HOUSE COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM HOLDS A HEARING ON PRIVATE SECURITY CONTRACTING IN IRAQ AND AFGHANISTAN

OCTOBER 2, 2007

SPEAKERS:

REP. HENRY A. WAXMAN, D-CALIF. CHAIRMAN

REP. TOM LANTOS, D-CALIF. 

REP. EDOLPHUS TOWNS, D-N.Y. 

REP. PAUL E. KANJORSKI, D-PA. 

REP. CAROLYN B. MALONEY, D-N.Y. 

REP. ELIJAH E. CUMMINGS, D-MD. 

REP. DENNIS J. KUCINICH, D-OHIO 

REP. DANNY K. DAVIS, D-ILL. 

REP. WILLIAM LACY CLAY, D-MO. 

REP. DIANE WATSON, D-CALIF. 

REP. STEPHEN F. LYNCH, D-MASS. 

REP. CHRIS VAN HOLLEN, D-MD. 

REP. BRIAN HIGGINS, D-N.Y. 

DEL. ELEANOR HOLMES NORTON, D-D.C.

REP. PAUL W. HODES, D-N.H. 

REP. CHRISTOPHER S. MURPHY, D-CONN. 

REP. BRUCE BRALEY, D-IOWA

REP. PETER WELCH, D-VT.

REP. JOHN YARMUTH, D-KY. 

REP. BETTY MCCOLLUM, D-MINN. 

REP. JIM COOPER, D-TENN. 

REP. JOHN SARBANES, D-MD. 

REP. JOHN F. TIERNEY, D-MASS.

REP. THOMAS M. DAVIS III, R-VA. RANKING MEMBER 

REP. DAN BURTON, R-IND. 

REP. CHRISTOPHER SHAYS, R-CONN. 

REP. JOHN M. MCHUGH, R-N.Y. 

REP. JOHN L. MICA, R-FLA. 

REP. MARK SOUDER, R-IND. 

REP. TODD R. PLATTS, R-PA. 

REP. CHRIS CANNON, R-UTAH 

REP. JOHN J. "JIMMY" DUNCAN JR., R-TENN. 

REP. MICHAEL R. TURNER, R-OHIO 

REP. DARRELL ISSA, R-CALIF. 

REP. KENNY MARCHANT, R-TEXAS 

REP. LYNN WESTMORELAND, R-GA. 

REP. PATRICK T. MCHENRY, R-N.C. 

REP. VIRGINIA FOXX, R-N.C. 

REP. BRIAN P. BILBRAY, R-CALIF. 

REP. BILL SALI, R-IDAHO

REP. JIM JORDAN, R-OHIO

REP. JAN SCHAKOWSKY, D-ILL.

WITNESSES:

ERIK PRINCE

CEO, 

BLACKWATER USA

SPECIAL ADVISER TO THE SECRETARY OF STATE AND 

COORDINATOR FOR IRAQ AMBASSADOR DAVID M. SATTERFIELD

AMBASSADOR RICHARD J. GRIFFIN, 

ASSISTANT SECRETARY OF STATE, 

BUREAU OF DIPLOMATIC SECURITY,

DIRECTOR,

OFFICE OF FOREIGN MISSIONS, 

DEPARTMENT OF STATE

WILLIAM H. MOSER, 

DEPUTY ASSISTANT SECRETARY OF STATE FOR 

LOGISTICS MANAGEMENT, 

DEPARTMENT OF STATE

[*]

WAXMAN: The meeting of the committee will come to order. 

Over the past 25 years, a sophisticated campaign has been waged to privatize government services. The theory is that corporations can deliver government services better and at a lower cost than the government.

Over the last six years, this theory has been put into practice. The result is that privatization has exploded. For every taxpayer dollar spent on federal programs, over 40 cents now goes to private contractors. Our government now outsources even the oversight of the outsourcing.

At home, core government functions like tax collection and emergency response have been contracted out.

Abroad, companies like Halliburton and Blackwater have made billions performing tasks that used to be done by our nation's military forces.

What's been missing is a serious evaluation of whether the promises of privatizing are actually realized. Inside our government, it has become an article of faith that outsourcing is best.

Today, we're going to examine the impact of privatization on our military forces. We will focus on a specific example: the outsourcing of military functions to Blackwater, a private military contractor, providing protective services to U.S. officials in Iraq. 

We will seek to answer basic questions: Is Blackwater a private -- Is Blackwater, a private military contractor, helping or hurting our efforts in Iraq? Is the government doing enough to hold Blackwater accountable for alleged misconduct? And what are the costs to the federal taxpayers?

I want to thank Erik Prince, Blackwater's founder and CEO, for his cooperation in this hearing. 

As a general rule, children from wealthy and politically connected families no longer serve in the military. Mr. Prince is an exception. He enlisted in the Navy in 1992 and joined the Navy SEALs in 1993, where he served for four years.

WAXMAN: And we thank you for that service. 

In 1997, he saw an opportunity to start his own company and created Blackwater. And he has said, quote, "We're trying to do for the national security apparatus what FedEx did for the postal service," end quote. 

There may be no federal contractor in America that has grown more rapidly than Blackwater over the last seven years. 

In 2000, Blackwater had just $204,000 in government contracts. Since then, it has received over a billion dollars in federal contracts. More than half of these contracts were awarded without full and open competition. 

Privatizing is working exceptionally well for Blackwater. The question for this hearing is whether outsourcing to Blackwater is a good deal for the American taxpayer, whether it's a good deal for the military and whether it's serving our national interest in Iraq.

The first part of that question is cost. We know that sergeants in the military generally cost the government between $50,000 to $70,000 per year. We also know that a comparable position at Blackwater costs the federal government over $400,000: six times as much. 

Defense Secretary Gates testified about this problem last week. He said Blackwater charges the government so much, that it can lure highly trained soldiers out of our forces to work for them. He is now taking the unprecedented step of considering whether to ask our troops to sign a noncompete agreement to prevent the U.S. military from becoming a taxpayer-funded training program for private contractors. 

There also serious questions about Blackwater's performance. The September 16th shooting that killed at least 11 Iraqis is just the latest in the series of troubling Blackwater incidents. 

WAXMAN: Earlier this year, our committee examined the company's mistakes in Fallujah, where four contractors were killed and their bodies burned. That incident triggered a major battle in the Iraq war.

New documents indicate that there have been a total of 195 shooting incidents involving Blackwater forces since 2005. Blackwater's contract says the company is hired to provide defensive services, but in most of these incidents, it was Blackwater forces who fired first.

We have also learned that 122 Blackwater employees, one-seventh of the company's current workforce in Iraq, have been terminated for improper conduct. 

We have the best troops in the world. The men and women in our armed forces are extraordinarily able and dedicated. Their pay does not reflect their value, but they don't complain. So I have a high bar when I ask whether Blackwater and other private military contractors can meet the performance standards of our soldiers.

In recent days, military leaders have said that Blackwater's missteps in Iraq are going to hurt us badly.

One senior U.S. military official said, Blackwater's actions are creating resentment among Iraqis that, quote, "may be worse than Abu Ghraib," end quote.

If these observations are true, they mean that our reliance on a private military contractor is backfiring.

The committee's investigation raises as many questions about the State Department's oversight of Blackwater as it does about Blackwater itself. 

On December 24th, 2006, a drunken Blackwater contractor shot the guard of the Iraqi vice president. This didn't happen out on a mission protecting diplomats. It occurred inside the protected green zone. 

If this had happened in the United States, the contractor would have been arrested and a criminal investigation launched. If a drunken U.S. soldier had killed an Iraqi guard, the soldier would have faced a court-martial. 

But all that has happened to the Blackwater contractor is that he has lost his job. 

The State Department advised Blackwater how much to pay the family to make the problem go away, and then allowed the contractor to leave Iraq just 36 hours after the shooting. 

Incredibly, internal e-mails document a debate over the size of the payment. The charge d'affaires recommended $250,000 payment, but this was cut to $15,000 because the Diplomatic Security Service said Iraqis would try to get themselves killed for such a large payout.

Well, it's hard to read these e-mails and not come to the conclusion that the State Department is acting as Blackwater's enabler.

If Blackwater and other companies are really providing better service at a lower cost, the experiment of privatizing is working. But if the costs are higher and performance is worse, then I don't understand why we're doing this. It makes no sense to pay more for less.

We will examine this issue today. And facts, not ideology, need to guide us here.

Yesterday, the FBI announced that it launched a criminal investigation into Blackwater's actions on September 16th. This morning, the Justice Department sent a letter to the committee asking that in light of this development, the committee not take testimony at this time about the events of September 16th.

WAXMAN: Our precedent on this committee is that Congress has an independent right to this information. But in this case, Ranking Member Davis and I have conferred and we have agreed to postpone any public discussion of this issue as we work with the department to obtain the information that the committee lacks. 

For the same reason, at the request of the Justice Department, I'll ask our witness Mr. Prince and our State Department witnesses on the second panel not to discuss the September 16th incident in this public setting today.

The last point I want to make is directed to the families of the Blackwater employees killed in Fallujah and the families of the soldiers killed in a tragic and unnecessary accident with Blackwater airlines, so of whom are here today. I know many of you believe that Blackwater has been unaccountable to anyone in our government. I want you to know that Blackwater will be accountable today. We'll be asking some tough questions about the (inaudible) actions. 

And I also want to assure Mr. Prince that we will be fair. 

And we will not tolerate any demonstrations or disturbances from anyone attending this hearing. 

Thank you and I am looking forward to Mr. Prince 's testimony. 

I want to recognize the ranking member, Mr. Davis.

T. DAVIS: Thank you, Mr. Waxman. 

Security contractors have been working U.S. diplomatic posts for more than 20 years. But their extensive use in the midst of ongoing military conflict raises important new questions about the ability of government acquisition officials to manage and oversee those contracts, the vetting and training of security personnel, and how best to control and coordinate private security firms in a complex, highly dangerous battlespace. 

Contracts for the use of force in war also pose legitimate questions about the propriety of hiring private firms to perform such a public -- some would say inherently governmental -- function. But those complex questions won't be addressed responsibly by fixating on the operations of any one company, nor are we likely to learn much by focusing on one sensational incident still under investigation. 

So we appreciate Chairman Waxman agreeing to add testimony from State Department witnesses today. They will discuss overall management of the competitively worldwide personnel protective services contract under which Blackwater and two other firms provide security services in Iraq. 

And we take the chairman at his word there will be additional hearings through examine the broader range of important oversight issues implicated in the use of security contractors in hostile environments. 

Contractor personnel working in support of diplomatic and military activities abroad have become (ph) an inescapable fact of modern life. Today, they provide everything from logistics and engineering services to food preparation, laundry, housing, construction and, of course, security.

T. DAVIS: They offer invaluable surge capacity and contingent capabilities federal agencies can't afford to keep in-house. By some estimates, the number of private contractors now exceeds total U.S. military personnel in Iraq.

But the presence of so many foreigners, particularly so many with guns, offends some Iraqis and gives others a pretext to incite mistrust and violence. To paraphrase the title of one recent study, "The Phenomena," Iraqis fear they can't live with private security contractors; U.S. personnel believe they can't live without them.

So it's critical the Departments of State and Defense get it right when they contract for sensitive security services in someone else's sovereign territory.

However you define success in Iraq, from stay the course to immediate withdrawal and every scenario in between, security contractors are going to play an integral part. The inevitable redeployment of U.S. military units out of the current urban battlespace will only increase the need for well-trained and well- managed private security forces to fill that vacuum and protect diplomatic and reconstruction efforts.

As the lead editorial of this morning's Washington Post concluded, "It is foolish to propose the elimination of private security firms in Iraq and Afghanistan, at least in the short term." 

Contract documents and incident reports reviewed by the committee suggest the State Department is trying to get it right. There's clear evidence of proactive management and oversight of security contractors in Iraq. The State Department requires specific qualifications and rigorous ongoing training for all contract security personnel, including extensive prior security experience and firearms proficiency.

Those hired must also undergo background investigations and qualify for a security clearance. And the contract contains carefully crafted comprehensive provisions on standards of conducts for security personnel, strict rules for the use of any type of force and extensive reporting requirements when any incident occurs.

But State Department oversight of security contractors seems to have some blind spots, as well. 

There's little aggregate or comparative data on contractor performance, so it's impossible to know if one company's rate of weapons-related incidents is the product of a dangerous cowboy culture or the predictable result of conducting higher-risk missions.

And incidents of erratic and dangerous behavior by security personnel from all the companies involved, not just Blackwater, are handled with little or no regard to Iraqi law.

T. DAVIS: Usually the bad actor is simply whisked out of the country, whether the offense is a civilian casualty, negligent discharge of a weapon, alcohol or drug abuse, or destruction of property.

To date, there has not been a single successful prosecution of a security provider in Iraq for criminal misconduct. 

Iraqis, understandably, resent our preaching about the rule of law when so visible an element of the U.S. presence there appears to be above the law.

That's why the events of September 16th sparked such an outcry by the Iraqi government, which sees unpunished assaults on civilians as a threat to national sovereignty.

The incident is also being used by those seeking to exploit accumulated resentments and draw attacks on private contractors, a force even the Iraqi government concedes is still a vital layer of security.

Given that volatile environment, we should take care not to prejudge the ongoing investigations into events of that day. 

Published eyewitness statements provide very contradictory accounts, but this much we know. Standard operating procedures for personnel security details dictate getting protected persons in U.S. vehicles away from an incident as quickly as possible. No one stays to secure the scene or to help frightened civilians; that's not their job. So we may never know who or how many shot first. In the time it takes to hide an AK-47, murderous insurgents and corrupt Iraqi police can be transformed into martyred civilians. 

We need to look at the proper role of security contractors in a war zone, not through the clouded lens of one company or one uncertain incident, but with a clear-eyed, objective view of what best serves the interests of U.S. personnel in-theater and U.S. taxpayers at home.

I look forward to that discussion.

WAXMAN: Thank you very much, Mr. Davis.

While the rules do not provide opening statements for all members at a hearing, Mr. Davis and I have consulted about this, and I'd like to ask unanimous consent that we have four members on each side, designated by the chairman and the ranking member, to be permitted to give a two-minute statement.

When we begin the questioning, we will begin with 10 minutes controlled by the chairman and 10 minutes controlled by the ranking member.

And I'd further like to ask unanimous consent that Jan Schakowsky be permitted -- who is not a member of this committee, be permitted to join us at this hearing today.

Is there any objection to this unanimous consent request? If not, that will be the order.

I'd like to now call on for two minutes -- it would be Mr. Tierney for his statement.

TIERNEY: Thank you, Mr. Chairman.

Mr. Chairman, the fundamental question here ought to be whether or not it makes sense to contract out in the first place. We really need to reevaluate our use of private military contractors to determine what roles are appropriate or not for private firms and what must be kept in control of those in uniform or those in public service.

You know, the all-voluntary professional force after the Vietnam War employed the so-called Abrams' doctrine. The idea was that we wouldn't go to war without the sufficient backing of the nation.

Outsourcing has circumvented this doctrine. It allows the administration to almost double the force size without any political price being paid. 

We have too few regular troops, and if we admitted that and tried to put in more, the administration would have to admit it was wrong in the way it prosecuted this war originally; it would have to recognize the impact on drawing forces out of Afghanistan.

It would call up even more National Guard or Reservists. Then it would cause even more of a protect among people in this country that are already not sold on the Iraq venture.

And if we relied more on our allies, they would have had to share the power, share the decision-making and share the contract work.

So, private contractors have allowed, essentially, this administration to add additional forces without paying an political capital. 

Very little conversation goes into the number of people dedicated to their jobs in the private sector that are being killed or injured on a regular basis. Figures by one account are some nine individuals a week losing their lives in the service of private contracting that are not counted in the figures of casualties reported to the American people.

Outsourcing, as you indicated, Mr. Chairman, seem to increase the cost, not decrease the cost. And I hope we get into the numbers on that as the hearing goes on. 

It seems to be harming the very counterinsurgency effort that General Petraeus seems to want to implement. 

And we have far too few government managers to oversee the situation. 

We need more accountability. We need to clarify and update our laws. We need to restore the government's ability to manage any such contracts. We need to punish corporations that commit fraud or undermine our security. But basically we need to reconsider which jobs should be private and which jobs should remain in the public sector.

Thank you, Mr. Chairman.

WAXMAN: Thank you, Mr. Tierney.

The chair would now like to recognize Mr. McHenry for two minutes.

MCHENRY: Thank you, Mr. Chairman.

And while we are the investigative committee of Congress, I believe it's irresponsible when an ongoing investigation in the executive branch is trying to establish the facts of the September 16th event that we call before this committee contractors involved with that.

Establishing those facts are included in those two ongoing investigations. And I believe it's irresponsible for us to convict before the executive branch has first established the facts of what did occur with the Blackwater incident in Baghdad.

MCHENRY: Blackwater has protected dozens, if not hundreds, of members of Congress, including myself and members of this committee, when they travel to Afghanistan and Iraq. I, for one, am grateful for their service. Not one single member of Congress has been injured nor killed under Blackwater protection. And for that, I'm grateful.

Let me be clear, we should not speculate on the actions of the men on September 16th. Those facts are not yet established. We need to get the facts on the record on these contradictoring (sic) reports that are coming from media sources.

Much is not clear with conflicting media reports written by reporters who were not present for the events. We do not yet have an authoritative report from the executive branch based on eyewitness accounts.

Today, we should be reviewing the rules of contracting, investigating whether companies are following those rules, the legal ramifications, and whether the system of contracting should be modified and improved. These are the issues that we should be dealing with today.

Patience is a virtue when it comes to investigating something as serious as a loss of human life. And we all abhor the loss of any human life. Justice must be served.

With thousands of soldiers, diplomats and contractors risking their lives in such a dangerous region of the world, we should exercise patience in this process and allow the ongoing investigations to come to a conclusion and establish clear facts before we complicate this process with a knee-jerk congressional hearing.

Let's deal with solid facts, not simply follow the front-page stories and the dictates of trial lawyers, which this committee, it appears, has done over the last nine months.

WAXMAN: Gentleman's time has expired.

MCHENRY: Again, contracting is the liberal cause de jure. And we should move past that and ensure that we have proper government service.

Thank you.

WAXMAN: Ms. Maloney, recognized for two minutes.

MALONEY: Thank you, Chairman Waxman and Ranking Member Davis, for holding today's hearing to examine the heavy reliance upon private security contractors in Iraq and Afghanistan. 

There have been troubling reports about incidents involving Blackwater where Iraqi civilians have been killed, and there have been many, many troubling reports.

Today, we are basically going to examine the privatization of the military. What are the costs and what are the consequences of privatizing our military? 

Blackwater guards are highly trained and, in some cases, have been brave.

MALONEY: Yet they make six times more than our own military. And, coming from a military family, where my father served in World War II and my brother in Vietnam, I do not believe that the Blackwater Guards are any more brave or more committed or more disciplined or more effective than the American armed services.

So our basic question -- mine is -- today, is why are we using this service, contracting out, privatizing our military, to an organization that has been aggressive and, I would say, in some cases, reckless in the handling of their duties?

And there are many questions we have on accountability. And basically, why are we doing this?

We were told that we were going to contract out these security services to save the government money. But, in fact, it is costing significantly more to pay Blackwater than it would for our own military to perform these duties. And their actions have really undermined our effectiveness in Iraq. 

Thank you.

WAXMAN: Your time has expired. 

Mr. Burton, recognized for two minutes.

BURTON: Thank you, Mr. Chairman.

I have no objection to this kind of a hearing. But what really concerns me is that there appears to be a rush to judgment. And I don't think that should happen.

It's going to be thoroughly investigated in Iraq, by Iraqis and American officials. And until we get that, we won't know exactly what happened or who might have made a mistake or who might have done something they shouldn't have done.

And so, while the hearing here is OK, I hope everybody, including the media, will know that this is not the final report on this. There's going to be a complete investigation.

I'd like to give you a few facts. 

There have been 3,073 missions in the last nine months over there by private contractors. And there were 77 involving them using weapons.

There have been 54,000 recorded attacks, 6,000 a month. And there have been a lot of these contractors who have lost their lives.

Since 2004, there have been 42 security contractors killed and 76 have been wounded.

This is a time when we should reevaluate or evaluate the procedures that are being used over there. If we find, after the investigation, there have been errors in judgment or somebody made a downright conscious mistake, then things need to be changed.

I would just like to say one more time, it's important to have these hearings.

BURTON: Congress needs to know what went on over there. But there should not be a rush to judgment. 

I would like to say one other thing. There has not been one Congressman or one public official that's been killed while in -- under the protection of these people. And that should account for something.

With that, Mr. Chairman, I yield back my time.

WAXMAN: Gentlemen's time has expired. 

The chair now recognizes Mr. Cummings.

CUMMINGS: Thank you very much, Mr. Chairman. 

In light of the last statement that was just made, it's not about Blackwater and what they do; that they may have done some good things. The question is is whether there's accountability. 

Blackwater we have to question in this hearing whether it was -- it created a shadow military of mercenary forces that are not accountable to United States government or to anyone else. 

Blackwater appears to have fostered a culture of shoot first and sometimes kill, and then ask the questions. Blackwater has been involved in at least 195 escalation of force incidents since 2005; an average of 1.4 shooting incidents per week. 

We must ask -- we must seriously reassess whether these practices are undermining our ability to accomplish our mission in Iraq. 

We must also reassess how Blackwater not only affects our mission in Iraq, but also how it may negatively affect our foreign relation efforts in the Middle East, these same neighboring states that we need to utilize as vehicles to spare multilateral and bilateral support as to create a political reconciliation in Iraq. 

This is about accountability and I am going to be very interested to hear what Mr. Prince has to say about that accountability.

And with that, Mr. Chairman, I yield back.

WAXMAN: Gentlemen yields back his time. 

The chair recognize Mr. Issa for two minutes.

ISSA: Thank you, Mr. Chairman. 

I think it's been made incredibly clear by the previous statements on the Democrats side that this is not about Blackwater, when they talk about being paid six times as much, when they talk about the president shouldn't have gone into this war, when they talk about, they talk about.

ISSA: What we're hearing today is in fact a repeat of the MoveOn.org attack on General Petraeus' patriotism. 

What we're seeing is that, except for the 79 members who voted against denouncing MoveOn.org, eight of whom are on the dais here today, what we're seeing is what they couldn't do to our men and women in uniform, they'll simply switch targets.

The bodies were not cold in Iraq before this became a story worth going after here in committee.

The second panel today will include people from the State Department who will tell us about the command-and-control rules, about whether or not Blackwater made mistakes, whether they did their job and whether they're going to be continued as a contractor. 

That's appropriate. I'm not here to defend Blackwater. 

But I am here to defend General Petraeus and the men and women in uniform who do their job, who were first denounced by MoveOn.org, then not denounced by members of Congress, many of whom are on the dais today, speaking as though they don't support attacking every possible way the administration's war in Iraq.

We are going to get to the bottom of what happened on September 16th. But, quite frankly, when we're done with that, we're still going to have the same problem, with all due respect to the members on the other side of the aisle. 

We do not want the military guarding State Department personnel. There's a long tradition, in fact, of very limited military guarding of even our embassies, a limited amount of Marines. 

The fact is, the State Department has a surge responsibility in Iraq and Afghanistan. They're meeting it with private contractors. When that ends, do we really want to have 1,500 special ops people working for the State Department in career positions?

I look forward to the debate on that, and not on whether this war was ill-founded, which has been the Democrats' mantra.

WAXMAN: The gentleman's time has expired.

The chair would now turn to Mr. Kucinich for two minutes.

KUCINICH: Mr. Chairman, a British polling agency has determined that more than 1 million Iraqi citizens have died as a result of the Iraq war. Opinion Research Business found that the death rate rose. Almost one in two households in Baghdad have lost a family member since the invasion began in 2003.

KUCINICH: This report confirms the results of a survey released last fall by Lancet, a prestigious medical magazine, which gave a conservative estimate of 650,000 innocent civilian deaths.

Now, this great human tragedy is taking place in many forms. In today's hearing we are investigating Blackwater's outrageous behavior that has killed countless innocent Iraqis. And I'm deeply concerned that the Department of State appears to have attempted to cover up Blackwater's killings rather than seek appropriate remedies.

What are the implications of killing an innocent Iraqi? What is this government's position on the killing of innocent Iraqis by a U.S. citizen? 

If war is privatized, then private contractors have a vested interest in keeping the war going. The longer the war goes on, the more money they make. 

Eighty-four percent of the shooting incidents involving Blackwater are where they fired first, and Blackwater did not remain at the scene. So Blackwater's "shoot first and don't ask questions later" approach undermines the United States' position and jeopardizes the safety of our soldiers. 

How much more do we need to know to conclude that the war against Iraq has been a disaster for the Iraqi people and for the people of this country as well?

I yield back.

WAXMAN: The gentleman yields back the time.

All opening statements have been concluded. 

Mr. Prince ...

(CROSSTALK)

WAXMAN: Oh, excuse me, there is one more.

Mr. Mica for two minutes?

MICA: Thank you.

Well, let me try to frame the context of this hearing. 

Been on the committee for some 15 years. And, you know, from the outset the Democrat side on the majority have tried to discredit the president. In fact, I have a quote from a press release from Chairman Waxman, January 10th.

"As part of President Bush's revised strategy for Iraq, he appears likely to propose giving large sums of taxpayer dollars to decrepit and possibly corrupt state-owned Iraqi companies."

MICA: So, we've started first in this -- in these hearings to try to discredit the president, we've tried to discredit the ambassador, we tried to discredit the secretary of defense, we did a great job in trying to discredit the military here and then we worked on the Iraqi government. So, now that we're down to some of the contractors, so this is the hearing to discredit them. 

And probably one of the reasons why is there's some bad news for the other side. Today at -- it's on page 15 -- it's a 48 percent drop in deaths in Iraq in one month. So, they don't want that good news to get out. 

But on the front page you want the "Other Killings by Blackwater," the contractors we're going after today. 

Now, if they're really intent on going after the contractors, and I don't know what happened on the 16th -- I don't know what happened in other incidents -- but if they're really intent on going after criminal misconduct, then we have a letter from the Department of Justice, we have some words about not interfering in this process.

But we are interfering with both a Department of State investigation and a criminal misconduct investigation -- potentially criminal charges. And let me quote from some of the words: "This presents serious challenges for any potential criminal prosecution." And then they cite case law.

So, my concern, if we really want to do this, we should not be holding this hearing. Therefore, I move that the committee do now adjourn.

WAXMAN: Motion is before us to adjourn.

All those in favor of the motion, say "aye."

Opposed, "no."

The noes have it and the motion is defeated.

We have a witness now and I'd like to call forward Erik Prince , who is the head of The Prince Group, LLC and Blackwater USA.

Mr. Prince , please come forward.

Mr. Prince , it's the practice of this committee that all witnesses take an oath before they testify. If you'd please raise your right hand, do you promise to solemnly swear that the testimony you will give before this committee will be the truth, the whole truth and nothing but the truth?

PRINCE : Yes, sir.

WAXMAN: Thank you. Please be seated.

The record will indicate it that the witness answered in the affirmative.

I do want to say, Mr. Prince , that there have been press reports over the past two weeks, regarding the recent incident on September 16th and there have been conflicting accounts of what actually happened on the ground.

I know that you had prepared to address this incident today, as did our other witnesses and no doubt our members did, too. So, I just want to note that -- for the record that the request to refrain from public comment came from the Justice Department, not Mr. Prince and not from anyone else. And I want to thank him for complying with that Justice Department request.

I know you'd been prepared to talk about, but we would ask you please not to go into that incident.

PRINCE : Yes, sir. I'm more than happy to (inaudible).

WAXMAN: Before you begin, just push the button on the mike.

PRINCE : Is that better?

WAXMAN: Yes, fine.

OK. Please proceed however you see fit.

PRINCE : Chairman Waxman, Congressman Davis, members of the committee, my name is Eric Prince and I am the chairman and CEO of the Prince Group and Blackwater USA. 

Blackwater's a team of dedicated professionals who provide training to America's military and law enforcement communities and risk their lives to protect Americans in harm's way overseas.

Under the direction and oversight of the United States government, Blackwater provides an opportunity for military and law enforcement veterans with a record of honorable service to continue their support to the United States. 

Words alone cannot express the respect I have for these brave men and women who defend -- who volunteer to defend U.S. personnel facilities and diplomatic missions. I am proud to be there to represent them today.

After almost five years in active service as a U.S. Navy SEAL, I founded Blackwater in 1997. I wanted to offer the military and law enforcement communities assistance by providing expert instruction and world-class training venues. Ten years later, Blackwater trains approximately 500 members of the United States military and law enforcement agencies every day.

After 9/11, when the U.S. began its stabilization efforts in Afghanistan and then Iraq, the United States government called upon Blackwater to fill a need for protective services in hostile areas. Blackwater responded immediately. We are extremely proud of answering that call in supporting our country. 

Blackwater personnel supporting our overseas missions are all military and law enforcement veterans, many of whom have recent military deployments. No individual ever protected by Blackwater has ever been killed or seriously injured. There is no better evidence of the skill and dedication of these men.

At the same time, 30 brave men have made the ultimate sacrifice while working for Blackwater and its affiliates. Numerous others have been wounded and permanently maimed. The entire Blackwater family mourns the loss of these brave lives. Our thoughts and our prayers are with their families.

The areas of Iraq in which we operate are particularly dangerous and challenging. Blackwater personnel are subject to regular attacks by terrorists and other nefarious forces within Iraq. We're the targets of the same ruthless enemies that have killed more than 3,800 American military personnel and thousands of innocent Iraqis. 

Any incident where Americans are attacked serves as a reminder of the hostile environment in which our professionals work to keep American officials and dignitaries safe, including visiting members of Congress.

PRINCE : In doing so, more American servicemembers are available to fight the enemy.

Blackwater shares the committee's interest in ensuring the accountability and oversight of contract personnel supporting U.S. operations. 

The company's personnel are already accountable under and subject to numerous statutes, treaties and regulations of the United States. Blackwater looks forward to working with Congress and the executive branch to ensure that any necessary improvements to these laws and policies are implemented. 

The worldwide personnel protection services contract, which has been provided to this committee, was competitively awarded and details almost every aspect of operation and contract performance, including the hiring, vetting guidelines, background checks, screening, training standards, rules of force, and conduct standards.

In Iraq, Blackwater reports to the embassy's regional security officer, or RSO. All Blackwater movements and operations are directed by the RSO. In conjunction with internal company procedures and controls, the RSO ensures that Blackwater complies with all relevant contractual terms and conditions, as well as any applicable laws and regulations.

We have approximately 1,000 professionals serving today in Iraq as part of our nation's total force. Blackwater does not engage in offensive or military missions but performs only defensive security functions.

My understanding of the September 16th incident is that the Department of State and the FBI are conducting a full investigation, but those results are not yet available. We at Blackwater welcome the FBI review announced yesterday, and we will cooperate fully and look forward to receiving their conclusions. 

I just want to put some other things in perspective. 

A recent report from the Department of State stated that in 2007 Blackwater conducted 1,873 security details for diplomatic visits to the red zone, areas outside the green zone in Iraq, and there have been only 56 incidences in which weapons were discharged, or less than 3 percent of all movements.

In 2006, Blackwater conducted over 6,500 diplomatic movements in the red zone. Weapons were discharged in less than 1 percent of those missions.

To the extent there is any loss of innocent life, ever, let me be clear that I consider that tragic. Every life, whether American or Iraqi, is precious. I stress to the committee and to the American public, however, that I believe we acted appropriately at all times. 

I am prepared to answer your questions.

WAXMAN: Thank you very much, Mr. Prince

I'm going to start off with a question.

The issue before us that I see that's important to understand is, we've gone now in a major way to contract out what the government and what the military ordinarily would do.

WAXMAN: Your company started off in the beginning, 2001, with, I think, around -- over $200,000 in government contracts. You now are making over $1 billion a year. That's quite a success. Even if I'm wrong on the exact numbers, it's quite a success.

Now, we're paying a lot of money for privatized military to do the work that our military people have done, and no one does this work better than the U.S. military. They're a very able and brave and courageous people that do a fantastic job for us.

So the question in my mind is, are we paying more and getting less? And in asking that question I want to focus on a particular incident.

That incident received almost no public attention, but involved the tragic loss of three of our troops. And my staff has reviewed the documents describing the incident, and they've prepared a memo, which I'd like, without objection, to make part of the record.

On November 27th, 2004, there was a plane run by Blackwater Aviation that crashed into a wall -- a canyon in the mountains of Afghanistan. 

This plane was carrying three military personnel and -- three active duty U.S. personnel, Lieutenant Colonel Michael McMahon, Chief Warrant Officer Travis Grogan and Specialist Harley Miller. 

About 40 minutes after takeoff, Blackwater 61 crashed into the wall of a canyon and all of the occupants were killed. The crash was investigated by a joint Army and Air Force task force and by the National Transportation Safety Board.

The NTSB report found that Blackwater captain and first officer behaved unprofessionally, were deliberately flying the nonstandard route low through the valley for fun. The report found that the pilots were unfamiliar with the route, deviated almost immediately after takeoff, and failed to maintain adequate terrain clearance.

They also had a transcript of the cockpit voice recording, and on this recording the flight crew joked with each other, saying, "You're an X-wing fighter Star Wars man," and "You're" -- expletive -- "right. This is fun."

WAXMAN: The captain stated, "I swear to God, they wouldn't pay me if they knew how much fun this was," end quote.

Mr. Prince , one allegation raised recently about Blackwater's action is that your contractors have acted irresponsibly. One senior U.S. commander told The Washington Post, quote, "They often act like cowboys," end quote.

Let me ask you about that crash of Blackwater Flight 61. In this case, did Blackwater's pilots act responsibly, or were they, in the words of the U.S. commander, acting like cowboys?

PRINCE : I disagree with the assertion that they acted like cowboys. They -- we provide a very reliable, valuable service to the Air Force and the Army in Afghanistan.

Any time, you have an accident, it's an accident; something could have been done better. 

It is not a Part 135 U.S.-type flying operation. There's no flight services. There's no flight routes. There's no nav aids. It is truly rugged, Alaska-style bush flying.

WAXMAN: Well, the investigator said -- from the National Transportation Safety Board -- that Blackwater Aviation violated its own policies by assigning two pilots without adequate flying experience in Afghanistan.

And, according to the military report, it was your policy, Blackwater policy, that required at least one of the pilots to have flown in-theater for at least a month. But neither pilot had flown for that long and neither had flown the route they were assigned that day.

This is clear in the cockpit voice recording. Right after takeoff, the Blackwater captain said, quote, "I hope I'm going into the right valley."

The first officer replied, "This one or that one?"

The captain then apparently guessed which valley to fly, saying, "I'm just gonna go up this one."

The flight mechanic later observed, "We don't normally go this route."

Why didn't Blackwater follow its own policies and team new pilots with more experienced ones?

WAXMAN: Why did you have two inexperienced pilots together?

PRINCE : I'm not qualified to speak to the experience level of the pilots. 

I will tell you that we are operating under military control. In fact, the aircraft was set to take off with two passengers onboard, and they actually turned around for the lieutenant colonel, who I believe boarded late. 

There was also, it violated -- the military violated its policy by loading both ammunition -- that aircraft was also flying with a large number of illumination mortar rounds, and they're not supposed to mix packs (ph) and cargo, but, again, we followed our customer's instructions. 

Yes, accidents happen. We provided thousands and thousands of flight hours of arrival service since then. Today, still, we're flying more than a thousand missions a month.

WAXMAN: But on that one, the investigators found that Blackwater failed to follow standard precautions to track flights, failed to file a flight plan, failed to maintain emergency communications in case of an accident. And, tragically, these failures may have cost the life of the crash's sole survivor, because one of the military people that you were escorting -- or your flight was escorting, evidently survived for at least 10 hours after the crash. 

He suffered internal injuries, but he got out of the plane to urinate. He smoked a cigarette. He rolled out a sleeping bag. And nobody came. And then he died of cold from inattention. 

There was no way, as required, for anybody to know where that plane had landed, even though that's a requirement.

I have an e-mail that I want to read to you. It was sent on November 10th, 2004, 16 days before the crash. It's from Paul Hooper, Blackwater Afghanistan site manager. And it was sent to John Height (ph), vice president for operations for Blackwater Aviation. 

In it, Mr. Hooper says Blackwater knowingly hired pilots with background and experience shortfalls. Here's what he wrote: "By necessity, the initial group hired to support the Afghanistan operation did not meet the criteria identified in e-mail traffic and had some background and experience shortfalls overlooked in favor of getting the requisite number of personnel onboard to start up the contract."

One of the great ironies of this accident is that while the aircraft was being piloted by an inexperienced Blackwater pilot, a skilled military pilot with an exemplary safety record, Lieutenant Colonel Michael McMahon, was onboard the flight as a passenger.

This is what his widow wrote to me. She is Colonel Jeanette McMahon, and she works at West Point. She said, "Mike, like Mr. Prince , was a CEO of sorts in the military as an aviation commander. And, as such, had amassed a great safety record in his unit. It's ironic and unfortunate that he had to be a passenger on this plane vs. one of the people responsible for its safe operation. 

"Some would say it was simply a tragic accident. But this accident was due to the gross lack of judgment in managing this company."

WAXMAN: Mr. Prince , Colonel McMahon is asking why the taxpayers should be paying your company millions to conduct military transport missions over dangerous terrain when the military's own pilots are better trained and a lot less expensive. How do you respond?

PRINCE : We were hired to fill that void because there is a different -- it's a different kind of airlift mission going in and out of the very short strips in Afghanistan. You have high altitude, short strips, unimproved runways, and you have transport aircraft that are designed to support a large, conventional battle. 

We're doing small missions. Typical cost of payload maxs out at 4,000 pounds; they can't even hold that because of the short altitude -- or the high altitude, short strips they have to go in and out of. Hauling mail, hauling parts, we're filling that gap.

WAXMAN: Are you saying...

PRINCE : Because these strips are too small for C-17s. They're too small for C-130s. They're going in and out of places that the military can't get to with the existing aircraft they have. 

That's why we're doing that mission.

WAXMAN: You're saying that the military could not do this job?

PRINCE : They did not have the assets to do it in-theater or back in the United States, no, sir.

WAXMAN: And they could've acquired those assets, however instead they hired you.

PRINCE : I believe the Congress has seem fit to proceed with some sort of aircraft acquisition program to fill that void going forward. But this is a temporary service to fill that gap.

WAXMAN: Well, we've been in Iraq for five years now. The pilots of Blackwater 61 paid for their errors with their lives, but I'm wondering whether there was any corporate accountability for Blackwater. 

Were any sanctions placed on the company after the investigative reports that were so critical of Blackwater were released?

PRINCE : Any time there's an accident, a company always should be introspective and look back and see what can be done to make sure that doesn't happen again. 

WAXMAN: Well, aside from your introspection, were you ever penalized in any way? Were you ever fined or suspended or reprimanded or placed on probation?

PRINCE : I believe the Air Force investigated the incident and they found that it was pilot error, it was not due to corporate error that caused the problem -- the mistake that had crashed the aircraft.

WAXMAN: Well, my time's up. But the corporation hired inexperienced pilots, they sent them on a route they didn't know about, they didn't even follow your own rules. It seems to me that it's more than pilot error. There ought to be corporate responsibility and Blackwater was the corporation involved.

WAXMAN: Aside from your introspection, you've just been awarded a new contract for almost $92 million. I want to see whether you're getting a stick as well as all these carrots.

Mr. Davis, your turn.

T. DAVIS: Thank you, Mr. Chairman.

Let me just say -- I mean, I think if there's a question, if this should be in or out, if private companies are doing work the Army -- that really ought to be addressed to the Defense Department and State Department. And...

MCHENRY: Mr. Chairman, would you -- Mr. Ranking Member, would you yield for a question?

T. DAVIS: I would.

MCHENRY: Since I wasn't here during the Clinton administration, did Mr. Waxman and this committee investigate Secretary Brown's crash, in which he was killed? That was a military flight -- C-130, I believe. Was that investigated?

T. DAVIS: I wasn't here. I was not here at that point. But I understand the question.

(CROSSTALK)

WAXMAN: That crash was investigated and the gentleman would be able to get the report of that investigation.

T. DAVIS: Let me yield five minutes to the gentleman from North Carolina.

MCHENRY: I thank the ranking member for yielding.

Mr. Prince , can you describe to the committee the nature of your contracts, who your client is in Iraq?

PRINCE : In Iraq we work for the Department of State.

MCHENRY: And what is the service you provide for the Department of State?

PRINCE : We operate under the Worldwide Personal Protective Services contract and we are charged with protecting diplomats, reconstructions officials and visiting CODELs, members of Congress and their staffs.

MCHENRY: And in the last -- in this calendar year, how many missions have you had in Iraq?

PRINCE : Eighteen hundred and seventy-three.

MCHENRY: How many incidents occurred during those 1,873 movements?

PRINCE : Only 56 incidents.

MCHENRY: All right. 

And a movement is a -- for instance, you take a member of Congress lands at the airstrip, they are transported to the embassy -- that's one movement. Is that...

PRINCE : Yes, sir.

MCHENRY: All right. 

And 56 incidents out of 1,873 movements in a war zone, is that correct?

PRINCE : Resulting in the discharge of one of our guys' weapons.

MCHENRY: Those 56 incidents, does that mean that they shot at someone? Describe what an incident is.

PRINCE : Yes. We don't even record all the times that our guys receive fire. The vehicles get shot at on a daily basis, multiple times a day. So that's not something we even record.

In this case, an incident is a defensive measure. You're responding to an IED attack followed by small arms fire. Most of the attacks we get in Iraq complex; meaning it's not just one bad thing, it's a host of bad things: car bomb followed by small arms attack, RPGs followed by sniper fire.

An incident occurs, typically, when our men fear for their life, they're not able to extract themselves from the situation; they have to use sufficient defensive fire to get off the X -- to get off that place where the bad guys have tried to kill Americans that day.

MCHENRY: So, in 1,873 missions, 56 incidents occurred, which means, potentially -- it means the Blackwater individual -- this former soldier, in most cases -- discharges the weapon, perhaps in the air; is that a possibility?

PRINCE : It's not likely into the air. It's either going to be directed at someone that's shooting at us or the -- another real problem, you know, that recent Washington Post theories on IEDs in Iraq -- 81,000 IED attacks.

PRINCE : The bad guys have figured out how to make a precision weapon. You take a car, you pack it with explosives, and you put a suicidal person in there that wants to drive into the back of a convoy and blow themselves up.

MCHENRY: Additional question here. 

So those 56 incidents pretty much all involved returning fire. A caravan is being shot at, for instance, and you would return fire, or a potential car bomb is coming at you and you're returning...

PRINCE : A potential car bomb? Yes. Defensive fire or potential car bombs going -- potentially coming near you -- you have to warn them off. 

There's a whole series on the use-of-force continuum. Our guys are briefed and they abide by. They're briefed on it through their training back here in the United States. 

Every time they leave the wire, every time they launch on that mission, before they go in the morning, they get the mission brief, what they're going to do, who they're protecting, where they're going; the intelligence, what to be on the lookout for, where have there been particularly bad areas in the city; and the use-of-force continuum, those rules of engagement.

MCHENRY: Use-of-force continuum, is that dictated by the Department of State?

PRINCE : Yes.

MCHENRY: And you use their rules of engagement, the commonly used term?

PRINCE : Yes, sir.

MCHENRY: Is that a -- that's similar to the Department of Defense rules of engagement?

PRINCE : Yes. They're essentially the same.

MCHENRY: All right. Now -- OK. 

(CROSSTALK)

PRINCE : Well, sorry, Department of Defense rules for contractors. We do not have the same as a U.S. soldier at all.

MCHENRY: OK. 

And in the report that I have, in 2006 you had 6,254 missions and 38 incidents.

PRINCE : Yes, sir.

MCHENRY: Which means one of the contractors, one of the former soldiers who is now in State Department Protective Service, they returned fire. So that would be less than 1 percent of missions involved returning fire.

Question here: How long has Blackwater been involved in Iraq? How long have you had this contract in Iraq?

PRINCE : We started there first working for DOD under the CPA. And then I believe in '05 it transitioned from CPA over to...

(CROSSTALK)

MCHENRY: How many individuals under your protective service have been injured or killed?

PRINCE : Twenty-seven dead and hundreds wounded.

MCHENRY: How many individuals...

PRINCE : Oh, under our care?

MCHENRY: Under your care, that you were protecting.

PRINCE : Zero.

MCHENRY: Zero.

PRINCE : Zero, sir.

MCHENRY: Zero individuals that Blackwater's protected have been killed in a Blackwater transport.

PRINCE : That's correct.

MCHENRY: Zero.

PRINCE : Zero.

MCHENRY: That is, I think, the operable number here.

Your client is the State Department. The State Department has a contract with you to provide protective service for their visitors. For instance, CODELs, ambassadors and runs the gamut. And you've had zero individuals under your care and protection killed.

PRINCE : Correct.

WAXMAN: Mr. McHenry...

MCHENRY: I think that is a very important number that we need to discuss here, Mr. Chairman. And that should be, you know, a testament to the service that these former veterans -- these veterans...

WAXMAN: Five minutes was yielded to you...

MCHENRY: ... that are currently working for Blackwater. 

And I'm happy to yield back to the ranking member.

T. DAVIS: Mr. Prince , let me just continue with that.

Are there any other security firms in Iraq that provide services that involve as much danger as your escort services that your company provides in Baghdad?

PRINCE : Sir, we certainly have a high-profile mission. We protect the U.S. ambassador, we protect all the diplomats in the greater Baghdad area, which is the hottest part of the country by far.

T. DAVIS: How is your firm paid under the current task order contract for security details? Is it by the mission, by the hour, or some other method? How do you bill the government?

PRINCE : It's generally billed on a per man day, for every day that the operator's in the country.

T. DAVIS: Is it a cost-plus-fee or is it just like a time and materials?

PRINCE : It's blended. Most of it is firm fixed price. There's a few things that are directly cost reimbursable, like insurance.

T. DAVIS: OK. 

Does the contract provide for monetary penalties for any performance difficulties, like shooting incidents that were reported to have occurred, and the like?

PRINCE : Yes, there's all sorts of penalty clauses. If we don't have it fully manned, if they're not happy with the leadership. 

We are very responsive. If there's someone that doesn't agree or is not operating within the standards of the Department of State, they have two decisions: window or aisle.

T. DAVIS: Do you work just for the Department of State or do you work for Defense Department as well?

PRINCE : In Iraq, we essentially work for the Department of State. There's one or two folks here or there in a consultant-type position, but nothing significant, nothing armed.

T. DAVIS: Yes. 

It's important for the committee to understand there are two different contracting entities that are contracting in Iraq, and you work for State.

Do you think the contract provisions and the State Department contract management personnel provide sufficient guidance for the use of force under the contract?

PRINCE : Yes, sir. 

We've seen the full gamut of contracting and contract management in the stabilization section -- or stabilization phase of the Iraq war. And there's a whole host of differences in oversight. And I will tell you, State Department is the highest, they're the G.E.-like buyers, the most sophisticated oversight standards that we have to comply with on the front end for our personnel and management in the field.

T. DAVIS: When your teams are operating on the ground in Baghdad, what entity has the authority to control your activities: Is it the State Department or is it the military commander who's responsible for the battle space?

PRINCE : We work for the RSO, the regional security officer. He's the chief security official for the State Department in Iraq.

T. DAVIS: So it's the State Department ultimately.

PRINCE : Yes.

T. DAVIS: And can you describe the process that's followed under the contract when a shooting incident occurs? And how many employees -- have you dismissed any employees for shooting incidents under your security contracts in Iraq? And what happens to dismissed employees? Are they sent out of Iraq?

PRINCE : OK, let me answer the last one first.

T. DAVIS: That's fine.

PRINCE : If there is any sort of discipline problem, whether it's bad attitude, a dirty weapon, riding someone's bike that's not his, we fire him.

PRINCE : We hold ourselves internally accountable very high. We fire them, we confine them, but we can't do anything else. So if there's any incidences where we believe wrong doing is done, we present that incident, any incident -- anytime a weapon is discharged there's an incident report given to the RSO.

T. DAVIS: Any idea how many employees you fired over the time?

PRINCE : I think in the committee's report, they said 122 or something.

T. DAVIS: So you have taken action when its come to your attention?

PRINCE : Say again, sir.

T. DAVIS: So you've taken action when its come to your attention?

PRINCE : It generally comes to our attention first. We, as a company, we fire them, we send the termination notice to the State Department as to why we fired someone.

T. DAVIS: Thank you.

WAXMAN: Gentlemen's time has expired. 

Ms. Maloney for five minutes.

MALONEY: Thank you, Mr. Chairman. 

I'd like to ask you, Mr. Prince , about one of these employees whom you fired. And this was a employee who got drunk on Christmas Eve of 2006. And according to documents that we got yesterday from the State Department, this particular man, while he was drunk, shot and killed the guard to the Iraqi vice president, obviously causing great tensions between the Iraqi government and the United States military. And I'd like to ask you about his firing. 

You fired this individual for handling a weapon and being intoxicated, is that right?

PRINCE : The men operate with a clear policy: If there is to be any alcohol consumed it's eight hours between any time of consumption of alcohol...

MALONEY: Was he fired or not?

PRINCE : Excuse me?

MALONEY: Was he fired?

PRINCE : Oh yes, ma'am. He was fired.

MALONEY: OK. 

Have any charges been brought against him in the Iraqi justice system?

PRINCE : I don't believe, in the Iraqi justice system. I do believe -- I know we've referred it over to the...

MALONEY: Justice Department. They told us they're still looking at it nine months later.

Have any charges been brought against him in the U.S. military justice system?

PRINCE : I don't know. 

MALONEY: Have any charges been brought against him in the U.S. civilian justice system?

PRINCE : Well, that would be handled by the Justice Department, ma'am. I -- that's for them to answer, not me.

MALONEY: Other than firing him, has there been any sanction against him by any government authority? You mentioned you fined people for bad behavior. Was he fined for killing the Iraqi guard?

PRINCE : Yes, he was.

MALONEY: How much was he fined?

PRINCE : Multiple thousands of dollars. I don't know the exact number; I'll have to get you that answer.

MALONEY: OK.

PRINCE : Look, I'm not going to make any apologies for what he did.

MALONEY: OK. But...

PRINCE : He clearly violated our policies.

MALONEY: All right. 

We all -- every American believes he violated policies. If he lived in America, he would have been arrested and he would be facing criminal charges.

MALONEY: If he was a member of our military, he would be under a court-martial. 

But it appears to me that Blackwater has special rules. That's one of the reasons of this hearing.

Now, within 36 hours of the shooting, he was flown out of Iraq. And did Blackwater arrange for this contractor to leave Iraq less than two hours after the shooting?

PRINCE : I do not believe we arranged for him to leave. After two hours after the shooting, he was arrested.

MALONEY: OK. 

What about two days? It was two days after the shooting. Did you arrange -- did Blackwater arrange for him to leave the country?

PRINCE : That could easily be.

MALONEY: OK.

PRINCE : I.G. police arrested him. 

MALONEY: OK, then I have...

PRINCE : There was evidence gathered. There was information turned over to the Justice Department office in Baghdad. 

We fired him. He certainly didn't have a job with us.

MALONEY: Well, in America, if you committed a crime, you don't pack them up and ship them out of the country in two days. If you're really concerned about accountability, which you testified in your testimony, you would have gone in and done a thorough investigation. 

And because this shooting took place within the green zone, this was a controllable situation. You could have gone in it and done forensic and all the things that they do. 

But the response was to pack him up and have him leave the country within two days.

And I'd like to ask you, how do you justify sending him away from Iraq when any investigation would have only just begun?

PRINCE : Again, he was fired. The Justice Department was investigating. In Baghdad, there was a Justice Department office there. He didn't have a job with us anymore.

We, as a private company, cannot detain him. We can fire, we can fine, but we can't do anything else. And the State Department...

MALONEY: What evidence do you have...

PRINCE : And the State Department...

MALONEY: What evidence do you have that the Justice Department was investigating him at that time?

PRINCE : From talking to my program management people in the country. They said it's in the hands of -- the I.G. police, which is Air Force, arrested him. They took him in for questioning. It was handled by the Justice Department.

He was fired by us. The State Department ordered...

MALONEY: Well, it's been 10 months and the Justice Department has not done anything to him. 

Again, I repeat, if he was a U.S. citizen or in America, he would have been arrested immediately. He would have faced criminal charges. We know about the chain of command in the military. They are court- martialed immediately. 

But if you work for Blackwater, you get packed up and you leave within two days and you face a $1,000 fine.

So I am concerned about accountability and, really, the unfairness of this. And I am concerned about how Blackwater -- if I could just say, Mr. Chairman -- that your actions may be undermining our mission in Iraq and really hurting the relationship and trust between the Iraqi people and the American military.

WAXMAN: Gentlelady's time has expired.

Mr. Burton?

BURTON: Can you tell us, Mr. Prince , how many people witnessed the incident she just referred to?

PRINCE : I don't believe anyone did, sir.

BURTON: So, the only people who were involved were the man who was shot and your employee?

PRINCE : Yes, sir.

BURTON: Can you, in some detail, go into the rules of engagement?

I have talked to some of the people at State Department about this and I've talked to people within your organization. And as I understand it, on the back of every one of your vehicles, in both Arabic and English, there is a warning to not go within 100 meters of that vehicle. Is that correct?

PRINCE : Yes. That's right, sir.

BURTON: And if somebody is coming at your vehicle at a high rate of speed, do your employees have any actions that they should take, especially if it might be a car bomb or something like that?

PRINCE : Yes, sir. 

There's generally lights and sirens on the vehicles, air horn, the personnel whose security sector is facing back toward that oncoming threat will be giving hand signals, audible -- yelling, "stop," "kif," -- Arabic for stop.

There's a pen flare, which is a signalling device kind of like a bottle rocket. It's a device used for a pilot to signal his whereabouts on the ground to be rescued. But it's a bright incendiary device that flies by the vehicle -- where it hits the vehicle. It's not lethal at all, but it definitely -- you know something's happening.

Water bottles are sometimes thrown at vehicles to warn them off. 

If you have to go beyond that, they take shots into the radiator. You hear that hitting the car. It disables the car. You definitely -- you know something's happening.

If they go beyond that, they spider the windshield -- you put a round through the center of the windshield, away from the occupants, so that the safety glass and the windshield makes it difficult to see through. 

Only after that do they actually direct any shots toward the driver.

So, there's a whole use-of-force continuum.

BURTON: The questions that I have heard today from the other side indicate that there ought to be perfection in your organization.

BURTON: Now, you're a Navy SEAL, and you served in the military. Do you believe that any kind of military operation of this type or any type can be absolutely perfect all the time?

PRINCE : I'm afraid not, sir. 

We strive for perfection. We try to drive toward the highest standards. But the fog of war and accidents, and the bad guys just have to get lucky once.

BURTON: I think it's very important that everybody who's involved in this hearing today understand that you have high public officials, congressmen and others, who you have to protect. And you've indicated that nobody's been killed or hurt under your protection.

And yet you're going through all kinds of zones where there's car bombs going off, small arms fire, cars coming at you at high rates of speed. 

Can you explain to me why in the world there wouldn't be some precautions taken when those sorts of things take place?

PRINCE : And the bad guys just figured out killing Americans is big media. I think they're trying to drive us out. They try to drive to the heart of American resolve and will to stay there. 

So we have to provide that protective screen. We only play defense. And our job is to get those reconstruction officials, those people that are trying to weave the fabric of Iraq back together, to get them away from that X, the place where the bad guys, the terrorists, have decided to kill them that day.

BURTON: One of the members on the other side indicated that when there is a firefight or when there's a car bomb go off or something, there's an attack on your convoy, that you don't stay there. 

Can you explain to me what would happen if you stayed there when you were under attack?

PRINCE : Again, there'd be a lot more firefight, there'd be a lot more shooting.

Our job is to get them off the X. The X is what we refer to in our business about the pre-planned ambush site, where bad guys have planned to kill you. So our job is get them away from that X, to get them to a safe place.

So we can't stay in a security terrorist crime scene investigation.

BURTON: You're in a war zone.

PRINCE : Yes, sir.

BURTON: Now, so the instructions -- I want to get this straight: If your people come under fire or there's a car bomb, or an RPG fired at them, they're supposed to turn around, under some rules, and get out of there to protect the people that they're guarding.

PRINCE : Yes, sir. 

Defensive fire, sufficient force to extricate ourselves from that dangerous situation. We're not there to achieve firepower dominance, or to drive the insurgents back. We're there to get our package away from danger. 

BURTON: Thank you.

WAXMAN: Gentlemen's time has expired. 

The chair now recognize Mr. Cummings for five.

CUMMINGS: Mr. Prince , you're a very impressive witness. And I just want to ask you a few questions that cause me some concern that seems to go counter to some of the things that you've said. 

And I'm wondering whether Blackwater is actually helping our military or hurting them. Frankly, I'm concerned that the ordinary Iraqi may not be able to distinguish military actions from contractor actions. They view them all as American actions. 

Now, I want to go back to this incident that we've been talking about for the last few minutes, the 2006 Christmas Eve incident where the drunken Blackwater official shot and killed a guard of the Iraqi vice president, which is, basically, like killing a Secret Service person guarding our vice president. 

When this incident first happened, an Arab television station ran an incorrect story saying that a, quote, "drunken U.S. soldier," unquote, killed the Iraqi vice president's guard. Were you aware of this incorrect press report?

PRINCE : No, sir, I was not. 

CUMMINGS: Of course, you can see how a media report like that makes it more likely that Iraqis will blame the United States military rather than Blackwater for the killing of the Iraqi vice president's guard. Again, (inaudible) our vice president. 

Did Blackwater take any steps to inform the press that it was actually a Blackwater employee who killed the vice president's guard?

PRINCE : By contract, we are not allowed to engage with the press.

CUMMINGS: All right. 

And why is that?

PRINCE : That's part of the stipulations in the WPPS contract.

CUMMINGS: And this report aired -- after this report aired, an official who works for you -- and this is what really concerns me and I just want to know your reaction to this -- Blackwater sent an e-mail -- this is an employee of yours -- an e-mail internally to some of his colleagues. 

He did not suggest contacting the station, I guess for the reason you just said. He didn't suggest putting out a press release and he didn't suggest correcting the false story in any way.

CUMMINGS: Instead, this is what the e-mail said: quote, "At least the ID of the shooter will take the heat off of us," meaning Blackwater. In other words, he was saying, "Wow, everyone thinks it was the military and not Blackwater. What great news for us. What a silver lining."

Mr. Prince , you said in your testimony that Blackwater is extremely proud of answering the call and supporting our country. Did anyone in your organization ever raise any concerns that allowing a false story to continue might lead to retaliation -- retaliation or insurgent activity against our troops?

PRINCE : I don't believe that false story lasted in the media for than a few hours, sir.

CUMMINGS: But the fact still remains that it was a false story. And we are trying to be supportive of the Iraqi government, trying to get this reconciliation, trying to make sure that they, as President Bush said -- says that they stand up so that we can stand down.

But at the same time, when these stories are put out, I think you would agree that the Iraqi people then say, "Well, wait a minute. The United States is supposed to be supporting our government." 

President Bush talks about how we have gone over to export democracy. Here is the very symbol: The vice president of the country -- of a country killed by a drunken Blackwater employee, and yet and still, it just seems to, you know -- the question is then, what lies in the mind of the Iraqi? What lies in the mind of those people who may have wanted to cooperate with our security over there, but then they said, "Well, wait a minute. If they -- United States soldiers -- but really, Blackwater -- is doing this to the very government that we are supposed to be supporting, then what does that say and why should we support the United States?"

Fair question?

PRINCE : Yes, sir.

Look, I'm not going to make any apologies for the...

CUMMINGS: I'm not asking you to make any apologies. 

You're the president of this company, is that right?

PRINCE : CEO.

CUMMINGS: CEO. Well, you're the top guy. You're one of the top guys. Is that right?

PRINCE : Pretty much. Yes, sir.

CUMMINGS: All right. So I'm just asking you a question about what your policies are, that's all.

PRINCE : We have clear policies. Whether the guy was involved in a shooting that night or not, the fact that he violated the alcohol policy with firearms would have gotten him fired on the spot.

PRINCE : That's why we fire people. We hold them independently accountable. 

The guy slipped away from the party. He was by himself. I'm confident, if he had been with another guy from Blackwater, the other guy would have stopped him and said, "Enough."

You know, again...

CUMMINGS: So, Congressman -- Mr. Burton said this was after hours in the green zone, wasn't it? This wasn't some mission, was it?

PRINCE : Correct.

CUMMINGS: Right.

PRINCE : He was on his own time.

CUMMINGS: And is it your understanding...

PRINCE : It was a Christmas Eve party.

CUMMINGS: And I've heard a lot of complimentary things about what you all do. And I'm sure you do a great job. 

But it's not about -- it's not about what you do well. It's a question of, when things go wrong, where is the accountability?

PRINCE : And, sir, we fired him. We fined him. But we, as a private organization, can't do any more. We can't flog him. We can't incarcerate him. That's up to the Justice Department. We are not empowered to enforce U.S. law.

CUMMINGS: Do you think more should be done?

PRINCE : I'd be happy to see a further investigation and prosecution by the Justice Department, yes, sir.

CUMMINGS: Thank you.

WAXMAN: I want to call on Mr. Mica next. 

But how much did you fine him?

PRINCE : It was multiple thousands of dollars, sir. I don't know the exact number. But whatever we had left due him in pay, I believe, we withheld, and plus his plane ticket.

WAXMAN: OK, thank you. 

Mr. Mica?

MICA: Thank you. 

Mr. Prince , in your testimony earlier, you said -- let me quote here -- "Killing Americans, I guess, in Iraq, is big media."

You said that?

PRINCE : Yes, sir.

MICA: Did you have any idea that wounding American contractors in a congressional hearing would be this big a media?

PRINCE : More than I bargained for, sir, yes.

(LAUGHTER)

MICA: I described, you know, you're here because you're, sort of, in the chain of command to be attacked next by some folks who want to discredit what you're doing.

And I might say that I don't know if there were criminal acts committed. And there will probably be ways in which we can go after folks. One of those would be to have the Department of Justice pursue the case.

Isn't that the -- would that be the normal procedure?

PRINCE : Yes, sir. 

We welcome it. We encourage it. We want that accountability. We hold ourselves internally accountable. But if, you know, we put 1,000 guys out in the field, humans make mistakes and they do stupid things sometimes.

We try to catch those as much as we can, but if they go over the line...

MICA: Well, they criticized you -- I guess we could start with the pilots and the NTSB investigation. They should go back and look at the Comair crash in Kentucky with the accounts of the pilots, which was a distraction and led to the crash, according to their findings -- I have chaired the Aviation Subcommittee, and followed that very closely -- let alone an incident -- basically there's no -- as Al Gore would put it, there's no controlling authority for airspace in Afghanistan.

PRINCE : There is no FAA in Afghanistan.

MICA: And then you were criticized, too, you let the pilot -- I guess he survived but was not found, is that what?

PRINCE : No, there was -- the two DOD -- two of the DOD personnel in the back survived the crash.

MICA: OK, well, two survived and weren't found. And I guess they perished.

PRINCE : They perished before they were found.

MICA: And I guess in the United States, like we have an experienced pilot, like Fossett, he's lost. Have we found him yet?

PRINCE : No, sir.

MICA: OK. But this is in the -- what? -- terrain...

PRINCE : A terrain very similar to what is in Nevada. 

MICA: Yes. So, OK. I just want to try to put things in perspective.

There's also some argument that you cost the government too much, and that you're getting paid too much, and that maybe this is something that the military should be doing. Could you respond to that?

PRINCE : Yes, sir. 

I think there's two arguments for or against privatization. There's reliability, there's accountability, and there's cost. 

Accountability issues can be handled by exercising MEJA. Congress expanded MEJA at the end of 2004 to any DOD contingency operation, I believe.

So, anytime a U.S. contractor is abroad, they can be brought up on charges -- on behalf of the U.S. government, they can be brought up on charges back here in the States.

There's reliability -- that comes down to, I think, individual vendor reliability: How well does that company execute? Are they complete, correct and on time?

And then there's cost. The American automotive industry, any manufacturer in America has to deal with that cost issue all the time -- whether they should make something. It's that make vs. buy argument.

PRINCE : I greatly encourage Congress to do some true activity base cost studies; what are some of these basic government functions really cost? Because I don't believe it's as simple as saying, "Well, this sergeant cost us this much." Because that sergeant doesn't show up there naked and untrained. There's a whole bunch of other costs that go into it. 

So figure out, if the Army does a job, how many of those people leave the wire every day? What is their tooth-to-tail ratio? How many people are operators vs. how many are support people? That all drives into what your total cost is.

MICA: Now, can you...

PRINCE : The American industry got pushed by the Japanese car makers, you know, and by foreign competitors because you've got to focus on cost and being efficient and delivering a good or a product or a service at a better competitive price.

MICA: Finally, you were criticized for not detaining someone who committed a criminal act. Now, if an employee commits a criminal act in the United States and you fire him, are you responsible in the United States for detaining him and, you know, handling the...

PRINCE : Well, that would be a crime that we committed then, because we're not allowed to detain.

MICA: You're not allowed to detain?

PRINCE : No, sir.

MICA: OK. 

So in that situation, you were criticized for providing someone transport back. Was it to the United States?

PRINCE : It was...

MICA: Or wherever?

PRINCE : We acquired...

MICA: I'm attempting...

PRINCE : We acquired airline ticket -- an airline ticket for him back to the States. That's all.

(CROSSTALK)

WAXMAN: The gentlemen's time has expired. 

Now, the chair recognizes Mr. Kucinich.

KUCINICH: Thank you very much, Mr. Chairman. 

In my opening remarks I pointed out that if war was privatized, private contractors have a vested interest in keeping the war going. The longer the war goes on, the more money they make. 

I want to, for my time here, explore the questions regarding how Blackwater got its contracts.

Mr. Prince , your company's undergone a staggering growth just over the past few years. The committee's attention can be directed to the chart. 

In 2000, your company was bringing in only about $200,000 in government contracts. But since then, according to the committee, you've sky rocketed to something in the nature of a billion dollars in government contracts. 

The real increase in Blackwater's contract began with the Iraq war. 

KUCINICH: In fact, if you look at the chart, you can see how, from 2004 on, the amount of taxpayer dollars Blackwater was awarded by the administration began to go through the roof from about $48 million in 2004, to $350 million in 2005, to over $500 million last year. So, it's really an unprecedented rate of increase. And I want to understand how this happened, Mr. Prince .

We'd been informed that one of your first contracts in Iraq was for the Coalition Provisional Authority. Ambassador Paul Bremer awarded you a contract to protect officials and dignitaries. That was at the end of 2003 -- toward the end of 2003. It may have been in August, is that right, sir?

PRINCE : I believe it happened right after the U.N. facility in Baghdad was blown up by a large truck bomb. Yes, sir. They then feared for the U.S. officials.

KUCINICH: Now, that contract was no-bid, is that right, sir?

PRINCE : It was off the GSA schedule.

KUCINICH: Can you tell us how you got this no-bid contract?

PRINCE : Off the GSA schedule it's considered a bid contract, sir. The GSA schedule is a pre-bid program, kind of like a catalog of services that you put out, like buying something from the Sears catalog.

KUCINICH: Did you talk to anyone in the White House about the contract?

PRINCE : No, sir.

KUCINICH: Did you talk to anyone in the Congress about the contract?

PRINCE : No, sir.

KUCINICH: Did anyone, to your knowledge, connected with Blackwater talk to anyone in either the White House or the Congress about the contract?

PRINCE : Not to my knowledge. No.

KUCINICH: Did anyone in the DeVos family talk to anyone in the White House or the Congress about the contract?

PRINCE : No.

KUCINICH: As a taxpayer, do you think it's proper that no other companies were allowed to bid?

PRINCE : To that I'm not aware of, sir. 

It's a requirement government officials had. They came to us, asked if it could be fulfilled. I don't know what other companies they went to, as well. I'm not aware of that.

KUCINICH: In 2004, the State Department awarded Blackwater a $332 million task order under its diplomatic protection contract. Are you familiar with that?

PRINCE : I knew about the amount. I know that we transitioned over to working for the State Department from the CPA. I'm not sure exactly when that happened, but...

KUCINICH: Thank you, sir.

KUCINICH: According to the federal contracting database, you didn't have to compete for that one, either, is that correct?

PRINCE : Again, I believe they continued that off the GSA schedule, which is an approved contracting pre-bid method.

KUCINICH: And who at the State Department were you dealing with in order to get this contract?

PRINCE : I don't know. I presume it was under the -- it was under the Diplomatic Security Service. That's the folks at State we were working for.

KUCINICH: Now, S-I-G-I-R, SIGIR, reported that this was a no-bid contract. Are you -- was SIGIR incorrect? Was this -- it was a no- bid contract, or it wasn't?

PRINCE : I'm not sure how they're defining bid or no-bid. But my understanding, we used pricing off the GSA schedule. And I believe that's considered or regarded as a biddable contract.

WAXMAN: Would the gentleman yield to me?

KUCINICH: I'll yield to the chairman.

WAXMAN: It's on the GSA schedule. Did they come to you to put your offer of services on the GSA schedule? Did you go to them? How did that get on the GSA schedule?

PRINCE : Most companies in our kind of work have a GSA schedule. We have a GSA schedule for target systems. We have a GSA schedule for...

WAXMAN: So you offered services, and you're on the list of services that they can purchase.

PRINCE : Yes, sir.

WAXMAN: And you don't know if anybody else was on the list -- you were the -- for these kind of services.

PRINCE : Oh, I'm sure there's lots of companies that are...

WAXMAN: For some of the services. 

Did you go to anyone else, or did anyone else in the government go to you to ask you to do the work?

PRINCE : I don't know, sir.

WAXMAN: Did they ask you to see if you could put together this operation, and then they put you on the schedule?

PRINCE : I would say we were present in the country already. We already had significant presence with the CPA under a bid contract. I believe that contract was called Security Services-Iraq. So we had a large presence of static guards and PSD kind of work for them. So I think they -- they probably just wanted a transition from DOD work to Department of State work.

WAXMAN: Mr. Shays?

SHAYS: Thank you, Mr. Chairman.

Mr. Chairman, I didn't make an opening statement, and I was chairman of the National Security Subcommittee, and ranking member, and so I have a keen interest in this issue. But other members had important statements to make, so first I'd like to make an observation.

SHAYS: I want to align myself with the statement of Tom Davis, my ranking member now. I thought it adequately, perfectly expresses my view. 

And I want to thank both the chairman and Mr. Davis for honoring U.S. Department of Justice's request to not discuss an incident we don't have enough facts to discuss. And we'll deal with that later and I think that's responsible. 

And I think this hearing, the way we're dealing with it, is a very important effort given what we're doing.

Now, saying that, during the Vietnam War, I was a conscious objector, I was a Peace Corps volunteer, so I try to be very careful when I evaluate the performance of men and women under fire. And, frankly, many of those behind you in this desk are exactly that: were behind a desk, never been shot at, never tried to understand what it's like to be under fire.

Blackwater, I want to say, has a reputation of being a bit of a cowboy. But I know we absolutely need protective security contractors. The role of security contractors is much different than the role of the military.

But I also want to say that I feel the State Department can do a better job of enforcing and holding contractors accountable. And I think they're going to make a point that they're willing to have this reviewed by a outside party and then have us look at it. 

Now, saying that, I also want say the number of times that you all have to protect members of Congress is infinitesimal compared to all the civilians you have to protect. And one of the outrages, in my judgment, is that there haven't been more members who've gone there and, frankly, that some members who have never been there are passing judgment on what we're doing there. They're behind a desk with no sense of what's happening there.

I am in awe of what your men and women -- and they've been mostly men -- have done to protect our civilians. I am absolutely in awe of it. 

You know, you can't be perfect but in one way you have been perfect. If this is true, tell me in tooth (ph) and -- from June of '04, to the end of that year, how many missions you protected -- or let me say it this way, if you don't know how many missions you protected, how many people you protected were wounded or killed in '04...

PRINCE : Oh.

SHAYS: ... end of '04.

PRINCE : No, sir, we've never had anyone seriously injured.

SHAYS: I'm going to do it year by year. Did you have anyone wounded or killed in '04?

PRINCE : No, sir.

SHAYS: Did you have anyone wounded or killed in '05?

PRINCE : No, sir.

SHAYS: These are the people you're trying to protect.

PRINCE : I mean, wounded, yes. Big IED ruptured an eardrum; that's the most serious level there.

SHAYS: Did you have anyone wounded or killed in '06?

PRINCE : People that we're protecting?

SHAYS: Yes.

PRINCE : No.

SHAYS: Did you have anyone who was wounded or killed in '07 that you were to protect?

PRINCE : No, sir.

SHAYS: That's a perfect record. And you don't get any credit for it for some reason. 

Now, did any of your people -- were any of your people killed in '04 trying to protect the civilians?

PRINCE : Yes, sir.

SHAYS: Were any of your people killed in '05 trying to protect civilians?

PRINCE : Yes, sir.

SHAYS: Were any of your people killed in '06 trying to protect civilians?

PRINCE : Yes, sir.

SHAYS: Were any of your people protected in trying to -- killed by trying to protect the civilians in '07?

PRINCE : Yes, sir.

SHAYS: Every year you have had men you have risked their lives and who have been killed fulfilling their mission and they have succeeded 100 percent. And I just want to be on record for thanking you for an amazing job that you do. 

I've been to Iraq 18 times. I've been outside the umbrella four times.

SHAYS: It is one dangerous place. I have seen films where vehicles come up to our troops or to our security people and they're blown up in it. 

You have done an amazing task. And there is a huge difference from being a police officer or protected and being the military; totally different role.

I've had no one in the military say to me, "I want to guard all these civilians." And the last thing you want is to have Humvees and Army take civilians who are meeting other civilians, like our State Department, with that kind of precedent.

And the military would not do it. They're not going to be in a Suburban. They're going to be in what their protocol requires. The protocol is totally different. We need security people who do their job.

Thank you for doing a perfect job in protecting the people you're required to protect.

PRINCE : Thank you, sir. It's an honor to do the work.

WAXMAN: Gentleman's time has expired.

Before I recognize Mr. Davis, I want to put in the record a statement from the special inspector general in Iraq from July '04 that indicates that the security guards and two helicopters for Bremer, sole source; directed the security for inner-ring republican presidential compound -- Al Rashid Hotel -- sole source; the security for Al Rashid Hotel, sole source to Blackwater.

(UNKNOWN): Reserve (ph) my right to object.

What the gentleman say -- was that under the Bremer or after Bremer?

WAXMAN: This is in '04. So it would have been Mr. Bremer.

(UNKNOWN): So, it was under Mr. Bremer; not since we transferred power to the Iraqis.

WAXMAN: I don't know the answer to that. But this document only refers to the period of time...

(UNKNOWN): Under Mr. Bremer. I don't object.

PRINCE : Mr. Chairman, may I have a minute please? May I have a minute please? One minute please? Thank you.

WAXMAN: We'll take -- yes.

(RECESS)

PRINCE : Thank you. Thank you, sir.

WAXMAN: Thank you. 

Mr. Davis?

D. DAVIS: Thank you, Mr. Chairman.

Mr. Prince , throughout your testimony, and in other comments attributed to you, you have praised the Blackwater personnel on the ground in Iraq. But mistakes do, in fact, happen.

You do admit that Blackwater personnel have shot and killed innocent civilians, don't you?

PRINCE : No, sir. I disagree with that. 

I think there's been times when guys are using defensive force to protect themselves, to protect the package they're trying to get away from danger.

There could be ricochets. There are traffic accidents, yes. This is war.

You know, since 2005, we've conducted in excess of 16,000 missions in Iraq, and 195 incidents with weapons discharged. In that time, did a ricochet hurt or kill an innocent person? That's entirely possible.

Again, we do not have the luxury of staying behind to do that terrorist crime scene investigation to figure out what happened.

D. DAVIS: Well, according to a document we obtained from the State Department, on June 25, 2005, Blackwater guards shot and killed an innocent man who was standing by the side of the street. His death left six children alone with no one to provide them support. 

Are you familiar with this incident?

PRINCE : I'm somewhat familiar with that incident. 

I believe what happened, there was a car bomb, or a potential car bomb had rapidly approached our convoy. I believe our guys shot rounds at the car, not at the driver, to warn them off.

One of those rounds, as I understand, penetrated to the far side of the car, ricocheted and injured that innocent -- or killed that innocent man.

D. DAVIS: Well, again, according...

(CROSSTALK)

PRINCE : Go ahead, sir.

D. DAVIS: According to the State Department document, this was a case, and I'm quoting, "involving the PSD personnel who failed to report the shooting, covered it up, and subsequently were removed from (inaudible)."

The State Department described the death as, and I quote, "the random death of an innocent Iraqi."

Do you know why Blackwater officials failed to report this shooting and later tried to cover it up?

PRINCE : I can clarify that fully, sir. Thanks for asking that question. 

There was no cover-up because our people reported it to the State Department. They did look into the shooting and the justification of it, and it was deemed to be inappropriate use of force.

The man was fired because he had tried to cover it up. He panicked, and had asked the other two members to cover it up and to not report it.

D. DAVIS: Well, was there...

PRINCE : We discovered that through our -- I mean, our policy worked. We reported the incident to the State Department. And that's why you folks have it in the committee, because we fired the guy. He was terminated not for inappropriate shooting but for not following the reporting procedure.

D. DAVIS: Well, was there any reason this report was not provided to the committee?

PRINCE : I don't know, sir. I'll have to -- I'll look into that and get back to you.

D. DAVIS: Well, the same document states that State Department contacted Blackwater headquarters to encourage you to offer this man's family compensation.

After this shooting of an innocent man, and after the attempted cover-up, Blackwater paid $5,000 to the family, is that not correct?

PRINCE : I believe that was paid to the State Department. That's similar to what DOD does, what the Army does if there is an accidental from a -- whether it's an aerial bomb, a tank backs over somebody's car or injures someone, there is compensation paid to try to make amends.

But that was done through the State Department. That was not paid to try to hush it up or cover it up; that is part of the regular course of action. 

And there was no cover up because we -- you know, our guys reported the incident and the company fired him for not reporting the incident.

D. DAVIS: Well, can you tell me how it was determined that this man's life was worth $5,000?

PRINCE : We don't determine that value, sir. That's, kind of, an Iraq-wide policy. We don't make that one.

D. DAVIS: Do you know how many payments Blackwater has made to compensate innocent Iraqis or their families for deaths or injuries caused by Blackwater personnel?

PRINCE : I do not know that, sir.

D. DAVIS: Do you know what the total value of those payments might be?

PRINCE : No, sir.

D. DAVIS: Could you supply the committee with that information?

PRINCE : Yes, sir. I'll make sure we get it back to you.

D. DAVIS: Thank you very much.

And, Mr. Chairman, what I'm concerned about is the lack of accountability. If one of our soldiers shoots an innocent Iraqi, he or she can face a military court-martial. But when a Blackwater guard does this, State Department helps arrange a payout to make the problem go away.

This seems to be a double standard and it's causing all kind of problems in Iraq.

WAXMAN: Gentleman's time has expired.

Mr. Platts?

PLATTS: Thank you, Mr. Chairman. Appreciate your holding this hearing. 

And, Mr. Prince , I appreciate your testimony and want to thank you, personally, for your five years of service to our nation as a Navy SEAL.

And also, having been to Iraq five times, for the dedication of your colleagues, for delegations I've been part of and certainly many others as well. We're grateful for their courageous service.

PLATTS: Your contract has been discussed already as under the Worldwide Personal Protective Services contract. And my understanding is under that contract, there are specific terms of conduct including rules of engagement with use of force. Is that correct?

PRINCE : Yes, sir. That is correct.

PLATTS: The -- you testified about, as a example of the seriousness with which your company takes the conduct of your employees, of 122 individuals that have been fired for misconduct. Are you able to give us what number of those were related to violations regarding use of force rules of engagement specifically?

PRINCE : I believe the committee report listed it. Don't quote me on it. It says in the committee report around 10 or 15.

PLATTS: And the...

PRINCE : But I'm not sure. It's (inaudible) the committee report, sir.

PLATTS: And you accept that information as accurate?

PRINCE : Yes. 

Now, that -- a weapons violation that could mean dirty gun or possession of some unauthorized firearm. We have very clear rules. We are only issued -- the government issues us our weapons, even down to scopes. We're specified as to which optical device we can put on the weapon. Some guys get fired because they put a -- they like an Aimpoint instead of an ACOG.

PLATTS: So, of those 10 to 15 they may not all be related to use of force -- misuse of force?

PRINCE : Yes, sir. That's correct.

PLATTS: OK. 

A number of times you were asked about, in addition of firing and fining and removing the person from your employment and from Iraq about what criminal actions you took. And you appropriately stated that you're not a law enforcement entity, you're a private company. 

With that being said, though, is it accurate to say that whether there is a criminal investigation by the Department of Justice or the Department of State pursuing, that you provide any information that your company has about misconduct to them?

PRINCE : Yes, we fully cooperate, in the Christmas Eve incident and any other ones that State Department of Justice Department wants to look at. 

PLATTS: OK. 

Thank you, Mr. Chairman. That's all my questions. 

And again, my thanks to Mr. Prince and their colleagues for their service.

WAXMAN: Will the gentleman yield some of his time to me?

PLATTS: Yes, Mr. Chairman, I would.

WAXMAN: Thank you. 

The point I want to ask you, Mr. Prince , is, we appreciate what you've done, but it looks like a lot of people in the U.S. military don't appreciate it.

One man, an Army colonel, Teddy Spain, said, "I personally was concerned about any of the civilians who were running around on the battlefield during my time there. My main concern was with their lack of accountability when things went wrong."

Another senior U.S. military official said, "We had guys who saw the aftermath" -- meaning aftermath of your activities there. "It was very bad. This is going to hurt us badly."

And then we had Secretary of Defense Robert Gates. "These incidents may be uncommon. We don't how common they are, but let's assume that they are uncommon. I believe that they still have disproportionate impact on the Iraqi people. We have people who are conducting themselves in a way that makes them an asset in this war, not a liability."

You're not answerable to the U.S. military, are you?

PRINCE : (OFF-MIKE)

WAXMAN: You report to the State Department. You're under contract to State, isn't that right?

PRINCE : In Iraq, we report to the State Department. 

But if I could just add...

WAXMAN: Your people aren't under the same rules as the U.S. military?

PRINCE : We operate under defensive rules of engagement.

(UNKNOWN): Will the gentleman yield? Will the gentleman yield?

PLATTS: Actually, Mr. Chairman, if I could reclaim my time, in responding, Mr. Prince , you've provided the committee a detailed list of the regulations, treaties, laws that you operate under, is that correct?

PRINCE : Yes, sir.

PLATTS: And that includes items that relate to both Department of State and Department of Defense?

PRINCE : It includes laws like MEJA, the UCMJ, all of which we can be held accountable -- our people can be held accountable for while operating overseas.

And let me just ask -- answer, Mr. Chairman, about whether we're adding value to the military or not.

I have to say, my proudest professional moment was about a year and a half ago, I spoke at the National War College. And after my speech, a colonel, full bird colonel, came up to me afterwards. And he said, "You know, I just came back from a brigade command in Baghdad." 

I had 4,000 or 5,000 guys working for him.

He said, as his guys were driving around the city, on the tops of their dashboards of their Humvees were the Blackwater call signs and the frequencies. Because his soldiers knew that, if they got in trouble, the Blackwater guys would come for them. They would come to their aid and assist them, medevac them, and help them out of a tough spot.

PRINCE : So, if that's the reputation we have...

WAXMAN: Well, Brigadier General Karl Horst said, "These guys are running..."

PRINCE : Mr. Chairman?

WAXMAN: "... loose in this country and do stupid stuff. There's not authority over them, so you can't..."

PRINCE : Mr. Chairman?

WAXMAN: "... come down on them when they escalate force. They shoot people and someone else has to deal with the aftermath. It happens all over the place, security contractors in Iraq under scrutiny after shootings."

What do you say?

PRINCE : Sir, I can also tell you there's 170-some security companies operating through Iraq. We get painted with a very broad brush on a lot of the stuff they do. On almost weekly basis, we get a contact from someone in DOD, some talk somewhere that says, "Oh, three Blackwater guys were just taken hostage here. Four guys were killed there. Oh, you were involved in a shooting over here."

When we fully investigate, we didn't have any team of guys within 100 miles of that location. But if a private security contractor did it, it often gets attributed to us.

WAXMAN: Regardless of what private security contractor does it, it's a problem for the United States. 

Mr. Platts, you were kind enough to yield me time. Without objection, I'd like to give to you another 30 seconds.

PLATTS: If you could. And I was going to yield to the ranking member.

Thank you, Mr. Chairman.

T. DAVIS: Mr. Chairman, I appreciate your questions, but let me just say, Mr. Chairman, for the sake of argument you're right. If we're paying too much and getting too little, what's the answer: more troops in Iraq, less safe troops, less safe diplomats or less safe members?

I mean, this is the trade-off; this is what we're trying to explore here. 

They're contractors. At the end of the day, we have to look to the government who is contracting this out, putting down the rules of engagement and they'll be on our next panel.

He's just performing his contract at this point. And I think we have questions that we can ask the State Department. 

But the alternatives, none of them are attractive when you're in a war zone.

WAXMAN: Gentleman's time has expired.

Mr. Tierney?

TIERNEY: Thank you, Mr. Chairman.

PRINCE : Mr. Chairman, can I have one minute, please? We do not need to leave. One minute please?

WAXMAN: Yes.

PRINCE : Thank you.

WAXMAN: Yes, go ahead.

(RECESS)

WAXMAN: Without objection, I'd like to ask if Mr. Davis and I, during this moment, have a minute each, because I would like to say something. (inaudible) doesn't involve a question and you might want to respond to it.

PRINCE : (OFF-MIKE)

WAXMAN: The point I want to make, you raised that very essential question what do we do if we don't have enough troops there? 

Well, I think we have to look at the fact that this isn't a short-term war. We've been there five years. It looks like we may be there another 10 years. And even General Shinseki said we needed more troops. 

Well, at some point you have to make a decision in this battlefield, in this war: If we don't have enough troops to do the job, then we should get more troops.

But if we're going to go on the cheap to get private contractors, we're not on the cheap at all. It's costing us more money and I believe it's costing us problems -- causing us problems with the Iraqi people. 

Let's let the military replan this. It seems to me we've had bad decisions from this administration too much of the time in handling this whole war planning for it adequately and staffing it adequately with the U.S. military. They're the ones who ought to be doing this job. 

Mr. Davis?

T. DAVIS: Well, Mr. Chairman, I understand. 

But let me just say troops are there -- are not paid to protect civilians. That's not what military troops are trained for. 

I went through Officer Basic Course in Georgia at Fort Benning. I went through basic training at Fort Ord. That's not what troops are trained for when they go out into the battlezone.

This is a unique responsibility. It is through the State Department, not the Department of Defense. And as we'll hear from the next panel, our troops are not, at this point, been trained to do this kind of work. This is a different kind of a province (ph). 

Now, if we want to train them to do that, we can do that. But that hasn't been the history throughout the last 50 years of the military that I'm aware of.

So, we then have to decide from a cost-benefit perspective. I think this is an important conversation to have. But to date, that's not the contractors' fault. I think our argument would be with the State Department.

WAXMAN: I want to yield to Mr. Tierney, but Blackwater and the private military recruit from our military. So these people are trained to do the job that Blackwater and other private military people are asking them to do. So why can't the military do it?

WAXMAN: I think they could do it if we had enough military personnel.

T. DAVIS: Sir, I'd like Mr. Prince to respond, but I'm sure they re-train them; they don't just take raw recruits out.

Could I just ask him to respond?

PRINCE : Yes, sir. 

There was an earlier allegation about companies like us raiding the ranks of the special operations community for this kind of work. And the GAO report found that, yes, they are getting out and working for companies like us, but they're not getting out at any higher rate than they ever did before.

So, they're -- instead of becoming a financial analyst or an accountant or a -- some other kind of other businessmen, they come to work for companies like Blackwater. But they're not getting out at any rate higher than they ever did before.

Now, if I could just correct two slight errors I made, we do not have any fatalities of Blackwater personnel in 2006. 

And one of the contracts I testified to as being in the GSA schedule was, in fact, sole source. We'll get you the very detailed information as to which contracts were GSA and which were sole source. I'm not qualified to answer that right now.

WAXMAN: Well, we'll receive any documents you have...

T. DAVIS: Mr. Chairman, if I could just have a minute. 

But I think that's one of the things we want to get to in this and later hearings is, if the mission is going to be four or five or six years, do you want to change the mission of the military?

But that's not the contractors' fault. Our argument there is with the Defense Department, the State Department.

PRINCE : I strongly encourage the Congress to sponsor true activity-based cost studies. What does it cost the Air Force to move a pound of cargo in a war zone? What does it cost to put a brigade in the field or to train it and to equip it? All these basic functions.

Even what are the (inaudible) costs of aircraft doing refueling?

WAXMAN: We're going to have you answer some more questions, I'm sure, along those lines.

Mr. Tierney, it's your turn to...

TIERNEY: Are you certain, Mr. Chairman?

WAXMAN: Yes.

TIERNEY: Thank you.

Mr. Prince , thank you for being here today on that. 

You were discussing a little bit here about the goal of this particular venture here. And I think that General Petraeus has been pretty clear that he'd like to change it from the type of war it's been to one where he wants to defeat insurgents. And that entails in significant part winning the hearts and minds.

So, I want to read you this quote: "Counterinsurgents that use excessive force to limit short-term risk alienate the local populace. They deprive themselves of the support or tolerance of the people. This situation is what insurgents want. It increases the threat they pose."

Do you know who made that statement?

PRINCE : Do I know who made that statement?

TIERNEY: Yes.

PRINCE : No, sir.

TIERNEY: That was General Petraeus. You know, he's the one that wrote the official counterinsurgency manual. 

It does appear, from some of the evidence here, though, that Blackwater and other companies sometimes at least conduct their missions in ways that lead exactly in the opposite direction that General Petraeus wants to go. 

But that doesn't mean you're not fulfilling your contractual obligations.

In a recent report, there was a quote from Ann Exline Starr, who was a former Coalition Provisional Authority adviser. Talks about the fact that, "The private mission is different from the overall public operation. Those, for example, doing escort duty are going to be judged by their bosses solely on whether they get their client from point A to point B, not whether they win Iraqi hearts and minds along the way."

And she goes on to talk about the fact that soldiers, when they escorted her -- because they are able to escort people and are trained for that -- "oftentimes also interacted with the Iraqi community and did things to ingratiate themselves to the Iraqis. The contractors, by contrast, focused only on the contract."

She said, what they told her was, "Our mission is to protect the principal at all costs. If that means pissing off the Iraqis, too bad" -- her language, not mine.

Another counterinsurgency expert is Army Colonel Peter Mansoor. Earlier this year, he made a statement about private military contractors and he said, "If they push traffic off the roads or if they shoot up a car that looks suspicious, they may be operating within their contract, but it is to the detriment of the mission, which is to bring the people over to our side."

So, when we look at Blackwater's own records, that show that you regularly move traffic off the roads and you shoot up cars, in over 160 incidents of firing on suspicious cars, we can see, I think, why the tactics you use in carrying out your contract might mitigate against what we're trying to do in the insurgency.

Retired Army officer -- and actually he's a conservative analyst now -- Peter -- Ralph Peters -- he was more blunt about it. He said, "Armed contractors do harm COIN" -- counterinsurgency -- "efforts. Just ask the troops in Iraq."

We've had complaints of military leaders over and over again that the way that some contractors operate in Iraq are causing danger and anger against the United States forces.

Let me give you one example. 

For most of 2005, the Army's 3rd Infantry Division was in charge of security of Baghdad. Here's what the deputy commander of this division, Brigadier General Karl Horst, said about Blackwater and other private military contractors. 

"These guys run loose in this country and do stupid stuff. There's no authority over them so you can't come down on them when they escalate force. They shoot people and someone else has to deal with the aftermath. It happens all over the place."

TIERNEY: Are you familiar with General Horst, sir?

PRINCE : No, sir. I've never met him.

TIERNEY: OK. 

Well, here's what Colonel (inaudible) said when he was an officer in Iraq. He said: "The problem is in protecting the principle they had to be very aggressive. And each time they went out, they had to offend locals forcing them to side -- to the side of the road, being overpowering and intimidating at times running vehicles off the road making enemies each time they went out. So they were actually getting our contract exactly how we asked them to, with the same time hurting our counterinsurgency effort."

This goes on again back to Colonel Peter Mansoor, who said, "I would much rather see all armed entities in the counterinsurgency operation fall under the military chain of command."

And the CENTCOM commander, Admiral James Fallon, who we all know now for his current work, his quote is: "My instinct is that it's easier and better if they were in uniform and working for me."

Can you see and appreciate, Mr. Prince , why that there might be some contradiction between what we're asking your organization and others like it to do under the contract as opposed to what we're trying to do as a military force in counterinsurgency?

PRINCE : Sir, I understand the challenges that the military faces there. 

Like I said before, there's 170 some companies doing business in Iraq. Most of those security contractors are DOD. I think DOD officers would even complain about their lack of reach over their own DOD Corps of Engineers, MNSTC-I type contractors. 

Second, we know we're part of the total force in trying to get the mission accomplished. 

You know, of the 16,000 missions our guys have done, only 195 resulted in any kind of discharge of a weapon. That's less than 1 percent. So we strive for perfection, but we don't get to choose when the bad guys attack us. You know, the bad guys have figured out -- the terrorists have figured out how to make a precision weapon with a car, loaded with explosives, with a suicidal driver.

TIERNEY: But just to interrupt you for a second. You're not asserting that every time that you take affirmative action it was somebody firing at you first. You do acknowledge that on some occasions at least it was a preventative fact on your part of your people?

PRINCE : Yes, sir. 

But this is what happens when our guys are not able to prevent a suicide car bomb. This happened -- this blew up three Blackwater personnel and one State Department security officer up in Mosul.

PRINCE : It tossed a 9,000-pound armored Suburban 50 feet into the side of a building, followed by a whole bunch of small arms fire from the rooftops. A very serious ambush killed four Americans that fast.

TIERNEY: My question was, if you're not disputing the fact that on some occasions when your people might be afraid that something like that is going to happen, that they may fire first, ask questions later.

PRINCE : Sir, the -- like I said, the bad guys have made a precision weapon. 

The Air Force has a system called a DIRCM -- Directional Infrared Countermeasures. It's used to break the lock of an incoming surface- to-air missile. Shines a laser in the seeker head, the missile breaks lock and it veers away.

We have to go through a use of force continuum to try to break the lock of this potential deadly suicide weapon: hand and arm signals, sirens, signs at the back of the vehicles, water bottles, pen flares, shots to the radiator, shots to the windshield before we even go to a lethal force option.

So, our guys do go through it. But they...

(CROSSTALK)

WAXMAN: The gentleman's time has expired.

TIERNEY: Mr. Waxman, I'd like to just finish up my thought. And if I might, I think there's been fairly good...

WAXMAN: If you could do it in...

TIERNEY: ... information on the part of the committee here.

WAXMAN: ... seconds, rather than minutes.

TIERNEY: Thank you.

The point being made is that there are instances that you're not denying that -- where people shoot first on that. And when you multiply that by the number of times it happens, the number of people and Iraqis that are implicated in those situations, the number of people that they tell, it goes against our counterinsurgency effort and it goes to the issue of whether or not we ought to have military personnel doing the job; whether this is an inherently government function that we ought to have done on the public side of it, as opposed to having contractors who, by what we see here today, really don't have much accountability be exercised over them by either the State Department or the Department of Defense.

I yield back, Mr. Chairman.

WAXMAN: Gentleman yields back the rest of his time.

And the chair now recognizes Mr. Duncan.

DUNCAN: Thank you, Mr. Chairman.

BURTON: Excuse me, Mr. Chairman.

Mr. Prince , did you want to respond to what was just...

WAXMAN: That wasn't a question. That was a statement and the member...

BURTON: Well, I know. But when an allegation...

WAXMAN: Mr. Duncan is recognized.

BURTON: Mr. Chairman, when an allegation is made...

WAXMAN: Mr. Duncan is recognized; you're using his time.

(CROSSTALK)

DUNCAN: Thank you, Mr. Chairman. 

The Washington Post reported yesterday. It said, "Army General David H. Petraeus, the top U.S. commander in Baghdad overseeing more than 160,000 troops, makes roughly $180,000 a year or some $493 a day." That comes out to less than half the fee charged by Blackwater for its senior manager of a 34-man security team. 

Our committee memorandum says using Blackwater instead of U.S. troops to protect embassy officials is expensive. That's putting it lightly. Blackwater charges the government $1,222 per day for the services of a private military contractor. This is equivalent to $445,000 per year; over six times more than the cost of an equivalent U.S. soldier.

This war has produced some of the most lavish, most fiscally excessive, most exorbitantly profitable contracts in the history of the world. And it seems to me that fiscal conservatives should be under no -- should feel no obligation to defend this kind of contracting. In fact, it seems to me that fiscal conservatives should be the ones most horrified by this.

And I notice in the table that Blackwater's contracting has gone from $25 million in 2003, $48 million in 2004, to $593 million in 2006. If we are going to be there another 10 years as some have said, I surely hope that we're not going to continue to see these types of ridiculously, excessive increases in the contracts that are being handed out.

I also notice that Blackwater is a subsidiary of the Prince Group -- of Prince Group Holdings. And another one of the holdings of that firm is Presidential Airways, an aviation company that has held a contract with the U.S. Air Force Air Mobility Command. Mr. Prince , can you tell me what percentage of Prince Group Holdings comes from federal contracts of all or any types?

PRINCE : Could you say the question again? I'm sorry, I didn't quite hear you.

DUNCAN: Can you tell me -- I don't know what all companies are in -- I don't know all the companies that are in your Prince Group Holdings. Apparently, there is a Presidential Airways. I don't know how many other companies there are. 

What I'm wondering about is how much of Prince Group Holdings comes from federal contracts of any and all types.

PRINCE : Most of Prince Group Holdings come from federal contracts. 

But if I could just come back and answer your statement about prices that we charge, that $1,222...

DUNCAN: When you say "most," does that mean 100 percent?

PRINCE : No.

DUNCAN: Rough guess, what percentage?

PRINCE : Rough guess, 90 percent.

DUNCAN: Ninety percent.

Do you still have a contract with Presidential Airways with the Air Force Mobility Command?

PRINCE : Yes, sir.

DUNCAN: And, rough guess, how much is that contract each year?

PRINCE : I don't know what the exact number is, sir. It's for eight aircraft right now. I don't know what they price out at.

DUNCAN: What other companies are in Prince Group holdings?

PRINCE : There's a long list. 

I've got a manufacturing business that has nothing to do with federal stuff and we make pieces and parts for automotive, appliance, industrial, power. We compete against the likes of the Japanese and Koreans and European companies every day.

But if I could just answer the question about how much we charge, those are competitively bid prices. The $1,222 cited in the report is not accurate. 

You also -- the committee should have received this. I don't know if you've seen that. It lays out (inaudible) bill rates for an average security guard. (inaudible) is $981, not $1,222. And our profit on that, projected to be 10.4 percent; nothing higher.

And on top of that, I can tell you we have three helicopters that have been shot down this year -- Little Bird, two Bell 412s. Those are company helicopters and when they go down, that comes out of our hide. We have to self-insure on those.

So, the risks we take -- the financial risks -- whenever an aircraft is doing a mission for the State Department or responding to some medevac need above and beyond the statement of our contract -- trying to pull a U.S. soldier out of a bad wounded situation -- we take that risk as a company and our guys do, themselves, at great personal peril.

PRINCE : So it is not just about the money. We're a business. We try to be efficient and excellent and deliver a good service. 

We're happy to have that argument, sir, about -- not the argument, the discussion -- sponsor and activity-based cost study. What would it cost to the diplomatic security service to bring all those folks in-house as staff? Look at it. We're happy to have that argument. If government doesn't want us to do this, we'll go do something else. But there's plenty of case to be made and plenty of spreadsheets to be analyzed. 

WAXMAN: Gentlemen's time has expired. 

Chair now recognizes Mr. Clay.

CLAY: Thank you, Mr. Chairman. 

Mr. Prince , I am truly disturbed by reports of Blackwater contractors wreaking havoc on innocent Iraqi citizens. I'm equally troubled that taxpayers have been taken for a ride by paying six times the cost of a U.S. soldier for Blackwater contractors. 

Now, Mr. Prince , you have argued that Blackwater provides a cost- effective service to the U.S. government in part because, by hiring private contractors, the government can avoid paying carrying costs such as training, salaries and benefits. 

Yet, in your written testimony, you state, "The Blackwater personnel are all military veterans and law enforcement veterans; many of whom have recent military deployments." 

Since so many of your employees have recently left government service, doesn't that mean they have received years of specialized training at the expense of the federal government?

PRINCE : People serve the U.S. government for different periods of time and that's a choice they make and have been making since the U.S. has had a standing military. They serve for four years, they serve for six, they serve for 20 or 30. 

CLAY: So U.S. taxpayers are paying for their training?

PRINCE : They're paying for that anyway. We provide a vehicle, a mechanism for the U.S. government to utilize that some costs that they put into the training for these people, we reorganize it and package it in a way to fill these gaps that the U.S. government has in these kind of contingency operations. 

To stand up 1,000-man -- or actually you can do 3,000 man, at least, Military Police brigade to do this kind of work because for every person that's deployed, they're going to have two more back stateside; one in training and one in standdown. 

So you spend that (inaudible) and the costs get big very quickly.

CLAY: You know...

PRINCE : So we're just reorganizing those skills the government has already paid for to put them back to work.

CLAY: Last week, Defense Secretary Robert Gates expressed concern that Blackwater and other private military contractors are actually poaching the military's ranks, luring servicemembers away with much higher salaries.

CLAY: When Secretary Gates testified before the Senate Appropriations Committee, he said he has asked Pentagon officials to work on drafting noncompete clauses in order to put some limits on the ability of these contractors to lure highly trained soldiers out of our forces to go and work for them.

How do you feel about noncompete clauses, Mr. Prince ?

PRINCE : I think that would be fine. But the fact is, everyone that joins the military doesn't necessarily serve 20 years. So at some point, they're going to get out, after four, six, eight, whatever that period of time is, whatever they decide, because we don't have a draft. We have a voluntary service.

I think it would be upsetting to a lot of soldiers the ability to go, use the skills that they've accumulated in the military, to go work in the private sector.

Because you could make the same case about aviation mechanics, jet engine mechanics, guys that work on the reactor on the submarine. All those skills have direct correlation to private sector. I don't think putting noncompetes in for them would do well to draw guys in the military in the front side, either.

Again, the (inaudible) study found that the special operations community, yes, folks are getting out, and they go to MBA school, they become some other private sector job. Yes, a lot of them come to work for companies like us. But not at any higher rate than they ever did before.

CLAY: Well, I mean, if the Pentagon adopts the noncompete clause, I mean, it certainly indicates to me that the secretary is really concerned about you all poaching on our service personnel. And that's what it indicates to me.

Let me also say that to the viewers of C-SPAN today, this Congress and those in -- some in this Congress and the administration seem to be steeped in hypocrisy, as far as taking these frequent flyers to the Green Zone in Baghdad, when you look at, they are some of the same ones who would never lift a rifle to defend this country in Vietnam, but yet ridicule and criticize those who have not traveled to Baghdad.

I just want the American public to be aware that some in here are steeped in hypocrisy.

And I yield back my time, Mr. Chairman.

WAXMAN: The gentleman's time is concluded. 

The gentleman from Idaho, Mr. Simpson?

SIMPSON: Thank you, Mr. Chairman.

I come from Ohio. And Ohio is known, frequently, as the heartland. And in the heartland, there are few things that are easy that are not so easy in Washington D.C. Even in Hollywood, some of these things are easy. And those are the issues of who's on our team and who's on their team.

And today, I'm a little saddened by this hearing because I am absolutely a supporter of congressional oversight and believe that this committee has incredible functions that we have to do.

Our witness today even talked about being a contractor, the questions that we should be asking of reliability, accountability, costs. Many of -- a lot of the information we have before us is about dollars, rules of engagement and the like.

But what unfortunately dissolves into our team versus their team, by any account -- by Hollywood's account, by the performance account -- Blackwater is our team. They are our team working in the trenches and in a war zone.

I haven't heard many questions in this committee about the rules of engagement or the limits on the work of Al Qaida or the insurgents. In fact, I don't recall one hearing in this community where these has been indignation or troubling responses as a result of the senseless and heartless killings of Al Qaida and the insurgents.

But I hear today huge concerns over what we must exert as oversight on Blackwater and I think it crosses the line between our team and their team. Blackwater has questions to answer and I believe that they are prepared to do that and, today, have come forward to do those things.

But we should not go to the extent of undermining Blackwater's ability to perform as our team. The Washington Post, today, in its editorial -- in reviewing how this issue has come to light stated, "Congressional Democrats despise the firm because it symbolizes the private contracting of military missions that many oppose in principle."

This is the Washington Post saying that the congressional Democrats are despising this firm because of its engagement in military missions that they oppose.

The Washington Post goes on to say, "At the same time, it is foolish" -- that's a pretty strong word for the Washington Post -- "At the same time, it is foolish to propose the elimination of private security firms in Iraq and Afghanistan, at least in the short term."

I would hope as we continue our important functions of oversight that we don't undermine our team. Now, Mr. Chairman, you made a comment that I've got to respond to in your opening statement -- it's written in your opening statement. And it says, "As a general rule, children from wealthy and politically connected families no longer serve in the military."

Mr. Chairman, that's an attack on our team. I can tell you that Duncan Hunter -- former chairman of the Armed Services Committee, currently ranking member -- whose son has served in Iraq, would disagree with you. Joe Wilson, member of the Armed Services Committee, whose son served , would disagree with you. 

And I can tell you that the DOD, in its report on social representation in the U.S. military services, and the GAO, in their September 22nd, 2005 report, would disagree with you.

Quoting from the DOD report, it says, "Our population representation report shows both a diversity and quality of the total force. Men and women of various racial and ethnic groups, of divergent backgrounds from every state in our country serve as active selective reserve enlisted members and officers of the Army, Navy, Marine Corps and Air Force and Coast Guard.

SIMPSON: On particular note, the mean cognitive ability and educational levels of these soldiers, sailors, Marines, airmen and Coast Guardsmen are above the average of comparatively aged U.S. citizens. The GAO in their report similarly confirms that between 1974 and 2000 the force became older and better educated.

So I would hope that the comments by the chairman are not interpreted as what I heard them as, as diminishing the abilities of the backgrounds of those who serve in our military.

Mr. Prince , my question for you, you are free of some of the limiting acquisition rules that our military is subject to. A general has a different ability to be able to acquire something as you do corporately.

Could you give us some insight as to how our acquisition rules inhibit our military in performing some of the things that you do and ways in which we can change those acquisition rules to deliver to them the things that they need?

PRINCE : Thanks for that question.

I would say we find that the requirements process for the military constantly looks for the 120 percent solution, and it over- specs the electronic capability -- I mean, there's an enormous amount of extra stuff and capability put on a vehicle that might not be necessary to just fulfill that job. 

I mean, if you're going to -- you could almost buy vehicles just planned on for Iraq right now almost off the shelf, without having to plan about netcentric warfare and all the other bells and whistles that sometimes the DOD wants to put on things.

So we buy to solve the situation at hand.

WAXMAN: Gentleman's time has expired.

And I want to apologize to the gentleman for indicating that he's from a different state than Ohio. He's a proud Ohioan. And I certainly wouldn't agree -- I want to agree with him. I hope nobody misinterprets my comments.

Now call on Ms. Watson?

WATSON: Then I want an apology for the reference to Hollywood. That's the area that I represent here.

(CROSSTALK)

WATSON: But I want to commend Mr. Prince for his duties, for his skill, and for his heading up Blackwater. However, when I hear that one of the patron saints of some people, Rush Limbaugh, called our soldiers, who had been critical of the experience in Iraq, "Phony soldiers." 

I am offended and you should be offended too. And there was a sign over there earlier, Mr. Chair, the General Petraeus satire. And I had sent a message that it should be taken down because it was insulting to people. 

WATSON: And I think that people who call our soldiers, who speak from experience, "Phony," ought to be made to apologize.

(UNKNOWN): Would the gentlelady from Hollywood yield for a question?

WATSON: No. I will not yield because I have just a little time. Let me say this: I am really concerned when it comes to privatizing. The various struggles that we are having in a war zone -- and I'm looking at a book here that says, "Blackwater: The Rise of the World's Most Powerful Mercenary Army." 

That is really disturbing to me because I feel that every young man and woman or every man and woman in the military ought to be paid for their service. And I think you're making a good argument for the among of money that you have been paid, your organization. 

And I think my question is: Do you feel that we ought to continue on with privatizing the kinds of duties that our military should be trained to execute?

PRINCE : Ma'am, the United States military is the finest, most powerful military in the world.

WATSON: Absolutely.

PRINCE : Bar none.

WATSON: And they should be paid accordingly.

PRINCE : It's designed for large-scale, conventional operations. What they did to Saddam in '91 and then...

WATSON: Well, then, there's something wrong with the design. And that's my point.

I think you responded, and I hear you clearly. You're providing a service. And I commend you -- let me just continue on. You are providing a service. 

And those little voids, Mr. Chairman and committee members, ought to be filled by the young -- the people who volunteer. We have no draft. These are volunteers. And why should they put their lives on the line for this country and not be compensated so their families back at home don't have to go on welfare and are living in housing that is substandard?

And I am just infuriated, not with you, but with the fact that our State Department and our Department of Defense cannot see their way -- and they talk about, "We don't have the money," saving money. This war is costing us a trillion dollars. You have been paid over a billion dollars, and will continue to be paid, so that you can buy the helicopters that are shot down. 

And so my question to you: Are we going to have to continue to privatize because we're not training to do what you do? And would it not be better to hire you to train our military to do the kind of guarding or of VIP personnel? 

Whenever there's a CODEL, you have to guard them; when people from the State Department come, you have to guard them, because we say that our military is not prepared and not trained to do that.

PRINCE : Well, ma'am, I'm happy to say that we do a significant amount of training for the U.S. military every day at a couple of facilities we have around the country.

WATSON: But you're saying that you fill in a specialty area. And my question (inaudible) to all of us is why can't we train these people who are willing, who have courage, to go in to the military, but then we have to bring on a private firm to do the job they should be trained to do, and pay them three or four times more than we pay those who choose to serve their country by fighting in-theater.

PRINCE : The military could do that. But the U.S. military can't be all things to all people all the time.

WATSON: Why not?

WAXMAN: The gentlelady's time has expired.

PRINCE : A shortage of time and distance. I mean, you can't have an anti-air missile guy also be doing PSD missions and knowing how to be an aviation mechanic. It's too broad of a base of skill requirements.

WATSON: So we need more people.

WAXMAN: Mr. Issa?

ISSA: Thank you, Mr. Chairman. 

ISSA: Boy, there's so many inaccuracies, so little time. Perhaps lets start with something from the gentlelady from Hollywood. Isn't it true that, in fact, the military's mission has historically not been to guard VIPs or the State Department as a whole?

PRINCE : Correct. Yes, sir.

ISSA: Isn't it true, that in fact, your organization works under the regional security officer for Baghdad?

PRINCE : Yes, sir.

ISSA: And isn't it true that contractors have been used directly and indirectly? In other words, nonfederal employees in places like Beirut, Afghanistan, Bosnia under the Clinton administration. Routinely, isn't there a historic time in which we use non career RSO (ph), you know, foreign service officers for these jobs?

PRINCE : Since the founding of the republic.

ISSA: OK. So we're not talking about the military here at all, including, with all due respect to Secretary Gates -- somebody -- if the State Department recruited for the position you're presently providing, they would be, in all likelihood, repeating -- recruiting either current or prior military, wouldn't they?

PRINCE : Yes, sir.

ISSA: OK. And is it reasonable for the State Department to own attack helicopters or (inaudible) helicopters that are weaponized?

(CROSSTALK)

ISSA: Let's look at it another way. Outside of the two theaters, Afghanistan and Iraq, do you know of any place in which the State Department owns or directly controls weapons, gunships, if you will, to protect convoys?

PRINCE : They do some crop eradications and cocaine eradication work in Colombia. That's the only place I know of.

ISSA: OK. So this is an unusual mission and one that begs for not creating a career position for, you know, foreign service officer helicopter pilot. There'd only be about two or three places they'd ever be. Isn't that true?

PRINCE : Actually, those are all...

(CROSSTALK)

ISSA: I agree. I'm very well aware of that. And that's the point, I guess, is that we're having a hearing that is supposed to not be about your company, and supposed to not be about one incident on September 16. It's supposed to be about cost effectiveness of contractors, isn't it?

PRINCE : Yes, sir.

ISSA: And I wish we were bringing in facts and figures about, let's say, $600 billion of DOD contracts -- or DOD cost into 1 million soldiers so that we could kind of go, "Well, isn't that about $600,000 for every soldier?" 

Isn't, in fact, the cost of the Department of Defense, the military, far greater than what we pay our men and women in uniform at the times they're in combat?

PRINCE : I don't know what those numbers are, sir, but that would be a great, fully burdened cost study that Congress could sponsor. They don't have to do the whole thing, just take some key nodes and really study it.

ISSA: Well -- and hopefully we will. Hopefully we will get to serious discussion on these issues, because I think that, looking at the cost-benefit should always be done. And I don't want to, for permanent requirements, I don't want to use contractors if, in fact, federal employees would be more appropriate.

I will mention one thing, is if you're feeling a little pressure today, if it's a little tough, just be glad you don't make a diabetes drug. 

(CROSSTALK)

ISSA: Be glad you don't make a diabetes drug. Compared to what we did to the Avandia makers, GlaxoSmithKline, you're getting off easy, trust me. They had their product destroyed by jury-rigged testimony and studies that were essentially co-opted in advance.

But let's just go to one area that I think hasn't been discussed, and others might not discuss it. 

Is your sister's name Betsy DeVos.

PRINCE : DeVos.

ISSA: Yes. Is that your sister?

PRINCE : Yes, it is.

ISSA: And was she a former Michigan Republican Party chairwoman?

PRINCE : Yes, she was.

ISSA: And was she a Pioneer for Bush?

PRINCE : I don't know. Could be.

ISSA: Was she a large contributor to President Bush?

PRINCE : They probably were.

ISSA: And raised a lot of money for President Bush?

(CROSSTALK)

ISSA: Went to the Republican conventions in 2000, 2004.

PRINCE : I would imagine they did, yes.

ISSA: Isn't it true that your family, at least that part of the family, are very well known Republicans?

PRINCE : Yes.

ISSA: Wouldn't it be fair to say that your company is easily identified as a Republican-leaning company and in fact the Amway company somewhat so because of family members there?

ISSA: You don't have to speculate overly, but isn't that generally something you understand?

PRINCE : Blackwater's not a partisan company. We haven't done any, you know, we execute the mission given us, whether it's training Navy sailors or protecting State Department personnel. 

Yes, I've given individual political contributions. I've done that since college, and I did it when I was an active duty member of the armed services. And I'll probably continue doing that forward. I don't give that -- I didn't give up that right when I became a defense contractor.

ISSA: Mr. Chairman...

WAXMAN: The gentleman's time has expired.

ISSA: ... just to finish the thought, like we did on the other side of the aisle, I think you're exactly right, that, in fact, while being identified as partisan Republican, in fact your company appears to have done what all companies do, which is, in fact, to operate, to do the job they're doing in a nonpartisan way.

And I would hope that this committee and the public takes note that labeling some company as Republican-oriented because of family members is inappropriate. And I would hope that we not do it again.

And I yield back.

WAXMAN: Well, the only one who's done it is you.

(LAUGHTER)

ISSA: Mr. Chairman, I think it's been made -- I think the...

WAXMAN: Maybe that's why all the Republicans are defending the company.

Well, Mr. Yarmuth, it's your time.

YARMUTH: Thank you, Mr. Chairman.

Mr. Prince , welcome. Thank you for your testimony.

PRINCE : Thank you, sir.

YARMUTH: I want to focus on the whole issue of cost and profitability. And I want to clarify something. You talked at one point about the fact that what you are essentially doing is bidding for people who would otherwise be able to make as much money as you would be paying them in the private sector.

And, first of all, some of that defies imagination, because we're talking about essentially $400,000 to $500,000 worth of cost per individual per year to the government, which would put that individual or that job category in the highest 1 percent of income earners in the country. 

So my question would be -- and this is not in any way to impugn or to minimize the value of Navy SEALS, but outside of a military setting, where could a Navy SEAL for those talents make $400,000 to $500,000, if it weren't for a government contract?

PRINCE : I don't know of any of our people that have made $400,000 - $500,000 working as a contractor. They're not getting paid that much. They get paid for every day they're in the hot zone. So it's very much like a professional mariner's existence. They go to sea, they get paid every day they're in the hot zone. The day they leave, their pay goes to zero.

Average pay, hypothetically, around $500 a day. We don't pay the thousand dollars a day. That's a huge misperception. That's a flat- out error in the media. So if you took $15,000 a month and they work for six months, it's $90,000.

YARMUTH: But that's not the cost of that job to the American taxpayer. 

(CROSSTALK)

PRINCE : Yes, sir. But they're not showing up at the job naked.

They need uniforms, equipment, body armor, boots, everything you wear from head to toe.

YARMUTH: Right.

PRINCE : Their training, their travel, their insurance, sometimes their food. I mean, there's very, very sophisticated price models that we bid competitively for hundreds and hundreds of line items. Believe me, our folks earn a lot of electrons putting those price models together, because they're -- you really got to know what you're doing on the front end.

But, again, it is a competitively bid product.

YARMUTH: I appreciate that and I want to pursue that a second.

But I do have, in front of me, an invoice from Blackwater to the Department of State, in which one of the items is -- invoice quantity 3,450 units each at a cost of $1,221.62. That's your invoice, so...

PRINCE : I'm not sure that invoice is...

(CROSSTALK)

YARMUTH: I'd be happy to submit that for the record.

We dealt, several months ago, with a situation in which I don't believe you were a subcontractor -- your company was a subcontractor for the State Department -- or contractor. You were a subcontractor -- and I'm relating -- I'm talking about the incident in Fallujah where four of your employees were ambushed and killed and we had testimony from two of their wives and two of their mothers several months ago. 

And in the course of that testimony, it was -- we were told that they had actually contracted each of them at a rate of $600 a day; that's what they were to be paid.

By the time it got to the American taxpayer, it was around $1100 a day. You were the third subcontractor under a contract or given to KBR, as I recall, a Halliburton -- then a Halliburton subsidiary -- and we asked the question -- of all of those subcontracts, did anybody add value up the ladder for that additional $500, based on -- and we asked, did they provide any special equipment, any special services, whatever.

YARMUTH: And the answer was no. So in that case that's not your profit but it appears to us -- it appeared to us that by and large that additional $500 that the American taxpayer paid for that one person was largely profit to three different corporations. 

Now, can you shed any light on that situation? 

And I don't believe, again, that was, I think a Defense Department contract and KBR was just delivering supplies to troops. And you were guarding the convoys.

PRINCE : That could easily be -- I'm not completely familiar with the contracted and subcontracting arrangement that you're speaking of. But I can tell you that I work with the State Department, directly (inaudible) State Department, and there is no other intermediaries adding costs or not adding value.

YARMUTH: OK. One other question I want to ask. You made the comparison, again, about that we have to bid for these people. But isn't there a significant distinction? 

I understand if we, the military, trains the pilot and then the pilot goes out and is bid for by commercial aircraft and so forth, that's the private sector bidding. But, in this situation, the American taxpayers are bidding against themselves because we trained Navy Seals. Navy Seals then go into your employ. Then the Navy has to bid, as I understand -- in one report -- $100,000 to get them back. 

But we're bidding against ourselves, aren't we? We're not bidding against another external competitor? 

PRINCE : The nature of the demand of this, especially, it grew for Blackwater not -- it grew even before 9/11. It grew after the Cole was blown up, that Navy ship. So, now, in a post-9/11 world you have a lot of different demands for those kind of skill sets that are much higher demand than they were in the late '90s. So that is a changing nature of the market.

WAXMAN: Gentleman's time has expired. 

Mr. McHenry?

Mr. Westmoreland. I'm sorry. 

Mr. Westmoreland?

WESTMORELAND: Thank you, Mr. Chairman. And just to clarify a little bit about who's calling who a Republican company, I want to read from a December 13, 2006 letter from Callahan and Blaine to Ms. Pelosi, Mr. Waxman, Senator Dorgan, Senator Reid, Representative Chris Van Hollen. 

"Nonetheless, as American citizens, we hereby petition to you to initiate support and continue the congressional investigations into war profiteering and specifically Blackwater's conduct."

WESTMORELAND: "Now that there has been a shift in power in Congress, we are hopeful that your investigation, as well as the investigations by Senator (inaudible) and Senator (sic) Waxman will be taken seriously by these extremely Republican companies such as Blackwater, who have been uncooperative to date, and that these investigations will be fruitful and meaningful."

And, Mr. Prince , you may recognize that name because I believe they also are the attorneys from some people who are suing you.

Mr. Prince , first of all, let me give you a little background probably as to why you're here. There is a party in Congress that does not like companies who show a profit. If you're wealthy, they figure you should have paid more taxes or that you're a crooked businessmen. They do not understand someone who is an entrepreneur and offers a valuable service that is above its competitions and that is based at a competitive price.

They want to fight a war with no casualties. They exploit our children, whether it is with a plan that will socialize medicine in this country or the horrible situation when innocent children are victims of an act of war. 

They often have hearings such as this to bias lawsuits that their crony lawyer friends may be handling. There is no cost to high for them for citizens to pay, citizens of this country, whether it is the price of personal integrity or more of their wealth, as long as it moves forward with the ultimate goal of redistribution of wealth or other successes for the takers of this world.

They love to have their cake and eat it too, though. For instance, they think the Iraqi government is corrupt and inept, but, yet, they question you about taking one of your former employees out of the country with the government's permission.

Another example: They say the military should be doing your job, yet they don't want additional troops sent to the theater.

WESTMORELAND: One more example, Mr. Prince , is they complain about what our military personnel makes and then they complain about what you pay the same people that they complained about making so little. 

So you can see that there is some confusion.

I also want to point out to you that nine of the 22 members on this panel that voted, voted that they agreed with MoveOn.org's attack on General Petraeus.

Let me ask you, Mr. Prince , what -- well, let me say, some of Blackwater's critics have stated that the firing of personnel has been surprisingly frequent. 

Have you or your managers ever fired an employee for doing a good job?

PRINCE : Not that I know of. And...

WESTMORELAND: I don't think anybody does, do they. So if one of your employees was doing a bad job or not meeting your criteria, then those are some of the people that you got rid of, right?

PRINCE : If they don't hold to the standard, they have one decision to make: window or aisle.

WESTMORELAND: And, Mr. Prince , what kinds of professional backgrounds do most of your security personnel have?

PRINCE : All of our personnel working on the WPPS-type contract come from the U.S. military or law enforcement community. They have a number of years of experience doing that kind of work, ranging from five, eight years, up to 20 or 30 years of experience. They are discharged honorably. Most of them are decorated. They've gotten out of the military to choose -- to take another career path. And so we give them ability to use those skills back again working for the U.S. government. 

And let me just say: We are not a partisan organization. That's not on the interview form when you come to work for Blackwater; what party you affiliate with, at all. We affiliate with America. 

WESTMORELAND: I understand.

PRINCE : And the idea that people call us mercenaries, we have Americans working for America, protecting Americans. And...

WESTMORELAND: And I think you do a very good job. 

PRINCE : And the Oxford dictionary, you know, details a -- defines a mercenary as a professional soldier working for a foreign government. And Americans working for America is not it.

PRINCE : Yes, we have a handful of, we call them third-country national folks, folks from Latin America. They guard some gates and they guard some camps. They don't leave that area. They're static guards. Our PSD guys are Americans working for America. 

WESTMORELAND: Thank you sir.

WAXMAN: The gentleman's time has expired. 

Mr. Braley?

BRALEY: Thank you, Mr. Chairman. 

Mr. Prince , my best friend Mary -- Mary Lubbers (ph), whose father and grandfather were the presidents at Hope College...

PRINCE : Small world.

BRALEY: I want to start by asking you about a question you -- or a statement you made on page 3 of your written statement that you shared with the committee, where you wrote: "The company and its personnel are already accountable under, and subject to numerous statutes, treaties and regulations of the United States." 

And then you went on and attached to your statement a list of existing laws, regulations and treaties that apply to contractors and their personnel. 

Is that the document that I'm holding up?

PRINCE : Yes, sir.

BRALEY: Is it your testimony today, under oath, that all Blackwater employees working in Iraq and Afghanistan are subject to the Uniform Code of Military Justice, the Military Extraterritorial Jurisdiction Act and the War Crimes Act?

PRINCE : It is my understanding that is the case. Yes, sir. 

BRALEY: All right. Well, let's look at this document. I want to ask you about it. This document, the Uniform Code of Military Justice, applies in the time of declared war. 

You would agree that there has been no declared war in Iraq or Afghanistan?

PRINCE : No, but I believe it's been amended to include contingency operations.

BRALEY: Is it your understanding that a contingency operation would apply to what's going on in Iraq and Afghanistan?

PRINCE : I'm not a lawyer, but my layman's understanding is yes.

BRALEY: All right. And then it says: to persons serving with or accompanying an armed force in the field. Do you see that?

PRINCE : I don't have it in front of me, but you're reading from it.

BRALEY: Well, I'm just reading from the document that you provided to us.

If that's what the Uniform Code of Military Justice provides, you would agree that based upon your own description of the activities of your company, there are times when your employees are not serving with or accompanying armed forces in the field?

PRINCE : There are times when U.S. military units are actually embedded in our motorcades.

BRALEY: But to answer my question, there are times when your employees are not serving with or accompanying armed forces in the field. Isn't that correct?

PRINCE : Sir, I'm not a lawyer. So I'm not going to give you that level of detail. If you went to a clear written statement as to the "accompanying" opinion, I'm sure the State Department can answer what their opinion is on that. 

But we've looked at it, and we feel comfortable that our guys could be brought under investigation with those ruling legal authorities over their heads.

BRALEY: And then let's look at Military Extraterritorial Jurisdiction Act, Section 3261, criminal offenses committed by certain members of the armed forces and by persons employed by or accompanied by the armed forces outside the United States. 

You would agree that there are circumstances where your employees would not meet that definition, based upon their service in Iraq and Afghanistan?

PRINCE : I believe that was changed, yet again, to include any U.S.-funded contract.

BRALEY: Well, that's the definition that applies to U.S.-funded contracts from the statute.

PRINCE : Again, I'm not a lawyer, sir. I'm sorry.

BRALEY: Then, let's look at the War Crimes Act of 1996, which applies if the perpetrator is a U.S. national or a member of the U.S. armed forces. 

You would agree, based upon your testimony today, that there would be circumstances when some of your employees would not meet the definition of perpetrator to be covered by the War Crimes Act?

PRINCE : Again, I'm not sure, sir.

BRALEY: Will you testify that, if you hired some third country nationals, they would not be U.S. nationals, would they?

PRINCE : That's correct.

BRALEY: And they would not be members of the U.S. armed forces?

PRINCE : But they're serving in a U.S. DOD contingency operation.

BRALEY: Then, let's talk about these payments that have been made as a result of deaths that were related to the conduct of Blackwater employees. One of the payments that we've been provided information about was this $15,000 payment to the guard family who was guarding Iraqi Vice President Mahdi.

Are you familiar with that payment?

PRINCE : Yes, sir.

BRALEY: Did you have any input into the determination of the amount of that payment?

PRINCE : I discussed it with some State Department officials, yes.

BRALEY: Did you feel that it was a satisfactory level of compensation for the loss of that individual? 

PRINCE : I believe the cash that was paid was actually $20,000, not $15,000.

BRALEY: All right. $15,000 or $20,000. Based on the information that we've been provided, one of the things we know is that Blackwater charges the government $1,222 a day for the services of its -- some of its employees. Is that correct?

PRINCE : I believe that number is lower.

BRALEY: Well, assuming...

PRINCE : The chart that we provided the committee shows a blended average significantly less than that.

BRALEY: Assuming that figure is correct, if you take someone your age, in the United States and look at the U.S. life table, you'll find that somebody your age, in this country, has a life expectancy of 40 years. So if you were to take that rate of $1,222 a day, multiply it times 365 days a year, multiply it by a 40-year life expectancy, you would get a total lifetime earnings payout of $17,841,200. 

You would agree with me that pales in comparison to a payment of either $15,000 or $20,000?

WAXMAN: Gentleman's time has expired. You can answer the question.

PRINCE : Actually, your calculations there don't make any sense to me because that charge, that $,1200 charge that you're talking about as claiming that we charge the government, that includes aviation support. Some of those helicopters that got shot down, that comes out of our hide -- gear, training, travel, all the rest. 

Some I'm not quite sure how that math works out. But I'd be happy to get back to you if you have any written questions.

WAXMAN: Gentleman's time has expired. 

Mr. McHenry?

MCHENRY: Thank you, Mr. Chairman. I want to go through a few facts and make sure we have this on the record. The gentleman's discussing costs and I want to sort of understand all the facts before we get to a conclusion here.

You were previously in the Navy SEALs. How long were you in the military, sir?

PRINCE : '92 through the end of '96.

MCHENRY: OK. What is the average time -- having been the seals, perhaps you would know this -- what's the average time a special forces operator is in the service?

PRINCE : Five, six years, up to 20. It really varies.

MCHENRY: But based on your experience...

PRINCE : That is where we make a decision point that about 12 years, whether they're going to stay for a career or whether they'll get out. So I give them 12 years. 

MCHENRY: OK. Let's say an operator retires from the military, at which point a Navy SEAL average -- a Navy SEAL is doing much more -- a much different operation. They're dealing with explosives, rather than defensive caravans and convoys.

What do you do with those individuals? Do you take Navy SEALS and put them right in there, right out under the streets? Is there training from Blackwater?

PRINCE : The personnel that deploy for us, they go through -- obviously, we've got their resumes. We do a criminal background check on them. When they've been accepted -- when the resume has been accepted by the customer, they come in for training. They go through another 164 hours of training and vetting at Blackwater tactics, techniques, procedures, driving, firearms, defensive tactics. 

They go through a full psychological evaluation, medical, dental exam, physical test, shooting tests. There is a very, very rigorous pre-deployment program they all have to do.

MCHENRY: That's coming out of expense.

PRINCE : Yes. And that's all baked into that daily cost.

MCHENRY: All right. Just for the record, when was Blackwater formed?

PRINCE : 1997.

MCHENRY: At what point did you receive your first government contract?

PRINCE : For the first number of years, our customers were individual SEAL platoons or a Marine recon platoon or A-Team. And it was down to the individual team sergeant or warrant officer paying with a credit card. Our first big government contract that we won, competitively, was the Navy force protection contract that they started off after the Cole was blown up.

We had a $1.5 billion blown up by two guys and a zodiac.

MCHENRY: What year was that?

What year is that?

PRINCE : We started that in 2001.

MCHENRY: OK. Who was your client in Iraq?

PRINCE : Department of State.

MCHENRY: OK. How many competitors do you have within this contract?

PRINCE : There are two others.

MCHENRY: Two others. OK.

PRINCE : And there was a big competition before then to be (inaudible) for the WPPS contract.

MCHENRY: And how is that contract awarded?

PRINCE : It's awarded competitively. You go through an enormous proposal process. They come and inspect your facilities, your training standards, the resumes of each of your personnel. They even have to accept and inspect the resumes of the instructors you're going to have. And they come and audit the program on an almost weekly basis.

MCHENRY: OK. So let's go forward. There's roughly 1,000 Blackwater contractors, operators. These former veterans that you -- or veterans that you now have trained that are out securing embassy staff and a number of civilians in Iraq. Let's say it's 1,000, just for purposes here. 

Roughly how much administrative staff to have associated with those 1,000 individuals?

PRINCE : We run that whole program -- instructors, program management people, that sort of thing -- with less than 50 people.

MCHENRY: With less than 50 people?

PRINCE : Yes, sir.

MCHENRY: So roughly it's 1,000 to 50 is the ratio from operators in the field to administrative staff?

PRINCE : Yes, sir.

MCHENRY: All right.

Now there's this notion -- we're not the Armed Services Committee here, but there's this notion of tooth-to-tail ratio, which means how many operators you have in the field and expense of them; how much administrative functions do you have. In active duty military, based on your recollection, what is that rough estimate?

PRINCE : What's the DOD's tooth-to-tail ratio?

MCHENRY: Yes.

PRINCE : I've seen as high as eight to one or even 12 to one.

MCHENRY: OK.

PRINCE : One tooth, eight to 10, 12 tail.

MCHENRY: So one individual in the field, 12 individuals outside of operating.

So the ratio, when you talk -- when these people on the committee talk about the expense of having that one operator in the field, it is far less for an individual contractor, when you're a private security contractor like you are in Iraq, it's fair more efficient for the total program to have a contractor because their tooth-to-tail ratio is far better than what it is in the active duty military.

MCHENRY: Therefore, the cost of that one operator in the field for all the support services they have associated with them is far less for a company like Blackwater than it is for the active duty military. And, you know, my time is up. 

But if you can actually discuss this with the committee in maybe in a minute or so explain the expense of the overall operations.

PRINCE : All I would say is...

WAXMAN: Gentleman's time is up. But, Mr. Prince , you can go ahead and answer.

PRINCE : I would just encourage the committee -- and would be happy to make some suggestions on areas if you can do a true activity based cost study. What does it cost the U.S. government to do XYZ functions in the field and do an accurate drawdown because, unless you know what something costs, everything before that or after that is...

MCHENRY: Is it your...

PRINCE : ... hyperbole.

MCHENRY: ... contention that it's far cheaper...

WAXMAN: The gentleman's time really has expired.

MCHENRY: ... for you to operate in the field. I just want him to answer this question if I could, Mr. Chairman.

WAXMAN: You didn't answer the...

MCHENRY: Is it your contention that it is much cheaper to the taxpayers for your activities as a contractor with the Department of State than it would be for active duty military to do the very same task because of that tooth-to-tail ratio?

PRINCE : Yes, because it's tough for the military to be all things, to all people, all the time. If they're going to continue to have air defense, artillerymen, all the other conventional warfare specifications -- qualifications they have, it's tough for them to do all things, all the time.

MCHENRY: Thank you.

WAXMAN: If you have some kind of document that backs up your statement we certainly would like to see it and we'd like to ask you to provide it to our committee.

PRINCE : Yes, sir.

WAXMAN: Thank you. 

Ms. McCollum?

MCCOLLUM: Thank you, Mr. Chair. 

Mr. McHenry and I had the opportunity to go to Afghanistan together where in fact the military did provide -- when we went out on visits -- did provide our security.

I also had the opportunity of being in Iraq where we had a private security detail take us from point to point. And there's been some discussion about who is more caring about getting on the ground and seeing what is going on.

MCCOLLUM: And I just wanted people to know for the record here that I've been both places and under both circumstances.

I'd like to follow up a little more on what Mr. Braley was talking about. You've provided this chart on contract -- contractor accountability. And you've made the statement that the DOD could bring charges against your contractors. Can the Department of State bring charges against your contractors?

PRINCE : I believe that would be done by the Justice Department. They do the prosecuting of those laws.

MCCOLLUM: Under the CPA order 17, contractors have immunity from the Iraqi legal system. Is that correct?

PRINCE : That's my understanding, yes.

MCCOLLUM: So, if a Blackwater contractor would commit as what an investigation might determine would be murder, on their own time -- then this was a Christmas Eve holiday, I believe, that you are describing or Christmas holiday -- do you believe the Iraqi government would not be able to charge that individual with a crime, even on their own time?

PRINCE : That's my understanding, yes.

MCCOLLUM: Do you believe that immunity should be repealed, if something happens when someone's quote/unquote "off duty" and an Iraqi is murdered?

PRINCE : I believe U.S. laws should be enforced, and you can have that justice system back here in America work.

MCCOLLUM: So you believe that the immunity under CPA order 17 should stand?

PRINCE : I believe so. I'm not sure any foreigner would get a fair trial in Iraq right now. I think they'd at least get a fair trial here in the United States.

MCCOLLUM: Your charts indicate that contractors are accountable under the Uniform Code of Military Justice. Your contractors work for the Department of State. 

Is the Department of State accountable under the Uniform Code of Military Justice?

PRINCE : I will not be presumptuous to answer for the Department of State, ma'am.

MCCOLLUM: Well, you've provide us -- you've told Mr. Braley that all your employees are under this chart. So, then you're saying that...

PRINCE : Well, ultimately, it's for the Justice Department to decide which avenue of jurisdiction they have.

MCCOLLUM: So this is just what you feel that people might be held under accountability with your contracts. This is just a feeling you have. You don't know any of that for a fact, do you?

PRINCE : I had legal opinions that I respect put that together and they gave their opinions that those were laws that State Department contractors, DOD contractors, contractors for the U.S. government could be accountable under.

MCCOLLUM: So, whether it's a feeling or an opinion, you cannot state for a fact -- for a fact -- that any of your contractors that have a State Department contract can be held accountable under the uniform code of military justice?

PRINCE : That's correct, ma'am, because that's for the Justice Department to decide.

MCCOLLUM: I think that's important to clear that up.

Do you operate in a military capacity or a civilian capacity?

PRINCE : Civilian capacity.

MCCOLLUM: So, now you're saying that civilians...

PRINCE : Well, our men are not serving members of the US military.

MCCOLLUM: So, what you're saying that civilians can be held accountable to the uniform code of military justice, in your opinion?

PRINCE : And I believe that's why they extended that not just to wars that were declared, but also to contingency operations, as well.

MCCOLLUM: To your knowledge, have there been any military courts or civilian courts that have held any of the contractors who have been charged or been accused of a crime in Iraq?

PRINCE : It's my understanding there was a conviction of a contractor that was working for the CIA that was convicted in North Carolina -- for actions in Afghanistan, not Iraq.

WAXMAN: Gentlelady's time is expired.

Mr. Jordan?

MCCOLLUM: Thank you, Mr. Chairman.

Thank you for answering my questions, I appreciate it.

PRINCE : Thanks for having me.

JORDAN: Thank you, Mr. Chairman. 

Mr. Prince , I, too, want to thank you for your service to our country and for the good work that your company has been doing in Iraq and Afghanistan.

Just want to pick up on a couple things that the Congressman from North Carolina had talked about; just some general questions. I know you've been sitting there for three hours. So just a few a questions then I'm going to yield some time to the gentleman from California.

How many employees does your -- you mentioned before, a little bit earlier, a thousand in the field, 50 administrative. But does that represent the entire workforce at Blackwater?

PRINCE : We have about 550 full time folks in the United States. A thousand, 1,100 or so in Iraq, and then hundreds more in little pockets around the world. The next greatest concentration, obviously, would be Afghanistan.

PRINCE : There's about 300, 400 there.

JORDAN: So a couple thousand working for you now?

PRINCE : More or less, yes, sir.

JORDAN: And you mentioned the extensive training when you -- some of the special operations individuals who then come to work for you after they leave military service and the training they undergo. 

I believe you said earlier that there was a study done that shows there was no higher exit rate or quicker exit rate, we will say, because of your company versus what typically happens. Is that true?

PRINCE : Right. It was a GAO study and it was not just directed at us, it was directed at the private security industry.

JORDAN: OK. And real quick, just tell me how does your -- in your testimony, in the opening paragraph you talk about you provide training to America's military and law enforcement (inaudible) and risk their lives to protect America -- Americans in harm's way overseas. 

So are there are several types of contracts that your company does, you do training contracts with the government, protective contracts? Or do you do one contract per year? Tell me how those work.

PRINCE : We have a number of different contracts. Never started this operation to be a security provider; started as a training facility. The SEAL teams, special forces, Marine recon, SWAT teams, those were our customers for the first few years. 

The Navy came after the Cole was blown up. We've trained well over 100,000 sailors since then how to protect their ships. We do -- through one of our affiliates we do aviation support in Afghanistan. We do...

JORDAN: Mr. Prince , how many contracts would you have right now with the federal government? Any idea?

PRINCE : More than 50.

JORDAN: OK.

PRINCE : Some are very small. Some are very big.

JORDAN: Again, I want to thank you for your service. 

And, Mr. Chairman, if I could yield to the gentleman from California.

ISSA: I thank the gentleman.

And I just wanted to point something out. 

Mr. Prince , did you see the memorandum dated October 1 -- that's yesterday -- that is entitled, "Additional information about Blackwater USA"? Comes out of Mr. Waxman's office, 15 pages.

PRINCE : I did see that, yes, sir.

ISSA: OK. Did you note that on page 5, Mr. Waxman and/or his staff said the following: "Blackwater is owned by Erik Prince . Mr. Prince is a former Navy SEAL who owns the company through a holding company." 

After that it begins to talk about the White House, your father, your father-in-law, your sister, et cetera, and basically talks about everything I asked you, the Michigan Republican Party, the donations.

So, Mr. Chairman, hopefully you'll appreciate that it was your staff that created everything that I brought up, and you put it out in writing one day before this hearing. 

And my question to you, Mr. Prince , is have you ever seen a bio about your life that starts off, you were a Navy SEAL, and then goes on to everything your sister did on behalf of the Michigan party and your Republican credentials?

Is this the first time you've seen a bio like this?

PRINCE : I love my sister very much, but it's not often our bios get printed together.

ISSA: Well, and, you know, it's interesting, because, you know, I'm noticing, you know, that for this committee, you know, a donor search done on the 29th of September at OpenSecrets.org was done to find out how much money you gave to who.

ISSA: Did you know that?

PRINCE : I did not know that.

ISSA: And do you think that's really germane to today, or do you think that attempts to paint you as Republican supporter?

PRINCE : I don't think it's germane today to today. I think we do good work and then mighty proud of the folks that we have doing the work.

ISSA: OK. And I heard a rumor that your company or someone in your company had given to the Green Party. Do you know about that? 

PRINCE : It could have been.

(LAUGHTER)

ISSA: OK. I just wanted to note that there were people on a both on the far left and the far right, relative to the chairman, who may have benefited by your company.

But, Mr. Chairman, I would ask that page 5 of your memo be considered as what I called it, an attempt to paint this gentleman and his company through Republican eyes to a Democrat base for political purposes. 

And I stand by my statement, Mr. Chairman. Yield back to the gentleman from Ohio.

T. DAVIS: Could I just ask one, just clarification, Mr. Chairman?

WAXMAN: Yes.

T. DAVIS: Your first contract, Mr. Prince , government contract was in 1997, wasn't it?

PRINCE : Yes.

T. DAVIS: '98?

PRINCE : Well, no, our first customer -- we started the business in '97. The first customer was January of '98.

T. DAVIS: First federal customer was under the Clinton administration.

PRINCE : Yes, sir.

WAXMAN: The gentleman's time has expired. 

I'd like to now recognize Mr. Cooper.

COOPER: Thank you, Mr. Chairman.

Mr. Prince , in the charter or bylaws of your corporation, either the holding company or Blackwater, does it say explicitly that it will only work for the United States of America or its entities?

PRINCE : No, it doesn't.

COOPER: So...

PRINCE : If I could clarify, anything we do for any foreign governments, any training of anything, from law enforcement training to any kind of aviation training, tactical flying, any of that stuff, all of that is licensed back through the State Department -- another part of the State Department.

COOPER: But you're the owner of the company, the CEO. If limitations like this are not in the charter and bylaws, isn't there a risk that should something happen to you, that different management, in order to maximize profits, might seek contracts from any number of other foreign countries? Like, if Vladimir Putin offered a lot of money, why would you want to turn that down as a business entity.

PRINCE : Because you'd be violating federal law, and the whole place could be shut down very, very quickly.

COOPER: But you're assuming a State Department license would apply.

PRINCE : Oh, it does.

COOPER: You're a private company. You can...

PRINCE : No, no, no, sir. I'm sorry -- we have to have a license to train...

COOPER: But I'm not talking about training other people's private place. Say you took some of your former people who are former Navy SEALs, special forces, whatever, and they're working for hire. What prevents you in your current company charter or bylaws to prevent those -- hiring out those people to foreign governments?

PRINCE : U.S. federal law does.

COOPER: Which law?

PRINCE : Defense Trade Controls Act. Any training, any security services, any export of any weapons, any equipment you'd use to do that kind of job requires a license. 

And on top of that, this idea that we have this private army in the wings, is just not accurate. The people we employ our former U.S. military and law enforcement people; people that have sworn the oath to support and defend the Constitution against all enemies, foreign and domestic. They bleed red, white and blue. So the idea that they're going to suddenly switch after having served honorably for the U.S. military and go play for the other team, it's not likely.

COOPER: But these are independent contractor or employees. They're supposed to do what they're told. 

And is your omission of this key bit of information from the charter or bylaws only due to the fact that it would be redundant? If it's assumed, why don't you go ahead and put it in the charter and bylaws, that these people, this company will only work for the United States of America and its entities? Why wouldn't that be a nice addition to the charter or bylaws?

PRINCE : That wouldn't make any sense because we have NATO allies helping in Afghanistan, helping the United States mission there. 

And there might be opportunities for us to support -- provide them with training, or aviation support, or logistics, or construction, or a lot of other things that allies need. Especially as the U.S. is trying to build capacity around the world, there's a lot of countries that need help building up their police departments, giving them...

COOPER: So there's...

PRINCE : ... more counterterrorism capability...

COOPER: ... 26 NATO allies. So you could work for any of them?

PRINCE : 26 NATO allies but, more and more, the U.S. government is doing FID missions, foreign internal defense. We've done a number of successful programs for them working for the U.S. government, where they hire us, we go in and we build that capacity and train them and provide the equipment -- all of which is licensed by the State Department.

When we apply for that license it goes to the State Department and they fund it out to the relevant part of the DOD to control and authorize that licensing; what's the curriculum going to be, what tactics, even down to which individual in which country is going to be trained so they can do a check on them. 

So that is all controlled by the U.S. government already, sir.

COOPER: On your Web site, it says that you were contracted to enhance the Azerbaijan Naval Sea Commandos maritime interdiction capability. Is Azerbaijan a member of NATO?

PRINCE : No. But that was paid for by the U.S. government.

COOPER: Well, let me ask another question.

PRINCE : It was part of their regional engagement policy. I don't make that policy, sir.

COOPER: Wouldn't it be nice to put in your charter and bylaws that you only work for U.S. or U.S.-approved entities? Why would that be harmful to your company?

PRINCE : We'd be happy to do that. But it's absolutely redundant because we can't work for someone that's not U.S.-approved.

COOPER: Redundancy is a small objection to making sure that you're a loyal U.S. company.

Let me ask another question. What if a large company inside the United States of America wanted to hire your company for services -- say to break a strike or for other purposes like that -- is that allowed under your charter and bylaws?

PRINCE : That's not something we've even explored.

COOPER: But it would be permissible under your current company charter? It's a new line of business, possibly?

PRINCE : No.

COOPER: It might be very profitable?

PRINCE : It's not something we're looking at. Not part of our strategic plan at all, sir.

COOPER: I know, but you're a mortal human being. Your company would allow it according to its current charter and bylaws?

PRINCE : Well, I have five boys I'm raising, so one of them, perhaps, will take over some day.

WAXMAN: Gentlemen...

COOPER: Why not put it in the charter and bylaws?

COOPER: Thank you, Mr. Chairman. I see that my time is expired.

WAXMAN: Mr. Cooper, your time is expired. 

Mr. Hodes?

HODES: Thank you, Mr. Chairman.

Mr. Prince , thank you for being with us today.

PRINCE : Thanks for having me, sir. Glad I could come here and correct some facts.

HODES: There has been some discussion from the other side of the aisle about whether or not these hearings are partisan. Do you agree that it is not a partisan issue to examine whether or not the use of private contractors, including Blackwater, is advantageous to American taxpayers?

PRINCE : Certainly the part of Congress to make sure that money is spent well that the taxpayers pay. 

HODES: And do you also agree that it is not a partisan issue to inquire whether failures to hold Blackwater personnel accountable for misconduct undermine our efforts in Iraq?

PRINCE : It's a fair enough thing to look into.

HODES: Earlier today, you were asked what action Blackwater took to penalize an employee who, while drunk, shot and killed an Iraqi security guard for the Iraqi vice president on Christmas Eve of 2006. You recall those questions?

PRINCE : Yes, sir.

HODES: And you responded that Blackwater fired and fined the employee, but you weren't sure of the amount of the fine. Do you recall that?

PRINCE : Yes, sir.

HODES: Blackwater, at the committee's request, provided the committee an internal Blackwater e-mail that appears to reflect the discussion of what Blackwater did to this employee. 

It's dated Monday, January 8th, 2007, approximately 2 weeks after the incident in question. 

And it says, quote, "Regarding termination, he has forfeited the following compensation that he would have otherwise been authorized: return airfare, $1,630; completion bonus, $7,067; Fourth of July bonus, $3,000; and a Christmas bonus of $3,000.

Now, it appears to me that the so-called fine consisted of taking away the contractor's bonuses and making him pay his own way home. Is that accurate?

PRINCE : And any forthcoming compensation that he had. I don't know when the guy's contract would have ended, but yes. We took away whatever else we could.

HODES: How long he worked for your company?

PRINCE : I have no idea.

HODES: Do you know what he'd been paid during the time of his employment up until the time he shot and killed the Iraqi guard?

PRINCE : I have no idea, sir.

HODES: Do you have any idea what your profit on that employee had been up until the time of this incident?

PRINCE : Probably in keeping with the 10, 10.5 percent indicated on our chart.

HODES: Would you have records that would show us what you had paid him up until that time and from which we could find out what profit you had made?

PRINCE : I'm sure we could dig through that and find it, yes, sir.

HODES: And would you be willing to provide that to us?

PRINCE : I'll get my people right on it.

HODES: I'm asking for it now, so I'd like to have that sent. 

HODES: Thank you very much.

Now you've also...

WAXMAN: Without objection, the document you've used for your questioning will be made part of the record.

HODES: Thank you.

Mr. Prince , you also said that Blackwater is extremely scrupulous in enforcing your standards. And you've told us that you did, basically, all you could do to this employee and that the rest was up to the Department of Justice. What you did was you took away his bonuses, Fourth of July, completion bonus, Christmas bonus. He paid his own way home and he couldn't work for you anymore.

PRINCE : And made sure his clearance was canceled, as well.

HODES: Is that your idea, Mr. Prince , of corporate accountability?

PRINCE : Could you say the question again, sir, please? 

HODES: Is that your idea, Mr. Prince , of corporate accountability?

PRINCE : This employee, I can't make any apologies for what he did. He clearly violated the rules that he knew that, you know, we give each of our guys an independent contractor handbook. It's all the do's and don'ts of what they're expected to do and not do. Beyond firing him for breaking the rules, withholding any funds we can, we can't flog him. We can't incarcerate him. We can't do anything beyond that. That is sole reservation of the U.S. Justice Department.

HODES: The Justice Department has not acted against this individual?

PRINCE : I believe their investigation is ongoing.

HODES: They haven't done anything so far. Right?

PRINCE : We're not privy to that information, sir.

HODES: This was a potential murder, was it not?

PRINCE : It was a guy that put himself in a bad situation.

HODES: Would you agree with me that this was potentially a murder, sir?

PRINCE : Beyond watching detective shows on T.V., sir, I'm not a lawyer so I can't determine whether it would be a manslaughter, a negligent homicide, a -- I don't know. I don't know how to nuance that. But I do know he broke our rules, he put himself in a bad situation, and something very tragic happened.

WAXMAN: Thank you, Mr. Hodes.

HODES: Thank you.

WAXMAN: Mr. Sarbanes?

SARBANES: Thank you, Mr. Chairman. I actually want to follow up on that line of questioning a little bit more. I think you said that when people violate the rules in a significant way, they have one decision left to make which is aisle or window, right? Meaning, they're...

PRINCE : Because they're fired. There out of there.

SARBANES: They're on their way out. They have one decision and that's whether to sit on the aisle or sit by the window. 

SARBANES: And then the other consequence, that Mr. Hodes spoke to, was the financial penalty that they would experience. But it just seems like a few thousand dollars, particularly against a pretty lucrative contract that they would have had.

And it strikes me that if that's the only deterrent that's at work in terms of people performing at a high level, that's not much. In other words, you can say, "Let me get in here; let me make a good living here for a moment, and if I screw up and if I screw up in a terrible way," as this one incident illustrates, "then the worst that's going to happen to me is I'm going to have to choose between an aisle seat or a window seat and maybe give up a bonus and my last paycheck." 

I mean, that's essentially the consequence that they face. Isn't that right?

PRINCE : I would also add that we endeavor to get their security clearance pulled, canceled. And once that's done, they'll never work in a clearance capacity for the U.S. government again -- or it's very, very unlikely.

SARBANES: OK. OK.

But you'd agree that it's not -- it doesn't have the same kind of deterrent effect that it would have if they thought that they were going to be subject to prosecution, if there was a clear set of rules in place, a clear context in which they could be prosecuted, they could face something akin to a court-martial, or all the other kinds of measures that can occur if you were in a traditional military setting?

You'd agree that that provides an extra level of deterrent?

(UNKNOWN): Mr. Chairman? Mr. Chairman? I think the witness has already testified that he did everything that his company could to this person and that he is not the prosecutor.

WAXMAN: I'm sorry, you're not acting according to the rules...

(CROSSTALK)

WAXMAN: This is not a court case. The gentleman has time and I'm going to restore his time, whatever he wants and to say whatever he wants. Some people on this committee have said completely outlandish things and nothing we can do about it, they have the right, including you. You read a whole blasphemous statement about Democrats, but no one objected to that. 

WAXMAN: So the gentleman is going to be recognized for...

SARBANES: In any event, would you agree that that would provide some extra deterrence, some extra reason for people to exercise their conduct in a careful way?

PRINCE : We welcome that level of accountability. Most of our people have already served in the U.S. military, or they've served in a law enforcement capacity. They're used to that kind of accountability and transparency into what they're doing.

SARBANES: Well, I appreciate you're saying that, because I...

PRINCE : We're not hiding anything.

SARBANES: I would like to leave aside the question of whether you should be -- Blackwater should be in the space that you're in. I don't know enough about the history of whether providing the sort of protective services that you do is something that isn't done by the military traditionally, or is, so I'm going to leave that aside.

I'm also leaving aside the issue of the costs, which strikes me as exorbitant in terms of what the taxpayers are paying here. You keep calling for I think an activity-based cost analysis or assessment, which I think we'd be happy to get more information about.

I've got to believe that there's a less expensive way, even to hire private contractors like yourself. 

And so, I'm really left with the accountability issue as the one that strikes me as a front and center here. And as I've listened to your testimony, in particular you're saying with respect to this one person who was drunk and committed this -- this homicide -- I'll characterize it that way, I think you said you'd be happy to see that person prosecuted, something akin to that. 

And I'd like to enlist you as an advocate to strengthen whatever the rules and rules of engagement are, whatever the statutes are that are out there.

Mr. Braley took us through these various things. And you indicate that you weren't sure whether each of those necessarily reached as far as they could, in providing that kind of penalty environment. And I'd like -- I'd like you to speak to whether it would be a good thing to make sure that it does.

PRINCE : I believe Congressman Price from North Carolina has been pushing to amend some of that language. And we support that fully.

SARBANES: Thank you. 

ACTING CHAIR: The gentleman yields back his time. 

The next questioner on the list from the chairman looks like Mr. Welch.

WELCH: Thank you, Mr. Chairman.

Mr. Prince , thank you for coming. I want to ask a few questions about the finances. My understanding is that Blackwater had contracts with the federal government in 2001 in the amount of $736,000.

PRINCE : It could easily be. Yes, sir.

WELCH: And, in 2006, that number had exploded to $593 million.

(CROSSTALK)

WELCH: Well, you don't dispute it. This is what's in the report that was referred to earlier.

PRINCE : Well, some of the later years on that report aren't quite accurate. So, I'm not going to discount the whole thing, but...

WELCH: OK. According to the report, 51% of the Blackwater contracts were no-bid contracts, $493 million that were explicitly no competition, and $30 million were awards after limiting or excluding qualified bidders. 

Is this more or less correct? Any reason to dispute it?

PRINCE : It could be, sir. I don't know.

WELCH: All right. And since 2003, when the war began, your Blackwater contracts have exceeded $1 billion. Correct?

PRINCE : I don't know the answer, sir. If you have specific questions on financials, we'll get you the answers.

WELCH: Well, these are facts that are in the record. You can check them out. But I'll just advise you...

PRINCE : Well, there's some stuff in the chairman and the committee's report that are not accurate, so I can't agree to the entire committee's report.

WELCH: Let me continue going through this.

One of the concerns that's been expressed is that a sergeant who provides security services in a full military setting is paid $50,000 to $60,000. To an employee from Blackwater, the cost to the taxpayers is about $445,000.

Is that more or less correct?

PRINCE : Could you let me have a copy of what you're reading from, at least?

WELCH: You've been asked about this by several members already. 

Let me just continue.

Let's talk a little bit about training. You were a SEAL and served with distinction, as I understand it, as a SEAL. Correct?

PRINCE : Yes.

WELCH: And your training as a SEAL was beneficial to you in the work that you're doing now as the head of this agency -- this company?

PRINCE : Helped formed me in my life, absolutely.

WELCH: And you, I think, also indicated that Blackwater hires our military veterans and law enforcement veterans, many of whom have recent military deployments, correct? It makes sense to do that.

PRINCE : Yes.

WELCH: So it's fair to say that Blackwater as a company in recruiting personnel has benefited from the taxpayer-financed training of people that Blackwater hires, correct?

PRINCE : We take people that have prior honorable military service and provide them an opportunity to use those skills again at their highest and best use.

WELCH: OK. And it's fair to say that Blackwater contracts have in fact surged since 2003 when the war began, correct?

PRINCE : The nature of the security environment around the world has changed, yes.

WELCH: And it's true -- or is it true that, as reported by the Center for Responsive Politics, you did make, as you have a right to make, contributions of $225,000 to the -- that included $160,000 to the Republican National Committee and the National Republican Campaign Committee?

PRINCE : I don't know that, sitting here right now. Again, I can go back and go dig through our contribution records to figure out exactly what we gave, in what period.

WELCH: Well, that's the report that we have been given. And again, you have a right to do that. My concern is the nature of the contracts.

Now, you are also aware that General Petraeus, who's in command of 160,000 troops, is paid by taxpayers $180,000 for the extraordinary responsibilities that he bears for security in Iraq, correct?

PRINCE : I don't know what General Petraeus gets paid.

WELCH: That's what it is. Blackwater has 861 are so personnel, according to this report, in 2006, in Iraq. Is that more or less right?

PRINCE : Could be, yes, sir. 

WELCH: General Petraeus is paid $180,000 for supervising 160,000 troops. How much were you paid in 2006?

PRINCE : I'll get back to you with that exact answer. I don't know.

WELCH: Well, you can give me an estimate.

PRINCE : More than $1 million.

WELCH: Well, as I remember, when my colleague, Mr. Hunter, asked you about your contracts, you indicated 90 percent of your Blackwater contracts came from the federal government, correct?

PRINCE : Yes.

WELCH: I.E. the taxpayer. And he asked you what your profit margin was. And my recollection of your testimony today was about 10 percent.

PRINCE : That's what the report that we submitted to the committee says, yes.

WELCH: So walk through the math with me. If Blackwater's had $1 billion in contracts since the war began in 2003, and there's a 10 percent profit margin, that's $100 million in profit, is it not?

PRINCE : This is a representative of one of the WPPS contract. Some contracts we lose money on some we lose all kinds of money on. Some we make money on.

(CROSSTALK)

WELCH: You were asked the question and you gave an answer. And the question was very simple. It's the kind of question that CEO pays real attention to, what's your profit margin. Your answer was 10 percent. I'm doing the math: $1 billion, 10 percent, $100 million.

ACTING CHAIR: The gentleman's time has expired.

Do you want to respond?

PRINCE : Some contracts we lose money on. Losing three helicopters this year is certainly beyond the scope of math.

ACTING CHAIR: The next questioner is Mr. Murphy.

MURPHY: Thank you very much, Mr. Chairman. Let me just follow up on Mr. Welch's question. Certainly, the CEO of the company you can tell us what your profit has been in the past several years as a company.

PRINCE : I can give approximate numbers, but we're a private company and I'm sure it's the Congress' main interest in maintaining healthy competition amongst government vendors. So we're a private company and there's a key word there, private. 

MURPHY: And so you will not disclose to us what the profit -- what the annual profit over the last...

PRINCE : No, that's not what I just said. We gave you the example of the profitability of a WPPS contract looks like, but were not going to -- I'm going to go into our full financials.

MURPHY: And I guess I'm a new member of Congress but as a representative of my constituents that pay 90 percent of your salary, pay 90 percent of the salaries of your employees, I think it's a little difficult for us to fathom how that information isn't relevant to this committee or this Congress.

(UNKNOWN): Mr. Chairman, may I have a minute with the witness, please?

ACTING CHAIR: Yes.

You have four minutes left. The hearing will resume.

(UNKNOWN): Thank you, and I want wrap up some -- Mr. Lynch, can I ask some questions before we break.

So let me ask the question again, after your consultation with your colleague.

It's your position that you don't believe that it's in the best interests of your company or this committee to have discussions with the United States Congress about the profit that you make off of U.S. government contracts?

PRINCE : We can have that discussion, but I'm not fully prepared here sitting today to answer each and every one of your questions down to that level of detail.

(UNKNOWN): I'm not asking for a level of detail. I'm asking for an approximation of your annual profit, based on the fact that you make 90% of your money from U.S. taxpayers.

PRINCE : Again, we'll come back to you. If you have written questions, we'll give you written answers after the hearing is done.

(UNKNOWN): Because you testified today that you are not sure of that number? You don't have that number?

PRINCE : I'm not sure of that number. How can I calculate in depreciation on assets when our helicopters parked around -- near the embassy in Baghdad get hit by rockets all the time, that they get fragged, that three of them have been shot down? There's a whole host of variability to our profitability depending on when an asset is expended or destroyed.

(UNKNOWN): You know, Mr. Prince , I'm not a businessman, but I find it pretty hard to believe that the CEO of a major company in this country, whether it be privately financed or publicly financed, can't give an approximation of your annual profit on a year-to-year basis.

PRINCE : I think, when the committee meets many of my finance folks, they'll tell you I'm not a financially driven guy.

(UNKNOWN): Let me just ask one other quick question before I yield back. You made a comment before that you had a handful of third-country nationals working for you. 

And not to disparage the need to have third-country nationals working for the company, but I just want to get a better handle on what a handful means. The number that we have before us, and I understand you draw issue with some of those numbers, so want to get it straight -- suggests that, of the 161 (ph) Blackwater personnel in Iraq today, 243 of them are third country nationals. Does that sound right?

PRINCE : Your best bet is drawing off these -- page 1 of what we submitted the committee, where it says U.S. TCN or HCN.

(UNKNOWN): So what percentage of those serving in Iraq are under Blackwater are third country nationals -- by your numbers? Because by our numbers, it's about -- it's just less than one third, which doesn't sound like a handful. That sounds like one third of all your personnel are not U.S. citizens.

PRINCE : Well, I'm looking at one here. It shows 576 U.S., 129 TCN, and 16 locals.

(UNKNOWN): So, again, your talking about...

PRINCE : To divide 129 by 576 and you'll get your percentage.

(UNKNOWN): OK. Sounds like a little bit more than a handful, but I appreciate your testimony and yield back.

ACTING CHAIR: Gentleman yields back his time. The next questioner is Mr. Lynch.

LYNCH: Thank you, Mr. Chairman. And I want to thank the witness for his perseverance here today and for helping the committee with its work. We've heard a lot today about the loss of accountability when an inherent government function, in this case duties that are incidental to the prosecution of war, are subcontracted out to private entities. 

And as Mr. Shays and Mr. Platts have mentioned earlier, my Republican colleagues, I also have had an opportunity to view firsthand more than a few occasions the work of Blackwater employees. 

I would guess that in the dozen or so occasions when I've traveled with my colleagues to Iraq and Afghanistan, your area of operations, principally, I would bet at least half of those times, for at least a portion of our time there, we've been protected by Blackwater employees.

LYNCH: And based on my own personal experience, I have to -- I have to say from personally what I have seen and what I have experienced, those people who were protecting us who were Blackwater employees did a very, very good job. 

I have to give you credit for that. They are brave employees, brave Americans in a very hostile environment.

And I find myself right now in this committee having a difficult time criticizing those employees because I am in their debt. 

You know, that's a very hostile environment, and they do a good job on our behalf. Which brings me to my problem: If I have a problem criticizing Blackwater and criticizing the employees and some of the times that you've fouled up, what about the State Department?

The State Department employees, you protect them every single day. You protect their physical well-being. You transport them. You escort them. And I'm sure there is a heavy debt of gratitude on the part of the State Department for your service. 

And yet they are the very same people who are, in our system, responsible for holding you accountable in every respect with your contract and the conduct of your employees.

And I know from my own experience in the time there, that that's an impossible conflict for them to resolve. 

And I have here in my possession -- and I'm going to ask them to be entered into the record in a minute -- some internal e-mails from the State Department. And these documents that the committee's received raise questions, again, about the State Department's oversight of Blackwater's activities under the contract.

Even in the cases involving the death of Iraqis, it appears that the State Department's primary response was to ask Blackwater to make monetary payments to quote/unquote -- this is from the e-mails -- "to put these matters behind us" -- this is the deaths of Iraqi civilians -- rather than to insist upon accountability or to investigate Blackwater personnel for potential criminal liability.

The most serious consequence face by a Blackwater personnel for misconduct appears to be termination of their employment.

And even though Secretary of State John Negroponte asserted that every instance in which Blackwater fires its weapon is, quote, "reviewed by management officials to ensure the procedures were followed," the documents that we have before the committee don't indicate that. 

I do have some e-mails, though. And this one is dated -- I'll ask these to be entered into the record, Mr. Chairman...

ACTING CHAIR: Without objection, so ordered.

LYNCH: This is July 1st, 2005, from RSO Al Hillah. This is a situation where Blackwater personnel fired and killed. 

"This morning," it says, "this morning I met with the brothers of an adult Iraqi male who was killed by a gunshot to the chest at the time and location where the PSD, in this case a Blackwater team, fired shots in Al Hillah on Saturday, June 25th, 2005. The gentleman in question was killed."

And then, it says, -- it says, "Gentlemen, allow me to second the comments on the need for Blackwater to provide ASAP. For all the reasons enunciated in the past, we are better off getting this case and any similar cases behind us quickly.

"Again, the Department of State needs to promptly approve and fund an expedited means of handling these situations. Thanks."

And it mentions $5,000 for the family there.

Again, another e-mail, dated December 26th, 2006, and it says, "This is again a situation where Blackwater personnel killed an individual civilian, innocently standing near an area where the convoy was traveling."

LYNCH: It criticizes the way the charge d'affaires was talking about, quote, "some crazy sums." Originally she mentioned $250,000 and later $100,000.

Of course, I think that a sum this high will set a terrible precedent. This could cause incidents with people trying to get killed by our guys to financially guarantee their family's future.

ACTING CHAIR: The gentleman's time has expired.

LYNCH: Yes, I'm going to wrap up here.

And, again, I'm going to ask these to be placed in the record. 

The question is, based on that arrangement...

ACTING CHAIR: The gentleman's time has expired.

LYNCH: ... does it not make sense that an independent inspector general instead of the State Department inspector general review these?

I mean, I think it would help the credibility of the company to have an independent inspector general reviewing these cases instead of having the State Department basically make you pay up $5,000 every time you kill a person.

(CROSSTALK)

BURTON: Mr. Chairman, I have high regard for the gentleman from Massachusetts, but he's gone two or three minutes over...

ACTING CHAIR: The gentleman's time has expired.

I need to ask the witness, we have two questioners remaining, if you would like to take a break now, that would be fine, or there are about 10 minutes of questions remaining. It's your call.

PRINCE : If there's two questions left, I'll take them, and then let's be done.

ACTING CHAIR: OK.

LYNCH: Mr. Chairman, do you want to give the witness a chance to answer that last question?

ACTING CHAIR: Well, the gentleman considerably exceeded his time limit. We had actually given you considerably more than the five minutes due to a mistake in the clock, so I think we need to keep this in regular order.

The gentlelady is recognized, Ms. Norton.

NORTON: Thank you, Mr. Chairman. 

And, Mr. Prince , I want to be clear that however you serve your country, whether as a member of the armed forces or now as a contractor in a time of war, the American people are indebted to you. We understand that the risk is the same. 

I want to avoid confusing the high purpose of the volunteer army with what some nations -- how some nations candidly operate.

However you define mercenary armies, some nations have long used mercenary soldiers to deal in foreign countries with unpleasant tasks. The more dependent we become on contractors, the more we risk falling right off the cliff into a mercenary army. 

That's nothing that you would have responsibility for it, but it must be said. 

People fight wars that -- countries fight wars where the people support them. The people support them by being willing to provide the troops to fight those wars. And that's a risk we have.

I'm going to ask you a question or two about your contract with the State Department. Under this contract, you employ security personnel as independent contractors, rather than as your own direct employees, isn't that right?

PRINCE : Yes, ma'am.

NORTON: You don't have to provide employee benefits such as health or disability insurance, vacation, retirement and the like as a result.

PRINCE : Each of the individuals that deploys for us has a very robust insurance package that is with them every day they're working for us.

NORTON: You also can avoid making Social Security contributions or withholding taxes? Is that not true?

PRINCE : I'm not sure on that.

NORTON: I believe that is true, sir. 

By contrast, DynCorp and Triple Canopy and other security firms that support the State Department treat their personnel as employees, entitled to these benefits. Why do you treat your personnel differently from these two companies?

PRINCE : I don't know the differences in how they compensate their people. I will tell you we have the highest retention in the industry. We have guys that sign up for us at a very, very high rate. So we don't get (inaudible) the men seem to -- the men and women seem to feel very well treated by us.

NORTON: Well, of course, one of the differences is in the employee benefit package I just named.

Does Blackwater hire personnel as independent contractors in order to avoid legal responsibility for the company?

PRINCE : No. It's actually really what the men that deploy for us prefer. We find it's the model that works.

NORTON: Well, Mr. Chairman, it may, in fact...

PRINCE : They like the flexibility of signing on for a certain period of time and being able to schedule their off-time around an anniversary, a child's birthday, being home for Christmas, et cetera. So it gives them flexibility as to when they're going to deploy and when they're going to go to work, just like the professional...

NORTON: (OFF-MIKE) give them more flexibility than the other two companies who have them as employees. Those people don't have the same kind of flexibility. What kind of flexibility can you have if you need your employees at a time of engagement, for example?

PRINCE : I don't know, ma'am.

NORTON: Well, I think the fact is, when you need them, you need them. You don't say you can go home for Christmas, sir.

Mr. Chairman, I think we should -- I'm very disturbed -- very disturbed by this confusion, which amounts legal confusion about the responsibilities of contractors. I will give -- concede the notion that employees can choose whether they want to work for a company that, in fact, requires them to stay for their own benefits or not. My confusion...

PRINCE : Let me just add, we have a Uni-K program that allows them -- it's like an individual 401(k) plan. So they are able to -- while working for us -- able to have a 401(k)-like program.

NORTON: Yes, I understand that. Probably the other employees -- excuse me, companies that I mentioned probably also have 401(k) programs. And again, my major concern is not what private employees decide to do.

Mr. Chairman, my concern is that these Blackwater contractors, so far as I can see, operate under the direct command or supervised by Mr. Prince and his company. They operate under the law of the United States in some fashion.

And it is simply unclear, after a full days hearing, whether these employees, whether this company is subject to law in the way that the American people expect anybody in a field of combat to, in fact, be subject to the law of some place. 

I believe we need an investigation, Mr. Chairman, by the JO (ph) to clarify what law, if any, such companies and their employees, whether contract employees or not, should answer to.

PRINCE : If I could just answer that, I think the FBI investigation regarding the September 16 event -- incident -- proves that there is a measure, that accountability is in place, that that process is working. 

And as far as working for us when they're overseas, we provide the trained person with the right equipment, the right training, the logistics to get them in and out of theater. 

When they get to Iraq or they get to Afghanistan, they work for the State Department. We work under that -- the RSO's operational control. They're not under our operational control.

WAXMAN: Thank you, Ms. Norton. 

Ms. Schakowsky?

SCHAKOWSKY: Thank you, Mr. Chairman. And I really appreciate you allowing me to participate in this hearing, and I thank the committee for their indulgence. 

I wanted to let everyone know that I'm shortly going to be introducing legislation to carefully phase out the use of private security contractors, for-profit companies that carry out sensitive missions that have repeatedly and dramatically affected our mission.

I want to recognize the mother of Jerry Zovko, who is here today. Jerry was an Army Ranger before becoming a Blackwater employee. He died in Fallujah on an infamous mission fraught with mistakes on the part of his Blackwater supervisors. That was over 3 and a half years ago and led to the battle of Fallujah, during which many of our U.S. forces lost their lives.

As Mr. Davis, the ranking member, said, we need a conversation in this Congress about that. And I'm hoping that my legislation will provide that.

Mr. Prince , in your testimony, you stated Blackwater personnel supporting our country's overseas missions are all military and law enforcement veterans. You did not state that they were all Americans, all American military and law-enforcement veterans.

Is it true that Blackwater hires foreign security personnel?

PRINCE : One of your colleagues previously asked that question. Yes, some of the camp guards, gate guards, static locations, are indeed third-country national soldiers.

SCHAKOWSKY: And in 2004, Gary Jackson, the president of Blackwater USA, admitted that your company had hired former commandos from Chile to work in Iraq, many of which served under General Augusto Pinochet, the former dictator of Chile. As you must know, his forces perpetrated widespread human rights abuses, including torture and murder of over 3,000 people.

SCHAKOWSKY: Did Blackwater or any of its affiliated companies at that time use any -- at any time -- use any Chilean contractors with ties to Pinochet?

PRINCE : Well, I can say Mr. Jackson did not admit to hiring some commandos. Yes, we did hire some Chileans. Any foreign national soldier that works for us now for the State Department after having -- it's called a high public trust clearance.

SCHAKOWSKY: OK. Let me ask you...

PRINCE : It's basically a security clearance for a third country national soldier, where you take their name, it goes back through the U.S. Embassy in that country and their name is run kind of like a national agency check here, which is what someone does for a security clearance.

SCHAKOWSKY: OK. I understand that one of your...

PRINCE : That way we can ensure that they have no criminal record, ma'am.

SCHAKOWSKY: I understand that one of your business associates, Jose Miguel Pizzaro, was indicted in Chile for his role in supplying commandos to serve Blackwater. 

Is that correct?

PRINCE : He was not an associate. He might have been a vendor to us.

SCHAKOWSKY: In your written statement today, you state that Blackwater mandates that its security professionals have a security clearance of at least the secret level.

Did any Chilean contractors work for Blackwater ever get a security clearance?

PRINCE : I believe what I said is with a WPPS has contract, the Americans working on that that are doing the PSD mission are required a secret clearance.

SCHAKOWSKY: Did any Chilean contractors get a security clearance?

PRINCE : I don't know, ma'am.

SCHAKOWSKY: Because, you know, sir, if yes, they were provided with classified information, if no, then it's not true that all Blackwater personnel in Iraq have security clearances.

On your Web site -- I don't know if it's still there -- there was a recent one -- there was a jobs fare advertised in Bucharest. And we've heard allegations that Blackwater recruited Serbians and former Yugoslavs with combat experience from the Balkan wars, some linked to atrocities committed in Croatia and Kosovo and Bosnia and associates of Milosevic. 

I'm wondering if you could talk to me about that for a minute.

PRINCE : To my knowledge, we've never employed anyone out of those countries.

SCHAKOWSKY: Would you know?

PRINCE : There were some Romanians that were on a contract that we took over from a previous vendor, competitor, but we phased them out and we use guys out of Latin America now.

SCHAKOWSKY: Would you know if people have been associated with Pinochet or Milosevic before you hire them? Is this part of your inquiry?

PRINCE : Again, for the State Department, for the static guards that were utilized, third country national soldiers, a high public trust clearance is required, where their name, their background, their address, their date of birth, whatever information is available on them is run back through the equivalent country that they're from, a national agency check to ensure that they don't have any criminal record, human rights abuses or any other bad marks against their name.

SCHAKOWSKY: OK. Well, we should check into that process. But let me ask a question.

You said that you as a company would not work overseas in any way that's not associated -- that the United States does not approve.

However, Chile has made a decision not to participate as part of a coalition member in this war. They won't send any troops.

Do you have any qualms about hiring people out of Chile to participate actively in this war?

PRINCE : We don't hire anybody from Chile right now, to my knowledge.

SCHAKOWSKY: Have you ever?

PRINCE : I previously just said that we had previously, yes.

SCHAKOWSKY: And so the answer is you don't have any qualms about doing that based on the fact that Chile has made a public policy decision not to participate.

PRINCE : I believe the persons of that country have a free right to contract.

I'll give you an example. The Philippines doesn't allow their personnel to go to Iraq. So we don't hire their people to go to Iraq.

SCHAKOWSKY: OK. But you do hire Chileans.

Thank you. I appreciate it.

WAXMAN: Thank you very much, Ms. Schakowsky.

Mr. Prince , let me thank you very much. You've been very patient. You've been here a long time.

I do want to acknowledge the presence today of Rhonda Teague (ph) and Crystal Batalona (ph), the daughter and wife of Wesley Batalona (ph). And Ms. Schakowsky acknowledged the mother of Jerry Silko (ph) was in the audience today.

These are people from Fallujah. I'm sorry we didn't get a chance to ask you more questions about Fallujah. 

I might, with your permission, send you some questions and ask you to respond for the record, because that was an example, we had a hearing on that issue, that was an example where one of the ways corporations could make money is not to have fully trained personnel. 

I don't know if that was the case or not, but it certainly appeared to us that the people were not given adequate protection and training for the Fallujah mission and it had an unprecedented consequence in the battle of Fallujah that followed.

In closing, let me just say that we really have a remarkably unprecedented experiment going on in the United States today by having private military contractors. It raises a lot of issues. It raises issues about cost, it raises issues about whether it interferes with our military objectives. 

And I think this hearing with you and the next witnesses will help us continue to sort through what that means for our nation.

We have never had anything of this magnitude before where we've turned so much of our military activity over to private military that used to be for the most part provided by the U.S. military itself.

I want to thank you.

If Mr. Davis has any last comments, I'll recognize him, and otherwise we have another panel.

T. DAVIS: Mr. Prince , thank you very much. I think you've -- anything else you want to add after all this? Would you like to add anything you didn't get to say?

PRINCE : Thanks for having me. I'd invite some of the leadership of the committee, if they'd like to come and visit our operations, we'd be happy to show you what we do.

T. DAVIS: Fine. Let me just say, I think we do need a dialogue on what -- and our next panel will tell us the State Department's rationale and the large number of contractors and why they're utilizing that versus active duty. And I think that'll give more clarification to members. 

But thank you very much.

WAXMAN: We'll proceed to our next panel, but we want to give Mr. Prince and his group an opportunity to leave.

WAXMAN: The committee will now continue on with our second panel.

We have with us Ambassador David M. Satterfield, Special Advisor, the Coordinator for Iraq, U.S. Department of State; Ambassador Richard J. Griffin, Assistant Secretary, Bureau of Diplomatic Security and Director of the Office of Foreign Missions, U.S. State Department; and, Mr. William H. Moser, Deputy Assistant Secretary for Logistics Management, U.S. Department of State.

Well, I thank the three of you for being here. And I gather you're not taking your seats because you know you're going to take the oath. But it is the practice of this committee to swear in all witnesses. So if you, do you solemnly swear that the testimony you will give before this committee will be the truth, the whole truth and nothing but the truth?

The record will indicate that each of the witnesses answered in the affirmative.

Your prepared statements will be in the record in full. We'd like to recognize each of you for an oral statement for five minutes and then after that we'll have questions that we'll want to pursue with you.

Mr. Satterfield, Ambassador Satterfield, if we might start with you.

SATTERFIELD: Chairman Waxman, Ranking Member Davis, members of the committee, thank you for inviting me here today and for the opportunity to speak to the vital security that private security firms provide to our State Department personnel.

In Iraq, as in Jerusalem, Gaza and the West Bank, I've been protected by Blackwater and other private security details. 

As you know, Mr. Chairman, I was the deputy chief of mission in Baghdad from the spring of 2005 until late summer of 2006. I witnessed firsthand what Ambassador Crocker has rightly described as the capability and courage of our protective details, as have many members of Congress, including some, Mr. Chairman, on this committee.

The contracting of security personnel for State Department officials is neither new nor unique to Iraq. For example, we have employed private protective security details, PSDs, in Haiti, Afghanistan, Bosnia, as well as Jerusalem, Gaza and the West Bank. 

We do not bunker down in dangerous environments, but we do need and we do take prudent precautions to protect the safety and welfare of our personnel.

Iraq is a dangerous place. Yet, I think we can all agree that our diplomats and civilian personnel need to be able to operate alongside our military colleagues and to have the broadest possible freedom of movement throughout that country.

We must be able to interact with our Iraqi counterparts and with the Iraqi population. Without protective security details, we would not be able to have the interaction with Iraqi government officials, institutions and other Iraqi citizens critical to our mission there.

The State Department uses multiple security specialists in Iraq. Furthermore, it should be noted that the Department of State is not the sole client of these security companies. The U.S. military, Iraqi government officials, private Iraqi citizens, independent institutions and nongovernmental organizations, as well as journalists all use private security firms, of which Blackwater is one of many.

A black Suburban does not equate Blackwater.

Insofar as the State Department security contractors in Iraq are concerned, we demand high standards and professionalism. Those standards include relevant prior experience, strict vetting, specified pre-deployment training and in-country supervision and oversight.

As you know, many of the individuals serving are veterans who have performed honorably in America's armed forces. All Embassy Baghdad security contracts fall under the oversight of the regional security office. Those contracts require high standards, covering areas ranging from conduct and demeanor to use of force to mission operational guidelines.

Those standards are written into the companies' contracts. These policies, these standards only allow for the use of force when absolutely necessary to address imminent and grave danger against those under their protection, themselves and others. 

In those rare instances when security contractors must use force, management officials at the embassy conduct a thorough review in each and every instance to ensure the proper procedures were, in fact, followed.

In addition, we are in constant and regular conduct with our Iraqi counterparts about such instances and the incident of September 16 was no exception.

I want to underscore, Mr. Chairman, the seriousness with which Secretary Rice and the Department of State view both the events of September 16 and the overall operations of private security contractors working for the Department of State in Iraq. At the direction of the secretary, we are conducting three different reviews.

As I stated before, the embassy conducts regular reviews of every security incident. We are conducting a thorough investigation into and review of the facts surrounding the events of September 16. At the request of the Department of State, the Federal Bureau of Investigation is sending a team to Iraq to assist in the ongoing investigation into that incident allegedly involving Blackwater employees.

The secretary of state has made clear that she wishes to have a probing, comprehensive, unvarnished examination of the overall issue of security contractors working for her department in Iraq. 

And so we are working on two different fronts, Mr. Chairman. Following direct communication between Secretary Rice and Prime Minister Maliki, our embassy in Baghdad and the prime minister's office have established a joint government of Iraq and U.S. government commission to examine issues of security and safety related to U.S. government-affiliated protective security detail operations.

This will also include a review of the effect of CPA Order 17 on such operations. This joint commission will make policy recommendations for resolving any problems it may uncover. 

Finally, the secretary has directed Ambassador Patrick Kennedy, a very senior and extremely capable department management officer, to carry out a full and complete view of security practices for our diplomats in Iraq. 

His review will address the question of how we are providing security to our employees. It will take into account all aspects of this protection, including the rules of engagement and under what jurisdiction they should be covered.

Ambassador Kennedy is now in Baghdad with some of his team. In addition to Ambassador Kennedy, his team will ultimately include General George Joulwan, Ambassador Stapleton Roy and Ambassador Eric Boswell, outsiders who will bring with them clear eyes and an independent view of what needs to be done.

This is an extraordinarily well qualified team and it has experience directly relative to this review.

We are fully committed to working with both our security specialists and the Iraqi government to ensure the safety of U.S. government personnel. Both are and will be essential to our success.

With that, Mr. Chairman, Assistant Secretary Griffin, Deputy Assistant Secretary Moser and I are happy to take your questions.

WAXMAN: Neither of you two have opening statements. You're just here to answer questions. Is that correct? Thank you.

Mr. Ambassador, when Mr. Prince was testifying here earlier today, we asked him about that very disturbing incident on Christmas Eve 2006 and the basic facts of the incident are that a Blackwater contractor shot and killed an Iraqi security guard working for the Iraqi vice president.

According to the documents the committee received, Blackwater transported the shooter out of Iraq within 36 hours of the killing and then it did so with the approval of the Baghdad embassy's regional security officer.

Why did the State Department facilitate the departure of the Blackwater contractor suspected of murdering one of the Iraqi vice president's security guards?

GRIFFIN: As you know, the incident that you describe is presently in the Department of Justice for a prosecutive review. I think that to prejudge exactly what occurred that evening as far as the facts of the case go would be inappropriate for me at this time.

WAXMAN: I am not asking you about the facts of the case. I'm asking you about the State Department's response. 

Why did the State Department respond in this way?

GRIFFIN: At the time of the incident, after a number of interviews were conducted, there was no reason for him to stay in Baghdad.

WAXMAN: Well, the committee had a briefing from Ambassador Kennedy last week and he stated that the subjects of investigation should be kept in country because the investigators may need access to them.

In fact, when you think about this, this is an obvious point. Why didn't you follow the policy recommended by Ambassador Kennedy?

GRIFFIN: You can't describe how a case should be handled universally. Each case has to be judged on its own merits and Ambassador Kennedy may have had some other notion about the proper way to proceed.

WAXMAN: Well, this is not an ordinary case. This is a pretty extreme one. You have a private military contractor within the green zone, which is an internationally protected area, shoot and kill an Iraqi security guard and what we saw was that within 36 hours, he was ushered out of the country and the State Department helped that happen.

In fact, the documents show that the primary response of the State Department was to ask Blackwater to make a payment to the family in the hope that this would make the problem go away.

There was even a discussion among State Department officials about how large the payment should be. One official suggested $250,000, but this was reduced instead to just $15,000.

Yesterday, during the State Department's daily press briefing, the agency spokesman said, quote, "We are scrupulous in terms of oversight of scrutiny not only of Blackwater, but all of our contractors. I would strongly dispute anyone's assertion that the State Department has not exercised good and strong oversight in our efforts to manage these contractors." 

That was the statement made yesterday. But when I look at the statement department response to the Christmas Eve shooting, I don't see scrupulous oversight and scrutiny. I see an effort to sweep the whole incident under the rug.

How would you respond to that?

GRIFFIN: I would say that the area of what laws are available for prosecution is very murky. I believe it's something that the executive and legislative branches have been working on to try and clarify and I think that that lack of clarity is part of the problem.

WAXMAN: So you're unsure at the State Department whether this was a possible criminal violation, when a person hired by a contractor of the United States shoots and kills an Iraqi in the green zone. There's a question of whether this is criminal. 

Is that why the State Department helped get him out of the country and gave Blackwater a suggestion of how much to pay to get rid of the whole incident?

GRIFFIN: That's your judgment that that's what happened. I was not there. I think that's why the Department of Justice is examining this case and they're examining the potential ways that it might be prosecuted.

WAXMAN: Well, it just seems to me common sense to say that if there's an examination going on and the man's not there any longer, you can't pursue some of those issues. And the ones to pursue the investigation are the ones right there on the ground. You don't get the guy out of the country as fast as possible and then say, "We did what we thought was the responsible thing to do."

Even the deputy director of the trade association representing private security contractors could see a problem. He told the -- I think it's a she -- told the "Washington Post" -- he told the "Washington Post," "Blackwater has a client who will support them no matter what they do." 

As I view the record, it shows that the State Department is acting as an enabler to Blackwater tactics. The company acts as if they are untouchable for the simple reason the State Department demands no accountability. 

They're not accountable to the military. They're not accountable to the Iraqi criminal system. And the State Department, who is the contractor, seems to act like they're helping Blackwater get rid of the guy so that the whole incident can go away.

GRIFFIN: The incident was referred to the Department of Justice of our country for their prosecutive decision and follow-up. They're the prosecutors. The State Department isn't the prosecutive department for the U.S. government.

WAXMAN: Have the State Department people been asked any questions by the Department of Justice about this issue?

GRIFFIN: I'm sure there's been conversation, but I can't go into...

WAXMAN: You're sure, but you don't know.

GRIFFIN: No. I can't name when and where.

WAXMAN: So the fact of the matter is it's just strange that there's this kind of situation and there hasn't been any action by the justice department to date. This is almost -- well, not quite a year, but this is the fall, nine, ten months later. I wonder what really is going on.

Mr. Davis?

T. DAVIS: Thank you. My good friend here said that this was unprecedented in terms of the amount of security going on over there, private security.

I just wonder, Mr. Satterfield, my understanding is that the State Department has been contracted for security services at diplomatic posts throughout the world for decades.

Is this unprecedented?

SATTERFIELD: The scale of the operation in Iraq is unprecedented. But the fact of contracting, both through direct hire and by use of private security contractors, such as Blackwater, DynCorp, Triple Canopy and others is certainly not unprecedented. It is practiced at a number of posts in a number of countries around the world.

T. DAVIS: If you could go back four years, would you have taken this in-house or would you stick to what we're doing at this point in terms of contracting out?

GRIFFIN: At the time that the decision was made to use contractors, it was made because there was an immediate need to provide security for U.S. government employees working in a hostile environment, trying to assist the Iraqi people in standing up various civilian agencies.

Everyone knows that the military was doing their function there. We were trying to stand up the civilian side of the government, which was pretty much in shambles at that time.

In order to fulfill that security mission, in order to be able to immediately deploy people in the near term, contractors were used.

The fact is if we were to attempt to recruit and train diplomatic security agents for that mission, it would take anywhere from 18 months to two years to identify them, do all the backgrounds, do the clearance work, seven months of basic training, follow-on training for high threats parts of the world...

T. DAVIS: Also, when the mission winds down, what do you do with them at that point, too?

GRIFFIN: When the mission ends, you may have more people than you have work for. 

There are also specialists that are employed by the contractors, people who have training in helicopter pilots, people who are mechanics for armored vehicles, people who are armorers, people who are medical technicians, et cetera, that are all part of the requirement that you have when you're working in a combat zone.

So for a multitude of reasons, it made good sense to deploy people with the expertise that's needed, but for what was expected to be a short to medium term duration. 

T. DAVIS: But it's been a longer term duration, hasn't it?

GRIFFIN: It has been. But the fact is we have used contractors going back to 1994 for this protective security mission, when they were first used in Haiti. 

Those previous contracts, some have come and gone. So it does demonstrate that this is not a career type assignment for somebody.

T. DAVIS: Is it cheaper to go outside or would it be cheaper to take them inside and basically start a bureaucracy within the government to handle these kind of things?

GRIFFIN: Mr. Moser can speak to all the contract costs, but when you're looking at the cost of whether it's a contractor or a person in the military or a person in the State Department, you have to look at what we call the fully loaded cost, which includes all of the expenses, which you're all very well aware of from your dealing with the budget for all these years. 

The fact is that the cost for a State Department special agent to be deployed in a high threat area approaches $500,000. 

T. DAVIS: Mr. Moser, do you want to...

MOSER: Well, I will add one thing to that. You know, we actually do cost analysis in the acquisition activity and I'm very proud of the cost analysis they do, because particularly if we have a situation -- when our first contract to Blackwater was awarded in 2004, we did not have competition.

So we had to actually do extensive analysis at that time to make sure that the costs were reasonable. 

But to add to what Ambassador Griffin has said, you know, I used to work in an office called global support services and innovation and we spent many, many months discussing how much it actually costs to position an American overseas, an American diplomatic, like me, or a D.S. agent, and the prices range from around $400,000 for a regular mission around the world to around $1 million for an American diplomat positioned in Iraq.

So when we talk about using contract employees, I think that we have to be very careful to consider what the fully loaded costs would be of direct hires and, as you've already pointed out, very wisely, Congressman Davis, you do have to think about do you really need these people for a long term. 

T. DAVIS: So basically when we start comparing costs, and I think earlier someone used the analogy of a sergeant being $60,000 to $80,000 a year and a contract employee being $400,000 a year, those aren't fully loaded costs and it's not apples to apples. Would that be your...

MOSER: Well, I'll look at it this way. You know, we have lots of employees in Iraq and the missions around the world. Well, I actually -- also, one of my duties is to run the transportation part of the State Department and that's where we move people's household effects around the world.

Well, that activity alone is around $220 million a year and that doesn't appear in that employee's salary cost. That's something that we do for each employee.

So that's like you can say...

T. DAVIS: So if you divided the number of employees by the 220, you'd get a high number.

MOSER: That's right. And you keep on adding these costs. As I said in my previous summit, we looked at this, how do you amortize the building cost for over the years and say what the rental price is.

T. DAVIS: I think one of the things that Mr. Waxman and myself and the committee ultimately want to understand is really what are the costs and I don't know if we could get GAO to look at that or how we compare apples to apples in an objective way, because everybody's got their own numbers on this, and that's something that would be helpful to you, I would think, as well.

MOSER: It is very helpful to me. And I will say that over the years, I've actually discussed this topic with a number of employees at GAO, because it's not an old topic, by any means.

T. DAVIS: No.

WAXMAN: Thank you, Mr. Davis.

Mr. Tierney? 

TIERNEY: (OFF-MIKE) Thank you.

Can you tell us whether or not the number of diplomatic security service agents has been reduced at the State Department since 2001? 

MOSER: I think Ambassador Griffin's going to need to answer that question.

TIERNEY: Ambassador, can you answer that question?

GRIFFIN: Current staffing is about 1,450 and it does reflect an increase over the past four or five years. I've been on board two years and I know one of those years we brought on 175 additional agents and there were some brought on the year before.

But I could certainly give you the specifics for the record, if you'd like to have that.

TIERNEY: Were any of those additional agents brought in with respect to Iraq or were they for other places around the world?

GRIFFIN: They're for various places around the world. We have, at the present time, approximately 36 of our agents in Iraq.

TIERNEY: Now, I think we can all agree that Baghdad's not just any other embassy right now. It's the largest post and it's in a war zone.

There are about 800 personnel, I think you said earlier or told the committee earlier, that are involved in the private security detail to protect embassy personnel in Iraq. Would that be accurate?

GRIFFIN: There are 845 Blackwater personnel in Baghdad and Hillah and the other two contractors have additional resources. So it's about 1,150 total.

TIERNEY: Are there any other embassies around the world where the security details are that large?

GRIFFIN: I don't believe so.

TIERNEY: Now, just looking at some of the statistics here, we have reports that say Blackwater engaged in shooting incidents on 195 occasions in less than three years. That's about 1.4 times per week.

Are there any other embassies around the world in which the security details have been engaged in that many shootings in the last three years?

GRIFFIN: I would say that the environment in Iraq is unique in that we're operating in a combat zone.

TIERNEY: So is that a no?

GRIFFIN: As to whether anyone else has the same...

TIERNEY: As to whether there's any other embassy around the world where the security details have engaged in that many shootings in the last three years.

GRIFFIN: Not that I can think of.

TIERNEY: And when we look at the Blackwater reports, we also show that Blackwater has caused at least 16 casualties and significant property damage from firing weapons on over 160 occasions in the last three years. 

TIERNEY: Are there any other embassies around the world in which security details have caused that many casualties or that much property damage in the same period of time?

GRIFFIN: No, but there are no other embassies like Baghdad.

TIERNEY: Well, I think we established that in my fist question. I was fully in agreement with you on that. It's a unique situation.

GRIFFIN: Thank you.

TIERNEY: So I think Blackwater thinks that all the shootings were justified and I think that raises another question.

You told us that there's a special use of force policy specific to the embassy in Baghdad and that special policy would allow security forces to do things that ordinarily they might not be able to do, such as shooting at cars that get close to the motorcades.

Are there, in fact, special rules on the use of force that permit that type of shooting in Baghdad?

GRIFFIN: Yes, there are.

TIERNEY: And is there any other place, other than perhaps Afghanistan, is there any other place where those special rules are in effect?

GRIFFIN: You know, I can't say, as I sit here. Each post in the State Department operates under the chief of missions firearm policy. In most of our posts, they're fairly similar. 

All of our agents operate under the normal DOJ guidance for federal law enforcement personnel for deadly use of force.

TIERNEY: I guess my point on the special rules that apply to Iraq is when you have those special rules and the need for those special rules, are you going to be able to shoot at cars that get within a particular distance of a motorcade, because you're concerned about an IED attack, that happens over 160 times in three years.

It appears to me that this might not be a mission for civilian law enforcement agents, like the diplomatic security or other contractors. It, in fact, might be a mission for the United States armed forces.

So the real question we're trying to get at here as a committee is whether or not -- whether diplomatic security has enough agents may be beside the point. The question may be whether or not this is a case where 800 troops or 845 troops actually should be taking over that mission.

And if we're fighting a war and we have two different departments, State Department and the defense department, maybe they ought to get together and try to figure out when and how they're going to perform that responsibility.

Let me just, in the time left to me, the brief time, just ask a quick question here.

On February 4, 2007, the Iraqi government alleged that on that day, Blackwater shot and killed an Iraqi journalist, Hana al-Ameedi, of the Iraqi foreign ministry.

Is that true?

GRIFFIN: I'm aware that there were a number of allegations made about shootings in the newspaper. If I may, I'd like to describe what happens when one of our PSD teams is involved in a shooting incident so we can have a clear understanding of how the procedures work.

TIERNEY: Could I ask you, in the course of doing it, if the chairman's going to allow us to get into this, my way of approaching that, if you'd be good enough to work with me on that, is let us know which of the incidents the State Department has actually investigated and then tell us whether or not you can provide us with copies of that investigation.

Then after you've done that, we'll be happy to hear the way that you go about doing it.

GRIFFIN: We will provide you copies of every investigation that's been done.

The standard procedure is when one of our protective security details is on a mission and a weapon is fired, as soon as they get back to the international zone, the team that was involved in that incident comes to the tactical operations center, which is the hub for D.S. operations. 

Members of the team are segregated. They're interviewed by D.S. agents to report what had happened. Within 24 hours, they have to provide a written sworn statement as to what happened. 

The statements I review to make sure that the statements are consistent as to what occurred. They're reviewed by management at the post and, on a parallel track, on a weekly basis, our people who manage our overseas protective operations have weekly meetings with our contractors.

So at the same time, they are also exchanging information about any incident that might have occurred during the course of that week.

WAXMAN: Thank you, Mr. Tierney.

Mr. Burton?

BURTON: Thank you, Mr. Chairman.

I'll probably ask you some questions that we asked of the CEO of Blackwater, because I'd like to get a perspective of that from the State Department.

First of all, would it be more effective if we used active Army personnel to provide these services?

MOSER: Well, more cost effective, generally more effective.

GRIFFIN: I think that the professional men and women in the armed forces could do this mission, provided that they were given the training that professional security specialists have.

It's not the normal military training that they receive to go out and fight a war. When you're in a professional security mission where your mission is protect the person who is your principal and you come under fire, your response is not to stay and fight. Your response is to get off the "X." 

BURTON: So the mission is more defensive than offensive.

GRIFFIN: That's right.

BURTON: Several times, it's been suggested that the department's contract with Blackwater and other firms was sole source, a sole source contract.

Was it awarded improperly or not?

MOSER: I think I need to take that question, Mr. Burton.

In 2004, as the U.S. government made the transition from the coalition provisional authority to a U.S. embassy presence, we decided to do a sole source contract for Blackwater to provide the personal security services that Blackwater provides.

That was the only time that this contract has been sole sourced in the Department of State. The reason we did that was for urgent, compelling reasons and essentially there as a fully signed document by the proper officials within the State Department in order to -- that signed that justification. 

We were under a very, very urgent situation to make that transition. We had to make an effective transition and provide the security services so that the embassy could get up and running.

That document, for urging and compelling reasons, was signed by the procurement executive of the State Department, by the department's legal counsel for acquisitions, and by all the necessary officials in both diplomatic security and in the acquisition activity.

We did not like doing a sole source award to Blackwater and, therefore, at the close of 2004, we asked our OIG to get an audit of their price proposal and Mr. Waxman actually put the results of that audit in his letter of yesterday and we were very glad to see that there, because that was an audit that the acquisition activity asked for.

The reason we asked for it is that sometimes we need an outside audit to come in and take a look at a contractor to see if the rates are correct. 

In the actual results of that audit, we were able to take part of the Blackwater contract costs, which were -- Blackwater proposed around $140 million, and negotiate those down to $106 million.

So we think that the audit was a very positive thing.

Then the next year, in 2005, Blackwater -- this contract was incorporated into the worldwide protective services contract and it was competitively bid and awarded.

BURTON: That was a very thorough answer.

In the opinion of the State Department, are the contractors out of control or are any of them untrained?

MOSER: Well, I know that by the terms of the contract, they are very well trained. I will defer to my colleagues in diplomatic security to answer the question about out of control.

As part of the contracting activity, I would not make that judgment, but that is where we rely on the advice of the programmatic people. 

BURTON: Would one of you ambassadors like to comment?

GRIFFIN: Please, if I may, Mr. Burton.

All of the WPPS contractors who are employed under the terms of that contract must have at least one year of prior military experience, prior law enforcement experience.

Very often, the military experience is special forces. The law enforcement experience is SWAT type experience. 

Upon being identified, they have to successfully undergo a background check. They have to qualify for a secret clearance from our government and they also have to go through a training course which has been prescribed by D.S. of 164 hours in order to give them specific training on the mission that they'll be tasked to do when they arrive in country.

BURTON: I see my time has expired. I have some more questions, Mr. Chairman. Are we going to have a second round?

WAXMAN: I wasn't planning on it. How much more do you have?

BURTON: Just one or two more.

WAXMAN: Why don't you see if you can do the one or two more?

BURTON: Thank you, Mr. Chairman. I appreciate that.

WAXMAN: Give you another minute.

BURTON: When your contractors fire first at a vehicle speeding towards a chief of mission motorcade, is that a violation of the contract rules of engagement?

GRIFFIN: Absolutely not.

BURTON: Tell me, from your perspective, what takes place and what should take place. That'll be my last question.

GRIFFIN: In the use of force policy which is prescribed in the chief of mission policy in Baghdad and it's in our standard operating procedures for our high threat protection division, one does not have to wait until the protectee or a coworker is physically harmed before taking action.

We have an escalation of force policy in order to try and take a number of steps prior to having to go to the use of the firearms that our people carry.

On the back of all of our motorcade vehicles, in Arabic and English, there's a warning to stay back 100 meters. These vehicles are operating with lights and sirens. If a vehicle approaches from the rear when everyone else has stopped or goes around stopped vehicles and appears to be approaching our convoy, hand signals will be given, verbal commands will be given in order to get the attention of that driver, in order to get them to stop.

If they still haven't gotten their attention, they'll shoot a flare at the vehicle, which also will get their attention, but it won't hurt anybody. They'll use a bright light to shine at the vehicle.

If the vehicle is still coming, they may even throw a bottle of water at the vehicle.

Having all of those steps failed, they will put a round in the radiator of the vehicle or a couple of rounds to try and stop the vehicle. If the vehicle continues to come, realizing the number of VBIED attacks that occur in this environment, they're then authorized, for their safety and the safety of the people they're protecting, to shoot into the windshield in order to stop that vehicle.

BURTON: Thank you.

GRIFFIN: But it's an escalation of force policy, as we call it.

WAXMAN: Ms. Watson?

BURTON: Thank you, Mr. Chairman.

WATSON: Thank you, Mr. Chairman.

The colonel has spoken about how important private security contractors are for the State Department and how good they are at their jobs.

Ambassador Griffin, in your prepared testimony, you refer to private contractors as a skilled cadre of security professionals.

And, Ambassador Satterfield, you mentioned that you demand high standards and professionalism from these contractors.

In general, do you feel that private security companies do a good job in carrying out their mission of protecting State Department personnel?

SATTERFIELD: Congresswoman, we do believe that the overall mission of security contractors in Iraq is performed exceedingly well, with professionalism, with courage.

The undertaking that the secretary of state has made is to have a comprehensive review of all operations, to look at the mission, to look at the resources brought to the mission, to look at all aspects of procedures, rules of engagement, questions of jurisdiction and authority, to take a solid look at whether something better can be done, whether there are issues that need to be addressed.

Then we'll go to expose that to...

WATSON: Let me just cut you off.

SATTERFIELD: ... independent review...

WATSON: Let me just cut you off. Are you doing that review for all security or just for those in the theater in Iraq?

SATTERFIELD: For all private security contractors operating in Iraq.

WATSON: OK. Now, you know I've been an ambassador. I probably am the only one in Congress at the time in the House that's been there and I would insist that you do that, because I had an incident with a private contractor at my post where he would knock trainees down and then kick them with the point of his boot.

I would have fired him, but the word back from the State Department was that there's no one else to hire.

So I would hope that would be broad-based, the investigation, and not just there. 

One of the major reasons this committee has expressed some skepticism about the use of Blackwater and other private security contractors is because of the great respect we have for all the men and women who wear the uniform in Iraq.

WATSON: And we trust the military to face our most pressing challenges and stand up to our greatest threats and, yet, for all your statements about the skill and professionalism of these private contractors -- and I'm a witness, if you want to come and talk to me privately, I will tell you about my experiences with these private contractors.

So many in the military have been very critical of private security contractors in Iraq and especially Blackwater. 

Brigadier General Carl Hurst (ph) said, "These guys run loose in this country and do stupid stuff." I'm quoting. "There's not authority over them. You know, I was the authority over my security team when I was the ambassador and I reprimanded them for how they treated their trainees. So there's not authority over them. So you can't come down on them when they escalate force. They shoot people and someone else has to deal with the aftermath. It happens all over the place," unquote.

An Army lieutenant colonel serving in Iraq said of Blackwater, "They are immature shooters and have very quick trigger fingers. Their tendency is to shoot first and ask questions later. We are all carrying their black eyes." Now, that's a quote.

A senior U.S. commander serving in Iraq said, "Many of my peers think Blackwater is oftentimes out of control. They often act like cowboys over here."

Another U.S. military commander put it bluntly, "Iraqis hate them, the troops don't particularly care for them, and they tend to have a know-it-all attitude, which means they rarely listen to anyone, even folks that patrol the grounds on a daily basis."

And I can go on and on. But I'd like you to address how we can, if you will, be sure that our military has the training you, the State Department, contract and you go to private firms. If you see areas of our training that are missing, would you make that recommendation to the Department of Defense?

SATTERFIELD: Madam Congresswoman, there are different missions in Iraq today. Certainly, the issues you raise are ones that can be considered by the Department of Defense and by the joint chiefs in terms of the mission to be assigned to U.S. forces, whether in Iraq or elsewhere. I really can't speak to that.

What I can speak to is the oversight and accountability which the Department of State has and must exercise over those private security contractors that work for us today in Iraq.

That is a responsibility we take quite seriously. It's a responsibility that we will be carrying out in terms of this overall view in a very comprehensive fashion and we can...

WATSON: OK.

SATTERFIELD: ... make the results of that available.

WATSON: My time is up.

SATTERFIELD: Thank you.

WATSON: I'd just like to say, in closing, as I run out the door, I think somebody from the State Department ought to come and talk to me.

WAXMAN: Thank you, Ms. Watson.

GRIFFIN: We will get on our schedule at your earliest convenience, look forward to talking to you.

WAXMAN: Mr. Shays?

SHAYS: Thank you.

Gentlemen, would you agree that there's a huge difference between an ambassador in a country where there's not a threat to the lives and the challenge that that ambassador would have with a contracting team that's to protect them and one in places like Jordan and other areas in the Middle East and particularly Iraq, is there not a big difference?

GRIFFIN: The environment...

SHAYS: In other words, don't you have a lot more contractors having to secure people in a place like Iraq versus what an ambassador would have to protect his or her wellbeing?

GRIFFIN: Some of the personnel that we have under contract...

SHAYS: I want you to move the mike closer, please. 

GRIFFIN: I'm sorry?

SHAYS: Move the mike closer to you, please.

GRIFFIN: Some of the people at our posts around the world are part of our local guard force and those local guards...

SHAYS: No, you're not answering the question. I asked is there a difference and you can say yes or no.

GRIFFIN: There's a huge difference between...

SHAYS: Thank you.

GRIFFIN: ... Baghdad...

SHAYS: There is a huge difference.

GRIFFIN: My point is there are guards...

SHAYS: Fine. Let me take the next question.

GRIFFIN: OK.

SHAYS: I only have five minutes. If you need to answer, there's a big difference. The men and women who are being defended in Iraq by security people, their lives are in danger every day.

Now, Mr. Satterfield, isn't it true the ambassador has responsibility in Iraq for those security personnel?

SATTERFIELD: Indeed, he does.

SHAYS: Would you move the mike closer, please?

SATTERFIELD: Indeed, he does, Congressman.

SHAYS: Thank you. And does exercise it.

SATTERFIELD: Yes, he does.

SHAYS: Thank you. Would you tell me, Mr. Satterfield, can you describe the process that is followed by the department -- excuse me.

Let me ask this question. If there were sufficient -- I'd like to know if there were sufficient military personnel to provide armed escorts for convoys in Baghdad and, by conduct, protection, would you still use contractors to provide such security?

GRIFFIN: As I mentioned a minute ago, Mr. Shays, if the outstanding young men and women of the military received training in protective security operations, then they certainly would be capable of performing...

SHAYS: That's not what I asked. I want to know if you have a preference for using -- and I'm sorry, these are basically simple questions.

I want to know if your choice is between people -- outside contractors or would you like to use the resources of the military to have to spend their time to protect State Department employees.

Do you want State Department employees to go out in Humvees with lots of armored personnel or would you prefer that they go around the way they do in civilian clothes with people who are securing them that aren't in Army uniforms?

If you prefer the Army, tell me to do it.

GRIFFIN: All I was saying is the Army would be capable of doing it if it was done in the manner that we prescribed, which would not be Humvees and would not be in uniforms.

The protective security personnel that we utilize are trained for that specific mission. 

SHAYS: If they were Army personnel, would they be under your command and oversight or would they be under the command of the Army?

GRIFFIN: If they were performing a protective mission of the ambassador and other...

SHAYS: Do you command the Army or does the Army...

GRIFFIN: No, I don't.

SHAYS: ... command the Army?

GRIFFIN: The Army commands the Army.

SHAYS: So the answer is, isn't it, that the Army would be -- they would be under the commander of the Army and not under your jurisdiction and oversight if they were, in fact, Army? I don't want to put words in your mouth.

(CROSSTALK)

GRIFFIN: Well, I guess they would be.

SHAYS: I'm just asking the question. Yes, sir.

The issue -- let me ask you this. Would it be a problem if, in fact, you had no responsibility and they were to be answerable to the Army, the generals and so on?

GRIFFIN: I think that's a national policy consideration as to the staffing levels of the Army to perform that mission.

SHAYS: Well, as a Peace Corps volunteer, and I'll just make this point, the last thing you want when you are going into the community is to come in with a military force. 

What you want is to have a low profile. You want a protocol that says you don't bring in tanks, you don't bring in Humvees. You bring in a civilian car. You want people dressed in civilian clothes, for the most part, not dressed in armed uniform.

Let me ask you, in closing, Mr. Satterfield, when Mr. Bremer went in places, wasn't one of the criticisms that he was going in with the Army, with a high profile of military personnel and having an Army footprint instead of having a civilian footprint?

SATTERFIELD: Congressman, around the world, whether it's a critical threat post or a different threat level post, we try to make our protective details, our presence as low profile as possible, consistent with the protective mission, as unobtrusive as possible and as consistent with the civilian setting in which we operate as possible.

SHAYS: Thank you.

WAXMAN: The gentleman's time has expired.

Mr. Cooper?

COOPER: Thank you, Mr. Chairman.

I took my 88-year-old mother to the movies the other day. We saw a movie called "No End in Sight." It's really more of a documentary than a movie. 

In the middle of it, they say that the following footage was filmed by a U.S. security contractor" and he or she set the film footage to their own music.

So it sounds like "MTV," driving rock music, but the video footage is truly startling. It's shooting up cars apparently on a street in Baghdad, killing civilians, to this driving rock music.

Is the State Department aware of this film or have you made inquiries as to which contractor employee or independent contractor shot this footage?

GRIFFIN: No, I'm not familiar with the footage.

COOPER: And you're not familiar with the fact that it's being shown all over America. 

GRIFFIN: I'm not familiar with the footage.

COOPER: Ambassador Satterfield, same answer?

SATTERFIELD: I'm aware of that footage. It's outrageous. The U.S. government responded in just that fashion at the time it was initially circulated. I believe that was some years ago.

It may be featured in a movie today, but the film footage is not new. It does not reflect in any way the standards of conduct that are prescribed by our regional security office on the operation of any private security contractor operating in Iraq, not today and not then.

COOPER: So you've not seen it, but you know it's not true.

SATTERFIELD: I have seen that footage.

COOPER: Well, Mr. Ambassador, you say in your testimony, in those rare instances when security contractors must use force, management officials at the embassy conduct a thorough review to ensure that proper procedures were followed.

Ambassador Negroponte testified something similar just days ago. The committee tried to find out about an incident that happened on November 28, 2005. That's when a Blackwater convoy deliberately smashed into 18 different cars on route to and from the ministry of oil. 

Blackwater's own internal memo on the incident said that Blackwater's tactical commander on that mission, quote, "gave clear direction to the primary driver to conduct these acts of random negligence for no apparent reason," end of quote.

We have the Blackwater memo right here, the Blackwater aviation team that was accompanying convoy pointed out the problems. It also says that when Blackwater officials responsible were questioned about this incident, they gave statements, official statements that your own employees said were, quote, "deemed to be invalid, inaccurate and, at best, dishonest reporting."

So we've got a problem here and the State Department investigates problems. Well, when the committee asked the State Department about this incident, we got no response. 

So we don't know whether that means you investigated it and won't tell us or you didn't investigate it. Which is it?

GRIFFIN: There were a number of incidents that the committee requested reports on six days ago. I regret that we were unable to pull all those reports together in time for the hearing. We will certainly provide those reports for the record.

COOPER: We requested this in March of this year. So it's been more like six months than six days.

Are you saying that Blackwater's recordkeeping is better than yours?

GRIFFIN: I'm saying that there were a number of other requests made six days ago and I don't have instant recall of all of them, but we will certainly get a report to you about this particular incident.

COOPER: Another question. Blackwater testified they hired away a number of military personnel and Secretary Gates is even worried about that and is talking about non-compete agreements.

How many diplomatic security folks have they hired away?

GRIFFIN: I'm not aware that they've hired any.

COOPER: Do you take that as an insult, they don't covet your employees? 

GRIFFIN: No.

COOPER: Do you take it as an insult that we have to have extra help in so many places around the world, including Haiti? Are you not training your folks to that level?

GRIFFIN: I take that as an indicator of the environment that we're operating in in a number of posts around the world.

COOPER: Have you requested the money or the training or the resources to train your people up to the level that we need them in Jerusalem and Port-au Prince and Kabul and Baghdad and Basra and lots of places around the world?

GRIFFIN: My people have the training necessary to work in those areas and they are working there, but we don't have the numbers of people that it would take to fully staff all of those operations and we don't have all of the various areas of expertise, as I mentioned, such as helicopter pilots and medics and armorers and mechanics, et cetera.

COOPER: Have you asked for the additional resources so that you could augment your forces to meet the mission in those areas?

GRIFFIN: We have requested additional resources, but, again, the question includes whether or not you hire a full-time government employee is an employee for 25 or 30 years, when the mission might only last two years. 

So, certainly, there's a middle ground somewhere.

COOPER: So the State Department is saying we're exiting from Iraq in two years.

GRIFFIN: No. I'm just saying that we have deployed in other places going back to 1994 and certainly, at the beginning of a mission, it's hard to predict exactly how long the operation will go on.

But that we have operated in a number of different countries using these protective security specialists.

WAXMAN: Gentleman's time has expired.

Mr. Issa?

ISSA: Thank you, Mr. Chairman.

I'm going to continue along that line because I think it's a very good line of questioning. And I appreciate this part of the hearing, because I think we're getting to some fundamental questions about -- we're supposed to be oversight and reform. And if at the end of this day, the oversight doesn't lead to constructive dialogue on reform, then we didn't do our job.

When we look at, nominally, 1,000 security people related to the State Department, 800 -- almost 900 in Iraq -- if, hypothetically, they all were standard pays and training that you have somewhere else in the world, how often would you have to be rotating these people in?

This is assuming that they -- that everyone of those 900 or so positions were standard security within, you know, the State Department's security apparatus. 

What would that do to your rotation into Iraq? How often would these people be going to Iraq?

GRIFFIN: Presently, the rotation is one year.

ISSA: No, that's not what I'm saying.

What's the total number of government employee, RSOs and below, that you have at your disposal worldwide, not including contractors?

GRIFFIN: Our total staffing is roughly 1,450.

ISSA: OK. So, every year, almost, they're doing schooling and retirement. Every year, you'd be rotating half your people in. You have 1,400. If we added 1,000, then you'd have 2,400 and you'd need 1,000 of them in Afghanistan and Iraq. Is that right?

OK. So, this is a surge of huge proportion.

ISSA: Isn't that right?

GRIFFIN: Yes, it is.

ISSA: Let's go to a couple other areas.

Ambassador Satterfield, you and I have known each other for a few years because of my travels to Lebanon while you were there, and you've been a specialist in the Middle East.

When you were ambassador in Lebanon, this is an area in which the State Department contracts itself for its employees. Is that correct?

SATTERFIELD: That's correct.

ISSA: OK. At the time that you were ambassador in Lebanon, what was your amount of career foreign service personnel that were security, your RSO and so on, versus the contracted personnel that were most Lebanese?

SATTERFIELD: We had a team of approximately eight RSOs. We had approximately 450 local guards who mainly performed static guard duties at the mission. We had a team of about 75 bodyguards who had a specialty protective role, both at the compound and, more importantly, outside the compound.

ISSA: And substantially that's still what's going on at Embassy Beirut.

SATTERFIELD: Those ratios have changed, Congressman, in terms of the number of local guards, the number of bodyguards, and the number of RSOs, but the ratios in general are similar.

ISSA: So I'm trying to understand, from a standpoint of how you do business in a situation like Beirut, which since 1983 has been unique, you've refined it, but for all practical purposes what you do is you use your career State Department people, many of them at the pinnacle of their training and experience, to oversee essentially 75 mostly national...

SATTERFIELD: All national.

ISSA: What?

SATTERFIELD: All national.

ISSA: All national trigger pullers, to use a term that's been used here today, and another 450 watch tower people. And that's an efficient way to leverage your U.S. citizens relative to the total exposure to the U.S. government at Embassy Beirut.

SATTERFIELD: In Beirut we found it a highly effective way to run the operation.

ISSA: OK.

So this is a model that would not be unreasonable if we knew we were going to be doing the next 20 years in Iraq at this level. Is that true, Ambassador Griffin?

GRIFFIN: That is true. And the fact is that, if you look at all of our posts worldwide, we have in excess of 30,000 local guard force employees that secure our embassy and consular facilities overseas.

ISSA: OK. So I'm going to ask you the question, this is the reform question again. Do you have or are you working out plans for areas like Haiti, Bosnia, Afghanistan and Iraq to increase the number of direct contract personnel, particularly indigenous, where appropriate in order to both increase the domestic participation and reduce the reliance on out-of-country and comparatively expensive contract people?

GRIFFIN: I think Mr. Moser can talk about the cycle for our contracts and the fact that they are short-term. And we're always looking for ways to improve.

ISSA: No, I understand that you can terminate Blackwater at the end of a year, anytime you want. But I guess the question -- because this is a committee that should be looking at the long-term costs -- and I share with the chairman the fact that we shouldn't be spending $200,000 forever, if we could be spending, in some cases, a lesser amount and getting as good or better service, whether or not that is a career person or an indigenous person taking the place.

MOSER: Well, Mr. Issa, I've been in the Foreign Service for a number of years, too, and I've actually been in a couple -- visited or actually served in a couple of posts in the Middle East.

And I think my career colleagues in diplomatic security would agree that our preference is to always use local personnel for these services, if it's possible to do so.

It is not in the State Department's interest to have expatriate contractors for these kinds of services. It's only something that we do in the most extreme of circumstances.

Just as you pointed out in Mr. Satterfield's experience in Beirut, that's more closer to our traditional model.

ISSA: Thank you very much...

WAXMAN: Mr. Lynch?

LYNCH: Thank you, Mr. Chairman.

I want to thank the panelists for their testimony.

Ambassador Satterfield, in the testimony you prepared for today's hearing, you wrote, quote, "In those rare instances when security contractors must use force, management officials at the embassy conduct a thorough review to ensure the proper procedures were followed.

I'd like to ask you about the investigation conducted by the State Department and a couple incidents we've looked at. I might only get through one.

During our investigation, we found that, on June 25, 2005, a Blackwater operator shot and killed an innocent Iraqi bystander in Al Hillah.

According to a State Department e-mail, Blackwater personnel failed to report the shooting; they covered it up; and subsequently, they were removed from Al Hillah.

Now, the State Department then, in their e-mail asked Blackwater to pay $5,000 in compensation. But we have no information showing that the State Department ever conducted an investigation of that incident in Al Hillah.

Can you tell me: Was an investigation ever conducted?

SATTERFIELD: Congressman, if you will, we will get back to you with the full details of that incident and the investigatory follow- up.

LYNCH: You're kidding. This is a June 26, 2005, case. 

SATTERFIELD: Congressman, we will respond in detail on the questions you have posed.

LYNCH: But, sir, you were the deputy chief of mission at the time. I mean, you don't recall this?

SATTERFIELD: Congressman, I do not recall in the fashion necessary to respond to your question in the detail it deserves.

LYNCH: I was just asking if there was an investigation. That's not -- you know -- OK, you got the shooting, you were there. Do you remember if there was an investigation? That's not heavy on detail.

SATTERFIELD: Again, Congressman, I would prefer to respond to you in writing on this.

LYNCH: Are you refusing to answer? Is that...

SATTERFIELD: No, Congressman. I want to give you a full answer. I'm not able to do that at this time.

LYNCH: I'm just looking for a yes or no. Was there an investigation? Yes, there was an investigation, no.

SATTERFIELD: I am not able to confirm the details of what happened following that incident at this time.

LYNCH: I'm not looking for details. I'm just looking for the fact of an investigation. Did it occur or it didn't occur?

SATTERFIELD: Congressman, I will have to check on that for you.

LYNCH: So you don't know? You don't remember if there was an investigation?

SATTERFIELD: I cannot recall.

WAXMAN: Would the gentleman yield to me?

LYNCH: I will yield to the chairman.

WAXMAN: The committee asked for investigative reports and other documents relating to incidents involving allegations of Blackwater's misconduct, which would, presumably, include shooting civilians and seeking to cover it up.

And that virtually none would provide, the fact, alone, casts doubt on the sufficiency of any State Department investigations into these incidents. We've had a better response from Blackwater than we had from the State Department on getting information.

Does that bother you as much as it bothers me, or do you have to find out whether you feel that way or not?

SATTERFIELD: No, Mr. Chairman...

WAXMAN: I can't understand why we don't get responses from the State Department.

SATTERFIELD: We will be responding fully to all of the requests made both at this hearing and by the committee.

WAXMAN: Well, some of these requests were made in March; some were requested in June; were already holding the hearing. We made requests so that we could have them before the hearing, not requests so that we can get them after the hearing.

Gentlemen...

LYNCH: With all due respect, reclaiming my time, sir.

Look, what I'm getting at is this. The State Department works hand in hand with Blackwater, from my own experience in Iraq, in a fairly coordinated team approach in protecting State Department personnel.

The closeness of that relationship between State Department personnel -- look, Blackwater is protecting these folks every single day in a very hostile environment. Friendships develop. Reliance develops.

It is just not possible because of the conflict that's created that the folks that are being protected, State Department, are going to do an objective job in reviewing the conduct of the people who are protecting them.

And all I'm suggesting is this -- and please, if you can answer this question -- don't you think it might provide a little separation and a more objective assessment of Blackwater's conduct if we had a special inspector general reviewing those incidents so that there'd be a little space there -- they wouldn't be reviewing the conduct of people that protect them everyday?

If you'd take a crack at an answer on that one, thank you.

SATTERFIELD: Congressman, we do take the issue you raise very seriously about distance, transparency, objectivity of review of instance, as well as objectivity of review of rules operation in general -- conduct, in general.

We're looking at that right now, comprehensively. But to go back to your original question -- do we believe it is possible to objectively oversee the operation of security personnel in the field who protect us? Yes, we believe that is possible. It's executed everyday around the world. There are dismissals from service made everyday in response to incidents. This is done.

But we are looking at the overall picture in Iraq right now. And we will consider what steps may be appropriate.

LYNCH: Here's my problem with that answer. In the case in which I cited, there was a murder -- there was a killing of an innocent Iraqi. The RSO in question, I think, works for you, Ambassador Griffin.

They were part of the review of the incident, itself. So, just from an objective standpoint, looking at the whole situation, there may have been some complicity or some involvement or -- let's call it negligence, even, on the part of that individual.

LYNCH: And they are now reviewing the events in question.

So that's all. I'd just like some good, hard, objective review of the conduct here that would not be tainted by these relationships.

I yield back.

WAXMAN: Thank you.

Blackwater -- the private contractors have to be responsive to you, but you have to be responsive to us. We have the oversight jurisdiction, and you have the oversight jurisdiction over Blackwater. We want to know if you're exercising that oversight responsibility.

Ms. Schakowsky?

SCHAKOWSKY: Thank you, Mr. Chairman.

I would think that the State Department is very concerned on whether or not these private contractors, security contractors are actually helping us achieve our mission. That is, whether they're helping to win hearts and minds or exactly the opposite.

And so what we're seeing is that these -- that this isn't a benign function. All these various incidents, aren't they making the job harder?

For example, after the Fallujah four were humiliated and killed in Fallujah, we had the battle of Fallujah, where a number of our forces who participated, a large number were killed there.

The latest incident that we had has enraged the Iraqis, but also shut down the green zone, essentially, so that our diplomats couldn't leave for a certain period of time.

And I'm just very concerned that all of these things have been virtually ignored. And, in fact, when it comes to Blackwater the position that seems to be taken with a number of different quotes of e-mails and memos has been: Let's just pay people off and put this incident behind us. 

And I could go back and quote all these various things, but I think you've probably been here and heard that.

I'm concerned that you're allowing these private contractors to hurt our mission in Iraq and I...

GRIFFIN: If I may, David, again, realizing the environment that we're operating in, in Iraq, just this calendar year Blackwater has been involved in 3,073 missions, protective missions on behalf of the State Department.

Let me correct myself. There have been 3,073 countrywide missions by the three...

SCHAKOWSKY: I heard all that. That's the Blackwater talking points. I have heard those.

GRIFFIN: This is a D.S. talking point. The reality is, this year there have been 6,000 attacks per month going on in Iraq. 

GRIFFIN: That is the environment that they're trying to perform the protective mission in: 6,000 attacks per month.

SCHAKOWSKY: And I'm not questioning the level of violence in Iraq. I'm asking -- and I'll move on. I guess, in some ways, I was commenting that these private security guards, who were unclear on what kind of oversight we can exert and what you can exert, has been damaging our mission in Iraq.

So let me proceed to that. Under CPA, the Coalition Provisional Authority, Order 17, contractors have immunity from the Iraq legal system.

I heard you say, Ambassador Satterfield, that you were going to review -- this is now four years later -- the effect of CPA Order 17.

Don't you think there's prima facie evidence, since only two contractors that I know of have been prosecuted in any way, that we are insufficiently providing oversight?

SATTERFIELD: Congresswoman, CPA Order 17...

SCHAKOWSKY: Deals with Iraq...

SATTERFIELD: ... which is part of Iraqi law...

SCHAKOWSKY: Right.

SATTERFIELD: ... provides immunities not just for security contractors by for our armed forces in Iraq, for diplomatic personnel of all diplomatic and counselor missions, not just that of the United States, in Iraq, and for contractors associated with them.

It is a very broad measure.

SCHAKOWSKY: And does it still apply to everyone? They're not subject to Iraqi law at all?

SATTERFIELD: CPA Order 17 provides immunities for those classes of individuals, military, and civilian, diplomatic and non-diplomatic, operating in Iraq today.

But the question you raised, Congresswoman, is broader than the operation of CPA Order 17, and we recognize that.

SCHAKOWSKY: Correct, correct.

SATTERFIELD: It deals with issues of jurisdiction and authority in U.S. domestic law, not just the operation of a piece of Iraqi law that provides immunity for Iraqis.

SCHAKOWSKY: Right. And so is it your position that a Blackwater contractor, working for the State Department, can be court-martialed in the military justice system?

SATTERFIELD: The issue of jurisdiction and operation of U.S. domestic law, reach of U.S. domestic law, over individuals who are covered by the operation of CPA Order 17, in certain cases, is a question being examined now.

SCHAKOWSKY: So, almost five years later, we're now figuring out who is subject to what laws.

SATTERFIELD: This is a broader issue than Iraq, CPA order 17, or Blackwater. It is a global issue involving jurisdiction.

SCHAKOWSKY: Do you think it's a problem that almost five years into -- or four and a half years into the war, that only two of the -- God knows how many people of the 160,000 we think are now serving, in terms of contractors, have been formally charged with anything and prosecuted?

Don't you think that's prima facie evidence that we're not doing enough?

SATTERFIELD: No, Congresswoman. Because that would require an examination of whether, in fact, there was a body of individuals for whom there was reason to believe prosecution should be made. And I'm not able to comment on that.

SCHAKOWSKY: But you would say that, perhaps, only two people out of all those private contractors that have served should be charged with anything?

SATTERFIELD: Congresswoman, I'm not able to comment on culpability under U.S. law...

SCHAKOWSKY: I'm asking you to comment on whether our oversight structure is sufficient -- if that has been the outcome.

SATTERFIELD: There are significant issues involving the clarity and application of U.S. domestic law, with respect to certain classes of individuals who operate in environments such as Iraq, but not exclusively in Iraq.

WAXMAN: The gentlelady's time has expired.

Mr. Cummings?

CUMMINGS: Thank you very much, Mr. Chairman.

Mr. Chairman, I -- gentlemen, first of all, thank you for being with us.

You know, Blackwater has had an enormous growth in the size of its federal contracts. Would you agree? 

Mr. Satterfield? 

Mr. Moser?

MOSER: I've been told that that is true. I'm really only concerned with the growth of its size, with regard to the State Department. And that operation has grown some.

CUMMINGS: OK. In 2000, the company had less than a million dollars in federal contracts. But since then, the company has received over $1 billion in federal contracts, and I consider that incredible growth for any company.

The first State Department contract that Blackwater got was awarded in June of 2004.

CUMMINGS: Is that correct?

MOSER: Yes, that's correct.

CUMMINGS: It was a contract to provide security services to State Department officials in Iraq, and it was worth over $300 million. Is that correct?

MOSER: Yes, that's correct.

CUMMINGS: What bothers me is that this contract -- and I know you talked about this a little bit earlier, Mr. Moser -- but it was a no-bid contract.

MOSER: Yes, it was a sole-source award.

CUMMINGS: And according to the federal procurement database, the contract was awarded as a sole-source contract without any competition on the basis of urgency. Is that correct?

MOSER: On the basis of urgent and compelling, because we were transitioning from the Coalition Provisional Authority to a State Department entity. That is correct.

CUMMINGS: And how do we determine -- let's say we've got -- let's say we've got 12 companies that could do the same thing. Do you just pick up the phone and say, "Hey, guys, I think we want to give you this $300 million contract," or do you -- I mean, what do you do? I mean, all things being equal, urgent situation, how do you determine?

Because, look, let me tell you something, if you choose Blackwater and I'm Company X and I can do the same thing, and you say, "Well, we gave it to Blackwater because of urgency," I want to know, "Hey, why wasn't I in the pool for the urgent group?"

MOSER: Mr. Cummings, that is a very, very good question. And as the head of the acquisition activity, we're always concerned about promoting competition.

This one was done for urgent and compelling reasons. It is something the acquisition activity does very reluctantly.

At the time when that was done there was market research done. We examined the capabilities of four other firms and made the determination whether they could take on this task of providing these services. 

Realizing that we had done a sole-source contract, we worked with our partners in Diplomatic Security and awarded on a competitive basis the Worldwide Protective Services contract iteration two in the next year so that we only had a sole-source award for that one year for urgent and compelling reasons.

And as I said earlier in my remarks, because we were very concerned about this contract, we asked for a cost -- an independent cost audit to be done on this. 

This is something we take very seriously.

CUMMINGS: Yes. So the audit is done when?

MOSER: The audit was done, actually, in January of 2005. In other words, with the current contract award. And we actually negotiated down the cost of that contract by about $25 million.

CUMMINGS: Now, let me make sure I'm clear on this.

Are you trying to tell me that when you did this evaluation, you said there were four other companies. Are you trying to tell me that those four other companies were not as qualified as this company?

MOSER: That is correct.

But given the urgent and compelling circumstances, we did not feel that they could meet the government's need at that time.

CUMMINGS: And were there any other companies that you considered outside now of the total of five? In other words, you've got Blackwater, who got the contract -- $300 million -- and then we've got four other companies that weren't apparently qualified.

I guess I'm concerned about this qualified pool. I kind of hear people talk about pools and who's qualified, and I'm trying to figure out who's qualified and how are they qualified, because I can -- I mean, I can imagine there are a lot of people that feel like they've been not treated right.

MOSER: And I agree with that, Mr. Cummings. And that's the reason why we use the authority within the federal acquisition regulations, to use those urge of compelling reason to award a contract very sparingly.

And this is the reason why that when we did the particular award, we had it reviewed by our procurement executive to make sure -- and by our competition advocates -- to make sure that we're not unjustifiably taking this action. And that is the reason why we were so anxious and one year later to award this competitively.

CUMMINGS: It was my understanding that the previous year, they had a contract for $3 million. And then, lo and behold, the next year, $300 million. Well, boy, that sounds like the lottery.

MOSER: Well, I could understand that, too. But I really can't speak about any contract that was awarded by the Coalition Provisional Authority.

CUMMINGS: But would you have looked at those contracts? But that have been a part of your consideration?

MOSER: Yes. We would have actually examined those for the past performance criteria.

CUMMINGS: And who made the decision? Who made the final decision to award it and who signed the contract? That's all.

MOSER: Well, the contract -- you know, I have to look. I can't remember which one of my contracting officer staff actually signed it. It was one of the -- I'd have to look at that contract.

But that contract is actual -- that contracting action has gone through and we've actually given those documents to the committee. I see my colleagues in the staff, they've received copies of those several times.

WAXMAN: Did that go any higher than just your contracting officer? This is a pretty...

MOSER: Yes. I said that it was signed by the procurement executive of the Department of State, which is not part of the acquisition activity. He is an independent entity.

It was also signed by our acquisitions attorney, to make sure that it had a full legal review.

WAXMAN: Was this in 2004 or -- 2004 -- not 2007, 2006...

MOSER: No, this was in 2004.

WAXMAN: Yes, it was 2004, under Mr. Bremer?

MOSER: Yes, that's -- no, actually, 2004, as the embassy was stood up.

In other words, the 2003 award -- I think it was 2003, and this is where I'm not really confident to speak -- I think, was made under Mr. Bremer. And I can't really speak to that.

I can only speak to the contracts that the State Department has awarded.

WAXMAN: May I ask this question of -- maybe the other -- Ambassador Satterfield or Ambassador Griffin would know. Maybe you know.

You told us who signed it, but who approved it?

How high up did it go in the State Department for approval?

It's a large contract.

MOSER: Oh, OK. The head of the acquisition activity signed the sole-source justification. That's a senior executive service officer. It was reviewed by the deputy assistant secretary at the time, who I replaced.

WAXMAN: Deputy assistant secretary...

MOSER: Deputy assistant secretary, yes.

CUMMINGS: I have just one other question, just very briefly. Do you look at a company's capacity to perform a contract?

MOSER: Yes, we do.

CUMMINGS: And did you look at it in this instance?

MOSER: Yes, we did.

CUMMINGS: Did they have the resources to do this contract at the time, or did they have to use the $300 million to ramp up to do it?

MOSER: No, in fact, Congressman Cummings, we actually always look at the capital requirements in the contract, and then look and see if the contractor, or the offerer, the offerer, in this case, because he's not really a contractor until he's gotten an award -- if the offer has the financial capacity in order to provide the resources that we're going to need.

Now, and this is a typical -- you know, this is very much a business analysis-type decision. Because what we're looking to make sure is that they're going to be depending on the next paycheck to come so that they could actually keep on going.

We never want to put the U.S. government at risk in that kind of situation. Because, in fact, our biggest criterion, at the end of the day, is what risk is the government at, in terms of the financial arrangements in the contract?

CUMMINGS: Thank you, sir.

WAXMAN: Thank you very much.

In conclusion...

T. DAVIS: We were going to alternate equal time?

WAXMAN: We had Mr. Cummings take the questions. Do you want to ask a question or two? Do you want a minute?

T. DAVIS: I do. My understanding, Mr. Chairman, was...

(UNKNOWN): Take a minute. He's giving you a minute. Just take it.

WAXMAN: Can you do your questions in a minute?

T. DAVIS: I will be brief.

WAXMAN: The gentleman's granted a minute.

T. DAVIS: The recent report by retired General Jim Jones and Chief Ramsey appears to say, in pretty much no uncertain terms, that there are roughly 300,000 police forces throughout Iraq, 85 percent of whom are Shia, who are constituted, in large amounts, by people who are not working in the best interests of fairness and justice in Iraq, and that they have been so infiltrated by people who will in fact kill Sunnis and do do other things wrong, that they should be, for all practical purposes, torn down and started over again.

In that environment -- and this is for Ambassador Griffin -- what does that mean to anyone, D.S. or contractor, trying to protect your people when Iraqi police forces appear to be coming in on the scene?

GRIFFIN: As you can well imagine, it's an extremely difficult task as is, and if you're not sure if the people who are supposed to be supporting your mission are really with you or not, it only makes it more complicated.

We recently had an incident in Baghdad in September where one of our convoys that was out to do an advance for our chief of mission motorcade proceeded through an intersection where the traffic was being held up by a police official in order to clear the way for our motorcade, which was promptly hit by an EFP -- an explosively formed penetrator.

T. DAVIS: The worst of all IEDs.

GRIFFIN: The worst of all.

It resulted in three injured Blackwater employees who had to be medevac'ed to the combat support hospital after the small arms fire ceased, because it was a complex attack.

So, it makes it extremely difficult. And it's part of this environment that I alluded to where you have 6,000 attacks a month and you don't always know who's with you and who's against you.

(CROSSTALK)

(UNKNOWN): Mr. Chairman. Mr. Chairman, the rules of the committee...

WAXMAN: Your time has expired.

(UNKNOWN): Mr. Chairman, are we going to have regular order?

WAXMAN: Mr. Shays is recognized for any closing comment he wishes to make.

Your time is expired. I'm only going by the rules.

(CROSSTALK)

SHAYS: Let me just thank you, Mr. Chairman, for holding this hearing and making sure it didn't focus on an incident we do not yet know the facts on.

I want to thank our first panel and also our second and say, as I wrestle with this issue, it seems to me we are really debating whether, one, we want contractors or we want the army, or a second issue as to do we want the State Department to have its own protective force that would be paid employees? And I think these are all issues that are valid and we need to have dialogue on. 

And I want to say again to you, Mr. Satterfield, that when I've been in Iraq, you've been at the forefront of tremendous sacrifice for our country. Mr. Griffin, our paths didn't really cross. But I just want to say to you, Mr. Satterfield, thank you for your service in Iraq.

Again, Mr. Chairman, thank you.

WAXMAN: I just want to conclude by saying it's interesting how at the end of the hearing, we come to the recognition on both sides of the aisle that this is a valid question and an important one -- whether we should contract out these kinds of services in Iraq or anywhere else.

At the beginning of this hearing, all we had from the other side of the aisle were complaints that we shouldn't even be holding this hearing.

Now, as far as the State Department is concerned, what we've heard is that this was anticipated to be temporary. You needed to quickly put out a contract because it was going to be a temporary matter, yet the embassy was being built for $600 million.

This doesn't indicate to me that there was going to be a temporary presence in Iraq. It indicates to me that we were planning to be in Iraq and may still be planning to be in Iraq for a very long period of time.

I can't understand why a security officer that's hired by Blackwater should be paid two or three times what our commander in Iraq is paid. It confuses me why we need Mr. Prince to figure out to hire military veterans and give them the training to do the job that the State Department could do with these military personnel.

I just think no one cared about the money because Blackwater was organized and you just pay them amount of money and they did the job. And from my point of view as a chairman of an oversight committee, and I'd want to work together with Democrats and Republicans, the taxpayers are not getting their money's worth by all the billion of dollars that's gone to Blackwater and these other private security contractors, when it could have been done a lot cheaper.

And we're not getting our money's worth when we have so many complaints about innocent people being shot with unclear -- unclear whether they're actually being investigated by the State Department, because we haven't had cooperation from the State Department to even tell us if the investigations have been done by them.

So, if we're paying more and getting less than what we can get from our military, I think that the American are entitled to ask why. And I still am not satisfied, after this whole long day of hearings, that I've had a good answer to this question.

I thank the three of you very much for being here. We'll continue to be in touch with you because we think you owe us more answers. And we're going to continue to ask the questions until we get those answers.

The committee stands adjourned.

END

Courtesy CQ Transcripts Wire

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