Despite Investigations, Blackwater to Keep Working in Iraq

April 4, 2008— -- Although it has been accused of tax fraud, improper use of force, arms trafficking and overbilling, the Blackwater firm will have its $1.2 billion contract for private security in Iraq renewed by the State Department, a spokesman confirmed Friday.

The one-year extension, worth an estimated $240 million, was requested by officials at the U.S. Embassy in Baghdad, two sources close to the arrangement tell ABC News.

"The State Department's decision to renew the contract not only puts the lives of innocent Iraqi civilians at risk, but it threatens the safety of our troops and jeopardizes the U.S. mission in Iraq," Rep. Jan Schakowsky, D-Ill., a member of the House Intelligence Committee who introduced the Stop Outsourcing Security (S.O.S.) Act to phase out the use of private military contractors in Iraq and Afghanistan.

Meanwhile, a grand jury, federal prosecutors and congressional investigators are probing a host of allegations against the company.

The grand jury is reportedly investigating whether Blackwater security guards used excessive force in killing 13 Iraqi civilians in a violent incident in central Baghdad last September. At the time, many speculated the incident would effectively end the firm's work for the State Department when its contract came up for renewal in May 2008.

Federal prosecutors are probing allegations that Blackwater personnel smuggled weapons, night-vision scopes and other sensitive material into Iraq. The firm has denied any involvement in such a scheme.

A congressional panel is investigating whether the company illegally dodged millions in taxes by misclassifying its employees as "independent contractors." The allegation, Blackwater spokeswoman Anne Tyrrell said at the time, was "incorrect."

And a State Department investigation in 2005 found Blackwater sometimes double-billed employees' time, resulting in "duplication of profit."

Blackwater has more than 850 personnel in Iraq under contract to the U.S. government in Iraq.