Washington Post Staff Writer

Thursday, February 11, 2010; 9:47 AM

Two former employees of Blackwater Worldwide have accused the private security contractor of defrauding the government for years with phony billing, including charging for a prostitute, alcohol and spa trips.

In newly unsealed court records, a husband and wife who once worked for Blackwater said they had personal knowledge of the company falsifying invoices, double-billing federal agencies and charging the government for personal and inappropriate items whose real purpose was hidden. They said they witnessed "systematic" fraud on the company's security contracts with the State Department in Iraq and Afghanistan, and with the Department of Homeland Security and Federal Emergency Management Agency in Louisiana after Hurricane Katrina.

After the terrorist attacks of Sept. 11, 2001, Blackwater rose to become the largest of the State Department's private security contractors and has since been paid billions of dollars to protect diplomatic employees in Iraq and Afghanistan and for other agencies' security missions. The company became a major source of anti-American sentiment in Iraq because of repeated, deadly shootings involving its guards. Iraq moved to expel Blackwater after a September 2007 incident, in which witnesses told the FBI that the company's guards shot without provocation into a busy intersection, resulting in the deaths of 17 Iraqis.

The company last year changed its name to Xe Services LLC. A spokesperson could not be reached for comment late Wednesday.

Brad and Melan Davis worked in various Blackwater locations. Brad Davis, a former Marine, served as a team leader and security guard, including in Iraq. His wife, Melan Davis, worked as a finance and payroll employee, starting in Louisiana. They have filed their allegations that Blackwater defrauded the government as part of a false claims lawsuit, which allows whistleblowers to win a portion of any public money that the government recovers as a result of the information. However, the Justice Department has chosen not to join them in pursuing their civil suit, a decision that led to the Davises' claims being unsealed this week in a Virginia federal court.

The Davises assert that Blackwater officials kept a Filipino prostitute on the company payroll for a State Department contract in Afghanistan, and billed the government for her time working for Blackwater male employees in Kabul. The alleged prostitute's salary was categorized as part of the company's "Morale Welfare Recreation" expenses, they said.

Melan Davis said that while working in Blackwater's finance department, she questioned how Blackwater could bill the government for its workers' travel expenses to and from Iraq when it lacked the documentation for those trips. She said in court papers that she later traveled to a hotel in Amman, Jordan, where Blackwater personnel were often housed en route to Iraq. She said that while there, she and two co-workers spent numerous hours generating reams of false invoices for plane travel at inflated rates, so that her Blackwater bosses could overcharge the government for the travel.

In one instance, the Davises claimed the company was paying inflated prices to a vendor whose work was billed to the Department of Homeland Security for services related to post-Hurricane Katrina security. They said the overpayments allowed the vendor to provide a barbecue pit grill for Blackwater staff parties.

Melan Davis argues that Blackwater terminated her in February 2008 as a result of her questioning fraudulent billing. Brad Davis resigned.