Is Blackwater founder's lucrative security-training deal with Chinese insiders against US interests?
By MARC FISHER, IAN SHAPIRA AND EMILY RAUHALA | The Washington Post | Published: May 4, 2018
Beijing's International Security Defense College, which boasts of becoming "the largest private security training school in China," sits behind a 45-foot-high exterior wall and a barricade. Inside the compound, trainers with police and military experience teach classes on tackling detainees, handling hostage situations and thwarting terrorist attacks.
The school is overseen by Frontier Services Group, a Hong Kong-based company founded by Erik Prince, a former Navy SEAL who created Blackwater, a security firm that played a major and controversial role in the U.S. wars in Iraq and Afghanistan.
In November, Frontier graduated its first class of "overseas security specialists," who were given "strict, strenuous and systematic" training to manage security in "high risk environments, warzones and operations across the globe," according to a Frontier promotional statement. Prince delivered the commencement address by video link.
The school's promotional materials boast that Frontier has trained more than 5,000 Chinese military personnel, 200 plainclothes police officers, 500 SWAT specialists, 200 railway police officers and 300 overseas military police officers. A slogan painted on the school's wall reads, "Training ground for warriors."
Prince spent more than a decade at the helm of Blackwater, which won hundreds of millions of dollars in government contracts to guard U.S. officials and facilities, mainly in Iraq and Afghanistan. After the company ran into legal and political problems stemming from its work for the U.S. military — including an incident in 2007 in which Blackwater workers killed 14 unarmed Iraqi civilians — Prince has lived and worked around the world, creating businesses based on providing security and handling logistics for enterprises on several continents.
Some members of Congress, military officials and people who do similar security work say that Prince's role as chairman of Frontier puts him in the unsettling position of advancing the strategic agenda of the United States' largest rival.
"He cloaks himself in the American flag when he's seeking a U.S. contract, but he is the hood ornament of the new era of the military industrial complex and a set of mercenaries who work for countries, oligarchs and random billionaires," said Sean McFate, a former military contractor who wrote a book about private armies, "The Modern Mercenary." "The Pentagon and national security establishment view Erik as a pariah."
Prince has said that the security training that Frontier does in China is meant to protect Chinese enterprises in Africa and Asia, not to support China's domestic police or military.
Prince grew up in a strongly anti-communist home. From an early age, he wrote in his autobiography, "I wanted to battle the Soviets myself."
More recently, however, he has said that his business in China "is not a patriotic endeavor"; rather, it is an effort "to build a great business and make some money doing it."
Prince has a knack for showing up where history is being made. Born to a fortune, he has built armies of contractors, buddied up with foreign leaders, and delved into domestic politics, playing a supporting role in various campaigns against Hillary Clinton and helping Donald Trump's presidential candidacy in 2016.
Blackwater won him prominence but also infamy, especially after some of his guards working in Iraq killed unarmed civilians. Prince, 48, portrays himself as a misunderstood patriot, a devoted warrior for his country. But he is also a globetrotting entrepreneur with a flair for intrigue.
Prince is a man of supreme connections — after living out of the country for several years, he turned up at Trump's election night party; his oldest sister, Betsy DeVos, is the president's education secretary; he's also close to Steve Bannon, Trump's former chief strategist. His companies won contracts from the George W. Bush and Barack Obama administrations to operate drones and provide security for the CIA.
His connections get his ideas in front of important people: Last summer and fall, Prince's proposal to have about 6,000 private contractors take on the training of Afghan security forces won consideration from top officials at the National Security Council, as did a related plan to pay private companies to help capture suspected terrorists for the U.S. government.
His connections get him into trouble: Special counsel Robert S. Mueller III is looking into whether Prince's meeting last year in the Seychelles islands with a Russian official close to Russian President Vladimir Putin was actually an effort to create a back channel between the incoming Trump administration and the Kremlin. Prince has denied that he was representing the administration when he met with Kirill Dmitriev, the chief of the Russian Direct Investment Fund.
And Prince has used his connections to push the envelope in innovative and potentially problematic ways: His growing business in China has now sparked allegations that he is acting against U.S. interests.
"Erik Prince likes to present himself as the perfect patriot, but in fact he is the super mercenary," said Rep. Jan Schakowsky, D-Ill., a longtime Prince critic. "The definition of a country is having hegemony over the use of force, and Erik Prince blurs that. . . . He wants to monetize war and peace."
Prince turned down requests for an interview with The Washington Post. His spokesman, Jonathan Garfield, offered to answer questions sent by email. The Post provided detailed questions, and several days later, another Frontier spokesman, Marc Cohen, said the company would not respond to the questions because "it's pretty clear that you've already made up what type of story you want to write and it's not a good one."
A Frontier spokesman later sent The Post a written statement saying that "Erik Prince is a proud American who would never seek to undermine the national interest. FSG is an international company with operations in China and is listed in Hong Kong. It aims to support infrastructure projects internationally to serve its clients' needs in the interest of shareholders and does not support a political agenda."
Prince contends that nothing he is doing in China conflicts with his dedication to his own country, but a former U.S. intelligence official who is knowledgeable about Prince's initiatives said many of his former colleagues think he has crossed a line.
"The China stuff makes everybody uncomfortable," said the former official, who spoke on the condition of anonymity because he is not authorized to discuss intelligence matters in public. "In the intelligence community and the Pentagon, there was discomfort to begin with because he was courting the Chinese government at the same time as he was courting the American government for work. . . . He is way out of bounds."
Prince calls his palatial estate in Middleburg, Virginia, Blackwater Ranch, but in the seven years since he sold Blackwater's successor company, he has built new businesses all around the world.
Blackwater, Prince wrote in his autobiography, "Civilian Warriors," "became something resembling its own branch of the military and other government agencies. . . . We became the ultimate tool in the war on terror," with 1,000 contractors in Iraq and hundreds in Afghanistan. Back at home, though, Prince's company became, as even he described its soiled reputation, "the face of military evil — gun-toting bullies for hire."
After the 2007 incident in Iraq turned Blackwater into a target of political criticism, especially from Democrats, and after then-Secretary of State Hillary Clinton in 2009 scrapped Blackwater's contract to protect U.S. diplomats in Iraq, Prince came to believe that he was the target of unfair and unwarranted inspection.
"I was strung up so the politicians could feign indignation and pretend my men hadn't done exactly what they had paid us handsomely to do," he wrote.
Boxed out of new business with the U.S. government, Prince turned his attention to partnerships in other countries. In 2010, after lawsuits and congressional investigations focused on Blackwater and those who had worked for the company, Prince moved to the United Arab Emirates, living there for three years. He wrote in his autobiography that he made the move because he was "fed up with an endless drip of frivolous lawsuits and years of bad press."
In 2013, two years after he'd sold off the remains of Blackwater, Prince was working hard to write a new chapter of his career. According to a former associate, Prince poured millions of his own dollars into Africa through a private equity fund called Frontier Resource Group, which invested in mineral and oil extraction in countries such as Guinea and South Sudan.
But when the firm struggled to raise capital, former associates of Prince said, he changed course and began Frontier Services Group (FSG). The new venture was aimed squarely at the rapidly expanding economic engine of China, which was creating enterprises across Asia and Africa. Prince wanted to offer logistics and aviation services for China's new businesses in some of the planet's most problematic places.
After all the controversy surrounding Blackwater's use of force and its military role, Prince repeatedly promised to steer clear of security work. He was, he said, creating an "austere logistics" company, which would focus on moving people and goods rather than providing security.
With that assurance, in 2014, William J. Fallon, a retired Navy admiral who served as the head of U.S. Central Command and had known Prince for many years, eagerly joined the company's board, comfortable with Frontier's mission.
"Erik's a guy who's very smart and very aggressive and has a lot of good ideas, and with some amount of prudent risk-taking, this was one of those things that looked appealing," Fallon said.
Prince had allied himself with a well-connected Hong Kong entrepreneur, Johnson Ko, whom Forbes magazine ranked in 2016 as Hong Kong's 49th-richest resident and whose digital TV set-top box business was a dominant player in the Chinese market.
For Ko, Prince offered a different kind of cachet. "He was a cool American," said a second former Prince associate, who spoke on the condition of anonymity.
At a private security industry conference in Beijing last year, Prince was a VIP guest. The speeches were all in Chinese, but Prince was one of the main attractions. People lined up to have their photos taken with him.
"Erik's a bit of a celebrity in China," said the first onetime Prince associate. "People, including prominent Communist Party members, would just show up where Prince was just because they wanted to meet with him."
At dozens of meetings in Hong Kong, Beijing and Shanghai, Prince pressed Ko's company to acquire Frontier Services Group, the associate said. Five days after Prince's memoir was published in 2013, the two men signed a deal that, according to the associate, netted Prince $3.5 million along with hundreds of millions of shares in the new Frontier Services Group.
Prince became chairman of Frontier, which would now be run by an executive team including Americans — its chief executive, Gregg Smith, a former Marine who had advised Prince on the Blackwater sale in 2010 — and Chinese managers from CITIC Group, formerly the China International Trust Investment Corp., a state-owned Chinese enterprise that held 20 percent of Frontier. (CITIC Group had been a major shareholder in Ko's earlier venture, DVN, which became Frontier.)
CITIC "is just one step removed from the Chinese government, "said Nicholas Bequelin, East Asia director of Amnesty International. "State-owned enterprises are led by people with key positions in the Communist Party." After The Post provided CITIC with a list of questions, the company, through a spokesman, declined to comment.
For China's leaders, the chance to work with someone like Prince was priceless, Bequelin said: "This is an attempt to learn how to secure interests. The Chinese realize they don't have the know-how . . . to compete on the geopolitical stage. As they invest in places like Pakistan and Latin America, they know security is going to be a crucial need and you need to know how to do that."
But although Prince is valuable as a symbol of American expertise in security, "among our partners, he's not the one that matters," said Xin Yang, founder and president of Frontier's Beijing security training school. "The Chinese are gradually taking more control" of the company. CITIC is now playing a larger role as Frontier's dominant shareholder, Xin said, and "Prince's share is decreasing. The Chinese are in charge, so it won't matter."
More than 5,000 private security companies do business in China, according to Alessandro Arduino, author of "China's Private Army," a book about how the country uses foreign expertise to protect its fast-expanding economic empire.
Prince's company has a special status among those businesses, Arduino said. Despite its sullied reputation back home, "Blackwater is a brand name in China," he said, "and people know that no one under their protection died. And for the new Chinese generation, most of whom have only one child, nothing is more important than protecting life. Blackwater's aggressive tactics have earned them criticism, but also praise within Beijing's security apparatus because they never lost a client."
As China presses its "Silk Road" strategy, a $1 trillion effort to extend its political and economic influence across Asia and into Europe and Africa, security has become a vital concern. And the role of private security companies was changing, especially after a 2010 law nudged those companies — a relatively new phenomenon in a country where the state has a monopoly on security matters — toward hiring military personnel. Today, "most of the people in private security in China are former members of the People's Liberation Army or People's Armed Police," Arduino said.
Prince and Ko sold Frontier to potential investors at a 2014 dinner in Hong Kong that featured a celebrity chef and signed copies of "Civilian Warriors." To some Americans at the event, Frontier's sales pitch to hedge fund operators and other affluent guests sounded familiar. The company's promotional slide deck included an illustration of a rugged landscape featuring armored vehicles, helicopters, a plane and a surveillance blimp. Although the page was stamped with the Frontier logo, "it was the same page used for a presentation" by Blackwater, which had been renamed Xe Services, the first former Prince associate said. Only the company logo had been swapped out.
Frontier's early work took place mainly in Africa, where the firm bought a Kenyan aviation firm, enabling it to transport officials from the United Nations or the U.S. military's Africa Command. Frontier later purchased an aviation company in Malta, where it used Boeing 737s to fly around sports and music celebrities such as Lady Gaga and U2, according to Prince's former associates.
Frontier also conducted medical evacuations, such as after the 2015 al-Shabab terrorist attack at Garissa University College in Kenya that killed 148 people. By late 2015, Frontier was trucking all manner of products — furniture, mustard, mayonnaise, skin cream — across Africa.
"Frontier Services Group is not Blackwater at all," Prince told CNN last year. "None of our men are armed. We deliver groceries, including frozen groceries, from Capetown and Durban all the way up through the Democratic Republic of Congo. We do aviation out of Malta and we are the biggest medevac provider for the U.N. . . . It is not a defense contractor at all."
At first, Fallon wasn't bothered by the Chinese enterprise's stake in Frontier. The country, he said, is one of the few willing to invest in Africa. "The regulations in Hong Kong are up front and they're very strict, and they play by the rules," he said.
Before joining Frontier, Fallon had only one serious reservation. He worried about violating the U.S. Constitution's ban on retired or active government employees accepting "emoluments," or payments from foreign nations, without congressional approval. But Fallon got legal advice and a green light because the Chinese didn't own a controlling interest in Frontier.
But Fallon knew his limits. As a former high-ranking U.S. military officer, he could not in good conscience work on security matters for another country. "I didn't want to get into the security business," he said in an interview. "Guns, bullets, training people, protection services. That's not what I signed up for. I wanted a complete divorce from that stuff, especially given my history. If I show up at someone's door and I am with an outfit doing security, what are they going to think? This was a strong red line."
Although Frontier initially focused its work on Africa, it changed course last year. On its website, security now took top billing. "FSG understands what it takes to succeed in frontier markets," the site says. "Our solutions are based on firsthand experience operating in the most austere environments. Integrating security, logistics and insurance services into customized solutions."
The second former Prince associate said the shift has been marked: "Currently, Frontier Services Group is one-hundred percent focused on security and supporting One Belt One Road," China's initiative to create a transportation network to enhance its economic influence across Eurasia. "And Erik is setting himself up to offer military-style security service for the power projection of China globally."
"When you want logistics done in Africa, you call DHL," said McFate, the former military contractor. "When you want muscle, you call Erik Prince."
A promotional video for Frontier's Beijing security training school shows students taking on masked, knife-wielding men — a type of attack that, in China, is indelibly associated with a 2014 assault at a train station in Kunming, a city in Yunnan province, where terrorists dressed in black and carrying knives killed 31 people and injured more than 140. China blamed the attack on Muslim "terrorists" from the Xinjiang region. Chinese media called the assault China's 9/11.
After the attack, Chinese authorities ratcheted up what official state media call a "people's war on terror," even as human rights groups view the confrontation as a crackdown on the Uighurs, a Muslim minority, and other ethnic groups.
The Kunming attack led the school to shift its focus, offering counterterrorism classes in addition to training for elite bodyguards, said Xin, the academy's founder. Today, he said, the most commonly requested training is lessons in tackling an attacker armed with a knife.
Frontier acquired a 25 percent share of the security college last year and now runs the facility to "help companies better prepare their workforce for operating across One Belt One Road regions in Asia and Africa," Prince said in a statement at the time of the purchase.
Xin, 35, is a martial arts expert who has worked with China's military and police. He said the risk of terrorist attacks, particularly along China's new Silk Road, is the basis for the school's major expansion plans from its Beijing campus to four new locations, including outposts in the Xinjiang Uighur region, in China's northwest, near the borders with Pakistan and Afghanistan; and in Yunnan province, where China meets Burma, Laos and Vietnam. In the long term, Frontier plans to open branches of the school in every province in China.
The Xinjiang branch is being built south of Kashgar, an area where a massive Chinese security presence has reshaped Uighur life. The school will focus on training police and military personnel stationed there, Xin said.
Frontier's presence in Xinjiang is evidence of an unusually close relationship with the Chinese government, said Bequelin, of Amnesty International. "Frontier cannot decide for itself where it sets up shop," he said. "Xinjiang is a sensitive region, so you're not going to get permission to set up there except from very high up in the government."
Xinjiang is a difficult place for any outsider to operate in, the human rights activist said. "It's a place with a layered history of violations and conflict," he said. "The security mission there is to defend China's borderlands and facilitate the assimilation of ethnic minorities."
Frontier says its trainers in China are unarmed and are not engaged in operations, only in passing along security know-how. "FSG has no security operations within China other than our training center in Beijing, which is for kidnap and terrorism avoidance," a Frontier spokesman said in a statement.
Advocates for the Uighur minority in Xinjiang argue, however, that Frontier's work there supports the Chinese authorities' crackdown on the Muslim minority, a drive that includes sending people to reeducation camps.
"It's really sad to see a United States company sending personnel to support the Chinese mission to completely eliminate the Uighur culture," said Rushan Abbas, a Uighur-American translator and former journalist who worked as a consultant for the State Department in the George W. Bush administration.
Frontier's exact role in the province is not clear, said Nury Turkel, chairman of the Uighur Human Rights Project and a Washington lawyer, "but it's very disturbing to have an American entity helping the Chinese government further their oppressive policies."
Frontier declined to respond to The Post's questions about its forward operating base in Xinjiang, but in previous statements, the company has said that its training at such facilities is designed to teach security skills to unarmed nonmilitary personnel.
At a tense, two-day board meeting in March 2016, the Americans and the Chinese who ran Frontier were on opposite sides of a basic division about the company's future, according to the first former Prince associate.
Convening in Hong Kong, Frontier's American executives detailed the results of an internal investigation that the company had commissioned of whether Frontier was at risk of violating U.S. regulations governing the sale of weapons or combat tools to foreign governments.
As Frontier expanded into security work, Fallon and some other U.S. executives at the company had begun to worry. In 2015, according to Frontier documents, Smith, the company's chief executive, learned that Prince had directed two of the company's crop dusters — small planes that FSG rented out to governments so they could keep watch on trouble spots — to be modified so they could be armed with guns, rockets or Hellfire missiles.
The modified planes were intended for use by the government of Azerbaijan in its decades-old conflict with ethnic Armenians, according to the former Prince associate. That person said Prince helped set up a mercenary unit for the former Soviet republic, but the modified cropdusters never reached Azerbaijan.
According to internal Frontier documents, executives were concerned that the company might be skirting U.S. law — known as International Traffic in Arms Regulations (ITAR) — requiring Americans to obtain special permits before defense-related technology can be transferred to foreign countries.
In a 2015 memo to Prince obtained by The Post, attorneys at the Washington law firm Steptoe & Johnson recommended that "Frontier's U.S. personnel should exercise utmost caution not to provide military advice or training to foreign units and forces that could be construed as defense services." The memo said an American who advised a foreign entity on the "make-up of the security force or the sourcing of equipment" would face "a high risk" of legal exposure.
Frontier's executives asked two law firms to conduct an internal investigation, and an inquiry by King & Spalding and Holland & Hart concluded that Prince's Azerbaijan plan probably would be a problem for U.S. regulators. "The evidence strongly suggests that Mr. Prince was offering a foreign defense article (i.e., an attack aircraft) for sale" to Azerbaijan's defense ministry, the law firms' report said. Frontier itself didn't appear to violate U.S. regulations, the report said, but Prince and some other Frontier employees appeared to engage "in brokering activities without being registered with [the State Department]. This presents potential violations of ITAR, liability for which may flow to FSG."
Prince never applied to the State Department for a license to broker the sale of the planes, according to the first former Prince associate.
John Black, part-owner of a Virginia firm that trains companies to comply with ITAR, said Prince probably would have been rejected for a license. "The State Department doesn't like to approve exports to places where there are these regional conflicts," he said.
When Frontier executives learned what the investigation had found, they canceled the sale of the planes, the two former Prince associates said. And King & Spalding's attorneys, worried that Frontier faced legal liability from Prince's actions, went to the Justice Department in February 2016 to lay out their findings, according to company documents. The visit to Justice took place without Prince's knowledge, the first former Prince associate said.
A London-based spokesman for Frontier said that "FSG's review did not identify ITAR violations. Any assertion that FSG or Mr. Prince violated any laws in this matter is categorically false. FSG voluntarily filed a report with the [State Department's Directorate of Defense Trade Controls] back in September 2016 to assist with their enquiries, to which there has been no follow up whatsoever, making it crystal clear that this matter has ended."
The Justice Department and other U.S. officials declined to say whether they are investigating Prince's role in engaging in military commerce with other nations. The State Department, which Frontier also notified of possible transgressions, declined to comment. A person familiar with the department's investigation of Frontier said the case was still active as of December 2017. "It was taken very seriously," the person said. "This case was not considered routine."
Frontier has rejected any notion that it might have been involved in selling military equipment. "Since our inception, FSG has had bright line policies against the provision of defense services," the company said in a statement. "FSG has been and remains strictly a Transportation and Third Party Logistics business."
At Frontier's Hong Kong board session, a few weeks after the Justice Department meeting, Ko, the senior Chinese official on the board, defended Prince, according to the first former Prince associate with knowledge of the meeting. The board's Chinese members said China needed his expertise. Ko declined to speak to The Post and did not respond to written questions that Frontier's spokesman had requested.
Immediately after Ko spoke, Smith, Frontier's chief executive, and Fallon announced their resignations. Fallon declined to discuss his departure and Smith would not comment for this article. Dong Yi Hua, a former CITIC executive, is now Frontier's chief executive.
Within months, all but two of Frontier's American senior executives had departed, mainly because of their concern that Prince's work in China could conflict with U.S. interests, said five people who worked closely with Prince.
A few months ago, when a former colleague confronted Prince about his work training Chinese security officers, Prince replied by asking whether it would be better if he did the work in China or if the Russians did it, the former colleague recalled.
Although some of Prince's former associates wish he would steer Frontier away from security work, others say his initiatives in China fit in with his view that American foreign policy has lost its way.
"In some ways, nothing's changed with Erik," said a former military contractor who worked closely with Prince for years. "He clearly feels that the U.S. government and State Department betrayed him. He's very, very angry. The Chinese paid him a lot of money, but he's not doing this just for the money. He believes the Chinese have a better strategy to solve problems than we do and he thinks a global response is required."
Rauhala reported from Beijing. The Washington Post's Luna Lin in Beijing contributed to this report.