A Bet on Peace for War-Torn Somalia

Michael Stock is pursuing an extreme version of that basic investor’s principle: Get in early. He’s just finished building a resort on the coast of war-torn Mogadishu, Somalia. WSJ’s Christopher S. Stewart reports. (Photo: Dominic Nahr/WSJ)

MOGADISHU, Somalia—Michael Stock sees things that others don’t. “Imagine this,” he says one recent afternoon, standing on the sunny second-floor deck of his new oceanside hotel in Somalia’s war-battered capital. “There are banana trees where there’s desert now, and there’s this view.”

The banana trees haven’t grown in yet, but International Campus, as he calls the complex, is the closest thing to a Ritz for many miles. A fortified compound sprawled across 11 acres of rocky white beach, it offers 212 rooms including $500-a-night villas, several dining rooms, coffee and snack shops, and a curving slate-colored pool where sun-seekers can loll away Somali afternoons.

“It’s going to be ridiculous!” Mr. Stock said, just weeks before residents began arriving for April’s opening.

A few hours later, the jittery sound of gunfire split the warm February air not far from his new hotel—a reminder that the country is still muddling through a decades-old conflict and that there are still bullets flying, bombs detonating.
Bananas in the Desert

Most Western countries have avoided Somalia, leaving a void to be filled by contractors like Michael Stock’s Bancroft Global Development. He envisions ‘banana trees where there is desert.’

Dominic Nahr/Magnum Photos for The Wall Street Journal

Here, Mr. Stock, left, outside Mogadishu, Somalia’s war-battered capital, with an employee, Richard Rouget.

Mr. Stock isn’t just anyone gambling on a far-fetched idea in a conflict zone. In an unusual twist of the war business, the 36-year-old American is deeply involved in the conflict itself. In addition to being a real estate developer, his company also helps train Somalis in modern military techniques.

His security company, Bancroft Global Development, has supported African troops since 2008 as they fought al-Shabaab, the Somali Islamic group tied to al Qaeda, which the U.S. views as a terrorist threat. The United Nations and the African Union, with U.S. State Department money, pay Bancroft to support soldiers in everything from counterinsurgency tactics to bomb disposal, sniper training, road building and, as Mr. Stock puts it, “bandaging shot-off thumbs.”

Security companies have, of course, been rushing into war zones forever, sometimes controversially. A recent congressional study on wartime contracting estimated that the U.S. spent some $206 billion on outside contracts and grants in Iraq and Afghanistan between 2002 and 2011.

Most Western countries have stayed out of Somalia. Contractors like Bancroft partly fill that void. The U.S., which pulled its troops after American soldiers died in the 1993 Black Hawk Down tragedy, has spent more than $650 million since 2006 on supporting the African Union Mission in Somalia, known as Amisom, and its more than 17,000 soldiers.

Unlike many security contractors, Mr. Stock’s company, based in Washington, D.C., is a nonprofit not primarily concerned with making money on military support services. In fact, it actually sustains stretches of multimillion-dollar losses, Mr. Stock says. Meanwhile its sister company, Bancroft Global Investment, chases profits by pouring money into war-zone real estate.

Dominic Nahr/Magnum Photos for The Wall Street Journal

Michael Stock develops real estate in Somalia and Afghanistan.

Mr. Stock’s gamble: The security outfit will help guide the country toward peace, turning his investments into big money. “It’s like getting in at the bottom of the stock market,” says Mr. Stock. His unusual war operation is making him into a kind of ultimate gentrifier, a mini mogul of Mogadishu, perhaps.

His first properties went up in Afghanistan. But Somalia represents his latest push. Along with the new place, Mr. Stock says he has invested more than $25 million in various for-profit ventures, including a “trailer park” hotel built out of shipping containers at the airport, a compound of prefabricated buildings fronting the city’s old port and a cement factory.

Bancroft is the only contractor supplying military training to Amisom soldiers in the country. Mr. Stock estimates that his team of 100 or so people in Somalia works with roughly a third of the 17,000 Amisom forces at any given time.

After more than two decades of violence in Somalia, there are glimmers of hope. African troops, with Bancroft’s support, have pushed the insurgents to more rural areas. In January, the U.S. recognized the Somali government for the first time since 1991 and last month a U.S. Agency for International Development official urged at a news conference, “Get in on the ground floor.”

A new president leads Somalia. Expats are returning to rebuild and there are even people on the beaches. “We swim here all the time,” said a Russian helicopter operator, as a friend floated on an inner tube along a bullet-littered stretch of ocean near the airport. “The water’s good!”

With dwindling war efforts in Iraq and Afghanistan, other American contractors are moving in, too. A Virginia company, Atlantean, is setting up an airport hotel in the south. Among its board members, according to its website, is former Maj. Gen. William Garrison, who led the mission associated with Black Hawk Down. In the movie version, he was played by Sam Shepard. Maj. Gen. Garrison couldn’t be reached for comment.

‘Will we get shot at the first day?’ a colleague asked as they flew into Somalia. ‘Probably,’ Mr. Stock laughed.

“There are infinite possibilities in a country that has to be literally built from the ground up,” said Ken Menkhaus, a Somalia expert at Davidson College. These possibilities, however, also include the worst: a return to a hell-ripped Somalia. That reality loomed only weeks ago when militants bombed the capital’s main courthouse, killing more than two dozen people.

Contracting out security has its perils. An investigation by the U.N.’s Monitoring Group on Somalia and Eritrea last summer found companies “operating in an arguably paramilitary fashion.” The investigation found a “growing number” of foreign private security companies working in Somalia with diplomatic missions, international companies and individuals.

According to one person familiar with the confidential part of the report and unaffiliated with Bancroft, the report found that Bancroft was “very transparent about the way they operated,” whereas some other companies were “more deceptive.”

Mr. Stock has attracted some big-name attention. In November, he flew in Warren Buffett’s son Howard to look at potential agricultural projects—part of Mr. Stock’s interest in creating a farming operation to service his hotels, among other things.

“He was the only one who would bring me into the country,” said Mr. Buffett, who has been involved in philanthropy around the Horn of Africa.

Almost monthly, Mr. Stock commutes here from Washington, D.C. This time his “fast plane,” a 10-seat jet, was in the shop so he borrowed a five-seater Cessna in Kenya from a friend.

Accompanying him was a new Bancroft recruit. He had been a part of an Army Delta Force squad that chased al Qaeda in Iraq.

“Will we get shot at the first day?” the former soldier asked at one point.

“Probably,” Mr. Stock said, laughing. “I promised you some spice!”

Bancroft says it employs about 200 men around the world. About half work in Somalia. Some have roots in elite military forces including the Navy SEALs, French Foreign Legion and British Special Air Service, the employees say. “It’s like an extreme sport,” says one, Richard Rouget, a South African resident and former French soldier.

The idea for the business came during a summer job in 1998 with the U.S. embassy in Morocco, where Mr. Stock visited a refugee camp in the Sahara ringed by land mines. “Why hasn’t someone shown them how to remove the mines?” he recalls thinking.

A year later, after graduating from Princeton, he started a mine-removal company. “Like a dot-com,” is how Mr. Stock describes the early days. He had no full-time staffers and spent months meeting people in the field. There was only sporadic mine-removal work, for little money, in some of the world’s most unstable places: Mali, Chad, and Iraq.

His family’s wealth helped. His great-grandfather, Lewis Strauss, made tens of millions as partner at the investment firm Kuhn, Loeb & Co. In time, Mr. Stock borrowed some $8 million from different banks and invested about $2 million of his own money.

As the U.S. military went after the Taliban in 2002, Mr. Stock’s company landed in Afghanistan and offered services through a local partner, Mine Pro. He invested in the company and built a group to train bomb-detecting dogs and do anything from plumbing to car repair.

But his company operated at a loss, he says. It didn’t make money for about two years, the time it took to get his local Afghan partner up to speed and wait for it to win contracts.

A more profit-minded security contractor might have called it quits. Mr. Stock, however, had another idea. “My thinking was that you could lose money on security to bet on development,” he says.

Afghanistan certainly lacked decent, secure accommodation. Initially he built an eight-bedroom compound in Kabul and another, bigger residence in Herat, the country’s third-largest city. He started a car rental service, too.

Eventually, security began paying off, Mr. Stock says. He started receiving a share of his partner company’s contracts, with that revenue peaking at about $1.8 million in 2005.

But the bigger money was in his properties. Today, the original two have been expanded into protected city blocks of multiple buildings. They house tenants associated with the World Bank and the International Development Law Organization, among others.

Over the past eight years, the real estate and other commercial services like car rental in Afghanistan have brought in about $32 million in net revenue, according to financial documents provided by Bancroft. Much of that money is now being invested in Somalia.

“It was like Stalingrad in 1942,” Mr. Stock says of the day in late 2007 when he flew into Mogadishu. The city was a smoky battlefield of bomb explosions and firefights between the Shabaab and the African troops, who had arrived earlier in the year.

But that was the point, he says. “We wanted get in at the worst time, when it’s really bad.”

The Shabaab, Arabic for “The Youth,” had taken over much of the capital. They built power over years, though the bloodshed had begun long before, in 1991, when armed clans forced out Somalia’s military-run government.

His team set up tents at the airport and struck a deal with the African troops, he says. “We said we’ll help you, if you keep us from getting killed.”

Some worry that contractors like Bancroft face little scrutiny—an issue of “accountability,” as one Western intelligence analyst put it. “Who works for them?” he said. “What are they doing?”

“The pro side,” he said, “is that they were here when no one else would come.”

A person familiar with the U.S. State Department’s policy on Somalia said that the company had helped create an “effective fighting force.” A U.N. official, meanwhile, noted that Bancroft’s training in roadside bombs had reduced deaths among African soldiers.

Mr. Stock winces at the terms “mercenary” and “hired guns,” which he considers inaccurate. He calls his men “mentors” who train people rather than fight.

Even though they don’t carry weapons, working closely with soldiers, medics and others means that they are in the line of fire. “If the African forces are overrun, we’re all dead,” he says.

Dressed in body armor and a helmet one morning, Mr. Stock says he had never considered joining the military himself. “I don’t take orders well,” he joked, riding along in a convoy of armored carriers in downtown Mogadishu, gunners manning the roof hatches. It was part of a sweep Burundi and Somali soldiers for insurgents.

The streets alternated between bombed-out buildings and stretches of fresh paint. Soon, a sniper was spotted. Later, a gunfight broke out. Then, an exploded roadside bomb brought the convoy to a halt. By the end, six suspected militants were detained and Bancroft took the bomb for analysis.

“Danger comes and goes quickly here,” says Mr. Stock. “It’s like lightning. If it hits, it hits.”

It was nearly three years of free security training in Somalia, and $6 million out of pocket, according to financial filings, before he landed his first contract with the U.N. Various U.N. agencies have paid the company some $15 million since then and the African Union, with the U.S. State Department money, will have paid Bancroft a total of about $25 million by the end of the year.

All along, though, he expanded into real estate. In 2011, he created the for-profit side of the company, Bancroft Global Investment. That year, he sold an 18% stake, just under $1 million, in the Somali properties to a Washington, D.C., developer, Michael Darby.

“When you hear Somalia, you think of the most dangerous place on earth,” says Mr. Darby. “But I’m prone to take more risks than others.”

Making real-estate deals in Somalia wasn’t easy, Mr. Stock says. It took “dozens” of meetings with government officials, clan leaders and neighbors of the properties. “You have to spend a lot of time figuring out who is who,” he says. There is no formal contract for the land, but rather “consensus building,” he says, that results in a verbal go-ahead from the collective parties.

Mr. Stock made a similar land deal, a public-private partnership with the Somali government for some beach property near the port, but didn’t work out as well.

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A version of this article appeared April 27, 2013, on page A1 in the U.S. edition of The Wall Street Journal, with the headline: A Bet on Peace for War-Torn Somalia.

Updated April 26, 2013, 10:37 p.m. ET

By CHRISTOPHER S. STEWART

Write to Christopher S. Stewart at christopher.stewart@wsj.com

Find this story at 26 April 2013

Copyright 2012 Dow Jones & Company, Inc.

Private Army Formed to Fight Somali Pirates Leaves Troubled Legacy

WASHINGTON — It seemed like a simple idea: In the chaos that is Somalia, create a sophisticated, highly trained fighting force that could finally defeat the pirates terrorizing the shipping lanes off the Somali coast.

But the creation of the Puntland Maritime Police Force was anything but simple. It involved dozens of South African mercenaries and the shadowy security firm that employed them, millions of dollars in secret payments by the United Arab Emirates, a former clandestine officer with the Central Intelligence Agency, and Erik Prince, the billionaire former head of Blackwater Worldwide who was residing at the time in the emirates.

And its fate makes the story of the pirate hunters for hire a case study in the inherent dangers in the outsourced wars in Somalia, where the United States and other countries have relied on proxy forces and armed private contractors to battle pirates and, increasingly, Islamic militants.

That strategy has had some success, including a recent offensive by Kenyan and African Union troops to push the militant group Al Shabab from its stronghold in the port city of Kismayu.

But with the antipiracy army now abandoned by its sponsors, the hundreds of half-trained and well-armed members of the Puntland Maritime Police Force have been left to fend for themselves at a desert camp carved out of the sand, perhaps to join up with the pirates or Qaeda-linked militants or to sell themselves to the highest bidder in Somalia’s clan wars — yet another dangerous element in the Somali mix.

A United Nations investigative group described the effort by a company based in Dubai called Sterling Corporate Services to create the force as a “brazen, large-scale and protracted violation” of the arms embargo in place on Somalia, and has tried to document a number of grisly cases in which Somali trainees were beaten and even killed. In one case in October 2010, according to the United Nations group, a trainee was hogtied with his arms and feet bound behind his back and beaten. The group said the trainee had died from his injuries, an accusation disputed by the company.

Sterling has portrayed its operation as a bold private-sector attempt to battle the scourge of piracy where governments were failing. Lafras Luitingh, a senior manager for the project, described the October 2010 occurrence as a case of “Somali-on-Somali violence” that was not indicative of the overall training program. He said that the trainee had recovered from his injuries, and that “the allegations reflect not the professional training that occurred but the fact that professional training was needed,” he said.

A lawyer for the company, Stephen Heifetz, wrote an official response to the United Nations report, calling it “a collection of unsubstantiated and often false innuendo assembled by a group with extreme views regarding participants in Somali politics.”

Sterling officials have pointed out that in March, a United Nations counterpiracy organization — a separate entity from the investigative group that criticized Sterling — praised the semiautonomous Somali region of Puntland for creating the program. Moreover, the company argues, Somalia already is a playground for clandestine operations, with the C.I.A. now in the midst of an extensive effort to arm and equip Somali spies. Why, they ask, is Sterling Corporate Services singled out for criticism?

Concerned about the impact of piracy on commercial shipping in the Middle East, the United Arab Emirates has sought to take the lead in battling Somali pirates, both overtly and in secret by bankrolling operations like Sterling’s.

American officials have said publicly that they never endorsed the creation of the private army, but it is unclear if Sterling had tacit support from parts of the United States government. For instance, the investigative group reported in July that the counterpiracy force shared some of the same facilities as the Puntland Intelligence Service, a spy organization answering to Puntland’s president, Abdirahman Farole, that has been trained by C.I.A. officers and contractors for more than a decade.

With the South African trainers gone, the African Union has turned to a different security contractor, Bancroft Global Development, based in Washington, to assess whether the pirate hunters in Puntland can be assimilated into the stew of other security forces in Somalia sanctioned both by the United States and the African Union. Among those groups are a 10,000-man Somali national army and troops of Somalia’s National Security Agency, based in Mogadishu, which is closely allied with the C.I.A.

Michael Stock, Bancroft’s president, said a team of his that recently visited the camp where the Puntland force is based witnessed something out of the Wild West: nearly 500 soldiers who had gone weeks without pay wandering the main compound and two other small camps, an armory of weapons amassed over two years at their disposal.

Although the force is far from the 1,000-man elite unit with helicopters and airplanes described in the United Nations report, Mr. Stock and independent analysts said the Puntland soldiers still posed a potential threat to the region if left unchecked.

“Sterling is leaving behind an unpaid but well-armed security force in Puntland,” said Andre Le Sage, a senior research fellow who specializes in Africa at the National Defense University in Washington. “It’s important to find a way to make them part of a regular force or to disarm them and take control of them. If that’s not done, it could make things worse.”

Mr. Stock, whose company trains soldiers from Uganda and Burundi for counterinsurgency missions in Somalia under the African Union banner, said Bancroft would not take over Sterling’s counterpiracy mission.

The Sterling operation was shrouded in a degree of secrecy from the time Mr. Luitingh and a small group of South Africans traveling in a private plane first touched down in Bosasso, Puntland’s capital, in 2010. The men worked for Saracen International, a South African private military firm hired by the emirates and composed of several former members of the Civil Cooperation Bureau, the feared paramilitary squad during the apartheid era.

The following year, after The New York Times wrote about the operation, Saracen hired a prominent Washington law firm to advocate for the mission at the State Department and the Pentagon, and a rebranding campaign began. A new company, Sterling Corporate Services, was created in Dubai to oversee the training in Puntland. It was an attempt to put distance between the Somalia operations and Saracen’s apartheid-era past, but some of the officers of the two companies were the same.

Two well-connected Americans were also involved in the project. Michael Shanklin, a former C.I.A. station chief in Mogadishu, was hired to tap a network of contacts both in Washington and East Africa to build support for the counterpiracy force. More significant was the role of Mr. Prince, who had become an informal adviser to the crown prince of Abu Dhabi, Sheik Mohamed bin Zayed Al Nahyan.

At the time, Mr. Prince was also involved in a project to train Colombian mercenaries at a desert camp in the emirates to carry out missions at the behest of the Emirati government.

But the emirates’ refusal to publicly acknowledge their role in the operation, or to make a formal case to the United Nations Security Council to receive permission to build the army under the terms of the Somalia arms embargo, drew the ire of United Nations arms monitors, who repeatedly pressed the emirates to shut down the mission.

Lawyers for Sterling gave extensive briefings on the program to the State Department, the Pentagon and various United Nations agencies dealing with piracy.

Yousef Al Otaiba, the emirates’ ambassador to Washington, declined to comment for this article.

American officials said they had urged Sterling’s lawyers, from the firm of Steptoe & Johnson, to have the operation approved by the Security Council. Mr. Heifetz, the company’s lawyer, said Puntland and other Somali authorities did receive permission to build the police force. A spokeswoman for the State Department said the United States government never approved Sterling’s activities.

“We share the monitoring group’s concerns about the lack of transparency regarding the Saracen and Sterling Corporate Services’ train-and-equip program for the Puntland Maritime Police Force, as well as the abuses alleged to have occurred during the training,” said Hilary Renner, a State Department spokeswoman, referring to the United Nations Monitoring Group on Somalia and Eritrea, the investigative arm.

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October 4, 2012
By MARK MAZZETTI and ERIC SCHMITT

Find this story at 4 October 2012

© 2012 The New York Times Company

Private Security Companies in Somalia are in violation of the arms embargo – UN

The United Nations is concerned that member states are failing to uphold the arms embargo on Somalia by allowing private security companies (PSCs) to operate in the country. South Africa, Uganda, Ethiopia and the United Arab Emirates were singled out in a UN report.

In its Report of the Monitoring Group on Somalia and Eritrea, the United Nations said that the provision of security assistance, in the absence of UN authorisation, “constitutes a violation of the general and complete arms embargo on Somalia.” It added that the Monitoring Group was concerned that member states “routinely fail to fulfil their obligations” which require them to prevent “the direct or indirect supply, sale or transfer of weapons and military equipment and the direct or indirect supply of technical assistance or training, financial or other assistance” to Somalia.

The report highlights several of the numerous security companies operating in Somalia, notably Sterling Corporate Services/Saracen International Lebanon. In late 2011, the assets, personnel and operations of Saracen International Lebanon were transferred to Sterling Corporate Services (SCS), reportedly a Dubai registered company, which resumed large-scale military training, technical assistance and support to the Puntland Maritime Police Force (PMPF).

“Established in May 2010, with the involvement of Erik Dean Prince, the American founder of Blackwater U.S.A., this externally-financed assistance programme has remained the most brazen violation of the arms embargo by a PSC,” the report said. “In 2011, Saracen’s training camp near Bosaaso became the best-equipped military facility in Somalia after AMISOM’s bases in Mogadishu. The SCS base today includes a modern operational command centre, control tower, airstrip, helicopter deck and about 70 tents, which can host up to 1,500 trainees.”

“Thanks to this massive initiative, the Puntland Maritime Police Force is now a well-equipped elite force, over 1,000 strong, with air assets used to carry out ground attacks, that operates beyond the rule of law and reports directly to the President of Puntland. This private army disingenuously labeled a ‘counter-piracy’ force, has been financed by zakat [Muslim charity] contributions mainly from high-ranking officials from the United Arab Emirates, including Crown Prince and Deputy Supreme Commander of the UAE Armed Forces, Sheikh Mohammed bin Zayed Al Nahyan. The UAE government, however, has officially denied any involvement in the project,” the UN reports.

The Monitoring Group stated that SCS was characterised by a lack of transparency, accountability or regard for international law and this was unlikely to change without intervention from its state sponsor.

Another private security company mentioned in the report was the South African-based Pathfinder, which in August 2011 was contracted by Africa Oil, via its local subsidiaries, to provide security advice and risk analysis. Pathfinder personnel on the ground liaise with local authorities in charge of security and oversee the Exploration Security Unit (ESU), a special branch of the Puntland security forces established to protect oil exploration and exploitation.

The UN report noted that Pathfinder’s transparency and its efforts to comply with the sanctions regime arguably represent ‘best practices’ for private security companies in Somalia. “However, its ‘temporary issue’ of military equipment and the direct funding of the ESU by Africa Oil (via its subsidiary, Canmex) constitute violations of Security Council resolution 733 (1992).”

Also singled out in the report was the Washington DC-based charity Bancroft Global Development, operating in Somalia under the auspices of AMISOM. The report said it is currently the only private company providing assistance to Somali security sector institutions that complies with UN resolutions.

Other security providers form part of a growing network of private contractors that provide security details for individuals, foreign companies, diplomatic missions, international non-governmental organisations and international organizations in Somalia. They supervise local militias, provide armed escorts and static guards, often importing armoured vehicles, personal protective equipment (PPE) and operating in an arguably paramilitary fashion, according to the United Nations report.

Apart from organisations based in Somalia, private security companies are also used to provide protection to diplomats, international NGO workers, journalists, foreign contractors and businessmen visiting Mogadishu. Since November 2011, even the United Nations has also engaged a private local militia in Mogadishu to protect the movements of its staff.

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Written by defenceWeb
Wednesday, 08 August 2012 14:28

Find this story at 8 August 2012

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