Blackwater likely to be fined millions in Iraq weapons case

McClatcly NewspapersNovember 12, 2008 

US NEWS USIRAQ-BLACKWATER 7 MCT

Erik Prince, founder of CEO of Blackwater

CHUCK KENNEDY — Chuck Kennedy / MCT

WASHINGTON — The State Department is preparing to slap a multi-million dollar fine on private military contractor Blackwater USA for shipping hundreds of automatic weapons to Iraq without the necessary permits.

Some of the weapons are believed to have ended up on the country's black market, department officials told McClatchy, but no criminal charges have been filed in the case.

The expected fine is the result of a long-running federal investigation into whether employees of the firm shipped weapons hidden in shrink-wrapped pallets from its Moyock, N.C. headquarters to Iraq, where Blackwater is the State Department's largest personal security contractor.

Since the arms shipment allegations first became public 14 months ago, Blackwater, which has received $1.2 billion in federal contracts, according to the Web site fedspending.org, has consistently denied involvement in illicit arms trafficking.

However, the State Department found that Blackwater shipped 900 weapons to Iraq without the paperwork required by arms export control regulations, one department official said. Of that number, 119 were "particularly ... erroneous," he said. He and the other officials spoke on the condition of anonymity because the decision hasn't been announced.

Federal laws require obtaining a license before exporting military hardware, including automatic weapons, overseas.

Blackwater spokeswoman Anne Tyrrell said Wednesday that the company had "not been informed of an intent to impose a fine, however ... we have been cooperating with the government to respond to inquiries into our export processes."

The State Department's "resolution of export matters with other significant defense contractors, such as Boeing, L-3, Lockheed-Martin and General Dynamics has typically resulted in some payment" to the government, she said in an e-mail exchange.

Blackwater last month announced what it billed as a major new initiative to ensure that the company complies with rules for exporting military hardware.

Saying that "our company has experienced remarkable growth in the last few years," Blackwater CEO Erik Prince said: "This growth, our work for the U.S. Government around the world, and the nature of the services we offer have created compliance challenges."

Blackwater said it created the position of Vice President of Export Compliance and created a three-person independent oversight committee whose members include former U.S. Rep. Asa Hutchinson, R-Ark.

The amount of the planned fine couldn't be learned, but one State Department official said it was "way in the millions." The official said the fine could be announced as early as this week. A second official, however, cautioned that it's not imminent.

Jay Greer, a spokesman for the State Department Bureau of Politico-Military Affairs, which implements defense export controls, declined comment.

The weapons case became public in September 2007 as part of a House Oversight and Government Reform Committee inquiry into then-State Department inspector general Howard Krongard.

The Raleigh, N.C., News & Observer, a McClatchy newspaper, first reported that two former Blackwater employees, Kenneth Wayne Cashwell and William Ellsworth "Max" Grumiaux, had pleaded guilty to weapons charges and were cooperating with federal prosecutors in North Carolina.

What became of the weapons may never be known.

Iraq has a brisk black market for weapons. Pentagon probes have found that Defense Department-supplied weapons intended for Iraq's security forces were diverted. The Turkish government has complained that some ended up in the hands of the Kurdistan Workers Party, or PKK, which Washington and Ankara consider a terrorist group.

Blackwater employees are also the subjects of a Justice Department probe into the killing of 17 Iraqi civilians in Baghdad's Nisoor Square on Sept. 16, 2007. That incident sparked outrage over the actions of private military contractors and forced the State Department to impose tighter rules on the contractors.

A federal grand jury is weighing whether to indict the Blackwater guards who were involved in the killings.

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