Waxman on warpath over Blackwater payments
Waxman: Company should give taxpayers' money back.
Joseph Neff and Jay Price, Staff Writers
The Democrat slated to be the U.S. House's lead watchdog next year demanded answers Thursday about why Blackwater USA was paid so much for security work in Iraq -- and why, in fact, the North Carolina company was paid at all.
Taxpayers paid exorbitant prices for Blackwater's services, U.S. Rep. Henry Waxman wrote in a letter to outgoing Defense Secretary Donald Rumsfeld. Waxman said it wasn't clear precisely how much taxpayers overpaid because the Army hasn't provided answers to questions first raised two years ago,
The California congressman said that Blackwater's services were not just pricey, but prohibited, because the Army never authorized Blackwater or any other Halliburton subcontractors to guard convoys or carry weapons. Houston-based Halliburton has been paid at least $16 billion to provide food, lodging and other support for troops in Iraq, and $2.4 billion to work on Iraqi oil infrastructure.
Waxman demanded "whether and how the Army intends to recover taxpayer funds paid to Halliburton and Blackwater for services prohibited under [Halliburton's] contract."
The high cost of private military contractors and the use of multiple layers of subcontractors surfaced after four Blackwater men were massacred in Fallujah in March 2004. Wesley Batalona, Scott Helvenston, Michael Teague and Jerry Zovko were guarding a convoy for ESS, a food supplier to the military, when they were ambushed. A mob dragged their charred corpses through the streets and hung the remains of two from a bridge over the Euphrates River. The grotesque images were broadcast around the world and triggered a deadlier phase of the war.
Waxman, the next chairman of the House Government Reform Committee, has tried to get answers about the Blackwater and Halliburton contracts for two years, since The News & Observer detailed how multiple layers of contracts inflated war costs.
At the lowest level, Blackwater security guards were paid $600 a day. Blackwater added a 36 percent markup, plus overhead costs, and sent the bill to a Kuwaiti company that ordinarily runs hotels, according to the contract.
Tacked on costs, profit
That company, Regency Hotel, tacked on costs and profit and sent an invoice to ESS. The food company added its costs and profit and sent its bill to Kellogg Brown & Root, a division of Halliburton, which added overhead and profit and presented the final bill to the Pentagon.
In his letter Thursday, Waxman said he had not received accurate answers from the Army and Blackwater when their officials testified under oath before his committee.
Tina Ballard, an undersecretary of the Army, testified in September that the Army had never authorized Halliburton or its subcontractors to carry weapons or guard convoys. Ballard testified that Blackwater provided no services for Halliburton or its subcontractors.
Waxman said ESS had sent him a memo saying the food company had hired Blackwater to provide security services under the Halliburton contract.
"If the ESS memo is accurate, it appears that Halliburton entered into a subcontracting arrangement that is expressly prohibited by the contract itself," Waxman wrote. "After more than two years, we still do not know how much ESS and Halliburton charged for these security services."
At a hearing in June, Blackwater vice president Chris Taylor testified that Blackwater's 36 percent markup included all the company's costs. Rep. Christopher Shays, a Connecticut Republican, interrupted, reminded Taylor he was under oath and ordered Blackwater to provide the documents to back up his testimony. Blackwater has not provided any of the contracts and other documents requested by the committee.
In Thursday's letter, Waxman said Taylor's testimony was wrong: Blackwater's contracts posted on The N&O's Web site showed that Blackwater billed separately for insurance, room and board, travel, weapons, ammunition, vehicles and office space, as The N&O article reported.
A spokeswoman for Ballard did not immediately return a call Thursday. Joseph C. Schmitz, chief operating officer and general counsel for Blackwater's parent company, The Prince Group, said he would have to defer comment until he could obtain and read the documents referred to in Waxman's letter.
Kellogg Brown & Root, the Halliburton subsidiary, released a statement: "All information available to KBR confirms that Blackwater's work for ESS was not in support of KBR and not under a KBR subcontract."
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