Feds Won't Charge Blackwater in Sudan Sanctions Case

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the McClatchy Newspapers

Feds Won't Charge Blackwater in Sudan Sanctions Case

by
Warren P. Strobel, Jonathan S. Landay and Joseph Neff

WASHINGTON - The security contractor Blackwater
Worldwide tried for two years to secure lucrative defense business in
Southern Sudan while the country was under U.S. economic sanctions,
according to current and former U.S. officials and hundreds of pages of
documents reviewed by McClatchy.

The effort to drum up new business in East Africa
by Blackwater owner Erik Prince, a former Navy SEAL who had close ties
with top officials in the George W. Bush White House and the CIA, became
a major element in a continuing four-year federal investigation into
allegations of sanctions violations, illegal exports and bribery.

The
Obama administration, however, has decided for now not to bring
criminal charges against Blackwater, according to a U.S. official close
to the case.

Instead, the U.S. government and the private military contractor
are negotiating a multimillion-dollar fine to settle allegations that
Blackwater violated U.S. export control regulations in Sudan, Iraq and
elsewhere. Prince renamed the company Xe Services in an apparent attempt
to shake off a reputation for recklessness, and this month put it up
for sale.

Had the company been indicted, it could have been
suspended from doing business with the U.S. government, and a conviction
could have brought debarment from all government contracts, including
providing guard services for the CIA and State Department in war zones.
In recent weeks the Obama administration awarded the firm a $120 million
State Department security contract, and about $100 million in new CIA
work.

The story of Blackwater's efforts in Sudan is a tale of
mixed motives that echo an earlier era of overseas empires, of
evangelical Christians who offered to help defend Christian and animist
Southern Sudan from the Muslim Arab military dictatorship in the north,
but also sought to exploit the region's oil and mineral wealth.

According
to two former senior U.S. officials, the firm headed by Prince, who's
long been active in evangelical groups, at one point proposed a broad
defense package that would have required the south to pledge as much as
half its mineral wealth to pay for Blackwater's services.

It's
also a story of a divided Bush administration. Prince personally lobbied
Vice President Dick Cheney to lift the sanctions on Southern Sudan,
according to the documents and a former senior U.S. official, who said
that one meeting took place aboard Air Force Two. Prince's aides also
helped draft a letter from Southern Sudan's leader, Salva Kiir, to
President George W. Bush seeking an end to the sanctions.

Cheney
supported Blackwater's sales pitch, according to the documents. The
State, Justice and Commerce Departments, however, investigated whether
Blackwater had violated the sanctions that were imposed on Sudan
beginning in 1997, some of which the Bush administration lifted in late
2006.

McClatchy reporters reviewed the documents on Blackwater's
drive for a security contract with Sudan and interviewed more than a
dozen senior officials who were involved in Sudan policy decisions in
the Bush and Obama administrations. None would speak on the record due
to the sensitivity surrounding an ongoing law enforcement investigation.
The company didn't respond to repeated requests for comment.


POTENTIAL PROFITS

Perhaps the most unique character in the story is
Bradford Phillips, a Christian evangelical activist and former
congressional aide who runs the Persecution Project Foundation, a
Culpeper, Va., nonprofit that works to publicize and alleviate the
plight of Sudan's Christians.

At Prince's request, Phillips called
on the government of Southern Sudan and recommended Blackwater's
protective services. He helped set up meetings between Kiir and Prince
in Africa and Washington. The Washington session took place in November
2005 at the J.W. Marriott Hotel, a few blocks from the White House, the
documents show.

The chief salesman to the Sudanese during the
Washington meeting appears to have been Cofer Black, a former top CIA
and State Department official who in 2001 famously demanded that a CIA
subordinate kill terrorist leader Osama bin Laden and deliver his head
in dry ice.

Southern Sudan had emerged in 2005 as an autonomous
region after a U.S.-brokered peace deal ended a 22-year war with the
North. Weeks after he took the helm of the new Southern Sudan
government, Kiir's predecessor, John Garang, was killed in an
unexplained helicopter crash, and Blackwater's sales pitch to the Bush
administration was that protecting the new leader would support U.S.
policy objectives.

The company, however, also saw huge potential
profits.

After negotiating a $2 million draft contract to train
Kiir's personal security detail, Blackwater in early 2007 drafted a
detailed second proposal, valued at more than $100 million, to equip and
train the south's army. Because the south lacked ready cash, Blackwater
sought 50 percent of the south's untapped mineral wealth, a former
senior U.S. official said.

In addition to its well-known oil and
natural gas reserves, Southern Sudan has vast untapped reserves of gold,
iron and diamonds.

"Most people don't know this stuff exists.
These guys did," said a second former senior official who saw the
document, which apparently was never signed.

Ultimately, though,
Blackwater's venture in Southern Sudan foundered, U.S. officials said.

"Blackwater
had some problems in Iraq," said Deng Deng Nhial, the deputy chief of
Southern Sudan's Washington office. "Nothing really materialized. No
services were performed."

Deng said he had "no knowledge" that any
contracts had been negotiated or signed.

Federal investigators,
however, found evidence that Blackwater's sales campaign had violated
U.S. sanctions, export control laws and the Foreign Corrupt Practices
Act, which is designed to prevent U.S. companies from bribing foreign
officials in return for business, according to the officials and
documents.

The suspected violations included brokering for defense
services without a U.S. government-approved license; transferring
satellite phones and encrypted e-mail capabilities to Southern Sudanese
officials; and attempting to open a joint escrow account with the
south's government at a Minnesota bank.


FEDERAL PROBE

The focus on Sudan was part of a broader federal probe
of Blackwater that began in 2006 and also examined the alleged bribery
of foreign officials in Jordan, Iraq and Sudan and the alleged illegal
exports of rifles, silencers and other military hardware to the Middle
East, some of it hidden in pallets of dog food.

The U.S. Attorney
for the Eastern District of North Carolina, where Xe Services is based,
established a special task force that at times comprised as many as two
dozen federal agents from at least eight U.S. agencies. They included
the Justice, State, Defense, Homeland Security, Treasury and Commerce
departments, and the FBI and CIA Inspector General's office.

Prosecutors
convened a grand jury in North Carolina to consider the case.

In
April, a federal grand jury in that state indicted former Blackwater
president Gary Jackson, former general counsel Andrew Howell and three
other ex-employees with violating U.S. firearms laws, including
falsifying federal paperwork to conceal a gift of firearms to King
Abdullah II of Jordan, with whom the company had extensive ties.

No
charges have been brought against the company itself, or against Prince
or current executives.

Prince, who founded the firm in 1997 and
won more than $1.6 billion in unclassified federal contracts and an
unknown amount of secret work, announced in early June that he plans to
sell Xe Services.

"The intent (of the pending fine) was not to
force the company to go out of business. That may be the result - that
was not (the) intent," said the U.S. official familiar with the case and
with the pending multi-million dollar fine.

Why Blackwater hasn't
been charged in the Sudan matter remains contentious.

"These were
. . . allegations of serious violations," said a former State
Department official with knowledge of the case. "Anything that involves a
proscribed country like Sudan is . . . serious."

Some officials
charge that Blackwater has received special treatment, in light of the
wide range of alleged export control violations - some of which the
company has acknowledged to the U.S. government, according to documents
McClatchy has reviewed.

The U.S. official close to the case, who
asked that neither he nor his agency be named, indicated that there are
differences over whether there's sufficient evidence to support a
successful prosecution. Moreover, he said, Xe has improved its export
control practices.

The official also emphasized that "Southern
Sudan was a very unique beast," a U.S.-backed enclave within a country
that was under stiff American sanctions.

Justice Department
spokesman Dean Boyd said the department doesn't comment on internal
deliberations. "The Justice Department follows the facts and the
evidence wherever they lead in investigations and prosecutions, and will
continue to do so," he said.


BROKEN PROMISE

If the renamed Blackwater were indicted under the
Foreign Corrupt Practices Act and the International Traffic in Arms
Regulations, it would cost Xe Services more than 95 percent of its
business.

As Blackwater, that business included protecting the
CIA's Kabul station and participating in a never-implemented program to
hunt down and kill al Qaida leaders.

Blackwater's failed foray
into Sudan began as an attempt to branch out from its work in Iraq,
which peaked in 2006, where it first gained international attention
after four of its security guards were ambushed and killed, and two of
the charred bodies hung on a bridge in the town of Fallujah in March
2004.

Africa was a new market, and Sudan's Christian-Muslim divide
looked to some within Blackwater as a front in Bush's "war on
terrorism."

Several officials with knowledge of Sudan policy said
the State Department and CIA initially encouraged Blackwater to explore
providing protection for Southern Sudan's leaders, fearing they could be
targeted for assassination.

The Bush administration promised
protection, secure communications and air transport to Garang, the
long-time Southern Sudanese rebel leader, said a U.S. official with
years of experience in Sudan. The promise went unfulfilled, however, and
Garang's untimely death in July 2005 caused great bitterness among his
backers in Washington.

A month earlier, Prince had met with
Bradford Phillips, who knew Garang, to discuss possible Blackwater
training for the Southern Sudanese leader's security detail.

The
two men had met years earlier through their fathers, industrialist Edgar
Prince and conservative activist Howard Phillips, both prominent in the
Christian conservative movement.

That fall, Blackwater formally
retained Phillips, who traveled to the Southern Sudanese capital of
Juba, where he promoted Blackwater to Kiir, who was Garang's successor.

Christopher
Taylor, a Blackwater vice president who led the company's Sudan
initiative, accompanied Phillips on two subsequent trips.

Phillips
didn't respond to repeated requests for comment and ordered a reporter
who visited his Charlottesville, Va., home to get off his property.
Reached by phone, Taylor declined comment for this report. Neither man
has been charged with any wrongdoing.


EQUIPMENT AND TRAINING

Documents show there was extensive activity by the
company well before the U.S. sanctions against Southern Sudan were
lifted in late 2006. In November 2005, Kiir traveled to Washington on
his first official visit and met Cheney.

While there, Kiir and his
aides met Blackwater executives, including Prince, Taylor and Black,
the veteran CIA officer. At the Marriott hotel, Black delivered a
presentation on Blackwater's capabilities and urged Kiir to lobby Bush
to lift the sanctions on Southern Sudan.

Several days later,
accompanied by Philips, two of Kiir's close advisers toured Blackwater's
sprawling Moyock, N.C., facility.

A senior Southern Sudanese
official confirmed the trip to Blackwater's headquarters, and said
Kiir's government was interested in elite bodyguard training and secure
satellite phones that couldn't be intercepted by the Khartoum
government.

Taylor and Phillips then visited Sudan in February
2006. Taylor gave Kiir and his aides the satellite phones, access to the
secure e-mail accounts and a formal proposal for Blackwater protective
services.

Over subsequent months, and while the U.S. sanctions
were still in effect, Blackwater pressed its sales drive, which included
a meeting between Prince and Kiir in Nairobi, Kenya, and a third visit
to Sudan by Taylor.

Bush lifted the U.S. sanctions on Southern
Sudan by executive order on Oct. 13, 2006, but by that time, federal
investigators had concluded that Blackwater had already crossed the
permissible line in brokering defense services.

Eleven days later,
Blackwater and Southern Sudan concluded preliminary negotiations on a
contract to train Kiir's bodyguards. It's not clear whether the contract
was ever implemented.


HISTORY OF CONFLICT

Sudan, Africa's largest country in land area, was riven
by a 22-year civil war between the mostly Muslim north and the Christian
and animist south that killed an estimated 2 million people and forced
millions more to flee. The International Criminal Court last year
charged Sudan's president, Omar al Bashir, with war crimes stemming from
the conflict in Sudan's Darfur region and which the U.S. has called
genocide.

Sudan was added to the State Department's list of state
sponsors of terrorism in the 1990s, in part because it harbored Osama
bin Laden. President Bill Clinton imposed comprehensive sanctions on the
country in 1997 in an attempt to weaken the country's Islamic
dictatorship.

The 2005 Comprehensive Peace Agreement, brokered
with U.S. help, ended the north-south war. However, there's widespread
concern that civil war could erupt again if the south chooses to secede
in a referendum scheduled for January. Both sides are rapidly arming
themselves, Sudan specialists say.

(Landay and
Strobel reported from Washington. Neff, of the Raleigh News &
Observer, reported from Raleigh, N.C. McClatchy special correspondent
Alan Boswell in Juba, Sudan, and intern Maggie Bridgeman in Washington
contributed to this article.)

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