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Safety at a Price: Security is a booming, sophisticated, global business

Sunday, February 13, 2000

By Jack Kelly, Post-Gazette National Bureau

WASHINGTON -- The men in the dark, well-tailored suits in the plush offices in the heart of the nation's capital seem no different from the lawyers with whom they share the 13th floor. They are.

Safety At A Price
First of a series


At GlobalOptions, the director of intelligence spent 28 years in the FBI, seven heading the bomb data center. The director of security services was present at the creation of Delta Force, the Army's elite anti-terrorist unit. The chief operating officer is a former Navy Seal. CEO Neil Livingstone is author of nine books on terrorism.

GlobalOptions provides high-end security, intelligence and investigative services. It bills itself as a "private CIA, FBI, State Department and Justice Department wrapped up into one."

Across the Potomac River in Alexandria, Va., when senior executives of a competing firm called MPRI gather around a conference table, there are almost as many stars as in "the Tank," the basement room in the Pentagon where the Joint Chiefs of Staff meet. President and CEO is Gen. Carl Vuono, who retired as Army chief of staff. The board includes a former Air Force chief and former commanders of NATO, the U.S. Special Operations Command and the Atlantic fleet.

The first global one-stop shop for security services was formed three years ago when Kroll Associates, a detective firm, merged with O'Gara, Hess & Eisenhardt, specialists in armored vehicles.Late last year, Bill O'Gara sat in a conference room at company headquarters outside Cincinnati and shook his head:

"It's kind of interesting to see what we started. In 1996, there was no global company. The security business pretty much was guards."

The security business is a lot more than guards today.

Business is booming, and companies like GlobalOptions, MPRI and Kroll-O'Gara are part of a worldwide trend toward the creation of multinational organizations that can police communities, operate prisons, recapture kidnapped executives or children stolen in custody disputes, protect against acts of terror, even provide military training, intelligence or troops.

The trend is driven by fears of residential crime and workplace violence, by governments seeking to save money on police or prison operations, by corporations seeking to protect employees from each other and executives from terrorists or kidnappers.

It reflects rising threats from armed religious cults, militia movements, drug cartels, environmental radicals and political extremists.

And with civil and regional wars springing up in the post Cold War period, Western military knowhow is in great demand. In 1995, MPRI was advising the Croatian army when it launched an offensive that drove the Serbs to sign the Bosnian peace accords. MPRI has been training the Bosnian army ever since.

Growing fast all over

In the 1990s, private security companies with publicly traded stocks grew at twice the rate of the Dow Jones industrial average. In the United States, more than twice as much money is spent on private security as on law enforcement, and private firms employ nearly three times as many people as public agencies.

Since 1984, the number of security firms in Germany has doubled; their payrolls have more than tripled. In Britain, the number of people employed by security firms rose from 10,000 in 1950 to more than 250,000 today, outnumbering soldiers in the British army.

Private security companies are taking on functions once performed by governments. Wackenhut Corp. runs prisons in 13 U.S. states and four foreign countries. It provides emergency response SWAT teams for nuclear weapons facilities in South Carolina and Nevada.

To protect their neighborhoods, wealthy Americans depend more and more on gates and security guards, not the cop on the beat.

Many U.S. embassies and consulates are guarded by employees of DynCorp, a private contractor. DynCorp protects U.S. personnel in Bosnia and Kosovo.

To some extent the growth of private security firms is a throwback to the past. The Pinkerton detective agency -- now part of Securitas A.B., the largest global security company -- spied for the Union Army during the Civil War and investigated cases of counterfeiting. It was Pinkerton that introduced the mugshot and the rap sheet.

And private security firms still spark controversy. Just as Pinkerton was accused of strikebreaking and protecting the rich at the turn of the last century, so, too, are the rise of gated communities, private prisons, well-guarded elites and the export of military expertise seen today as measures further separating haves from have-nots.

Nevertheless, the trend is clear and in the future, private firms are expected to take the lead in many new arenas, such as the burgeoning field of electronic security. "The government can't compete," argues O'Gara. "The decision-making process is too slow, too cumbersome and the government doesn't pay enough. There'll be a talent drain to the private sector."

Terrorism fuels growth

One major reason for the explosive growth of private security is the threat of terrorism.

The Red Brigades in Italy, the Baader-Meinhof gang in Germany and Islamic militants operating on European soil in the 1970s and '80s began a wave of kidnappings, bombings and assassinations. The bombing of the World Trade Center in 1993 by radical Islamists and of the federal building in Oklahoma City in 1995 by homegrown terrorists showed that America was not immune.

Now, roughly 40 percent of U.S. airline employees in Europe are security personnel. At the Atlanta Olympics, there were twice as many security guards as athletes, and still there was a bombing at Centennial Olympic Park in which two people were killed and many injured.

Though some terrorists are state-supported, threats increasingly come from private groups with links across national borders.

"We used to worry about the Soviets or the Nazis," said John Thompson, a former Canadian army officer who is managing director of the Mackenzie Institute, a Toronto think tank that studies global conflict. "Today, we worry more about drug cartels, the Russian mafia, religious lunatics from Osama bin Laden to Aum Shinri Kyo."

Osama bin Laden is the wealthy Islamic fundamentalist suspected of masterminding the bombing of U.S. embassies in Africa last year that killed 80 and wounded 1,600. Aum Shinri Kyo is the religious cult that spread nerve gas in Tokyo subways in 1995, killing 12 and injuring hundreds.

"The transition from fanaticism to barbarism is but one step, and if present trends continue, there is every reason for grim forebodings," warns Walter Laqueur, a terrorism expert affiliated with the Center for Strategic and International Studies, a think tank in Washington, D.C. "Megaterrorism could well become . . . the devastating storm of the coming century."

Regis Becker, a former FBI agent who directs corporate security for PPG Industries in Pittsburgh, says he worries less about organized groups, no matter how bizarre, than about disturbed individuals. He cites Ted Kaczynski, the "Unabomber," who mailed explosives to scientists, and Benjamin Nathaniel Smith, the white supremacist who went on a murder spree in Illinois and Indiana in July, shooting blacks and Asians at random from his car.

"The kind of person who is going to do this doesn't really respect an organizational structure," Becker said. "Even if the group doesn't advocate violence, these deranged individuals take matters into their own hands to advance the goals of the organization by what they feel are more appropriate means."

High-tech threats

The technology of terror has advanced to such a degree that a single individual can do great harm. A biological warfare scenario role-played by 1,000 public health experts last year left 15,000 people dead over two months, 80 million dead within a year.

The exercise, designed by the Center for Civilian Biodefense Studies at Johns Hopkins University, featured a release of smallpox during a university speech. Infection spread as people returned to their homes, passing through subways, train stations, airports and freeway rest stops. It took 11 days for victims to first report "flu-like symptoms"; within two and a half months, more than 15,000 people had died.

Because smallpox was eradicated in 1977, smallpox vaccines are in short supply. Most of the 80 million hypothetical deaths in 14 countries -- all stemming from a single release of smallpox -- occurred because vaccines ran out.

Robert Gallucci has nightmares of terrorists who use small nuclear devices. He thinks the odds are better than even that an American city will be destroyed by a nuclear blast within the next 10 years.

Now dean of the school of foreign service at Georgetown University, Gallucci was a State Department expert on nuclear proliferation and helped design the weapons inspection program in Iraq.

"Nuclear weapons are so deadly they should be placed in a class by themselves," he said. It takes only "fissile material" about the size of a softball to build a nuclear bomb, he said, noting there are thousands of tons of enriched uranium and plutonium in Russia, some of it poorly secured, possibly available to those with money.

"If you want to smuggle a nuclear weapon into the United States, hide it in a bale of marijuana," he said.

Terrorists armed with computers may pose an even greater threat than terrorists armed with chemical, biological or nuclear weapons, argues Mark Gembicki.

Gembicki was plucked out of high school by the National Security Agency after he tested remarkably high in electronics and computer science. When other teens were going to dances and football games, he was helping to design the "football" that provides secure communications for the president when he travels.

Gembicki, 34, is chairman of WARROOM, Inc., an Annapolis, Md., firm that consults on information security with government agencies and private businesses. Computer security is America's Achilles' heel, he says.

"Keyboard attacks do not draw blood or emotion, but they can paralyze the nation's critical nerve centers," agreed a panel headed by William Webster, former head of the FBI and CIA.

Proof was provided in a recent wargame entitled: "Eligible Receiver." Computer hackers for the National Security Agency penetrated the headquarters of the U.S. Pacific Command, paralyzing it for two weeks.

Information warfare specialists at the Pentagon estimate that a well-coordinated attack by 30 computer experts strategically located around the world could bring the United States to its knees.

"Such a strategic attack, mounted by a cyberterrorist group . . . would shut down everything from electric power grids to air traffic control centers," said the Webster panel. "A combination of cyberweapons, poison gas and even nuclear devices could produce a global Waterloo for the United States."

Cyberattacks aren't something that might happen someday. The Pentagon is probed tens of thousands of times a year. Of 520 corporations, government agencies and universities that responded to a survey last year by the National Computer Security Center, 64 percent reported intrusions. The oil and health-care industries may be most vulnerable, but cyberattacks this week that disrupted Yahoo!, CNN, eBay and other commercial Web sites show that almost any organization could be targeted.

Most computer hacking has been done by teen-agers playing pranks. But that's changing. Gembicki says, "The hacks of the future will be driven by cybercartels -- which are forming even now."

It isn't just extremists with racial, political, religious or environmental agendas who pose a threat. According to the United Nations, international crime syndicates last year grossed $1.5 trillion. Narcotics trafficking is estimated to comprise 8 percent of world trade, on a par with the oil and gas industry. The drug cartels have more sophisticated weapons and intelligence systems than many countries.

"The scary truth is that the cybercrooks and the emerging cybercartels are much more organized and motivated than American industry and law enforcement," according to Gembicki.

Seeking softer targets

Terrorists are just as likely to physically strike private businesses as government or military installations, experts believe.

"Terrorists go after the softer targets," said former Secret Service agent Charles Vance, founder of Vance International, a pioneer of executive protection. "As governments take more precautions, business targets become more inviting."

Former FBI bomb expert Robert Quigley said businesses were the target of 52 percent of the 3,163 bombing attacks that took place in 1994. Thirty-four percent were directed at civilian government facilities; 12 percent at police and military facilities. The number of bombing incidents annually has tripled since 1986.

Just the threat of a bombing can be very expensive for business, said Quigley, who is now director of intelligence and investigations for GlobalOptions.

"The New York Times estimated it loses $1 million per [every] phoned bomb threat," he told a group of corporate CEOs attending a security training course in North Carolina.

Firms like GlobalOptions provide protection for corporate executives. They teach employees how to recognize threats and simple methods to defend against them. They assess the risk from terrorists or criminals to offices or factories. They test and improve the security of computer systems. And they conduct background investigations on potential employees. If a crisis develops, they are equipped to negotiate with kidnappers or terrorists.

Two of the leading "risk mitigation" companies are Control Risk, a British firm started in 1975 by two former members of Britain's elite commando unit and two retired CIA officers, and Vance International.

Control Risk specializes in crisis response. According to Eleni Yakub, a former CIA analyst who works for the firm in Washington, it is "the only company in the world that has a full-time capacity to respond to kidnappings or product extortion anywhere in the world." Control Risk has handled more than 1,100 cases.

Vance International pioneered executive protection.

"Chuck [Vance] saw a need to provide for the Saudis the type of security the Secret Service was giving government officials," said Joe Ricci, marketing director for Vance International. "The business grew from there."

Like other security firms, Control Risk and Vance International are diversifying.

Control Risk has a highly regarded risk assessment service, is branching into investigations, and from time to time provides executive protection through subcontractors. Vance has become the national leader in "asset protection," supporting companies involved in labor disputes. It has started a uniformed guard service for businesses in Washington D.C. and Minneapolis.

About half the growth in the security industry has been new business and about half substitution, as major corporations contract out for security services they once provided in-house, said Ricci, who was director of public relations for the American Society for Industrial Security before joining Vance.

Ricci expects the trend toward outsourcing to continue and predicts that government agencies will continue to fuel the trend, as well.

Private security firms already perform many functions once performed only by government. The newest Wackenhut prison opened in Baldwin, Mich., in July. The state-of-the-art facility was built to house juveniles who are sentenced as adults for major felonies. Michigan pays Wackenhut $67.50 per prisoner per day. Per diem costs at prisons run by the Michigan Department of Corrections range between $83 and $110.

Industry analyst Jack Mallon predicts continued strong growth in private corrections, which had an annual growth rate of 45 percent between 1986 and 1996. State and academic studies indicate privatization can reduce prison operating costs by as much as 20 percent and new construction by even more.

Aside from saving money, another reason corporations contract for security is fear of litigation, according to Toledo-based security consultant Kim Klewer, because "if something goes wrong, the aggrieved party will sue the guard company instead of the XYZ Corporation."

American litigiousness also creates demand for investigative services. More money than ever is being spent on investigations for plaintiffs or defendants in lawsuits, says Quigley of GlobalOptions. "There's a tremendous resurgence of law firms and corporate general counsels wanting reputable people to conduct independent investigations."

Corporations also pay more attention to pre-employment screening. "It's hard to get rid of a bad apple these days, so you've got to be more careful who you hire in the first place," Quigley said.

Fear of workplace violence -- which topped the list of security concerns in Pinkerton's 1999 survey of Fortune 1000 companies -- is also driving the boom in pre-employment screening. On average, three people are murdered on the job in the United States each workday.

According to the Workplace Violence Research Institute, on-the-job violence costs employers $36 billion a year.

Executive protection, which ranked second on the Pinkerton's survey, is the fastest-growing concern.

"We used to have to convince corporate executives that they needed security before we could convince them that we were the ones to provide it," said Chuck Vance. "Today, most people are aware they need security."

Fueling the demand are the increasing number of American corporations that do business overseas.

"Companies are becoming far more reliant on providing their own security because they can't rely on foreign governments to protect them," said Hugh Brazier, managing director of Houston-based Sterling Lines, a firm that specializes in executive protection and risk assessment.

Private-public gap

Analysts predict continued growth for the security industry. Some expect it to double in size to $200 billion annually by 2010. And that's assuming there is no major terrorist incident in the United States in the meantime.

Few analysts believe there will be anything close to that kind of increase in the size of law enforcement agencies, which means the huge gap in resources and number of employees between private security companies and public law enforcement is likely to grow.

In addition to a quantitative imbalance, there may be a qualitative imbalance. Private firms are spending more on computer security and access-control technologies.

The similar nature of new threats to private companies, government facilities and the public at large would seem to call for more cooperation among government agencies and between government and private security forces.

Nowhere is cooperation more urgent than in cyberspace, says Gembicki, whose company provides computer security services to both government agencies and private corporations. Intelligence and military services have solid security systems, but the FBI lags, said Gembicki, who has consulted for them all.

"Is a cyberattack a law enforcement issue or a national security issue?" Gembicki asked. "The FBI says it is a law enforcement issue. But the FBI is less capable than the other agencies of dealing with a cyberattack. If Bell Atlantic shuts down, Washington, D.C., can't fly and fight. We need to let our computer pros support U.S. companies."

When he was president of the American Society for Industrial Security in 1996, PPG's Becker testified in favor of a bill that would have created a federal commission to encourage cooperation between law enforcement agencies and private sector security professionals. It died in committee.

Next: One of the fastest growing security services is executive protection. The best in the business make a good living.

Correction/Clarification: An earlier version of this story included one or more photos by Allan Detrich. The photos have been removed. This action is explained in a note from the editor.

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