Feral Jundi

Tuesday, March 3, 2009

Industry Talk: Erik Prince Steps Down

Filed under: Industry Talk — Tags: , , , — Matt @ 12:04 AM

   This was kind of a shocker.  I would have thought that Erik would have hung on as a leader that ‘found religion’, along with the new rebranding of the company.  But I guess this move is just one more way of cleansing the company image.  Mr. Prince is attached to the old Blackwater, and unfortunately that is very tough image to escape. 

   More than likely, he will still be connected as part owner or what not, and still be involved at some level.  But as a figure head, I guess his small group of leaders just came to the conclusion that it wasn’t helpful for him to remain.  We’ll see how things go, and I wish Mr. Prince all the best as he ‘re-charges’ and connects with family.  

    But like I have mentioned before, with changing the name, and having the old CEO step down, will the company take the necessary measures to insure good solid leadership, Kaizen, and outstanding customer service with this new version of a company?  The ultimate transformation of a company in my opinion, is for it to come from the bottom, and rise to the top as the best model of a company in the private military and security industry.  If Erik truly wanted to change the legacy of Blackwater, he should take a personal interest in the reformation and development of this new company.  And if he has issues with those in the media that were unfair with their reportage, then the best revenge would be to build an exemplary company that would prove them all wrong about the true potential and societal impact of a well organized and managed PMC/PSC.

   On a side note, I highly suggest that guys hang on to their Blackwater t-shirts and trinkets.  I predict that those things will be collector’s items in the coming years, much like Air America items from the Vietnam days are collector items now.  Blackwater is very much a part of the history of this conflict, good or bad. This company also had contractors that certainly gave all, and we must honor those sacrifices as best we can. They did not just die for a company, they died for this country and in a war, defending those that depended on Blackwater for protection.  It is up to us to learn from this company and remember the things they did well, and did not do well, and use those lessons to shape this industry into something that people will admire and respect. Semper Fi. –Matt  

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Blackwater T-Shirt 

Founder, CEO of Blackwater Steps Aside, ‘Worn Out’

MARCH 2, 2009

By AUGUST COLE

Erik Prince, who founded security contractor Blackwater Worldwide and remained defiant after the company became embroiled in controversy following a deadly 2007 shooting incident in Baghdad, is stepping down as chief executive of the parent company.

The 39-year-old Mr. Prince will retain his post as chairman but move away from daily oversight of the company he started 11 years ago. The closely held venture earned more than $600 million in revenue last year, with about a third of that coming from a major U.S. State Department contract to protect diplomats in war zones.

“I’m a little worn out by the whole thing, the politics of it all,” Mr. Prince said during an interview at the company’s headquarters in McLean, Va. “Me not being part of the equation reduces the ‘X’ on the thing.”

The move comes at a turning point for the security industry. The Obama administration plans to withdraw most U.S. combat troops from Iraq by next summer and the Iraqi government is assuming legal authority over Defense Department and State Department contractors.

With this new legal authority, the Iraqi government is effectively forcing the company to leave by denying it a needed license to work there. That led to the State Department’s announcement in January it won’t renew Blackwater’s contract.

The parent company, EP Investments, in February announced it was changing its name to Xe, in part to distance the company from the stigma attached to the Blackwater moniker. Mr. Prince said the new name is derived from the abbreviation for Xenon: “It’s an inert, non-combustible gas.” Blackwater references were also dropped from the names of its affiliated business units.

Other management changes are being made. Joe Yorio, 44, an executive from shipping company DHL with an Army Special Forces background, will become president of Xe, replacing longtime employee Gary Jackson. Danielle Esposito, 32, a veteran employee, will become chief operating officer and executive vice president. The chief executive slot remains open and is likely to be filled by Mr. Yorio, Mr. Prince said.

“It’s not an entrepreneurial start-up anymore,” said Mr. Prince. “Any systems can always be made better…and that’s what the new management team is there to do.” Other longtime executives have also recently departed.

The company’s image was forged from its high-risk guard work protecting State Department diplomats in Iraq. A growing aviation business, and a successful training operation in Moyock, N.C., have largely remained in the shadow. Without the State Department contract in Iraq, Xe will largely be out of the guard business. That puts an increasing importance on military and police training as well as flying helicopters and planes for the U.S. military, with a focus on Afghanistan.

Mr. Prince defended the company’s track record, saying “we have done great work for the U.S. government.” With unrivaled equipment, including a fleet of helicopters, and an American contracted guard force in Baghdad, Blackwater retained a perfect record of never having one of its State Department clients killed or injured under its protection.

Blackwater’s tactics were put under a microscope after a shooting incident on Sept. 16, 2007, that left 17 Iraqis dead. Although the company said its guards acted in self defense, the U.S. Justice Department recently charged five of the men for their alleged role in the incident. They pleaded not guilty and a trial is expected early next year. A sixth guard pleaded guilty and is cooperating with the government.

Mr. Prince said his decision to step aside was motivated by wanting to spend more time with his seven children, noting that his father almost died at 42 while building an auto-parts company. Mr. Prince used part of the $1.35 billion from the sale of that business to start Blackwater in 1997.

Among other things, Mr. Prince said he is also planning to start a private-equity venture.

Looking back, Mr. Prince said he is proud of the company’s record in the security business, as well as its training operations in the U.S. and abroad. “The PR challenges were far more relevant than I thought they would be,” he said. “I thought we operated in a meritocracy.”

Write to August Cole at august.cole@dowjones.com

Story Here

3 Comments

  1. Matt: You'll never hear about it from MSM, because they only peddle scandal, dirt and sleaze, but a glance at the press release on the changes talks about the kind of stuff you mention–"Other changes connected to this yearlong review include the addition of an independent committee of outside experts charged with supervising Xe compliance structures; the expansion of a quality program in support of ISO 9000 certification; and the creation of a corporate governance and ethics program modeled on Defense Industry Initiative standards." Won't matter, though. Critics can't let reality–or real change–make a difference in the anti-PSC mythology.

    Comment by Drew — Tuesday, March 3, 2009 @ 10:11 AM

  2. Thanks Drew. Boy, I would love to hear a company rep at Xe talk about some of this stuff on the radio show. The lessons learned are what I am most concerned with now, and a lot of companies could gain some useful knowledge about what Xe is doing to make themselves into a better company.

    I don't call it exposing trade secrets, I call it sharing the better way with an industry that needs all the help it can get. I just don't want to see other companies fall into the same trap, and have their incidents damage the industry image. The strength of the whole, depends upon the strengths of the parts. Cheers.

    Comment by headjundi — Tuesday, March 3, 2009 @ 12:32 PM

  3. Matt,

    The second to last sentence in this piece from the WSJ is pretty telling. Prince says, "The PR challenges were far more relevant than I thought they would be.” Really makes you wonder 'what could have been' had they been more proactive.

    Jake

    Comment by Jake — Tuesday, March 3, 2009 @ 4:17 PM

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