The state trooper stood outside, his gun as yet undrawn.
"Stay in the car!"
The Englishman Reginald Taylor (not his real name) was slowly disobeying the state trooper by getting out of the car. The car, a silver Mercedes, was parked at the side of an exit ramp off the New Jersey Turnpike, somewhere between Newark and Hoboken.
The car's owner, James Christodoulou, the chief executive of a small merchant shipping company based in Connecticut, sat behind the wheel. He was cradling a cell phone tightly to his ear and listening to a man named Abbas accuse him, in angry broken English, of secretly transporting nuclear waste for the U.S. government -- or maybe also the Italian mob -- and dumping it off the coast of Somali. This, said Abbas, was why the pirates who'd hijacked Christodoulou's ship had become distressed. This was why he needed to pay the multimillion-dollar ransom, immediately. This was why, if he didn't pay, the gang of pirates might at any moment run the ship aground on a Somali beach and force its crew of 28 men -- at gunpoint, at knife point, hands on their heads -- down the gangway and into the bush.
Minutes before, Christodoulou had taken the call while steering his Mercedes through the Turnpike traffic. He'd become distracted; he'd entered a cash lane when he'd meant to go through the EZ-Pass; he'd blown the toll booth, drawing the attention of this New Jersey trooper.
Now, watching the cop in the rearview mirror, the cell phone clasped to his ear, a recording device attached to the phone, Christodoulou held his left hand aloft in the high-stress gesture of:
I can't talk
His right-hand man, however, could. "I know this is going to be hard to believe," Taylor, the Englishman, said.
His accent was full Oxbridge. A professional kidnap-for-ransom expert, hired to advise Christodoulou through the hostage crisis by Christodoulou's insurance company, Taylor explained to the trooper that his friend couldn't, at the moment, hunt for his driver's license, since his friend was just then on the phone with pirates in Somalia. A little less than a month ago, they'd captured one of his ships and taken its crew hostage; his friend, Taylor said, was right now negotiating for their release.
"He really can't get off of the phone."
If the trooper didn't roll his eyes, he expressed something less than total credulity.
"I don't care if he's talking to Queen Elizabeth, I want license, insurance and registration!"
Taylor, his hands held where the trooper could see them, managed to convince the trooper to let him remove, very deliberately, from the back seat -- "Please, it will explain everything" -- a copy of a New York newspaper, one of the tabloids. Taylor held it up; emblazoned across the pages were photographs of Christodoulou's ship, the
, swarmed with pirates.
The trooper, American law-and-order, glanced at an intense Christodoulou in the front seat. He looked at the newspaper photographs -- pirates, Kalashnikovs, hostages, Africa -- an alien shard of experience from the other side of the planet flashing into life on a New Jersey highway. The trooper got back in his car and drove off.
Christodoulou was left with his pirates.
If anything has brought the merchant shipping industry into the light of popular culture over the last two years it's been the pirates of Somalia, who have during that time hijacked 94 vessels, held an estimated 1,800 people hostage, and extracted something close to $200 million in ransom from ship owners around the world.
They've attacked virtually every type of sea craft there is -- polished European sailing yachts, dilapidated Vietnamese fishing trawlers, bone-white promenade-deck cruise ships sailing out of Miami, break-bulk stick freighters chugging out of the Port of Singapore, high-riding container ships owned by spruce Scandinavian industrial conglomerates, low-riding dry-bulk carriers, Ro/Ro car carriers and very-large crude carriers -- the VLCC supertankers that weigh more than 300,000 tons fully loaded -- owned by Armani-draped Athens shipping magnates.
The pirates are, by and large, fearless. Once, a gang had enough temerity to assail an American supply ship, the
Lewis & Clark
, then carrying fuel, ammunition and sailors' mail for the warships of the United States Navy. (The attack was thwarted.)
So dense is the action that the crew of one ship -- the
-- witnessed the hijacking of a second ship, the
, while both vessels were navigating pirate waters in the Gulf of Aden in March 2009. Four months later, in July, as it steamed through on a return voyage, pirates captured the
Nearly every major shipping company has experienced a run-in with Somali pirates of one kind or another:
, carrying coal to Slovenia, was captured in February 2009, released for some millions in ransom that April;
Navios Maritime Partners'
, hauling fertilizer from Florida to India, was hijacked in December, released in late February, about two weeks ago. Earlier this year, pirates held two ships managed by the unlucky
, a privately held U.K. concern,
at the same time
Eagle Bulk Shipping
-- all have had ships attacked since Somalia-based piracy first burst into the headlines in 2005.
That so many dry-bulk-carrier and tanker operators have suffered attacks and hijackings should surprise no one. These ships are, in the nautical argot, slow and low. Their tonnages sink them into the sea, closing the distance from deck to waterline -- the freeboard. They move at a deliberate pace: 14 knots and slower. They present to pirates the easiest targets on the oceans, like fat antelopes to a pride of lions.
In response, marine insurance companies -- whose byzantine policies sometimes baffle even those who have spent careers deep inside their codicils -- have jacked their rates. The Gulf of Aden and an enormous swath of the Indian Ocean from the coast of East Africa to the Seychelles has been declared, for insurance purposes, a war zone.
This means that shipping companies, or the outfits that charter merchant ships to transport their cargos, must purchase a special kind of insurance at a premium -- in effect a kind of tax -- for each voyage through this "war risk" region.
Both the premiums and the area described by the zone were at the end of 2009 expanded once again, under the auspices of a junta of British maritime underwriters and syndicates and reinsurers and indemnity clubs called, ominously, the Joint War Committee. London is basically the world headquarters of marine insurance. (Though, somehow funnily,
has a very large practice in this area.) This makes sense. The business of underwriting insurance was pretty much invented in the seventeenth century in a London coffee shop, a ship captains' hang out where they traded gossip, gambled, and sold each other guarantees on the value of goods sailing on English ships throughout the world. The coffee shop was known as Lloyd's.
Prices for insurance depend on the size of the ship, the type of cargo, the number of potential piracy-induced costs you want covered, and "how good you are at negotiating with your insurance company," says Per Gullestrup, CEO of Copenhagen's
, which had a chemical tanker abducted in the Gulf of Aden in 2008
pirates aboard the ship are pictured above
. In total, shippers end up paying anywhere from $20,000 to $100,000 per vessel per voyage through the war zone. Multiply that times the number of merchant ships going through the area each year and the amount paid to the insurance industry by shipping companies approaches $1 billion per annum.
Directly and indirectly, the costs of piracy multiply. Ransoms suffer inflation, the average payout rising from the tens of thousands of dollars just four years ago to $1 million in 2008 to $2 million in 2009, according to figures collected from insurers and other sources by Roger Middleton, a Somalia expert at Chatham House, the foreign-policy think-tank in London.
Merchant mariners' unions push through hazard pay: crews now receive double their normal hourly wage during the time it takes to transit the war zone. Owners hire expensive security guards and station them on their ships -- Blackwater-esque former commandoes or Interpol-ish ex-cops, usually, who stand with flack jackets on forward decks while the ships sail through pirate waters, peering through high-powered binoculars and frowning. One imagines them in their cabins in the evenings, practicing their martial arts. A whole cottage industry of maritime-security specialist firms -- many of them, again, based in Britain -- arises to exploit the burgeoning demands of the skittish shipping executive.
Moves and countermoves: the bandits of coastal Somalia -- harassing the shipping lanes of global commerce --
, some 20 countries at last count. (Even Iran has freelanced a few battleships over to the region to keep an eye on things.)
Meanwhile, an international naval effort called Combined Task Force 151, led by the U.S., has morphed. Shifting world threats have caused its reassignment. Originally created not long after September 11 as one of the naval components to the war on terrorism, it now fights Somali skiffs powered by outboard motors
a French warship flanks a pirate skiff in the photo above
The success of Somalia's pirates has given rise to a certain kind of portrayal in the Western media. "Cutthroat Capitalism," reads the title for a piece in
. "They've come up with a good business model ... with a low cost of entry," writes the foreign relations expert in
The Wall Street Journal
. Piracy's "flashy new-money culture" has become "entrenched," declares a dispatch in
The Washington Post
. A new neighborhood of "huge homes" rises in an otherwise miserable hut-and-shack village in Somalia, reports
The New York Times
. The neighborhood is called "New Boosaaso" and the "minicastles" there cost "several hundred thousand dollars."
stringer goes into a pirate stronghold -- "stronghold," with its whiff of the medieval, being a favorite word to describe the places where Somali pirates live -- and comes out with the news that there exists a kind of bandit stock exchange; it's possible -- so the story goes -- to buy shares in a gang of pirates. If your company of corsairs returns to shore with a ransom: dividend yield.
Cutlasses, new money, strongholds, business models: it's difficult to resist, and likely unavoidable, this temptation to explain Somalia's pirates in the language of the rich-nation business world. It's a shorthand that allows us to convert the exotic and dimly understood into something familiar, to regain control.
And it is true: the pirate gangs of the Somali coast
seen here in one of their craft
have indeed developed a venture that has brought more money into these communities than perhaps ever before. Somalia, after all, is arguably the world's most notorious failed state -- no central government, feuding clans, warlords,
Black Hawk Down
, Islamist insurrections, terrorist influxes, drought, refugee crises from nearby genocides -- all that is dysfunctional and tragic about Africa seems to be contained in our idea of Somalia. The people who live there are now viewed in the West as the world's most trenchant have-nots.
The men in control of the country's pirate bands have, in a sense, with one of the world's busiest shipping lanes right off the beach, lit upon perhaps the most lucrative money-making scheme available to them. They've figured out a way to participate in a global economy from which they are largely excluded. Failed-state entrepreneurs, they are hijacking ships and disrupting world trade by taking -- literally, figuratively -- a toll on it.
Within the insular maritime-shipping community, disagreement reigns on the question of whether
on the business of moving goods across the oceans -- or whether it threatens to do so. The answers depend on who you talk to, and the more they talk, the more the notion of risk elides.
"It's no big deal -- insurance covers it," says the shipping investment specialist at a well-known New York fund.
"Put it this way: shipping companies aren't overly concerned about rising costs because of piracy," says the shipping-industry stock analyst at Jeffries & Co.
The maritime lawyer says: "It's putting a lot of pressure on costs at a time when the market is still quite depressed from where it was 18 months ago. Either you pass on those costs or it drops to the bottom line."
Says the stock analyst at Oppenheimer: "The direct costs are fairly minimal. You just hope you don't get hit."
"The insurance industry hasn't completely got its hands around it," says the industry consultant.
"Piracy costs were
thought to be a 'cost of doing business' that owners, insurers and their customers could absorb. That view appears to have changed," says the insurance-industry trade publication.
"This whole thing is costing the industry billions," says Per Gullestrup, CEO of the Clipper Group, which had a ship captured in 2008.
"The financial impact is not that significant," says Ion Varouxakis, CEO of FreeSeas, a dry-bulk shipping company that has never experienced a hijacking (though one of its carriers managed to evade an approaching boatload of pirates in the Gulf of Aden about a year ago).
The hostage crisis James Christodoulou supervised for 56 days between Thanksgiving 2008 and late January 2009 has transformed him, a year later, into a bankable expert on all things piracy.
pictured above, (a story first told in
The Wall Street Journal
days after the ship's release), his expertise has become almost a second career.
He recently gave a presentation at NASA. Topic: crisis management. His fame arguably reached its height during the Maersk
drama of April 2009; he spent a lot of time in the Manhattan green rooms of cable all-news channels; he was a virtual sidekick to Shepard Smith. Larry King had him on twice. Christodoulou is also a frequent speaker at shipping conferences, where he sits on panels and keynotes seminars, and lectures in front of ballrooms full of maritime executives. He talks about anti-piracy measures, he says, "and about what we did, what our best practices were, and how best to deal with piracy."
He also says, "Regardless of the financial costs of piracy, it's still first and foremost a human issue -- period. The pirates are taking the ships because they know that the
, the crews, are what's being paid for to be released."
But the full meaning behind this insight would only come in time. Before the hijacking, Christodoulou was more concerned with the fiscal health of his company, Industrial Shipping Enterprise Corp., or ISEC, which he had taken over as CEO in 2007, hired by its seed-capital investors to prepare it for an eventual IPO, at which he had some experience.
Though his name might suggest deep nautical genetics, or whitewashed villages climbing the cliffs from a turquoise sea, Christodoulou was born and bred in New Jersey, the son of a printer. (He sometimes looks the part, though. Burly as a stevedore, he seems to prefer heavy woolen turtleneck sweaters. At such times, you wonder where's the corncob pipe.) He came to shipping in the late 1990s while working for a private equity firm that had transacted some business with the company that would become
. He got to know its founder, Peter Georgiopolous, who brought him on as chief financial officer. He helped take it public in 2001. He did the same, a few years later, for
( OCNF). In between, he worked as a shipping-industry banker for a boutique investment bank called Dahlman Rose.
ISEC, however, was a long way from the
New York Stock Exchange
. It employed five full-time people, Christodoulou included, outsourcing most of its tasks. Annual revenue approached $8 million, and it owned just two ships -- a pair of sibling double-hulled "product tankers," the kind of vessels outfitted to carry anything wet, save for crude oil. Built in 1986, the sisters had aged. Christodoulou's ultimate goal was to renovate and expand ISEC's "fleet," if that term was yet quite applicable, but any IPO dreams had been deferred in the late summer of 2008, with a global financial crisis and recession just then expanding into bloom.
In September 2008, when ISEC scored a cargo -- $600,000 to carry 25,000 tons of palm oil from Indonesia to Spain -- Christodoulou's main goal was to get through the rest of the year unscathed. He focused his attentions on the
"DON'T WORRY ABOUT IT"
The fastest way to point B would take about 28 days and would mean a transit through the Gulf of Aden, a.k.a. "Pirate Alley," often abbreviated "GOA" by shipping people, and known in the Somali language as
. Four times the area of Texas, the Gulf of Aden is 200 miles wide and 550 long -- a crocodile's mouth of water formed by the jaws of the Arabian Peninsula coast to the north and the Somali Horn of Africa to the south. It funnels all Mediterranean-bound traffic up the sluice of the Red Sea; in either direction, almost anything that wants to use the Suez Canal -- where ships ride the lochs over the sands of the Sinai -- must therefore traverse the Gulf of Aden.
Above, a convoy of merchant ships makes its way through the GOA, led by a warship.
The whole connected waterway -- GOA, Red Sea, Suez, Med -- is one of the busiest shipping lanes on earth. The goods of the East en route to the merchants of Europe (and vice versa) -- it isn't so much the descendent of the Silk Road as the current iteration of it. A guesstimated 20,000 to 25,000 merchant ships move through the waterway each year (no one knows for sure how many, not even the Suez Canal), including as much as 20% of the world's ocean-going oil. For the pirates of Somalia, this presents a rather target-rich environment.
Christodoulou and ISEC therefore faced a choice: either send the
through the Suez, risking an attack or worse, or take the long route around Africa, around the Cape of Good Hope, up the west coast of the continent and on to Spain. It would add something like 8,000 miles and three weeks to the trip -- at the time, about $350,000 more in fuel costs than the Suez route. Of course, bypassing the canal would save ISEC about $250,000 -- the amount in fees the Suez charges for a ship of the
It's well understood among shipping people that if the industry were to collude, and everyone agreed to bypass the Suez, freight rates would rocket; the longer voyages would pull ships off the market, squeezing supply. "Piracy could be considered a good thing," says a shipping-stock analyst, "if you look at the supply-demand balance."
But the longer journey would take money out of ISEC's pocket in other ways. Because the company hired out its ships on the spot market as opposed to fixing them into long-term charters, the longer the delay on one trip, the more it would reduce the available days for the
to earn money on future voyages: the cost of the lost opportunity. ISEC figured that number at about $400,000, according to the going spot rate for a
-size product tanker, which was then a little north of $20,000 a day.
Further, ISEC wasn't exactly in a position of cash strength. Things were tight. It owed a bank. The bank wanted a debt payment by the end of the year. ISEC needed the voyage's $600,000 in revenue to make the payment. If the ship had to circumnavigate a continent, it likely wouldn't discharge its palm oil -- and receive its $600,000 -- until January. Going around Africa, then, could possibly mean delinquency.
Piracy vs. delinquency, the odds of a hijacking against the probability of missing a debt payment, "which would send up red flags at the bank at a time when we didn't want to send up red flags": this was the calculus of the moment. And the calculus said: via Suez.
Back then, in the fall of 2008, piracy in the GOA had only just begun to make headlines in the U.S. By far the most famous pirate incident to date, the bloody attempted hijacking of the Maersk
, when Navy SEAL sharpshooters killed three pirates holding the ship's captain hostage in a lifeboat after a botched raid, wouldn't occur for another five months.
The aftermath of the rescue is pictured above; the orange craft is the Alabama's lifeboat.
Colleagues in the industry pooh-poohed Christodoulou's fears. "Don't worry about it. It's a few ragtag guys. Nothing's going to happen." They pointed out the minuscule odds of a ship getting hit. If twenty-some-thousand craft sail through Pirate Alley in a year, and a few dozen are hijacked, the result of the obvious math ought to ease any ship owner's mind. (Even considering the huge upsurge in Somalia-based piracy since 2008, the odds of capture remain microscopic. If the number of annual GOA-Suez transits are to be believed, in 2009, a ship had a 0.002% chance of getting hijacked.)
And yet, Christodoulou says, "There was just something in the pit of my stomach saying, 'You know what? I don't think so. Let me really look at this.' I studied every attack that had occurred within the last two years."
BELT AND SUSPENDERS
To that point in 2008, 57 ships had reported to the International Maritime Bureau (a group that monitors high-seas crime for the International Chamber of Commerce) that Somali pirates had attacked them; 38 had been hijacked.
Of those, perhaps a dozen were still anchored off the coast of Somalia, engines idle in a kind of pirate-induced doldrums, awaiting ransom deals as their owners negotiated with the pirate bands for their release.
Christodoulou took precautions, what he likes to call a "belt-and-suspenders approach." First, ISEC went all-in on insurance, paying up for every sort of policy on the market that promised to guarantee against piracy-induced losses. (Some of it purchased from Hiscox, the huge British underwriter, one of the largest syndicates at Lloyds' of London
.) He bought loss-of-hire insurance, to cover the income the
wouldn't be earning should pirates hold the ship for who knows how many weeks. He bought a kidnap-and-ransom policy, new to the maritime insurance trade, previously the domain of the famous, the super-rich, and those with business to conduct in places like Colombia. (Some shippers consider K&R insurance unnecessary, since war risk premiums are thought to be enough to cover ransom payouts.) Total cost for the voyage's insurance: $50,000.
He hired security guards (three of them): $40,000. He armed them with a so-called long-range-acoustical device, the amplifiers that somehow beam ear-splitting noise directionally over thousands of feet and into the ears of pirates or rioters or protesters, who -- the manufacturer's marketing literature assures -- will then double over in skull-clutching anguish: $5,000. (But he didn't arm the guards or crew with actual arms. Putting guns aboard ships remains taboo in the merchant-shipping business, not because of any pacific worldview on the part of ship owners, but for fear of the liability-lawsuit nightmare should a firefight erupt between pirates and the crew and any seafarer-workers get hurt, or worse. This taboo, however, might be changing.)
He had reams of concertina wire wrapped around the perimeter of the
Totting it all up, Christodoulou says ISEC spent about $100,000 to protect itself from pirates and any potential damages caused by them.
There were other safeguards as well. The
would take part in a convoy led by a French naval frigate. The ship would try to pass through the highest-risk part of the GOA at night; hardly any pirate attacks happen nocturnally. While in the GOA, the captain of the
would ask the engine room to give him all she had: the ship's highest speed through the danger zone. All hands on deck. Water canons and fire hoses and at the ready.
"But the most important thing," Christodoulou says now, was his decision to "empower" the ship's officers and crew. At the cusp of the danger zone, the men on the
-- most of them from India -- would vote on whether to steam ahead or abort and head south for the tip of Africa. "It was their decision, not mine, to asses the risk at that time based on what they were seeing and hearing." If there were a sudden burst of pirate activity in the neighborhood, for example, the captain could make the call to split.
In the event, at the cusp of the GOA, the men of the Biscaglia chose "go."
Thirty-six hours later, at five minutes past midnight on the day after Thanksgiving, Christodoulou was awoken by a phone call from his outsourced technical manager (responsible for ship logistics like food and fuel), based in Singapore. Latitude 13:54 North, longitude 49:09 East, in the heart of GOA, the
, the manager said, had been "unlawfully boarded."
Despite all the carefully planned "defensive and counter measures," Christodoulou says, "at the end of the day, a loud speaker and a water hose are no match for an AK-47 and a rocket-propelled grenade."
WHEN PIRATES ATTACK: SCENES FROM A HIJACKING
According to the International Maritime Bureau's 2008 annual report on world piracy, the attack occurred at about a quarter to eight in the morning, local time.
Flashes of hearsay, of details cobbled from secondary sources: Two speed boats carrying 11 or 12 men (no one seems to know for sure, except, probably, the pirates themselves), overtook the
in the Gulf of Aden. Slow and low, the ship had fallen two hours behind the convoy led by the French naval frigate. The people on the skiffs, most of them apparently teenagers, carried AK-47s and a rocket-propelled grenade launcher -- the de rigueur weaponry of Somalia's pirate squad.
The ship's alarm sounded; the captain sent a distress signal from the bridge. The French warship received the signal, and two helicopters -- one French and one German -- launched, en route to intercept the
A naval chopper confronts a pirate skiff in a separate incident in the photo above.
The captain gave instructions to the helmsman. The ship went hard to starboard and then hard to port -- an S-turn -- an attempt to kick up a wake. The wake was meant to hinder or, best case, capsize the skiffs. It didn't. Bullets sprayed the wheelhouse. Windows shattered. The
security-guard specialists, two ex-marines, one ex-paratrooper, all three British, aimed the LRAD. They unleashed its noise-ray. The pirates did not collapse in skull-clutching anguish. "It was a total waste of time," one of the guards later said. (The LRAD people have disputed this characterization.)
Two grenades detonated on the deck. No one was injured; damage was light. Smoke rose from the deck and turned the air acrid. The security guards found a few scaffolding poles, put them on their shoulders and fired their flare guns -- red balls whooshing -- through the shafts -- MacGyver bazookas. The bazookas, however, were "wildly inaccurate."
The day was sunny and warm.
Seized pirate armaments are pictured above.
Fire hoses gushed from at least nine points around the ship -- white jets of water arching and spitting into the calm blue GOA in what appears, in photographs taken from one of the naval helicopters, like some great uncorked display of celebration -- a fireboat in New York Harbor on the Fourth of July.
A ladder went up the side of the
. The razor wire, to the ascending pirates, presented no particular challenge. Nor did the cascading water. Six men, perhaps more, clamored onto the deck from the ladders.
The helicopters kept their distance, thudding in the background, for fear of provoking the teenagers into shooting the crew. The 28 members of the crew had already assembled at their prearranged emergency muster point on the bridge. The security guards did the same on the "monkey deck," the roof of the superstructure. The pirates pointed their Kalashnikovs at the crewmen, who knelt, hands on heads. The security guards, standing above, jumped 50 feet into the GOA, an area known for sharks. The pirates shot at the guards swimming in the water.
"Let me just say something," says Christodoulou. "They absolutely did the right thing by jumping. In World War I, in World War II , sometimes there was what's called an open city. They fight, they fight, they fight. When they realized that they couldn't win this fight, many times the defenders evacuated the city to save the citizenry, the infrastructure, the buildings. Those guys, people thought it was cowardice, and I will tell you it was not cowardice."
The German helicopter fished out the guards. The crew, coached long beforehand not to resist if pirates breached the ship, did not resist. "Nobody's a hero on this thing," Christodoulou says. "That was their instruction. Everybody's a survivor, nobody's a hero." The pirates ordered the captain to pilot the
to a spot a mile or two off the coast of northeastern Somalia, not far from a "known pirate stronghold" called Garacad (though the annual report of the International Maritime Bureau says the ship went to another well-known pirate port, this one called Eyl.)
At his condo in Hoboken, New Jersey, Christodoulou received a fax on his computer. "First Greetings," it said. Handwritten, the fax was a ransom note. It demanded a sum Christodoulou won't now divulge. Negotiations had begun.
Above: An unexploded rocket-propelled grenade on the deck of a ship attacked by pirates
RULES OF ENGAGEMENT
"What was their first number?"
"More than ten million?"
"More than fifty?"
"No, no. But it was ridiculous. It was more than the value of the ship. It was like, 'Guys, just take the ship, then.'"
A body of common knowledge -- of best practices, helpful contexts, rules of engagement, SOPs -- has evolved over the last few years when it comes to the highly specialized ins and outs of negotiating with Somali pirates.
Christodoulou's introduction to this world came over breakfast at Claridge's, in London. ("I always stay at Claridge's when I'm in London.") Two days after that first phone call on Thanksgiving night, he flew there to meet with his insurance representatives and, most importantly, the professional hostage negotiator assigned to him by his kidnap-and-ransom underwriter. K&R insurers keep such specialists on retainer. Reginald Taylor (not his real name) happened to work for one of the more illustrious firms in this secretive business: Risk Management, which once employed the man on whom the Russell Crowe-vehicle
Proof of Life
The average length of captivity is 60 days. The ships are nearly always taken to points off the coast of known pirate strongholds and anchored there. The pirate gangs -- thought to be run by clans, which are thought to be headed by so-called "boards of elders" -- will assign an English-speaking negotiator to each ship. The negotiators are likely subcontractors or middlemen; they're based for the most part on the beach, not onboard the vessels, so as to avoid cases of Stockholm syndrome; they might be working on several hijacked ships at once.
Threats will be made: Running ships aground. Debarking crew members and hustling them into the interior. "It's a long and laborious negotiation," says Dick Hildreth, a kidnap-for-ransom specialist with the firm Corporate Risk International, of Reston, Va. "The negotiators and the pirates will change their minds halfway through. They'll lie."
There will likely be accusations of toxic-waste dumping, of working secretly for the Italian mafia to transport and discharge the toxic waste. There will be wild swings in the ransom asking price. It will be difficult to keep it all straight. All conversations ought to be tape recorded, transcribed immediately, the dialogue studied. "It's a very difficult situation, especially the first 24 to 48 hours," says Stephen Askins, a maritime lawyer. (He has advised a dozen ship-owner clients on such negotiations, including the notorious affair of the
, the hijacked Ukrainian ship carrying a cargo of arms to Kenya in 2008.
In the photo above, the Faina's crew arrives at port after the ordeal
Ship owners must steel themselves and not immediately cave. Christodoulou says, "The last thing you want to do is pay a ransom and then have them say, 'Thanks for the down payment. Now we want the rest.'"
He says, "The pirates have to make sure they've got every last drop of blood out of you. If you agree too quickly, if you seem too eager, they're like: 'Ah! There's probably more!' And holding the line for days and weeks? If you don' think that's tough, let me tell you something...."
He says, "There's no receipt, there's no return policy, and if you mess up -- you get
chance! You only have one shot at this, and it's got to be right."
Reginald Taylor went back with Christodoulou to Hoboken, where the pair hunkered down at the CEO's apartment, in a high rise overlooking the Hudson, for the duration of the ordeal. (Except, that is, for a brief period when Taylor was replaced with another Risk Management specialist -- a pre-scheduled rotation -- but Christodoulou and the replacement didn't click, and Taylor swapped back in.)
Also in the core group were Christodoulou's lawyer, Larry Rutkowski, and his media-relations man, Tom Rozynski, who helped keep the crew members' families, nearly all of them in India, up to speed on the proceedings. Levity was often required to break the stifling tension. Someone got hold of a life-size cutout -- Johnny Depp-as-Jack Sparrow -- and put it against a wall. The ISEC team threw darts at the pirate of the Caribbean.
Because of ISEC's tiny size, Christodoulou pretty much had to serve as his own negotiator. To his counterpart on the other side of the planet, however, he presented himself as "Gus," a fiction, a second personality for Christodoulou to play-act: a company employee deputized on behalf of ISEC's chieftains to work a deal with the pirates.
Above: Men about to be charged with piracy on the high seas by a court in Mombasa, Kenya.
Gus was the name of Chirstodoulou's grandfather. He wrote the name on a piece of tape and stuck it to a cell phone he bought to handle only pirate phone calls. They plugged a digital voice recorder into the cell phone. They called the whole apparatus the "football."
Using the football, Christodoulou spoke with the negotiator several times a day, mostly in the morning, Somali time, before the pirates had a chance to chew the legendary
leaf, the mild narcotic cross between tobacco and low-grade cocaine, which Somali pirates are known to enjoy as much as Christodoulou and his team enjoyed, at the end of each tense day, a nightcap of Johnny Walker Blue.
"Mr. Gus. The money you offer, the pirates say it is very less."
"I understand you want more money. But we are a
company. We have only two ships. You have
of the ships."
"Mr. Gus. The pirates they say it is very less. The pirates they say more money."
"I wish I could give you more money ... but you're already putting my company out of business."
"Mr. Gus. The money is very less."
The expression "very less" became a catchphrase in Hoboken.
Some pirate negotiators speak near-native English. The one drawn by Per Gellustrup's Clipper Group -- his hijacking coincided with ISEC's -- reportedly lived for 29 years in the United States. Not so Christodoulou's, a fact that compounded the stress.
"You can't convey frustration. You can't convey nuance. You can't convey complexity," Christodoulou says, his voice rising an octave with each sentence. "You're negotiating life and death -- a multimillion-dollar, life-and-death contract -- on a
. I mean please! It was hard, man!"
A French marine squad makes a pirate arrest
Partly for this reason, Christodoulou took a rather soft approach to his negotiating style. The Clipper people did not. The Clipper people at one point told their Somali negotiator, in effect, "Enough. We're done. Call us back you when decide to go below two million."
Mr. Gus, on the other hand, opened every conversation by asking after the health of the "Somali gentlemen" and then after the health of his
"Hello, my friend," Gus would say. "Before we start talking about the negotiation -- are you OK, are the Somali gentlemen OK? Do you have enough food? Is there water? Is there anything I can do? I know this is tough on you, too. We'll get through this. We'll be OK. Please don't ... please don't get nervous."
Apart from a simple language barrier, there were other, profounder reasons for taking a light touch. "People would ask me, 'What do
care if the Somalis have enough food?' But think of it. If the Somalis have enough food, chances are my
has enough food.
"Look, I didn't want anything to happen to the Somalis either. I just wanted them to get off my ship! And I wanted them to get off safely, because if
didn't get off safely, my crew was in trouble.
"My entire strategy was to decompress the situation. For everybody's sake. I never had a call with them where I didn't say: 'How are the Somali gentlemen doing on board the ship? We want everybody, including the Somali gentlemen, to get out of this thing safely -- and just finish with it.' Believe me, I wasn't there to make any kind of statement. I just wanted everybody to go home and be happy. Let God sort it out."
When James Christodoulou received the phone call (
) while driving on the New Jersey Turnpike -- the one in which the caller accused of him of working for the mob and dumping toxic waste into Somali waters -- he was speaking for the first time to Abbas, a new negotiator. Hussein, the one he had spent the last few weeks attempting to disarm, had evidently been fired.
Christodoulou wouldn't learn the reason why until much later, until he had a chance to speak to the
crew after the ship's release. Hussein's bosses -- the clan "elders," or whomever headed this particular band -- felt that Hussein had become too soft in his negotiating style, that perhaps he had shown too much sympathy toward this group of Indian captives. Hussein, evidently, had come down with a case of Stockholm Syndrome.
The 28 members of the
crew spent the 56 days of the crisis inside the wheelhouse, an enclosure, roughly 50 feet by 20 feet, interrupted throughout by radars, desks, the helm. They slept on the available floor space, guarded by dozens of young
-gnawing Somalis with AK-47s. They ate not from the ship's stores -- the pirates had removed much of the food on board, the better to wield control over their captives. Instead, the pirates brought live goats to the ship every few days and slaughtered the animals there.
Most of the crew, like seafarers the world over, came from poor families in poor countries. Almost all merchant ships fly flags of convenience -- that is, the "home"-port boutique registries purchased by ship owners no matter where their company might have its headquarters -- whether Athens, Oslo or Stamford, Conn. This has given rise to a lot of vessels on the water with the names of island nations and obscure microstates painted onto their sterns: St. Vincent and the Grenadines. The Marshall Islands. Malta. Kirabati. In addition to tax avoidance, the flag of convenience allows a ship owner certain labor-cost advantages: that is, the ability to hire able-bodied seamen from anywhere in the world. It's the maritime version of offshoring.
Police in the semi-autonomous state of Puntland, in Somalia, guard a group of men suspected of piracy on the high seas.
ISEC had hired the men who would operate the
as almost all shipping companies do, through a crewing agent. Up the gangway at the start of the voyage came 25 Indians and three Bangladeshis, including the captain. Before the hijacking, Christodoulou had met nary a one. "To me they were just names on a manifest." After the hijacking, he says, he trades emails with them. He receives cards from their parents.
By early January, however, a little more than a month after the hijacking, the crewmembers' families in India had reached a state of high anxiety. Christodoulou and the rest knew about this because they kept in daily contact with them. Tom Rozycki, ISEC's media-relations pro, sent out an email update each night. (A woman on his staff luckily spoke Hindi.) He also implored them not to talk to anyone in India's notoriously aggressive press -- the
captivity was big news in India -- for fear of tipping off the increasingly media-savvy pirates in Somalia, who could use any familial unrest as a chit in their bargaining favor.
Then the grandmother of one crew member went on a hunger strike. Christodoulou, when he found out, was on a plane to Bombay shortly thereafter. About 90 relatives -- parents, spouses, children -- traveled from as far as a day away to grill Christodoulou with questions. He went alone. "I was in a town-hall style meeting, surrounded on three sides. For three hours they were just beating me up. But, I think what they wanted to see was that I could withstand their beating, keep my cool, maintain my focus. I think what they said was, 'If he can take this, we're OK. We have confidence in him.'" He entreated the grandmother to eat by kneeling down in front of her and holding her hand.
He says, "That was the toughest shareholder meeting I ever had in my life. The toughest, and the most important one."
The grandmother, at the end of that long day, ate some ice cream.
Marines confront possible pirate skiffs off Somalia.
In his hotel room in Bombay that night, Christodoulou spoke to Abbas, the pirate negotiator. He'd brought the football with him to India. Through the entire ordeal, he was never far from Somalia.
Reflecting back, Christodoulou describes his relationship with the pirates as a "sick codependency." Both pirate and owner "are held hostage." Everyone involved understands, in other words, that the ship and the cargo are, at bottom, worthless to the Somalis. What could they do with 25,000 tons of palm oil? Two million barrels of oil? A panamax-size load of coking coal? In Christodoulou's words, "It's the crew that's the real thing of value."
He says, "The pirates can't go anywhere else, because no one else is going to pay them for what they've got. So they're held captive to me. And I'm held captive to them because I can't say, 'F--- you. I don't want to do this deal,' and walk way. No one can walk away from it. But because no one can walk away from it, it tends to have a 100% resolution rate."
Before Christodoulou and his pirates could break their codependency, frightening moments accrued. While he tried to hold pat and not cave by sweetening the ISEC counteroffer, threats, both subtle and unsubtle, began to come down from the stronghold at Garacad. Even Hussein, the relative sweetheart, caused anxiety. The parties sometimes communicated via fax. The pirates used the
"Your crew they don't have water maybe they will dye..."
"Somali gentlemen they know only how to kill or shooting the people. So please help me to finish this problem..."
When Abbas the hardliner took charge, the threats gathered clarity -- the
thrust aground onto some deserted Somali beach, the
crew marched at gunpoint into the Somali interior -- but still these coercions were subtly couched. They never took the form of:
Pay this amount, or else.
Abbas would say, in his highly imperfect English, that some of his bosses may have recently discussed the possibility of these drastic measures. It became, in effect, the threat of a threat.
Christodoulou would respond in kind: I know you're capable of doing this, he would reply through the football. "But you're businessmen, not murderers. I know we don't want to let our situation get to that."
The Americans hunkered in Hoboken understood that Abbas' subtlety was smart. Neither side wanted to force a "face-off," Christodoulou says, "where somebody's gotta blink." (The story of the crisis, in the retelling, has burnished Christodoulou's language at times into noir.)
It did not put Christodoulou's mind at ease that Somalia's pirates had yet to run a ship aground, to shoot a sailor to make a point. "In the investment world, they're always saying that past results are not necessarily an indicator of future performance. Well, you never know if you're going be the first guy where they kill a crew, where they run your ship into the ground, where they take your guys into the caves."
All through the days, in the background to these conversations between Christodoulou and his pirate liaison, Reginald Taylor, the Englishman (not his real name), whose pre-kidnap-and-ransom career remained mysterious and much-discussed among the Americans in the Hoboken condo-bunker -- Christodoulou suspected Her Majesty's S.S. -- played many crucial roles. Among them was gathering "market intelligence."
So busy have the hijackings become off Somalia that -- in 2008 as now -- ships go in and out of captivity almost every week. Ransoms, therefore, are being transacted frequently enough that a going rate for the termination of a hijacking has more or less evolved. The going rate for a ransom depends on a ship's size and age and cargo and number of crew -- just as it would for charter rates, for ship asset values, for maritime insurance, for fees at the gates of the Suez Canal.
The Maersk Alabama as seen from a naval aircraft on the day the ship was hijacked by pirates.
Taylor, then, would monitor the "ransom market" for Christodoulou, who cringes when he says it.
"I hate to say it, but it is a market. I hate to put it in financial terms, but to them it's a business."
(He also compared notes with Per Gullestrup, of the
, which finally re-acquired its ship from the pirates who'd siezed it for a reported $1 million to $2 million, on Jan. 13, 2009. The ship, the CEC Future, was a freighter somewhat smaller than the
The pirates, too, must contend with the movement of their captured ships. And so Taylor also kept tabs on this for Christodoulou and his team. There came a time when Hoboken saw that Garacad had experienced a sudden increase in hijackings. Christodoulou says, "We knew that they would have to redeploy their assets from our ship to the new ones, that they'd have to clear inventory -- so to speak. Once they get too many ships in, it becomes a storage problem. So they have to start to release ships to free up manpower for
ships. It's a cycle! A
He says, "Don't think they don't understand the time-value of money. They do!"
It's an insight that comes directly out of Christodoulou's dialogue with the pirate negotiators. In the event, the pirates here perhaps made an error. Abbas one day told his American counterpart something like the following:
Every day we have your ship, it costs us money.
In mid January, Christodoulou inched his offer higher.
MUM'S THE WORD
Like everything else, the Somali ransom market has suffered from inflation. The average payout sum has doubled between 2008 and 2009 ($1 million vs. $2 million). The shipping industry has noticed the trend and registered its disapproval.
Within maritime circles it's a touchy subject, piracy. Not many ship owners will freely discuss it, not publicly.
won't comment on the
, its panamax ship hijacked in April 2009.
Navios Maritime Partners
, on the subject of its pirate-captured
, doesn't return phone calls. Even
, which has never had a ship hijacked, says, through a spokesperson, that its executives "don't really have anything to add on the piracy issue."
A group of pirates said to have attacked a fishing vessel near the Seychelles are being guarded by Portuguese naval marines.
This isn't altogether surprising. It's bad publicity -- what businessman would want to admit to a security breach as serious as having a multi-million-dollar asset, poof, abducted in broad daylight? Who would want to admit to negotiating with criminals? But apart from this, ship owners and their insurers alike are wary of divulging anything that might embolden the pirate gangs, that might accrue to the corsairs' advantage. Say something in the media about the insurance you've taken out on your slow-and-low bulk carrier and the pirates, seeing the media report, might single it out on its next transit near Somali waters.
But mostly it's the subject of ransom that makes ship owners go mum. It's true that word of a payout will quickly spread through the streets of pirate-stronghold communities and into the media. (
man in Somalia in particular appears to be well sourced when it comes to ransom-market scuttlebutt; for almost every ship released from captivity, the newswire reports a specific ransom figure, in U.S. dollars.) Still, ship owners would prefer to keep this information out of the public realm, Christodoulou says, "because you don't want to create expectations, inflation, market movement." He also says that such information could jeopardize negotiations ongoing, thus endangering crews' lives.
By the last week of January, Christodoulou believed a deal was imminent. "I could tell, from pricing conversations, from the tone and pace, that we were getting to closure. It's not: they're saying A and we're saying Z. It was: they're saying M and we're saying L." The number of phone calls between Hoboken and Somalia shot up to as many as 20 per day as the two sides maneuvered.
This meant that, at long last, Christodoulou needed to call in a favor. Because kidnap-and-ransom insurance is an indemnity policy, the insurer does not front the capital for the payout, and ISEC, in its tight cash spot, didn't have the money to cover a (roughly) million-dollar ransom.
But, Christodoulou says, one of ISEC's biggest investors, a private-equity firm called Regent Private Capital LLC, of Tulsa, Okla., had assured him that finding the ransom money wouldn't be a problem. "We'd always been very confident that having the funds would not be an issue," Christodoulou says. "And that the only thing we had to focus on was safely resolving the negotiations."
Ransom money being readied for shipment to the pirates who captured the Clipper Group's CEC Future.
Christodoulou says ISEC and Regent had many times discussed the need to have money ready to go, "what we used to call cash-in-theater."
Switching to the present tense, Christodoulou describes this moment in the negotiations with the pirates: "It's getting to the point where any call coming up now could be the call where we agree on a price. I can't agree on that price until I
that we have the cash."
With Hoboken and Garacad "within spitting distance," he put in the call to Regent. The answer, according to Christodoulou, was: "We really can't. We really aren't a source for those funds."
Lawrence Field, one of the managing directors of Regent Private Capital, says, "I have absolutely no comment," when asked whether his firm had made any kind of assurances to ISEC regarding funds for the ransom. He says, "We're really bound under the insurance policies not to talk about it." He says, "Regent does not negotiate with any type of terrorist whatsoever."
On the call with Regent, Christodoulou received the same rationale for the firm's decision. When he closed his cell phone after the conversation, he went black with rage. Of the whole crisis, he says, this was his "darkest hour."
The question of paying ransoms is controversial only on the surface. Every ship owner, and almost assuredly every pirate, knows there's really no other alternative. "Is paying the ransom reinforcing bad behavior? Are we in fact perpetuating the cycle by rewarding them?" Christodoulou asks rhetorically.
Yes, a military operation could be mounted to take back any ship from the pirate gangs who have captured it. And yes, the operation would likely "save a good portion of the crew. But what the hell do you tell the familes of the crew members who were collateral damage on this thing," he says. "Blood on a CEO's hands? Or saying, 'Well, we've sacrificed these five people because we wanted to draw a line in the sand?' You can't do that. I don't care what they say."
Ransom drop: Millions of dollars in cash float toward Somali waters as the Clipper Group attempts to secure the release of its hijacked ship.
With a deal nearly on the table, but no money to pay the pirates holding the
, Christodoulou and his team began scrambling and brainstorming. He considered going on CNN to make some sort of public appeal. A fundraiser. A hotline phone number and Christodoulou on the air: "Everybody, please, send in your nickel, dimes quarters. I gotta get my guys out." Some type of variety-show benefit concert. "You want me to sing Tom Jones karaoke? I'll do it." He went so far as to ask his lawyer to look into the legality of raising money to pay off criminals.
But it was, in the end, unnecessary. A simple call to Per Gullestrup in Copenhagen solved the problem. The Clipper Group would advance ISEC the ransom amount. "He didn't even have to think about it," says Christodoulou. "Boom, done." Two days later, through the windows at his riverfront condo, Cristodoulou saw some sort of froth on the Hudson. He was on the football, making final arrangements with Abbas. At the front of the turbulence was an oddly shape watercraft. Sully had just landed his plane.
With Clipper's guarantee, ISEC got a loan. With the loan, cash -- 100s, 50s, 20s, 10s, "It's been reported as more than a million; let's leave it at that," is all Christodoulou will say -- went into a tube and into a private aircraft that flew over the
anchored off Garacad, swooped low over the ship to take photographs of 28 crew members standing on the deck -- proof of life -- swung back around and dropped the tube, parachute blooming, which fell softly into the ocean. Also in the tube was a cash-counting machine.
When the crew returned to India several days later, they walked together into the Bombay airport terminal and were mobbed by media, camera flashes popping.
Before the tube of cash parachuted into the water, ISEC's lawyers drafted an actual contract, signed by both parties, ship-owner and pirate gang. The irony was not lost on anyone: drafting a contract for the release of a thing from the very party that stole it from you.
Among the last things Christodoulou told Abbas was a half joke that later became the full truth: You're going to put me out of business, and then I'll need to find a job.
And Abbas said: I'll give you a good reference.
Earlier this year, ISEC sold the
and its sister ship to a Turkish company. Despite Christodoulou's belt-and-suspenders approach to insurance coverage, enough gray-zone costs came out of the hijacking that it overwhelmed ISEC. Repairing the ship, for instance -- ships sitting idle for long periods don't do well -- cost hundreds of thousands of dollars. A poor market for seaborne shipping rates didn't help matters. And so ISEC has been dissolved, and Christodoulou is looking for a new job.
But in some respects, more than a year later, he remains in Somalia. He's adamant about the subject of piracy; he still gives his talks at shipping-industry conferences. He keeps in touch with some of the
crew. And if he does return to the shipping world for employment, he'll assuredly be forced to confront the subject once more. Piracy, after all, is in the nature of shipping.
During an interview session not long ago in the lobby of a Manhattan hotel, Christodoulou pulled out one of his cell phones -- not the football. He scrolled through his contact list. Under the "A"s was "Abbas." He held the phone up: in underscored blue lettering, a pirate's hotmail.
"He gave it to me," Christodoulou said. "In case we ever had to communicate again."
-- Written by Scott Eden in New York
Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining TheStreet.com, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.