The Shock Doctrine

Disaster Capitalism in Action: contractors

Halliburton, KBR Pay $579 Million in Corruption Case

Zachary A. Goldfarb, Washington Post, February 12, 2009

"Halliburton and Kellogg Brown & Root have agreed to pay $579 million in fines related to allegations of foreign bribery, the biggest fines ever paid by U.S. companies in a foreign corruption case, federal authorities and the companies said yesterday.

"The Securities and Exchange Commission and Department of Justice alleged that Houston-based Halliburton and KBR were part of a joint venture that spent $182 million to bribe Nigerian government officials over a 10-year period to win more than $6 billion in construction contracts."

Report: Prospective FEMA Chief Overbilled Louisiana for Katrina Cleanup

Al Kamen, Washington Post, November 25, 2008

"There's increasing talk that former director James Lee Witt, who took over the then-troubled agency at the start of the Clinton administration and left it eight years later with a much-enhanced reputation, is coming back from retirement to run FEMA for six months to a year, to whip it into shape....

"Witt, however, is likely to be grilled about his work on Katrina relief. Witt and Merritt began their work in the days after the hurricane, when Louisiana Gov. Kathleen Babineaux Blanco (D) hired their disaster recovery firm with an open-ended no-bid contract.

"An NBC News investigation of Louisiana records found that James Lee Witt Associates was paid more than $40 million for its work. Merritt, who had been the firm's top manager in Louisiana, tallied $506,000 in billable hours over the 10-month span from September 2005 through June 2006, NBC News found in its July 2007 report. The firm allegedly billed the state double what it actually paid its subcontractors, the report said. For instance, the firm subcontracted an Indiana company to manage recovery grants. That company's workers were paid $19 to $20 an hour, but the company billed Witt Associates $37.50 an hour, and Witt Associates billed the state $75 an hour, according to the NBC report."

Treasury to Outsource Implementation of $700 Billion Bailout

Mark Landler and Edmund L. Andrews, New York Times, October 4, 2008

"Treasury officials do not plan to manage the mortgage assets on their own. Instead, they will outsource nearly all of the work to professionals, who will oversee huge portfolios of bonds and other securities for a management fee....

"The selected asset management firms will receive a chunk of the $250 billion that Congress is allowing the Treasury to spend in the first phase of the bailout. Those firms will receive fees that are likely to be lower than the industry standard of 1 percent of assets, or $1 for every $100 under management....

"Using outside contractors on such an extensive scale raises a host of thorny questions, outside experts said. Among the most pressing is: How will the Treasury avoid conflicts of interest that fund managers will encounter as they work both for their own clients’ interests — which could pay higher fees — and the interests of taxpayers?

"'With anyone short of the stature and honesty of a Paul Volcker running it, you need to worry a lot about conflicts of interest,' said Alan S. Blinder, a former vice chairman of the Federal Reserve, referring to its former head. 'Unfortunately, there just aren’t many people with the expertise you need but without any possible conflicts.'"

See Also:
Treasury to dole out no-bid contracts due to "compelling urgency" of the crisis

Blackwater on Hiring Blitz Ahead of Hurricane Gustav

R. J. Hillhouse, The Spy Who Billed Me, August 29, 2008

"Blackwater Worldwide is currently seeking qualified law enforcement officers and security personnel to potentially deploy to provide security in the possible aftermath of Hurricane Gustav. This is the first time Blackwater has mobilized under its controversial Homeland Security contracts. Blackwater did deploy security personnel to assist New Orleans in wake of Hurricane Katrina and this resulted in great controversy since it was the first time a private military corporation had deployed on US soil."

See also:
Jeremy Scahill discusses Blackwater's work in New Orleans

Contractors Charge City Staggering Fees for Debris Removal after 2007 Wildfires

Dana Wilkie, Brooke Williams and Danielle Cervantes, San Diego Union-Tribune, August 3, 2008

"The city [of San Diego] hired two companies, which billed by the ton. They removed more debris from 112 homes than the city anticipated and more than many private contractors believe would have been possible.

"Ultimately, A.J. Diani Construction Co. of Santa Maria and Watsonville-based Granite Construction Co. charged an average of nearly $83,400 per home, according to a San Diego Union-Tribune analysis of the companies' contracts and invoices. The total program cost was at least $9.4 million.

"The contractors' bills far exceeded an initial estimate of $28,000 per home. Some were almost nine times what privately retained contractors charged to clear nearly identical lots."

Defense Contractor Lockheed Martin Unhurt by Economic Crisis; Earnings Up 13%

Dana Hedgpeth, Washington Post, July 23, 2008

"Not all sectors of the economy are suffering these days. Lockheed Martin, the world's biggest defense contractor, reported a strong second quarter yesterday, with profit up 13 percent compared with the corresponding period last year. The Bethesda company said its net earnings were $882 million ($2.15 per share) for the period ended June 29, up from $778 million ($1.82) in the second quarter of 2007. Revenue rose 3.6 percent, to $11.04 billion....

"The defense sector has suffered little in the economic downturn, instead benefiting from government spending on the occupations of Iraq and Afghanistan."

U.S. Relies Heavily on Contractors to Fight Drug Trade

August Cole, Wall Street Journal, July 5, 2008

"During the more than five years that three Northrop Grumman Corp. employees were held hostage in Colombia, captured while on a Defense Department job, the U.S. steadily increased its use of contractors to help fight the drug trade in dangerous parts of the world. Although the biggest defense contractors have shown no interest in providing teams of armed security guards similar to those in Iraq from Blackwater Worldwide or DynCorp International, they are increasingly willing to operate close to danger.

"The U.S. spends hundreds of millions of dollars a year hiring pilots, mechanics, and military and police trainers to combat the drug trade in South American countries, as well as Afghanistan and other Central Asian states. Lockheed Martin Corp. also supports peacekeeping forces in Darfur."

151 Congress Members Invest up to $196 Million in Defense Contractors

Center for Responsive Politics,, April 3, 2008

"According to the most recent reports of their personal finances, 151 current members of Congress had between $78.7 million and $195.5 million invested in companies that received defense contracts of at least $5 million in 2006. In all, these companies received more than $275.6 billion from the government in 2006, or $755 million per day....

"While Democrats are more likely to advocate for ending the Iraq war sooner than Republicans, as a group they have more of their own money invested in America's military efforts. In 2006 Democrats had at least $3.7 million invested in the defense sector alone, compared to Republicans' $577,500. More Republicans, however, held stock in defense companies in 2006—28 of them, compared to 19 Democrats."

Former Rumsfeld Aide Secures Contracts for Qinetiq

Tim Shorrock, CorpWatch, January 15, 2008

"A Pentagon office that claims to monitor terrorist threats to U.S. military bases in North America -- and was once reprimanded by the U.S. Congress for spying on antiwar activists -- has just awarded a multi-million dollar contract to a company that employs one of Donald Rumsfeld’s former aides. That aide, Stephen Cambone, helped create the very office that issued the contract."

Private Firefighting Becomes Massive Industry

Miriam Raftery, Raw Story, December 10, 2007

"Today, a decline in public funding for firefighting services has sparked explosive growth in the private sector. The world’s largest insurance company – American Insurance Group – now has “Wildfire Protection Units” in 150 US zip codes. During the 2007 California wildfires, AIG’s firefighters saved homes in wealthy areas, while less fortunate neighbors were left with rubble....Fighting fires has become big business. The National Wildfire Suppression Association (NWSA), a trade organization founded in 2000, now represents over 200 private companies and 10,000 wild land firefighters. The private firefighting industry is estimated to be worth billions of dollars."

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