Two former Blackwater employees say they have new evidence that the company may have overbilled the federal government more than $300 million for security services in Iraq and Afghanistan.

They cite a report from an outside auditor who says Blackwater executives and State Department officials withheld critical information from him - including allegations of bribing foreign officials.

The former employees are suing the Moyock, N.C.-based company, now known as Xe Services, for alleged contract fraud. They filed papers in federal court in Alexandria this week citing an audit performed in 2008 for the State Department's inspector general.

David Cotton, the accountant who oversaw the audit, is expected to testify in the fraud trial, which is scheduled to begin July 25.

In a declaration filed with the court, Cotton said, "We determined that, due to significant deficiencies in Blackwater's internal accounting controls, it was not possible to conclude that the State Department was being correctly billed by Blackwater."

He also said Blackwater executives and State Department officials withheld critical information from the audit team, including reports from Blackwater employees that the company was intentionally overbilling the government and bribing foreign officials.

The company has been paid more than $1 billion for protecting U.S. diplomats in war zones.

Cotton said company executives told him their contract exempted them from timekeeping requirements that are normally imposed on contractors to assure that the government does not overpay for labor.

"We were not persuaded that these arguments had merit," he said.

Melan and Brad Davis, a married couple who both once worked for Blackwater, are suing the company on behalf of the government under the False Claims Act, a law that allows plaintiffs to collect triple damages upon successfully proving fraud.

Their attorney, Susan Burke, filed Cotton's statement in an effort to get Blackwater founder Erik Prince reinstated as a defendant in the case. Prince was dismissed as a defendant last month by U.S. District Judge T.S. Ellis III.

The audit clearly "put Mr. Prince on notice that his company may be overbilling for labor - in an amount in excess of $300 million," the Davises allege.

They say Prince also was aware of attempted obstruction of justice by Andrew Howell, Blackwater's general counsel at the time. They cite testimony from Joseph Yorio, Blackwater's president in 2009 and 2010, that he called Prince in 2009 and reported that Howell had tried to get him to falsify a letter to mislead government investigators.

Howell and four other former Blackwater executives are awaiting trial on federal firearms charges in North Carolina.

Prince sold the company in December and now lives in Abu Dhabi.

Xe's attorneys have not yet responded to the Davises' latest allegations.

Bill Sizemore, (757) 446-2276, bill.sizemore@pilotonline.com

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Document: Motion filed in case

http://hamptonroads.com/2011/07/suit-blackwater-may-have-overbilled...

Motion for Reconsideration

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Court filing seeking to have Blackwater founder Erik Prince reinstated as a defendant in an upcoming fraud trial

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