October 2, 2008 -- An M4 machine gun sent to Iraq by the Blackwater private security firm somehow disappeared from the company's storage facility in Baghdad and was later discovered during a US military operation, apparently against suspected insurgents, people familiar with the situation have told ABC News.
The incident, in 2006, has been kept secret until now but it raised more questions about Blackwater's operations in Iraq.
Allegations that Blackwater shipped weapons and silencers to Iraq without proper licensing are already under investigation by a federal grand jury in North Carolina, according to people familiar with the case.
Blackwater says all of its weapons "are shipped in accordance with U.S. export control regulations."
A separate federal grand jury in Washington, D.C. is investigating a shooting incident involving Blackwater guards that led to the deaths of 17 civilians. Indictments in that case could come as soon as next week, officials say.
Blackwater says it is cooperating with the grand jury investigation and has said that its guards acted in self-defense during the incident.
The State Department renewed Blackwater's one-billion dollar private security contract earlier this year, despite the grand jury investigations.
In the case of the missing machine gun, Army investigators said the "Bushmaster M4" was discovered in March 2006 by US troops during an unspecified military operation.
Blackwater apparently had no idea the machine gun had gone missing and possibly ended up in the hands of insurgents fighting US troops, according to documents reviewed by ABC News.
In a statement, Blackwater said "equipment has been stolen by insurgents" in some instances, but that "every loss has been reported to the relevant U.S. authorities."
But that was not the case with the M4, according to internal documents.
Blackwater's inventory records showed no transfer of the weapon after it arrived in Baghdad, and it was listed as still in the weapons pool.
US soldiers reportedly found the weapon was in surprisingly good condition when it was recovered.
Criminal investigators for the US Army turned the weapon over to Blackwater. A spokesman for the Army CID said no further investigation was conducted as to whether the weapon had been stolen or sold on the black market by someone with access to the Blackwater facility.
The Bushmaster, according to the company's website, is one of the "world's most popular military and law enforcement carbine models." It is outfitted with a flash suppressor and, in military models, can fire three round bursts or fully automatic.