Wall Street Journal
By Nathan Hodge
September 29th, 2011
When Ted Wright became president and chief executive of Xe Services LLC in June, he took over a global security contractor with important U.S. government contracts, state-of-the-art training facilities and a work force with experience in some of the world’s most dangerous places.
He also inherited the formidable task of rebranding the company, formerly known as Blackwater Worldwide, and preparing it for an uncertain regulatory climate and heightened public scrutiny of the private-security business.
Since his arrival, he has tried to distance the company from its original ownership and management without obliterating its legacy, which includes a willingness to risk death or injury to protect clients in combat zones.
He has relocated Xe’s North Carolina headquarters to Arlington, Va., close to its primary customers: the State Department, the Pentagon and U.S. intelligence agencies. He has hired a new governance chief to oversee ethics and legal compliance. And the company now has an independent board that includes former government officials, such as former U.S. Attorney General John Ashcroft and retired Navy Adm. Bobby Inman.
Founded by former Navy SEAL Erik Prince, Xe emerged in the post-9/11 world as a top provider of security guards and training services to the U.S. government. It also came laden with controversy. The company, then known as Blackwater, was forced out of Iraq after being involved in a deadly shootout in Baghdad in 2007 that claimed the lives of 17 Iraqi civilians.
More broadly, its reputation for aggressive tactics and its menacing bear-paw logo made it a lightning rod for critics of U.S. reliance on private contractors to protect diplomats and other officials abroad.
Mr. Prince responded to the political and public-relations fallout with a major reorganization of the business, giving it a new name and selling off some assets, including its aviation wing. Late last year, however, Mr. Prince left the company, selling his stake to the investor group USTC Holdings LLC.
“Do I think the rebranding of Xe was successful? Absolutely not,” Mr. Wright said in an interview. “Here’s the reason why: All they did was change the name of the company; they didn’t change the company.”
On a tour of Xe’s sprawling Moyock, N.C., training facility, Mr. Wright said part of his rationale for moving the company’s headquarters was to shed some of the Blackwater “mystique.” He said that while the company still has classified clients, its move inside the Washington Beltway was meant in part to convey greater openness and transparency to its government overseers and the public.
Of the company’s $330 million of annual revenue, 95% comes from government work, two-thirds of it from defense and intelligence contracts.
But the company’s original name, along with its controversial founder, casts a long shadow. Earlier this year, Mr. Prince was the subject of media reports about his role consulting on a project to raise a private army in the United Arab Emirates.
More recently, Mr. Prince, who still owns the Blackwater name, entered the entertainment business with a Blackwater “first-person shooter” videogame, to be released next month.
Mr. Wright said the persistence of the Blackwater brand makes it harder for Xe to turn the page, but “sooner or later people are going to see that separation.”
The private-security market, meanwhile, is under a microscope in Washington.
The Commission on Wartime Contracting in Iraq and Afghanistan, a bipartisan panel established by Congress, recently recommended curtailing the government’s use of private-security contractors. This summer, Reps. Jan Schakowsky (D., Ill.) and Sen. Bernie Sanders (I., Vt.) introduced legislation that would phase out private-security contractors in conflict zones.
“Given [Xe’s] history, I think a healthy dose of skepticism is justified,” said Jake Wiens, an investigator with the Project on Government Oversight, a nonprofit group. “But it’s a good sign that private-security contractors are looking to brand themselves as ethical and accountable companies.”
Xe board member Jack Quinn, a former Clinton White House official and former chief of staff to Vice President Al Gore, said the company “admittedly has had a cloud over it, but it is not one that is well deserved. A single incident caused it a significant reputational problem.”
The mission of providing training and security, Mr. Quinn added, “is absolutely critical to our government in pursuing its national-security objectives.”
Some signs of Xe’s Blackwater past linger. At the Moyock training facility, it maintains a carefully tended sculpture garden, with stones commemorating each of the 42 company operatives killed in the line of duty. The memorial features a statue of a boy holding a folded American flag and plaque with the name Blackwater USA.
Craig Stephens, a senior driving instructor at the facility, said the company’s employees are motivated to bring a real-world feel to training that could save the lives of the company’s personnel and its clients. “I do everything I can to make sure they come home safe,” he said. “We take that personally. Everyone here has lost somebody.”
On the facility’s 52 shooting ranges, the focus is on precision shooting and responding to realistic threats. One team of instructors demonstrates a hostage rescue in one of the customized “shoot houses,” clearing rooms with rifles and flash-bang grenades in a matter of seconds.
A decade ago, that kind of specialized training, known as “close quarters battle,” would have been available only to elite police SWAT teams and military special-operations units. Now it is required by more ordinary military units, said Bill Solares, one of the shooting instructors.
At the same time, company officers talk up a new emphasis on compliance and accountability. Last year, Xe reached a deal with the State Department to pay a multimillion-dollar fine for alleged violations of the U.S. export-control law by trying to sell its services to southern Sudan and other governments.
Joe Dickinson, program director at the training center, said Xe is taking pains to ensure that it doesn’t run afoul of the law. “The company’s mantra is compliance and regulation,” he said.
Xe, Mr. Dickinson added, has had its “bruises and broken bones. But when we saved someone downrange, we have something to be proud of.”