US: Quick Rise for Purveyors of Propaganda in Iraq

Two years ago, Christian Bailey and Paige Craig were living in a half-renovated Washington group house, with a string of failed startup companies behind them.

Mr. Bailey, a boyish-looking Briton, and Mr. Craig, a chain-smoking former Marine sergeant, then began winning multimillion-dollar contracts with the United States military to produce propaganda in Iraq.

Now their company, Lincoln Group, works out of elegant offices along Pennsylvania Avenue and sponsors polo matches in Virginia horse country. Mr. Bailey recently bought a million-dollar Georgetown row house. Mr. Craig drives a Jaguar and shows up for interviews accompanied by his "director of security," a beefy bodyguard.

The company's rise, though, has been built in part by exaggerated claims about its abilities and connections, according to interviews with more than a dozen current and former Lincoln Group employees and associates, and a review of company documents.

In collecting government money, Lincoln has followed a blueprint taught to Mr. Bailey by Daniel S. Peña Sr., a retired American businessman who described Mr. Bailey as a protégé.

Federal contracts in Washington can supply easy seed capital for a struggling entrepreneur, Mr. Peña says he advised a youthful Mr. Bailey in the mid-1990's when the two men started a short-lived technology company. "I told him, 'When in trouble, go to D.C.,' and the kid listened," Mr. Peña said.

Mr. Bailey defends his company's record, saying, "Lincoln Group successfully executes challenging assignments." He added that "teams are created from the best available resources."

Lincoln won its contracts after claiming to have partnerships with major media and advertising companies, former government officials with extensive Middle East experience, and ex-military officers with background in intelligence and psychological warfare, the documents show. But some of those companies and individuals say their associations were fleeting.

Lincoln has also run into problems delivering on work for the military after its partnerships with more experienced firms fell apart, company documents and interviews indicate. The firm has continued to bid for new business from the Pentagon and has hired two Washington lobbying firms to promote itself on Capitol Hill and with the Bush administration.

"They appear very professional on the surface, then you dig a little deeper and you find that they are pretty amateurish," said Jason Santamaria, a former Marine officer whom the company once described as a "strategic adviser."

The company's work in Iraq, where Mr. Bailey and Mr. Craig visit from time to time to direct operations, is facing growing scrutiny.

The Pentagon's inspector general last month opened an audit of Lincoln Group's contracts there, according to two Defense Department officials. A separate inquiry ordered by Gen. George W. Casey Jr., the top American commander in Iraq, after disclosures late last year that Lincoln Group paid Iraqi publications to run one-sided stories by American soldiers, has been completed but not made public, military officials said.

A spokesman for General Casey, Lt. Col. Barry Johnson, declined to comment on Lincoln Group, citing the ongoing investigation.

In interviews, Mr. Bailey, 30, and Mr. Craig, 31, said they had succeeded by anticipating the military's need for help communicating with and influencing the Iraqi public, just as the insurgency was building. "We saw that it was very hard for the U.S. to do that work," Mr. Bailey said. "They didn't do media and outreach very well. We had local offices in a tough environment where traditional U.S. contractors would not operate."

He disputed suggestions that Lincoln had experienced difficulty delivering on work for the military, saying the firm had "successfully executed" more than 20 contracts from the Defense Department.

Lincoln's roster of advisers and other businesses assisting it has continually changed, Mr. Craig said, because "our work in often hostile environments has occasionally proved to be too risky or challenging for some of our partners."

Little in Mr. Bailey's background indicated he would end up doing propaganda work in Iraq. Born in Britain as Christian Jozefowicz, he changed his name when he graduated from Oxford University and moved to San Francisco during the late-1990's dot-com boom.

There he founded or advised several companies and plunged into the Silicon Valley social scene, according to Mr. Bailey and several friends and former business associates. Among the companies were Express Action, a company that planned to develop an Internet service to calculate duties on overseas purchases, and Motion Power, which intended to invent a shoe that would generate its own electrical power to run portable consumer devices.

"You would have been proud had you seen this 23-year-old kid pitching, with no product, no customers, no business plan," Mr. Bailey wrote in a letter to Mr. Peña, describing how he raised $15 million from investors for Express Action.

Mr. Bailey later moved to New York and sought investors for an investment fund, according to documents filed with the National Futures Association. In 2003, he moved to Washington.

Mr. Craig's path to the capital began when he dropped out of West Point to pursue, he says, his interests in business and national security.

Enlisting in the Marines in 1995, he began working in military intelligence. He earned an undergraduate degree in information technology while stationed in Okinawa and Australia through the University of Maryland and a masters in business administration from National University, which runs academic programs on military bases. He left the Marines in 2000.

By 2004, Mr. Bailey had moved into Mr. Craig's house near downtown Washington, and the two had formed the company that eventually became Lincoln Group.

Their original goal was to make money exploiting Iraq's most obvious surplus - its shattered infrastructure. But those efforts faltered.

A project to export scrap metal fell apart after the Iraqi government banned scrap exports in 2004, Mr. Bailey said. A pile of scrap metal, purchased with a loan from an Indonesian bank, has been sitting in Basra ever since, according to two ex-employees. Like several other former Lincoln workers, they asked to remain anonymous because they had signed confidentiality agreements with the company or still dealt with the firm.

Lincoln also spent about $50,000 for two portable brick-making machines from Texas. The company had hoped to set up a brick plant near Mosul, where the demand for construction materials was vast, according to a presentation Mr. Bailey made to potential investors in Dubai. The machines, though, were principally designed for homeowners or small contractors. Lincoln would not comment on the project.

Eventually, Lincoln began working with the American military, which was spending millions on contractors for a broad range of services. The firm rented a one-story house inside the Green Zone, the heavily fortified government compound in central Baghdad. Furnished with two sofas and a sheet of plywood that served as a desk, the house had a single telephone and an overloaded electrical outlet.

Lincoln formed a partnership with The Rendon Group, a Washington company with close ties to the Bush administration, and won a $5 million Pentagon contract to help inform Iraqis about the American-led effort to defeat the insurgency and form a new government. One contract requirement was to get Iraqi publications to run articles written by the military, according to several ex-Lincoln employees.

Rendon soon dropped out and Lincoln handled the contract alone. But the company had fewer than two dozen workers and little experience with public relations, according to several ex-employees.

Problems arose from the start. In a 2004 briefing to the military, Lincoln conceded that it was "not yet fully staffed" and that "media monitoring software" required by the contract was "not ready."

And the government did not provide that much work at first. The military's public affairs office produced only a few articles a day during that period, one Lincoln ex-employee said. A small State Department contract to assist small businesses had just been cancelled, he said, and the firm was having difficulty making its payroll.

Lincoln lacked the armored vehicles or security guards employed by more established contractors. When venturing outside the Green Zone, employees would grab weapons and climb into one of two beat-up Proton sedans, which employees were told were chosen to blend in with dilapidated Iraqi vehicles on the streets.

After winning a small contract from the Marines to do polling, the company hired Iraqis to go door-to-door in Anbar Province with questionnaires. To protect themselves from possible insurgent reprisals, they were told to say they were working for an Iraqi university, according to a former Lincoln employee.

Last August, gunmen came to the home of one of the Iraqi workers, killing him and three others, according to an ex- employee. Mr. Bailey said it was not clear whether the killing was related to the polling, but the company decided to move a Lincoln office staffed by Iraqis in downtown Baghdad to a less noticeable location.

Back in the United States, Mr. Bailey and Mr. Craig worked to drum up more business.

In late 2004, Mr. Craig traveled to Fort Bragg, N.C., to meet with officers of the 18th Airborne Corps, which was preparing take over management of Lincoln's public affairs contract in Iraq, according to a former employee and company documents. Despite the problems with the existing work, Lincoln said it could assist the military in the more secretive realm of "information operations," according to a transcript of the briefing. Unlike public affairs work, information operations are meant to influence and help defeat foreign adversaries, using deception, if necessary.

The briefing also touted the firm's "strategic advisers," including Mr. Santamaria, the former Marine officer, who received a master's degree from the Wharton business school and was co-author of a business book called "The Marine Corps Way."

Mr. Santamaria said he reviewed several investment proposals for Lincoln during a two-week association in late 2004. But after becoming "concerned about their methods," he said, "I severed ties with them as quickly as I could."

A Lincoln spokesman, William Dixon, said "it was a mistake" to include Mr. Santamaria's name in the December briefing because he was no longer affiliated with the company.

Lincoln may simply have been following another principle taught by Mr. Peña. "How do you create an instant track record?" Mr. Peña says he told Mr. Bailey. "You joint-venture with someone who has a track record."

Early last summer, military commanders made Lincoln Group the main civilian contractor for carrying out an aggressive propaganda campaign in Anbar Province, known as the Western Mission project. Over the next several months, the military transferred tens of millions of dollars to Lincoln for the project, records show.

The company hired dozens of employees, including academics and former military personnel, as well as hundreds of contract workers in Iraq and elsewhere, a number that fluctuates by contract requirements, according to Mr. Dixon, the Lincoln spokesman.

With the new duties came substantial new requirements, including producing television and radio ads, buying newspaper ads and placing many more articles in the Iraqi press. The military also approved paying Iraqi editors to run stories, according to ex-Lincoln employees.

Lincoln also enlisted the New York advertising executive Jerry Della Femina, chairman of Della Femina Rothschild Jeary & Partners. Mr. Della Femina said he was introduced to Mr. Craig last spring by a Washington lobbyist.

Mr. Della Femina said his firm "did a great deal of work" on advertising ideas for Lincoln to present to the military's Special Operations Command, which last summer was soliciting bids for contracts, potentially worth millions, for psychological operations.

Lincoln listed Mr. Della Femina as a "creative director" in materials presented last spring at a meeting with Special Operations officers in Tampa. But Mr. Della Femina said his firm pulled out before executing any of the ideas. Three months after ending the collaboration, Mr. Della Femina said, he discovered that Lincoln's Web site listed him as one of its partners.

"I was surprised that they had our name on their Web site in the first place," he said.

After he asked that his name be removed, Mr. Craig said, "we honored his request within the week."

By that time, Lincoln had already been notified by Special Operations Command that it and two other companies had been chosen to compete for work under the contract.

Lincoln later told Special Operations Command that one of its principal subcontractors was Omnicom Group Inc. of New York, an advertising and marketing conglomerate. A proposal signed by Mr. Bailey in October said Lincoln "has exploited the extensive experience and expertise of the Omnicom Group."

But Pat Sloan, an Omnicom spokeswoman, said she could find no evidence it has ever worked with Lincoln Group. "We're not aware of any relationship with Lincoln Group," she said. She noted that Omnicom had once owned 49 percent of Mr. Della Femina's agency but had sold the stake in early 2005. Michael J. Jeary, president of Mr. Della Femina's agency, said Lincoln's claim of Omnicom as a subcontractor was an "honest mistake" because he had never told the firm Omnicom had sold its minority stake.

Although Lincoln Group's work in Iraq is now under scrutiny in two Pentagon investigations, the firm is hunting for more government work. Last month, Mr. Bailey attended a going-away reception at the Virginia condominium of a mid-level government employee on her way to a new job at the American Embassy in Baghdad. Her job: overseeing contracts.

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