Blackwater (now Xi)

[Austin Kelley]

The author has a personal history that might raise some questions but I see no negative effected on his reporting here:

Contractors stirred by sexy tales
By David Isenberg


Xe Services (formerly known as Blackwater) is once again in the news, thanks to charges made by two former employees. Brad and Melan Davis, a married couple, worked in various Blackwater locations, both overseas and in the United States.

They are suing Blackwater using the False Claims Act, a US federal law that allows people with no government affiliation to file lawsuits against federal contractors claiming fraud against the government. People filing under the act stand to receive a portion (usually about 15-25%) of any recovered damages. Typically, allegations have been filed by people with inside knowledge of false claims involving health care, military or other government spending programs. The government recovered nearly $22 billion under the act between 1987 and 2008.

Their suit makes many allegations but, predictably, the press thus far have largely focused on the most sensational, namely that Blackwater officials kept a Filipino prostitute on the company payroll for a US State Department contract in Afghanistan, and billed the government for her time working for Blackwater male employees in Kabul. The alleged prostitute's salary was categorized as part of the company's "Morale Welfare Recreation" expenses. The Davis' charges have not yet been proved or disproved.

It may be sad to say but, given the history of sexual activities and some private contractors, the alleged use of a prostitute may actually be a step up. At least they were not trafficking in child sex slaves, as some DynCorp contractors did in Bosnia in the late 1990s.

The story of the now legendary Tori the Escort shows how prostitutes have been shipped in to war zones. In 2007, the blog Wonkette broke the story that Tori was going to be in Baghdad's Green Zone for an extended tour, "entertaining all members of the PMC community registered with PSCAI [Private Security Company Association of Iraq]".

As the use of a prostitute is between consenting parties it cannot be termed "sexual harassment", which is prohibited under the terms of the Worldwide Personal Protective Services (WPPS) contract under which Blackwater operates in Afghanistan. However, there is a clause with respect to guard conduct that states:

Personal activity on post: The guards will not engage in any unofficial business on post; ie, soliciting, canvassing, peddling, sales promotion of a commercial item, loan money for interest and etc. [pg 70]

A lawyer could probably argue that the woman was originally working at a hotel, thus not on base, and as such is not covered by the clause. Where she worked when she was put on the payroll remains an unanswered question.

It bears pointing out that Melan Davis, who reported the billing of the prostitute's services to the government, was hired back in December 2005. In the suit she notes:

After the Department of State meeting educated me on dire permissibility of various practices, I discovered a substantial amount of fraudulent billing. One of the first items I uncovered was Blackwater billing for payments made to a prostitute. I came across the name of a female Filipino on the expenses submitted for cost reimbursables in connection with Task Force No 4. At that time, to my knowledge, the only third-country nationals we had in country in Afghanistan were Columbians. I wanted to figure out whether we had Filipino third-country nationals as well because I had not seen any others beyond this name.

I contacted Susan Bergman, who was the logistics operations manager in Kabul, Afghanistan. She informed me that the woman was not a third-country national hired to serve as a static guard, but rather was a prostitute, who had been ousted from the hotel where she was working for several Blackwater men. As a result, they put her on the Blackwater payroll under the Morale Welfare Recreation (MWR) category. To the best of my knowledge, Blackwater billed her plane tickets and monthly salary to the United States under the Task Orders.

This takes corporate pimping to new heights. Also, given the timeline she describes this means that Blackwater was still a member of the International Peace Operations Association, a leading trade group for the private military contracting industry.

Blackwater pulled out of IPOA after Blackwater employees were accused of killing innocent Iraqi civilians in the Nisour Square shootings of September, 2007. In December, a US federal judge dismissed charges against the contractors on the grounds that the government bungled the case by using testimony that was given under a grant of immunity.

The IPOA has a code of conduct that its member companies are supposed to follow, though what happens if a company violates the code has never been clear. While nothing in the code says that contractors can't use prostitutes, there is language that could reasonably be construed as suggesting it is a bad idea.

The section on accountability says: "Signatories shall support effective legal accountability to relevant authorities for their actions and the actions of their personnel. Signatories shall proactively address minor infractions, and to the extent possible and subject to contractual and legal limitations, fully cooperate with official investigations into allegations of contractual violations and breaches of international humanitarian and human rights laws." By billing the government for the prostitute's services Blackwater was certainly in violation of "contractual limitations".

Moving on, there are a number of far more serious allegations in the Davis' suit, which merit full investigation.

Consider Hurricane Katrina. Over the years Blackwater has taken lots of criticism from people with axes to grind for supposedly providing jackbooted mercenaries to patrol the streets in the hurricane's aftermath. Up to now this has mostly been hot air with precious little substantiation.

But in the suit, Brad Davis, who worked in Louisiana for Blackwater, contends:

Blackwater failed to provide the services required by the contract with FEMA [the Federal Emergency Management Agency] and the State of Louisiana. Blackwater was arming its employees with deadly weapons (shotguns, Glocks, and M-4s) in order to provide security. As a result, Blackwater was required to monitor closely the weaponry, and keep at all times a registry of the weapons in the hands of its employees. Blackwater utterly failed to monitor these deadly weapons, and instead lost track of countless weapons.

Blackwater repeatedly and routinely falsified records to hide this serious issue from FEMA and other United States agencies.

Blackwater repeatedly and routinely falsified GSA 139 forms, which are the forms that Blackwater was directed to use to record the hours worked by its employees. Blackwater permitted employees to "clock in" for their fellow employees.

Beginning in October 2005, and continuing until at least April 2006, Blackwater submitted invoices to the United States and to the State of Louisiana that contained falsified hours.

Reasonable discovery is likely to establish that the persistent fraud by Blackwater on the Hurricane Katrina contracts that was observed firsthand by Relators from October 2005 to April 2006 actually persisted well past then.

It bears to note that during this time, when Blackwater was a member, that IPOA's code of conduct states that, "Signatories using weapons shall put the highest emphasis on accounting for and controlling all weapons and ammunition utilized during an operation and for ensuring their legal and proper accounting and disposal at the end of a contract."

A thus-far unmentioned aspect to the weapons issue, mentioned in a footnote to the suit, is the following from Brad Davis:

I also learned from colleagues that the failure to account for weapons was not limited to Louisiana. On one occasion, Blackwater employees working in Moyock sold a M249 (known as a "saw") to a civilian for $10,000. It is illegal to possess such weapons. Not realizing it was illegal, the purchaser brought it back to the armory on a different shift, complaining that there was something wrong and seeking refund or replacement Although the United States ended up learning about the incident, the United States did not realize that the United States law enforcement personnel tasked to investigate the incident were put on Blackwater's payroll.

In plain English that seems to allege that Blackwater paid off the police to ignore its violation of the law.

Davis also says that:

Blackwater failed to fulfill the contract requirements for training in Louisiana. Blackwater hired persons without completing any screening in advance. At times, it turned out that Blackwater had armed and placed on the streets persons who had been convicted of felonies or were otherwise prohibited by the Lautenberg Act (regarding persons convicted of domestic violence) from carrying weapons. Although Blackwater eventually terminated some or all of those persons, Blackwater had armed them and placed them on public streets of Louisiana for a significant period of time.

Another disturbing charge is this:

Blackwater operated a private training facility called Blackwater Academy.

Many persons enrolled in Blackwater Academy were subsequently hired by Blackwater to serve on the Department of State contract, International Republican Institute contract, and other contracts funded by the United States.

Blackwater hired persons to serve on these contracts in order to ensure that these persons had the funds necessary to pay their outstanding tuition bills at Blackwater Academy.

As a result of this direct financial benefit to Blackwater Academy, Blackwater would continue to deploy persons to serve as "shooters” on contracts funded by the United States even after such persons had proven themselves wholly incompetent.

Despite pleas from its own management, Blackwater repeatedly refused to terminate shooters who had used excessive and unjustified force against Iraqis because Blackwater wanted to ensure that these persons could pay outstanding Blackwater Academy tuition.

By providing unqualified shooters who used excessive and unjustified force against Iraqis, Blackwater defrauded the United States in two ways: First, it failed to provide contractually required services. Second, this misconduct caused the United States to expend substantial time and money redressing the various harms caused by these unqualified persons.

These unqualified persons included Beau Phillips and Luke Doak, both of whom injured Iraqis with unjustified and excessive force.

Blackwater management was well aware of the unjustified shootings, but failed to report them to the United States as was required by the terms of the contract. Blackwater also failed to terminate these persons and instead continued to bill the United States for their services.

Blackwater continues to defraud the United States to date by billing the United States for trainings conducted by Luke Doak.

If true, what Blackwater did could be considered a form of indentured servitude. Blackwater permits persons to go through the academy at no charge, and then deducts the tuition from their subsequent pay as Blackwater contractors over a two-year period. That explains why Blackwater would keep someone in the field who should not be there. For example, Blackwater benefited financially in two ways by keeping Doak on contract: Blackwater received payments from the United States and also received payments directly from Doak.

As Davis notes in the suit, "Gloria Shyties told me that Blackwater needed to find Doak a job in order to ensure that he repaid Blackwater the tuition. She was well aware of the fact that Doak had murdered two people with Blackwater weapons while working on a Blackwater contract in Iraq."

Second, if Blackwater was providing unqualified personnel to work in Iraq it was clearly in violation of the terms of its WPPS contract.

According to Brad Davis, Blackwater not only overbilled the United States for travel expenses in Afghanistan but did so in various ways:

First, Blackwater created phony invoices that misled the United States into believing Blackwater had made payments to an unrelated third party.

Second, Blackwater transported employees on its own wholly-controlled Presidential Airways subsidiary (previously called Blackwater Aviation), but billed the United States as if the travel had occurred on unrelated third-party commercial carriers.

Third, Blackwater created phony invoices to obscure the fact that Blackwater had failed to keep any of the necessary contemporaneous documentation on travel. Blackwater and Greystone employees worked around the clock in Jordan for several days in February 2008 creating phony invoices - at rates well in excess of what was actually paid to any third party - to match personnel musters. In reality, Blackwater lacked the necessary contemporaneous records and was not authorized to bill the United States under the terms of the contract.

Davis also charges that in addition to improperly billing the US government it also solicited kickbacks:

Blackwater overbilled the United States for services provided by a man named Sargon Hendrich. Mr Hendrich provided some services to Blackwater, and invoiced those services at rates well in excess of fair market value. Blackwater billed the services to the United States. After the funds received from the United States were disbursed to Mr Hendrich, he would then pay kickbacks to Blackwater.

Furthermore, in what can be only viewed as a moment of serendipity in light of a recent US Government Accountability Office report on the subject, Brad Davis charges that:

Blackwater used Greystone, a wholly-controlled offshore company, to obscure the amount of taxable revenues earned by Blackwater. Reasonable discovery will show that Blackwater transferred funds offshore to Greystone, and then reflected those funds as payment for management fees.

Reasonable discovery will show that Blackwater was using this mechanism to send its profits offshore beyond the reach of the United States Internal Revenue Service.

It also appears that Blackwater may have been inspired by former US senator John Edwards of North Carolina, the state where Blackwater is headquartered. Among other things, Edwards is distinguished for cheating on his wife when she was battling lung cancer. The suit notes that:

Defendants wrongfully terminated Melan Davis from the corporate offices in retaliation for her attempts to rectify the abuses occurring in the Jordan offices. Defendants' own internal investigation recommended that Ms Davis not be terminated, but Defendants nonetheless terminated Ms Davis on February 1, 2008, while she was out on leave battling cancer.

Yet another charge, which seems reminiscent of the character Lieutenant Milo Minderbinder in Joseph Heller's famed Catch-22 novel is that "Erik Prince personally smuggled out antique Iraqi fighter planes. He had the planes dismantled, smuggled out in parts, and then reassembled for display."

Mark Corallo, a spokesman for Xe Services said: "The allegations are without merit and the company will vigorously defend against this lawsuit. It is noteworthy that the government has declined to intervene in this action," he said.

Back when the US government was investigating Blackwater contractors for the Nisour Square shootings company spokesmen condemned the government for what it characterized as a rush to government before the facts were in. Now it is praising the government for not joining in even though the facts have yet to be verified.



David Isenberg is a researcher at the International Peace Research Institute, Oslo. He is an adjunct scholar with the Cato Institute, a research fellow at the Independent Institute, a US Navy veteran, and the author of a new book, Shadow Force: Private Security Contractors in Iraq. The views expressed are his own. His email is sento@earthlink.net.

http://www.atimes.com/atimes/Middle_East/LB18Ak02.html