Report: Blackwater created shell companies to win contracts

Sep 4, 2010, 13:51 GMT

Washington - The private security firm Blackwater Worldwide created more than 30 shell companies in an attempt to secure millions of dollars in US government contracts, The New York Times reported Saturday.

Blackwater, which is now known as XE Services, formed these companies after coming under harsh scrutiny for its conduct in Iraq, the report said, citing investigators and former company officials. Many of these companies were located in offshore tax havens.

While it was unclear how many of those companies received government contracts, at least three of them struck deals with the US military or the Central Intelligence Agency (CIA), the Times reported. A government official said the CIA has awarded close to 600 million dollars in classified contracts to Blackwater and its affiliates since 2001.

The North Carolina-based firm is contracted by the US State Department to provide private security to US personnel and diplomatic convoys in dangerous parts of the world.

The company was sharply criticized after a September 2007 shooting by its contractors in Iraq that killed 17 civilians. It lost its contract there because of the incident.

This week, the Senate Armed Services Committee, which is investigating government contracting, released a chart that identified 31 affiliates of Blackwater, the report said. The investigation revealed the steps Blackwater took to continue winning contracts after September 2007.

Michigan Democrat Carl Levin, the chairman of the Armed Services Committee, said in a statement quoted by the Times that it was worth 'looking into why Blackwater would need to create the dozens of other names.' He has requested the Justice Department investigate whether Blackwater misled the government when using these subsidiaries to obtain contracts.

The CIA recently awarded the company a 100-million-dollar contract to provide security in Afghanistan, a move that has been severely criticized by some members of Congress.

The Times cited former Blackwater employees as saying that at least two of the affiliated companies, XPG and Greystone, obtained secret contracts from the CIA.

Last month, Blackwater reached a 42-million-dollar settlement with the State Department for export violations - allegedly committing 288 violations related to the unauthorized export of defence equipment as well as the provision of defence services 'to foreign end-users' in several countries between 2003 and 2009.

The violations 'did not involve sensitive technologies or cause a known harm to national security,' and took place when Blackwater was working in support of US government programmes and military operations abroad.

The hundreds of violations cited against the firm included exporting illegal weapons to Afghanistan, providing sniper training to Taiwanese police and making unauthorized proposals to train troops in southern Sudan.

The deal enables the company to avoid criminal charges. But it continues to face other legal problems.

In April, the former president of the firm was indicted on federal weapons charges. Gary Jackson and four other executives face 15 charges related to possession of unregistered weapons, organizing 'straw purchases' to acquire guns and falsifying government gun forms.