Center for American Progress

The Blackwater Scandal or The More Things Don’t Change…

The Blackwater Scandal or The More Things Don’t Change…

It's obvious that the operations of Blackwater Corp. and other private contractors constitute yet another Bush administration scandal.

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It’s become obvious to almost everyone paying attention that the operations of the Blackwater Corporation, among other private contractors, constitute yet another Bush administration scandal of significant proportions. The companies are reaping hitherto unimaginable profits while operating with a virtual—and sometimes literal—license to kill.

The oddest aspect of these operations is that they are, in most cases, fully within the law. Blackwater’s friends in the administration, the State Department and Pentagon set it up that way, and in doing so set up a system with next to no oversight. Then again, to put all the onus on these contractors themselves is in many ways to miss the point. Blackwater is merely an extreme version of the way our system operates. And while there has been some exceptional journalism looking into their operations of late, this central point is being missed. We have a defense sector in the United States that is out of control. And it’s been that way nearly from the start.

Until Franklin Roosevelt began preparing the country to enter into World War II, the United States did not have a significant defense sector. In early 1941, the government had already issued $10 billion in private defense contracts, before America even entered the war. On a muddy plot of land outside Washington, the Pentagon was being constructed and would stand as the largest office building in the world. As the stream of dollars flowing to defense contracts swelled into a torrent, an obscure senator from Missouri named Harry S. Truman began hearing complaints from his constituents about rampant profiteering in the construction of Fort Leonard Wood in his home state of Missouri.

Truman embarked on a 10,000 mile car trip to investigate the building of Fort Leonard Wood and several other army camps across the country. He returned to Washington astonished. “It was the same everywhere, he found,” writes Truman biographer David McCullough. “Millions of dollars were being squandered. Had there been such mismanagement of federal help for the poor and unemployed a few years earlier, he thought, the outcry would have been overwhelming. As it was, no one seemed to care or to be saying anything.”

On Monday, February 10, 1941, Truman took the Senate floor and forever entered the spotlight of history by proposing the establishment of a Senate committee to investigate how defense contracts were awarded. The Truman Commission, formally titled the Senate Special Committee to Investigate the National Defense Program, was formed a month later. Over the course of its investigations—which resulted in 50 reports, 400 hearings, and 1,798 witnesses—the Truman Committee would be credited with saving taxpayers billions of dollars.

The committee began by investigating the construction of Army camps. It found that the contracts awarded to developers provided a legal incentive for graft—they were “cost-plus” contracts, meaning the contractor was reimbursed for the costs of construction, plus a percentage of the profits—an obvious incentive to drive up the profits of the project. The Truman Commission found one architect who increased his income by 1000 percent through a defense contract, and one army camp in Texas rose from a cost projection of $480,000 to $2.54 million.

The Truman Commission saved taxpayers $250 million in Army camp building costs alone and then moved on to investigating even bigger defense contracts—those awarded to companies providing crucial materials for the war machine, like fuel for the ships and steel for the planes. A substantial number of these companies were found to be ripping off the taxpayers and unintentionally—although in some cases intentionally—helping the enemy.

The American aluminum firm Alcoa was found to be holding back on the production of magnesium, a key component of aluminum, in order to protect its American aluminum market. The company had also agreed to sell what magnesium it did have to a German company at a discounted price. This led to Germany having more magnesium than America, McCullough writes, and a strategic advantage in their aluminum production.

The Truman Commission also discovered that the Curtiss-Wright company sold faulty airplane engines to combat forces. And when the U.S. warship Schenectady literally broke in half in Portland, Oregon, the Commission discovered widespread—and intentional—selling of defective steel by American companies to the U.S. Navy. When the swindling companies squealed at Truman’s investigations, he only promised to “give them hell” to the thrills of his cheering constituents.

The commission didn’t attribute any direct “unpatriotic” motives to the war profiteers, writes McCullough, but rather wrote in its reports that it was “big business playing the game according to the rules,” with a heavy price “to be borne by the entire nation.”

Truman drew significant public attention to the rampant profiteering and convinced President Roosevelt to disband the Office of Production Management and establish an all-new War Production Board. In doing so, Truman saved the country billions of dollars and became famous in the process, earning the cover of Time magazine in 1943 as “Investigator Truman.”

His career only improved from there, of course, as he earned a vice presidential nod from Roosevelt and the Oval Office upon FDR’s death. (Interestingly, Truman first learned about the Manhattan Project during his time heading the Truman Commission, as he began receiving bits of information about a large project with vast, unexplained expenditures). Overall, the Truman Commission is largely hailed as the most successful congressional investigation effort of all time.

Certainly it would stand to reason that, all these years after the triumph of the Truman Commission, we should have an even better system for monitoring graft in such a vital area of national security profiteering. Instead we have merely institutionalized the profiteering process. Now we are all bearing the cost, though none so much as the soldiers who must depend on contractors.

The New York Times reported Wednesday that the amount of money the State Department pays to private security contractors has skyrocketed to $4 billion, from just $1 billion four years ago. Unfortunately, the budget for oversight of the contracts has remained virtually unchanged, and few officials have been added to oversee the contracts. This leads to unsurprising reports like this one, from Reuters this week: “The State Department does not know specifically what it received for a billion-dollar contract with security firm DynCorp International to provide training services for Iraqi police, a U.S. watchdog agency said on Tuesday.”

The added dimension to our 21st century crisis in military privatization is that the impunity legally given to companies like Blackwater also extends to possibly criminal acts of violence. The most well-known incident involving Blackwater was one that roiled Iraq—the shooting of 17 Iraqi civilians on Sept. 16 in Baghdad, which American soldiers at the scene called “criminal event.” There are many other cases of inexcusable violence, too, like the intoxicated Blackwater contractor who killed a bodyguard for Iraq’s vice president last December.

None of these violations appears to be prosecutable by law. Blackwater likes to claim it’s part of the U.S. Armed Forces when it’s being sued in America, but in order to give itself immunity, the company alternately defines itself as an “independent contractor” when it comes to being subjected to the military’s court martial system, thus rendering it immune from any prosecution. This slippery move is thanks to L. Paul Bremmer, who signed the order allowing it on his final day in Baghdad.

When asked about the Blackwater employee who killed the Iraqi vice president’s bodyguard, Blackwater CEO Erik Prince said the company could fire or fine the employee, but not detain him. Asked if Blackwater helped the employee escape the country following the killing, Prince said “It could easily be.

How has the situation metastasized so incredibly, from the days when Truman and company sought to clamp down on fraud in the burgeoning military-industrial complex, to today, when the number of private security contractors in Iraq outnumbers U.S. troops, and as the CEOs of these companies bank billions of taxpayer dollars while some employees kill at will?

One obvious explanation is that Rep. Henry Waxman (D-CA), the initiator of ongoing congressional investigations, faces something Truman never did—an executive branch that aggressively opposes any intrusion whatsoever into how it awards these contracts. In response to increasing pressure to rein in Blackwater, Secretary of State Condoleezza Rice responded this week only with a plan for sensitivity training for Blackwater employees. ( Spencer Ackerman offers an improved lesson plan, starting with “Don’t drunkenly murder bodyguards of Iraqi dignitaries.”)

Nevertheless, the American people should still be outraged over the profiteering of companies like Blackwater. They are accountable to neither the taxpayers who fund them, nor the soldiers they serve with. “The man from Missouri,” said former Sen. Claude Pepper (D-FL), “dared to say ‘show me’ to the powerful military-industrial complex and he had caught many people in the act.” Once again, the profiteers have been caught in the act—this time only to be given sensitivity training.

True the Bush administration’s characteristic mix of incompetence, extremism, and corruption has worsened these abuses, but the problem is the system itself. Before anything gets fixed, reporters will have to find a way to communicate clearly how it works—or more accurately, does not. Only then can congressmen like Waxman give them the “hell”—to borrow a phrase from his predecessor, Truman—they have so richly earned.

Eric Alterman is a Senior Fellow of the Center for American Progress and a Distinguished Professor of English at Brooklyn College, and a professor of journalism at the CUNY Graduate School of Journalism. His blog, “Altercation,” appears at, His seventh book, Why We’re Liberals: A Political Handbook for Post-Bush America, will appear early next year.

George Zornick is a New York-based writer.

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Eric Alterman

Senior Fellow

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