government established right from the beginning.”167 In early 2005, Schmitz delivered a lecture to the Order of Malta Federal Association at Bremer’s church in Bethesda, Maryland, during which he told a story from Frances Bremer’s (Paul’s wife) novel Running to Paradise.168 A few months later, in November 2005, Schmitz and Paul Bremer would be united again, as Blackwater hosted Bremer at a “fundraiser” for victims of Hurricane Katrina.169