U. S. House of Representatives, Committee on Oversight and Government Reform - Blackwater USA Hearing, October 2, 2007 -- Part III: Questioning of Erik Prince, Chairman, Blackwater USA lyrics

Chairman Waxman. Thank you very much, Mr. Prince. I am going to start off with the questions. The issue before us that I see that is important to understand is we have gone now in a major way to contract out what the Government and what the military ordinarily would do. Your company started off at the beginning of 2001 with, I think, around over $200,000 in Government contracts. You now are making over $1 billion a year. That is quite a success. Even if I am wrong on the exact numbers, it is quite a success. Now we are paying a lot of money for privatized military to do the work that our military people have done, and no one does this work better than the U.S. military. They are a very able and brave and courageous people that do a fantastic job for us. So the question in my mind is are we paying more and getting less? In asking that question, I want to focus on a particular incident. That incident received almost no public attention but involved the tragic loss of three of our troops, and my staff has reviewed the documents describing the incident. They prepared a memo which I would like, without objection, to make part of the record. Chairman Waxman. On November 27, 2004, there was a plane run by Blackwater Aviation that crashed into a wall of a canyon in the mountains of Afghanistan. This plane was carrying three military personnel, three active duty U.S. personnel: Lieutenant Colonel Michael McMahon, Chief Warrant Officer Travis Grogan, and Specialist Harley Miller. About 40 minutes after takeoff, Blackwater 61 crashed into the wall of a canyon and all the occupants were k**ed. The crash was investigated by a joint Army and Air Force taskforce and by the National Transportation Safety Board. The NTSB report found that Blackwater captain and first officer behaved unprofessionally and were deliberately flying the non-standard route low through the valley for fun. The report found that the pilots were unfamiliar with the route, deviated almost immediately after takeoff and failed to maintain adequate terrain clearance. They also had a transcript of the co*kpit voice recording, and on this recording the flight crew joked with each other, saying, ``You are an X-wing fighter Star Wars man and you are,'' expletive ``right. This is fun.'' The captain stated, ``I swear to God they wouldn't pay me if they knew how much fun this was.'' Mr. Prince, one allegation raised recently about Blackwater's actions is that your contractors have acted irresponsibly. One senior U.S. commander told the Washington Post ``They often act like cowboys.'' Let me ask you about that crash of Blackwater Flight 61. In this case, did Blackwater's pilots act responsibly or were they, in the words of the U.S. commander, acting like cowboys? Mr. Prince. I disagree with the a**ertion that they acted like cowboys. We provide a very reliable, valuable service to the Air Force and the Army in Afghanistan. Anytime you have an accident, it is an accident. Something could have been done better. It is not a Part 135 U.S. type flying operation. There are no flight services. There are no flight routes. There are no nav aids. It is truly rugged Alaska-style bush flying. Chairman Waxman. Well, the investigators said from the National Transportation Safety Board that Blackwater Aviation violated its own policies by a**igning two pilots without adequate flying experience in Afghanistan. According to the military report, it was your policy, Blackwater policy, that required at least one of the pilots to have flown in theater for at least a month, but neither pilot had flown for that long and neither had flown the route they were a**igned that day. This is clear in the co*kpit voice recording. Right after takeoff, the Blackwater captain said, ``I hope I am going into the right valley.'' The first one replied, ``This one or that one?'' The captain then apparently guessed which valley to fly, saying, ``I am just going to go up this one.'' The flight mechanic later observed, ``We don't normally go this route.'' Why didn't Blackwater follow its own policies and team two new pilots with more experienced ones? Why did you have two inexperienced pilots together? Mr. Prince. I am not qualified to speak to the experience level of the pilots. I will tell you that we are operating under military control. In fact, the aircraft was set to take off with two pa**engers onboard, and they actually turned around for the lieutenant colonel who I believe who boarded late. There was also it violated. The military violated its policy by loading both ammunition. That aircraft is also flying with a large number of illumination mortar rounds, and they are not supposed to mix pax and cargo. But, again, we followed our customer's instructions. Yes, accidents happened. We provided thousands and thousands of flight hours of reliable service since then. Today still, we are flying more than 1,000 missions a month. Chairman Waxman. But on that one, the investigators found that Blackwater failed to follow standard precautions to track flights, failed to file a flight plan, failed to maintain emergency communications in case of an accident, and tragically these failures may have cost the life of the crash's sole survivor because one of the military people that you were escorting or your flight was escorting evidently survived for at least 10 hours after the crash. He suffered internal injuries, but he got out of the plane to urinate. He smoked a cigarette. He rolled out a sleeping bag. Nobody came, and then he died of cold from inattention. There was no way, as required, for anybody to know where that plane had landed even though that is a requirement. I have an email that I want to read to you. It was sent on November 10, 2004, 16 days before the crash. It is from Paul Hooper, Blackwater Afghanistan site manager, and it was sent to John Hite, vice president for operations for Blackwater Aviation. In it, Mr. Hooper says, Blackwater knowingly hired pilots with background and experience shortfalls. Here is what he wrote: ``By necessity, the initial group hired to support the Afghanistan operation did not meet the criteria identified in email traffic and had some background and experience shortfalls overlooked in favor of getting the requisite number of personnel on board to startup the contract.'' One of the great ironies of this accident is that while the aircraft was being piloted by an inexperienced Blackwater pilot, a sk**ed military pilot with an exemplary safety record, Lieutenant Colonel Michael McMahon was on board the flight as a pa**enger. This is what his widow wrote to me. She is Colonel Jeanette McMahon, and she works at West Point. She said, ``Mike, like Mr. Prince, was a CEO of sorts in the military as an aviation commander and as such had ama**ed a great safety record in his unit. It is ironic and unfortunate that he had to be a pa**enger on this plane versus one of the people responsible for its safe operation. Some would say it was simply a tragic accident . . . but this accident was due to the gross lack of judgment in managing this company.'' Mr. Prince, Colonel McMahon is asking why the taxpayers should be paying your company millions to conduct military transport missions over dangerous terrain when the military's own pilots are better trained and a lot less expensive. How do you respond? Mr. Prince. We were hired to fill that void because there is a different--it is a different kind of airlift mission going in and out of the very short strips in Afghanistan. You have high altitude, short strips, unimproved runways, and you have transport aircraft that are designed to support a large conventional battle. We are doing small missions. The typical CASA payload maxes out at 4,000 pounds. They can't even hold that because of the short altitude or the high altitude short strips, they have to go in and out of, hauling mail, hauling parts. We are filling that gap because these strips are too small for C-17s. They are too small for C-130's. They are going in and out of places that the military can't get to with existing aircraft they have. That is why we are doing that mission. Chairman Waxman. You are saying that the military could not do this job? Mr. Prince. They did not have the a**ets to do it in theater or back in the United States, no, sir. Chairman Waxman. They could have acquired those a**ets, however. Instead, they hired you. Mr. Prince. I believe the Congress has seen fit to proceed with some sort of aircraft acquisition program to fill that void going forward, but this is a temporary service to fill that gap. Chairman Waxman. Well, we have been in Iraq for 5 years now. The pilots of Blackwater 61 paid for their errors with their lives, but I am wondering whether there was any corporate accountability for Blackwater. Were any sanctions placed on the company after the investigative reports that were so critical of Blackwater were released? Mr. Prince. Anytime there is an accident, a company also should be introspective and look back and see what can be done to make sure that it doesn't happen again. Chairman Waxman. Aside from your introspection, were you ever penalized in any way? Were you ever fined or suspended or reprimanded or placed on probation? Mr. Prince. I believe the Air Force investigated the incident, and they found that it was. It was pilot error. It was not due to corporate error that caused the mistake or that crashed the aircraft. Chairman Waxman. My time is up, but the corporation hired inexperienced pilots. They sent them on a route they didn't know about. They didn't even follow your own rules. It seems to me that it is more than pilot error. There ought to be corporate responsibility, and Blackwater was the corporation involved. Aside from your introspection, you have just been awarded a new contract for almost $92 million. I want to see whether you are getting a stick as well as all these carrots. Mr. Davis, your turn. Mr. Davis of Virginia. Thank you, Mr. Chairman. Let me just say I think if there is a question if they should be in or out, if the private companies are doing work of the Army, that really ought to be addressed by the Defense Department and State Department. Mr. Issa. Mr. Chairman. Mr. Ranking Member, would you yield for a question? Mr. Davis of Virginia. I would. Mr. Issa. Since I wasn't here during the Clinton administration, did Mr. Waxman and this committee investigate Secretary Brown's crash in which he was k**ed? That was a military flight, C-130, I believe. Was that investigated? Mr. Davis of Virginia. I wasn't here. I was not here at that point, but I understand the question. Mr. Issa. So crashes happen bad weather and in combat. Chairman Waxman. Will the gentleman yield to me? That crash was investigated, and the gentleman would be able to get the report of that investigation. Mr. Davis of Virginia. Let me yield 5 minutes to the gentleman from North Carolina. Mr. McHenry. I thank the ranking member for yielding. Mr. Prince, can you describe to the committee the nature of your contract, who your client is in Iraq? Mr. Prince. In Iraq, we work for the Department of State. Mr. McHenry. What is the service you provide for the Department of State? Mr. Prince. We operate under the Worldwide Personal Protective Services Contract, and we are charged with protecting diplomats, reconstruction officials and visiting CODELs, Members of Congress and their staffs. Mr. McHenry. In this calendar year, how many missions have you had in Iraq? Mr. Prince. 1,873. Mr. McHenry. How many incidents occurred during those 1,873 movements? Mr. Prince. Only 56 incidents. Mr. McHenry. A movement is, for instance, a Member of Congress lands at the airstrip. They are transported to the emba**y. That is one movement. Mr. Prince. Yes, sir. Mr. McHenry. All right, and 56 incidents out of 1,873 movements in a war zone, is that correct? Mr. Prince. Resulted in a discharge of one of our guys' weapons. Mr. McHenry. Those 56 incidents, does that mean that they shot at someone? Describe what an incident is. Mr. Prince. Yes. We don't even record all the times that our guys receive fire. The vehicles get shot at on a daily basis, multiple times a day. So that is not something we even record. In this case, an incident is a defensive measure. You are responding to an IED attack followed by small arms fire. Most of the attacks we get in Iraq are complex, meaning it is not just one bad thing; it is a host of bad things. Car bomb followed by small arms attack. RPGs followed by sniper fire. An incident occurs typically when our men fear for their life. They are not able to extract themselves from the situation. They have to use sufficient defensive fire to off the X, to get off that place where the bad guys have tried to k** Americans that day. Mr. McHenry. So in 1,873 missions, 56 incidents occurred which means potentially the Blackwater individual, the former soldier in most cases, discharges a weapon. Perhaps in the air, is that a possibility? Mr. Prince. It is not likely into the air. It is either going to be directed at someone that is shooting at us or another real problem. You know the recent Washington Post series on IEDs in Iraq, 81,000 IED attacks. The bad guys have figured out how to make a precision weapon. You take a car. You pack it with explosives, and you put a suicidal person in there that wants to drive into the back of a convoy and blow themselves up. Mr. McHenry. An additional question here, those 56 incidents pretty much all involved returning fire. A caravan is being shot at, for instance, and you would return fire or a potential car bomb is coming at you and you are returning. Mr. Prince. A potential car bomb, yes. Defensive fire or potential car bombs going, potentially coming near you, you have to warn them off. There is a whole series in the use of force continuum that our guys are briefed and they abide by. They are briefed on it through their training back here in the United States. Every time they leave the wire, every time they launch on that mission, before they go in the morning, they get the mission brief on what they are going to do, who they are protecting, where they are going, the intelligence, what to be on the lookout for, where have there been particularly bad areas in the city and the use of force continuum, those rules of engagement. Mr. McHenry. The use of force continuum, is that dictated by the Department of State? Mr. Prince. Yes. Mr. McHenry. You use their rules of engagement, the commonly used term? Mr. Prince. Yes, sir. Mr. McHenry. That is similar to the Department of Defense rules of engagement. Mr. Prince. Yes, they are essentially the same. Mr. McHenry. OK. So you had 1,800. Mr. Prince. Sorry, Department of Defense rules for contractors. We do not have the same as a U.S. soldier at all. Mr. McHenry. OK. In the report that I have, in 2006, you had 6,254 missions and 38 incidents. Mr. Prince. Yes, sir. Mr. McHenry. Which means one of the contractors, one of the former soldiers, who is now in State Department Protective Service, they returned fire. So that would be less than 1 percent of missions involved returning fire. The question here, how long has Blackwater been involved in Iraq? How long have you had this contract in Iraq? Mr. Prince. We started there first working for DOD under the CPA, and then I believe in 2005 it transitioned from CPA over to Department of State. Mr. McHenry. How many individuals under your protective service have been injured or k**ed? Mr. Prince. Twenty-seven dead and hundreds wounded. Mr. McHenry. How many individuals? Mr. Prince. Oh, under our care? Mr. McHenry. Under your care that you are protecting. Mr. Prince. Zero. Mr. McHenry. Zero? Mr. Prince. Zero, sir. Mr. McHenry. Zero individuals that Blackwater has protected have been k**ed in a Blackwater transport. Mr. Prince. That is correct. Mr. McHenry. Zero? Mr. Prince. Zero. Mr. McHenry. That is, I think, the operable number here. Your client is the State Department. The State Department has a contract with you to provide protective service for their visitors, for instance, CODELs, Amba**adors and runs the gamut, and you have had zero individuals under your care and protection k**ed. Mr. Prince. Correct. Mr. McHenry. I think that is a very important number that we need to discuss here, Mr. Chairman, and that should be a testament to the service that these former veterans, these veterans that are currently working for Blackwater. Chairman Waxman. The 5 minutes that was yielded to you is over. Mr. McHenry. I am happy to yield back to the ranking member. Mr. Davis of Virginia. Mr. Prince, let me just continue with that. Are there any other security firms in Iraq that provide the services that involve as much danger as your escort services that your company provides in Baghdad? Mr. Prince. Sir, we certainly have a high profile mission. We protect the U.S. Amba**ador. We protect all the diplomats in the greater Baghdad area which is the hottest part of the country by far. Mr. Davis of Virginia. How is your firm paid under the current task order contract for security details? Is it by the mission, by the hour or some other method? How do you bill the Government? Mr. Prince. It is generally billed on a per man day for every day that the operator is in the country. Mr. Davis of Virginia. Is it a cost plus fee or is it just like a time and materials? Mr. Prince. It is blended. Most of it is firm fixed price. There are a few things that are directly cost reimbursable like insurance. Mr. Davis of Virginia. Does the contract provide for monetary penalties for any performance difficulties like shooting incidents that were reported to have occurred and the like? Mr. Prince. Yes, there are sorts of penalty clauses, if we don't have it fully manned, if they are not happy with the leadership. We are very responsive. If there is someone that doesn't agree or is not operating within the standards of the Department of State, they have two decisions, window or aisle. Mr. Davis of Virginia. Do you work just for the Department of State or do you work for the Defense Department as well? Mr. Prince. In Iraq, we essentially work for the Department of State. There are one or two folks here or there in a consultant type position but nothing, nothing significant, nothing armed. Mr. Davis of Virginia. It is important for the committee to understand there are two different contracting entities that are contracting in Iraq, and you work for State. Do you think the contract provisions and the State Department contract management personnel provide sufficient guidance for the use of force under the contract? Mr. Prince. Yes, sir. We have seen the full gamut of contracting and contract management in the stabilization section or stabilization phase of the Iraq War, and there is a whole host of differences in oversight. I will tell you the State Department is the highest. They are the GE-like buyers, the most sophisticated oversight standards that we have to comply with on the front end for our personnel and management in the field. Mr. Davis of Virginia. When your teams are operating on the ground in Baghdad, what entity has the authority to control your activities? Is it the State Department or is it the military commander who is responsible for the battle space? Mr. Prince. We work for the RSO, the regional security officer. He is the chief security official for the State Department in Iraq. Mr. Davis of Virginia. So it is the State Department ultimately for whom you are contracting. Mr. Prince. Yes. Mr. Davis of Virginia. Can you describe the process that is followed under the contract when a shooting incident occurs? Have you dismissed any employees for shooting incidents under your security contracts in Iraq and what happens to dismissed employees? Are they sent out of Iraq? Mr. Prince. OK, let me answer the last one first. If there is any sort of discipline problem, whether it is bad attitude, a dirty weapon, riding someone's bike that is not his, we fire them. We hold ourselves internally accountable, very high. We fire them. We can fine them, but we can't do anything else. So if there is any incidents where we believe wrongdoing is done, we present that incident, any incident, any time a weapon is discharged, there is an incident report given to the RSO. Mr. Davis of Virginia. Any idea how many employees you have fired over the time? Mr. Prince. I think in the committee's report, they said 122 or something over. Mr. Davis of Virginia. So you have taken action when it has come to your attention. Mr. Prince. Say again, sir. Mr. Davis of Virginia. So you have taken action when it has come to your attention. Mr. Prince. It generally comes to our attention first. We as a company, we fire them. We send the termination notice to the State Department as to why we fired someone. Mr. Davis of Virginia. Thank you. Chairman Waxman. The gentleman's time has expired. Mrs. Maloney for 5 minutes. Mrs. Maloney. Thank you, Mr. Chairman. I would like to ask you, Mr. Prince, about one of these employees whom you fired, and this was an employee who got drunk on Christmas Eve of 2006. According to documents that we got yesterday from the State Department, this particular man, while he was drunk, shot and k**ed the guard to the Iraqi Vice President, obviously causing great tensions between the Iraqi government and the U.S. military. I would like to ask you about his firing. You fired this individual for handling a weapon and for being intoxicated, is that right? Mr. Prince. The men operate with a clear policy. If there is to be any alcohol consumed, it is 8 hours between any time of consumption of alcohol. Mrs. Maloney. Was he fired or not? Mr. Prince. Excuse me? Mrs. Maloney. Was he fired? Mr. Prince. Oh, yes, ma'am, he was fired. Mrs. Maloney. Have any charges been brought against him in the Iraqi justice system? Mr. Prince. I don't believe in the Iraqi justice system. I do believe. I know we referred it over to the---- Mrs. Maloney. Justice Department, they told us they are still looking at it 9 months later. Have any charges been brought against him in the U.S. military justice system? Mr. Prince. I don't know. Mrs. Maloney. Have any charges been brought against him in the U.S. civilian justice system? Mr. Prince. Well, that would be handled by the Justice Department, ma'am. That is for them to answer, not me. Mrs. Maloney. Other than firing him, has there been any sanction against him about any Government authority? You mentioned you fined people for bad behavior. Was he fined for k**ing the Iraqi guard? Mr. Prince. Yes, he was. Mrs. Maloney. How much was he fined? Mr. Prince. Multiple thousands of dollars, I don't know the exact number. I will have to get you that answer. Mrs. Maloney. OK. Mr. Prince. Look, I am not going to make any apologies for what he did. He clearly violated our policies. Mrs. Maloney. OK. All right. Every American believes he violated policies. If he lived in America, he would have been arrested, and he would be facing criminal charges. If he was a member of our military, he would be under a court martial. But it appears to me that Blackwater has special rules. That is one of the reasons of this hearing. Now, within 36 hours of the shooting, he was flown out of Iraq. Did Blackwater arrange for this contractor to leave Iraq less than 2 hours after the shooting? Mr. Prince. I do not believe we arranged for him to leave after 2 hours after the shooting. He was arrested. Mrs. Maloney. OK, what about 2 days? It was 2 days after the shooting. Did Blackwater arrange for him to leave the country? Mr. Prince. That could easily be. Mrs. Maloney. OK. Mr. Prince. IZ Police arrested him. There was evidence gathered. There was information turned over to the Justice Department office in Baghdad. We fired him. He certainly didn't have a job with us. Mrs. Maloney. Well, in America, if you committed a crime, you don't pack them up and ship them out of the country in 2 days. If you are really concerned about accountability, which you testified in your testimony, you would have gone in and done a thorough investigation. Because this shooting took place within the Green Zone, this was a controllable situation. You could have gone in and done forensics and all the things that they do, but the response was to pack him and have him leave the country within 2 days. I would like to ask you, how do you justify sending him away from Iraq when any investigation would have only just begun? Mr. Prince. Again, he was fired. The Justice Department was investigating. In Baghdad, there is a Justice Department office there. He didn't have a job with us anymore. We as a private company cannot detain him. We can fire, we can fine, but we can't do anything else. The State Department---- Mrs. Maloney. What evidence do you have that the Justice Department was investigating him at that time? Mr. Prince. From talking to my program management people in the country, they said it is in the hands of the IZ Police, which is Air Force, arrested him. They took him in for questioning. It was handled by the Justice Department. He was fired by us. The State Department ordered. Mrs. Maloney. Well, it has been 10 months, and the Justice Department has not done anything to him. Again, I repeat, if he was a U.S. citizen or in America, he would have been arrested immediately. He would have faced criminal charges. We know about the chain of command in the military. They are court-martialed immediately. But if you work for Blackwater, you get packed up and you leave within 2 days and you face a $1,000 fine. So I am concerned about accountability and really the unfairness of this, and I am concerned about how Blackwater--if I could just say, Mr. Chairman--your actions may be undermining our mission in Iraq and really hurting the relationship and trust between the Iraqi people and the American military. Chairman Waxman. The gentlelady's time has expired. Mr. Burton. Mr. Burton. Can you tell us, Mr. Prince, how many people witnessed the incident she just referred to? Mr. Prince. I don't believe anyone did, sir. Mr. Burton. So the only people who were involved was the man who was shot and your employee? Mr. Prince. Yes, sir. Mr. Burton. Can you, in some detail, go into the rules of engagement? I have talked to some of the people at State Department about this, and I have talked to people within your organization. As I understand it, on the back of every one of your vehicles, in both Arabic and English, there is a warning to not get 100 meters of that vehicle, is that correct? Mr. Prince. Yes, that is right, sir. Mr. Burton. If somebody is coming at your vehicle at a high rate of speed, do your employees have any actions that they should take especially if it might be a car bomb or something like that? Mr. Prince. Yes, sir. There are generally lights and sirens on the vehicles, air horn. The personnel, whose security sector is facing back toward that oncoming threat, will be giving hand signals, audible yelling, stop, qif, Arabic for stop. There is a pin flare, which is a signaling device kind of like a bottle rocket. It is the device used for a pilot to signal his whereabouts on the ground to be rescued, but it is a bright incendiary device that flies by the vehicle or it hits the vehicle. It is not lethal at all, but definitely you know something is happening. Water bottles are sometimes thrown at vehicles to warn them off. If you have to go beyond that, they take shots into the radiator. You hear that hitting the car. It disables the car. Definitely, you know something is happening. If they go beyond that, they spider the windshield. You put a round through the center of the windshield away from the occupants so that the safety gla** in the windshield makes it difficult to see through. Only after that do they actually direct any shots toward the driver. So there is a whole use of force continuum. Mr. Burton. The questions that I have heard today from the other side indicate that there ought to be perfection in your organization. Now you are a Navy SEAL, and you served in the military. Do you believe that any kind of military operation of this type or any type can be absolutely perfect all the time? Mr. Prince. I am afraid not, sir. We strive for perfection. We try to drive toward the highest standards, but the fog of war and accidents and the bad guys just have to get lucky once. Mr. Burton. I think it is very important that everybody who is involved in this hearing today understand that you have high public officials, Congressman and others, whom you have to protect, and you have indicated that nobody has been k**ed or hurt under your protection. Yet, you are going through all kinds of zones where there are car bombs going off, small arms fire, cars coming at you at high rates of speed. Can you explain to me why in the world there wouldn't be some precautions taken when those sorts of things take place? Mr. Prince. Again, the bad guys have figured out k**ing Americans is big media, I think. They are trying to drive us out. They try to drive to the heart of American resolve and will to stay there. So we have to provide that protective screen. We only play defense, and our job is to get those reconstruction officials, those people that are trying to weave the fabric of Iraq back together, to get them away from that X, the place where the bad guys, the terrorists, have decided to k** them that day. Mr. Burton. One of the Members on the other side indicated that when there is a firefight or when there is a car bomb going off or something, there is an attack on your convoy, that you don't stay there. Can you explain to me what would happen if you stayed there when you were under attack? Mr. Prince. Again, there would be a lot more firefight. There would be a lot more shooting. Our job is to get them off the X. The X is what we refer to in our business about the preplanned ambush site where bad guys have planned to k** you. So our job is to get them away from that X, to get them to a safe place. So we can't stay and secure the terrorist crime scene investigation. Mr. Burton. You are in a war zone. Mr. Prince. Yes, sir. Mr. Burton. So, the instructions, I want to get this straight. If your people come under fire or there is a car bomb or RPG fired at them, they are supposed to turn around under some rules and get out of there to protect the people that they are guarding. Mr. Prince. Yes, sir, defensive fire, sufficient force to extricate ourselves from that dangerous situation. We are not there to achieve firepower dominance or to drive the insurgents back. We are there to get our package away from danger. Mr. Burton. Thank you. Chairman Waxman. The gentleman's time has expired. The Chair now recognizes Mr. Cummings for 5 minutes. Mr. Cummings. Mr. Prince, you are a very impressive witness. I just want to ask you a few questions that cause me some concern that seems to go counter to some of the things that you have said. I am wondering whether Blackwater is actually helping our military or hurting them. Frankly, I am concerned that the ordinary Iraqi may not be able to distinguish military actions from contractor actions. They view them all as American actions. Now I want to go back to this incident that we have been talking about for the last few minutes, the 2006 Christmas Eve incident where the drunken Blackwater official shot and k**ed a guard of the Iraqi Vice President, which is basically like k**ing a Secret Service person guarding our Vice President. When this incident first happened, an Arab television station ran an incorrect story, saying that a ``drunken U.S. soldier'' k**ed the Iraqi Vice President's guard. Were you aware of this incorrect press report? Mr. Prince. No, sir, I was not. Mr. Cummings. Of course, you can see how a media report like that makes it more likely that Iraqis will blame the U.S. military rather than Blackwater for the k**ing of the Iraqi Vice President's guard. Again, what if it were our Vice President? Did Blackwater take any steps to inform the press that it was actually a Blackwater employee who k**ed the Vice President's guard? Mr. Prince. By contract, we are not allowed to engage with the press. Mr. Cummings. All right, and why is that? Mr. Prince. That is part of the stipulations in the WPPS contract. Mr. Cummings. After this report aired, an official who works for you--and this is what really concerns me and I just want to know your reaction to this--at Blackwater sent an email. This is an employee of yours sent an email internally to some of his colleagues. He did not suggest contacting the station, I guess, for the reason you just said. He didn't suggest putting out a press release, and he didn't suggest correcting the false story in any way. Instead, this is what the email said: ``At least the ID of the shooter will take the heat off of us,'' meaning Blackwater. In other words, he was saying: Wow, everyone thinks it was the military and not Blackwater. What great news for us. What a silver lining. Mr. Prince, you said in your testimony that Blackwater is extremely proud of answering the call and supporting our country. Did anyone in your organization ever raise any concerns that a lying, a false story to continue might lead to retaliation or insurgent activity against our troops? Mr. Prince. I don't believe that false story lasted in the media for more than a few hours, sir. Mr. Cummings. But the fact still remains that it was a false story, and we are trying to be supportive of the Iraqi government, trying to get this reconciliation, trying to make sure that they, as President Bush says, that they stand up so that we can stand down. But, at the same time, when these stories are put out--I think you would agree--that the Iraqi people then say, well, wait a minute, the United States is supposed to be supporting our Government. President Bush talks about how we have gone over to export democracy. Here is the very symbol. The Vice President of a country, k**ed by a drunken Blackwater employee. The question is then what lies in the mind of the Iraqi? What lies in the minds of those people who may have wanted to cooperate with our security over there? Then they say, well, wait a minute, if they, U.S. soldiers, but really Blackwater is doing this to the very Government that we are supposed to be supporting. Then what does that say and why should we support the United States? Fair question? Mr. Prince. Yes, sir. Look, I am not going to make any apologies for the---- Mr. Cummings. I am not asking you to make any apologies. You are the president of this company, is that right? Mr. Prince. The CEO. Mr. Cummings. CEO, well, you are the top guy. You are one of the top guys, is that right? Mr. Prince. Pretty much, yes, sir. Mr. Cummings. All right. So I am just asking you a question about what your policies are. That is all. Mr. Prince. We have clear policies. Whether the guy was involved in a shooting that night or not, the fact that he violated the alcohol policy with firearms would have gotten him fired on the spot. That is why we fire people. We hold them independently accountable. The guy slipped away from the party. He was by himself. I am confident that if he had been with another guy from Blackwater, the other guy would have stopped him and said, enough. You know. Mr. Cummings. So contrary to what Mr. Burton said, this was after hours in the Green Zone, wasn't it? This wasn't some mission, was it? Mr. Prince. Correct. Mr. Cummings. Right. Mr. Prince. He was on his own time. It was a Christmas Eve party. Mr. Cummings. Do you understand what I mean? I have heard not a lot of complimentary things about what you all are doing. I am sure you are doing a great job, but it is not about what you do well. It is a question of when things go wrong, where is the accountability? Mr. Prince. And, sir, we fired him. We fined him. But we, as a private organization, can't do any more. We can't flog him. We can't incarcerate him. That is up to the Justice Department. We are not empowered to enforce U.S. law. Mr. Cummings. Do you think more should be done? Mr. Prince. I would be happy to see further investigation and prosecution by the Justice Department, yes, sir. Mr. Cummings. Thank you. Chairman Waxman. I am going to call Mr. Mica next. How much did you fine him? Mr. Prince. Multiple thousands of dollars, sir. I don't know the exact number, but whatever we had left due him in pay, I believe we withheld and plus his plane ticket. Chairman Waxman. Thank you. Mr. Mica. Mr. Mica. Thank you. Mr. Prince, in your testimony earlier, you said, ``k**ing Americans, I guess, in Iraq is big media.'' You said that? Mr. Prince. Yes, sir. Mr. Mica. Did you have any idea that wounding American contractors in a congressional hearing would be this big media? Mr. Prince. More than I bargained for, sir, yes. Mr. Mica. I described you are here because you are sort of in the chain of command to be attacked next by some folks who want to discredit what you are doing. I might say that I don't know if there were criminal acts committed, and there will probably be ways in which we can go after folks. One of those would be to have the Department of Justice pursue the case. Would that be the normal procedure? Mr. Prince. Yes, sir. We welcome it. We encourage it. We want that accountability. We hold ourselves internally accountable, but you know we put 1,000 guys out in the field. Humans make mistakes and they do stupid things sometimes. We try to catch those as much as we can, but if they go over the line. Mr. Mica. Well, they criticized you. I guess we could start with the pilots and the NTSB investigation. They should go back and look at the Comair crash in Kentucky with the accounts of the pilots which was a distraction and led to the crash according to their findings. I have chaired the Aviation Subcommittee and followed that very closely. Basically, as Al Gore would put it, there is no controlling authority for airspace in Afghanistan. Mr. Prince. There is no FAA in Afghanistan. Mr. Mica. Then you were criticized, too. You left the pilot. I guess he survived but was not found. Is that it? Mr. Prince. No. There were two of the DOD personnel in back survived the crash. Mr. Mica. Survived, OK. Well, two survived and weren't found, and I guess they perished. Mr. Prince. They perished before they were found. Mr. Mica. I guess in the United States, like we have an experienced pilot like Fossett. He is lost. Have we found him yet? Mr. Prince. No, sir. Mr. Mica. OK, but this is in the terrain. Mr. Prince. Terrain very similar to what is in Nevada. Mr. Mica. I just want to try to put things in perspective. There is also some argument that you cost the Government too much and that you are getting paid too much and maybe this is something that the military should be doing. Could you respond to that? Mr. Prince. Yes, sir. I think there are three arguments for or against privatization. There is reliability, there is accountability, and there is cost. Accountability issues can be handled by exercising MEJA. Congress expanded MEJA at the end of 2004 to any DOD contingency operation, I believe. So any time a U.S. contractor is abroad, they can be brought up on charges on behalf of the U.S. Government. They can be brought up on charges back here in the States. There is reliability. That comes down to, I think, individual vendor reliability. How well does that company execute? Are they complete, correct and on time? And then there is cost. The American automotive industry, any manufacturer in America has to deal with that cost issue all the time, whether they should make something. It is that make versus buy argument. I greatly encourage Congress to do some true activity-based cost studies. What do some of these basic Government functions really cost? Because I don't believe it is as simple as saying, well, this sergeant costs us this much because that sergeant doesn't show up there naked and untrained. There are a whole bunch of other costs that go into it. So, figure out if the Army does the job, how many of those people leave the wire every day? What is their tooth to tail ratio? How many people are operators versus how many people are support people? That all drives into what your total cost is. Now American industry got pushed by the Japanese car makers and you know by foreign competitors because you have to focus on cost and being efficient in delivering a good or a product or a service at a better competitive price. Mr. Mica. Finally, you were criticized for not detaining someone who committed a criminal act. Now if an employee commits a criminal act in the United States, and you fire him, are you responsible in the United States for detaining him and handling? Mr. Prince. Well, that would be a crime that we committed then because we are not allowed to detain. Mr. Mica. You are not allowed to detain? Mr. Prince. No, sir. Mr. Mica. OK. So, in that situation, you were criticized for providing someone transport back. Was it to the United States? Mr. Prince. It was. Mr. Mica. Or wherever. Mr. Prince. We acquired an airline ticket for him back to the States. That is all by direction of the State Department. Chairman Waxman. The gentleman's time has expired. Now the Chair recognizes Mr. Kucinich. Mr. Kucinich. Thank you very much, Mr. Chairman. In my opening remarks, I pointed out that if war is privatized, private contractors have a vested interest in keeping the war going. The longer the war goes on, the more money they make. I want to, for my time here, explore the questions regarding how Blackwater got its contracts. Mr. Prince, your company has undergone a staggering growth just over the past few years. The committee's attention can be directed to the chart. In 2000, your company was bringing in only about $200,000 in Government contracts but since then, according to the committee, you have skyrocketed to something in the nature of $1 billion in Government contracts. The real increase in Blackwater's contracts began with the Iraq War. In fact, if you look at the chart, you can see how from 2004 on, the amount of taxpayer dollars Blackwater was awarded by the administration began to go through the roof from about $48 million in 2004 to $350 million in 2005 to over $500 million last year. This is really an unprecedented rate of increase, and I want to understand how this happened, Mr. Prince. We have been informed that one of your first contracts in Iraq was for the Coalition Provisional Authority. Amba**ador Paul Bremer awarded you a contract to protect officials and dignitaries. That was at the end of 2003, toward the end of 2003. It may have been in August. Is that right, sir? Mr. Prince. I believe it happened right after the U.N. facility in Baghdad was blown up by a large truck bomb. Yes, sir, they then feared for the U.S. officials. Mr. Kucinich. Now that contract was no-bid, is that right, sir? Mr. Prince. It was off the GSA schedule. Mr. Kucinich. Can you tell us how you got this no-bid contract? Mr. Prince. Off the GSA schedule is considered a bid contract, sir. The GSA schedule is a pre-bid program kind of like catalogue of services that you put out, like buying something from the Sears catalog. Mr. Kucinich. Did you talk to anyone in the White House about the contract? Mr. Prince. No, sir. Mr. Kucinich. Did you talk to anyone in the Congress about the contract? Mr. Prince. No, sir. Mr. Kucinich. Did anyone, to your knowledge, connected with Blackwater talk to anyone in either the White House or the Congress about the contract? Mr. Prince. Not to my knowledge, no. Mr. Kucinich. Did anyone in the DeVos Family talk to anyone in the White House or the Congress about the contract? Mr. Prince. No. Mr. Kucinich. As a taxpayer, do you think it is proper that no other companies were allowed to bid? Mr. Prince. That, I am not aware of, sir. It is a requirement, Government officials had. They came to us, asked if it could be fulfilled. I don't know what other companies they went to as well. I am not aware of that. Mr. Kucinich. In 2004, the State Department awarded Blackwater a $332 million task order under its diplomatic protection contract. Are you familiar with that? Mr. Prince. I am familiar about the amount. I know that we transitioned over to working for the State Department from the CPA. I am not sure exactly when that happened. Mr. Kucinich. Thank you, sir. According to the Federal Contracting Data base, you didn't have to compete for that one either, is that correct? Mr. Prince. Again, I believe they continued that off the GSA schedule which is an approved contracting pre-bid method. Mr. Kucinich. Who at the State Department were you dealing with in order to get this contract? Mr. Prince. I don't know. I presume it was under the diplomat. Mr. Kucinich. Excuse me? Mr. Prince. It was under the Diplomatic Security Service. That is the folks at State we were working for. Mr. Kucinich. Now SIGIR reported that this was a no-bid contract. Was SIGIR incorrect? It was a no-bid contract or not? Mr. Prince. I am not sure how they are defining bid or no- bid. In my understanding, they used, we used pricing off the GSA schedule, and I believe that is considered, regarded as a biddable contract. Chairman Waxman. Will the gentleman yield to me? Mr. Kucinich. I yield to the Chair. Chairman Waxman. It is on the GSA schedule. Did they come to you to put your offer of services on the GSA schedule? Did you go to them? How did that get on the GSA schedule? Mr. Prince. Oh, most companies in our kind of work have a GSA schedule. We have a GSA schedule for target systems. We have a GSA schedule for---- Chairman Waxman. So you offered services and you are on the list of services that they can purchase? Mr. Prince. Yes, sir. Chairman Waxman. You don't know if anybody was on the list for these kinds of services? Mr. Prince. Oh, I am sure there are lots of companies that are. Chairman Waxman. For some of the services. Did you go to anyone else or did anyone else from the Government go to you to ask you to do the work? Mr. Prince. I don't know, sir. Chairman Waxman. Did they ask you to see if you could put together this operation and then they put you on the schedule? Mr. Prince. I would say we were present in the country already. We already had significant presence with the CPA under a bid contract. I believe that contract was called Security Services Iraq. So we had a large presence of static guards and PSD kind of work for them. So I think they probably just wanted to transition from DOD work to Department of State work. Chairman Waxman. Thank you. Mr. Shays. Mr. Shays. Thank you, Mr. Chairman. Mr. Chairman, I didn't make an opening statement. I was chairman of the National Security Subcommittee and ranking member, and so I have a keen interest in this issue, but other Members had important statements to make. So, first, I would like to make an observation. I want to align myself with the statement of Tom Davis, my ranking member now. I thought it adequately and perfectly expresses my view. I want to thank both the chairman and Mr. Davis for honoring U.S. Department of Justice's request not to discuss an incident we don't have enough facts to discuss, and we will deal with that later. I think that is responsible. I think this hearing, the way we are dealing with it, is a very important effort, given what we are doing. Now, saying that, during the Vietnam War, I was a conscientious objector. I was a Peace Corps volunteer, so I try to be very careful when I evaluate the performance of men and women under fire. Frankly, many of those behind you at this desk are exactly that. We are behind a desk, never been shot at, never tried to understand what it is like to be under fire. Blackwater, I want to say, has a reputation of being a bit of a cowboy, but I know we absolutely need protective security contractors. The role of security contractors is much different than the role of the military. But I also want to say that I feel that the State Department could do a better job of enforcing and holding contractors accountable, and I think they are going to make a point that they are willing to have this reviewed by an outside party and then have us look at it. Now, saying that, I also want to say the number of times that you all have to protect Members of Congress is infinitesimal compared to all the civilians you have to protect. One of the outrages, in my judgment, is that there haven't been more Members who have gone there and, frankly, that some Members who have never been there are pa**ing judgment on what we are doing there. They are behind a desk with no sense of what is happening there. I am in awe of what your men and women and they have been mostly men, have done to protect our civilians. I am absolutely in awe of it. You know you can't be perfect, but in one way you have been perfect if this is true. Tell me, from June 2004 to the end of that year, how many missions you protected or let me say it this way, if you don't know how many missions you protected, how many people you protected were wounded or k**ed in 2004? Mr. Prince. No, sir, we have never had anyone seriously injured. Mr. Shays. I am going to do year by year. Did you have anyone wounded or k**ed in 2004? Mr. Prince. No, sir. Mr. Shays. Did you have anybody wounded or k**ed in 2005? Mr. Prince. No, sir. Mr. Shays. These are the people you are trying to protect. Mr. Prince. I mean wounded, yeah. A big IED ruptured an eardrum. That is the most serious level there. Mr. Shays. Did you have anyone wounded or k**ed in 2006? Mr. Prince. People that we were protecting? Mr. Shays. Yes. Mr. Prince. No. Mr. Shays. Did you have anyone who was wounded or k**ed in 2007 that you were to protect? Mr. Prince. No, sir. Mr. Shays. That is a perfect record, and you don't get any credit for it for some reason. Now, were any of your people k**ed in 2004, trying to protect the civilians? Mr. Prince. Yes, sir. Mr. Shays. Were any of your people k**ed in 2005, trying to protect civilians? Mr. Prince. Yes, sir. Mr. Shays. Were any of your people k**ed in 2006, trying to protect civilians? Mr. Prince. Yes, sir. Mr. Shays. Were any of your people k**ed by trying to protect the civilians in 2007? Mr. Prince. Yes, sir. Mr. Shays. Every year, you have had men who have risked their lives and who have been k**ed, fulfilling their mission, and they have succeeded 100 percent, and I just want to be on record as thanking you for an amazing job that you do. I have been to Iraq 18 times. I have been outside the umbrella four times. It is one dangerous place. I have seen films where vehicles come up to our troops or to our security people, and they are blown up in it. You have done an amazing task, and there is a huge difference from being a police officer or protective and being the military, a totally different role. I have had no one in the military say to me, I want to guard all these civilians. The last thing you want is to have humvees and Army take civilians who are meeting other civilians like our State Department with that kind of precedent, and the military would not do it. They are not going to be in a Suburban. They are going to be in what their protocol requires. The protocol is totally different. We need security people who do their job. Thank you for doing a perfect job in protecting the people you are required to protect. I yield back. Mr. Prince. Thank you, sir. It is an honor to do the work. Chairman Waxman. The gentleman's time has expired. Before I recognize Mr. Davis, I want to put in the record, a statement from the Special Inspector General in Iraq from July 2004, that indicates that the security guards and two helicopters for Bremer, sole source directed; the security for inner ring Republican Presidential compound, Al Rashid Hotel, sole source; the security for Al-Rashid Hotel, sole source to Blackwater. Mr. Shays. I reserve my right to object. Would the gentleman say was that under Bremer or after Bremer? Chairman Waxman. This is in 2004. It would have been Bremer. Mr. Shays. So it was under Bremer, not since we transferred power to the Iraqis. Chairman Waxman. I don't know the answer to that. This document only refers to the period of time. Mr. Shays. Under Mr. Bremer. I don't object. [The information referred to follows:] [GRAPHIC] [TIFF OMITTED] T5219.036 Mr. Ryan. Mr. Chairman, may I have minute, please? May I have a minute, please? One minute, please? Chairman Waxman. Yes. Mr. Prince. Thank you, sir. Chairman Waxman. Thank you. Mr. Davis. Mr. Davis of Illinois. Thank you, Mr. Chairman. Mr. Prince, throughout your testimony and in other comments attributed to you, you have praised the Blackwater personnel on the ground in Iraq, but mistakes do, in fact, happen. You do admit that Blackwater personnel have shot and k**ed innocent civilians, don't you? Mr. Prince. No, sir. I disagree with that. I think there have been times when guys are using defensive force to protect themselves, to protect the package they are trying to get away from danger. There could be ricochets. There are traffic accidents. Yes. This is war. You know since 2005, we have conducted in excess of 16,000 missions in Iraq and 195 incidences with weapons discharged. In that time, did a ricochet hurt or k** an innocent person? That is entirely possible. Again, we do not have the luxury of staying behind to do that terrorist crime scene investigation to figure out what happened. Mr. Davis of Illinois. Well, according to a document we obtained from the State Department on June 25, 2005, Blackwater guards shot and k**ed an innocent man who was standing by the side of the street. His d**h left six children alone with no one to provide them support. Are you familiar with this incident? Mr. Prince. I am somewhat familiar with that incident. I believe what happened, it was a car bomb or a potential car bomb had rapidly approached our convoy. I believe our guys shot rounds at the car, not at the driver, to warn them off. One of those rounds, as I understand, penetrated through the far side of the car, ricocheted and injured that innocent or k**ed that innocent man. Mr. Davis of Illinois. Well, again, according to the State Department document, this was a case, ``involving the PSD personnel who failed to report the shooting, covered it up and subsequently were removed from Al-Hillah.'' The State Department described the d**h as ``the random d**h of an innocent Iraqi.'' Do you know why Blackwater officials failed to report this shooting and later tried to cover it up? Mr. Prince. I can clarify that fully, sir. Thanks for asking that question. There was no cover-up because our people reported it to the State Department. They did look into the shooting and the justification of it, and it was deemed to be an appropriate use of force. The man was fired because he had tried to cover it up. He panicked and had asked the other team members to cover it up and to not report it. We discovered that through our, I mean our policy worked. We reported the incident to the State Department, and that is why you folks have it in the committee because we fired the guy. He was terminated not for an inappropriate shooting but for not following the reporting procedure. Mr. Davis of Illinois. Well, was there any reason this report was not provided to the committee? Mr. Prince. I don't know, sir. I will have to. I will look into that and get back to you. Mr. Davis of Illinois. Well, the same document states that the State Department contacted Blackwater headquarters to encourage you to offer this man's family, compensation. After this shooting of an innocent man and after the attempted cover- up, Blackwater paid $5,000 to the family. Is that not correct? Mr. Prince. I believe that was paid through the State Department. That is similar to what DOD does, what the Army does if there is an accidental d**h from whether it is an aerial bomb, a tank backs over somebody's car or injures someone. There is compensation paid to try to make amends, but that was done through the State Department. That was not paid to try to hush it up or cover it up. That is part of the regular course of action. There was no cover-up because our guys reported the incident, and the company fired him for not reporting the incident. Mr. Davis of Illinois. Can you tell me how it was determined that this man's life was worth $5,000? Mr. Prince. We don't determine that value, sir. That is kind of an Iraqi-wide policy. We don't make that one. Mr. Davis of Illinois. Do you know how many payments Blackwater has made to compensate innocent Iraqis or their families for d**hs or injuries caused by Blackwater personnel? Mr. Prince. I do not know that, sir. Mr. Davis of Illinois. Do you know what the total value of those payments might be? Mr. Prince. No, sir. Mr. Davis of Illinois. Could you supply the committee with that information? Mr. Prince. Yes, sir. I will make sure we get it back to you. Mr. Davis of Illinois. Thank you very much. Mr. Chairman, what I am concerned about is the lack of accountability. If one of our soldiers shoots an innocent Iraqi, he or she can face a military court martial. But when a Blackwater guard does this, the State Department helps arrange a payout to make the problem go away. This seems to be a double standard, and it is causing all kinds of problems in Iraq. Chairman Waxman. The gentleman's time has expired. Mr. Platts. Mr. Platts. Thank you, Mr. Chairman. I appreciate your holding this hearing. Mr. Prince, I appreciate your testimony and want to thank you personally for your 5 years of service to our Nation as a Navy SEAL and also, having been to Iraq five times, for the dedication of your colleagues for delegations I have been part of and certainly many others as well. We are grateful for their courageous service. Your contract, and it has been discussed already, is under the Worldwide Personal Protective Services Contract. My understanding is under that contract, there are specific terms of conduct including rules of engagement with the use of force. Is that correct? Mr. Prince. Yes, sir, that is correct. Mr. Platts. You testified about, as an example of the seriousness with which your company takes the conduct of your employees, of 122 individuals that have been fired for misconduct. Are you able to give us what number of those were related to violations regarding use of force rules of engagement, specifically? Mr. Prince. I believe the committee report listed it. Don't quote me on it. I think it says in the committee report around 10 or 15. I am not sure. It is in the committee report. Mr. Platts. You accept that information as accurate? Mr. Prince. That is a weapons violation. That could mean a dirty gun or possession of some unauthorized firearm. We have very clear rules. We are only issued. The Government issues us our weapons, even down to scopes. We are specified as to which optical device we can put on the weapon. Some guys get fired because they put, they like an aimpoint instead of an ACOG. Mr. Platts. Of those 10 to 15, they may not all be related to use of force, misuse of force. Mr. Prince. Yes, sir, correct. Mr. Platts. A number of times you were asked about in addition to firing and fining and removing the person from your employment and from Iraq, about what criminal actions you took, and you appropriately stated you are not a law enforcement entity. You are a private company. That being said, though, is it accurate to say that where there is a criminal investigation by the Department of Justice of Department of State pursuing, that you provide any information that your company has about misconduct? Mr. Prince. Yes, we fully cooperate in the Christmas Eve incident and any other ones that State Department or Justice Department wants to look at. Mr. Platts. Thank you, Mr. Chairman. That is all of my questions. Again, my thanks to Mr. Prince and his colleagues for their service. Chairman Waxman. Would the gentleman yield some of his time to me? Mr. Platts. Yes, Mr. Chairman. Chairman Waxman. Thank you. The point I want to ask you, Mr. Prince, is we appreciate what you have done, but it looks like a lot of people in the U.S. military don't appreciate it. One man, an Army colonel, Teddy Spain, said, ``I personally was concerned about any of the civilians running around on the battlefield during my time there. My main concern is with their lack of accountability when things went wrong.'' Another senior U.S. military official said, ``We had guys who saw the aftermath,'' meaning the aftermath of your activities there. ``It was very bad. This is going to hurt us badly.'' Then we had Secretary of Defense Robert Gates: ``These incidents may be uncommon. We don't know how common they are, but let's a**ume that they are uncommon. I believe that they still have disproportionate impact on the Iraqi people. We have people who are conducting themselves in a way that makes them an a**et in this war, not a liability.'' You are not answerable to the U.S. military, are you? You report to the State Department? You are under contract with State, isn't that right? Mr. Prince. In Iraq, we report to the State Department, but if I could just add. Chairman Waxman. So your people are under the same rules as the U.S. military. Mr. Prince. We operate under defensive rules of engagement. Mr. Davis of Virginia. Will the gentleman yield? Mr. Platts. Actually, Mr. Chairman, if I could reclaim my time in responding. Mr. Prince, you provided the committee a detailed list of the regulations, treaties, laws that you operate under, is that correct? Mr. Prince. Yes, sir. Mr. Platts. That includes items that relate to both Department of State and Department of Defense? Mr. Prince. It includes laws like MEJA, the UCMJ, all of which we can be held accountable. Our people can be held accountable for while operating overseas. Let me just ask, answer, Mr. Chairman, about whether we are adding value to the military or not. I have to say my proudest professional moment was about a year and a half ago. I spoke at the National War College. After my speech, a colonel, a full bird colonel, came up to me afterwards. He said, I just came back from brigade command in Baghdad, and he had 4,000 or 5,000 guys working for him. He said, as his guys were driving around the city, on the top of their dashboards of their humvees were the Blackwater call signs and the frequencies because his soldiers knew that if they got in trouble, the Blackwater guys would come for them. They would come to their aid and a**ist them, med evac them and help them out of a tough spot. So if that is the reputation we have, I---- Chairman Waxman. The Brigadier General Karl Horst said, ``These guys run loose in this country and do stupid stuff.'' Mr. Platts. Mr. Chairman. Chairman Waxman. ``There is no authority over them, so you can't come down on them when they escalate force.'' Mr. Platts. Mr. Chairman. Chairman Waxman. ``They shoot people, and someone else has to deal with the aftermath. It happens all over the place.'' Security contractors in Iraq are under scrutiny after shootings. What do you say? Mr. Prince. Sir, I can also tell you there is 170-some security companies operating through Iraq. We get painted with a very broad brush of a lot of the stuff they do. On almost weekly basis, we get a contact from someone in DOD, some talk somewhere that says, oh, three Blackwater guys were just taken hostage here. Four guys were k**ed there. Oh, you were involved in a shooting over here. When we fully investigate, we didn't have any teams of guys within 100 miles of that location, but if a private security contractor did it, it often gets attributed to us. Chairman Waxman. Regardless of what private security contractor does it, it is a problem for the United States. Mr. Platts, you were kind enough to yield me time. Without objection, I would like to give to you another 30 seconds. Mr. Platts. If you could, I was going to yield to the ranking member. Thank you, Mr. Chairman. Mr. Davis of Virginia. I appreciate your questions, but let me just say, Mr. Chairman, for the sake of argument, you are right. If we are paying too much and getting too little, what is the answer? More troops in Iraq? Less safe troops? Less safe diplomats or less safe Members? I mean this is the tradeoff. This is what we are trying to explore here. They are contractors. At the end of the day, we have to look to the Government who is contracting this out, putting down the rules of engagement, and they will be on our next panel. He is just performing his contract at this point, and I think we have questions that we can ask the State Department. But the alternatives, none of them are attractive when you are in a war zone. Chairman Waxman. The gentleman's time has expired. Mr. Tierney. Mr. Tierney. Thank you, Mr. Chairman. Mr. Ryan. Mr. Chairman, may I have 1 minute, please? We do not need to leave. One minute, please. Chairman Waxman. Yes, go ahead. Mr. Ryan. Thank you. Chairman Waxman. Without objection, I would like to ask that Mr. Davis and I, during this moment, have a minute each because I would like to say something that doesn't involve a question and you might want to respond to it. The point I want to make, you raise that very essential question, what do we do if we don't have enough troops there? Well, I think we have to look at the fact that this isn't a short term war. We have been there 5 years. It looks like we may be there another 10 years. Even General Shinseki said we need more troops. At some point, you have to make a decision in this battlefield, in this war. If we don't have enough troops to do the job, then we should get more troops. But if we are going to go on the cheap to get private contractors, we are not on the cheap at all. It is costing us more money, and I believe it is costing us problems, causing us problems with the Iraqi people. Let's let the military replan this. It seems to me we have had bad decisions from this administration too much of the time in handling this whole war, planning for it adequately and staffing it adequately with the U.S. military. They are the ones that ought to be doing this job. Mr. Davis. Mr. Davis of Virginia. Mr. Chairman, I understand, but let me just say troops that are there are not paid to protect civilians. That is not what military troops are trained for. I went through officer basic course in Georgia at Fort Benning. I went through basic training at Fort Ord. That is not what troops are trained for when they go out into the battle zone. This is a unique responsibility. It is through the State Department, not the Department of Defense. As we will hear from the next panel, our troops are not, at this point, being trained to do this kind of work. This is a different kind of process. Now if we want to train them to do that, we can do that, but that hasn't been the history throughout the last 50 years of the military that I am aware of. So we then have to decide from a cost-benefit perspective. I think this is an important conversation to have, but to date that is not the contractors' fault. I think our argument would be with the State Department. Chairman Waxman. I want to yield to Mr. Tierney, but Blackwater and the private military recruit from our military. So these people are trained to the job that Blackwater and other private military people are asking them to do. So why can't the military do it? I think they could do it if we had enough military personnel. Mr. Davis of Virginia. Sir, I would like Mr. Prince to respond, but I am sure they retrain them. They don't just take raw recruits out. Could I just ask him to respond? Mr. Prince. Yes, sir. There was an earlier allegation about companies like us raiding the ranks of the Special Operations community for this kind of work, and the GAO report found that, yes, they are getting out and working for companies like us, but they are not getting out at any higher rate than they ever did before. So, they are, instead of becoming a financial an*lyst or an accountant or some other kind of businessmen, they come to work for companies like Blackwater, but they are not getting out at any rate higher than they ever did before. If I could just correct two slight errors I made. We did not have any fatalities of Blackwater personnel in 2006. One of the contracts I testified to as being under the GSA schedule was, in fact, sole source. We will get you the very detailed information as to which contracts were GSA and which were sole source. I am not qualified to answer that right now. Chairman Waxman. Thank you. We will receive any documents you have. Mr. Davis of Virginia. Mr. Chairman, if I could just have a minute. I think that one of the things we want to get to in this and later hearings is if the mission is going to be 4 or 5 or 6 years, do you want to change the mission of the military, but that is not the contractors' fault. Our argument there is with the Defense Department and the State Department. Mr. Prince. I strongly encourage the Congress to sponsor true activity-based cost studies. What does it cost the Air Force to move a pound of cargo in a war zone? What does it cost to put a brigade in the field or train it and to equip it? All these basic functions, even what is the hourly cost of aircraft doing refueling? Chairman Waxman. We are going to have you answer some more questions, I am sure, along those lines. Mr. Tierney, it is your turn. Mr. Tierney. Are you certain, Mr. Chairman? Thank you. Mr. Prince, thank you for being here today. We have been discussing a little bit here about the goal of this particular venture here. I think that General Petraeus has been pretty clear that he would like to change it from the type of war it has been to one where he wants to defeat insurgents, and that entails, in significant part, winning the hearts and minds. So I want to read to you this quote: ``Counterinsurgents that use excessive force to limit short term risk alienate the local populace. They deprive themselves of support or tolerance of the people. This situation is what insurgents want. It increases the threat they pose.'' Do you know who made that statement? Mr. Prince. Do I know who made that statement? Mr. Tierney. Yes. Mr. Prince. No, sir. Mr. Tierney. That was General Petraeus. You know he was the one who wrote the official counterinsurgency manual. It does appear from some of the evidence here, though, that Blackwater and other companies, sometimes at least, conduct their missions in ways that lead exactly in the opposite direction that General Petraeus wants to go, but that doesn't mean you are not fulfilling your contractual obligations. In a recent report, there was a quote from Ann Exline Starr who is a former Coalition Provisional Authority Advisor. She talks about the fact that the private mission is different from the overall public operation. ``Those, for example, doing escort duty are going to be judged by their bosses solely on whether they get their client from point A to point B, not whether they win Iraqi hearts and minds along the way.'' She goes on to talk about the fact that soldiers, when they escorted her because they are able to escort people in training for that, often times also interacted with the Iraqi community and did things to ingratiate themselves to the Iraqis. The contractors, by contrast, focused only on the contract. She said what they told her was our mission is to protect the principal at all cost. If that means pissing off the Iraqis, too bad, her language, not mine. Another counterinsurgency expert is Army Colonel Peter Mansoor. Earlier this year, he made a statement about private military contractors, and he said, ``If they push traffic off the roads or if they shoot up a car that looks suspicious, they may be operating within their contract, but it is to the detriment of the mission which is to bring people over to our side.'' So when we look at Blackwater's own records that show that you regularly move traffic off the roads and you shoot up cars in over 160 incidents of firing on suspicious cars, we can see, I think, why the tactics you use in carrying out your contract might mitigate against what we are trying to do in the insurgency. Retired Army officer, actually, he is a conservative an*lyst now, Ralph Peters. He was more blunt about it. He said, ``Armed contractors do harm COIN, counterinsurgency efforts. Just ask the troops in Iraq.'' We have had complaints from military leaders over and over again that the ways that some contractors operate in Iraq are causing danger and anger against the U.S. forces. Let me give you one example. For most of 2005, the Army's Third Infantry Division was in charge of security in Baghdad. Here is what the deputy commander of this division, Brigadier General Karl Horst, said about Blackwater and other private military contractors: ``These guys run loose in this country and do stupid stuff. There is no authority over them, so you can't come down on them when they escalate force. They shoot people, and someone else has to deal with the aftermath. It happens all over the place.'' Are you familiar with General Horst, sir? Mr. Prince. No, sir. I have never met him. Mr. Tierney. Well, here is what Colonel Hammes said when he was an officer in Iraq. He said, ``The problem is in protecting the principal, they had to be very aggressive and each time they went out, they had to offend locals, forcing them to the side of the road, being overpowering and intimidating, at times running vehicles off the road, making enemies each time they went out.'' So they were actually getting our contract exactly as we asked them to, at the same time hurting our counterinsurgency effort. This goes on again back to Colonel Peter Mansoor who said, ``I would much rather see basically all armed entities in a counterinsurgency operation fall under the military chain of command.'' The CENTCOM Commander, Admiral James Fallon, who we all know now for his current work, his quote is: ``My instinct is that it is easier and better if they were in uniform and working for me.'' Can you see and appreciate, Mr. Prince, why there might be some contradiction between what we are asking your organization and others like it to do under the contract as opposed to what we are trying to do as a military force in counterinsurgency? Mr. Prince. Sir, I understand the challenges that the military faces there. Like I said before, there is 170 some companies doing business in Iraq. Most of those security contractors are DOD. I think the DOD officers would even complain about their lack of reach over their own DOD Corps of Engineers, MNSTC-I type contractors. Second, we know we are part of the total force in trying to get the mission accomplished. Of the 16,000 missions our guys have done, only 195 resulted in any kind of discharge of a weapon. That is less than 1 percent. So we strive for perfection, but we don't get to choose when the bad guys attack us. You know the bad guys have figured out. The terrorists have figured out how to make a precision weapon with a car loaded with explosives with a suicidal driver. Mr. Tierney. Just to interrupt you for a second, you are not a**erting that every time that you take affirmative action it was somebody firing at you first. You do acknowledge that, on some occasions at least, it was a preventive act on your part of your people. Mr. Prince. Yes, sir, but this is what happens when our guys are not able to prevent a suicide car bomb. This happened. This blew up three Blackwater personnel and one State Department security officer up in Mosul. It tossed a 9,000 pound armored Suburban 50 feet into the side of a building, followed by a whole bunch of small arms fire from the rooftops, a very serious ambush, k**ed four Americans that fast. Mr. Tierney. My question was that you are not disputing the fact that on some occasions when your people might be afraid that something like that is going to happen, that they may fire first, ask questions later. Mr. Prince. Sir, like I said the bad guys have made a precision weapon. The Air Force has a system called a DIRCM, Directional Infrared Countermeasures. It is used to break the lock of an incoming surface to air missile. It shines a laser in the seeker head. The missile breaks lock, and it veers away. We have to go through a use of force continuum to try to break the lock of this potential deadly suicide weapon: hand and arm signals, sirens, signs at the back of the vehicles, water bottles, pen flares, shots to the radiator, shots to the windshield before we even go to a lethal force option. So our guys do go through it, but they---- Mr. Tierney. Well, some of the evidence indicates that---- Chairman Waxman. The gentleman's time has expired. Mr. Tierney. Mr. Waxman, I would like to just finish up my thought if I might. I think there has been fairly good estimation on the part of the committee here. Chairman Waxman. If you can do it in seconds rather than minutes. Mr. Tierney. Thank you. The point being made is that there are instances--you are not denying--when people shoot first on that. When you multiply that by the number of times it happens and the number of people and Iraqis, that are implicated in those situations, the number of people that they tell, it goes against our counterinsurgency effort and it goes to the issue of whether or not we ought to have military personnel doing the job, whether this is an inherently Government function that we ought to have done on the public side of it as opposed to having contractors who, by what we are seeing here today, really don't have much accountability being exercised over them by either the State Department or the Department of Defense. I yield back, Mr. Chairman. Chairman Waxman. The gentleman yields back the rest of his time. The Chair now recognizes Mr. Duncan. Mr. Duncan. Thank you, Mr. Chairman. Mr. Burton. Excuse me, Mr. Chairman. Mr. Prince, did you want to respond to what was said? Chairman Waxman. That wasn't a question. That was a statement by the Member. Mr. Burton. Well, I know, but when an allegation. Chairman Waxman. Mr. Duncan is recognized. Mr. Burton. Mr. Chairman, when an allegation is made. Chairman Waxman. Mr. Duncan is recognized. You are using his time. Mr. Prince. I will get it, Mr. Burton. It is all right. Mr. Duncan. Thank you, Mr. Chairman. The Washington Post reported yesterday. It said Army General David H. Petraeus, the top U.S. Commander in Baghdad, overseeing more than 160,000 troops, makes roughly $180,000 a year or some $493 a day. That comes out to less than half the fee charged by Blackwater for its senior manager of a 34-man security team. Our committee memorandum says using Blackwater instead of U.S. troops to protect emba**y officials is expensive. That is putting it lightly. Blackwater charges the Government $1,222 per day for the services of a private military contractor. This is equivalent to $445,000 per year, over six times more than the cost of an equivalent U.S. soldier. This war has produced some of the most lavish, most fiscally excessive and most exorbitantly profitable contracts in the history of the world. It seems to me that fiscal conservatives should feel no obligation to defend this type of contracting. In fact, it seems to me that fiscal conservatives should be the ones most horrified by this. I notice in the table that Blackwater's contracting has gone from $25 million in 2003, $48 million in 2004, to $593 million in 2006. If we are going to be there another 10 years, as some have said, I surely hope that we are not going to continue to see these types of ridiculously excessive increases in the contracts that are being handed out. I also notice that Blackwater is a subsidiary of the Prince Group, of Prince Group Holdings and that another one of the holdings of that firm is Presidential Airways, an aviation company that has held a contract with the U.S. Air Force Air Mobility Command. Mr. Prince, can you tell me what percentage of Prince Group Holdings comes from Federal contracts of all or any types? Mr. Prince. Could you say the question again, sir? I didn't quite hear you. Mr. Duncan. Can you tell me? I don't know all the companies that are in your Prince Group Holdings. Apparently, there is a Presidential Airways. I don't know how many other companies there are. What I am wondering about is how much of Prince Group Holdings comes from Federal contracts of any and all types? Mr. Prince. Most of Prince Group Holdings comes from Federal contracts, but if I could just come back and answer your statement about prices that we charge, that $1,222. Mr. Duncan. When you say most, does that mean 100 percent? Mr. Prince. No. Mr. Duncan. Rough guess, what percentage? Mr. Prince. Rough guess, 90 percent. Mr. Duncan. Do you still have a contract with Presidential Airways with Air Force Mobility Command? Mr. Prince. Yes, sir. Mr. Duncan. Rough guess, how much is that contract each year? Mr. Prince. I don't know what the exact number is, sir. It is for eight aircraft right now. I don't know what they price out at. Mr. Duncan. What other companies are in Prince Group Holdings? Mr. Prince. There is a long list. I have a manufacturing business that has nothing to do with Federal stuff, and we make pieces and parts for automotive, appliance, industrial, power. We compete with the likes of the Japanese and Koreans and European companies every day. Mr. Duncan. All right. Mr. Prince. But if I could just answer the question about how much we charge, those are competitively bid prices. The $1,222 cited in the report is not accurate. You also, the committee should have received this. I don't know if you have seen that. It lays out base year bill rates for an average security guy. Base year is $981, not $1,222, and our profit on that, projected to be 10.4 percent, nothing higher. And on top of that, I can tell you we have three helicopters that have been shot down this year, a Little Bird and two Bell 412s. Those are company helicopters, and when they go down that comes out of our hide. We have to self-insure on those. So the risks we take, the financial risks, whenever an aircraft is doing a mission for the State Department or responding to some med evac need, above and beyond the statement of our contract, trying to pull a U.S. soldier out of bad, wounded situation, we take that risk as a company, and our guys do themselves at great personal peril. So it is not just about the money. We are a business. We try to be efficient and excellent and deliver a good service. We are happy to have that argument, sir, not the argument, the discussion. Sponsor an activity-based cost study. What would it cost the Diplomatic Security Service to bring all those folks in house as staff? Look at it. We are happy to have that argument. If the Government doesn't want us to do this, we will go do something else, but there is plenty of case to be made and plenty of spreadsheets to be an*lyzed. Chairman Waxman. The gentleman's time has expired. The Chair now recognizes Mr. Clay. Mr. Clay. Thank you, Mr. Chairman. Mr. Prince, I am truly disturbed by reports of Blackwater contractors wreaking havoc on innocent Iraqi citizens. I am equally troubled that taxpayers have been taken for a ride by paying six times the cost of a U.S. soldier for Blackwater contractors. Now, Mr. Prince, you have argued that Blackwater provides a cost-effective service to the U.S. Government in part because by hiring private contractors the Government can avoid paying carrying costs such as training, salaries and benefits. Yet, in your written testimony, you state that Blackwater personnel are all military veterans and law enforcement veterans, many of whom had recent military deployments. Since so many of your employees have recently left Government service, doesn't that mean they have received years of specialized training at the expense of the Federal Government? Mr. Prince. People serve the U.S. Government for different periods of time, and that is a choice they make and have been making since the United States has had a standing military. They serve for 4 years. They serve for six. They serve for 20 or 30. Mr. Clay. So the U.S. taxpayers are paying for that training. Mr. Prince. They are paying for that anyway. We provide a vehicle, a mechanism for the U.S. Government to utilize that sunk cost that they have put into the training for these people. We reorganize it and package in a way to fill these gaps that the U.S. Government has in these kinds of contingency operations. To stand up a 1,000-man or actually you need a 3,000-man, at least, military police brigade to do this kind of work because for every person that is deployed, they are going to have two more back stateside, one in training and one in standdown. So you spin that meter, and the costs get big very quickly. So we are just reorganizing those sk**s that the Government has already paid for and putting them back to work. Mr. Clay. Last week, Defense Secretary Robert Gates expressed concern that Blackwater and other private military contractors are actually poaching the military's ranks, luring service members away with much higher salaries. When Secretary Gates testified before the Senate Appropriations Committee, he said he asked Pentagon officials to work on drafting non-compete clauses in order to put some limits on the ability of these contractors to lure highly trained soldiers out of our forces to go and work for them. How do you feel about non-compete clauses, Mr. Prince? Mr. Prince. I think that would be fine, but the fact is everyone that joins the military doesn't necessarily serve 20 years. So, at some point, they are going to get out after four, six, eight, whatever that period of time is, whatever they decide because we don't have a draft. We have a voluntary service. I think it would be upsetting to a lot of soldiers if they didn't have the ability to go use the sk**s that they have accumulated in the military to go work in the private sector because you could make the same case about aviation mechanics, jet engine mechanics, guys that work on a reactor on a submarine. All those sk**s have direct correlation to the private sector. I don't think putting in non-competes for them would do well to draw guys into the military in the front side either. Again, the GAO study found that the Special Operations community, yes, folks are getting out and they go to MBA school. They become some other private sector job. Yes, a lot of them come to work for companies like us but not at any higher rate than they ever did before. Mr. Clay. Well, I mean if the Pentagon adopts the non- compete clause, it certainly indicates to me that the Secretary is really concerned about you all poaching on our service personnel, and that is what it indicates to me. Let me also say to the viewers of C-SPAN today. This Congress, some in this Congress and the administration seem to be steeped in hypocrisy as far as taking these frequent flies to the Green Zone in Baghdad. When you look, they are some of the same ones who would never lift a rifle to defend this country in Vietnam but yet ridicule and criticize those who have not traveled to Baghdad. I just want the American public to be aware that some in here are steeped in hypocrisy. I yield back my time, Mr. Chairman. Chairman Waxman. The gentleman's time has concluded. The gentleman from Idaho, Mr. Simpson. Mr. Turner. Thank you, Mr. Chairman. I come from Ohio, and Ohio is known frequently as the Heartland, and in the Heartland there are a few things that are easy that are not so easy in Washington, DC. Even in Hollywood, some of these things are easy, and those are the issues of who is on our team and who is on their team. Today, I am a little saddened by this hearing because I am absolutely a supporter of congressional oversight and believe this committee has incredible functions that we have to do. Our witness today even talked about being a contractor, the questions that we should be asking of reliability, accountability, cost. A lot of the information we have before us is about dollars, rules of engagement and the like. But what unfortunately dissolves into our team versus their team, by any account, by Hollywood's account, by the performance account, Blackwater is our team. They are our team working in the trenches and in a war zone. I haven't heard many questions on this committee about the rules of engagement or the limits on the work of Al-Qaeda or the insurgents. In fact, I don't recall one hearing in this committee where there has been indignation or troubling responses as a result of the senseless and heartless k**ings of Al-Qaeda and the insurgents, but I hear today huge concerns over what we must exert as oversight on Blackwater. I think it crosses the line between our team and their team. Blackwater has questions to answer, and I believe that they are prepared to do that and today have come forward to do those things, but we should not go to the extent of undermining Blackwater's ability to perform as our team. The Washington Post today, in its editorial in reviewing how this issue has come to light, stated, ``Congressional Democrats despise the firm because it symbolizes the private contracting of military missions that many oppose in principle.'' This is the Washington Post saying that the congressional Democrats are despising this firm because of its engagement in military missions that they oppose. The Washington Post goes on to say, ``At the same time, it is foolish''--that is a pretty strong word for the Washington Post. ``At the same time, it is foolish to propose the elimination of private security firms in Iraq and Afghanistan, at least in the short term.'' I would hope as we continue our important functions of oversight that we don't undermine our team. Now, Mr. Chairman, you made a comment that I have to respond to in your opening statement. It is written in your opening statement, and it says, ``As a general rule, children from wealthy and politically connected families no longer serve in the military.'' Mr. Chairman, that is an attack on our team. I can tell you that Duncan Hunter, former chairman of the Armed Services Committee, currently ranking member, whose son served in Iraq, would disagree with you. Joe Wilson with the Armed Services Committee, whose son served, would disagree with you. I can tell you that the DOD in its report on social representation in the U.S. military services and the GAO in their September 22, 2005 report would disagree with you. Quoting from the DOD report, it says, ``Our Population Representation Report shows both a diversity and quality of the total force. Men and women of various racial and ethnic groups, of divergent backgrounds, from every State in our country serve as active and selective reserve, enlisted members and officers of the Army, Navy and Marine Corps and Air Force and Coast Guard. ``One particular note, the mean cognitive ability and educational levels of these Soldiers, Sailors, Marines, Airmen and Coast Guardsmen are above the average of comparatively aged U.S. citizens.'' The GAO, in their report, similarly confirms that between 1974 and 2000, the force became older and better educated. So I would hope that the comments by the chairman are not interpreted as what I heard them as, as diminishing the abilities and the backgrounds of those who serve in our military. Mr. Prince, my question for you, you are free of some of the limiting acquisition rules that our military is subject to. A general has a different ability to be able to acquire something as you do corporately. Could you give us some insight as to how our acquisition rules inhibit our military in performing some of the things that you do and ways in which we can change those acquisition rules to deliver to them the things that they need? Mr. Prince. Thanks for that question. I would say we find that the requirements process for the military constantly looks for the 120 percent solution, and it overspecs the electronic capability. I mean there is an enormous amount of extra stuff and capability put on a vehicle that might not be necessary to just fulfill that job. I mean if you are going to, you could almost buy vehicles just planned on for Iraq right now, almost off the shelf, without having to plan about net-centric warfare and all the other bells and whistles that sometimes the DOD wants to put on things. So we buy to solve the situation at hand. Chairman Waxman. The gentleman's time has expired. I want to apologize to the gentleman for indicating that he is from a different State than Ohio. He is a proud Ohioan, and I certainly want to agree with him. I hope nobody misinterprets my comments. I would like to now call on Ms. Watson. Ms. Watson. Then I want an apology for the reference to Hollywood. That is the area that I represent here. I heard the Chair apologize. I just had to tail-in on that one. I want to commend Mr. Prince for his duties, for his sk** and for his heading up Blackwater. However, when I hear that one of the patron saints of some people, Rush Limbaugh, called our soldiers, who have been critical of the experience in Iraq, phony soldiers, I am offended and you should be offended too. There was a sign over there earlier, Mr. Chair, the General Petraeus satire, and I had sent a message that it should be taken down because it was insulting to people. I think that people that call our soldiers, who speak from experience, phony, ought to be made to apologize. Mr. Issa. Would the gentlelady from Hollywood yield for a question? Ms. Watson. No, I will not yield because I have just a little time. Let me say this. I am really concerned when it comes to privatizing the various struggles that we are having in a war zone. I am looking at a book here that says Blackwater: The Rise of the World's Most Powerful Mercenary Army. That is really disturbing to me because I feel that every young man and woman or every man and woman in the military ought to be paid for their service, and I think you are making a good argument for the amount of money that you have been paid, your organization. I think my question is do you feel that we ought to continue on with privatizing the kinds of duties that our military should be trained to execute? Mr. Prince. Ma'am, the U.S. military is the finest, most powerful military in the world, bar none. Ms. Watson. Absolutely, and they should be paid accordingly. Mr. Prince. It is designed for large-scale conventional operations, what they did to Saddam in 1991 and then again in 2003. Ms. Watson. Well, then there is something wrong with the design, and that is my point. I think you responded, and I hear you clearly. You are providing a service, and I commend you. Let me just continue on. You are providing a service, and those little voids, Mr. Chairman and committee members, ought to be filled by the young, the people who volunteer. We have no draft. These are volunteers. Why should they put their lives on the line for this country and not be compensated, so their families back at home don't have to go on welfare and are living in housing that is substandard? I am just infuriated, not with you, but with the fact that our State Department and our Department of Defense cannot see their way. They talk about we don't have the money, saving money. This war is costing $1 trillion. You have been paid over $1 billion and will continue to be paid so that you can buy the helicopters that are shot down. And so, my question to you, are we going to have to continue to privatize because we are not training to do what you do and would it not be better to hire you to train our military to do the kind of guarding of VIP personnel? Whenever there is a CODEL, you have to guard them. When people from the State Department come, you have to guard them because we say that our military is not prepared and not trained to do that. Mr. Prince. Well, ma'am, I am happy to say that we do a significant amount of training for the U.S. military every day at our couple of facilities we have around the country. Ms. Watson. But you are saying that you fill in a specialty area. Mr. Prince. It is a specialty gap, high-end personal security. Ms. Watson. My question that I throw out to all of us is why can't we train these people who are willing, who have courage to go into the military, but then we have to bring on a private firm to do the job they should be trained to do and pay them three or four times more than we pay those who choose to serve their country by fighting in theater? Mr. Prince. The military could do that, but the U.S. military can't be all things to all people all the time. Ms. Watson. Why not? Chairman Waxman. The gentlelady's time has expired. Mr. Prince. The tyranny of shortage of time and distance. I mean you can't have an anti-air missile guy also be doing PSD missions and knowing how to be an aviation mechanic. It is too broad of a base of sk** requirement. Ms. Watson. We need more people. Chairman Waxman. Mr. Issa. Mr. Issa. Thank you, Mr. Chairman. Mr. Ryan. Mr. Chairman, may I have 1 minute? Chairman Waxman. Thank you. Mr. Issa. Mr. Issa. Thank you, Mr. Chairman. Boy, there are so many inaccuracies, so little time. Perhaps let's start with something from the gentlelady from Hollywood. Isn't it true that, in fact, the military's mission has historically not been to guard either VIPs or the State Department as a whole? Mr. Prince. Correct, yes, sir. Mr. Issa. Isn't it true that, in fact, your organization works under the regional security officer for Baghdad? Mr. Prince. Yes, sir. Mr. Issa. Isn't it true that contractors have been used directly and indirectly, in other words, non-Federal employees in places Beirut, Afghanistan, Bosnia, under the Clinton administration, routinely? Isn't there a historic time in which we used non-career RSOs or foreign service officers for these jobs? Mr. Prince. Since the founding of the republic. Mr. Issa. OK, so, we are not talking about the military here at all including, with all due respect, to Secretary Gates. Somebody, if the State Department recruited for the positions you are presently providing, they would be in all likelihood recruiting either current or prior military, wouldn't they? Mr. Prince. Yes, sir. Mr. Issa. Is it reasonable for the State Department to own attack helicopters or Bell helicopters that are weaponized? Mr. Prince. Well, that is up to them, and our helicopters aren't weaponized. Mr. Issa. Let's look at it another way. Outside of the two theaters, Afghanistan and Iraq, do you know of any place in which the State Department owns or directly controls weapons, gunships, if you will, to protect convoys? Mr. Prince. They do some crop eradication, some c**aine eradication work in Colombia. That is the only place I know. Mr. Issa. OK. So this is an unusual mission and one that begs for not creating a career position for foreign service helicopter pilot. There would only be about two or three places they would ever be, isn't that true? Mr. Prince. Well, actually, those are all flown by contractors as well, sir, down in Colombia. Mr. Issa. I am very well aware of that, and that is the point, I guess. We are having a hearing that is supposed to not be about your company and supposed to not be about one incident on September 16th. It is supposed to be about cost effectiveness of contractors, isn't it? Mr. Prince. Yes, sir. Mr. Issa. I wish we were bringing in facts and figures about let's say $600 billion of DOD contracts or DOD costs into one million soldiers so that we could go, well, isn't that about $600,000 for every soldier? Isn't, in fact, the cost of the Department of Defense, the military far greater than what we pay our men and women in uniform at the time that they are in combat? Mr. Prince. I don't know what those numbers are, sir, but that would be a great, fully burdened cost study that Congress could sponsor. They don't have to do the whole thing, just take some key nodes and really study it. Mr. Issa. Well, and hopefully, we will. Hopefully, we will get to serious discussion on these issues because I think looking at the costs-benefits should always be done. For permanent requirements, I don't want to use contractors if, in fact, Federal employees would be more appropriate. I will mention one thing. If you are feeling a little pressure today, if it is a little tough, just be glad you don't make a diabetes drug. Mr. Prince. To where, sir? Mr. Issa. Be glad you don't make a diabetes drug. Compared to what we did to the Avandia makers, GlaxoSmithKline, you are getting off easy. Trust me. They had their product destroyed by jury-rigged testimony and studies that were essentially co- opted in advance. But let's just go to one area that I think hasn't been discussed and others might not discuss it. Is your sister's name, Betsy DeVos? Mr. Prince. DeVos. Mr. Issa. Yes. Is that your sister? Mr. Prince. It is. Mr. Issa. Was she a former Michigan Republican Party Chairwoman? Mr. Prince. Yes, she was. Mr. Issa. Was she a pioneer for Bush? Mr. Prince. I don't know. Could be. Mr. Issa. Was she a large contributor to President Bush? Mr. Prince. They probably were. Mr. Issa. And raised a lot of money for President Bush? Mr. Prince. Could be. Mr. Issa. Went to the Republican conventions in 2000 and 2004? Mr. Prince. I would imagine they did, yes. Mr. Issa. Isn't it true that your family, at least that part of the family, are very well known Republicans? Mr. Prince. Yes. Mr. Issa. Wouldn't it be fair to say that your company is easily identified as a Republican-leaning company and, in fact, the Amway Co. somewhat so because of family members there? You don't have to speculate overly, but isn't that generally something you understand? Mr. Prince. Blackwater is not a partisan company. We haven't done any, you know. We execute the mission given us, whether it is training Navy Sailors or protecting State Department personnel. Yes, I have given individual political contributions. I have done that since college, and I did it when I was an active duty member of the Armed Services, and I will probably continue doing that forward. I don't give that. I didn't give up that right when I became a defense contractor. Mr. Issa. Right. Chairman Waxman. The gentleman's time has expired. Mr. Issa. Mr. Chairman, just to finish like we did on the other side of the aisle, I think you are exactly right, that in fact being identified as partisan Republican, in fact your company appears to have done what all companies do which is in fact to operate, to do the job they are doing in a non-partisan way. I would hope that this committee and the public take note that labeling some company as Republican-oriented because of family members is inappropriate, and I would hope that we not do it again. I yield back. Chairman Waxman. Well, the only one who has done it is you. [Laughter.] Mr. Issa. Mr. Chairman, I think it has been made. I think the report made it very clear. Chairman Waxman. Maybe that is why all the Republicans are defending the company. Well, Mr. Yarmuth, it is your time. Mr. Yarmuth. Thank you, Mr. Chairman. Mr. Prince, welcome. Thank you for your testimony. Mr. Prince. Thank you, sir. Mr. Yarmuth. I want to focus on the whole issue of cost and profitability, and I want to clarify something. You talked at one point about the fact that what you are essentially doing is bidding for people who would otherwise be able to make as much money as you would be paying them in the private sector. First of all, some of that defies imagination because we are talking about essentially $400,000 to $500,000 worth of cost per individual per year to the Government which would put that individual or that job category in the highest 1 percent of income earners in the country. So my question to you would be, and this is not in any way to impugn or to minimize the value of Navy SEALs, but outside of a military setting, where could a Navy SEAL, for those talents, make $400,000 to $500,000 if it weren't for a Government contract? Mr. Prince. I don't know of any of our people that have made $400,000 to $500,000 working as a contractor. They are not getting paid that much. They get paid for every day they are in the hot zone. So it is very much like a professional mariner's existence. They go to sea. They get paid every day they are in the hot zone. They day they leave, their pay goes to zero. Average pay, hypothetically, around $500 a day. We don't pay the $1,000 a day. That is a huge misperception. It is a flat-out error in the media. So if you take $15,000 a month and they work for 6 months, it is $90,000. Mr. Yarmuth. But that is not the cost of that job to the American taxpayer. Mr. Prince. Yes, sir, but they are not showing up at the job naked. They need uniforms, equipment, body armor, boots, everything you wear from head to toe, their training, their travel, their insurance, sometimes their food. I mean there are very, very sophisticated price models that we bid competitively for, hundreds and hundreds of line items. Believe me, our folks earn a lot of electrons putting those price models together because you really got to know what you are doing on the front end. But, again, it is a competitively bid product. Mr. Yarmuth. Well, I appreciate that, and I want to pursue that a second, but I do have in front of me an invoice from Blackwater to the Department of State in which one of the items is invoice quantity, 3,450 units each at a cost of $1,221.62. That is your invoice. Mr. Prince. I am not sure what that invoice is. Could I see that, sir? Mr. Yarmuth. I would be happy to submit that for the record. We dealt several months ago with a situation in which I don't believe your company was a subcontractor for the State Department or a contractor. You were a subcontractor. I am talking about the incident in Fallujah where four of your employees were ambushed and k**ed, and we had testimony from two of their wives and two of their mothers several months ago. In the course of that testimony, it was we were told that they had actually contracted, each of them, at a rate of $600 a day. That is what they were to be paid. By the time it got to the American taxpayer, it was around $1,100 a day. You were the third subcontractor under a contract given to KBR, as I recall, Halliburton, then a Halliburton subsidiary. And we asked the question of all of those subcontractors, did anybody add value up the ladder for that additional $500 based on--and we asked, did they provide any special equipment, any special services, whatever. And the answer was no. So in that case, that is not your profit, but it appeared to us that by and large that additional $500 that the American taxpayer paid for that one person was largely profit to three different corporations. Now, can you shed any light on that situation? And I don't believe, that was, I think, a Defense Department contract and KBR was just delivering supplies to troops and you were guarding the convoys. Mr. Prince. That could easily be. I am not completely familiar with the contracting and subcontracting arrangement that you are speaking of. But I can tell you, with our work with the State Department, we are direct to the State Department and there is no other intermediary adding cost or not adding value. Mr. Yarmuth. One other question I want to ask. You made the comparison, again, about that we have to bid for these people. But isn't there a significant distinction, I understand if we, the military trains a pilot and then the pilot goes out and is bid for by commercial aircraft and so forth, that is the private sector bidding. But in this situation, the American taxpayers are bidding against themselves. Because we trained Navy SEALs, Navy SEALs then go into your employ, then the Navy has to bid, as I understand, in one report, $100,000 to get them back. But we are bidding against ourselves, aren't we? We are not bidding against another external competitor. Mr. Prince. The nature of the demand of this, especially a group of Blackwater, even before 9/11, it grew after the Cole was blown up, that Navy ship. Now, in a post-9/11 world, you have a lot of different demands for those kinds of sk** sets that are in much higher demand than they were in the late 1990's. So that is the changing nature of the market. Chairman Waxman. The gentleman's time has expired. Mr. McHenry. Oh, I am sorry. Mr. Westmoreland. Mr. Westmoreland. Thank you, Mr. Chairman. Just to clarify a little bit about who is calling who a Republican company, I want to read from a December 13, 2006 letter from Callahan and Blaine to Ms. Pelosi, Mr. Waxman, Senator Dorgan, Senator Reid, Representative Chris Van Hollen: ``Nonetheless, as American citizens, we hereby petition to you to initiate support and continue the congressional investigations into war profiteering and specifically Blackwater's conduct. Now that there has been a shift in power in Congress, we are hopeful that your investigation, as well as the investigations by Senator Dorgan and Senator Waxman, will be taken seriously by these extremely Republican companies such as Blackwater, who have been uncooperative to date and that these investigations will be fruitful and meaningful.'' And Mr. Prince, you may recognize that name, because I believe they also are the attorneys for some people who are suing you. Mr. Prince, first of all, let me give you a little background, probably, as to why you are here. There is a party in Congress that does not like companies who show a profit. If you are wealthy, they figure you should have paid more taxes or that you are a crooked businessman. They do not understand someone who is an entrepreneur and offers a valuable service that is above its competitors and that is based at a competitive price. They want to fight a war with no casualties. They exploit our children, whether it is with a plan that will socialize medicine in this country or the horrible situation when innocent children are victims of an act of war. They often have hearings such as this to bias lawsuits that their crony lawyer friends may be handling. There is no cost too high for them for citizens to pay, citizens of this country, whether it is the price of personal integrity or more of their wealth, as long as it moves forward with the ultimate goal of distribution of wealth of the successful for the takers of this world. They love to have their cake and eat it too, though. For instance, they think the Iraqi government is corrupt and inept, but yet they question you about taking one of your former employees out of the country with the government's permission. Another example, they say the military should be doing your job, yet they don't want additional troops sent to the theater. One more example, Mr. Prince, is they complain about what our military personnel make, and then they complain about what you pay the same people that they complained about making so little. So you can see that there is some confusion. I also want to point out to you that 9 of the 22 Members on this panel that voted voted that they agreed with MoveOn.org's attack on General Petraeus. Let me ask you, Mr. Prince, well, let me say, some of Blackwater's critics have stated that the firing of personnel has been surprisingly frequent. Have you or your managers ever fired an employee for doing a good job? Mr. Prince. Not that I know of. Mr. Westmoreland. I don't think anybody does, do they? So if one of your employees was doing a bad job or not meeting your criteria, then those were some of the people that you got rid of, right? Mr. Prince. If they don't hold to the standard, they have one decision to make: window or aisle. Mr. Westmoreland. And Mr. Prince, what kinds of professional backgrounds do most of your security personnel have? Mr. Prince. All of our personnel working on the WPPS-type contract come from the U.S. military or law enforcement community. They have a number of years of experience doing that kind of work, ranging from 5, 8 years up to 20 or 30 years of experience. They are discharged honorably, most of them are decorated. They have gotten out of the military to choose to take another career path. So we give them the ability to use those sk**s back again working for the U.S. Government. And let me just say, we are not a partisan organization. That is not on the interview form when you come to work for Blackwater, what party you affiliate with at all. We affiliate with America. And the idea that people call us mercenaries, we have Americans working for America, protecting Americans. Mr. Westmoreland. And I think you do a very good job. Mr. Prince. And the Oxford Dictionary defines a mercenary as a professional soldier working for a foreign government. And Americans working for America is not it. Yet we have a handful of, we call them third country national folks, folks from Latin America, they guard some gates and they guard some camps. They don't leave that area, they are static guards. Our PSD guys are Americans working for America. Chairman Waxman. The gentleman's time has expired. Mr. Braley. Mr. Braley. Thank you, Mr. Chairman. Mr. Prince, my best friend married Mary Lubbers, whose father and grandfather were the presidents at Hope College. Mr. Prince. Small world. Mr. Braley. So I want to start by asking you about a statement you made on page 3 of your written statement that you shared with the committee, ``The company and its personnel are already accountable under and subject to numerous statutes, treaties and regulations of the United States.'' And then you went on and attached to your statement a list of existing laws, regulations and treaties that apply to contractors and their personnel. Is that the document that I am holding up that you attached? Mr. Prince. Yes, sir. Mr. Braley. Is it your testimony today, under oath, that all Blackwater employees working in Iraq and Afghanistan are subject to the Uniform Code of Military Justice, the Military Extra-Territorial Jurisdiction Act and the War Crimes Act? Mr. Prince. It is my understanding that is the case, yes, sir. Mr. Braley. All right, well, let's look at this document, I want to ask you about it. This document, the Uniform Code of Military Justice, applies in the time of declared war. You would agree that there has been no declared war in Iraq or Afghanistan? Mr. Prince. No, but I believe it has been amended to include contingency operations. Mr. Braley. Is it your understanding that a contingency operation would apply to what is going on in Iraq and Afghanistan? Mr. Prince. I am not a lawyer, but my layman's understanding is yes. Mr. Braley. All right. And then it says to persons serving with or accompanying an armed force in the field. Do you see that? Mr. Prince. I don't have it in front of me, but you are reading from it. Mr. Braley. Well, I am just reading from the document that you provided to us. Mr. Prince. Right. Mr. Braley. If that is what the Uniform Code of Military Justice provides, you would agree that based upon your own description of the activities of your company, there are times when your employees are not serving with or accompanying armed forces in the field. Mr. Prince. There are times when U.S. military units are actually embedded in our motorcades. Mr. Braley. But to answer my question, there are times when your employees are not serving with or accompanying armed forces in the field, isn't that correct? Mr. Prince. Sir, I am not a lawyer. So I am not going to give you that level of detail. If you want a clear written statement as to the accompanying opinion, I am sure the State Department can answer what their opinion is on that. But we have looked at it and we feel comfortable that our guys could be brought under investigation with those ruling legal authorities over their heads. Mr. Braley. Then let's look at the Military Extra- Territorial Jurisdiction Act, Section 3261, Criminal Offenses Committed by Certain Members of the Armed Forces and by Persons Employed by or Accompanied by the Armed Forces Outside the United States. You would agree that there are circumstances where your employees would not meet that definition based upon their service in Iraq and Afghanistan. Mr. Prince. I believe that was changed yet again to include any U.S.-funded contract. Mr. Braley. Well, that is the definition that applies to U.S.-funded contracts from the statute. Mr. Prince. Again, I am not a lawyer, sir. I am sorry. Mr. Braley. Then let's look at the War Crimes Act of 1996, which applies if the perpetrator is a U.S. national or a member of U.S. armed forces. You would agree based upon your testimony today that there would be circumstances when some of your employees would not meet the definition of perpetrator to be covered by the War Crimes Act. Mr. Prince. Again, I am not sure, sir. Mr. Braley. Well, you testified that you hire some third country nationals. They would not be U.S. nationals, would they? Mr. Prince. That is correct. Mr. Braley. And they would not be members of the U.S. armed forces. Mr. Prince. But they are serving in a U.S. DOD contingency operation. Mr. Braley. Then let's talk about these payments that have been made as a result of d**hs that were related to the conduct of Blackwater employees. One of the payments that we have been provided information about was this $15,000 payment to the guard's family who was guarding Iraqi Vice President Mahdi. Are you familiar with that payment? Mr. Prince. Yes, sir. Mr. Braley. Did you have any input into the determination of the amount of that payment? Mr. Prince. I discussed it with some State Department officials, yes. Mr. Braley. Did you feel that it was a satisfactory level of compensation for the loss of that individual? Mr. Prince. I believe the cash that was paid was actually $20,000, not $15,000. Mr. Braley. All right, $15,000 or $20,000. Based on the information that we have been provided, one of the things we know is that Blackwater charges the Government $1,222 a day for the services of some of its employees, is that correct? Mr. Prince. I believe that number is lower. The chart that we provided the committee shows a blended average significantly less than that. Mr. Braley. Assuming that figure is correct, if you take someone your age in the United States and look at the U.S. life table, you will find that somebody your age in this country has a life expectancy of 40 years. So if you were to take that rate of $1,222 a day, multiply it times 365 days a year, multiply it by a 40 year life expectancy, you would get a total lifetime earnings payout of $17,841,200. You would agree with me that pales in comparison to a payment of either $15,000 or $20,000. Chairman Waxman. The gentleman's time has expired. You can answer the question. Mr. Prince. Your calculations there don't make any sense to me, because that charge, that $1,200 charge that you are talking about, claiming that we charge the Government, that includes aviation support. Some of those helicopters that got shot down, that comes out of our hide. Gear, training, travel, all the rest. So I am not quite sure how that math works out. But I would be happy to get back to you if you have any written questions. Chairman Waxman. The gentleman's time has expired. Mr. McHenry. Mr. McHenry. Thank you, Mr. Chairman. I want to go through a few facts and make sure we have this on the record. The gentleman is discussing cost, and I want to sort of understand all the facts before we get to a conclusion here. You were previously in the Navy SEALs. How long were you in the military, sir? Mr. Prince. In 1992 through the end of 1996. Mr. McHenry. What is the average time, having been in the SEALs, perhaps you would know this, what is the average time a special forces operator is in the service? Mr. Prince. Five or 6 years, up to 20. It really varies. Mr. McHenry. But based on your experience? Mr. Prince. Guys really make a decision point at about 12 years whether they are going to stay for a career or get out. So I would say 10 to 12 years. Mr. McHenry. All right. Let's say an operator retires from the military, at which point a Navy SEAL, average Navy SEAL is doing a much more, a much different operation, they are dealing with explosives rather than defensive caravans and convoys. What do you do with those individuals? Do you take Navy SEALs and put them right in there, onto the streets? Is there training for Blackwater? Mr. Prince. The personnel that deploy for us, they go through, obviously we have the resumes, we do a criminal background check on them. When they have been accepted, when the resume has been accepted by the customer, they come in for training, they go through another 164 hours of training, embedding at Blackwater, tactics, techniques, procedures, driving, firearms, defensive tactics. They go through a full psychological evaluation, medical/dental exam, physical tests, shooting tests. There is a very, very rigorous pre-deployment program they all have to do. Mr. Braley. A significant amount of expense? Mr. Prince. Yes. And that is all baked into that daily cost. Mr. Braley. Just for the record, when was Blackwater formed? Mr. Prince. In 1997. Mr. Braley. At what point did you receive your first Government contract? Mr. Prince. For the first number of years, our customers were individual SEAL platoons or a Marine recon platoon or an A team. It was down to the individual team sergeant or warrant officer paying with a credit card. Our first big Government contract that we won competitively was the Navy force protection contract that they started off after the Cole was blown up. We had a $1\1/2\ billion ship blown up by two guys in a Zodiac. Mr. Braley. What year was that? Mr. Prince. We started that in 2001. Mr. Braley. OK. Who is your client in Iraq? Mr. Prince. Department of State. Mr. Braley. OK. How many competitors do you have within this contract? Mr. Prince. There are two others. There was a big competition before then to be down-selected for the WPPS contract. Mr. Braley. How is that contract awarded? Mr. Prince. It is awarded competitively. You go through an enormous proposal process, they come and inspect your facilities, your training standards, the resumes of each of your personnel. They even have to accept and inspect the resumes of the instructors you are going to have. And they come and audit the program on an almost weekly basis. Mr. Braley. So let's go forward. There are roughly 1,000 Blackwater contractors, operators, these former veterans that you now have trained that are out securing emba**y staff and a number of civilians in Iraq. Let's say it is 1,000, just for our purposes here. Roughly how much administrative staff do you have a**ociated with those 1,000 individuals? Mr. Prince. We run that whole program, instructors, program management people, that sort of thing, with less than 50 people. Mr. Braley. With less than 50 people? Mr. Prince. Yes, sir. Mr. Braley. So roughly it is 1,000 to 50, is the ratio from operators in the field to administrative staff? Mr. Prince. Yes, sir. Mr. Braley. All right. Now, there is this notion, we are not the Armed Services Committee here, but there is this notion of tooth to tail ratio, which means how many operators do you have in the field and the expense of them, how much administration function do you have. In active duty military, based on your recollection, what is that rough estimate? Mr. Prince. What is the DOD's tooth to tail ratio? Mr. Braley. Yes. Mr. Prince. I have seen as high as 8 to 1 or even 12 to 1. One tooth, 8 to 10, 12 tails. Mr. Braley. So one individual in the field, 12 individuals outside of operating. So the ratio, when these people on the committee talk about the expense of having that one operator in the field, it is far less for an individual contractor, when you are a private security contractor like you are in Iraq, it is far more efficient for the total program to have a contractor, because their tooth to tail ratio is far better than what it is in the active duty military. Therefore, the cost of that one operator in the field for all the support services they have a**ociated with them is far less for a company like Blackwater than it is for the active duty military. And can you, and my time is up, but if you can actually discuss this with the committee and maybe in a minute or so explain the expense of the overall operations. Chairman Waxman. The gentleman's time is up, but Mr. Prince, you may go ahead and answer. Mr. Prince. I would just encourage the committee, and would be happy to make some suggestions on areas where you could do a true activity-based cost study, what does it cost the U.S. Government to do X, Y, Z functions in the field, and do an accurate drill-down. Because unless you know what something costs, everything before that or after that is hyperbole. Mr. Braley. Is it your contention that it is far cheaper-- -- Chairman Waxman. The gentleman's time really has expired. Mr. Braley [continuing]. For you to operate in the field? I just want him to answer this question, if I could, Mr. Chairman. Is it your contention that it is much cheaper to the taxpayers for your activities as a contractor with the Department of State than it would be for active duty military to do the very same task because of that tooth to tail ratio? Mr. Prince. Yes, and because it is tough for the military to be all things to all people all the time. If they are going to have air defense artillerymen, all the other conventional warfare specifications they have to have, it is tough for them to do all things all the time. Chairman Waxman. If you have some kind of document that backs up your statement, we certainly would like to see it, and we would like to ask you to provide it to our committee. Mr. Prince. Yes, sir. Chairman Waxman. Thank you. Ms. McCollum. Ms. McCollum of Minnesota. Thank you, Mr. Chair. Mr. McHenry and I had the opportunity to go to Afghanistan together, where in fact the military did provide, when we went out on visits, did provide our security. I also had the opportunity of being in Iraq, where we had a private security detail take us from point to point. And I just, there has been some discussion about who is more caring about getting on the ground and seeing what is going on, and I just wanted people to know for the record here that I have been both places and under both circumstances. I would like to followup a little more on what Mr. Braley was talking about. You provided this chart on contractor accountability. And you have made the statement that the DOD can bring charges against your contractors. Can the Department of State bring charges against your contractors? Mr. Prince. I believe that would be done by the Justice Department. They do the prosecuting of those laws. Ms. McCollum of Minnesota. Under the CPA Order 17, contractors have immunity from the Iraqi legal system, is that correct? Mr. Prince. That is my understanding, yes. Ms. McCollum of Minnesota. So if a Blackwater contractor would commit, as what an investigation might determine would be murder, on their own time, it was a Christmas Eve holiday that you were describing, or Christmas holiday, do you believe the Iraqi government would not be able to charge that individual with a crime, even on their own time? Mr. Prince. That is my understanding, yes. Ms. McCollum of Minnesota. Do you believe that immunity should be repealed, if something happens when someone is ``off duty'' and an Iraqi is murdered? Mr. Prince. I believe U.S. laws should be enforced, and you can have that justice system back here in America work. Ms. McCollum of Minnesota. So you believe that the immunity under CPA Order 17 should stand? Mr. Prince. I believe so. I am not sure any foreigner would get a fair trial in Iraq right now. I think they would at least get a fair trial here in the United States. Ms. McCollum of Minnesota. Your charts indicate that contractors are accountable under the Uniform Code of Military Justice. Your contractors work for the Department of State. Is the Department of State accountable under the Uniform Code of Military Justice? Mr. Prince. I will not be presumptuous to answer for the Department of State, ma'am. Ms. McCollum of Minnesota. Well, you have provided this. You told Mr. Braley that all your employees are under this chart. So then you are saying that---- Mr. Prince. Well, ultimately that is for the Justice Department to decide which avenue of jurisdiction they have. Ms. McCollum of Minnesota. So this is just what you feel that people might be held under accountability with your contract? This is just a feeling you have? You don't know any of that for a fact, do you? Mr. Prince. I have legal opinions that I respect, put that together and they gave their opinions that those were laws that State Department contractors, DOD contractors, contractors for the U.S. Government could be held accountable under. Ms. McCollum of Minnesota. So whether it is a feeling or an opinion, you cannot state for a fact, for a fact, that any of your contractors that have a State Department contract can be held accountable under the Uniform Code of Military Justice? Mr. Prince. That is correct, ma'am, because that is for the Justice Department to decide. Ms. McCollum of Minnesota. I think that is important to clear that up. Do you operate in a military capacity or a civilian capacity? Mr. Prince. Civilian capacity. Ms. McCollum of Minnesota. So now you are saying that civilians---- Mr. Prince. Our men are not serving members of the U.S. military. Ms. McCollum of Minnesota. So you are saying that civilians can be held accountable to the Uniform Code of Military Justice in your opinion? Mr. Prince. And I believe that is why they extended that, not just to wars that were declared but also to contingency operations as well. Ms. McCollum of Minnesota. To your knowledge, have there been any military courts or civilian courts that have held any of the contractors who have been charged or been accused of a crime in Iraq? Mr. Prince. It is my understanding there is a conviction of a contractor that was working for the CIA that was convicted in North Carolina for actions in Afghanistan. Chairman Waxman. The gentlelady's time is expired. Ms. McCollum of Minnesota. Thank you, Mr. Chairman. Thank you for answering my questions. I appreciate it. Chairman Waxman. Mr. Jordan. Mr. Jordan. Thank you, Mr. Chairman. Mr. Prince, I too want to thank you for your service to our country and for the good work that your company has been doing in Iraq and Afghanistan. I just want to pick up on a couple of things that the Congressman from North Carolina had talked about, just some general questions. I know you have been sitting there for 3 hours. Just a few questions, then I am going to yield some time to the gentleman from California. How many employees, you mentioned before a little bit earlier, 1,000 in the field, 50 administrative, but does that represent the entire work force at Blackwater? Mr. Prince. We have about 550 full-time folks in the United States, 1,000, 1,100 or so in Iraq, and then hundreds more in little pockets around the world. The next greatest concentration would obviously be Afghanistan, there are about 300, 400 there. Mr. Jordan. So a couple of thousand? Mr. Prince. More or less, yes, sir. Mr. Jordan. And you mentioned the extensive training, some of the special operations individuals who come to work for you after they leave military service and the training they undergo, I believe you said earlier that there was a study done that shows there is no higher exit rate, or quicker exit rate, we will say, because of your company versus what typically happens. Is that true? Mr. Prince. Right. It was a GAO study and it was not just directed at us, it was directed at the private security industry. Mr. Jordan. And real quickly, in your testimony, your opening paragraph, you talk about you provide training to America's military and law enforcement communities who then risk their lives to protect Americans in harm's way overseas. So are there several types of contracts that your company does? You do training contract with the Government, protective contracts, or do you do one contract per year? Tell me how those work. Mr. Prince. We have a number of different contracts. We never started this operation to be a security provider. We started as a training facility. The SEAL teams, special forces, Marine recon, SWAT teams, those were our customers for the first few years. The Navy came after the Cole was blown up. We have trained well over 100,000 sailors since then on how to protect their ships. Through one of our affiliates, we do aviation support in Afghanistan. Mr. Jordan. Mr. Prince, how many contracts would you have right now with the Federal Government? Any idea? Mr. Prince. More than 50. Mr. Jordan. OK. Mr. Prince. Some are very small, some are very big. Mr. Jordan. Again, I want to thank you for your service. And Mr. Chairman, if I could yield to the gentleman from California. Mr. Issa. I thank the gentleman. I just wanted to point something out, Mr. Prince. Did you see the memorandum dated October 1st, that is yesterday, that is entitled Additional Information about Blackwater USA? It comes out of Mr. Waxman's office, it is 15 pages. Mr. Prince. I did see that, yes. Mr. Issa. OK. Did you note that on page 5, Mr. Waxman and/ or his staff said the following: ``Blackwater is owned by Erik Prince. Mr. Prince is a former Navy SEAL who owns the company through a holding company.'' After that, it begins to talk about the White House, your father, your father-in-law, your sister, etc., and basically talks about everything I asked you, the Michigan Republican party, the donations. So Mr. Chairman, hopefully you will appreciate that it was your staff that created everything that I brought up, and you put it out in writing 1 day before this hearing. My question to you, Mr. Prince, is have you ever seen a bio about your life that starts off, you were a Navy SEAL and then goes on to everything your sister did on behalf of the Michigan party and your Republican credentials? Is this the first time you have seen a bio like this? Mr. Prince. I love my sister very much, but it is not often our bios get printed together. [Laughter.] Mr. Issa. And you know, it is interesting, because I am noticing that for this committee, a donor search done on September 29th, at opensecrets.org, was done to find out how much money you gave to who. Did you know that? Mr. Prince. I did not know that. Mr. Issa. Do you think that is really germane to today, or do you think that attempts to paint you as a Republican supporter? Mr. Prince. I don't think it is germane to today. I think we do good work and I am mighty proud of the folks we have doing the work. Mr. Issa. OK, I heard a rumor that your company or someone in your company had given to the Green Party. Do you know about that? Mr. Prince. It could have been. Mr. Issa. OK. I just wanted to know that there were people on both the far left and the far right relative to the chairman who may have benefited by your company. But Mr. Chairman, I would ask that page 5 of your memo be considered as what I called it, an attempt to pain this gentleman and his company through Republican eyes to a Democrat base for political purposes. And I stand by my statement, Mr. Chairman, and yield back to the gentleman from Ohio. Mr. Davis of Virginia. Could I just ask one clarification, Mr. Chairman? Chairman Waxman. Yes. Mr. Davis of Virginia. Your first contract, Mr. Prince, Government contract, was in 1997, wasn't it? Mr. Prince. Yes. Well, no, our first customer, we started the business in 1997, first customer was January 1998. Mr. Davis of Virginia. First Federal customer---- Mr. Prince. That was the SEAL team. Mr. Davis of Virginia [continuing]. That was under the Clinton administration? Mr. Prince. Yes, sir. Mr. Davis of Virginia. Thank you. Chairman Waxman. The gentleman's time has expired. I would like to now recognize Mr. Cooper. Mr. Cooper. Thank you, Mr. Chairman. Mr. Prince, in the charter or by-laws of your corporation, either the holding company or Blackwater, does it say explicitly that it will only work for the United States of America or its entities? Mr. Prince. No, it doesn't. If I could clarify, anything we do for any foreign government, any training, of anything from law enforcement training to any kind of aviation training, tactical flying, any of that stuff, all of that is licensed back through the State Department, another part of the State Department. Mr. Cooper. But you are the owner of the company, the CEO. If limitations like this are not in the charter and by-laws, isn't there a risk that should something happen to you that different management, in order to maximize profits, might seek contracts from any number of other foreign countries, like of Vladmir Putin offered a lot of money, why would you want to turn that down as a business entity? Mr. Prince. Because we would be violating Federal law and the whole place could be shut down very, very quickly. Mr. Cooper. But you are a**uming a State Department license would apply. Mr. Prince. Oh, it does. Mr. Cooper. You are a regular, private company. You can---- Mr. Prince. No, sir, I am sorry. We have to have a license to train---- Mr. Cooper. I am not talking about training other people's private police. Say you took some of your former people who were former Navy SEALs, special forces, whatever, and they were working for hire, what prevents you in your current company charter or by-laws, prevents you from hiring out those people to foreign governments? Mr. Prince. U.S. Federal law does. Mr. Cooper. Which law? Mr. Prince. Defense Trade Controls Act. Any training, any security services, any export of any weapons, any equipment you would use to do that job requires a license. And on top of that, this idea that we have this private army in the wings is just not accurate. The people we employ are former U.S. military and law enforcement people, people who have sworn the oath to support and defend the Constitution against all enemies, foreign and domestic. They bleed red, white and blue. So the idea that they are going to suddenly switch after having served honorably for the U.S. military and go play for the other team, it is not likely. Mr. Cooper. But these are independent contractors or employees, they are supposed to do what they are told. And is your omission of this key bit of information from the charter or by-laws only due to the fact that it would be redundant? If it is a**umed, why don't you go ahead and put it in the charter and by-laws that these people, this company will only work for the United States of America and its entities? Why wouldn't that be a nice addition to the charter and by-laws? Mr. Prince. That wouldn't make any sense, because we have NATO allies helping in Afghanistan, helping the U.S. mission there. And there might be opportunities for us to support, provide them with training or aviation support or logistics or construction, a lot of other things that allies need, especially as the United States is trying to build capacity around the world. There are a lot of countries that need help building out their police departments, giving them more counter-terrorism capability. Mr. Cooper. Twenty-six NATO allies. So you could work for any of them? Mr. Prince. Twenty-six NATO allies, but more and more, the United States is doing FID missions, foreign internal defense. We have done a number of successful programs for them working with the U.S. Government, where they hire us, we go in and we build that capacity and train them and provide the equipment, all of which is licensed by the State Department. When we apply for that license, it goes to the State Department and they farm it out to the relevant part of the DOD to control and authorize that licensing. What is the curriculum going to be, what tactics, even down to which individual in which country is going to be trained, so they can do a check on them. So that is all controlled by the U.S. Government already, sir. Mr. Cooper. On your Web site, it says that you were contracted to enhance the Azerbaijan Naval Sea Commandos Maritime Interdiction capability. Is Azerbaijan a member of NATO? Mr. Prince. No, but that was paid for by the U.S. Government. Mr. Cooper. Well, let me ask another question. Mr. Prince. It was part of their regional engagement policy. I don't make that policy, sir. Mr. Cooper. Wouldn't it be nice to put in your charter and by-laws that you only work for United States or U.S.-approved entities? Why would that be harmful to your company? Mr. Prince. We would be happy to do that. But it is absolutely redundant, because we can't work for someone that is not U.S.-approved. Mr. Cooper. Redundancy is a small objection to making sure that you are a loyal U.S. company. Let me ask another question. What if a large company inside the United States of America wanted to hire your company for services, say, to break a strike or for other purposes like that? Is that allowed under your charter and by-laws? Mr. Prince. That is not something we have even explored. Mr. Cooper. But it would be permissible under your current company charter? It is a new line of business possibly? Mr. Prince. No. Mr. Cooper. It might be very profitable? Mr. Prince. It is not something we are looking at, not part of our strategic plan at all, sir. Mr. Cooper. I know, but you are a mortal human being. Your company would allow it, according to its current charter and by-laws? Mr. Prince. Well, I have five boys I am raising, so one of them perhaps will take over some day. Mr. Cooper. Why not put it in the charter and by-laws? Thank you, Mr. Chairman. I see that my time is expired. Chairman Waxman. Mr. Cooper, your time is expired. Mr. Hodes. Mr. Hodes. Thank you, Mr. Chairman. Mr. Prince, thank you for being with us today. Mr. Prince. Thanks for having me sir. I am glad I could come here and correct some facts. Mr. Hodes. There has been some discussion from the other side of the aisle about whether or not these hearings are partisan. Do you agree that it is not a partisan issue to examine whether or not the use of private contractors, including Blackwater, is advantageous to American taxpayers? Mr. Prince. It is certainly part of the Congress to make sure the money is spent well that taxpayers pay. Mr. Hodes. And do you also agree that it is not a partisan issue to inquire whether failures to hold Blackwater personnel accountable for misconduct undermine our efforts in Iraq? Mr. Prince. It is a fair enough thing to look into. Mr. Hodes. Earlier today you were asked what action Blackwater took to penalize an employee who while drunk, shot and k**ed and Iraqi security guard for the Iraqi vice president on Christmas Eve of 2006. Do you recall those questions? Mr. Prince. Yes, sir. Mr. Hodes. And you responded that Blackwater fired and fined the employee, but you are not sure of the amount of the fine. Do you recall that? Mr. Prince. Yes, sir. Mr. Hodes. Blackwater, at the committee's request, provided the committee an internal Blackwater e-mail that appears to reflect a discussion of what Blackwater did to this employee. It is dated Monday, January 8, 2007, approximately 2 weeks after the incident in question. And it says, ``Regarding termination, he has forfeited the following compensation that he would have otherwise been authorized: return airfare, $1,630; completion bonus, $7,067; 4th of July bonus, $3,000 and a Christmas bonus of $3,000.'' Now, it appears to me that the so-called fine consisted of taking away the contractor's bonuses and making him pay his own way home. Is that accurate? Mr. Prince. And any forthcoming compensation that he had. I don't know when the guy's contract would have ended, but yes, we took away whatever else we could. Mr. Hodes. How long had he worked for your company? Mr. Prince. I have no idea. Mr. Hodes. Do you know what he had been paid during the time of his employment up to the time he shot and k**ed the Iraqi guard? Mr. Prince. I have no idea, sir. Mr. Hodes. Do you have any idea what your profit on that employee had been up until the time of this incident? Mr. Prince. Probably in keeping with the 10, 10\1/2\ percent indicated on our chart. Mr. Hodes. Would you have records that would show us what you had paid him up until that time and from which we could find out what profit you had made? Mr. Prince. I am sure we could dig through that and find it, yes, sir. Mr. Hodes. And would you be willing to provide that to us? Mr. Prince. I will get my people right on it. Mr. Hodes. I am asking for it now, so I would like to have that sent. Thank you very much. Chairman Waxman. Without objection, the document you used for your questioning will be made part of the record. Mr. Hodes. Thank you. [The information referred to follows:] [GRAPHIC] [TIFF OMITTED] T5219.037 Mr. Hodes. Mr. Prince, you also said that Blackwater is extremely scrupulous in enforcing your standards. And you have told us that you did basically all you could to this employee and that the rest was up to the Department of Justice. What you did was you took away his bonuses, July 4th, completion bonus, Christmas bonus, he paid his own way home and he couldn't work for you any more. Mr. Prince. And made sure his clearance was canceled as well. Mr. Hodes. Is that your idea, Mr. Prince, of corporate accountability? Mr. Prince. Could you say the question again, sir, please? Mr. Hodes. Is that your idea, Mr. Prince, of corporate accountability? Mr. Prince. This employee, I can't make any apologies for what he did. He clearly violated the rules that he knew. We give each of our guys an independent contractor handbook. It is all the dos and don'ts of what they are expected to do and not do. Beyond firing him for breaking the rules, withholding any funds we can, we can't flog him, we can't incarcerate him, we can't do anything beyond that. That is the sole reservation of the U.S. Justice Department. Mr. Hodes. The Justice Department has not acted against this individual? Mr. Prince. I believe their investigation is ongoing. Mr. Hodes. They haven't done anything so far, right? Mr. Prince. We are not privy to that information, sir. Mr. Hodes. This was a potential murder, was it not? Mr. Prince. It was a guy that put himself in a bad situation. Mr. Hodes. Would you agree with me that this was potentially a murder, sir? Mr. Prince. Beyond watching detective shows on TV, sir, I am not a lawyer, so I can't determine whether it would be a manslaughter, a negligent homicide, I don't know. I don't know how to nuance that. But I do know he broke our rules, he put himself in a bad situation and something very tragic happened. Chairman Waxman. Thank you, Mr. Hodes. Mr. Sarbanes. Mr. Sarbanes. Thank you, Mr. Chairman. Actually, I want to followup on that line of questioning a little bit more. I think you said that when people violate the rules in a significant way, they have one decision left to make, which is aisle or window, right? Mr. Prince. Because they are fired. Mr. Sarbanes. They are on their way out, they have one decision, and that is whether to sit on the aisle or sit by the window. And then the other consequence that Mr. Hodes spoke to was the financial penalty that they would experience. But it just seems like a few thousand dollars, particularly against a pretty lucrative contract that they would have had. And it strikes me that if that is the only deterrent that is at work in terms of people performing at a high level, that is not much. In other words, you can say, well, let me get in here, let me make a good living here. And if I screw up, and if I screw up in a terrible way, as this one incident illustrates, then the worst that is going to happen to me is I am going to have to choose between an aisle seat or a window seat and maybe give up a bonus and my last paycheck, I mean, that is essentially the consequence that they face, isn't that right? Mr. Prince. I would also add that we endeavor to get their security clearance pulled, canceled. And once that is done, they will never work in a clearance capacity for the U.S. Government again, or very, very unlikely. Mr. Sarbanes. OK. But you would agree that it is not, it doesn't have the same kind of deterrent effect that it would have if they thought that they were going to be subject to prosecution, if there was a clear set of rules in place, a clear context in which they could be prosecuted, they could face something akin to a court martial, or all the other kinds of measures that can occur if you are in a traditional military setting? You would agree that provides an extra level of deterrence? Mr. Westmoreland. Mr. Chairman, I think the witness has already testified that he did everything that his company could to this person---- Chairman Waxman. I'm sorry---- Mr. Westmoreland [continuing]. And that he is not the prosecutor. Chairman Waxman [continuing]. You are not acting in accordance with the rules. Mr. Sarbanes. Well, I am actually, I am headed in the direction---- Chairman Waxman. This is not a court case. The gentleman has time and I am going to restore his time. He can ask whatever he wants and to say whatever he wants. Some people on this committee have said completely outlandish things. Nothing we can do about it. They have their right, including you. You read a whole blasphemous statement about Democrats, but no one objected to that. So the gentleman is going to be recognized for an additional minute. Mr. Sarbanes. In any event, would you agree that would provide some extra deterrence, some extra reason for people to exercise their conduct in a careful way? Mr. Prince. We welcome that level of accountability. Most of our people have already served in the U.S. military or they served in a law enforcement capacity. They are used to that kind of accountability and transparency into what they are doing. Mr. Sarbanes. Well, I appreciate your saying that, because I---- Mr. Prince. We are not hiding anything. Mr. Sarbanes. Yes. I would like to leave aside the question of whether you should be, Blackwater should be in this space that you are in. I don't know enough about the history of whether providing the sort of protective services that you do is something that isn't done by the military traditionally, or is. So I am going to leave that aside. I am also leaving aside the issue of the cost, which strikes me as exorbitant, in terms of what the taxpayers are paying here. You keep calling for, I think, an activity-based cost an*lysis or a**essment, which I think we would be happy to get more information about. I have to believe there is a less expensive way, even to hire private contractors like yourself. And so I am really left with the accountability issue as the one that strikes me as front and center here. And as I have listened to your testimony, in particular you are saying with respect to this one person who was drunk and committed this homicide, I will characterize it that way, I think you said you would be happy to see that person prosecuted, something akin to that. And I would like to enlist you as an advocate to strengthen whatever the rules of engagement are, whatever the statutes are that are out there. Mr. Braley took us through these various things and you indicated that you weren't sure whether each of those necessarily reached as far as they could in providing that kind of penalty environment. I would like you to speak to whether it would be a good thing to make sure that it does. Mr. Prince. I believe Congressman Price from North Carolina has been pushing to amend some of that language. And we support that fully. Mr. Sarbanes. Thank you. Mr. Cooper [presiding]. The gentleman yields back his time. The next questioner on the list from the chairman looks like Mr. Welch. Mr. Welch. Thank you, Mr. Chairman. Mr. Prince, thank you for coming. I want to ask a few questions about the finances. My understanding is that Blackwater had contracts with the Federal Government in 2001 in the amount of $736,000. Mr. Prince. It could easily be, yes, sir. Mr. Welch. And in 2006, that number had exploded to $593 million. Mr. Ryan. May I have just 1 minute, please? Mr. Prince. I am not sure. Mr. Welch. Well, you don't dispute it. This is what is in the report that was referred to earlier. Mr. Prince. Well, some of the later years on that report aren't quite accurate. So I am not going to discount the whole thing. Mr. Welch. OK. According to the report, 51 percent of the Blackwater contracts were no-bid contracts, $493 million that were explicitly no competition, and $30 million were awards after limiting or excluding qualified bidders. Is this more or less correct? Any reason to dispute it? Mr. Prince. It could be, sir. I don't know. Mr. Welch. All right. And since 2003, when the war began, Blackwater contracts have exceeded $1 billion, correct? Mr. Prince. I don't know the answer, sir. If you have specific questions on financials, we will get you the answers. Mr. Welch. Well, these are facts that are in the record. You can check them out. But I will just advise you---- Mr. Prince. Well, there is some stuff in the committee's report that is not accurate. So I can't agree to the entire committee report. Mr. Welch. Let me continue going through this. One of the concerns that has been expressed is that a sergeant who provides security services in a full military setting is paid $50,000, $60,000. If it is an employee from Blackwater, the cost to the taxpayer is about $445,000. Is that more or less correct? Mr. Prince. Could I have a copy of what you are reading from, at least? Mr. Welch. Well, you have been asked about this by several Members already. Let me just continue. Let's talk a little bit about training. You were a SEAL and served with distinction, as I understand it, as a SEAL, correct? Mr. Prince. Yes. Mr. Welch. And your training as a SEAL was beneficial to you in the work that you are doing now as the head of this company? Mr. Prince. It helped form me in my life, absolutely. Mr. Welch. And you had also I think indicated that Blackwater hires our military veterans and law enforcement veterans, many of whom have recent military deployments, correct? It makes sense to do that? Mr. Prince. Yes. Mr. Welch. So it is fair to say that Blackwater as a company in recruiting personnel has benefited from the taxpayer-financed training of people that Blackwater hires, correct? Mr. Prince. We have people that have prior honorable military service and provide them an opportunity to use those sk**s again at their highest and best use. Mr. Welch. And it is fair to say that Blackwater contracts have in fact surged since 2003 when the war began, correct? Mr. Prince. The nature of the security environment around the world has changed, yes. Mr. Welch. And it is true, or is it true that as reported by the Center for Responsive Politics, you did make, as you have a right to make, contributions of $225,000 to the, that include $160,000 to the Republican National Committee and the National Republican Campaign Committee? Mr. Prince. I don't know that sitting here right now. Again, I can go back and dig through our contribution records to figure out exactly what we gave in what period. Mr. Welch. Well, that is the report that we have been given. And again, you have a right to do that. My concern is the nature of the contracts. Now, you are also aware that General Petraeus, who is in command of 160,000 troops, is paid by taxpayers $180,000 for the extraordinary responsibilities that he bears for our security in Iraq, correct? Mr. Prince. I don't know what General Petraeus gets paid. Mr. Welch. Well, that is what it is. Blackwater has 861 or so personnel, according to this report in 2006, in Iraq. Is that more or less right? Mr. Prince. It could be, yes, sir. Mr. Welch. All right. General Petraeus is paid $180,000 for supervising 160,000 troops. How much were you paid in 2006? Mr. Prince. I'll get back to you with that exact answer. I don't know. Mr. Welch. Well, you can give me an estimate. Mr. Prince. More than $1 million. Mr. Welch. Well, as I remember, when my colleague, Mr. Hunter, asked you about your contracts, you indicated 90 percent of your Blackwater contracts came from the Federal Government, correct? Mr. Prince. Yes. Mr. Welch. I.e., the taxpayer. And he asked you what your profit margin was, and my recollection of your testimony today was about 10 percent? Mr. Prince. That is what the report that we submitted to the committee says, yes. Mr. Welch. So walk through the math with me. If Blackwater has had $1 billion in contracts since the war began in 2003, and there is a 10 percent profit margin, that is $100 million in profit, is it not? Mr. Prince. This is representative of one of the WPPS contracts. Some contracts we lose money on, some we lose all kinds of money on. Some we make money on. Mr. Welch. Mr.---- Mr. Prince. Understand we have significant variables. Mr. Welch. You were asked a question and you gave an answer. And the question was very simple. It is the kind of question that a CEO pays real attention to: what is your profit margin. Your answer was, 10 percent. I am doing the math, $1 billion, 10 percent, $100 million. Mr. Cooper. The gentleman's time is expired. Mr. Prince. Some contracts we lose money on. Losing three helicopters this year is certainly beyond the scope of math. Mr. Cooper. The next questioner is Mr. Murphy. Mr. Murphy. Thank you very much, Mr. Chairman. Let me just followup on Mr. Welch's question. Certainly, as a CEO of a company, you can tell us what your profit has been in the past several years as a company. Mr. Prince. I can give approximate numbers, but we are a private company. And I am sure it is the Congress's main interest in maintaining healthy competition amongst Government vendors. So we are a private company, and there is a key word there, private. Mr. Murphy. And so you will not disclose to us what the profit, what the annual profit or---- Mr. Prince. No, that is not what I just said. We gave you an example of what the profitability of a WPPS contract looks like. But I am not going to go into our full financials. Mr. Murphy. And I guess, I am a new Member of Congress, but as a representative of my constituents that pay 90 percent of your salary, pay 90 percent of the salaries of your employees, I think it is a little difficult for us to fathom how that information isn't relevant to this committee or this Congress. Mr. Ryan. Mr. Chairman, may I have a minute with the witness, please? Mr. Cooper. Yes. [Witness and counsel confer.] Mr. Prince. I am sorry. Go ahead. Mr. Cooper. Mr. Murphy has 4 minutes left. The hearing will resume. Mr. Murphy. Thank you, and I want to wrap up so Mr. Lynch can ask some questions before we break. So let me ask the question again after your consultation with your colleague. It is your position that you don't believe that it is in the best interests of your company or this committee to have discussions with the U.S. Congress about the profit that you make off of U.S. Government contracts? Mr. Prince. We can have that discussion, but I am not fully prepared, sitting here today, to answer each and every one of your questions down to that level of detail. Mr. Murphy. I am not asking for a level of detail. I am asking for an approximation of your annual profit, based on the fact that you make 90 percent of your money from U.S. taxpayers. Mr. Prince. Again, we will come back to you. If you have written questions, we will give you written answers after the hearing is done. Mr. Murphy. Because you testified today that you are not sure of that number? Mr. Prince. I am not sure of that number. How can I calculate in depreciation on a**ets when our helicopters parked around near the emba**y in Baghdad get hit by rockets all the time, that they get fragged, that three of them have been shot down? There is a whole host of variability to our profitability, depending on when an a**et is expended or destroyed. Mr. Murphy. Mr. Prince, I am not a businessman. But I find it pretty hard to believe that the CEO of a major company in this country, whether it be privately financed or publicly financed, can't give an approximation of your annual profit on a year to year basis. Mr. Prince. I think when the committee meets with any of my finance folks, they will tell you I am not a financially driven guy. Mr. Murphy. Let me just ask one other quick question before I yield back. You made a comment before that you had a handful of third country nationals working for you. And not to disparage the need to have third country nationals working for the company, but I just want to get a better handle on what a handful has. The memo that we have before us, and I understand you draw issue with some of those numbers, so I want to get it straight, suggests that of the 861 Blackwater personnel in Iraq today, 243 of them are third country nationals. Does that sound right? Mr. Prince. Your best bet is drawing off of page 1 of what we submitted to the committee, where it says, ``UCTCN or HCN.'' Mr. Murphy. What percentage of those serving in Iraq under Blackwater are third country nationals? By your numbers. Because by our numbers, it is just less than one third, which doesn't sound like a handful. That sounds like one third of all your personnel are not U.S. citizens. Mr. Prince. Well, I am looking at one here. It shows 576 United States, 129 TCN and 16 locals. Mr. Murphy. So again---- Mr. Prince. So divide 129 by 576 and you get your percentage. Mr. Murphy. OK. Sounds like a little bit more than a handful, but I appreciate your testimony and I yield back. Mr. Cooper. The gentleman yields back his time. The next questioner is Mr. Lynch. Mr. Lynch. Thank you, Mr. Chairman. And I want to thank the witness for his perseverance here today and for helping the committee with its work. We have heard a lot today about the loss of accountability when an inherent Government function, in this case duties that are incidental to the prosecution of war, are subcontracted out to private entities. And as Mr. Shays and Mr. Platts have mentioned earlier, my Republican colleagues, I also have had an opportunity to view first-hand on more than a few occasions the work of Blackwater employees. I would guess that in the dozen or so occasions when I have traveled with my colleagues to Iraq and Afghanistan, your area of operations, principally, I would bet at least half of those times, or at least a portion of time there, we have been protected by Blackwater employees. And based on my own personal experience, I have to say, from personally what I have seen, and what I have experienced, those people who were protecting us who were Blackwater employees did a very, very good job. I have to give you credit for that. They are brave employees, brave Americans in a very hostile environment. I find myself right now with this committee having a difficult time criticizing those employees, because I am in their debt. That is a very hostile environment and they do a good job on our behalf. Which brings me to my problem. If I have a problem criticizing Blackwater and criticizing the employees and some of the times that you have fouled up, what about the State Department? The State Department employees, you protect them every single day. You protect their physical well-being, you transport them, you escort them. And I am sure there is a heavy debt of gratitude on the part of the State Department for your service. And yet they are the very same people who are in our system responsible for holding you accountable in every respect with your contract and the conduct of your employees. And I know from my own experience, in the time there, that is an impossible conflict for them to resolve. I have here in my possession, I am going to ask that they be entered into the record in a minute, some internal e-mails from the State Department. These documents that the committee has received raise questions again about the State Department's oversight of Blackwater's activities under the contract. Even in the cases involving the d**h of Iraqis, it appears that the State Department's primary response was to ask Blackwater to make monetary payments to--this is from the e-mails--``to put these matters behind us,'' that is, the d**hs of Iraqi civilians, ``rather than to insist upon accountability or to investigate Blackwater personnel for potential criminal liability.'' The most serious consequence faced by a Blackwater personnel for misconduct appears to be termination of their employment. Even though Secretary of State John Negroponte a**erted that every incidence in which Blackwater fires its weapons is ``reviewed by management officials to ensure the procedures were followed,'' the documents that we have before the committee don't indicate that. I do have some e-mails, though. And this one is dated--I will ask these to be entered into the record, Mr. Chairman. Mr. Cooper. Without objection, so ordered. [The information referred to follows:] [GRAPHIC] [TIFF OMITTED] T5219.038 [GRAPHIC] [TIFF OMITTED] T5219.039 [GRAPHIC] [TIFF OMITTED] T5219.040 [GRAPHIC] [TIFF OMITTED] T5219.041 [GRAPHIC] [TIFF OMITTED] T5219.042 Mr. Lynch. This one is dated July 1, 2005 from RSO Al- Hillah. This is a situation where Blackwater personnel fired and k**ed. It says, ``This morning, I met with the brothers of an adult Iraqi male who was k**ed by a gunshot to the chest at the time and location where the PSD, in this case, Blackwater team, fired shots in Al-Hillah on Saturday, June 25th of 2005.'' The gentleman in question was k**ed. And then it says, ``Gentlemen, allow me to second the comments on the need for Blackwater to provide funds ASAP. For all the reasons enunciated in the past, we are better off getting this case and any similar cases behind us quickly. Again, the Department of State needs to promptly approve and fund an expedited means of handing these situations. Thanks.'' And it mentions $5,000 for the family there. Again, another e-mail dated December 26, 2006. And it says, this is again a situation where Blackwater personnel k**ed an individual civilian innocently, standing near an area where the convoy was traveling, it criticizes the way the charge d'affaires was talking about ``some crazy sums. Originally she mentioned $250,000 and later, $100,000. Of course, I think that a sum this high will set a terrible precedent. This could cause incidents with people trying to get k**ed by our guys to financially guarantee their families' future.'' Mr. Cooper. The gentleman's time has expired. Mr. Lynch. I am going to wrap up here. And again, I am going to ask these to be placed in the record. Mr. Cooper. I am afraid---- Mr. Lynch. The question is, based on that arrangement---- Mr. Cooper [continuing]. The gentleman's time has expired. Mr. Lynch [continuing]. Does it not make sense that an independent inspector general, instead of the State Department inspector general, review these? I think it would help the credibility of the company to have an independent inspector general reviewing these cases instead of having the State Department basically make you pay up $5,000 every time---- Mr. Burton. Mr. Chairman, I have high regard for the gentleman from Ma**achusetts but has gone 2 or 3 minutes over his time. Mr. Cooper. The gentleman's time has expired. I need to ask the witness, we have two questioners remaining. If you would like to take a break now, that would be fine. Or there are about 10 minutes of questions remaining. It is your call. Mr. Prince. If there are two questions left, I will take them and let's be done. Mr. Lynch. Mr. Chairman, do you want to give the witness a chance to answer that last question? Mr. Cooper. Well, the gentleman considerably exceeded his time limit. We had actually given you considerably more than the 5-minutes due to a mistake in the clock. So I think we need to keep this in regular order. The gentlelady is recognized, Ms. Norton. Ms. Norton. Thank you, Mr. Chairman. Mr. Prince, I want to be clear that however you serve your country, whether as a member of the armed forces or now as a contractor in time of war, the American people are indebted to you. We understand that the risk is the same. I want to avoid confusing the higher purpose of the volunteer army with what some nations, how some nations candidly operate. However you define mercenary armies, some nations have long used mercenary soldiers to deal in foreign countries with unpleasant tasks. The more dependent we become on contractors, the more we risk falling right off the cliff into a mercenary army that is nothing that you would have responsibility for. But it must be said, people fight wars that, countries fight wars where the people support them. And the people support them by being willing to provide the troops to fight those wars. That is a risk we have. I want to ask you a question or two about your contract with the State Department. Under this contract, you employ security personnel as independent contractors rather than as your own direct employees, isn't that right? Mr. Prince. Yes, ma'am. Ms. Norton. You don't have to provide employee benefits, such as health or disability insurance, vacation or retirement and the like as a result? Mr. Prince. Each of the individuals that deploys for us has a very robust insurance package that is with them every day they are working for us. Ms. Norton. You also can avoid making Social Security contributions or withholding taxes, is that not true? Mr. Prince. I am not sure on that. Ms. Norton. I believe that is true, sir. By contrast, DynCorp and Triple Canopy and other security firms that support the State Department treat their personnel as employees entitled to these benefits. Why do you treat your personnel differently from these two companies? Mr. Prince. I don't know the differences in how they compensate their people. I will tell you we have the highest retention in the industry. We have guys that sign up for us at a very, very high rate. So we don't get losses. Men and women seem to feel very well treated by us. Ms. Norton. Well, of course one of the differences is in the employee benefit package I have just named. Does Blackwater hire personnel as independent contractors in order to avoid legal responsibility for the company? Mr. Prince. No, it is actually really what the men that deploy for us prefer. We find it is a model that works. Ms. Norton. Well, Mr. Chairman, it may in fact---- Mr. Prince. They like the flexibility of signing on for a certain period of time and being able to schedule their off time around an anniversary, a child's birthday, being home for Christmas, etc. So it gives them flexibility as to when they are going to deploy, when they are going to go to work. Just like---- Ms. Norton. Does it really give them more flexibility than the other two companies who have them as employees? Those people don't have the same kind of flexibility? What kind of flexibility can you have if you need your employees at a time of engagement, for example? Mr. Prince. I don't know, ma'am. Ms. Norton. Well, I think the fact is, when you need them, you need them. You don't say, you can go home for Christmas, sir. Mr. Chairman, I think we should, I am very disturbed, very disturbed by this confusion, which amounts to legal confusion about the responsibilities of contractors. I will concede the notion that employees can choose whether they want to work for a company that in fact requires them to save for their own benefits or not. My confusion---- Mr. Prince. Ma'am, let me just add, we have a program that allows them, it is like an individual 401(k) plan. So they are able to, while working for us, able to have a 401(k)-like program. Ms. Norton. I understand that. Probably the other employees, excuse me, companies, that I mentioned probably also have 401(k) programs. And again, my major concern is not what private employees decide to do. Mr. Chairman, my concern is that these Blackwater contractors, so far as I can see, operate under the direct command or are supervised by Prince, Mr. Prince and his company. They are, they operate under the law of the United States in some fashion. It is simply unclear, after a full day's hearings, whether these employees, whether this company is subject to law in the way that the American people expect anybody in a field of combat to in fact be subject to the law of some place. I believe we need an investigation, Mr. Chairman, by the GAO to clarify what law if any such companies and their employees, whether contract employees or not, should answer to. Mr. Prince. If I could just answer, ma'am, I think the FBI investigation regarding the September 16th incident proves that there is a measure that accountability is in place, that process is working. And as for us---- Chairman Waxman [presiding]. That remains to be seen. Mr. Prince [continuing]. Working for us overseas, we provide the trained person with the right equipment, the right training, the logistics to get them in and out of theater, when they get to Iraq or to Afghanistan, they work for the State Department. We work under that, the RSO's operational control, they are not under our operational control. Chairman Waxman. Thank you, Ms. Norton. Ms. Schakowsky. Ms. Schakowsky. Thank you, Mr. Chairman. I really appreciate your allowing me to participate in this hearing, and I thank the committee for their indulgence. I wanted to let everyone know that I am shortly going to be introducing legislation to carefully phaseout the use of private security contractors, for-profit companies that carry out sensitive missions that have repeatedly and dramatically affected our mission. I want to recognize the mother of Jerry Zovko, who is here today. Jerry was an Army Ranger before becoming a Blackwater employee. He died in Fallujah in an infamous mission, fraught with mistakes on the part of his Blackwater supervisors. That was over 3\1/2\ years ago, and led to the Battle of Fallujah during which many of our U.S. forces lost their lives. As Mr. Davis, the ranking member, said, we need a conversation in this Congress about that, and I am hoping that my legislation will provide that. Mr. Prince, in your testimony you stated Blackwater personnel supporting our country's overseas missions are all military and law enforcement veterans. You did not state that they were all Americans, all American military and law enforcement veterans. Is it true that Blackwater hires foreign security personnel? Mr. Prince. One of your colleagues previously asked that question. Yes. Some of the camp guards, gate guards, static locations are indeed third country national soldiers. Ms. Schakowsky. And in 2004, Gary Jackson, the President of Blackwater USA admitted that your company had hired former commandoes from Chile to work in Iraq, many of which served under General Augusto Pinochet, the former dictator of Chile. As you must know, his forces perpetrated widespread human rights abuses, including torture and murder of over 3,000 people. Did Blackwater or any of its affiliated companies at that time, at any time, use any Chilean contractors with ties to Pinochet? Mr. Prince. Well, I can say Mr. Jackson did not admit to hiring some commandoes. Yes, we did hire some Chileans. Any foreign national soldier that works for us now, for the State Department, has to have a high public trust clearance. It is basically a security clearance for a third country national soldier where you take their name, it goes back through the U.S. emba**y in that country and their name is run, kind of like a national agency check here, which is what someone does for a security clearance. That way we can ensure that they have no criminal record, ma'am. Ms. Schakowsky. I understand that one of your business a**ociates, Jose Miguel Pa**aro, was indicted in Chile for his role in supplying commandoes to serve Blackwater. Is that correct? Mr. Prince. He was not an a**ociate. He might have been a vendor to us. Ms. Schakowsky. In your written statement today, you state that Blackwater mandates that its security professionals have a security clearance of at least the secret level. Did any Chilean contractors who worked for Blackwater ever get a security clearance? Mr. Prince. I believe what I said is for the WPPS contract, the Americans working on that are doing the PSD mission are required to have a secret clearance. Ms. Schakowsky. Did any Chilean contractors get a security clearance? Mr. Prince. I don't know, ma'am. Ms. Schakowsky. Because if yes, they were provided with cla**ified information, if no, then it is not true that all Blackwater personnel in Iraq have security clearances. On your Web site, I don't know if it is still there, there was a recent one, there was a jobs fair advertised in Bucharest. And we have heard allegations that Blackwater recruited Serbians and former Yugoslavs with combat experience from the Balkan wars, some linked to atrocities committed in Croatia and Kosovo and in Bosnia and a**ociates of Milosevic. I am wondering if you could talk to me about that for a minute. Mr. Prince. To my knowledge, we have never employed anyone out of those countries. Ms. Schakowsky. Would you know? Mr. Prince. There are some Romanians that were on a contract that we took over from a previous vendor, competitor. But we phased them out and we use guys out of Latin America now. Ms. Schakowsky. Would you know if people have been a**ociated with Pinochet or Milosevic before you hired them? Is this part of your inquiry? Mr. Prince. Again, for the State Department, for the static guards that were utilized, third country national soldiers, a high public trust clearance is required---- Ms. Schakowsky. I heard you say that. Mr. Prince [continuing]. Where their name, their background, their address, their date of birth, whatever information is available on them, is run back through the equivalent country that they are from, a national agency check, to ensure that they don't have any criminal record, human rights abuses, or any other bad marks against their name. Ms. Schakowsky. OK, well, we should check into that process. But let me ask a question. You said that you as a company would not work overseas in any way that is not a**ociated, that the United States does not approve. However, Chile has made a decision not to participate as part of a coalition member in this war. They won't send any troops. Do you have any qualms about hiring people out of Chile to participate actively in this war? Mr. Prince. We don't hire anybody from Chile right now, to my knowledge. Ms. Schakowsky. Have you ever? Mr. Prince. I previously just said that we had, previously. Yes. Ms. Schakowsky. And so the answer is you don't have any qualms about doing that, based on the fact that Chile has made a public policy decision not to participate? Mr. Prince. I believe the persons of that country have a free right to contract. I will give you an example. The Philippines doesn't allow their personnel to go to Iraq. So we don't hire their people to go to Iraq. Ms. Schakowsky. OK, but you do hire Chileans. Thank you. I appreciate it. Chairman Waxman. Thank you very much, Mr. Schakowsky. Mr. Prince, let me thank you very much. You have been very patient. You have been here a long time. I do want to acknowledge the presence today of Rhonda Teague and Kristal Batalona, the daughter and wife of Wesley Batalona. Ms. Schakowsky acknowledged the mother of Jerry Zovko, who is in the audience today. These are people from Fallujah. I am sorry we didn't get a chance to ask you more questions about Fallujah. I might, with your permission, send you some questions and ask you to respond for the record. Because that was an example, we had a hearing on that issue, and that was an example where one of the ways corporations could make money is not to have fully trained personnel. I don't know if that was the case or not, but it certainly appeared to us that the people were not given adequate protection and training for that Fallujah mission and it had an unprecedented consequence in the battle of Fallujah that followed. In closing, let me just say that we really have a remarkably unprecedented experiment going on in the United States today by having private military contractors. It raises a lot of issues. It raises issues about costs, it raises issues about whether it interferes with our military objectives. And I think this hearing and with you and the next witnesses will help us continue to sort through what that means for our Nation. We have never had anything of this magnitude before where we have turned so much of our military activity over to private military that used to be, for the most part, provided by the U.S. military itself. I want to thank you. If Mr. Davis has any last comments, I will recognize him. Mr. Davis of Virginia. Mr. Prince, thank you very much. I think you have--is there anything else you would like to add after all this? Would you like to add anything you didn't get to say? Mr. Prince. Thanks for having me. I would invite some of the leadership of the committee, if they would like, to come and visit our operations. We would be happy to show you what we do. Mr. Davis of Virginia. Fine. Let me just say, I think we do need a dialog, and our next panel will tell us the State Department's rationale and the large number of contractors and why they are utilizing that versus active duty. I think that will give more clarification to Members. Thank you very much. Mr. Prince. Thank you, sir. Chairman Waxman. We will proceed to our next panel, but we want to give Mr. Prince and his group an opportunity to leave.