Audit: U.S. Overpaid Blackwater

Millions went to controversial firm, despite understaffing.

June 16, 2009, 2:30 PM

June 16, 2009— -- The U.S. government overpaid tens of millions of dollars to the scandal-ridden security contractor once known as Blackwater, according to a new government audit.

The firm, now known as "Xe," understaffed its security teams assigned to protect the U.S. ambassador in Iraq and other U.S. officials in country. In total, the State Department could have dinged the company $55 million for work it didn't properly perform, auditors concluded.

Those fees should have been assessed for Blackwater's failure to meet staffing requirements laid out in its contract, the auditors said in their report. In addition, Blackwater also overcharged over $125,000 for travel, by booking tickets "in excess of coach fare."

In total, the firm has billed more than $1 billion in work to the State Department, much of it through contracts awarded without competition.

In a written statement, Xe spokeswoman Anne Tyrell disagreed with the auditor's conclusions. "The government contracting officer determined that Blackwater was compliant with the terms and conditions of the contract at the time for which they were reviewing and therefore did not apply any deductions or penalties," she said. "Blackwater only billed for services provided."

Blackwater has been the target of at least four grand jury investigations and accusations of tax fraud, improper use of force, arms trafficking and overbilling. The firm has denied any wrongdoing.

Blackwater Denies Overbilling Charges

The firm changed its name to Xe in February, after the State Department dropped its contract protecting diplomats in Iraq.

Last week, a Senate panel chided the State Department for overlooking similar problems with a security contractor in Afghanistan. The Subcommittee on Contracting Oversight took the department to task for renewing its $187 million contract with Armor Group North America, despite chronic understaffing of its security patrols around the U.S. embassy in Kabul.

A State official told lawmakers the firm's performance had been "satisfactory," contradicting internal documents which indicated otherwise.

Maddy Sauer contributed to this report.

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