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theintercept.com

How Erik Prince Used the Rise of Trump to Make an Improbable Comeback

Matthew Colematthew.cole@​theintercept.com@matthewacole
38-48 minutes

When Erik Prince arrived at the Four Seasons resort in the Seychelles in January 2017 for his now-famous meetings with a Russian banker and UAE ruler Mohammed bin Zayed, he was in the middle of an unexpected comeback. The election of Donald Trump had given the disgraced Blackwater founder a new opportunity to prove himself. After years of trying and failing to peddle a sweeping vision of mercenary warfare around the world, Erik Prince was back in the game.

Bin Zayed had convened a group of close family members and advisers at the luxurious Indian Ocean resort for a grand strategy session in anticipation of the new American administration. On the agenda were discussions of new approaches for dealing with the civil wars in Yemen, Syria, and Libya, the threat of the Islamic State, and the United Arab Emirates’ longstanding rivalry with Iran. Under bin Zayed’s leadership, the UAE had used its oil wealth to become one of the world’s largest arms purchasers and the third largest importer of U.S. weapons. A new American president meant new opportunities for the tiny Gulf nation to exert its outsized military and economic influence in the Gulf region and beyond.

Prince was no stranger to the Emiratis. He had known bin Zayed, the crown prince of Abu Dhabi and de facto ruler of the UAE, since 2009, when he sold the sheikh on creating an elite counterterrorism unit. That deal ended badly for Prince, but Trump’s election had recalibrated his usefulness. As a prominent Trump supporter and close associate of Steve Bannon, not to mention the brother of incoming cabinet member Betsy DeVos, Prince was invited to the meeting as an unofficial adviser to the incoming administration.

Prince’s meeting with a Putin intimate shortly before Trump’s inauguration has drawn intense interest from Congress, the Mueller investigation, and the press.

When Prince joined the Emirati royals and other government officials on a deck overlooking the Indian Ocean, bin Zayed made it clear to everyone there that “Erik was his guy,” said a source close to the Emirati rulers, who was briefed by some of those in attendance. Prince, in bin Zayed’s view, had built and established an elite ground force that bin Zayed had deployed to wars in Syria and Yemen, the first foreign conflicts in his young country’s history. It was because of Prince, bin Zayed said, that the Emiratis had no terrorists in their country. Prince had solved their problem with Somali pirates. “He let his court know that they owed Erik a favor,” the source said.

Part of that favor apparently involved facilitating an introduction to Kirill Dmitriev, CEO of an $8 billion Russian sovereign wealth fund and a close associate of President Vladimir Putin. Prince repeatedly and under oath in testimony to Congress denied that his meeting with Dmitriev had anything to do with the Trump administration, describing it as no more than a chance encounter over a beer.

“We were talking about the endless war and carnage in Iraq and Syria,” Prince told the House Intelligence Committee. “If Franklin Roosevelt can work with Joseph Stalin after the Ukraine terror famine, after killing tens of millions of his own citizens, we can certainly at least cooperate with the Russians in a productive way to defeat the Islamic State.”

MOSCOW, RUSSIA - OCTOBER 5, 2017: Russian Direct Investment Fund CEO Kirill Dmitriev (C) attends the Russian-Saudi Investment Forum at the Ritz-Carlton Moscow Hotel. Sergei Bobylev/TASS (Photo by Sergei BobylevTASS via Getty Images)

Russian Direct Investment Fund CEO Kirill Dmitriev, center, attends the Russian-Saudi Investment Forum at the Ritz-Carlton Moscow Hotel on Oct. 5, 2017.

Photo: Sergei Bobylev/TASS via Getty Images

Although the UAE has been a very good customer of U.S. arms dealers, bin Zayed had grown frustrated with the Obama administration’s refusal to work with Russia to end the war in Syria. Russia was actively courting the UAE, and from bin Zayed’s perspective Russia was a key player that couldn’t be ignored, according to a current and a former U.S. intelligence official. Trump’s public infatuation with Putin and his apparent eagerness to improve relations with Russia gave the UAE a chance to play dealmaker and diminish Iran’s position in the Middle East, starting with the war in Syria.

Prince’s 30-minute meeting with a Putin intimate shortly before Trump’s inauguration has drawn intense interest from Congress, the Mueller investigation, and the press. The Mueller report established that the meeting was a pre-arranged attempt to establish a backchannel between Russia and the incoming Trump administration and has led House Intelligence Committee chair Adam Schiff to make a criminal referral to the Justice Department for perjury. Yet the focus on Russian interference with the 2016 presidential election has deflected scrutiny from what the meeting reveals about Prince’s unique role in the world of covert services.

Blackwater made Prince an infamous symbol of U.S. foreign policy hubris, but America’s most famous mercenary has moved on. Although he continues to dream of deploying his military services in the world’s failed states, and persists in hawking a crackpot scheme of privatizing the U.S. war in Afghanistan, Prince has diversified his portfolio. No longer satisfied with contracting out former special forces operators to the State Department and Pentagon, Prince is now attempting to offer an entire supply chain of warfare and conflict. He wants to be able to skim a profitable cut from each stage of a hostile operation, whether it be overt or covert, foreign or domestic. His offerings range from the traditional mercenary toolkit, military hardware and manpower, to cellphone surveillance technology and malware, to psychological operations and social media manipulation in partnership with shadowy operations like James O’Keefe’s Project Veritas.

This account is based on interviews with more than a dozen of Prince’s former colleagues and peers, as well as court records, emails, and internal documents provided to The Intercept. An examination of Prince’s time working with the UAE in particular reveals suspicious financial transactions at a moment when his personal finances were under stress and his mercenary ventures were failing. The picture that emerges is one of a man desperately trying to avoid U.S. tax and weapons trafficking laws even as he offers military services, without a license, in no fewer than 15 countries around the world.

Prince’s former and current associates describe him as a visionary, a brilliant salesman with remarkable insight into the future of warfare, who is nonetheless so shady and incompetent that he fails at almost every enterprise he attempts. And yet he endures. Prince is thus, in many ways, an emblematic figure for the Trump era.

Suitcases Full of Cash

Prince’s partnership with bin Zayed got underway, fittingly, with a slapstick moment in early 2010, when two of Prince’s men, a veteran of the Canadian special forces and a Lebanese fixer, were ordered by Emirati security officials to meet at an Abu Dhabi intersection. There, a few government employees helped Prince’s men load the trunk of a Chevy Impala with more than half a dozen carry-on suitcases, most worn and with busted wheels. The two drove back to their hotel, Le Méridian, where they unloaded the bags, returned to their room, and summoned their immediate supervisor, a former Navy SEAL who had known Prince in the military, telling the American that they had a problem. Their new company, Reflex Responses, often called R2 for short, was so new it didn’t yet have a bank account or even an office with a safe.

When the former SEAL entered their hotel room, the contents of the suitcases had been largely removed, much of it dumped onto a bed: bricks of new, sequential $100 bills, in $10,000 stacks, each bound by a green and white band. The three men counted each stack, measuring the height to be sure that they all had 100 $100 bills, until they tallied it all: roughly $13 million. For the first two weeks of the program, the hotel room, always occupied by a security guard or a company employee, served as the Reflex Responses vault. Hotel staff were not allowed to clean the room, and by the time R2 opened a bank account and deposited the money, the room was covered in empty whiskey bottles and ashtrays overflowing with cigarette butts.

Prince had arrived in the UAE at a low moment. The Obama administration had made clear in its first months that it would not welcome new Blackwater contracts. The company had become infamous after Blackwater security contractors shot and killed 17 Iraqi civilians and wounded dozens more in Baghdad’s Nisour Square in 2007. By 2010, Prince had changed Blackwater’s name and sold the company, ceasing to work on any U.S. government contracts. As Prince negotiated a settlement with the Justice Department for a series of Blackwater arms trafficking violations,  then-CIA Director Leon Panetta discovered a secret assassination program involving Blackwater operatives that former Vice President Dick Cheney had hidden from Congress. Prince was bitter, blaming the Obama administration for leaking his CIA role and comparing himself to exposed CIA operative Valerie Plame. Prince couldn’t understand why the American public viewed him as a villain. “He was genuinely upset,” said a former colleague who discussed the public scrutiny of Blackwater. “He kept asking, ‘Why do they hate me?’”

A converted Catholic raised by Christian fundamentalists and the scion of a Midwestern auto-parts fortune would seem to be an unlikely ally to the Muslim crown prince of a tiny, oil-rich Arab kingdom, but from their first meeting in 2009, Prince and bin Zayed hit it off. Almost immediately it was clear they shared common enemies: Islamic militants and, especially, Iran. Prince was introduced to bin Zayed after pitching a two-page schematic of a light attack airplane — an agricultural crop duster modified with surveillance and laser-guided munitions — to the Emirati government as the Blackwater sale to a private equity group was being negotiated. When the Emirati ambassador to the U.S., Yousef Al Otaiba, learned that Prince’s legal problems with the Justice Department would mean that he wouldn’t be able to be involved in building, selling, or brokering armed aircraft, the Emirati government approached another aviation manufacturer to help establish an entire air wing of armored and weaponized crop dusters. In exchange for Prince bowing out of the deal quietly, Otaiba introduced him to bin Zayed explicitly in order to find another role in which he could assist the UAE government.

Saudi Crown Prince Mohammed bin Salman bin Abdulaziz Al Saud (known as MBS, not pictured in this photo) receives Abu Dhabi's Crown Prince Sheikh Mohammed bin Zayed Al Nahyan (known as MBZ) in Jeddah on June 6, 2018. Photo by Balkis Press/Abaca/Sipa USA(Sipa via AP Images)

Abu Dhabi’s Crown Prince Sheikh Mohammed bin Zayed Al Nahyan in Jeddah on June 6, 2018.

Photo: Balkis Press/Abaca/Sipa via AP

Bin Zayed was determined to bolster the UAE’s sphere of influence and project power in the Middle East. Despite Prince’s tarnished reputation, bin Zayed saw in him a glimpse of the future. It didn’t hurt that “Erik could sell you your own hat,” according to one former associate. The former SEAL and self-described CIA “asset” saw in bin Zayed a willing buyer who shared his desire to play soldier. Prince sold bin Zayed on the idea of creating a half-billion-dollar program in which he would train, equip, and lead an elite cadre of foreign soldiers called the Security Support Group that would serve as a presidential guard for the Emirati monarchies and help quell any internal unrest. Bin Zayed insisted that Prince use non-Muslim ex-soldiers, according to two senior advisers who helped build the unit, telling him that he did not believe Muslim soldiers could be trusted to kill other Muslims. Eventually, Prince also sold bin Zayed on the creation of an armed aviation wing, a team to protect the Emirates from a weapons of mass destruction attack, and a separate force to combat Somali piracy.

One indication of both Prince and R2’s growing value to bin Zayed was that Prince became a favored foreign policy and military adviser, joining bin Zayed’s inner sanctum. Prince told his colleagues at R2 that bin Zayed, whom Prince often referred to as “the boss,” gave him ownership of two side-by-side villas in Abu Dhabi, which were originally worth $10 million each. The wealthy enclave was built as a luxury community, each villa with a private beach, and quickly housed several foreign embassies. Prince’s neighboring houses sat at the end of a residential peninsula and had expansive views of central Abu Dhabi across a sea channel, a pool, and beachfront in the Persian Gulf. Prince built a dock for his sailboat, which has a Blackwater logo across the port side.

Despite Prince’s tarnished reputation, bin Zayed saw in him a glimpse of the future. The former SEAL and self-described CIA “asset” saw in bin Zayed a willing buyer who shared his desire to play soldier.

The $13 million in the suitcases was an advance on $110 million the UAE gave Prince to get Reflex Responses off the ground. The deal gave Prince and his team a guaranteed 15 percent profit margin on whatever the company spent in addition to salaries. Prince had long tried to own a piece of each part of the foreign conflict supply chain: planes, ships, vehicles, weapons, intelligence, men, and logistics. Reflex Responses gave him a blank check to do just that.

Structurally, Reflex Responses became a model for how Prince masks his involvement in selling or providing military services, which was a necessity given that he’s unlikely to obtain an arms trafficking license under the U.S. State Department’s International Traffic in Arms Regulations (ITAR). Officially, Prince was never an R2 employee. He officially worked for a company called Assurance Management Consultants, which shared a floor in an Abu Dhabi office tower with Reflex, where he oversaw the entire military program. It was Prince who hired and installed Reflex’s senior management, according to people directly involved in the effort. And it was Prince who recruited and hired the subcontractors who fulfilled Reflex’s contractual requirements. Prince flew to South America, where he helped oversee the recruitment of former Colombian soldiers who served as both hired guns and a training cadre for the fledgling Emirati security force.

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Erik Prince’s residency visa for the UAE, showing that he was, at the time, employed by Assurance Management Consultancy. Some personal information has been redacted for privacy.

Photo: Provided to The Intercept

Prince’s approach to management created problems almost immediately, issues that would arise again and again in his various projects. In what would become a pattern, Prince’s American colleagues at Reflex were troubled by his directives about ITAR regulations. Prince argued to his lawyers that because Reflex was an Emirati company, working on an Emirati government contract, he was not required to have an ITAR license from the State Department to sell military services. “We’d tell him, ‘No, that’s not how it works. You’re an American,’” said one of Prince’s former colleagues involved in Reflex Responses. “It was stupid, honestly. There was a way to do it legally and make lots of money, but Erik didn’t care. When Erik wakes up in the morning, Erik does whatever he feels like doing. I always assumed that’s how it is when your father is a billionaire.”

In response to a request for comment, a Prince spokesperson stated: Mr. Prince at all times relied upon the advice of counsel, including both in-house compliance counsel and outside experts, to ensure compliance with ITAR and other laws.”

Prince also hid his financial interest in subcontractors working with R2. Six months into the project, senior executives discovered that Prince had an arrangement with Thor Global, the company that he’d insisted Reflex use to hire the Colombian soldiers. On paper, Thor Global was wholly owned by Robert Owens, a former aide to Oliver North during the Iran-Contra affair, but Prince received a substantial amount of the money R2 paid Thor Global, according to court documents and two former Prince colleagues familiar with the arrangement. “I asked Erik if the crown prince knew he was self-dealing,” said one of the former colleagues. “Erik wouldn’t answer.”

Prince had long tried to own a piece of each part of the foreign conflict supply chain: planes, ships, vehicles, weapons, intelligence, men, and logistics. Reflex Responses gave him a blank check to do just that.

Owens’s involvement and connection to North is not incidental. Prince and North are friends, and Prince has told others over the years that he greatly admires the former Marine officer and Reagan National Security Council staffer, who was convicted on three felony counts during the Iran-Contra scandal. (The convictions were reversed in 1991.)

A former colleague said it took him some time to recognize that Prince generally works to control the entire supply chain of any mercenary or security contract. “Everything he does, he skims,” said the former colleague, who has known Prince for two decades and described how Prince generally operates as a military services provider. “He will run a contract through two companies and then dictate that those two companies have to subcontract out to another eight companies. What he doesn’t disclose is that he owns all or part of those eight companies and will take 25 percent from each company. Then, he can use those same eight entities to make the money disappear.”

After Prince’s first team of U.S. executives quit, he brought in another former SEAL and a former CIA officer. That team conducted audits and quickly discovered financial problems. “There was massive embezzlement going on inside R2,” said a third former employee with direct knowledge of the company’s finances. “Overbilling, false billing, missing cash — millions were gone.”

According to four former Reflex employees and consultants, the alleged graft and embezzlement ran through two of Prince’s lieutenants, who handled logistics and administration for R2. The first was a former Blackwater employee who told colleagues at Reflex that he’d done intelligence work in the Middle East for the Pentagon’s intelligence agency. Internal R2 documents list him as the first employee of the company. Several of Prince’s colleagues confronted him about the missing money and his lieutenants’ conduct, but Prince rebuffed any effort to remove them. Contacted by The Intercept for comment, Prince’s lieutenant denied that he had ever embezzled or stolen money and denied ever working for R2. He said that he had worked for Assurance Management and occasionally “consulted” for R2.

Prince did not respond on the record to questions about the financial improprieties.

While money was disappearing from Reflex Responses’s accounts as a result of these financial shenanigans, Somali pirates were engaging in a more traditional form of robbery off the Horn of Africa, harming UAE shipping interests. Prince had a solution: a sea, air, and land battalion to eradicate the pirates. He established a group for this purpose within Reflex Responses known as Special Projects and hired a former South African special forces officer named Lafras Luitingh, who also worked for Executive Outcomes, a private military company comprised mainly of apartheid-era South African soldiers.

Members of the Puntland Maritime Police Force on patrol for pirates near the village of Elayo, Somalia. The Puntland Maritime Police Force is a locally recruited, professional maritime security force. It is primarily aimed at preventing, detecting and eradicating piracy, illegal fishing, and other illicit activity off of the coast of Somalia, in addition to generally safeguarding the nation's marine resources.In addition, the Force provides logistics support to humanitarian efforts. (Photo by jason florio/Corbis via Getty Images)

Members of the Puntland Maritime Police Force on patrol for pirates near the village of Elayo, Somalia, on Sept. 18, 2011.

Photo: Jason Florio/Corbis via Getty Images

Together, Prince and Luitingh created the Puntland Maritime Police Force in northeastern Somalia, in a semiautonomous region home to the most active Somali pirates. A United Nations monitoring team subsequently documented extensive violations of the U.N. arms embargo of Somalia, including falsifying export paperwork for small arms and attacks that left civilian casualties by Luitingh’s company, Saracen, a subcontractor on the project. The two-year program resulted in “an elite force outside any legal framework … answerable only to the Puntland presidency,” according to a U.N. investigation into the PMPF. Both Prince and the UAE denied involvement, but one source with knowledge of the operation witnessed Emirati intelligence officers providing a suitcase with millions of dollars in $100 bills to Luitingh for his payroll. Citing Prince’s involvement in the police force, the U.N. report said, “This externally financed assistance programme has remained the most brazen violation of the arms embargo by a private security company.”

Although Prince and the UAE’s involvement was meant to be largely clandestine, Prince sought publicity for the program, according to a person with direct knowledge. Prince arranged for a February 2012 Fox News segment from North, then a military analyst for Fox News, who embedded with the PMPF in Puntland and explicitly reported that the UAE was behind the fledgling military unit. The media attention enraged the Emirati government, according to one of Prince’s former colleagues who worked with him at the time, and blamed him for the unwanted publicity.

The program’s lack of legal legitimacy was perhaps the least troubling legacy of Prince’s vision, however. The program shut down shortly after a South African mercenary was murdered by one of the local soldiers hired to fight the pirates during one of the first operations the Puntland force conducted. According to a contemporaneously filmed documentary of the anti-piracy effort, the killer was a relative of a pirate targeted by the unit. The unit had been infiltrated from the beginning, a failure of basic counterintelligence, which a former CIA officer, who was also involved, readily admitted in on-camera interviews. The U.N. would later report “credible” allegations of human rights violations stemming from corporal punishment, which led to severe injuries and a death at the South African-run PMPF camp.

Robert Young Pelton, an author who worked for Prince on the Somalia project and helped write Prince’s autobiography (and recently lost a civil suit against Prince over a contract dispute), said Prince’s efforts were “delusional. He operates with a 12-year-old’s mindset of war. He’s romanticized the South African mercenaries who fought those ugly wars.” Pelton said when Prince first showed him a map with plans for the security force, he realized that Prince had never been to Somalia. Pelton said Prince told him that the idea for an anti-piracy force came from reading “The Pirate Coast,” a book detailing a secret American operation in 1805 to end piracy off the coast of Libya.

As with the Security Support Group, the anti-piracy force suffered from mismanagement. According to two individuals who worked on the program, at least $50 million meant for the anti-piracy force had gone missing by the time the Emirates decided to stop funding the effort. Among the items that were never returned or accounted for were several aircraft, including at least one cargo plane and two helicopters, as well as several ships. Before he was asked by the Emirates to end his involvement in the program, Prince brought in a former intelligence operative to conduct an audit of the PMPF program. The American identified $38 million in cash that the UAE had delivered to Luitingh, for which the former South African mercenaries refused to provide accounting or receipts. “I told Erik, ‘[Luitingh] and the South Africans couldn’t account for $38 million,’” said a former Prince employee. “Erik wasn’t upset at all. He just said, ‘I’m sure they are just saving it for a rainy day.’” Luitingh did not respond to multiple requests for comment.

“When Erik wakes up in the morning, Erik does whatever he feels like doing. I always assumed that’s how it is when your father is a billionaire.”

Over a six month period beginning in late 2011, after the New York Times exposed Prince’s involvement with the UAE’s Security Support Group and the deployment of the anti-piracy force, bin Zayed gradually removed Prince from his multiple projects for the government. The parting of ways came as a result of the unwanted media exposure, U.N. pressure, and ongoing financial audits. The UAE shut down Reflex Responses and rolled what they wanted to keep into new companies with new management.

As his private military ventures with the UAE stumbled, Prince shifted to private equity, establishing an investment fund focused on African natural resources called Frontier Resource Group. But Prince’s income dried up after the UAE stopped funding him and he began having cash-flow problems. One of his personal bankers grew alarmed as Prince cashed out Treasury bonds to fund Frontier Resource. According to tax, banking, and internal business documents obtained by The Intercept, Prince at the time was worth less than $100 million, and much of his wealth was tied up in real estate and fixed-income investments. One of Prince’s creditors, Michigan’s Huntington Bank, refused a request for a $6 million increase on a $17.5 million line of credit, according to emails and other documents obtained by The Intercept. In turning Prince down, the bank reduced his line of credit by $2.5 million.

In late 2011, the Emirati government asked one of Prince’s former colleagues, Reno Alberto, if he would take over Prince’s aviation contract. Alberto was a former Navy SEAL who Prince originally hired to help save the Reflex Responses project. An Emirati general offered Alberto the job on two conditions: Reflex Responses needed to be shuttered so that a new corporate entity could take its place, and Prince could not be involved. Alberto agreed and created a new, temporary holding company called Vulcan Management. Vulcan would take the roughly $100 million resulting from the liquidation of R2 and hold it until a new entity could be established to create a wing of armed helicopters for the UAE air force.

Prince soon came calling on Alberto, however, claiming that a portion of the roughly $100 million left over from Reflex Responses was his and that any future contract for Alberto was a consequence of Prince’s efforts and therefore should result in him receiving a percentage. Prince claimed repeatedly to Alberto that bin Zayed had directed that some of the leftover R2 funding be paid to him. Prince and his business adviser Dorian Barak arranged to structure the payout as a loan from Alberto’s Vulcan Management to one of Prince’s holding companies in Bermuda. Barak, on behalf of Prince, requested that the loan be divided into 10 transactions, which Prince could then call on Vulcan to pay out as needed. Prince told several other colleagues that he felt he was owed upwards of $40 million for his effort in getting bin Zayed to create the SSG and establish R2. Alberto, who stood to make millions in his new venture, reluctantly agreed to pay his former boss through a loan.

On July 26, 2012, Barak emailed Prince, informing him that a wire transfer of approximately $5.9 million was sent by Vulcan, according to an email obtained by The Intercept. The money was wired to Prince’s Frontier Resource bank account in Abu Dhabi.

“That was fast. Well done,” Prince responded.

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An email exchange between Dorian Barak and Erik Prince in July 2012. Some personal information has been redacted for privacy.

Screenshot: The Intercept

Prince pitched Frontier Resource to potential investors as a $500 million private equity fund. Fund documents state that Prince would provide 10 percent of the funding. In late 2011 and early 2012, as FRG tried to get off the ground, Prince had soft commitments from investors in the UAE, including bin Zayed’s brother Sheikh Tahnoon bin Zayed, the Emirati national security adviser. But by the time he’d taken his first draw of the Vulcan loan, Prince was toxic, and the outside financial commitments had withered and disappeared. Sheikh Tahnoon, however, appears to have invested at least $5 million, according to internal Frontier Resource documents provided to The Intercept.

Then, in October 2012, Prince directed Alberto and Vulcan to make a second wire transfer. This one, however, was not sent to Prince or his companies. According to documents reviewed by The Intercept, and confirmed by a person with direct knowledge of the transaction, more than $9 million was wired to Zafra Group, the company Sheikh Tahnoon had originally created to invest in Prince’s Frontier Resource. It is unclear why Prince wanted the Vulcan money routed to Zafra Group, but he told Vulcan that the payment had been ordered by “the boss,” according to the person with direct knowledge of the transaction. In effect, Prince had steered UAE government money meant for an armed helicopter wing to one his fund’s investors, a senior member of the Emirati royal family.

When Prince asked for $10 million in the third installment, Alberto refused and subsequently told Prince that no more installments would be paid. According to a person with knowledge of the dispute, Alberto learned that no one in the Emirati royal family had ordered the payments to Prince.

The loan to Prince, which has not been previously reported, was not repaid to Vulcan, and the entire $15 million was written off as a loss by the company in subsequent years, according to a person with direct knowledge of the transaction. Prince did report the $5.9 million payment as a loan on his personal tax returns that year.

The Intercept sent Prince a detailed list of questions for this article. In response, a Prince spokesperson stated that “Vulcan Management’s loan, which was made in connection with FRG’s investment activity, was at all times fully disclosed to both FRG’s auditors and the IRS.” Prince would not comment for the record about the circumstances of the loan, or why he directed the $9 million payment to Zafra.

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Erik Prince, center, in one of his first meetings in China with Chinese investors for Frontier Services Group in 2013. At the far right is Johnson Ko, a Hong Kong tycoon.

Photo: Obtained by The Intercept

A New Frontier

Over the next several years, as his speculations in African natural resources turned into losers time and again, Prince looked to China for new funds, creating Frontier Services Group with an investment banker and former Marine named Gregg Smith. For Smith, the business model seemed simple enough: Frontier Resource would find undervalued, distressed assets, and Frontier Services would transport the materials out of Africa. Smith says he saw the potential of a logistics company to move freight and natural resources across Africa, where the Chinese were increasingly active. “We wanted to start a straightforward logistics company,” Smith said recently. “Trucks and planes and that’s it.”

Prince had other ideas, as did some Chinese investors, who made it clear that they wanted a “Blackwater China.” Although Frontier Services attracted a $110 million investment from a Hong Kong tycoon named Johnson Ko and the China International Trust Investment Corporation, a state-owned investment company, Prince’s investment fund lost money, and several projects ended in a total loss, according to three people with knowledge of Prince’s investment portfolio. Instead, Prince would end up directing FSG to purchase companies that Prince had a financial interest in — as well as services from such companies — in an effort to salvage his private-equity fund’s investment. In total, according to documents, FSG spent $8.5 million on Prince-connected businesses. And as he had with Thor Global and Reflex Responses, Prince failed to disclose his financial interest to the FSG board prior to most of the transactions. The board eventually passed a resolution prohibiting undisclosed self-dealing.

For two years, beginning in 2013, while Frontier Services executives ran a legitimate logistics and aviation company, Prince was traveling around Africa pitching paramilitary services under the Frontier Services banner. As reported by The Intercept, Prince proposed creating counterterrorism forces, a private air force, and a “black ops” program for Nigeria to defeat Boko Haram. He made a similar pitch to President Salva Kiir Mayardit of South Sudan to help him defeat rebels there. There were meetings and proposals for Libya, Cameroon, and Kurdish Iraq, none of which found a buyer. Although Prince failed to sell an entire paramilitary force, he did make money across the continent and the Middle East “advising” countries on how to fight wars. According to one of his closest colleagues, over a roughly five-year period, including his time as chair of the board of FSG, Prince earned as much as $10 million from his meetings. Prince’s efforts were nothing if not ambitious. “Erik was trying to create a private JSOC,” said a former senior military officer who discussed many of Prince’s ideas with him. Since he left Blackwater, Prince has sold or pitched his war supply chain in no fewer than 15 countries, nearly all of them with majority Muslim populations.

Since he left Blackwater, Prince has sold or pitched his war supply chain in no fewer than 15 countries, nearly all of them in countries with majority Muslim populations.

Prince tried to hawk surveillance products and services as well. In 2014, he demonstrated for some of his Frontier Services colleagues cellphone geolocation software that he said he had licensed from an Israeli company. At a strip mall diner in Washington, D.C., Prince pulled out a laptop and punched in a cellphone number. The program identified the most recent cell tower the phone had connected with, allowing the user to locate the target within 300 meters and revealing the last 10 calls the targeted user made. Prince, according to one person who discussed the software with him, believed his time at Frontier Services had “cleaned” his image up with the U.S. government enough that he approached both the CIA and the Pentagon, offering to run the software in counterterrorism operations. He was rebuffed. Later, he and one of his deputies claimed that they sold the program to the Saudi and Emirati air forces to locate bombing targets in Yemen.

In 2015, Prince became involved in the ongoing conflict between Azerbaijan and Armenia over the disputed area of Nagorno-Karabakh. Azerbaijan spent hundreds of millions of dollars equipping and training their small military. Prince was brought in by a former Russian weapons supplier to help create a training force. Prince would ultimately be kicked off the contract after his business partners accused him of wildly padding the proposed contract by adding a series of unnecessary expenditures that would have been provided by companies to which Prince had financial ties. In an effort to smooth over Prince’s anger at being fired, the Russian weapons supplier offered him $5 million, according to three people with direct knowledge of the offer. Prince agreed to take the money but insisted the payment be made through a complex series of loans between companies that Barak would set up. When his Russian colleague refused the terms and offered a simple check made out to Prince for the total amount, Prince walked away from the deal, according to a person with direct knowledge of the incident.

In response to questions from The Intercept, a Prince spokesperson stated: “FSG contemplated a logistics, construction, and aviation support project in Azerbaijan, but neither FSG nor Erik Prince ever moved forward with it, and neither FSG nor Mr. Prince was ever offered money to abandon the project.”

As The Intercept has reported previously, when Frontier Services Group discovered that Prince had secretly modified two crop dusters to be used as light attack aircraft, and had used an Austrian company he’d secretly purchased a stake in, FSG hired the law firm King & Spalding to conduct an investigation to determine whether Prince had violated arms trafficking laws. (Prince attempted to sell the two weaponized aircraft to Azerbaijan as part of their buildup — another potential violation of ITAR). The attorneys, supervised by current FBI Director Christopher Wray, concluded that Prince had likely violated U.S. law in his effort to sell the crop dusters. In 2016, FSG disclosed the ITAR violations to the Justice Department, which opened an investigation.

Then-White House Chief Strategist Steve Bannon listens as President Donald Trump speaks during a meeting on cyber security in the Roosevelt Room of the White House in Washington, Tuesday, Jan. 31, 2017. (AP Photo/Evan Vucci, File)

Then-White House Chief Strategist Steve Bannon listens as President Donald Trump speaks during a meeting on cybersecurity at the White House on Jan. 31, 2017.

Photo: Evan Vucci/AP

The Rise of Trump

Although Prince’s turn in Africa as a mercenary was a bust, he was somewhat successful at recasting himself as a globetrotting businessman through Frontier Services Group. The 2016 presidential election and the rise of Donald Trump now promised a full-scale rehabilitation. The potential for a Republican administration would be an opportunity for new U.S. government contracts and, possibly, something even more lucrative. After Trump had clinched the Republican nomination, Prince told his Chinese business and government contacts that if Trump won, he would be the next secretary of defense.

Prince’s family has a history of supporting right-wing and conservative causes. Edgar Prince, Erik’s father, was a major financial contributor to former President Gerald Ford, and in recent years, the family has supported Mike Pence, first as a member of Congress and later as Indiana governor. While in Congress, Pence helped Prince navigate Capitol Hill in the aftermath of the killing of four Blackwater contractors in Fallujah in 2004. Prince became an enthusiastic Trump supporter. By Election Day, Prince had donated $250,000 to Trump’s 2016 election effort.

During the campaign, Prince solidified his relationship with Steve Bannon, appearing on his Breitbart radio show on SiriusXM less than a month before Bannon formally joined the Trump campaign. Four days before the 2016 election, Prince went on Bannon’s show and smeared Hillary Clinton, claiming without evidence that a New York City police investigation into former Rep. Anthony Weiner had uncovered extensive criminal activity by the Democratic presidential candidate. Prince claimed that the Obama administration had suppressed the investigation implicating Clinton using “Stalinist tactics.”

In apparent coordination with Trump’s advisers, Prince had also begun exploring the world of domestic information warfare. In August 2016, according to the New York Times, Prince brokered a meeting at Trump Tower between George Nader, an aide to bin Zayed, Donald Trump Jr., and Joel Zamel, the owner of Psy-Group, an Israeli private intelligence company that specialized in manipulating elections using social media accounts and untraceable websites. The Trump campaign apparently passed on the offer. Prince already had familiarity with private Israeli intelligence companies through Dorian Barak. Several years earlier, Prince had been offered a financial stake in what was then a fledgling company called Black Cube, run by former Mossad officers. The company gained notoriety during the #MeToo movement when a firm representing Hollywood producer Harvey Weinstein hired Black Cube to help stop publication of an account of his abuses. Black Cube hired an operative who used false identities to approach actress Rose McGowan, as well as a reporter looking into the multitude of sexual misconduct and assault allegations against Weinstein.

Prince declined to invest in Black Cube, but appears to have liked the idea of selling a service that provided undercover operatives. During the 2016 election, he became involved with James O’Keefe and Project Veritas, a group of conservative provocateurs who specialize is using hidden-camera footage and secret recordings. O’Keefe, a protégé of the conservative firebrand Andrew Breitbart, describes himself as a “guerrilla journalist” and has used undercover cameras in an effort to expose purported liberal bias in political groups and the media. Trump often promoted O’Keefe’s videos and met with O’Keefe just days after he declared his candidacy. (A few weeks before that, Trump had donated $10,000 to Project Veritas through his foundation.) It is unclear if Trump’s support of Project Veritas spurred Prince’s interest in the group, but in late 2015 or early 2016, Prince arranged for O’Keefe and Project Veritas to receive training in intelligence and elicitation techniques from a retired military intelligence operative named Euripides Rubio Jr. According to a former Trump White House official who discussed the Veritas training with Rubio, the former special operative quit after several weeks of training, complaining that the Veritas group wasn’t capable of learning. Rubio did not respond to requests for comment.

“Erik was weaponizing a group that had close ties to the Trump White House.”

In the winter of 2017, Prince arranged for a former British MI6 officer to provide more surveillance and elicitation training for Veritas at his family’s Wyoming ranch, according to a person with direct knowledge of the effort. Prince was trying to turn O’Keefe and his group into domestic spies. For his part, O’Keefe posted photos on Instagram and Twitter from the Prince family ranch of himself holding a handgun with a silencer attached and wearing pseudo-military clothing. He described the ranch as a “classified location” where he was learning “spying and self-defense,” in an effort to make Project Veritas “the next great intelligence agency.”

“Erik was weaponizing a group that had close ties to the Trump White House,” said the former White House official familiar with Prince’s relationship with O’Keefe and Project Veritas.



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