Congressional Conflicts: Unraveling The Web Of Profit From The Afghanistan War

The war in Afghanistan has been lucrative for many, from major weapons manufacturers to entrepreneurs. The US government has spent $14 trillion on the war effort over two decades, and the defence industry has spent $2.5 billion lobbying Congress and donated $285 million to lawmakers' campaigns. An investigation by Sludge found that 51 members of Congress and their spouses own between $2.3 and $5.8 million worth of stocks in companies that are among the top 30 defence contractors in the world.

One of the most prominent examples of a Congressman who made money off the Afghanistan War is Republican Michael Waltz from Florida's 6th Congressional District. Waltz made up to $25 million from the sale of Metis Solutions, a defence contractor with a spotty record training Afghan security forces. Waltz was a co-founder of Metis Solutions and continued to hold up to $1 million in equity from the company in 2019, per congressional ethics disclosures. Waltz has been outspoken about the end of the war in Afghanistan, calling on President Biden to reverse course and relaunch military operations in the region.

Congress members profiting from defence stocks

The war in Afghanistan has been extremely profitable for defence contractors. If you had invested $10,000 in defence stocks when the Afghanistan War began, it would now be worth almost $100,000. This is a 58% greater return than was available in the overall stock market over the same period.

The top five defence contractors are Boeing, Raytheon, Lockheed Martin, Northrop Grumman, and General Dynamics. These companies have seen their stock prices surge as a result of the war in Afghanistan and other military conflicts. For example, Lockheed Martin's stock surged by 4.3% the day after Iranian General Qassem Soleimani was assassinated.

Members of Congress have not been immune to the financial gains from defence stocks. A review of financial disclosures revealed that 51 members of Congress and their spouses own between $2.3 and $5.8 million worth of stocks in companies that are among the top 30 defence contractors in the world. These members of Congress include those who sit on committees that determine funding for defence companies and weapons contractors.

One example is Senator Roy Blunt (R-Mo.), who owns as much as $100,000 worth of stock in Lockheed Martin. Another is Representative John Rutherford of Florida, who purchased between $1,001 and $15,000 worth of Raytheon stock on the day Russia invaded Ukraine. Representative Marjorie Taylor Greene of Georgia also bought between $1,001 and $15,000 in Lockheed Martin shares.

The potential for conflict of interest is clear. Congress continues to approve defence budgets beyond what the Pentagon requests, and more than half of this budget goes to private contractors such as Lockheed Martin and Raytheon. This could create a perverse incentive structure, as defence stocks tend to rise when global tensions increase.

In total, at least 25 members of Congress sat on committees that shape national security policy while simultaneously trading financial assets in defence companies. This has led to growing momentum for banning lawmakers from trading stocks altogether.

The Impact of Defence Spending

The high levels of defence spending have significant impacts on federal budgets and societal priorities. Nearly half of the federal discretionary budget goes to defence, with President Trump proposing to increase this amount to $750 billion in his 2020 Pentagon budget request. This means that other areas, such as healthcare, education, and addressing the climate crisis, may be underfunded.

In addition, weapons makers have spent $2.5 billion on lobbying over the past two decades, employing over 700 lobbyists per year on average. This influence has contributed to the high levels of defence spending and the profits of defence contractors.

Calls for Reform

Given the potential for conflict of interest and the public perception of Congress, there have been calls for self-regulation of stock trading by members of Congress. Currently, no law prohibits lawmakers from sitting on congressional committees, writing legislation, or voting on bills that might affect them financially.

Bills such as the Ban Conflicted Trading Act have been proposed to prohibit members of Congress from buying and selling individual stocks. However, some lawmakers, such as Senator Tommy Tuberville (R-Ala.), have resisted these efforts, arguing that it would reduce the number of people willing to serve in Congress.

The Afghanistan War and other military conflicts have been extremely profitable for defence contractors, and members of Congress have also profited from defence stocks. This has led to concerns about potential conflicts of interest and the impact of defence spending on federal budgets and societal priorities. There are growing calls for self-regulation or legislation to ban lawmakers from trading stocks to address these issues.

Outsourcing to private contractors

The U.S. military's decision to outsource tasks such as maintenance, cooking, laundry, and overland logistics to private contractors played a significant role in the war in Afghanistan. This move was driven by the desire to minimise casualties and focus on core military operations. As a result, the number of contractors in Afghanistan surpassed the number of U.S. troops, with a ratio of three contractors to one soldier by 2016.

This outsourcing created a lucrative opportunity for private companies, with billions of dollars in contracts being awarded. A notable example is Hikmatullah Shadman, an Afghan trucking company owner who earned over $160 million through contracts with the U.S. military. However, it also led to corruption and profiteering, with some contractors bribing military personnel to secure contracts and even funding the Taliban through protection payments for safe passage.

The use of private contractors in Afghanistan also raised concerns about accountability and oversight. With the U.S. government spending over $14 trillion on the war, a significant portion of which went to military contractors, there were questions about the value for money. Additionally, the large number of contractors and the complex web of subcontractors made it challenging to track how the funds were spent and who ultimately benefited.

The issue of outsourcing to private contractors during the Afghanistan War highlights the complex dynamics between the military, private companies, and local power brokers. It underscores the need for greater transparency and accountability in military spending to ensure that taxpayer money is used effectively and does not inadvertently fund America's enemies.

The role of subcontractors

The U.S. government's "Afghan First" and "Iraqi First" initiatives aimed to rely on local contractors, often through subcontracts, to stimulate the local economy. However, this created challenges in ensuring taxpayer dollars were well spent and not ending up in the hands of enemy fighters. The subcontracting process was often murky and complex, with prime contractors subcontracting work to other companies, including foreign-owned firms, who would then subcontract the work further. This made it difficult for the U.S. government to know who they were ultimately paying.

There were numerous investigations and reports highlighting the issues with subcontracting in Afghanistan. For example, the House Subcommittee on National Security's 2010 investigation into the Host Nation Trucking contract found that warlords, criminals, and insurgents were extorting contractors for protection payments to obtain safe passage. The Commission on Wartime Contracting also found that between $30 billion and $60 billion had been misappropriated in Iraq and Afghanistan since 2001.

To address these issues, the Defense Department established task forces to examine contracting corruption and its impact on counterinsurgency efforts. Measures taken included debarment of individuals and companies, increased vetting and transparency, and stricter oversight and performance controls in contracts. However, the complexity of the contracting chain and the challenges of operating in a corrupt business environment made it difficult to completely eliminate fraud and corruption.

Overall, the role of subcontractors in the Afghanistan War was critical but fraught with challenges and risks. While some measures were taken to address these issues, the nature of subcontracting in a war zone made it difficult to completely eradicate fraud and corruption.

Corruption and bribery

The US government's decision to flood Afghanistan with money, coupled with poor oversight and contracting practices, created an environment ripe for corruption and bribery. This resulted in the empowerment of abusive warlords and their militias, further undermining the legitimacy of the Afghan government and strengthening support for the insurgency.

US involvement in corruption

US agencies turned a blind eye to corruption, with one official stating that the US was "so desperate to have the alcoholics to the table, we kept pouring drinks, not knowing [or] considering we were killing them". The US also directly contributed to corruption by doling out cash to warlords, governors, parliamentarians, and religious leaders.

Impact of corruption

Corruption significantly hindered the US mission in Afghanistan, with billions of dollars in reconstruction funds ending up in the hands of insurgents, criminal syndicates, and corrupt officials. It also led to a loss of faith in the international reconstruction effort, with the Afghan public witnessing limited oversight of lucrative projects, resulting in bribery, fraud, extortion, and nepotism.

Recommendations to address corruption

To address corruption, the US government should:

• Make anti-corruption efforts a top priority in contingency operations to prevent systemic corruption from undermining strategic goals.
• Develop a shared understanding of the nature and scope of corruption in Afghanistan through political economy and network analyses.
• Take into account the amount of assistance Afghanistan can absorb and improve the ability to effectively monitor this assistance.
• Limit alliances with malign power brokers and aim to balance any short-term gains from such relationships against the risk of empowering actors who will lead to systemic corruption.
• Incorporate anti-corruption objectives into security and stability goals rather than viewing anti-corruption as imposing trade-offs on those goals.
• Recognize that solutions to endemic corruption are fundamentally political and bring high-level, consistent political will to bear when pressing the Afghan government for reforms.

The revolving door between defence companies and government

The revolving door between defence companies and the government has been a long-standing issue in the US. A report by the Project on Government Oversight (POGO) revealed that in 2021, 36 individuals left the Pentagon to join private defence or defence-adjacent firms. These firms received over $89.3 billion in contract obligations from the Pentagon during the same fiscal year.

The issue is not new. In 2018, POGO identified 645 instances of the top 20 defence contractors hiring former senior government officials, military officers, members of Congress, and senior legislative staff as lobbyists, board members, or senior executives. Of these, 95 went to work for the top five American defence contractors: Lockheed Martin, Boeing, Raytheon, General Dynamics, and Northrop Grumman.

The practice has raised concerns about conflicts of interest, with former government officials potentially using their influence to win contracts from the agencies they previously led. This could result in corporate favouritism, ineffective weapons and programs, bad deals, and wasteful spending of taxpayer dollars.

In response to these concerns, reforms have been included in the 2022 National Defense Authorization Act (NDAA) to close several loopholes. Additionally, Senator Elizabeth Warren has introduced the Department of Defense Ethics and Anti-Corruption Act, which aims to limit the influence of contractors on the military and increase transparency.

Despite these efforts, the revolving door between defence companies and the government remains a pervasive issue, with defence contractors spending millions on lobbying and hiring former government officials to secure lucrative contracts.

Frequently asked questions