Officials: Blackwater contractor had web of shell firms

9/4/2010

WASHINGTON - Blackwater Worldwide created a web of more than 30 shell firms or subsidiaries in part to obtain millions of dollars in U.S. government contracts after the security company came under intense criticism for reckless conduct in Iraq, according to congressional investigators and former Blackwater officials.

While it is unclear how many of those businesses won contracts, at least three had deals with the U.S. military or the Central Intelligence Agency, say former government and company officials.

Since 2001, the intelligence agency has awarded up to $600 million in classified contracts to Blackwater and its affiliates, a U.S. government official says.

The Senate Armed Services Committee this week released a chart that identified 31 affiliates of Blackwater, now known as Xe Services.

The network was disclosed as part of a committee's investigation into government contracting.

The probe revealed the lengths to which Blackwater went to continue winning contracts after Blackwater guards killed 17 Iraqi civilians in Baghdad in September, 2007.

That episode and other reports of abuses led to criminal and congressional investigations, and they cost the company its lucrative security contract with the State Department in Iraq.

The network of companies - which include several businesses in offshore tax havens - allowed Blackwater to obscure its involvement in government work from contracting officials or the public, and to assure a low profile for any of its classified activities, the former Blackwater officials said.

They and the government officials spoke on condition of anonymity.

Sen. Carl Levin (D., Mich.), chairman of the Armed Services Committee, said "it was worth looking into why Blackwater would need to create the dozens of other names."

He said he had requested that the Justice Department probe whether Blackwater officers misled the government when using subsidiaries to solicit contracts.

The CIA's continuing relationship with the firm, which recently was awarded a $100 million contract to provide security at agency bases in Afghanistan, has drawn criticism from some members of Congress, who argue the company's tarnished record should preclude it from such work.

At least two of the Blackwater-affiliated companies, XPG and Greystone, obtained secret contracts from the agency, according to the former Blackwater officials.

A CIA spokesman, Paul Gimigliano, said that Xe's only duties for the agency were to provide security for agency operatives.

Contractors "do the tasks we ask them to do in strict accord with the law; they are supervised by CIA staff officers; and they are held to the highest standards of conduct" he said.

"As for Xe specifically, they help provide security in tough environments, an assignment at which their people have shown both skill and courage."

Congress began to investigate the affiliated firms last year, after the shooting deaths of two Afghans by Blackwater security personnel working for a subsidiary named Paravant, which had obtained Pentagon contracts in Afghanistan.

In a Senate hearing earlier this year, Army officials said that when they awarded the contract to Paravant for training of the Afghan army, they had no idea that the business was part of Blackwater.

While congressional investigators have identified other Blackwater-linked businesses, it was not the focus of their inquiry to find out how much money from government contracts flowed through the web of corporations, especially money earmarked for clandestine programs.

The former company officials say that Greystone did extensive work for the intelligence community, although they did not describe the nature of the activities.

The firm was incorporated in Barbados for tax purposes but had executives who worked at Blackwater's headquarters in North Carolina.

The former company officials say that Erik Prince, the business' founder, was eager to find ways to continue secret work after the 2007 shootings in Baghdad and set up a special office to handle classified work at his farm in Middleburg, Va.

The firm is facing a string of legal problems, including the indictment in April of five former Blackwater officials on weapons and obstruction charges, and civil suits stemming from the 2007 shootings in Iraq.

Mr. Prince is selling the business and colleagues say he is bitter over the public criticism and scrutiny that Blackwater has faced.

He has not been implicated in the criminal charges against his former subordinates, but he has recently moved his family to Abu Dhabi, where he hopes to focus on obtaining contracts from governments in Africa and the Middle East, according to colleagues and former company officials.

After awarding Blackwater the new security contract in June, the CIA director, Leon Panetta, publicly defended the decision, saying Blackwater had "cleaned up its act."

But Rep. Jan Schakowsky (D., Ill.) of the House Intelligence Committee said she could not understand why the intelligence community had been unwilling to cut ties to Blackwater.

"I am continually and increasingly mystified by this relationship," she said. "To engage with a company that is such a chronic, repeat offender, it's reckless."