Iraq Disputes Blackwater's Account of Baghdad Killings

The Iraqi government is disputing the account by Blackwater security guards over a weekend shooting in Baghdad that it now says killed 20 Iraqis and wounded scores of others.

Ali Dabbagh, the Iraqi government spokesman in Baghdad, told ABC News that a preliminary Iraqi report says Blackwater security guards opened fired at a car when it failed to come to a complete stop at a checkpoint, ignoring a police warning to stop. The initial shots killed an Iraqi couple and their baby.

Blackwater officials have argued that their guards were firing in response to a car bomb and were being ambushed by Iraqi insurgents.

The investigation into a firefight between Blackwater USA personnel and Iraqi civilians has led to greater scrutiny of the role of private contractors in Iraq.

The Pentagon and Iraqi government announced today that a joint State Department-Iraq investigation will look into the incident and, among other things, try to determine whether the victims were insurgents or innocent Iraqis.

"This is not the first time this company has committed violations," said Iraqi Prime Minister Nouri Kamel al-Maliki on state-run TV. "It is our responsibility as a government to protect the lives of civilians."

Iraqi Report Says Blackwater Helicopter Fired on Iraqis

The Iraqi government has barred Blackwater from operating in Iraq, but said it didn't intend to ban the company forever. Iraqi officials said they want to ensure these contractors and others like them are held accountable for their actions.

"We are not intending to stop them from operating in Iraq," Dabbagh told ABC News. But he said, "we do need them to be kept accountable."

The Iraqi report also says Blackwater helicopters had fired on Iraqis — an accusation the company has denied.

"The helicopters providing aerial support never fired weapons," said Anne Tyrrell, spokeswoman for Blackwater USA, in a written statement provided to ABC News Tuesday.

'Blackwater Personnel Returned Defensive Fire'

"The 'civilians' reportedly fired upon by Blackwater professionals were in fact armed enemies and Blackwater personnel returned defensive fire," Tyrrell said.

U.S. Embassy officials had said Monday the guards were responding to a car bomb. However, Iraqi officials have said the car bomb was too far away for the Blackwater forces to be threatened by it.

"We know the convoy came under attack. What happened before, during and after is the subject of the investigation. And I think we need to let that investigation play out before I or anyone else is really in a position to assert definitively what we think happened," Tom Casey, deputy State Department spokesman, said today.

The Blackwater contractors in question are still in Iraq and will be part of the investigation, U.S. Embassy spokeswoman Mirembe Nantongo said today.

Investigators are looking into whether Blackwater violated rules of engagement that the military set up for private security contractors. The rules are secret, but a declassified copy obtained by ABC News says they must "fire only aimed shots" and "with due regard for the safety of innocent bystanders" — rules similar to those that apply to U.S. troops.

A confidential report obtained by ABC News from the U.S. Embassy Baghdad said five Blackwater security guards were involved in the firefight when a car bomb went off northwest of the Green Zone.

The report said that subsequent car bombs went off and that a firefight erupted, adding that the fight involved Iraqi police units.

None of the Blackwater security guards can be prosecuted in Iraqi courts because of a law passed by the U.S.-led Coalition Provisional Authority.

"They should not have immunity," Dabbagh said. "We don't want them to leave Iraq … but we need to keep them accountable."

Defense Secretary Ordered Review of Use of Security Contractors in Iraq

ABC News reported Tuesday that President Bush has personally ordered his top national security officials to get to the bottom of what happened.

Defense Secretary Robert Gates has also ordered a comprehensive review of the U.S. government's use of security contractors in Iraq.

The incident has effectively grounded U.S. Embassy officials in Baghdad — who rely on Blackwater's private security forces to get around — from visiting Iraqi leaders and ministries.

Private Security Firms in Iraq

During a congressional hearing last week, U.S. Ambassador to Iraq Ryan Crocker testified that the United States has become dependent on private security firms in Iraq.

"There is simply no way at all that the State Department's Bureau of Diplomatic Security could ever have enough full-time personnel to staff the security function in Iraq," Crocker said. "There is no alternative except through contracts."

Blackwater, based in Moyock, N.C., has more than 1,000 personnel in Iraq. Most of those security guards protect senior American diplomats in Iraq and others.

Statistics vary on how many private security guards are operating in Iraq. A recent Congressional Research report said there are as many as 30,000 security workers in Iraq.

However, a trade group in Washington that represents Blackwater and other companies in Iraq put the figure somewhere closer to 20,000 private guards.

Doug Brooks, president of the International Peace Operations Association, said on public television Tuesday that most of the private security forces in Iraq are Iraqi. Only 2,000 are American, he said.

Questions About Private Companies in War Zone

Critics of the Iraq War say the incident has brought to light how reliant the U.S. government has become on private firms, even in war zones.

"Blackwater is the realization of former Secretary of Defense Donald Rumsfeld's vision of a 'hollow military' where everything that can be privatized and outsourced, will be," author Naomi Klein said in an interview with ABC News.

Klein, who is promoting her new book, "The Shock Doctrine," argued the Bush administration has allowed private contractors to "gorge" on Iraq. She said the Bush administration has created a "parallel army" in Iraq of private contractors who are not held to the same rules as the U.S. military.

"That's what's been happening in Iraq. You have this corporate mission creep. As the war spirals, you have private companies taking on a larger and larger role," Klein said.

Klein said Americans only learn about how reliant the U.S. government is on private corporations when there is a crisis or incident, such as the Blackwater investigation and the Abu Ghraib scandal involving interrogators from a private intelligence firm called CACI.

Four in 10 Iraqis, and half of Baghdad residents, report "unnecessary violence against civilians" by U.S. or coalition forces in their local area, according to an ABC News poll of Iraqis that was released in September.

With reporting by ABC News' Brian Hartman in Iraq, Jonathan Karl, Luis Martinez and Kirit Radia.