Blackwater And The FCPA

The New York Times on Tuesday alleged here that executives at the private military security firm formerly known as Blackwater Worldwide authorized secret payments of about $1 million to Iraqi officials that might have violated the Foreign Corrupt Practices Act. The payments were "intended to silence [the officials'] criticism and buy their support after a September 2007 episode in which Blackwater security guards fatally shot 17 Iraqi civilians in Baghdad," the Times said.

Four former employees the Times interviewed claimed the payments were approved by the company's president and money was wired to Iraq from accounts in Jordan. The employees didn't know if the payments were actually made. The report said "Blackwater’s strategy of buying off the government officials, which would have been illegal under American law, created a deep rift inside the company, according to the former executives."

The North Carolina-based firm, now known as Xe Services LLC, said the allegations are completely baseless.

The Times said a federal grand jury in North Carolina has been investigating Blackwater. But the United States Attorney’s Office in Raleigh hasn't commented and the paper couldn't confirm if "the payment scheme is a focus of the grand jury."

The bribery allegations could be a serious setback for the company and its top officers. Before the Times report, Blackwater's founder Erik Prince had worked hard to enlist support in New York and Washington from media leaders and politicians. His message was that the company provides security services requested and needed by the State Department and follows the rules applicable to it wherever it operates. But no one will be willing to defend potential criminal violations of the FCPA.

In March 2009, Blackwater failed to obtain an operating license from the Iraqis. Two months later, the Times said, the State Department replaced the company with a competing security contractor.