War Profiteering, or How You Too Can Get Rich Quick

( – promoted by buhdydharma )

Robert McKeon, the head of Veritas Capital, is about to profit in “the most lucrative deal of the wars in Iraq and Afghanistan” notes the Street Talk blog at Forbes. How did McKeon do it? By investing in private military contracting mercenaries, of course! Now the DynCorp owner is set to cash out his wartime investment.

DynCorp International, the… provider of services to the U.S. military, announced Monday that it has reached a $1.5 billion deal to be acquired by funds managed by Cerberus Capital Management. If the deal goes through, McKeon will have turned a $48 million personal investment in DynCorp into some $320 million for himself.

Ka-ching!

Street Talk describes the DynCorp deal as a “defining transaction for McKeon”. So, is McKeon the definition of a Wall Street war profiteer?

McKeon signed a deal in 2004 to purchase DynCorp in a leveraged buyout. The deal, which closed in early 2005, looked like a sure thing and McKeon personally put up $48 million of the $100 million of equity needed to complete the purchase.

DynCorp benefited from the problems in Iraq and Afghanistan created by KBR and Blackwater. After all, the involvement of DynCorp employees in the Bosnian sex-slave trade happened in the late 1990s. But, those concerns were settled in 2002, two years before McKeon cut the check.

Basically, compared to the profiteers at KBR and trigger-happy mercenaries at Xe née Blackwater, the Pentagon had to go with the bids from DynCorp and Fluor Corp., which they did last year when DynCorp was awarded a “five-year, $5.9 billion deal… to logistically support U.S. troops in southern Afghanistan”.

DynCorp has emerged as one of the big winners of the wars in Iraq and Afghanistan, which now generate 53% of DynCorp’s $3.1 billion of annual revenue. The company’s revenue grew 45% last year thanks to a 51%-owned joint venture that has a multiyear $4.6 billion contract to supply 9,100 linguists to translate for U.S. soldiers in Iraq.

Ka-ching!

And the future for DynCorp looks bright. In December, the Wall Street Journal reported that the U.S. is adding private contractors at fast pace.

The Obama administration has made moves to reduce the use of government contractors at the Pentagon itself, amid concerns that outside companies were doing work that government employees should do. On the battlefield, however, their use is rising in what has become a permanent shift in how the U.S. military operates overseas.”

DynCorp and Fluor “what is effectively the biggest Defense Department contract supporting U.S. forces in Afghanistan, which could be worth as much as $7.5 billion to each company in the coming years.”

Ka-ching!

According to Jim Fink at Investing Daily, military contracting is still a terrific way to ‘profit from the war in Afghanistan‘.

The Afghanistan Troop Surge Means Profits!

But the likelihood that the U.S. will end up the loser in Afghanistan is a long-term worry. In the short-term, military contractors doing business in Afghanistan will make a boatload of money as the U.S. is committed to a “surge” that will accelerate military spending.

The U.S. is caught in a war without end and Afghanistan is the battle field, but that’s no reason not to make a quick buck million or two along the way.

The real reason why the U.S. is relying on private military contractors is because it obscures the true cost of our country’s wars both in terms of blood and treasure from the public and makes the oversight job for members of Congress, if they were actually interested, more difficult.

For at least the past couple years, contractors have outnumbered U.S. troops in Afghanistan according to the New York Times. To be fair some of the contractors in Afghanistan are locals hired by the U.S. in an effort to provide jobs and boost the war-torn country’s economy, but there are still many U.S.-hired contractors providing logistics and security.

In 2007, as violence escalated in Iraq there was surge in contractor casualties. Now this year, ProPublica reports that Contractor deaths in Afghanistan are rising.

Of the 289 civilians killed since the war began more than eight years ago, 100 have died in just the last six months. That’s a reflection of both growing violence and the importance of the civilians flooding into the country along with troops in response to President Obama’s decision to boost the American presence in Afghanistan…

The Pentagon reported 107,292 U.S.-hired civilian workers in Afghanistan as of February 2010, when there were about 78,000 soldiers…

Using civilian contractors to haul food, prepare meals and act as bodyguards has kept the Pentagon’s official casualty figures lower than they would have been in past conflicts, where contractors were not as heavily used.

Contractor casualties are, by and large, invisible to the public, disguising the full human cost of the wars in Iraq and Afghanistan. They are not reported in totals given by the government. If they were, the death toll in Afghanistan would have surpassed 1,000 — 848 soldiers, 289 civilian contractors — from 2001 to 2009, a milestone that has gone entirely unmarked.

Hiding the true costs of the wars is accomplished further, as the Huffington Post Investigative Fund reports, by hiring war contractors to overseeing each other. Shortages in contracting oversight personnel at the Pentagon and State Department continue more than eight years in to the wars in Iraq and Afghanistan.

By having Cerberus, a private equity investment firm buying out DynCorp, a public company, tracking the war profiteering will become that much more difficult.

But really, that’s just the cost of waging war doing business in America and its Afghanistan and Iraq subsidiaries. After all, you too could get rich quick by being a war profiteer.

Ka-ching!

 

^{Cross-posted from Daily Kos.}