Audit Finds That U.S. Overpaid Blackwater

By YOCHI J. DREAZEN, The Wall Street Journal, June 17, 2009

WASHINGTON -- A government audit found that the State Department overpaid the contract-security firm once known as Blackwater Worldwide by tens of millions of dollars because the company failed to properly staff its teams in Iraq.

The report didn't identify any specific security breaches, but it said the State Department should have withheld at least $55 million in payments to the company because of the shortfalls.

The audit by the Special Inspector General for Iraq Reconstruction and the State Department's Inspector General said the firm didn't employ enough guards, medics, marksmen and dog handlers to fully man the teams, which were responsible for protecting the U.S. ambassador to Iraq and other high-level officials.

The failure to consistently field the right numbers of guards endangered the U.S. officials whom the company was being paid to protect, the report concluded.

"We believe the full manning of protective details is important to the safety of the principal being protected, as well as to the members of the protective details," the audit noted. "Insufficient manning exposed the department to unnecessary risk."

The audit also found that Blackwater, which this year changed its name to Xe, sometimes overcharged for airfare to and from Iraq and failed to properly account for some equipment received from the U.S. government.

Anne Tyrell, a company spokeswoman, said it had been "fully compliant with the terms and conditions of the contract." Ms. Tyrrell said the company believed it was entitled to all of the disputed $55 million.

Officials in the State Department's Diplomatic Security office, which oversaw the contract, referred questions to the department's Bureau of Administration, which declined to comment.

The audit is the latest report to raise questions about Blackwater, which was for years the best known Western contractor in Iraq. Under the new name, Xe, the company is seeking new contracts worth tens of millions of dollars in Afghanistan for services ranging from training Afghan personnel to flying cargo for the U.S. military.

Blackwater wound down its Iraq operations earlier this year, after the Iraqi government refused to renew its operating license because of a 2007 shooting incident involving one of its security teams in which 17 Iraqis died. In December, U.S. prosecutors charged five former Blackwater guards with manslaughter and weapons charges for their alleged roles in the incident. Families of several of the dead Iraqis have also sued Blackwater in federal court seeking financial compensation.

The company also faces civil and criminal scrutiny stemming from the alleged killing of an Iraqi guard by a Blackwater employee inside Baghdad's heavily protected Green Zone on Christmas Eve 2006.

In Afghanistan, four U.S. contractors affiliated with Xe are under U.S. military investigation in the shooting of a civilian vehicle in Kabul last month, wounding at least two Afghan civilians.

The company has said it is cooperating with the investigations into all three incidents but denied responsibility. When the five former guards were indicted in December, the company said it didn't believe "criminal violations occurred" but that the men should be held accountable for any wrongdoing. The company fired the guard involved in the Christmas Eve shooting, fined him thousands of dollars and sent him back to the U.S.

Last month, the company said it terminated the contracts of all four of the guards involved in the Kabul shooting.

Write to Yochi J. Dreazen at

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