The Nation has a good article on the Blackwater lawsuit that is slowly working its way through the court system. In Blood Is Thicker Than Blackwater, Jeremy Scahill describes actions by a company that is the worst fear by many opposing privatization (did someone mention CusterBattles?).

When firms act like this, as Blackwater is alleged to have done, it not only taints the industry but also the United States. As an interview in the movie Shadow Company demonstrates, Stephen "Scott" Helvenston, Mike Teague, Jerko Zovko and Wesley
Batalona were attacked not because they were contractors or because they might have been military, but because they were thought to be CIA by the locals. While Americans tend to see contractors as independent operators, others see them as extensions, or a part of, the US Government (USG). The thousand or so deaths in Fallujah that were a direct result of the alleged failure of Blackwater to protect its men and the international coverage had tremendous impact on the image of the United States. Blackwater didn’t take the hit and in fact may have gained value from it (this is not to suggest it was intentional or even desired publicity). For the United States, this is image management and public diplomacy by proxy without recourse or management.

Below are some the highlights from the article.

According
to former Blackwater officials, Blackwater, Regency and ESS were
engaged in a classic war-profiteering scheme. Blackwater was paying its
men $600 a day but billing Regency $815, according to the Raleigh News
and Observer. "In addition," the paper reports, "Blackwater billed
Regency separately for all its overhead and costs in Iraq." Regency
would then bill ESS an unknown amount for these services. Kathy Potter
told the News and Observer that Regency would "quote ESS a price, say
$1,500 per man per day, and then tell Blackwater that it had quoted ESS
$1,200." ESS then contracted with Halliburton subsidiary KBR, which in
turn billed the government an unknown amount of money for the same
security services, according to the paper. KBR/Halliburton refuses to
discuss the matter and will not confirm any relationship with ESS.

All this was shady enough–but the real danger for Helvenston and the others lay in Blackwater’s decision to cut corners to make even more money. The original contract between Blackwater/Regency and ESS, obtained by The Nation, recognized that "the current threat in the Iraqi theater of operations" would remain "consistent and dangerous," and called for a minimum of three men in each vehicle on security missions
"with a minimum of two armored vehicles to support ESS movements." [Emphasis added.]

But on March 12, 2004, Blackwater and Regency signed a subcontract, which specified security provisions identical to the original except for one word: "armored." Blackwater deleted it from the contract.

"When they took that word ‘armored’ out, Blackwater was able to save $1.5 million in not buying armored vehicles, which they could then put in their pocket," says attorney Miles. "These men were told that they’d be operating in armored vehicles. Had they been, I sincerely believe that they’d be alive today. They were killed by insurgents literally walking up and shooting them  with small-arms fire. This was not a roadside bomb, it was not any other explosive device. It was merely small-arms fire, which could have been repelled by armored vehicles."

On March 30, 2004, Helvenston, Teague, Zovko and Batalona left Baghdad on the ESS security mission. The suit alleges that there were six guards available that day, but McQuown intervened and ordered only the four to be sent. The other two were kept behind at Blackwater’s Baghdad facility to perform clerical duties. A Blackwater official later boasted, the suit says, that they saved two lives by not sending all six men….

The four men were, in fact, working under contracts guaranteeing that they would travel with a six-person team.

…they
charge that Blackwater knowingly refused to provide guaranteed
safeguards, among them: They would have armored vehicles; there would be
three men in each vehicle–a driver, a navigator and a rear gunner; and
the rear gunner would be armed with a heavy automatic weapon, such as a
"SAW Mach 46," which can fire up to 850 rounds per minute, allowing the
gunner to fight off any attacks from the rear. "None of that was true,"
says attorney Callahan. Instead, each vehicle had only two men and far
less powerful "Mach 4" guns, which they had not even had a chance to
test out. "Without the big gun, without the third man, without the
armored vehicle, they were sitting ducks," says Callahan.

…Without a detailed map, they took the
most direct route, through the center of Falluja. According to Callahan,
there was a safer alternative route that went around the city, which the
men were unaware of because of Blackwater’s failure to conduct a "risk
assessment" before the trip, as mandated by the contract…

Attorney Marc Miles says that shortly after the suit was filed, he asked the court in North Carolina for an "expedited order" to depose John Potter. The deposition was set for January 28, 2005, and Miles was to fly to Alaska, where the Potters were living. But three days before the deposition, Miles says, "Blackwater hired Potter up, flew him to
Washington where it’s my understanding he met with Blackwater representatives and their lawyers. [Blackwater] then flew him to Jordan for ultimate deployment in the Middle East," Miles says. "Obviously they concealed a material witness by hiring him and sending him out of the country."…Blackwater subsequently attempted to have Potter’s deposition order dissolved, but a federal court said no….

Blackwater has not offered a rebuttal to the specific allegations made by the families, except to deny in general that they are valid. It has fought to have the case dismissed on grounds that because Blackwater is servicing US armed forces it cannot be sued for workers’ deaths or injuries and that all liability lies with the government. In its motion
to dismiss the case in federal court, Blackwater argues that the families of the four men killed in Falluja are entitled only to government insurance payments. That’s why the company moved swiftly to apply for benefits for the families under the Defense Base Act.

"What Blackwater is
trying to do is to sweep all of their wrongful conduct into the Defense
Base Act," says Miles. "What they’re trying to do is to say, ‘Look–we
can do anything we want and not be held accountable. We can send
our men out to die so that we can pad our bottom line, and if anybody
comes back at us, we have insurance.’ It’s essentially insurance to
kill."

In the end, Scahill notes President Bush mocks the question of private security companies. It is incredible, but unfortunately not surprising, that the President does not have an answer on how such a large number of people (to call them a group would imply some sort of larger unity) that has direct impact on our public diplomacy and foreign policy is regulated or controlled.