By James Risen

The New York Times

Saturday 10 May 2008

Washington - Last fall, Blackwater Worldwide was in deep peril.

Guards for the security company were involved in a shooting in September that left at least 17 Iraqis dead at a Baghdad intersection. Outrage over the killings prompted the Iraqi government to demand Blackwater's ouster from the country, and led to a criminal investigation by the F.B.I., a series of internal investigations by the State Department and the Pentagon, and high-profile Congressional hearings.

But after an intense public and private lobbying campaign, Blackwater appears to be back to business as usual.

The State Department has just renewed its contract to provide security for American diplomats in Iraq for at least another year. Threats by the Iraqi government to strip Western contractors of their immunity from Iraqi law have gone nowhere. No charges have been brought in the United States against any Blackwater guard in the September shooting, either, and the F.B.I. agents in Baghdad charged with investigating whether Blackwater guards have committed any crimes under United States law are sometimes protected as they travel through Baghdad by Blackwater guards.

The chief reason for the company's survival? State Department officials said Friday that they did not believe they had any alternative to Blackwater, which supplies about 800 guards to the department to provide security for diplomats in Baghdad. Officials say only three companies in the world meet their requirements for protective services in Iraq, and the other two do not have the capability to take on Blackwater's role in Baghdad. After the shooting in September, the State Department did not even open talks with the other two companies, DynCorp International and Triple Canopy, to see if they could take over from Blackwater, which is based in North Carolina.

"We cannot operate without private security firms in Iraq," said Patrick F. Kennedy, the under secretary of state for management. "If the contractors were removed, we would have to leave Iraq."

Still, serious risks remain for Blackwater and at least some of its current and former personnel. A federal grand jury continues to consider evidence in the Baghdad shooting. Although the company is not likely to face any criminal charges, people involved in the case say that some Blackwater guards involved in the shooting are cooperating with the F.B.I. as it pursues evidence against other guards.

Separately, a former Blackwater guard is under criminal investigation for the December 2006 shooting death of an Iraqi guard for an Iraqi vice president, and may soon face federal charges. In a third case, two former Blackwater workers pleaded guilty to weapons-related charges, but both received sentences that included no jail time in return for their cooperation with federal prosecutors in a broader investigation.

A House committee has also asked the Internal Revenue Service to begin an inquiry into whether Blackwater has designated its guards as independent contractors rather than employees to in order to avoid paying and withholding federal taxes. The State Department renewed the security contract for only one year - just long enough to take the company into the start of the next administration. And Blackwater's political connections to the Bush administration may not serve it well if the Democrats win the White House in November.

Given the furor that surrounded Blackwater after the September shooting in Baghdad, critics say the decision to renew the company's contract in Iraq is a sign of the Bush administration's inability to curb its reliance on outside contractors in the war.

"The shooting incident was like a hammer blow, but where are the consequences?" said Peter W. Singer, a scholar at the Brookings Institute and author of "Corporate Warriors," a book about contractors in Iraq. "I think it points to the fact that the dependence on contractors is like a drug addiction. They just can't help themselves."

Representative Henry Waxman, California Democrat who is chairman of the House Oversight and Government Reform Committee, which has been investigating Blackwater on several fronts, said, "I can't understand why Blackwater's contract was renewed. It seems to me the administration should have looked for others who could do the job, including the U.S. military."

In the past administration officials have dismissed the notion of using military personnel to guard diplomats.

Founded in 1997 by Erik Prince, a former member of the Navy Seals and heir to a family fortune made in the auto parts industry, Blackwater began to generate controversy in Iraq long before last September's shooting. Blackwater had developed a reputation among both Iraqis and American military personnel as a company that flaunted a quick-draw image that led its security personnel to take overly aggressive actions to protect the people they were paid to guard.

Last year the State Department acknowledged that Blackwater had been involved in significantly more shootings per convoy mission than DynCorp and Triple Canopy, which provide security for the State Department outside Baghdad.

The shooting death of the bodyguard for the Iraqi vice president in 2006 rankled the Iraqi government well before last September's shooting. An off-duty Blackwater guard who American and Iraqi officials said had been drinking heavily was the sole suspect. The off-duty Blackwater guard, Andrew J. Moonen, who no longer works for the company and who is a former Army paratrooper, is now under criminal investigation by federal prosecutors in Seattle. Although Mr. Moonen has not been charged, his lawyer, Stewart Riley of Seattle, said that he had recently been in contact about the case with prosecutors from the United States Attorney's Office in Seattle.

People familiar with the case said they believed that the Justice Department had recently concluded that it had found a way to skirt some of the jurisdictional problems that in the past made it difficult to bring charges in American courts for crimes committed by contractors in Iraq.

"I think they may come to a decision on what to do with this case in the next three or four months," said one person familiar with the matter. Mr. Riley says that Mr. Moonen maintains his innocence in the shooting.

In addition, a wrongful death lawsuit against Blackwater filed by the families of four Blackwater guards killed in Falluja, Iraq, in 2004 - an event that prompted the first major battle in Falluja between the American military and insurgents that year - is also still pending.

A federal appeals court is expected to rule this year on whether the families can proceed with their lawsuit or be forced into arbitration with Blackwater, an outcome the company prefers, according to the families' lawyer, Daniel Callahan of California.

Donna Zovko of Cleveland, the mother of Jerko Gerald Zovko, one of the Blackwater guards, says Blackwater has stonewalled the families.

"It is 1,501 days since he was killed, and I don't know one-tenth of what happened to him, and no one seems to care," Mrs. Zovko said in an interview.

Given so many headlines about his company, Mr. Prince until recently seemed eager to tell his side of the story, and there were reports that he planned to write a book. But on Friday, Anne Tyrrell, a Blackwater spokeswoman, said Mr. Prince's book project had been put on hold.

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