Blackwater Waiting Justice Still

Blackwater May Face Criminal Charges, Hefty Fines Over Arms Shipments

By Jason Leopold
The Public Record
Sunday, November 09, 2008


Private security contractor Blackwater Worldwide may be slapped with millions of dollars in fines by the State Department for shipping weapons to law enforcement facilities in Iraq and Jordan without authorization, according to a report published in the magazine Government Executive.

“Officials in the Commerce Department, which has jurisdiction over some military exports, are conducting a related regulatory review of Blackwater shipments,” the magazine reported, citing unnamed sources. “And federal officials in North Carolina have convened a grand jury to consider criminal charges related to the arms shipments.”

In a separate development involving the controversial security contractor, a Washington, D.C. Grand jury will soon decide whether to indict several Blackwater security guards over a shooting in Baghdad last year that claimed the lives of 17 civilians, unnamed sources told Government Executive.

The unauthorized arms shipments are said to total about 900 weapons sent to police training facilities in Iraq and Jordan.

Blackwater “didn't do the original paperwork, therefore they don't know where the guns are," one source familiar with the matter told Government Executive, adding that each weapon shipped overseas might result in a separate violation and result in hefty fines.

In a statement released by Blackwater Oct. 9, General Counsel Andrew Howell confirmed the company is under scrutiny.

"Ongoing reviews by the departments of Justice, State and Commerce have highlighted the need for a significant and systems-wide initiative," Howell said. On the same day Blackwater announced the formation of a new export compliance committee to oversee it’s international dealings. The committee was formed immediately after Blackwater received a letter from the State Department’s Defense Trade Control Directorate alerting the security firm to potential violations, Government Executive quoted sources familiar with the matter.

Rep. Asa Hutchinson, R-Ark., a former U.S. Attorney is a member of the committee.

In July, Blackwater said it would slowly exit the security business. The same month, the Inspector General of the Small Business Administration (SBA) released a report that said Blackwater misrepresented the size of its firm so it could receive more than $100 million in small business contracts from the federal government.

The report said the mercenary outfit obtained a total of 39 contracts intended for small businesses with annual revenues of $6.5 million between 2005 and 2007. But the report said Blackwater’s revenue surpassed $200 million for those years.

Blackwater “obtained a total of 33 contracts during Fiscal Years 2005 through 2007, totaling $2,188,620, which may have involved misrepresentations to obtain the contract.”

The report also found that “it is possible that misrepresentations took place" on the remaining six contracts, totaling $107,311,356.”

Of the 39 contracts reviewed, 38 were awarded by the Defense Department and the Department of Veterans Affairs awarded one. The Inspector General’s report says the small business contracts "could have involved potential misrepresentations by Blackwater.

Moreover, the Department of Defense wrongfully awarded Blackwater aviation contracts worth $107 million. That contract was earmarked for companies with annual revenues of less than $25 million or less than 1,500 employees, the report said.

The Small Business Administration was singled out and criticized for not thoroughly investigating Blackwater’s finances prior to awarding contracts to the company.

The report was prepared at the request of Congressman Henry Waxman, the chairman of the House Committee on Oversight and Government Reform, who sent a letter in March to Steven Preseton, the administrator of the Small Business Administration.

“As part of the Oversight Committee's investigation into the business practices of Blackwater Worldwide, the Committee has obtained evidence indicating that Blackwater may have applied for and received federal contracts by improperly claiming that it was eligible for small business preferences,” Waxman’s March 10 letter said. “It appears Blackwater sought these small business contracts by improperly designating its security guards as "independent contractors" rather than "employees."

The Inspector General’s 27-page report released Monday said Blackwater appeared to have improperly classified its guards stationed in Iraq and Afghanistan as independent contracts as opposed to full-fledged employees in order to obtain government contracts.

According to a memo issued by Waxman to Oversight Committee members Monday, “The key issue... was whether personnel hired by Blackwater to provide security services for the Department of State (DOS) and other agencies were Blackwater employees . . . or independent contractors."

“In claiming it was a small business, Blackwater argued that 1,000 security personnel it provided under the State Department’s $1.2 billion Worldwide Personal Protective Service (WPPS) contract were independent contractors,” Waxman’s memo says. “The [Small Business Administration Inspector General] reports that Blackwater claimed that it "had little or no knowledge of the activities of the security personnel performing the contract and exercised little or no supervision over these personnel once they were deployed.”

The report “concludes that these assertions were incorrect,” Waxman’s memo says.

The Inspector General’s report says “Our review of the WPPS Statement of Work indicates that it contained a number of provisions that appeared to be inconsistent with SBA's conclusion that Blackwater did not have knowledge about the actions of the personnel once they were deployed.”