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By William Fisher

NEW
YORK, Feb 28, 2010 (IPS) - Legal headaches are growing exponentially
for the security firm formerly known as Blackwater – once the darling
of the military-industrial community.

In separate
developments, two former employees of the company charged that the
security firm committed "systematic fraud" under its contracts with the
U.S. State Department in Iraq and Afghanistan; the Iraqi government
announced it would seize heavy weapons from foreign security firms and
expel ex-Blackwater contractors still in the country; and a U.S. Senate
hearing learned that Blackwater employees stole more than 500 assault
rifles intended for the Afghan police force.

The accusations of fraud came from two former employees who filed a
false claims lawsuit that allows the employees, acting as
whistleblowers, to win a portion of any public money the government
recovers as a result of the information.

The Washington Post reports that the former Blackwater (now known as Xe
Services) employees Brad and Melan Davis accused the firm of
over-billing for travel, charging for liquor and spa trips and for a
having a fire pit built for Blackwater staff parties, and charging for
the services of a Filipino prostitute who was kept on "staff" in
Afghanistan as part of the company's "Morale Welfare Recreation".

Brad Davis was a former Marine and served as a team leader and security
guard, including in a posting in Iraq. Melan Davis, his wife, worked as
a finance and payroll employee. Melan Davis has accused the company of
terminating her in 2008 because she questioned billing practices. Her
husband resigned shortly afterward.

Blackwater changed its name to Xe - pronounced "zee" - early
last year in an effort to shed the negative baggage acquired from its
frequent run-ins with Iraqi, Afghan, U.S. and NATO forces. The
Blackwater Lodge & Training Centre, the subsidiary that conducts
much of the company's overseas operations and domestic training, has
been renamed U.S. Training Centre Inc.

In a related development, the Iraqi government announced that
it would seize weapons from foreign security firms and expel
ex-Blackwater contractors still in the country within days, according
to Interior Minister Jawad al-Bolani.

The decision was triggered by the Iraqi government's outrage over the
dismissal by a U.S. court of charges against Blackwater Worldwide
guards who were accused of killing 17 Iraqi civilians in Baghdad in
2007. The guards said they shot in self-defence.

The judge said there was evidence of prosecutorial misconduct.
The U.S. government is appealing the dismissal of the court case. The
Iraqi government, which has prohibited Blackwater from operating in
Iraq, has hired U.S. lawyers to prepare a lawsuit against the company.

For many Iraqis, the killing of the 17 civilians became emblematic of
the impunity from prosecution in Iraq enjoyed by foreign security
contractors after the 2003 U.S. invasion. That immunity ended last year
under a U.S.-Iraqi security agreement transferring sovereignty back to
Iraq.

Parliamentary elections scheduled for Mar. 7 are also fuelling
Iraqi anger at Blackwater. Minister Bolani, who is running as the head
of his own coalition against a slate headed by Prime Minister Nuri
al-Maliki, told Reuters news service that he had "ordered that the
heavy weapons used by some of the foreign security firms be collected."

And in yet another development, it emerged at a hearing of the Senate
armed services committee that Blackwater employees took more than 500
assault rifles intended for the Afghan police force and routinely
carried weapons without permission.

It also emerged that to burnish its negative image to win
contracting business in Afghanistan, Blackwater created what one
senator called a shell company. Senators said that company, Paravant,
deceived U.S. officials. It claimed Blackwater was not involved but
used Blackwater's past performance to establish its credentials.

"They made representations here that are wildly false," said Senator
Carl Levin, a Democrat. "Everyone knew in the field it was Blackwater
trying to get rid of a negative name."

Levin warned that Afghan civilians did not distinguish between
troops and contractors, and that when contractors misbehaved it turned
the population against U.S. forces and encouraged them to side with the
Taliban.

The Senate hearing focused in part on a December 2008 accident
in which a Blackwater employee was shot in the head during what the
company described as a vehicle training exercise but Levin called
horseplay.

According to committee investigators, a Blackwater trainer
jumped on top of a moving vehicle while carrying a loaded AK47. The
vehicle hit a bump and the rifle discharged, striking another trainer
in the head. At the hearing Wednesday, former Blackwater officials
insisted the Americans were engaged in vehicle training. Levin accused
Blackwater of covering up misconduct by describing the shooting as an
accident during "routine" training.

In May, two Afghan civilians were killed in a shooting
involving Paravant employees. Investigators later determined that the
contractors had "violated alcohol policies", were not authorised to
have weapons and had violated other policies. The U.S. Justice
Department said the shooting had a detrimental effect on U.S. national
security.

Former Paravant official Brian McCracken acknowledged the
company's trainers were carrying weapons without authorisation but said
they often operated in dangerous environments among armed Afghans,
without U.S. army protection.

In the aftermath of the terrorist attacks on the U.S. in
September 2001, Blackwater was awarded contracts worth billions of
dollars in Iraq and Afghanistan. The company provided security for U.S.
embassy personnel and important visitors in those locations.

Erik Prince, Blackwater's founder and former CEO, was a
substantial contributor to the Republican Party and had close ties to
senior officials in the administration of George W. Bush.