Blackwater Probe Stifled by Conflicts

Associated Press (2007-11-26) Richard Lardner

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By RICHARD LARDNER – November 26, 2007

WASHINGTON (AP) — The State Department's acerbic top auditor wasn't happy when Justice Department officials told one of his aides to leave the room so they could discuss a criminal investigation of Blackwater Worldwide, the contractor protecting U.S. diplomats in Iraq.

The episode reveals the badly strained relationship between Bush administration officials over the probe into whether Blackwater smuggled weapons into Iraq that could have gotten into insurgents' hands.

As a result of the bureaucratic crosscurrents between State's top auditor and Justice, the investigation has been bogged down for months.

A key date was July 11, when Howard Krongard, State's inspector general, sent an e-mail to one of his assistant inspector generals, telling him to "IMMEDIATELY" stop work on the Blackwater investigation. That lead to criticisms by Democrats that Krongard has tried to protect Blackwater and block investigations into contractor-related wrongdoing in Iraq.

"Instead of cooperating, Mr. Krongard apparently created a series of obstacles to the inquiry," said Rep. Henry Waxman, D-Calif., chairman of the House Oversight and Government Reform Committee examining Krongard's performance as the State Department official responsible for stamping out waste, fraud and abuse.

Krongard, whose credibility was damaged by the recent disclosure that his brother had a business affiliation with Blackwater, has disputed the charge, though he recused himself from Blackwater matters after the potential conflict of interest emerged.

His aide, Terry Heide, who was kicked out of the July 31 meeting, also says she's been unfairly blamed for slowing the Blackwater probe. Her role was to collect State Department documents for the investigators - a job she did well, according to her lawyer. But even Krongard's own staff saw her as a hindrance.

Brian Rubendall, a senior State Department investigator, has questioned the halt in the inquiry, telling the oversight committee in an October interview that there was no justifiable "reason for us to stop that investigation. None."

Krongard said he put the brakes on because he was concerned a separate audit of Blackwater contracts might "contaminate" the Justice Department's work.

Blackwater has called the smuggling allegations baseless. However, earlier this year two former Blackwater employees pleaded guilty to possession of stolen firearms that were shipped in interstate or foreign commerce. They are cooperating with federal agents. Blackwater said the two were fired after it was learned they were stealing from the company.

Altogether, the trail of internal e-mails, testimony from a Nov. 14 oversight hearing and interviews with participants form a picture of bureaucratic infighting with consequences far beyond Washington.

The State Department's role in the Blackwater weapons probe began months before the Sept. 16 Baghdad shootings by Blackwater guards that killed 17 Iraqis and escalated public scrutiny of the company.

In March, Ron Militana, a special agent in the investigations unit, received Rubendall's approval to interview State Department personnel and meet with Blackwater attorneys about allegations the company was illegally transporting arms into Iraq. Militana also discussed potential criminal proceedings in the case with a federal prosecutor.

In late June, John De Dona, then chief of the IG's investigative unit, e-mailed Krongard and his deputy, William Todd, to alert them to the probe. Krongard responded cryptically: "Please do not treat anything in the e-mail below as having been seen by me, advised to me, or understood or approved by me. If there is something significant in the message below, please come and tell me about it."

Two weeks later, as Militana was trying to obtain copies of Blackwater contracts from the department's Bureau of Diplomatic Security, De Dona sent another message to Krongard telling him of Militana's work.

In a July 11 e-mail to De Dona, Krongard told him Militana was to "IMMEDIATELY" stop the work. Krongard said he wanted a briefing from the U.S. Attorney's office in North Carolina on its Blackwater investigation before his agents went farther.

Waxman and other critics say Howard Krongard's order to halt came at the same time Blackwater CEO Erik Prince was considering whether to offer his brother, Alvin "Buzzy" Krongard, a spot on the company's newly forming advisory board.

On July 26, Prince invited Alvin Krongard to join Blackwater's advisory board. A week later, Robert Higdon, chief of the criminal division in the U.S. Attorney's office for the eastern district of North Carolina, and James Candelmo, Higdon's deputy, were in Washington for the July 31 meeting with Krongard and his investigators.

Blackwater is based in Moyock, N.C.

Howard Krongard initially said his brother had no ties to Blackwater. But during the Nov. 14 oversight hearing, he recused himself from inquiries related to the company, explaining that Alvin Krongard had just told him he had attended an advisory board meeting. Alvin Krongard resigned from the board two days later because of the uproar the arrangement created.

While Democrats claimed a glaring conflict of interest, Krongard said he pulled his staff off the Blackwater probe so they wouldn't step on work being done by Stuart Bowen, the special inspector general for Iraq reconstruction.

Bowen had sought help from Krongard's office to audit two Blackwater contracts — the same ones Militana was helping the U.S. Attorney's office examine, according to Krongard, who said alarms went off when he realized the potential overlap.

"To be assisting a criminal investigation into the exact same two contracts that we were already assisting a civil audit into, raised a question of parallel proceedings, which needed to be deconflicted before one infected or contaminated the other," he said.

Krongard did not say what the contracts are for or give their value. The State Department pays Blackwater and two other firms $570 million a year for security services.

In a deposition to the oversight committee, Todd, the deputy inspector general, supported Krongard. "We had basically several of the same organizations looking at the exact same stuff," Todd said.

But Waxman rejected the rationale. "You halted an investigation, demanded a personal briefing from the Justice Department, (and) assigned your congressional affairs director to keep tabs on the investigation," Waxman said to Krongard at the hearing. Waxman called the moves "highly unorthodox."

Heide, the congressional affairs director Krongard called his "alter ego," was collecting the documents needed by Bowen and the U.S Attorney's office, e-mails show.

But members of Krongard's own staff, along with Higdon and Candelmo of the U.S. attorney's office in North Carolina, saw her as a roadblock. Rubendall told the committee Candelmo and Higdon planned in advance to raise grand jury information during the July 31 meeting in order to force Heide out of the room.

"We weren't going to discuss grand jury material, but that was the ruse that they were going to use to get her out of the meeting," Rubendall said.

Heide referred questions to her attorney, David Laufman, who said an e-mail exchange between Krongard and Heide indicated she was doing as directed.

"I am trying to stay only situationally aware," she wrote Aug. 8, "so I can keep any conflicts at bay."

According to Waxman, the problems hampering the Blackwater probe persist. Justice investigators have been unable to get needed documents. Militana has not been allowed to give his full attention to the criminal investigation even though Krongard said he would.

"I think that the State Department is responsible for investigating crimes perpetrated against the State Department," Militana said in an October interview with the committee. "The (Justice Department) can do it, of course, but there has to be some involvement by the State