Alex Constantine - October 3, 2008
by Pratap Chatterjee, Special to CorpWatch
September 22nd, 2008
Clandestine gun suppliers, funded by the U.S. and Iraqi governments, have flooded Iraq with a million weapons since 2003, charges a new Amnesty International investigation. Because of faulty or non-existent government tracking systems, many of those guns have gone missing, and some have turned up in the hands of insurgents.
Contracts with one of these companies, Taos Industries, account for almost half of the $217 million Baghdad and Washington have officially spent to arm the Iraqi army, police and security forces employed by various Iraqi ministries.
Taos was founded in 1989 by a former U.S. intelligence official in Madison, Alabama, to traffic Soviet weapons systems after the fall of the Berlin Wall. In October 2006 Taos was sold to a company controlled by the Sultans, a powerful Kuwaiti family that also controls billions of dollars worth of contracts for food supply and heavy equipment deliveries to U.S. bases throughout Iraq.
Global Arms Trafficking
Amnesty’s new report, "Blood at the Crossroads: Making the Case for a Global Arms Trade Treaty," shines a light on the catastrophic human rights consequences of the kind of unrestrained arms trading that forms much of Taos’s business. The reports draws lessons from nine case studies including the conflict in Darfur, military crackdowns in Burma and Guinea, and sectarian violence in Iraq, to make recommendation on how to prevent human rights abuses when governments sell or transfer conventional arms to other countries. (See box.)
All of the permanent members of the UN Security Council, including the U.S., armed the regime of Saddam Hussein. Even after the UN arms embargo was imposed on Iraq, arms continued to flow from several Eastern European states and Syria, according to the Amnesty International report. After the 2003 occupation, the new supplies compounded the massive proliferation of arms and gross human rights abuses that began under the former Saddam government.
In the last four years, the Pentagon has financed most of Iraq’s supply of more than one million rifles, pistols, and infantry weapons for 531,000 Iraqi security force personnel, according to research conducted by TransArms and Amnesty. TransArms is a U.S.-based nonprofit that tracks global arms transfers.
"Since 2004 there appears to have been no accountable and transparent US audit trail for approximately 360,000 infantry weapons supplied to the Iraqi security forces," said Brian Wood, Amnesty International's arms control manager. "Coupled with the poorly managed US supply of small arms, US forces in Iraq have provided operational training to the bulk of the Iraqi army and police in counter-insurgency and other methods, but the human rights content has been seriously open to question and gross violations of human rights have been perpetrated."
Taos Industries, the biggest corporate supplier of small arms to Iraq since the invasion in 2003, was founded by David Hogan shortly after he retired from the military in 1989. Hogan had been chief of foreign intelligence for the U.S. Army Missile Command at the Redstone Arsenal in Huntsville, Alabama. The company is run out of the Putnam Industrial Park in Madison, about a mile from the military base.
A few years after Taos was created, Keith R. Hall, deputy assistant secretary of defense for Intelligence under President Clinton, told the U.S. Congress that the fall of the Berlin Wall had created an “opportunity to acquire and exploit major, state-of-the-art weapons systems.”
From his vantage point as a former intelligence official in the missile command with knowledge of the “black budget” or secret military contracts used to buy such systems, Hogan was well aware that such opportunities could be very profitable.
In the early 1990s, he started bidding on classified contracts put out by the Defense Intelligence Agency, the Pentagon’s military intelligence branch.
At first he was beaten out by better-connected dealers, such as Carlyle Group subsidiary BDM International of McLean, Virginia, which won the bid to acquire an S-300, a series of Soviet long range surface-to-air missile systems (the equivalent of the Patriot missile defense system).
BDM’s chairman was Frank C. Carlucci, the secretary of defense and national security adviser under President Ronald Reagan. The company already had a “basic ordering agreement” that gave it an open-ended contract to acquire foreign military technology. (BDM eventually bought the S-300 from Belarus with the help of Emmanuel Weigensberg, a well-known Canadian arms merchant, who was the broker for the Reagan administration’s first, secret shipment of weapons to Nicaraguan rebels in the 1980s, the New York Times reported in December 1994.)
Despite losing this major contract, Taos won lucrative orders over the next decade to sell spare parts to foreign military customers that use older U.S. military equipment. Taos also provides vehicles or spare parts to test ranges that rely on Russian radars and vehicles, and in the last five years, has won a number of orders to provide weapons for the U.S. military-backed governments in Afghanistan and Iraq.
David Hogan turned the management of the company over to his two sons, Craig and Steven, both graduates of the U.S. Military Academy at West Point. Craig Hogan became president of Taos, and ran the company while serving as a battalion commander in the U.S. Army reserves for the 314th Press Camp Headquarters. He was deployed to Iraq in the first two years of invasion and occupation. The younger son, Steven Hogan, who had a bachelor’s degree in business administration, became Taos’s chief financial officer.
After both sons were killed in an Alabama plane crash in January 2005, the company promoted Vietnam veteran John Hamilton, also a West Point graduate, to take over. Hamilton came to the company after a 22-year military career and a short stint at Teledyne Brown Engineering. He had worked for the military as a program manager with the U.S. Army Tank-Automotive Command in Detroit, where he, too, acquired experience working for the Pentagon, one of Taos’s major customers.
Earlier this month, Hamilton was replaced as CEO by retired Army Lt. Gen. Joseph M. Cosumano Jr., the former commander of the U.S. Space and Missile Defense Command and KBR’s senior vice president in charge of Government and Infrastructure Operations, Maintenance, and Logistics.
The Iraq Sales
Over the last five years since the invasion of Iraq, Taos has received seven of the 47 weapons supply contracts listed by Amnesty, worth $95.1 million out of the $217 million total. (The second biggest supplier, with a little over $40 million in contracts, is Keisler of Jeffersonville, Indiana. Its website boasts that the company has “moved millions of rounds of ammunition and over a quarter million weapons to U.S. interests in the Mideast.”)
The majority of sales were for Soviet-type infantry weapons. Among the weapons listed in some 35 contract documents reviewed by CorpWatch were requests for assault rifles (AK-47s), M4 Benelli shotguns, portable machine guns (RPK, PKM), sniper rifles, shoulder-fired rocket propelled grenades (RPG-7), UBGL M1 grenade launcher and 9mm pistols (mostly Glocks), and ammunition.
Amnesty investigators have also uncovered documents that suggest that several of Taos’ subcontractors were either operating illegally or had been listed by the United Nations for smuggling weapons.
For example, Amnesty alleges that Taos first subcontracted to a Moldovan/Ukrainian company, Aerocom, to transport from Bosnia to Iraq 99 metric tons of arms for Iraqi security forces. The sales for the year ending June 31, 2005 were mostly for Kalashnikov rifles.
Aerocom has a history of shady dealings. In 2002 an expert report commissioned by the UN Security Council charged the company with smuggling weapons from Serbia to Liberia in violation of a UN arms embargo. In August 2004, Moldovan authorities revoked Aerocom’s air operating license. Scout d.o.o, a Croatian company named as the broker in these shipments, was not registered in Croatia to deal in arms.
Oddly enough, U.S. military air traffic controllers in Iraq said Aerocom never requested the necessary landing certificates, nor is there any official record of these deliveries to Iraq. This lack of paperwork raises Amnesty investigators’ suspicions that some of the arms may have been diverted elsewhere.
In May 2005 the Italian newspaper, Corriere della Sera, revealed that Taos had supplied thousands of Italian-made Beretta 92S pistols that were among the weapons seized in Iraq from Al Qaida operatives responsible for killing civilians. The Beretta pistols had been dispatched in July 2004 from the UK to the U.S. military base in Baghdad. An Italian court investigation the next year questioned the shadowy methods used in shipping the guns from Italy to the UK.
Despite the Italian reporting and the publication of the Aerocom contracts in a 2006 Amnesty report (Dead on Time), the U.S. government continued to award contracts to Taos as recently as October 2007.
Taos Industries refused to answer the specific allegations in Blood at the Crossroads. “Amnesty International’s reporting about Taos Industries is factually inaccurate and misleading. Taos’s operations have been conducted transparently and within U.S. Department of Defense guidelines,” the company said in a statement released to CorpWatch.
“Taos sells and delivers equipment to only one client: the U.S. government. The company has shared information about the transactions in the Amnesty reports with Congress and the Defense Department.”
Amnesty researchers note that blame must also be assigned to the U.S. officials who ran the program, who admit their arms control systems for contracts such as the Taos one using Aerocom have been flawed.
Enter the Sultans
Taos was bought in October 2006 by Agility, a Kuwaiti company that has recently become the second-largest provider to the U.S. Defense Logistics Agency, according to numbers cited by former Taos CEO Hamilton.
Agility, which was originally named Public Warehousing Corporation (PWC), is operated by the family of Jamil Sultan al-Essa, whose heritage has alternately been described as southern Iraqi and Saudi. As is common for many wealthy Middle Eastern families, siblings, cousins and other relatives, often with senior government positions, operate numerous businesses with overlapping ownership. Abdul Aziz Sultan Al-Essa, for example, was chairman of Kuwait’s Gulf Bank; Kamal Sultan ran the local franchise for Apple.
The Sultans became famous when, in 1981, they opened Kuwait’s first self-service store focusing on hardware and DIY products near the Shuwaikh port. They rapidly expanded the venture into a chain known as Sultan Centers.
Another of Sultan’s holdings is the National Real Estate corporation, which bought up 25 percent of the shares of PWC, a moribund Kuwaiti state agency, when it was privatized in 1997. (Created in the 1970s to develop and lease out government property, PWC was already making some money renting a 1.6 million square meter property near Shuwaik port to the U.S. military for Camp Doha for almost $60,000 a month.)
PWC was given to Abdul Aziz’s son, Tarek Sultan Al-Essa, whose mother and wife are both U.S. citizens. Tarek Sultan, also a U.S. citizen, grew up partly in the United States and attended the University of Pennsylvania’s Wharton School of Business. He quickly expanded the company and in December 2006 renamed it Agility.
In May 2003 PWC won its first major U.S. military contract. The multibillion dollar annual deal, Prime Vendor Subsistence, supplies all the food eaten on U.S. military bases in the region – more than half-a-million meals a day for the 150,000 troops and a similar number of contractors. (Halliburton/KBR cooks and serves the food, but does not provide the ingredients.)
When the contract came up for bid, Tarek Sultan had no experience in food supply, nor did he have a personal track record with the U.S. military. So he asked his cousin Kamal to create a joint venture to provide the “experience” required to bid on the contract. Kamal’s experience consisted of a minor toilet-cleaning contract on Camp Doha. (Once Tarek won the contract, he dropped his cousin. Kamal, who related this story to CorpWatch, has spent years suing Tarek in Kuwaiti courts for a share of the profits.)
The next major contract that PWC won was an August 2004 deal for $130 million to manage two of the biggest supply depots for the U.S. military in Iraq: the Abu Ghraib and Umm Qasr warehouses, near Baghdad and Basra respectively. Then, in the June 2005 PWC won part of the $1.5 billion Heavy Lift 6 contract to move all the military equipment from the Kuwait ports to Baghdad, sharing the award with Florida-based IAP Worldwide Services.
Court documents and CorpWatch sources show that over the course of these many bids, PWC officials wined and dined U.S. Army officials at five-star hotel resorts in Kuwait to win the contracts. PWC also paid for Army Chief Warrant Officer “Pete” Peleti to attend the Superbowl game in Detroit, Michigan, in January 2006. (Peleti was arrested in 2006 when he flew back to the Dover Air Force Base from the Middle East with a duffel bag stuffed with watches and jewelry, as well as about $40,000 concealed in his clothing.)
In October 2006 PWC bought up Taos, which provided a U.S.-based entity that allowed it to bid on classified military contracts. Two months after this, PWC changed its name to Agility. In 2007, Agility announced it had taken in $3.5 billion in revenue, with profits of $585.2 million. In 2008, the company announced revenues of $6 billion, a staff of 32,000 employees and 550 offices in 100 countries around the world.
From managing a few warehouses in 2003, Agility was suddenly in the same league as global logistics giants such as Fedex and DHL. It operated ports in Dubai and ran shipping companies out of New Orleans. The company boasted to the Los Angeles Times that it was capable of “hauling giant mining equipment through the jungles of Papua New Guinea or erecting stage sets in Asia for touring rock groups such as the Doobie Brothers.”
Because very few systems were set up to track weapons after they were delivered, the million guns that Taos and other companies sold to Iraq in the last five years have been in danger of falling into the hands of sectarian or insurgent groups.
Three U.S. government investigative reports, issued by different agencies in the last three years, have highlighted this problem.
An October 2006 report by the U.S. Special Inspector General to Iraq calculates that serial numbers were logged for only 2.7 percent of the 370,000 infantry weapons supplied to the Iraqi security forces under U.S. government contracts. In many cases, contractors delivering arms imports did not turn in the obligatory official inspection reports, known as DD-250s, substituting instead “Adequate for Payment” paperwork.
A July 2007 report by the U.S. Government Accountability Office revealed that at least 190,000 weapons were “unaccounted for” in Iraq because of discrepancies between what was authorized for export and what the Multinational Security Transition Command-Iraq (MNSTC-I) recorded for the period between June 2004 and July 2007.
In May 2008, the Pentagon’s own inspector general issued a report on the lack of proper accounting for billions of dollars spent on commercial contracts and miscellaneous payments for arms and security in Iraq, Afghanistan and Egypt. The report “estimated that the Army made $1.4 billion in commercial payments that lacked the minimum documentation for a valid payment, such as properly prepared receiving reports, invoices, and certified vouchers. We also estimated that the Army made an additional $6.3 billion of commercial payments that met the 27 criteria for payment but did not comply with other statutory and regulatory requirements. These other requirements included taxpayer identification numbers, contact information, and payment terms.”
Unchecked by proper tracking systems, current and former policemen are dealing in a flourishing weapons market that may well have exacerbated the sectarian killings that plagued Iraq in 2005 and 2006. A November 2007 New York Times investigation of Lee Dynamics International (not connected to Taos) found that the U.S. contractor appointed an Iraqi businessman whose “co-workers say, he also turned the armory into his own private arms bazaar with the seeming approval of some American officials and executives, selling AK-47 assault rifles, Glock pistols and heavy machine guns to anyone with cash in hand – Iraqi militias, South African security guards, and even American contractors.”
Arms experts say that this was a serious mistake, at the very least. “It is likely that a large proportion of the hundreds of thousands of small arms and light weapons that have ‘gone missing’ in Iraq are either in the hands of anti-U.S. insurgents or in other countries, fueling conflicts there,” says William Hartung, the director of the Arms and Security Initiative of the New America Foundation. “In order to prevent similar security risks in the future, the corporate and government officials responsible for putting U.S. troops at risk by failing to maintain control of these weapons must be held accountable.”
Amnesty's warnings have been ignored so far. On September 25, 2007, the U.S. Congress was notified of a possible $2.6 billion purchase of 123,544 M16A4 assault rifles and 12,035 M4 carbines by the government of Iraq. Indeed on February 28, 2008, the Pentagon announced that some 80,000 M16A4 assault rifles had been purchased and transferred to Iraq. Yet, this year alone, Amnesty says civilians have been killed, tortured and displaced on a significant scale in areas north of Baghdad, especially in the governates of Diyala and Mosul during fighting between US, Iraqi forces and insurgents.
The situation in Iraq is hardly unusual given that Washington provides a substantial amount of its arms and other military and security assistance in a similar manner. Amnesty International and TransArms found that between 2000 and 2007 the Pentagon granted $11.7 billion for about 14,000 contracts (including weapons and ammunition) to “Miscellaneous Foreign Contractors,” grouped under a Crystal City, Virginia-based entity which was listed as “office 911” of the General Service Administration.
Amnesty says that the situation in Iraq should also be seen as part of the bigger global problem of unrestricted arms sales. “The time for an Arms Trade Treaty is now,” says Amnesty’s Brian Wood. “Sixty years after the signing of the Universal Declaration of Human Rights, the same governments can and should deliver an effective agreement on international arms transfers with human rights at its heart.”