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IRAQI RECONSTRUCTION: RELIANCE ON PRIVATE

MILITARY CONTRACTORS AND STATUS REPORT

HEARING

BEFORE THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

FEBRUARY 7, 2007

Serial No. 110–11

Printed for the use of the Committee on Oversight and Government Reform

(

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html

http://www.house.gov/reform

(II)

COMMITTEE ON OVERSISGHT AND GOVERNMENT REFORM

HENRY A. WAXMAN, California, Chairman

TOM LANTOS, California

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

BRIAN HIGGINS, New York

JOHN A. YARMUTH, Kentucky

BRUCE L. BRALEY, Iowa

ELEANOR HOLMES NORTON, District of

Columbia

BETTY MCCOLLUM, Minnesota

JIM COOPER, Tennessee

CHRIS VAN HOLLEN, Maryland

PAUL W. HODES, New Hampshire

CHRISTOPHER S. MURPHY, Connecticut

JOHN P. SARBANES, Maryland

PETER WELCH, Vermont

TOM DAVIS, Virginia

DAN BURTON, Indiana

CHRISTOPHER SHAYS, Connecticut

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

MARK E. SOUDER, Indiana

TODD RUSSELL PLATTS, Pennsylvania

CHRIS CANNON, Utah

JOHN J. DUNCAN, JR., Tennessee

MICHAEL R. TURNER, Ohio

DARRELL E. ISSA, California

KENNY MARCHANT, Texas

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

VIRGINIA FOXX, North Carolina

BRIAN P. BILBRAY, California

BILL SALI, Idaho

——— ———

PHIL SCHILIRO, Chief of Staff

PHIL BARNETT, Staff Director

EARLEY GREEN, Chief Clerk

DAVID MARIN, Minority Staff Director

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C O N T E N T S

Page

Hearing held on February 7, 2007 ......................................................................... 1

Statement of:

Ballard, Tina, Assistant Undersecretary for Procurement and Policy, U.S.

Department of the Army; Andrew G. Howell, general counsel,

Blackwater USA; R. Timothy Tapp, managing director, business operations, Regency Hotel and Hospital Co.; W. Steve Murray, Jr., director

of contracting, ESS Support Services Worldwide; George Seagle, director of security, government and infrastructure division, KBR; Tom Flores, senior director, corporate security, Fluor Corp.; and Alan Chvotkin,

senior vice president and counsel, Professional Services Council ............. 111

Ballard, Tina .............................................................................................. 111

Chvotkin, Alan ........................................................................................... 135

Flores, Tom ................................................................................................ 133

Howell, Andrew G. .................................................................................... 121

Murray, W. Steve Jr. ................................................................................. 117

Seagle, George ........................................................................................... 128

Helvenston-Wettengel, Kathryn, mother of Blackwater employee Stephen

Helvenston; Kristal Batalona, daughter of Blackwater employee Wesley

Batalona; Rhonda Teague, wife of Blackwater employee Michael

Teague; and Donna Zovko, mother of Blackwater employee Jerry

Zovko .............................................................................................................. 71

Helvenston-Wettengel, Kathryn ............................................................... 71

Letters, statements, etc., submitted for the record by:

Ballard, Tina, Assistant Undersecretary for Procurement and Policy, U.S.

Department of the Army, prepared statement of ....................................... 113

Blackwater family members, prepared statement of ..................................... 76

Chvotkin, Alan, senior vice president and counsel, Professional Services

Council, prepared statement of .................................................................... 138

Flores, Tom, senior director, corporate security, Fluor Corp., prepared

statement of ................................................................................................... 134

Davis, Hon. Tom, a Representative in Congress from the State of Virginia:

Letter dated December 13, 2006 .............................................................. 15

Prepared statement of ............................................................................... 19

Howell, Andrew G., general counsel, Blackwater USA, prepared statement of ........................................................................................................... 123

Issa, Hon. Darrell E., a Representative in Congress from the State of

California, letter dated December 13, 2006 ................................................ 35

Murray, W. Steve, Jr., director of contracting, ESS Support Services

Worldwide, prepared statement of .............................................................. 119

Seagle, George, director of security, government and infrastructure division, KBR, prepared statement of ............................................................... 130

Waxman, Chairman Henry A., a Representative in Congress from the

State of California:

Memorandum dated February 7, 2007 .................................................... 27

Prepared statement of ............................................................................... 4

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IRAQI RECONSTRUCTION: RELIANCE ON PRIVATE MILITARY CONTRACTORS AND STATUS REPORT

WEDNESDAY, FEBRUARY 7, 2007

HOUSE OF REPRESENTATIVES,

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 10 a.m. in room

2157, Rayburn House Office Building, Hon. Henry A. Waxman

(chairman of the committee) presiding.

Present: Representatives Waxman, Lantos, Towns, Maloney,

Cummings, Kucinich, Davis of Illinois, Tierney, Clay, Watson,

Lynch, Higgins, Yarmuth, Braley, Holmes-Norton, Cooper, Van

Hollen, Hodes, Murphy, Sarbanes, Welch, Davis of Virginia, Shays,

Souder, Platts, Cannon, Duncan, Turner, Issa, Westmoreland,

McHenry, Foxx, Bilbray, and Sali.

Also present: Representative Schakowsky.

Staff present: Phil Schiliro, chief of staff; Phil Barnett, staff director and chief counsel; Kristin Amerling, general counsel; Karen

Lightfood, communications director and senior policy advisor;

David Rapallo, chief investigative counsel; Theodore Chuang, deputy chief investigative counsel; Jeff Baran, counsel; Christopher

Davis, professional staff member; Earley Green, chief clerk; Teresa

Coufal, deputy clerk; Matt Siegle, special assistant; Lauren Belive,

Kerry Gutknecht, Davis Hake, and Will Ragland, staff assistants;

Leneal Scott, information officer; David Martin, minority staff director; Larry Halloran, minority deputy staff director; Jennifer

Safavian, minority chief counsel for oversight and investigations;

Keith Ausbrook, minority general counsel; Ellen Brown, minority

legislative director and senior policy counsel; John Brosnan, minority senior procurement counsel; Steve Castor, minority counsel; Edward Kidd, Christopher Bright, and Allyson Blandford, minority

professional staff members; John Cuaderes and Larry Brady, minority senior investigator and policy advisors; Patrick Lyden, minority parliamentarian and member services coordinator; Brian

McNicoll, minority communications director; and Benjamin Chance,

minority clerk.

Chairman WAXMAN. The meeting of the committee will come to

order.

Today the committee will investigate potential fraud, waste, and

abuse in the almost indecipherable world of contractors and subcontractors.

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In the last 2 years I have tried to get a clear answer to what I

thought was a simple question: How much money the Halliburton

subsidiary named KBR and private security subcontractors were

making under the Army’s troop support contract called LOGCAP.

We know that the war in Iraq has given private contractors an unprecedented role in providing security services. Almost $4 billion

in taxpayer funds has been paid for private security services in the

reconstruction effort, alone. But sorting out overhead, subcontracts,

sub-subcontracts, profit, and performance has been nearly impossible.

For over 18 months the Defense Department wouldn’t even respond to my inquiry. When it finally replied last July, it didn’t

even supply the breakdown I requested. In fact, it denied that private security contractors did any work at all under the LOGCAP

contract. We now know that isn’t true, and today we will try to understand the layers of subcontractors, with a particular emphasis

on the Blackwater company.

On March 31, 2004, four Americans working as private security

personnel for Blackwater, all of whom were military veterans, were

ambushed and killed in Fallujah while on a protection mission.

Their tragic death became a turning point in public opinion about

the war and directly resulted in a major U.S. military offensive,

which is known as the First Battle of Fallujah.

Twenty-seven American soldiers and over 800 insurgents and

Iraqi citizens died in that battle, and military observers believe it

helped fuel an escalation of the insurgency.

It is now almost 3 years later and we still don’t know for sure

the identity of the primary contractor under which the four

Blackwater employees were working. What we do know is that

Blackwater was providing security services under a contract with

a Kuwaiti company called Regency, and that Regency was, itself,

a subcontractor for ESS Support Services Worldwide, which in turn

was a subcontractor providing dining services and contract services

for other contractors such as KBR and Fluor Corp.

We also know that both Blackwater and Regency were adding

significant markups to the cost of providing the security services.

And, on top of that, the prime contractor, whomever it was, was

making its own percentage off the contract. Blackwater initially indicated that it believed KBR was the prime contractor under the

LOGCAP contract. Three months ago, however, ESS told the committee that the Fluor Corp. was actually the prime contractor for

Blackwater work in Fallujah. The Fluor Corp. disputes this, and

the Defense Department doesn’t seem to be sure what is going on.

It is remarkable that the world of contractors and subcontractors

is so murky that we can’t even get to the bottom of this, let alone

calculate how many millions of dollars taxpayers lose in each step

of the subcontracting process, but the impacts of contracting waste

go beyond just dollars and cents.

Today four family members of the four murdered Blackwater employees will share their testimony with us. They believe Blackwater

sent their relatives into Fallujah unprepared and without armored

vehicles, a rear gunner for each vehicle, or heavy automatic weapons to defend against attacks. Their experience tells them that tax

dollars never reached the security personnel on the ground. They

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believe that the money for protective equipment took a back seat

to the multiple layers of contractor profits.

I don’t know if we will be able to resolve that issue today, but

I am deeply troubled by one document we have found in preparing

for this hearing. The day before the four soldiers were killed, a

Blackwater employee sent an e-mail alerting superiors that a lack

of equipment, armored vehicles, and other safety equipment left

the team unprepared to begin its mission. That warning was seemingly ignored, and we need to explore that further.

Without objection, this e-mail will be made part of the hearing

record today.

I have already learned that sorting out the webs of subcontracts

is confusing work, but our committee has an absolute obligation to

the taxpayers to make sure their tax dollars are well spent and not

siphoned off into billions of dollars of unnecessary overhead. And,

even more important, we have an inviolate obligation to the men

and women in harm’s way and to their families to make certain

that their safety doesn’t take a back seat to corporate profits or

wasteful spending.

I look forward to learning more from our witnesses this morning.

[The prepared statement of Chairman Henry A. Waxman and the

e-mail follow:]

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Chairman WAXMAN. I now call on the ranking member of this

committee, Mr. Davis.

Mr. DAVIS OF VIRGINIA. Thank you, Mr. Waxman. And thank you

for holding this hearing.

We once again meet to examine the challenges of managing contracts in Iraq. Since 2004 the committee has been engaged in continuous and vigorous oversight of contracting activities in the war

zone. That oversight involved 5 full committee hearings, 14 subcommittee sessions, numerous briefings from the agencies involved,

and review of thousands of documents the committee obtained from

key Federal agencies. Those efforts focused on contracts for

logistical support of U.S. military operations and for reconstruction

efforts.

Throughout this review it has been our goal to move beyond just

the charged rhetoric and easy generalities that swirl around the

topic and get to the underlying realities of acquisitions in Iraq. The

truth is gritty enough. No one needs to embellish or exaggerate it.

Still, some prefer to oversimplify, distort, and prejudge the outcome

of complex contracting processes to fit the preordained conclusion

that nothing goes right in Iraq. I would rather pursue a more constructive mode of oversight that looks beyond the headlines to

make a lasting difference in our policies and save taxpayers money.

Some of today’s testimony will focus on a brutal incident in 2004

in which four civilian security personnel retained by Blackwater

USA, a security contractor, were ambushed and killed in Fallujah.

Our hearts go out to the families of those four men. Committee

members should keep in mind that liability of Fallujah incident is

the subject of pending civil litigation, and I would ask unanimous

consent at this point to put in the record a letter from Callahan

and Blain to Speaker Pelosi on this matter.

Chairman WAXMAN. Without objection, the letter will be made a

part of the record.

Mr. DAVIS OF VIRGINIA. Thank you.

[The information referred to follows:]

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Mr. DAVIS OF VIRGINIA. In view of the court actions, I know that

the longstanding committee policy still applies. This is not the

forum to prosecute private lawsuits or the place to exploit the tragic events, but there are some unanswered questions, Mr. Waxman,

and I applaud you for trying to get to some closure on these issues.

A separate focus on this hearing is on management and oversight

of private security agreements; specifically, the allegation that

tiering of personnel charges by layers of security subcontractors exorbitantly inflated the price paid by the Government under costplus agreements. Tiering could be pernicious if each party was free

to mark up their invoices and pass them on, but so far we found

that subcontractors had fixed price contracts with the DOD prime

contractor, KBR, a former Halliburton subsidiary, so the subcontractors could not pass on costs beyond the fixed unit prices—

mostly competitive bid—in their contracts. In those cases, at least,

the alleged profiteering shouldn’t be possible. There is no legal way

to profit from tiering under that scenario.

Even so, there remains the question of whether KBR may have

acted improperly by allowing its subcontractors to use any type of

security services at all, or for not knowing whether third and

fourth-tier subs included any security costs in their competitively

bid fixed price contract costs.

The prime contract includes a generic prohibition against employees carrying weapons without special permission. Whether

state prohibition can be stretched into a specific ban or even specific security charges by remote subcontractors operating in a war

zone will likely be the subject of intense discussion between the

Army and KBR.

Make no mistake: there are still too many problems with contracting in Iraq. Just look again at the mess made through the

Baghdad Police College, with raw sewage surging through classrooms. More recently we heard about unauthorized VIP trailers

and Olympic-sized swimming pools paid for with U.S. tax dollars.

With that in mind, I look forward to exploring solutions to the constant security and logistical challenges that make contract oversight in a war zone so challenging.

How do we get the right number of acquisition professionals and

auditors with the right skills to the operational theater in time to

prevent and not just chase costly mistakes?

In previous hearings we heard that emergency short-term contracting gave way to longer contingency agreements. Then many

sustainment contracts were opened into using full and open competition. The process needs to mature and stabilize even further. I

hope these hearings help us get to that end. We are looking for a

slope to the acquisition learning curve, evidence that lessons

learned are being applied.

Thank you.

[The prepared statement of Hon. Tom Davis follows:]

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Chairman WAXMAN. Thank you very much, Mr. Davis.

By the announcement yesterday, all Members who have made an

opening statement will not be called on today for an opening statement. Mr. Towns was not here yesterday and has requested that

he be given an opportunity for an opening statement.

Mr. TOWNES. Thank you very much, Mr. Chairman. I had a conflict yesterday and, of course, was unable to be present. Thank you,

Mr. Chairman, for holding these hearings on waste, fraud, and

abuse in Federal contracting.

Today’s hearing focuses on military contracts in Iraq, but the

problems identified are not unique to the Pentagon or the war. In

fact, we see exactly the same type of waste in contracts of Hurricane Katrina and in other areas. The American people and Congress have been very, very generous, but not nearly enough of the

money has been sent into the places that need the help, especially

the victims of Katrina.

One of the biggest problems I see, Mr. Chairman, and something

that I plan to look into in my subcommittee as the Chair, the layers and layers and layers of middle men, each taking a cut of the

money before it gets to the people who are actually doing the work.

If we could cut out these middle men and middle women, we could

get more funds applied to the problems we are trying to solve and

save some money while we are dealing with the problem.

This problem is more than just wasted dollars. With so many layers of subcontractors, the Government cannot monitor the work

and hold people accountable. This absence of accountability has

real, real human cost. People who lost homes in Hurricane Katrina

tell us how many different contractors they had to deal with just

to get a trailer to live in or to put a roof over their heads. And relatives of Blackwater employees will tell us today how the lack of

oversight and planning can contribute to a tragedy.

Mr. Chairman, I am glad that we have the chance today to question some contractors and finally do some oversight, but the same

type of wasteful contracting happens so often that this is not just

a problem with a few bad apples. The Federal contracting system

is broken and we must fix it.

In this Congress we need to pass a bill that closes loopholes and

requires more competition. We need to take oversight and control

out of the hands of huge contractors and have Government officials

supervising the people who are actually doing the work. And we

need to make sure that we are not outsourcing work that should

be done by Government employees.

I look forward to working with you, Mr. Chairman, and with the

members of this committee on both sides of the aisle to pass some

real contracting reform as soon as possible.

On that note, Mr. Chairman, I yield back. I am eager to hear

from the witnesses.

Chairman WAXMAN. Thank you very much, Mr. Towns.

The Chair would note that Ms. Foxx did not have an opportunity

for an opening statement yesterday. I want to see if she wishes to

make one to day.

Ms. FOXX. I do, Mr. Chairman. Thank you very much for this opportunity.

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As our country engages in the historic struggle against evil and

terror, some publicly question whether our efforts are being properly administered and operated. While constructive criticism and

genuine critical analysis help ensure transparency and proper management, some partisan rhetoric can actually compromise the good

work that is being accomplished in places like Iraq.

Many contractors operating in Iraq have been subjected to a

great deal of scrutiny. While I understand there may be some

waste as contractors operate in a war zone, a vast majority of the

work done by our military contractors is praiseworthy.

American contractors deliver critical supplies, infrastructure, and

security in an incredibly hostile environment. One of these contractors, Blackwater USA, is headquartered in my home State of North

Carolina. Today they are facing accusations of negligence and profiteering, but I see another side of this company that often remains

unmentioned in the media. For example, many Blackwater security

personnel were previously honorable law enforcement and military

personnel, professionals. These folks are well trained and well

equipped as they work tirelessly side by side with our military as

they pursue victory over vicious, heartless attacks of violence. Furthermore, in response to emerging threats arising in the war on

terror, Blackwater is developing a number of technologies which

can serve to protect our brave servicemen and women fighting

overseas.

Given the tremendous personal sacrifices and acts of patriotism

made every day by the brave folks who work for contractors such

as Blackwater, I hope that today’s hearing will provide an opportunity for a fair defense against some of the accusations which

have been leveled against them.

I look forward to the testimony of today’s witnesses.

I want to add one comment to the prepared statements. I appreciate very much what Mr. Towns was saying about how we should

be looking at waste, fraud, and abuse throughout the Federal Government. I will tell you that this is an issue near and dear to my

heart. But one of the problems that we have is we are doing too

much at the Federal level and Congress is not exercising its appropriate oversight authorities. I think many times we are working

with systems that simply don’t work. Having hearing after hearing

is not as productive as it should be in terms of our looking at that.

But I think one of our biggest problems is that the Federal Government tries to do things it has no business doing, and we simply

cannot do the proper oversight, and we need to reduce the role of

the Federal Government instead of increasing the role of the Federal Government.

Thank you.

Chairman WAXMAN. Thank you very much for your comments.

We will now turn to the witnesses, but before that we have a

memo that has been circulated to the members of the committee.

It is additional information for hearing on private security contractors. Without objection, we would like to make that part of the

record.

[The information referred to follows:]

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Chairman WAXMAN. We will receive testimony from the first

panel of witnesses. Let me introduce them.

On March 31, 2004, four men working as private security personnel for Blackwater USA were securing a convoy when they were

killed as they traveled through Fallujah. These brave and patriotic

men were Scott Helvenston, Wesley Batalona, Jerry Zovko, and Michael Teague.

We have with us today family members of all four men. Katy

Helvenston-Wettengel is the mother of Scott Helvenston. Scott was

a former Navy Seal and a Seal instructor, a world-class athlete,

and the father of two young children. Donna Zovko is the mother

of Jerry Zovko, a former Army Ranger who was fluent in four languages and was just 32 at the time of his death. Rhonda Teague

is the widow of Michael Teague, who was also survived by his son.

Mike has served as a member of the Army’s elite helicopter unit

known as the Nightstalkers. He had completed tours of duty in Afghanistan, Panama, and Grenada. He was awarded the Bronze

Star. Kristal Batalona is the daughter of Wesley Batalona, a 20-

year veteran of the Army Rangers, who took part in the 1989 invasion of Panama, the first Gulf war in 1991, and the 1993 humanitarian mission in Somalia. Ms. Batalona heard the news of her father’s death on her 22nd birthday.

Before we begin, I would like to express, on behalf of myself and

the entire committee, our deepest condolences. Our hearts go out

to all of you for your loss. As Americans, we all felt the pain that

came across when we saw the horrific images, but none of us can

truly know your anguish and loss.

Second, I would like to thank you for being here today. Just like

your husbands, your fathers, and your sons, you are also very

brave to testify before Congress. It is not an easy thing to do, so

we thank you very much for it.

It is the custom of this committee to swear in all witnesses that

appear before us, so if you don’t mind I’d like to ask you to stand.

[Witnesses sworn.]

Chairman WAXMAN. Thank you very much. The record will note

that each of the witnesses answered in the affirmative.

We invited all of you to be here today. I understand that you

have a joint statement that all four of you signed and want to provide to the committee. Normally we’d give each witness 5 minutes,

but if one of you would like to read the statement we would like

to recognize you to do that and to take as much time as you need

to read the statement.

Mr. ISSA. Mr. Chairman, I would like unanimous consent to place

into the record two documents pertinent to this hearing, one addressed to you and Mrs. Pelosi in which it is cited that hearings

should go after the Blackwater, the serious lead by extremely Republican companies such as Blackwater, and second a memorandum of the funds given specifically to democratic causes by the law

firm that represents these three women.

Chairman WAXMAN. OK. Have you had a chance to review them?

Without objection, we will accept those and make them part of the

record.

Mr. ISSA. Thank you, Mr. Chairman.

[The information referred to follows:]

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Chairman WAXMAN. Please proceed however you wish, and thank

you very much for being here.

STATEMENTS OF KRISTAL BATALONA, DAUGHTER OF

BLACKWATER EMPLOYEE WESLEY BATALONA; KATHRYN

HELVENSTON-WETTENGEL, MOTHER OF BLACKWATER EMPLOYEE STEPHEN HELVENSTON; RHONDA TEAGUE, WIFE OF

BLACKWATER EMPLOYEE MICHAEL TEAGUE; AND DONNA

ZOVKO, MOTHER OF BLACKWATER EMPLOYEE JERRY

ZOVKO

STATEMENT OF KATHRYN HELVENSTON-WETTENGEL

Ms. HELVENSTON-WETTENGEL. I would like to start off by sincerely thanking the committee for inviting each of the families of

the four men who were killed in Fallujah. Although everyone remembers those images of the bodies being burned, beaten, dragged

through the streets, and ultimately hung up from a bridge, we continue to relive that horror day after day, as those men were our

fathers, sons, and husbands.

Following that horrific incident on March 31, 2004, we turned to

Blackwater for answers. What we received was appalling. We were

told that the information surrounding the circumstances in which

our loved ones were killed was confidential. When we insisted on

seeing the report concerning the incident, Blackwater told us that

we would have to sue them to get it.

Having just lost the most important people in our lives, a lawsuit

was the last thing on our minds. Instead, our focus was concentrated on finding out just what happened. However, the people

in the best position to tell us what happened refused to do so. It

was not as if Blackwater was claiming that it did not know what

happened; but instead Blackwater concealed the information from

us that we needed so desperately to understand why our loved ones

were dead.

Imagine having the people so near and dear to your hearts killed

overseas in a foreign country, and then having his or her employer

tell you that the details are confidential and that it would take a

lawsuit to turn the information over.

There is no accountability for the tens of thousands of contractors working Iraq and abroad. Private contractors like Blackwater

work outside the scope of the military’s chain of command and can

literally do whatever they please without any liability or accountability from the U.S. Government.

They also work in countries like Iraq which are not currently capable of enforcing the law and prosecuting wrongful conduct such

as murder. Therefore, Blackwater can continue accepting hundreds

of millions of dollars in taxpayer money from the Government without having to answer a single question about its security operators.

It is our understanding that Blackwater has lost more operators

than any other U.S. security company working in Iraq. The inherent flaw in the manner in which private contractors are being used

is that there is no accountability or oversight. If the U.S. military

was performing the job that is now farmed out to the private sector, there would always be someone to answer to, all the way up

to the President of the United States. More importantly, those in

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the chain of command would be looking out for the best interest of

the soldiers and their country.

In the case of Blackwater, the people making critical decisions

are those in corporate America, whose focus is often on cutting cost

and making profit. When the decision was made to save millions

of dollars by not buying armored vehicles, our husbands, fathers,

and sons were killed. Blackwater gets paid by the number of warm

bodies it can put on the ground in certain locations throughout the

world. If some are killed, it replaces them at a moment’s notice.

What Blackwater fails to realize is that the commodity it trades in

is human life.

While it may be just a statistic to Blackwater, the four men

killed in Fallujah were exceptional Special Forces who collectively

gave decades of military service to our country. My son Scotty became the youngest Navy Seal ever at the age of 17. He was fluent

in five dialects of Spanish. He served as a Navy Seal from Europe

to Central and South America. He helped train embassy staffs and

even set up the security for President Ronald Reagan’s summit

meeting in Venice, Italy.

Before leaving the Navy, Scott rose to the level of teaching Navy

Seal courses and was ultimately offered a commission. Scott was

also a Gold Medal winner at the World Pentathalon. That year he

won two golds, a silver, and a bronze out of five events.

Mike Teague served in the U.S. Army for 15 years in the 160th

Special Operations Community. He had deployed in Panama, Grenada, Spain, Somalia, and other places that constantly immersed

him in covert operations. As a civilian, Mike taught gun training

classes for the State of Tennessee, provided security for high-profile

celebrities and athletes, and worked as a police officer for the Federal Reserve. He was reactivated during the war in Iraq and spent

12 months in the Army Special Forces in Afghanistan.

Jerry Zovko and Wesley Batalona were similarly former Special

Forces with the U.S. Army. Jerry was a member of the U.S. Army’s

82nd Airborne Division and the Army Rangers. He served in Bosnia, and the Sinai Peninsula.

Wesley joined the Army after high school and quickly became an

Army Ranger. He gave 20 years of service to our country by serving

all around the world.

The talents of highly skilled Special Forces personnel do not always translate well into civilian life; however, Blackwater provided

the high-paying alternative to the routine jobs that former military

personnel usually resort to. Blackwater offered our men $600 per

day to work private security in Iraq. More importantly, Blackwater

also promised our men certain protections which were critical in

determining whether to accept such a high-paying job to work in

a war zone.

Our four men were told that they would be working in armored

vehicles with no less than six operators in each detail. There were

supposed to be at least three people in each vehicle. This would

have provided a driver, a navigator, and a rear gunner. They would

have heavy machine guns to fight off any attacks.

Our men were also told that they would be able to learn the

routes through Iraq prior to going on any missions, and to conduct

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a risk assessment of each mission to determine if it was too dangerous to go.

Blackwater did not provide our men with any of these protections. It is undisputed that they did not have armored vehicles,

they did not have a team of six, they did not have three people per

vehicle. They did not have a rear gunner. They did not have heavy

machine weapons. They were not able to conduct a risk assessment

of the mission. They did not have a chance to learn their routes before going on the mission. In fact, when Scotty asked for a map of

the route, he was told, ‘‘It is a little too late for a map now.’’

Ultimately, all four men died before the contract they were working under was even scheduled to begin.

Lack of preparation and the strive to make as much money as

quickly as possible, even if not 100 percent ready, is Blackwater’s

style of business. This style was confirmed just last month when

Blackwater’s president, Gary Jackson, told the Harvard Business

Review, ‘‘I constantly push for the 80 percent solution that is executable now over the 100 percent solution we might be able to devise in another 3 weeks.’’ An 80 percent solution means that 20

percent of the operators are dead. Blackwater actually lost 9 of its

34 operators in just over 2 months. That means that only 74 percent survived, which is pretty close to Blackwater’s goal of 80 percent.

Our men were told that they would be performing work that

would make a difference, such as guarding Ambassador Paul

Bremer. Instead, they died escorting empty trucks that were going

to pick up kitchen equipment.

Once the men signed on with Blackwater and were flown to the

Middle East, Blackwater treated them as fungible commodities. For

example, Scotty was physically and verbally attacked one night by

a Blackwater program manager when Scotty indicated that he was

not well enough to leave the following morning on the mission. Despite two other Blackwater operators offering to go in Scott’s place,

the Blackwater manager burst in to Scott’s room late at night, confiscated his weapon, and told Scotty that if he personally did not

go on the mission the following day, he would be fired.

It was under this threat of being fired and abandoned in Iraq

that forced Scott to leave for Baghdad the following morning. However, late that night Scott sent his last e-mail. It was addressed to

the owner, president, and upper management of Blackwater Security. The treatment of the security operators was so bad that after

working for Blackwater for just 11 days Scott felt compelled to

write an e-mail to the owner and president of the company that

began, ‘‘It is with deep regret and remorse that I send you this email. During my short tenure here with Blackwater I have witnessed and endured some extreme unprofessionalism.’’

In this lengthy e-mail, Scott detailed all of the problems with the

entire program and the treatment of the operators. There was no

response from Blackwater’s management to this call from help. Instead, our men were dead 4 days later.

After the incident, Blackwater held a small memorial service for

our men and the other Blackwater operators who were killed. During our time at the Blackwater compound, there were guards asVerDate 11-MAY-2000 10:54 Aug 15, 2007 Jkt 000000 PO 00000 Frm 00077 Fmt 6633 Sfmt 6633 C:\DOCS\36546.TXT HGOVREF1 PsN: HGOVREF1
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signed to each of the families. The guards were with us at all times

and did not let us speak with the other family members in private.

Ultimately, Blackwater refused to tell us anything about how our

men died. For 6 months after the incident, Blackwater did not return telephone calls or inquiries about the incident. Ultimately, I

tracked down a direct number for Blackwater’s owner, Erik Prince.

When I called it, Mr. Prince actually answered the phone. We had

a brief conversation, and I asked Mr. Prince for a copy of Scott’s

contract and the incident report. He told me that I should receive

them within a couple of weeks. No documents ever came.

Although Blackwater told us that we would have to file a lawsuit

to obtain a copy of the incident report, Blackwater has done everything possible to prevent the disclosure of any information. During

the past 2 years that the lawsuit has been pending, Blackwater has

not answered a single question or produced a single document. Instead, Blackwater has appealed every single ruling all the way up

to the U.S. Supreme Court. When we attempted to take the deposition of a key witness, Blackwater sent him out of the country just

days before his deposition. When he recently returned to the

United States after working for Blackwater for the past 2 years, we

obtained another court order to take his deposition. Blackwater has

now appealed that order, as well.

Thus far in our legal quest Blackwater has hired five different

law firms to fight us, including such politically connected lawyers

as Fred Fielding, White House counsel, and Kenneth Starr. It appears that Blackwater will go to any lengths to prevent us from

finding out why our men were killed and to avoid any accountability for its actions.

Through it all, Blackwater has never denied that it was obligated

to provide our men with certain protections. More importantly,

Blackwater has never denied that it did not provide our men with

these protections. Instead, Blackwater has simply said that it cannot be sued for its conduct.

As appalling as it may seem, Blackwater also recently filed a $10

million claim against us for bringing our lawsuit.

First and foremost, we are seeking answers from Blackwater as

to how and why our loved ones are dead. Why were they not in armored vehicles? Why were they not in a team of six? Why were

there not three operators in each vehicle? Why were there not provided heavy weapons? Why were they not permitted to learn the

routes in Iraq before going on their mission? Why were they not

allowed to gather intelligence from the outgoing security company?

Why was a risk assessment not performed prior to that mission?

Why were they not given 24 hours notice before their mission? Why

were they lost in the middle of Iraq? Why did they drive through

the center of Fallujah at a time when even U.S. military would not

go through? Why were they lied to about the weapons and protections they would have? In short, why did Blackwater choose to

make a profit over the safety of our loved ones?

Second, we are seeking accountability for the wrongful conduct of

Blackwater. Private contractors such as Blackwater are being paid

millions of dollars of our taxpayer money to line their own pockets

and jeopardize the safety of the men and women working for them.

There needs to be accountability for their conduct. While

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Blackwater is a private North Carolina company and should be

held to answer to a North Carolina jury, the Government should

also create some type of accountability and oversight for private

contractors.

Third, we are seeking to prevent other families from receiving

that dreadful telephone call explaining that the father, a son, or a

husband has been killed. If the message is sent throughout the industry that private contractors will be held accountable for their

wrongful conduct abroad, the companies may devote more attention

to the safety of their workers and less to the amount of their profits.

Having lost those close to our hearts and then having experienced the callous indifference of Blackwater, we sincerely hope that

Congress will take action by creating accountability for the private

contractors and not continue to allow them to make millions of dollars at the cost of the American lives.

[The prepared statement of the Blackwater family members follows:]

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Chairman WAXMAN. Thank you very much for that statement on

behalf of all of you. I know that up here we have the Democrats

and we have the Republicans. I don’t know whether you are Democrats or Republicans. I don’t know whether your sons or husbands

or family members were Democrats or Republicans. And it doesn’t

make any difference.

Ms. HELVENSTON-WETTENGEL. No, it doesn’t.

Chairman WAXMAN. They were American patriots. They were

veterans of our armed services. We want to know some of the

things that you want to know, because we ought to know what is

happening with our young men and women who are in the military

and who are in the front line risking their lives working for private

contractors paid by the U.S. taxpayers.

So we want to get some of the answers to some of the same questions, but we have an obligation beyond that to the taxpayers of

this country to know how this whole operation works. You have a

contractor, a subcontractor, and who is responsible. Who is accountable? If your loved ones had been members of the military put

into battle, I can’t imagine you would have had to go through all

that you seem to have had to go through just to get answers to

what happened to them. It is really inconceivable to me.

Ms. HELVENSTON-WETTENGEL. I agree. It is unconscionable.

Chairman WAXMAN. Let me ask you some questions, because we

are trying to get a record which we will share with our colleagues

and help us get the information that we need to try to understand

what has been happening.

Some of these questions you may have the answers to and some

you may not. I am asking anybody on the panel who wants to give

us your views.

Were your family members traveling in armored vehicles the day

in Fallujah when they were killed, to your knowledge?

Ms. HELVENSTON-WETTENGEL. They were Mitsubishi Pajeros

with reinforced back bumpers.

Chairman WAXMAN. And how about the number of team members that were in each vehicle?

Ms. HELVENSTON-WETTENGEL. Well, when they originally started

to pull out there were three. At the last minute, Dr. Justin

McGuown pulled out the rear gunner in each vehicle claiming that

they needed to have them there to help them do some clerical

work.

Chairman WAXMAN. What was that third person supposed to do

in the vehicle?

Ms. HELVENSTON-WETTENGEL. He was the one that would save

them if they got in trouble. He was the one to protect them.

Chairman WAXMAN. Did they have machine guns?

Ms. HELVENSTON-WETTENGEL. I don’t think Scotty ever got his

own gun back. I don’t think the navigators fired one bullet. The

people in Fallujah literally just walked up to these vehicles and

shot them at point blank range, but then what they did afterward

was just so horrendous.

Chairman WAXMAN. Yes.

Ms. HELVENSTON-WETTENGEL. Scotty lived a short while after

the initial shooting. I was told he was still alive when they tied

him to the back of that truck and drug him through the streets of

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Fallujah, and that was before they decapitated him, dismembered

him, and torched him.

Chairman WAXMAN. Do you know whether they had—I

assume——

Ms. HELVENSTON-WETTENGEL. I have no idea. I know they

didn’t——

Chairman WAXMAN. If there is any difference among the others,

because what you are saying, I assume you are speaking for all of

the——

Ms. HELVENSTON-WETTENGEL. Ask them.

Chairman WAXMAN. If there are any differences, please let us

know.

Did they have maps of the area?

Ms. TEAGUE. Not that I am aware of. I am not aware that they

had any maps.

Chairman WAXMAN. Did any of you know whether they had

maps?

Ms. HELVENSTON-WETTENGEL. I was told Scott specifically asked

for a map and he was told it was too late for a map.

Chairman WAXMAN. So it appears, from what all four of you

know, is that they were not traveling in armored vehicles, they

were traveling in teams of two in cars instead of three, and they

didn’t have a rear gunner, and they didn’t have heavy machine

guns, and they didn’t have a map; is that correct?

Ms. HELVENSTON-WETTENGEL. That is my understanding.

Chairman WAXMAN. All of you agree. And you believe it was

Blackwater’s responsibility to provide these items to your family

members; is that right?

Ms. HELVENSTON-WETTENGEL. Well, by just removing the armored vehicle, I was told gave Blackwater a profit of $1.5 million.

Chairman WAXMAN. Well, we don’t know. That is something you

have heard.

Ms. HELVENSTON-WETTENGEL. Yes.

Ms. TEAGUE. I am not sure of the profits gained by not providing

these men with armored vehicles, but I have watched extensive

footage of other contractors in Iraq taking heavy fire in fully armored vehicles. They can sustain 20 to 30 minutes. That is a possibility that our men could have gotten out, but we will never know

because they did not have those.

Chairman WAXMAN. You have wanted to know information from

Blackwater. What information did you want to get from Blackwater

that you feel you still haven’t received? I think, Ms. Zovko, you had

some specific information; is that right?

Ms. ZOVKO. Questions.

Chairman WAXMAN. Questions?

Ms. ZOVKO. Not information, but questions. Why were they sent?

What led them into the mission that they were going to or the job

that they were on for 3 days or 4 days prior than the contract actually going into effect? Why not prepare them? Why not give them

time to prepare and get to know the route, all of these things that

they were supposed to have been allowed to do prior to doing the

job. There are 1,001 questions, and no answers.

Chairman WAXMAN. Did you talk to anybody from Blackwater?

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Ms. ZOVKO. Did I? Yes, actually I did. On March 31st in the late

evening I spoke to a young woman by the name of Susan who had,

after three phone calls, confirmed that yes, Mr. Prince will be coming to our house to tell us that our son was dead, and had talked

to her a couple of times about the body coming home, and then all

of a sudden she disappeared. The only contact and good ears that

I had there to listen to me were not there any more. I have lost

contact with them. My son, Tom, had talked to Blackwater and had

communicated with them more so than I did after that. I met with

the Blackwater employees at the memorial that they had in October, which is 6 months after the death of my son, and after that

nothing.

Chairman WAXMAN. In the joint statement, at least one of you

was told sue Blackwater in order to get information. Is that something that was told to you?

Ms. ZOVKO. Yes, and told us to sue. I was under the impression

that all of the families, the families of my Jerry’s coworkers and

the families of the other young men that were killed that worked

for Blackwater in Iraq will have the opportunity to go into this

boardroom meeting for answers and questions. Actually, that is the

impression that I was under. Well, after lunch and after everything

that we went through that we did at the Blackwater facilities, my

husband, my son, and I were escorted to this meeting to where it

was only the three of us and four of the Blackwater employees.

There was no questions and answers really.

Chairman WAXMAN. Tell me about somebody telling you you

have to sue them to get answers.

Ms. ZOVKO. My husband was asking where are my son’s personal

things, where are things that belonged to my son, how did my son

die. And she said that was confidential. It was the information that

if we wanted to know we needed to sue. And she actually was sitting at this part of the table at the end of the table, or head of the

table. We were on the side. She stood up and she said that if we

wanted to know that, that we needed to sue. That was confidential.

Chairman WAXMAN. And was there anybody else there in that

room from Blackwater?

Ms. ZOVKO. Yes, there was Mr. Rush.

Chairman WAXMAN. That is Mike Rush?

Ms. ZOVKO. Yes.

Chairman WAXMAN. He’s a very senior Blackwater official, according to our information. And he’s the deputy director for operations at North Carolina headquarters. What did he have to say?

Ms. ZOVKO. Maybe at that time he wasn’t so high in the position

in chain of command, if you will, but, no, he was the person that

we had met that had spent time with the families, and he was sitting there. He was sitting to the right of Ann, and right next to

him was a gentleman by the first name of Dave that was the fastest gun, mind you, the fastest gun in Iraq. That was a joke. This

is supposed to make me feel like smiling or laughing because we

are sitting at this table and they are introducing this gentleman

that just came back from Iraq and he was the fastest gun in Iraq.

But we were told to sue, and we had gotten no information. We

did receive a copy of a flag that people that live near the

Blackwater headquarters have made for our sons, or it could have

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been the employees of Blackwater that were in Baghdad and Iraq,

but it did have my son Jerry’s name, Scotty’s, Wes’ and Mike’s on

that flag. That was the only thing that we have gotten out of that

answers and question session with Blackwater.

Chairman WAXMAN. Thank you.

Ms. HELVENSTON-WETTENGEL. I would like to add something

about that flag. It was crocheted by a 70 some year old woman that

lived near the Blackwater compound, and she crocheted it. It was

a very large flag. But Blackwater had nothing to do with that. She

just wanted to do something and she thought that might help us

feel better.

Chairman WAXMAN. Thank you.

Ms. HELVENSTON-WETTENGEL. But Blackwater had nothing to do

with it.

Chairman WAXMAN. Thank you.

Mr. Davis, I want to recognize you.

Mr. DAVIS OF VIRGINIA. Thank you. I join Chairman Waxman in

expressing our appreciation for their patriotism and trying to honor

their memories in an appropriate fashion. I am having a hard time

even understanding the contractual vehicle as we look at all of the

documents, too, if this was an ESS LOGCAP or ESSEUR. They

were a 4th or 5th year subcontractor, and I hope we can get to the

bottom of that. But one question I have, as we understand it, families ought to be entitled to and receive compensation under the insurance that contractors are required to carry pursuant to the Defense Base Act. Have each of you received those benefits?

Ms. HELVENSTON-WETTENGEL. Widows and minor children receive those benefits.

Mr. DAVIS OF VIRGINIA. Correct.

Ms. HELVENSTON-WETTENGEL. I don’t receive any.

Ms. TEAGUE. I personally never applied for those benefits. That

has been brought to my attention several times as we have asked

questions. That, to me, has nothing to do with who is accountable

for not providing the things to my husband and those other men

that they were promised for their protection.

Mr. DAVIS OF VIRGINIA. I agree.

Ms. ZOVKO. I received no benefits.

Mr. DAVIS OF VIRGINIA. OK.

Ms. BATALONA. My mother receives benefits.

Mr. DAVIS OF VIRGINIA. OK. Thank you. That is all my questions.

Chairman WAXMAN. Any questions?

Mr. DAVIS OF VIRGINIA. I will yield to Mr. Issa.

Mr. ISSA. Thank you. Thank you, Mr. Chairman.

I guess I have one opening comment. Although I don’t think your

testimony today is particularly germane to the oversight of this

committee, I am deeply sorry for the losses that you have had.

Camp Pendleton is the center of my District, and so Fallujah was

particularly painful for all of us in the community there, because

during the same period, obviously, the Camp Pendleton Marines

were heavily engaged in a dangerous zone.

One question I have is the opening statement. Who wrote it?

Ms. HELVENSTON-WETTENGEL. It was a compilation of all four of

us. We all sent in our thoughts and feelings to Dan Callahan and

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he compiled it, because we were told we only had 5 minutes, and

so we had to—I have my own personal statement that I——

Mr. ISSA. It was well written and I asked because it did appear

as though it was written by an attorney who had obviously slipped

in a lot of things that they believe would be facts in the lawsuit

now pending, and certainly I think it is regrettable that a family

should have to sue to get information.

I guess one question, all four of these men were experienced, seasoned people who understood the military and law enforcement; is

that fair to say?

Ms. HELVENSTON-WETTENGEL. Yes.

Mr. ISSA. In a sense, and hearing some of the biographies, these

were people who would have been able to set policy, set the terms,

if you will. I see you shaking the head, but think about this before

you answer. These are people who, in fact, trained other people,

particularly Scotty, so, as I understand, what we are talking about

are professionals, highly skilled, going into a combat situation with

experience about combat. Would that be fair to say?

Ms. HELVENSTON-WETTENGEL. No experience would have protected them that day.

Mr. ISSA. But that is not the question. Were these four loved

ones of yours——

Ms. HELVENSTON-WETTENGEL. They were very experienced. They

were definitely.

Mr. ISSA. OK. I think it is important, because one thing that is

legitimate to this committee’s oversight is: Does Blackwater, who

I don’t know from Adam, basically, but do they hire top-notch,

skilled professionals that come prepared with skills commensurate

with those of the U.S. military if they are to do similar jobs.

Ms. HELVENSTON-WETTENGEL. May I answer that?

Mr. ISSA. Yes, please.

Ms. HELVENSTON-WETTENGEL. Well, they do hire very highly

trained people, but they also are in Africa in these little villages

hiring these men that make $30 a month and are told that if they

die that their families will get $1 million. There is a man from Africa that came and interviewed me. I have done interviews from two

of them from Korea because they are hiring there.

Mr. ISSA. Sure. But you are experts on your children, your husbands, your father, your loved ones. They were highly qualified,

highly skilled.

Ms. HELVENSTON-WETTENGEL. They certainly were.

Mr. ISSA. They were the type that we should want to have doing

security and assisting our military in this combat zone. Would that

be fair to say for all four?

Ms. HELVENSTON-WETTENGEL. Those four were very highly

trained, but I cannot say that is the case for all of Blackwater’s employees.

Mr. ISSA. That is a great loss, obviously, to you and to the

work——

Ms. HELVENSTON-WETTENGEL. Yes. I am a widow.

Mr. ISSA [continuing]. That they were doing. I’d like to thank you

for the service they provided and again express our sympathies for

their loss.

I yield back.

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Chairman WAXMAN. I just want to take exception that it is not

germane to our inquiry. If taxpayers are paying for layers and layers and layers of private bureaucracy, and if somebody who is getting taxpayers’ dollars tells even highly trained American veterans

that they are going to have body armor, they are going to have

armed vehicles, and they are going to have special people with

them to help them carry out their job, we ought to know whether

they failed to do that, because of indifference or negligence or incompetence. That is very much our job in oversight. It seems to me

sometimes those who are criticizing our oversight didn’t think we

were actually going to do oversight, and this is part of our job.

Ms. SCHAKOWSKY. Would the gentleman yield for just a second?

Chairman WAXMAN. Well, let me ask unanimous consent that

Ms. Schakowsky, who is not a member of this committee, be able

to sit with us. Without objection, that will be the order.

I do want to recognize Members who——

Ms. SCHAKOWSKY. Can I just, in that regard——

Chairman WAXMAN. Yes.

Ms. SCHAKOWSKY. I also wanted to take exception to the question

about who wrote the testimony, because I think clearly the implication was that somehow these wonderful women couldn’t possibly

have written that wonderful heartfelt testimony and that it took a

lawyer in order to put it together. I resent that very much and I

wanted to just put that on the record. Thank you.

Ms. HELVENSTON-WETTENGEL. I do have my personal testimony,

if you would like to see it.

Chairman WAXMAN. Well, whatever you have, we will be happy

to receive for the record.

Mr. Tierney.

Mr. TIERNEY. Thank you, Mr. Chairman.

In your testimony that was given, you had a written question

that you wanted Blackwater to answer, and it essentially was: Why

did Blackwater not listen to its own manager in charge in Kuwait

who had warned of all the problems well in advance of the deaths

of your relatives. Ms. Helvenston-Wettengel, who was this manager?

Ms. HELVENSTON-WETTENGEL. Justin McGuown was his immediate superior.

Mr. TIERNEY. I am sorry. I couldn’t hear you.

Ms. HELVENSTON-WETTENGEL. His name was Justin McGuown.

He was Scott’s immediate superior.

Mr. TIERNEY. And what concerns did he raise with Blackwater?

Ms. HELVENSTON-WETTENGEL. John Potter.

Mr. TIERNEY. Mr. Potter? What concerns did Mr. Potter raise

with Blackwater?

Ms. HELVENSTON-WETTENGEL. Apparently it is my understanding that the guarantees that were given to our four men were not

allowed in a subcontract that was signed with ESS. In the ESS

contract they deleted the word ‘‘armored.’’

Mr. TIERNEY. They deleted the word ‘‘armor?’’

Ms. HELVENSTON-WETTENGEL. Yes.

Mr. TIERNEY. From the vehicles and from the——

Ms. HELVENSTON-WETTENGEL. In the ESS contract that

Blackwater signed after Scotty had signed his contract.

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Mr. TIERNEY. And you have had some difficulty getting the answers to these questions from Blackwater, so what was their response to Mr. Potter’s concerns, if you know?

Ms. HELVENSTON-WETTENGEL. Well, they fired him initially.

Mr. TIERNEY. They fired him?

Ms. HELVENSTON-WETTENGEL. Initially, yes, because he was very

upset because the word ‘‘armored’’ was deleted, and he argued for

that. He said we’d have to have armored vehicles. And he subsequently was fired.

Mr. TIERNEY. And have you had any communications with him

since he was fired by Blackwater?

Ms. HELVENSTON-WETTENGEL. Yes.

Mr. TIERNEY. Yes.

Ms. HELVENSTON-WETTENGEL. And you know where he is?

Mr. TIERNEY. Yes.

Ms. HELVENSTON-WETTENGEL. OK. Now, you brought a lawsuit

against the company, and their response was what?

Ms. HELVENSTON-WETTENGEL. They were outraged that we had

the audacity to sue them. They claim that they cannot be sued because they are a Defense contractor.

Mr. TIERNEY. And did they take any action against you?

Ms. HELVENSTON-WETTENGEL. Personally, $10 million is something kind of personal.

Mr. TIERNEY. The countersuit?

Ms. HELVENSTON-WETTENGEL. Yes. That is pretty personal.

Mr. TIERNEY. And, if I understand it, their countersuit asserts

that you had no right to sue them under the terms of the contract,

and therefore you are responsible to them for $10 million?

Ms. HELVENSTON-WETTENGEL. Yes, basically.

Mr. TIERNEY. And where in the court process is that suit and

countersuit right now? How far along are you?

Ms. HELVENSTON-WETTENGEL. That was fairly recently that they

did that. I don’t know how far it has progressed.

Mr. TIERNEY. If I discuss with you——

Ms. HELVENSTON-WETTENGEL. Well, after 3 years they have yet

to give us any kind of document or deposition.

Mr. TIERNEY. That is exactly where I was going to go.

Ms. HELVENSTON-WETTENGEL. Yes.

Mr. TIERNEY. So your lawyers have asked for written documents

to be produced?

Ms. HELVENSTON-WETTENGEL. We have received nothing.

Mr. TIERNEY. And you have received nothing. Have you had

depositions, times where you came in before——

Ms. HELVENSTON-WETTENGEL. At one point Mark Miles, who

works with Dan on this case, he flew all the way to Norfolk, and

he scheduled——

Mr. TIERNEY. All the way to Norfolk?

Ms. HELVENSTON-WETTENGEL. Norfolk. He had deposed a number of Blackwater employees and they just didn’t show, and so

Mark sat in his hotel room for 21⁄2 days and he kept faxing their

attorney saying at least give me the courtesy, if no one is going to

show all the way through Friday, please just let me know, sign it,

and I will go home. After I think it was the 3rd day they finally

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gave him that courtesy, just that nobody that had been deposed

would be there.

Mr. TIERNEY. In the course of your lawsuit do you know whether

or not your counsel have sought to have documents produced by

any Government agency, the Department of Defense, for instance,

or taken any testimony from any Government individuals?

Ms. HELVENSTON-WETTENGEL. I have no knowledge. I am not

saying that they didn’t; I just have no knowledge of it.

Mr. TIERNEY. I want to thank all of you for your testimony today

and say how sorry we all are. I think most people in this country,

if not all, understand that, while your family members may have

been serving as private individuals or citizens in this case, that

they were working in the interest of our country, and we all feel

that they deserve the same protections and regard as people in the

military, whether from our own Department of Defense or from

their contracting agent, so you have our sympathy.

Ms. HELVENSTON-WETTENGEL. They were all very proud, patriotic men——

Mr. TIERNEY. I am sure they were.

Ms. HELVENSTON-WETTENGEL [continuing]. Who loved their

country.

Mr. TIERNEY. As are you. Thank you very much.

Ms. HELVENSTON-WETTENGEL. You are welcome.

Mr. TIERNEY. I yield back.

Chairman WAXMAN. Thank you, Mr. Tierney.

Mr. ISSA. Mr. Chairman, point of order.

Chairman WAXMAN. Yes?

Mr. ISSA. While I was out of the room voting in Judiciary I understand that there was what I would consider a disparaging comment implying that my question to the witness was related to having been a woman outside the ordinary course of business. Would

that be correct?

Chairman WAXMAN. Well, it is not an adequate point of order,

but do you want to make a statement?

Mr. ISSA. I would like to have the words taken down.

Chairman WAXMAN. We will check with the parliamentarian to

see if that is appropriate in a committee. But meanwhile we have

witnesses here and I want to pursue——

Mr. ISSA. I look forward to hearing their testimony.

Chairman WAXMAN. Mr. Westmoreland. Mr. Bilbray. Mr. Platts.

Ms. TEAGUE. Congressman Waxman.

Chairman WAXMAN. Yes.

Ms. TEAGUE. I would just like to go back for a second for a point

simply to try to make it a little bit clearer about the Congressman’s

point that these were men that were highly skilled, familiar with

combat, the kind of men you would want in these positions. I agree

with that. But I don’t know if this was made clear. All four of these

men had not been with Blackwater. My husband had been with

them literally—I put him on the plane March 26th. He arrived in

Kuwait March 29th, and he was killed March 31st. Had never done

a mission with Blackwater before. OK? Her son had been with

Blackwater 11 days. Her son about 3 months, I believe.

Ms. BATALONA. Two weeks.

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Ms. TEAGUE. Two weeks. So here you have four men, highly

skilled, yes, understand combat, yes, but they are sent out on a

mission, my understanding, no map, no prior time to assess the situation. Could someone that has not worked with this company for

some time go with them or help them or sort of be, you know, take

the lead in that? You are all very well versed in this community

and in this building, but if you have never been here before

wouldn’t you need someone to show you a few things?

So whether they are highly skilled or not does not take away

from providing them with maybe just the operations of that company. That is different from active military. There are several

things that were different that they were not privy to.

Chairman WAXMAN. Thank you very much. That is a good clarifying point.

Mr. Platts.

Mr. PLATTS. Thank you, Mr. Chairman.

Ms. HELVENSTON-WETTENGEL. I would like to make one more

statement.

Chairman WAXMAN. See if you can respond in the question period, and then if you want to make a statement I am sure that

those of us who are proceeding with questions would be pleased to

allow you to do that.

Mr. Platts.

Mr. PLATTS. Thank you, Mr. Chairman. No question. I would just

convey my deep sympathies to you and your families on the loss

and for the service of your loved ones to our Nation and to the

cause of freedom.

Ms. HELVENSTON-WETTENGEL. I am having trouble hearing you,

sir.

Mr. PLATTS. I said no question, I would just convey my sympathies to you and your families on your loss and to the sacrifices

that your loved ones made to our Nation and to the cause of freedom.

Ms. HELVENSTON-WETTENGEL. Thank you.

Chairman WAXMAN. Thank you.

Mr. Lynch.

Mr. LYNCH. Thank you, Mr. Chairman. I also want to thank

Ranking Member Davis for helping on this.

First of all, I am very appreciative that you have come here

today to help the committee with its work.

I do want to go to the germaneness issue because it has been

raised by my colleague. First of all, we have a situation here where

there is a growing tendency for the military or for the administration to subcontract out work that has traditionally been performed

by our military, instead using private contractors. While the tangled web of subcontractors and sub-subcontractors has been noted

here this morning, it certainly is germane when American citizens

are put in a very difficult situation without adequate protection.

With respect to the gentleman’s comments, he initially raised the

fact that the germaneness may not be to this committee’s jurisdiction but may instead be connected to a civil lawsuit. That was the

gentleman’s comments. And then the question was whether or not

the opening statement of the witnesses here had been drafted by

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a lawyer, presumably with the same lawsuit. That was the inference that was left here.

I have only been a Member here for 5 years. I have only sat

through several hundred, maybe 1,000 hearings. That is the first

time as a Member of Congress that I have heard any witnesses

asked who wrote their opening statements. And I might say also

that, if that question is a fair one, then you might ask how many

Members up here at this table wrote their own opening statements.

[Laughter.]

You might be surprised at those answers.

Ms. HELVENSTON-WETTENGEL. Good point.

Mr. LYNCH. But I do want to ask the witnesses this. There is an

inference here by the attorney for Blackwater in a letter they have

presented to us that by coming forward and filing a lawsuit on behalf of your loved ones—and, you know, I have been to Fallujah a

couple of times. I have actually been under escort with Blackwater

security forces in Afghanistan, as well, so I understand how brave

your loved ones were and how patriotic they were, with the same

fervor, same patriotism as those who serve in American military

uniforms. I understand that. But the inference is there in the letter

from Blackwater’s counsel that, by their contract, somehow your

husbands, sons, brothers gave away the right for you to sue in the

event that negligence or extreme negligence caused their death.

Can you tell me where that came from?

Ms. HELVENSTON-WETTENGEL. They were also guaranteed certain provisions. Had they had any of those provisions, I know in

my heart they would be alive today. But the few minor things that

they were promised when they took that employment were taken

away from them, every single one of them. If they had that armored vehicle, if they had that rear gunner, if they had a map—

I think it is referred to as a black zone or red zone. The military

would not even go in there with the heaviest equipment over there,

it was so dangerous.

Mr. LYNCH. And I do realize at this point when their caravan,

their convoy had gone through Fallujah, the Marines hadn’t been

in to central Fallujah before your husbands and your loved ones

took that convoy through.

But, with respect to the inference that there is a bar on their

lawsuit because of the contract that your loved ones signed, is

there any more information that you have on that? And I realize

that there are allegations and there is certainly evidence that

Blackwater didn’t fulfill their part of the contract, but this bar on

your lawsuit, is that—that is something that concerns me for other

employees in the same situation that your loved ones were in. I

want to try to make sure that there is no assertion to other families that they can’t bring lawsuits because of something that was

put in that contract.

Ms. HELVENSTON-WETTENGEL. I am not familiar with this bar

that you refer to. I am not sure what that means.

Mr. LYNCH. OK. All right. That is fair enough.

Thank you, Mr. Chairman. I yield back.

Chairman WAXMAN. Thank you, Mr. Lynch.

Mr. Issa, you are recognized on your own time.

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Mr. ISSA. Thank you, Mr. Chairman. Perhaps I will use a little

of it to straighten out two things.

My understanding is that the U.S. Congress has put into law

prohibitions on lawsuits for our Government contractors operating

as agents of the U.S. Government in a combat zone.

Ms. HELVENSTON-WETTENGEL. Sir, I cannot answer any legal

questions. I don’t have the——

Mr. ISSA. I am not asking. I am making a statement just to set

the record straight. I have reviewed some of that. That bar might

be something that this and other committees should look at. Obviously, when a company bids, they bid based on the assumption that

relevant U.S. law would be there. In other words, that their losses

would be limited to whatever they contracted for in the case of a

death.

Having said that, I did ask an appropriate question, I believe, of

who wrote the opening statement for you, not because it is without

any—I mean, it is very common for attorneys or organizations, inhouse people to write opening statements.

Ms. HELVENSTON-WETTENGEL. Why are you dwelling on that?

Mr. ISSA. I am dwelling on that because, in fact, there is a real

question, not as to whether or not we should oversee Blackwater

and other contractors, but the role of having you three bereaved

women here——

Ms. HELVENSTON-WETTENGEL. There are four of us.

Mr. ISSA. I am sorry. Thank you. You know, it is a good thing

I learned to count early but not well. Having you here to tell us

about your loss when, in fact, it is the subject of a lawsuit that is

ongoing and, in fact, this committee has no jurisdiction here to

change the outcome of your loss today or to settle your lawsuit——

Ms. HELVENSTON-WETTENGEL. And why is that? We are subcontracting out our war. I understand there are 100,000 contractors

over there and there doesn’t seem to be a law that applies. They

literally can get away with murder, and it is happening over and

over again. It just happened to our four men. It is like the Wild

West over there, and there is no accountability.

Mr. ISSA. I would gather that all four of you would like us to

cease using contractors wherever possible? You think it inappropriate? Is that spoken for all of you?

Ms. HELVENSTON-WETTENGEL. I have found it difficult to understand why they do, because they are paid so much more than the

military, and the military resents them for that. They are taking

jobs that the military had been trained to do and they are giving

it to Blackwater and they are being paid enormous amounts of

money, and it is like a secret army over there that the majority of

Americans aren’t aware of. But if you are going to subcontract out

this war, then there needs to be some laws that apply to these people.

Ms. TEAGUE. Sir, I would like to comment.

Mr. ISSA. Yes, please.

Ms. TEAGUE. I think these questions are a bit leading, but I

would still like to comment. I think there is a need for contractors

and subcontractors in this war. I have felt that. I didn’t want my

husband to leave home again and work with Blackwater. It wasn’t

necessarily because it was Blackwater. I did not know as much

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about Blackwater. I was tired of my husband being gone. He felt

it was his calling and it was what he should do. I don’t feel that

it necessarily calls for there to be no contractors, no subcontractors,

but you just made a point, a very valid point. When these contractors bid jobs with the Department of Defense and they do so under

maybe some understanding that they are above the law and that

they can do this, do they also have to account for where all those

billions of dollars go? I don’t see where any of that is spent. I have

never heard or had any account of where it is at.

Mr. ISSA. Well, that is something that is—I appreciate that. That

is something that is very germane to this committee and something

that we are very interested in. As you probably know, we are going

to have Blackwater’s counsel here next. That will be one of the

questions is the money.

I would like to make a small enclosure into the record. During

the same time that your loved ones were there, March to August

2004, one of my legislative assistants was there with one of the

provisional ministers in an unarmored vehicle with only a guard/

driver, the three of them in a car outside the green zone. It appears

as though this has been a war that we thought wasn’t a war, then

we thought it was a war, then we thought it wasn’t a war, and it

is not uncommon for these loved ones to be lost or put into danger

when people are saying they are not in danger. We had 3,000 people working in that sort of capacity that were working for $35,000

or $40,000 for the U.S. Government at the time as USAID and

other provisional authority. This is something that is appropriate

to this committee to see whether or not we should have those kinds

of people in those kinds of zones with that kind of protection, and

to that extent I thank you for your testimony, because I think, to

the extent that we do understand whether we have appropriately

used contractors is very germane to this committee.

I yield back.

Ms. HELVENSTON-WETTENGEL. The Blackwater has claimed from

the beginning that they are exempt from all State and all Federal

laws. How can that be? These are human beings they are dealing

with, and they literally feel they cannot be sued, regardless of what

they have done.

Chairman WAXMAN. Mr. Kucinich is going to ask some questions.

Mr. KUCINICH. Thank you very much, Mr. Waxman.

Just picking up on the comments of the witness, if that is what

we are told is characterized as Blackwater’s way of operating, then

it is basically anything goes.

Ms. HELVENSTON-WETTENGEL. I am sorry?

Mr. KUCINICH. If Blackwater operates the way you say they operate, then it is basically anything goes, they aren’t bound by any

laws at all.

Ms. HELVENSTON-WETTENGEL. Exactly. That is the point I am

trying to make.

Mr. KUCINICH. I just wanted to make sure that it came through

boldly, because what you are saying is, you know, we see these witnesses effectively being impugned because they filed a lawsuit.

Let me ask you, the members of the families, were you motivated

by money or were you motivated by accountability? Did you want

to make sure that Blackwater was held accountable?

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Ms. HELVENSTON-WETTENGEL. I will not get one cent from this

lawsuit. I refuse to take a penny.

Ms. TEAGUE. I would like accountability, sir, from the beginning.

Ms. BATALONA. Same here.

Mr. KUCINICH. Ms. Zovko.

Ms. ZOVKO. Same here. Just let them face what they have done

and let them not do it to anyone else. Be accountable for what they

have done.

Ms. HELVENSTON-WETTENGEL. What I don’t understand is how

our Government can hire corporations like Blackwater knowing

that they refuse accountability. I mean, what does that say about

us as a country, as a Nation?

Mr. KUCINICH. See, this needs to be known. This is about a matter of the heart here. This isn’t about people trying to get money,

because when you see what these families have gone through and

even the courage it takes for them to come forward today, this committee is very appreciative of your being here.

I have a quick couple of questions that I want to ask the members of the panel here. The practice of contracting out military operations in a war zone to private security contractors, it is troubling. I will tell you why. When the Government first began turning to contractors on the battlefield it was to provide meals and

laundry and other services so the troops could focus on the fighting.

It was so our soldiers could be what they call the tip of the spear.

But today we are hiring out contractors to be that tip of the spear.

Now, here is what the head of Blackwater said last December

about his company’s role. ‘‘We are trying to do for the national security apparatus what FedEx did for the Postal Service. They did

many of the same services that the Postal Service did better,

cheaper, smarter, and faster by innovating, which the private sector can do much more effectively.’’ That is a direct quote.

Ms. HELVENSTON-WETTENGEL. Was that Blackwater?

Mr. KUCINICH. Pardon?

Ms. HELVENSTON-WETTENGEL. Is that from Blackwater?

Mr. KUCINICH. That is Erik Prince.

Ms. HELVENSTON-WETTENGEL. OK.

Mr. KUCINICH. And so he makes clear that the private sector has

a fundamentally different goal than our military. It is the private

sector that wants to make money. That is why some people could

be seeing the world in their own image, claiming that you are here

to make money. The private sector wants to make money. There is

nothing wrong with that unless it comes in conflict with the goals

of our military.

Each of your loved ones spent years as the best of the best, the

most elite in the U.S. military, each of them, and you were accustomed to military culture, so here’s the question. Ms. Zovko or Ms.

Helvenston-Wettengel, what were some of the differences that you

noticed between the U.S. military and Blackwater or a for-profit

business entity? For example, when your families were on active

duty what was the military more interested in, the safety of the

troops or how cheap they could carry out the mission? I would like

to hear your response to that.

Ms. HELVENSTON-WETTENGEL. Donna, do you want to go first?

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Ms. ZOVKO. Well, I know when my son Jerry was in the Army

he was the best that he could be. He loved it, and he was taken

care of and protected. He was to do his job, but he was given the

tools to do it with. He was the best of the best in the world, 82nd

Airborne, MP Company, Ranger. He didn’t lack anything. His experience and his knowledge from the Army he was going to use with

Blackwater, but they shot off his arms and his legs. They just let

him out there to die. They did not provide anything for him. He

had his discipline, he has his know-how, knowing the Middle East

as he did, but they didn’t give him the tools to work with. They

just simply sent him out there to die. They did.

You know, if you do what your job requires you to do and if you

are making the laws, you are not making them only for our country, for America, it is the world that we make because we are the

No. 1. My son was the No. 1. Blackwater and other companies like

Blackwater, they are recruiting from other countries and they are

not paying them well enough or taking care of them well enough

at all, so that needs to be seen. If we are going to police the world,

then let’s do it right. Let’s start at home taking care of what we

need to do here and go on with everything else.

Mr. KUCINICH. Ms. Zovko, first of all, to all of the witnesses, our

deepest condolences to your family for what you have suffered. If

you can make a final comment, Ms. Zovko, do you believe that

Blackwater is more concerned about the safety of its personnel or

how much profit it could make on the contract?

Ms. ZOVKO. It is profit. It is definitely profit, and I will go to my

grave believing it was profit. They were not concerned about my

son or his well-being or what he can do for them. It is what they

could have charged for my son. Remember, our country had given

the tools to my son to be who he was. He was an ex-Army person,

a Ranger, the best of the best, and they used him to get him killed.

Mr. KUCINICH. Thank you. Thank you to all of the witnesses.

Thank you.

Chairman WAXMAN. Thank you, Mr. Kucinich.

Mr. Shays.

Mr. SHAYS. Thank you, all four of you, for being here. We have

had a number of hearings in the subcommittee that I have chaired

over the last few years, and I have been to Iraq 15 times, and I

say that because I have been outside the umbrella of the military,

where I have literally gone in a taxi, where I have gone in a vehicle

that, unfortunately, was white and four-wheel drive and was a signal, you know, there was probably a European in it. You knew intuitively the moment you got off the airplane in Iraq that you were

in dangerous territory.

What I am wrestling with is this. First off, I want to tell you I

find myself agreeing with a lot of different people who you disagree

with and agreeing with you at the same time. All four of you have

a right to be outraged. You lost your loved ones. You have an extraordinary right to be hurt. The reason we pay contractors what

we pay them was so they could pay people who make much more

there than here, and a lot of people who went to Iraq went because

they could make more money, and they knew they were being put

in harm’s way. They could make two, three, four times as much.

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Ms. HELVENSTON-WETTENGEL. Not if you are dead they can’t.

They can’t make a thing.

Mr. SHAYS. Don’t interrupt me, ma’am. Let me make my point

and then you can make your point. It depends which contractor is

there. You interrupt me before you know whether I agree or disagree. Just listen. And so people went there so, in fact, they could

make additional money, and they knew they were in harm’s way.

What we wanted is to make sure we sent the best-trained people

there, the contractors.

One of the things that is not in dispute is all four of your family

members were skilled and knew the risk and knew what to do to

deal with it. The issue is were they being given the kind of assistance they needed to do their job properly.

So one of the questions that is raising for me is: Did they have

the capability to say hell, no, we are not going out there?

Ms. HELVENSTON-WETTENGEL. Scotty did say that, and he said

he would be fired.

Mr. SHAYS. Please do not interrupt. So I am just throwing that

out as an issue. Were they, in fact, capable? And if they did refuse,

what would be the result? Would they be court martialed or would

they be asked to say we don’t want you to work here? And, frankly,

if you are a skilled person you would say I don’t want to work here.

Were they forced under a threat of some kind of court martial not

to carry out what they did?

So I am saying what is the value of what you are doing here in

the course of this hearing is, one is we need to evaluate the role

of contractors. They aren’t the tip of the spear. The tip of the spear

are the men and women in uniform who are going out and actively

trying to root out the enemy. The whole purpose of contractors is

to free up our military from, instead of doing security work, the

whole purpose is to make sure that our military doesn’t have to do

the security work so they can be the tip of the spear.

And now I want to tell you where I have tremendous sympathy.

This company should answer every question you have, every question. They should have immediately called you up, they should

have let you know what happened, they should have said this is

what we know, what questions can we answer. They should have

assigned someone to you to help you get information, an ombudsman in the company. I will tell you, the moment I was in your

shoes where I got pushed back, I would sue them. I would sue

them. I would do anything I could to get the information. And so

I am just going to throw that out for your comment.

I do want to say, in sympathy to Mr. Issa, his point is I asked

this question on occasion to witnesses: Is this your statement or is

this a statement drafted by your attorney? The reason is, when an

attorney drafts a statement they are thinking of the lawsuit and

what information they want to put in the public record. It is a very

valid question. I know my colleague. It wasn’t whether you as

women or as bereaved people could write a statement. You could

write a wonderful statement. The question is, as we look at it, is

the committee being used properly to look at this, or are we furthering a private lawsuit.

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So let me just say to you: Is it true, in fact, that you asked for

information immediately and you got pushed back? And I would

like everybody, not just one spokesman. I would like to ask you.

Ms. ZOVKO. Yes, sir, it is the truth. We were pushed back and

not told the truth.

Ms. TEAGUE. Yes.

Ms. HELVENSTON-WETTENGEL. Blackwater lied to us.

Ms. BATALONA. Yes.

Mr. SHAYS. OK. and so the purpose, it seems to me, is that once

they did that you had no choice but to take action against them.

That is my view.

Ms. HELVENSTON-WETTENGEL. There was an earlier question in

your statement, and it was regarding whether or not Scotty had a

choice. An employee of Blackwater’s went up to Scotty’s room with

two thugs, held him down, took his gun away from him, told him

if he did not go on that mission he was on the streets of Baghdad

that night, he would be on his own to get home, and he would pay

back any moneys that Blackwater had paid him. So he didn’t have

a choice.

Mr. SHAYS. Let me just say that is an extraordinary statement

to put on the record under oath. Just tell me how you know that

to be true.

Ms. HELVENSTON-WETTENGEL. The person that was in the room

at that time with Scotty told me.

Mr. SHAYS. So someone else who was there shared that information with you? And would you identify who that person was?

Ms. HELVENSTON-WETTENGEL. I can’t. Also, Scotty’s e-mail

stated——

Mr. SHAYS. Ma’am, I need you to say—you said a person said.

Who is that person? You need to ask your attorney?

Ms. HELVENSTON-WETTENGEL. The person was in Scotty’s room.

Can I answer that?

Chairman WAXMAN. Well, as I understand—first of all, your time

is up. As I understand the question, you said there was a person

who said he was in the room and he sent an e-mail to you and you

believe it.

Ms. HELVENSTON-WETTENGEL. I know.

Chairman WAXMAN. I guess the real question is, even if he had

not been told that information, are people assuming the risk of

dying because their employees want to cut back on the payments

to provide the security for their employees? This is a doctrine

that——

Ms. HELVENSTON-WETTENGEL. Well, they took every—the few

very minor things that they were guaranteed, they took every one

of them away. Had they had any one of those they probably would

be alive today. It seems to me it was kind of a personal, intentional

thing. It was blatant.

Chairman WAXMAN. I understand what you are saying, and I

just want—I know it is not my time.

Ms. HELVENSTON-WETTENGEL. I can give the name of this person.

Chairman WAXMAN. It doesn’t make any difference.

Mr. SHAYS. A point of order, Mr. Chairman, please.

Chairman WAXMAN. What is your point of order?

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Mr. SHAYS. My point of order is that I had time, you’ve taken it

away, and now you are speaking without time and you are speaking on something that I was pursuing and leaving in question

something, making a statement it doesn’t matter. It doesn’t matter

to you; it matters to me. If I could have my time or if you could

have legitimate time we could have——

Chairman WAXMAN. The gentleman’s point of order is well taken.

I now recognize Mr. Yarmuth for his time.

Mr. YARMUTH. Thank you, Mr. Chairman.

Thanks to all of you for being here today. I join the other members of the committee in offering our sympathies and our gratitude

for your sacrifice and for being here.

I want to pursue for a second the train of thought of Mr. Shays,

because he tried to draw a distinction between what would be characterized as providing security and other types of military activity.

This may be something you may not be able to answer, but if so,

say so. It seems to me that a lot of what our military is being asked

to do in Iraq involves security; is that correct?

Ms. HELVENSTON-WETTENGEL. Yes.

Mr. YARMUTH. So my point, by way of a question, is: To the extent that you know, was the activity that your relatives were involved in distinguishable from what many of our military are doing

in Iraq right now, our active military?

Ms. HELVENSTON-WETTENGEL. I don’t know.

Mr. YARMUTH. You don’t know? OK.

Ms. HELVENSTON-WETTENGEL. Well, I know Scotty was told he

was going to be security for Paul Bremer and he would be working

in the green zone. He never met Paul Bremer.

Mr. YARMUTH. He was told that by Blackwater?

Ms. HELVENSTON-WETTENGEL. Yes.

Mr. YARMUTH. So essentially, to the best of your knowledge,

then, there really isn’t a distinction between what your relatives

were doing and what our active military are doing now, many of

our active military?

Ms. HELVENSTON-WETTENGEL. The main distinction is that they

were not given the equipment to do it.

Mr. YARMUTH. And they are being paid by a different employer.

Ms. HELVENSTON-WETTENGEL. Right.

Mr. YARMUTH. Immediately following the incident at Fallujah

there was a New York Times story and in that New York Times

story a man named Patrick Tooey, who is a high-level executive at

Blackwater, apparently, was asked about the attack and was

quoted as saying, ‘‘The truth is we got led into this ambush,’’ and

he then provided some details about the Iraqi Civil Defense Corps

and how an escort had been arranged just east of the city, and so

forth, so he seemed to know a fair amount of detail about the attack. Have any of you ever been contacted by Mr. Tooey? Did you

try to get information from him?

Ms. HELVENSTON-WETTENGEL. No.

Mr. YARMUTH. No?

Ms. HELVENSTON-WETTENGEL. We have contacted them numerous times asking those very questions and they won’t return our

calls.

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Mr. YARMUTH. So he was apparently willing to talk to the New

York Times, but not to you?

Ms. HELVENSTON-WETTENGEL. Yes.

Mr. YARMUTH. Somewhere later in that article he talked about

the fact that they were planning to conduct a more thorough investigation. Did you ever get any more information about subsequent

investigation that they may have——

Ms. HELVENSTON-WETTENGEL. We have received no information,

period.

Mr. YARMUTH. Thank you, Mr. Chairman. I yield back my time.

Chairman WAXMAN. Thank you, Mr. Yarmuth.

Mr. Hodes.

Mr. HODES. Thank you, Mr. Chairman.

Ladies, thank you for coming today. I want you to know how sincerely we appreciate your being here and the sacrifice that you

have made. Having some familiarity with litigation in my former

life, I know how tough it is to go through what you are going

through with the push-back from the other side, and it takes a

great deal of courage to do what you are doing in pursuing answers

from this company.

We have watched over a period of years this intermingling of

contractors with forces and the use of contractors growing by the

U.S. military, especially in Iraq, and it is clear now that the numbers of Americans who are serving in Iraq, serving their country

as your loved ones did, is actually much, much higher than the

numbers that the military reports because they don’t talk to us

about the contractors, even though they are providing those services that your loved ones did, so this is really a very important

issue in the way things work together.

And it doesn’t matter to us whether your loved ones were in the

Army or they were private contractors; they were Americans serving their country bravely, so we really understand and feel that.

I want to ask you what may be some basic questions about some

information that you had or didn’t have. Did your loved ones sign

written contracts with Blackwater?

Ms. HELVENSTON-WETTENGEL. No.

Mr. HODES. There were no written contracts?

Ms. HELVENSTON-WETTENGEL. Are you asking us personally did

we sign?

Mr. HODES. Yes. Not you. Did your sons and husbands sign written contracts with Blackwater?

Ms. HELVENSTON-WETTENGEL. I believe they did.

Mr. HODES. Do you have copies of those contracts?

Ms. HELVENSTON-WETTENGEL. Yes.

Mr. HODES. OK. And were you aware of whether or not there

were any other discussions surrounding those contracts where

Blackwater made representations to your loved ones about what

they would have to protect themselves and what equipment they

would have?

Ms. HELVENSTON-WETTENGEL. Your questions are long. Chris

Berman, who was with Scotty, he signed the same contract and so

he joined the same time Scotty did, so they were there together,

and they were friends back in California, so a lot of this information comes directly from Chris Berman.

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Mr. HODES. And your folks were told they would have armored

vehicles, they would have protection, they would have machine

guns, they would have what they needed to protect themselves

from risk?

Ms. HELVENSTON-WETTENGEL. Correct.

Mr. HODES. Were they told anything about the various levels of

subcontracts between Blackwater and these other companies that

we have now heard about?

Ms. HELVENSTON-WETTENGEL. I don’t know. I would doubt that

would have transpired.

Mr. HODES. Sitting here today, can any of you say with any certainty what the relationships were between Blackwater and Fluor

or KBR or ESS? Do you have any idea how that worked at all?

Ms. HELVENSTON-WETTENGEL. Well, I understand it is a pyramid

type thing, and usually starts with Halliburton, then it goes to

KBR, then Regency, then ESS, and then Blackwater, and then

Blackwater prepares their invoice, adds on their 35 percent, it goes

to ESS, they prepare theirs and add on 35 percent on top of

Blackwater’s 35 percent, and it just goes on and on.

Mr. HODES. So everybody gets a cut as it goes on up?

Ms. HELVENSTON-WETTENGEL. And it just keeps growing, too, because they are adding 35 percent on other 35 percents.

Mr. HODES. Do you know whether or not any of the companies,

as things go up, exercised any oversight over Blackwater and how

it was treating its employees?

Ms. HELVENSTON-WETTENGEL. I am not aware of any.

Mr. HODES. Do you know if the Defense Department, which ultimately was at the top of this pyramid, as you have called it, was

monitoring what Blackwater was doing with its employees?

Ms. HELVENSTON-WETTENGEL. The only Defense paper I saw

when Chris brought Scotty home and he gave me his personal

things, there was something in there with the Defense Department

heading, and it basically just said that they had no liability to

Blackwater.

Mr. HODES. Do you think that someone should do more to watch

over what is going on with the private security contractors, including Blackwater?

Ms. HELVENSTON-WETTENGEL. Yes. Most definitely.

Mr. HODES. And do you have any feelings as to whether or not

it ought to be the Department of Defense which ought to be doing

more to monitor what is going on with the contractors who are

serving our country so bravely?

Ms. HELVENSTON-WETTENGEL. Well, since Blackwater’s whole defense is if they had a Government contract with the Defense Department, yes, I think the Defense Department should establish

some rules.

Mr. HODES. And do the rest of you agree with that statement?

Ms. BATALONA. Yes.

Ms. ZOVKO. Yes.

Ms. TEAGUE. I do.

Mr. HODES. Thank you very much. Thank you for being here.

Thank you, Mr. Chairman. I yield back my time.

Chairman WAXMAN. Thank you, Mr. Hodes.

Mr. Welch.

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Mr. WELCH. Thank you, Mr. Chairman.

Welcome. You mentioned that there was a service at

Blackwater—not at Blackwater, for your loved ones. Did all of you

attend that?

Ms. HELVENSTON-WETTENGEL. Yes.

Ms. TEAGUE. I did not.

Ms. HELVENSTON-WETTENGEL. No, Rhonda didn’t.

Ms. BATALONA. I didn’t attend.

Mr. WELCH. Did your——

Ms. BATALONA. My mother did.

Mr. WELCH. Your mother did? OK. And there was a reference

that there were guards, that each of you was separated from one

another. I would like to ask you if you could each comment on that,

and in your case comment on how your parent was treated there.

Ms. BATALONA. I know that my mom said somebody was with

her. Somebody was with my mother, but I don’t think she ever referred to them as guards, per se.

Mr. WELCH. She what?

Ms. BATALONA. She never referred to them as being guards.

Mr. WELCH. OK.

Ms. BATALONA. But she knew that they were always with her

when—they never had alone time together with the family.

Mr. WELCH. Was she discouraged from spending time with the

other families?

Ms. BATALONA. She seemed that way, yes, because whenever

they went out to dinner they joined and if she went somewhere in

the hotel they followed.

Mr. WELCH. Thank you. And how about you, Ms. Helvenston?

Ms. HELVENSTON-WETTENGEL. The same. They would walk me to

my door to go to bed at night and there would be someone standing

outside of that door in the morning. The last night we were all

there we wanted to go out to dinner and just talk, and uninvited

they chose to join us, a number of them, and so it was a pretty

quiet dinner.

Mr. WELCH. Did that inhibit your conversation?

Ms. HELVENSTON-WETTENGEL. Well, one night, though, after the

first night we were there after the guards left, I snuck out of the

room and we all went down to Donna’s room and we talked. They

at least allowed us that.

Mr. WELCH. All right. And, Ms. Teague, you were not there?

Ms. TEAGUE. No. The time that it happened was my son’s birthday, Mike’s son. He was struggling and we opted not to attend.

Mr. WELCH. How old is your son?

Ms. TEAGUE. He is 19 now.

Mr. WELCH. All right. Ms. Zovko, how about you?

Ms. ZOVKO. Well, what they have shared, I did feel that they

were there to watch over us to see, you know, not to communicate

with the other people. For instance, this one thing, they have

planted trees and made headstones for my son and for his coworkers, or, you know, people that worked for Blackwater that were

killed in Iraq, and I ran out of film to take a picture. I just wanted

a picture of my husband with the headstone and all of that. I was

going to ask a lady that was there to take a picture for me so that,

you know, I was going to give her my address to mail it to me.

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Well, before you know it there was someone already there saying,

‘‘No, you don’t have to do that. I will take the picture and I will

send them to you.’’ Well, he took the pictures but he never mailed

the pictures to us.

Mr. WELCH. OK.

Ms. ZOVKO. That is there. I had my grandchildren there, and my

daughter-in-law. We were all there, but there was no ease. They

have told us that they didn’t work for Blackwater when we came

in.

Mr. WELCH. Yes.

Ms. ZOVKO. When we flew in. In reality, when we came into the

headquarters the following day, the same people that said that did

not work for Blackwater, that their wives worked for Blackwater,

had the T-shirts of Blackwater on and standing at the entrance letting us in.

Mr. WELCH. Thank you. Just one quick question for each. I appreciate that. You are all strong women, made stronger by being

together. If each of you could have asked a question of Blackwater

to get one piece of information, what would each of you ask

Blackwater to do to help you come to terms with the loss that you

have suffered?

Ms. ZOVKO. The truth. The simple, plain truth. ‘‘Mrs. Zovko or

Donna, this is what happened. This is how it happened. You

couldn’t see your son’s body, but we are telling you that this is how

it is.’’ Do you know the remains of my sons were sent to me in 11

months. The first was in 10 days, and then what was left of him,

11 months later.

Ms. HELVENSTON-WETTENGEL. They sent his charred arm to her.

Ms. ZOVKO. Just the truth. I mean, basic truth. You know, we

live in the best country in the whole wide world. Why can’t we

have the basics, what we were built on, the truth, you know, God

and truth. That is all.

Mr. WELCH. Thank you.

Ms. ZOVKO. That is all. That is all, nothing else.

Mr. WELCH. Ms. Teague. Thank you.

Ms. TEAGUE. Very similar. I would like an account from start to

finish of that day. Whether I want to hear it or see it, I would,

every minute of it, every part of it, the truth.

Mr. WELCH. Thank you. Ms. Helvenston.

Ms. HELVENSTON-WETTENGEL. They showed such a callous disregard for life, and now they claim we have no rights? If we don’t

have the right to sue them, I don’t know about you but I am outraged. Where is your outrage?

Mr. WELCH. Thank you. Ms. Batalona.

Ms. BATALONA. Like everybody else, I would also like the truth.

Just a simple question of why. Why couldn’t they give them the

protection and the tools that he needed to complete his mission?

Mr. WELCH. Thank you.

Mr. Chairman, I yield whatever time I have.

Chairman WAXMAN. Thank you, Mr. Welch.

Mr. Bilbray.

Mr. BILBRAY. Thank you, Mr. Chairman.

Let me thank the ladies for being here today. I think it is essential to remind us that, no matter how good the intentions are, there

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is always, in major efforts, major mistakes. Congress bears the responsibility of not just finding fault, but trying to find answers. We

can’t relieve you of the burden that you are going to bear the rest

of your lives, and your loved ones, but we do bear the burden of

trying to modify the process, to minimize the potential for this to

happen again.

Ms. Teague, there was a lot of discussion here about the isolation

of your loved ones from the rest of the rank and file of the employment of the group that was under Blackwater, and there were specific references to the fact of contractors going to Third World countries to find ‘‘inexpensive employees’’ to be able to provide the infrastructure, the support that your loved ones needed.

I will be very blunt with you. Do you think we should be looking

at the fact that the people that are recruited to do American jobs

may need to be Americans and should be required to be U.S. citizens so that it is U.S. citizens fighting side by side? Let me just

poll you. Would you suggest that we just make it a matter of fact

policy or consider a policy that says when an American contractor

gets an American contract to go into these situations, they must

hire U.S. citizens to do the job?

Ms. HELVENSTON-WETTENGEL. I think that would be very appropriate.

Ms. ZOVKO. I agree with that.

Ms. TEAGUE. I agree, but I think that there is also the intel part

of that, which again falls on other people, but you have to have

intel that involves, when you are in a foreign country, people that

can integrate in that. But I do prefer and wish they were all American, but that is a problem that has to be addressed in that.

Mr. BILBRAY. Thank you very much. I appreciate that. I appreciate the very balanced approach of many of you on this issue. It

is astonishing that you can be so level-headed and so cool with the

kind of experience you have gone through. I appreciate that.

At this time, the gentleman from California, the time I yield to

Mr. Issa.

Mr. ISSA. I thank the gentleman.

Following up a little bit on what Mr. Shays had asked about,

there was a statement made that there is—I think there were four

names named and a 35 percent markup each time. How did any

of you know about that, or what do you know about that?

Ms. HELVENSTON-WETTENGEL. I have read just about every article that has come out regarding Blackwater since about 6 months

after the incident. Jay Scahill has just finished a book. He has done

such incredible research and he is so thorough. Jerry Price has

been incredible.

Mr. ISSA. So it is from unclassified information. And if I did my

arithmetic, basically your loved ones were paid about $200,000

annualized. That would mean, with 35 percent, it would be about

$800,000 the Government would pay per person per year if four

contractors did 35 percent markup? Is that roughly your understanding, from the readings you have had?

Ms. HELVENSTON-WETTENGEL. I haven’t done the math, but all

I know is Scotty didn’t even get one paycheck.

Mr. ISSA. I understand. Are all of you aware that Secretary

Bremer was guarded for his time in Baghdad by Blackwater?

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Ms. HELVENSTON-WETTENGEL. Yes.

Ms. TEAGUE. Yes.

Ms. ZOVKO. Yes.

Mr. ISSA. That is not inconsistent?

Ms. HELVENSTON-WETTENGEL. I would venture a guess he had

armored vehicles.

Mr. ISSA. In your reading, were you aware of all the write-ups

about our military personnel, including the Marines from Camp

Pendleton, who were short of armored humvees and as a result

were driving around with tin-sided humvees at the time because

there was a worldwide shortage of the armor capability?

Ms. HELVENSTON-WETTENGEL. Yes, I was aware they would scavenge around Iraq in these junkyards trying to armor their own vehicles, which is horrible. How could our Government send them

over there and they become scavengers trying to protect themselves?

Mr. ISSA. I understand that, and it is regrettable, but it is documented that the U.S. military had the same problem of insufficient

armored vehicles during that time.

Are you also aware that Mr. Waxman and Speaker Pelosi and

myself were guarded by Blackwater as late as 2005, 2006 on our

last—March 2005, when we were there, that they have guarded, I

believe, 91 codels? Virtually every Congressman that went in and

out were guarded by Blackwater in Iraq.

Ms. HELVENSTON-WETTENGEL. I wasn’t aware of that.

Ms. ZOVKO. But what does that have to do with them——

Ms. HELVENSTON-WETTENGEL. What’s the point?

Ms. ZOVKO [continuing]. Sending my son the way they did on the

job that he was doing when he died. I mean, I didn’t come here and

say the people that work for Blackwater are not qualified to guard

and protect. My son was one of them. The reason that I am here

is because they did not supply to my son what he needed to do his

job, what he was qualified for. So what they did, that is just fine.

I hope that they keep on doing a great job. But that has nothing

to do with the death of my son or preventing them from not doing

it to someone else just because they are good at green zone and

they are able to protect the people that come there, be it you or

anyone else. They did not protect my son.

Mr. ISSA. Thank you, Mr. Chairman. I yield back as appropriate.

Chairman WAXMAN. The gentleman’s time has expired.

Mr. Clay.

Mr. CLAY. Thank you, Mr. Chairman. Thank you for this hearing

today.

It seems to me that, regardless of who they are technically working for, when Americans are killed in action in a war zone there

should be a moral obligation to tell the family how it happened.

Ms. Zovko, what is it that you want to know from Blackwater,

and what specific questions would you like to get the answers to?

If you have a list, send it forward. Can staff go get the list for us,

please.

Ms. ZOVKO. I want to know the truth about March 31, 2004. I

want to know about the way that they knew of this contract coming

up, that Blackwater is going to have the contract. They were working on having the things put together for the missions, and then

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all of a sudden the last minute they do what they did and send

these men on the mission as they did. I want to know about the

contracts that Blackwater needed to fulfill with the other companies that they were subcontracting from. Why didn’t they oblige?

Why did they not provide what they needed to provide for these

employees of theirs if these employees were going to do the job?

Why did they do it 3 days before the day was ever to come for them

to go into the effect? What was the hurry? What was the rush, and

especially with not giving them what they needed to have? Why did

it take so long for my son’s body to come home? Why wasn’t there

someone in front of them with the heavier equipment, if they were

not equipped, someone that was more equipped? If our military

couldn’t go in, how come Blackwater could send them? Why? Why?

Don’t you understand? What is the truth behind it? Is it the dollar

or what is it, or were there really lives being saved by taking my

Jerry’s life? What is it? Tell me. I don’t know.

Mr. CLAY. I don’t have the answers for you, and hopefully the

next panel can help shed some light on it, but it sounds like reasonable questions that deserve answers, and Blackwater should be

willing to answer those questions. I am sure that the military, if

these were active duty military, they would be willing to give you

the answers.

Let me also ask you about Erik Prince, who is Blackwater’s CEO.

He is known to be a very private man who does not often go on

the record to talk about his company, but I understand that two

of you have spoken with him personally.

Ms. ZOVKO. Yes.

Mr. CLAY. And, Ms. Zovko, Mr. Prince came to visit you at your

home in Ohio after news of Jerry’s death. What do you remember

about that visit?

Ms. ZOVKO. I remember being told that he would be there about

8. He came, accompanied by our sheriff’s department. They escorted him to my son’s house. Out of everything, my brothers-inlaw and my sisters-in-law were there, my daughter-in-law, and myself, and my husband. All I can remember—I can still see him sitting across the table, my son’s dining room table, telling me that

if he thought I thought—his words—‘‘if anyone could survive the

war in Iraq, it would be Jerry.’’ He actually told me and made me

feel like he knew who my Jerry was, to find out later that he was

just an employee that he did not know.

Mr. CLAY. It sounds as though they just looked at Jerry and the

other employees as just that, employees——

Ms. ZOVKO. Just that, employees.

Mr. CLAY [continuing]. That didn’t have a family attached to

them or anything else.

Ms. ZOVKO. Just a figure, just someone to be able to charge the

Government for services rendered from people the Government had

educated and made who and what they were, you know. But their

own choices, though, granted. My son went to work for Blackwater,

you know. He chose to, because that is how he could contribute in

fighting the war in Iraq. But Blackwater did him wrong, very, very,

very wrong.

Mr. CLAY. And it seems that this war has gone awry.

Ms. ZOVKO. It does.

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Mr. CLAY. And people have died unnecessarily that didn’t have

to, and in this case all under the name of profit.

Ms. ZOVKO. Yes. All.

Mr. CLAY. Thank you all for being here. Thank you for your testimony, and thank you for your insight.

Mr. Chairman, I yield back.

Chairman WAXMAN. Thank you for yielding back.

Someone asked whether this is germane of our job as Members

of Congress. If our military wasn’t providing sufficient equipment,

armored vests, basic needs of our troops, that is germane to us.

And if our subcontractors and contractors are not providing what

they should be providing to our troops that they have hired to represent our interests, that also is in our interest, that is also germane to what we want to know.

Ms. Schakowsky, do you want to be recognized?

Ms. SCHAKOWSKY. Thank you, Mr. Chairman. I really appreciate

the courtesy you have extended to me as someone who is not a

member of this committee but has tried to drill down over time on

the issue of private military contractors.

I want to say to you that I saw—I am not sure if it was all of

you—on the film ‘‘Iraq for Sale,’’ the Robert Greenwald film that

I wish every Member of Congress would watch about the role of

private contractors in Iraq. I really appreciate your raising the

questions of accountability that you have, because that is really the

policy, the questions we have. But one policy question I wanted to

point out to you is the question of why should we hire companies

like Blackwater if they are so much more expensive than the military. And Erik Prince actually answered that in a way that you

may have heard. He said last year about the military, ‘‘So when

they say ah, we need about 100 guys to do that job, we say actually

you only need about 10 to do that job.’’ I don’t know if you have

heard that quote before. You know, he’s saying Blackwater needs

only one-tenth the manpower to do the same job as the military.

I wondered if anyone had a reaction to that.

Ms. HELVENSTON-WETTENGEL. If you would compare the time

they were slaughtered, Blackwater had 400 employees in Iraq. By

March 2004, I think almost 25 had already died, versus the military, the total military over there and the total military that have

died. As I say, I have not done the math, but their percentage is

much higher, and if he thinks it is only worth sending 10 men out,

I would pretty much guarantee those 10 men would come back

dead.

Ms. SCHAKOWSKY. You know, on June 13, 2006 Chairman Shays

of the subcommittee you mentioned, we had a hearing.

Ms. HELVENSTON-WETTENGEL. I heard that entire hearing.

Ms. SCHAKOWSKY. At that hearing where we had the State Department, the Department of Defense, the USAID, I asked questions about how many contractors do we have there, how much

does it cost, how much are we paying, what’s the total number of

dead and wounded. You know, your loved ones are not considered

when the number——

Ms. HELVENSTON-WETTENGEL. They don’t count.

Ms. SCHAKOWSKY. No. They are not counted.

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Ms. HELVENSTON-WETTENGEL. They are so insignificant, they

don’t even count.

Ms. SCHAKOWSKY. We think that it is upwards of about 800, but

we can’t get that answer. I asked to see a Blackwater contract at

that time. We wanted to know if any laws had been broken in the

host country, U.S. laws, international laws, if disciplinary actions

had been taken against any contractors. No one had an answer.

That was in June.

In December 2006 the Government Accountability Office said

there is little visibility over these contracts. We don’t know.

So I just want you to know today I introduced a piece of legislation, the Iraq and Afghanistan Contractor Sunshine Act, to answer

those questions. We need to know. Are your loved ones being asked

to do jobs that are inherently governmental functions and given

what any soldier, what any U.S. military uniformed person would

be given? We need answers to these questions that you have been

asking, as responsible Members of Congress.

I really want to thank you, because you put a face on this veil

of secrecy of these troops that are there, or these personnel that

are there carrying on these missions for our country, and we don’t

know a darned thing about them, and when they die we don’t even

report their deaths. We don’t answer that.

I don’t know if you want to respond to that, but I thank you so

much.

Ms. HELVENSTON-WETTENGEL. Just thank you so much for that

acknowledgement, because that is why we are here today. That is

why. I appreciate so much, because my next question was after this

hearing what happens next. What will you do with the information?

Ms. SCHAKOWSKY. I hope more sponsors to this legislation.

I yield back. Thank you, Mr. Chairman.

Chairman WAXMAN. Before we do that, I would just like to—if

the gentlelady would yield?

Ms. SCHAKOWSKY. Yes.

Mr. SHAYS. I would just like to say I think it is a great summary

of the value of your testimony today.

Ms. HELVENSTON-WETTENGEL. Thank you.

Mr. SHAYS. I, for one, would like to be put on your legislation.

Ms. SCHAKOWSKY. Thank you, Mr. Shays.

Mr. SHAYS. Thank you for yielding.

Ms. HELVENSTON-WETTENGEL. Thank you, sir.

Chairman WAXMAN. Before we have you leave and hear from the

next panel, Mr. Shays did ask a question, and I saw you leaning

back. I guess that is your lawyer. I think he should get an answer.

We all want to get the answer to the question. Who was in the

room with your son?

Ms. HELVENSTON-WETTENGEL. It was Chris Berman.

Chairman WAXMAN. Chris Berman?

Ms. HELVENSTON-WETTENGEL. Chris Berman was the youngest

Navy Seal ever until Scotty came along, and they did these workout camps and workout videos together, and Scotty usurped him,

and that record will hold forever, so they have this fun rivalry. So

they went over together, and they had been friends prior to that.

Chairman WAXMAN. Mr. Shays, did you want anything else?

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Mr. SHAYS. No, Mr. Chairman. I really appreciate you moving

forward with that, and it is helpful for us to know, and I thank

you.

Ms. HELVENSTON-WETTENGEL. OK.

Mr. SHAYS. Thank you, Mr. Chairman.

Chairman WAXMAN. I think it is important when we ask questions of witnesses we get answers, complete answers, and I appreciate that you gave us that.

Ms. HELVENSTON-WETTENGEL. Chris Berman now is in Kuwait

City building armored vehicles. He finished his 2-month contract

with Blackwater then left, came home, built the most heavily plated armored vehicle over there, and he can’t build them fast enough,

so Chris is making a difference.

Chairman WAXMAN. Thank you. Well, I think your testimony will

make a difference, as well. I thank you very much for giving it.

Ms. HELVENSTON-WETTENGEL. Thank you.

Chairman WAXMAN. You can leave. We are going to now hear

from the next panel. In this next panel we will receive testimony.

First, we want to welcome Tina Ballard, the Deputy Assistant Secretary for Policy and Procurement for the U.S. Army. We also welcome Andrew Howell, general counsel for Blackwater USA; Steve

Murray, the director of contracting for ESS Support Services

Worldwide; George Seagle, the director of security for the Government and Infrastructure Division of KBR; and Tom Flores, the senior director for corporate security at the Fluor Corp.

It is our policy to swear in all the witnesses that appear before

our committee, so I would like to ask our witnesses to please rise.

[Witnesses sworn.]

Chairman WAXMAN. The record will indicate that each of the witnesses answered in the affirmative.

We have your prepared statements, which will be part of the

record in their entirety. We would like to ask each of the witnesses

to give a summary of that testimony and try to keep within the 5-

minutes that we allot. You may submit a longer written statement

and the committee will include that statement in the official hearing record.

Ms. Ballard, why don’t we start with you? We will go down in

the list and have questions after each witness has testified.

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STATEMENTS OF TINA BALLARD, ASSISTANT UNDERSECRETARY FOR PROCUREMENT AND POLICY, U.S. DEPARTMENT

OF THE ARMY; ANDREW G. HOWELL, GENERAL COUNSEL,

BLACKWATER USA; R. TIMOTHY TAPP, MANAGING DIRECTOR, BUSINESS OPERATIONS, REGENCY HOTEL AND HOSPITAL CO.; W. STEVE MURRAY, JR., DIRECTOR OF CONTRACTING, ESS SUPPORT SERVICES WORLDWIDE; GEORGE

SEAGLE, DIRECTOR OF SECURITY, GOVERNMENT AND INFRASTRUCTURE DIVISION, KBR; TOM FLORES, SENIOR DIRECTOR, CORPORATE SECURITY, FLUOR CORP.; AND ALAN

CHVOTKIN, SENIOR VICE PRESIDENT AND COUNSEL, PROFESSIONAL SERVICES COUNCIL

STATEMENT OF TINA BALLARD

Ms. BALLARD. Thank you. Thank you, Mr. Chairman, for this opportunity to again report to you on the U.S. Army contracts for reconstruction and troop support activities in Iraq. It is my privilege

to represent U.S. Army leadership, as well as the dedicated military and civilian members of the contracting work force who have

been at the forefront in Iraq.

Our work and our success to date would be impossible without

the tremendous support the Army receives from you, the members

of this committee. We thank you for your wisdom, your advice, and

your guidance.

The Army contracting work force has two very different important missions in Iraq: to support reconstruction contracting and to

provide support for the troops. The mission is also one of constant

change. Over time the reconstruction has moved from large design/

build contracts to firm fixed-price contracts with Iraqi firms in an

effort to reduce security costs and to provide economic opportunity

to the Iraqi people. The LOGCAP contract for troop support is also

changing as we move away from one contractor, as currently exists

under LOGCAP-III, to multiple contractors under LOGCAP-IV. Regardless of the contract vehicle, however, one thing has and will remain constant over time—our commitment to ensuring that our

contractors comply with the terms and conditions of their contracts.

There is no flexibility or negotiation or compromise in this commitment.

The last time I testified before this committee I was asked about

a letter from the Secretary of the Army dated July 14, 2006. The

letter from the Secretary was sent in response to allegations that

there was as subcontractor relationship between Kellogg, Brown

and Root Services, Inc., ESS worldwide Services, Regency Hotel &

Hospital Co., and Blackwater Security Services. The Secretary’s

letter stated that, based on information provided by KBRS to the

U.S. Army, KBRS had never directly hired a private security contractor in support of the execution of a statement of work under

any LOGCAP-III task order. Additionally, the letter stated, ‘‘KBR

has queried ESS and they are unaware of any services under the

LOGCAP contract that were provided by Blackwater USA.’’ I was

asked if this letter was accurate. I responded that Secretary Harvey’s letter was correct. I also committed to looking into this matter, and I have kept that commitment.

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As a result of extensive research, the U.S. Army correspondence

with ESS and KBRS, ESS recently confirmed to KBRS and the

Army that they obtained security services. ESS built and operated

dining facilities both as a direct contractor to the U.S. Government

and as a subcontractor to KBRS and other companies. On January

30, 2007, we learned ESS engaged Blackwater through Regency

Hotel, and that ESS employed private security, primarily to protect

its employees and management traveling in Iraq, and to transport

currency to pay vendors and employees.

Based on information we received from KBRS, we understand

that these security costs, which were not itemized in the contracts

or invoices, were factored into ESS labor costs under its DFAC

service contracts with KBRS under LOGCAP-III.

The U.S. Army is continuing to investigate this matter and we

are committed to providing full disclosure of the results of our investigations to the committee. If KBRS violated the terms of the

LOGCAP-III contract and knowingly or unknowingly incurred costs

for private security subcontractors under the LOGCAP-III, the U.S.

Army will take appropriate steps under the contract terms to recoup any funds paid for those services.

The last time I testified before this committee I also listed a few

reconstruction accomplishments of the Defense Department implementing agencies. Today I can add to that list. Twelve hospitals

serving over 6,000 patients a day have been refurbished. Water

treatment capacity now serves an estimated 2.2 million Iraqis.

Electrical generation projects have added 1,420 megawatts to the

power grid. Crude oil production has increased, though extenuating

circumstances have kept production from reaching full production.

And 839 schools providing classrooms for over 350,000 students

have been constructed or rehabilitated.

Sir, in conclusion we are proud of the dedication, commitment,

and hard work of our contracting work force in supporting our

troops and rebuilding Iraq.

Thank you. I look forward to your questions.

[The prepared statement of Ms. Ballard follows:]

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Chairman WAXMAN. Thank you very much, Ms. Ballard.

Mr. Murray?

STATEMENT OF STEVE MURRAY

Mr. MURRAY. Chairman Waxman, Representative Davis, members of the committee, I am Steve Murray, the director of contracting for ESS Support Services Worldwide. I served over 20 years in

the U.S. Army, retiring as a chief warrant officer. During my service, my mission often was to deliver food services and other logistics support to our troops. I carried out a similar mission as an employee of ESS.

ESS has extensive experience building and operating food service

facilities in remote and challenging locations, such as mining

camps and offshore in oil and gas drilling platforms, in Asia, Africa, and the Middle East. ESS provides a range of support services

to its customers, including full food services, supply logistics management, transportation, vehicle maintenance, facilities management, and communications.

I joined ESS in June 2003, to oversee its contracting for operations in Kuwait and Iraq. In December 2002, ESS began to build

and operate dining facilities known as DFACs to feed the American

and other Coalition troops that were arriving in Kuwait at bases

such as Camp Commando and Camp Coyote. Every day ESS served

thousands of our soldiers and marines four full-service, high-quality meals: breakfast, lunch, dinner, and a midnight meal.

After Coalition forces moved into Iraq in March 2003, ESS followed our troops, making sure that they were soon eating hot

meals instead of MREs. From 2003 to 2006, ESS built and operated

DFACs at over a dozen sites in Iraq, including Baghdad, Fallujah,

and Tikrit, as well as performing camp construction at Camp Taji

and in Basrah. ESS also provided food services and facilities management to the Coalition Provisional Authority, as well as food

services for civilians performing reconstruction work in Iraq.

ESS performed many of its services in Iraq as a subcontractor to

KBR. We also delivered on numerous contracts directly for the

Army, the Marine Corps, and the Department of State. All of the

subcontracts that ESS entered with KBR were competitively

awarded and were performed by ESS on a firm, fixed-price basis.

Instead of being a cost reimbursable or cost-plus contract, ESS’

contracts with KBR stated a bottom line, or a maximum not to exceed price for the services that ESS was contracted to provide. Except in unusual circumstances, if our costs were higher than anticipated that was our problem. We had agreed to a fixed price.

One of ESS’ costs that was higher than we had anticipated for

was for private security. Beginning in the middle of 2003, security

conditions in Iraq compelled ESS to hire private security firms to

move its personnel and supplies among DFACs. Without the aid of

private security firms, ESS could not have performed its mission of

feeding the troops.

ESS moved most of its supplies through sporadic military escorted convoys, and supplies often took days or even weeks to reach

the DFACs, or simply never arrived at all. When necessary, ESS

called on private security firms to provide well-trained, armed personnel who escorted supply trucks and ensured that food services

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to the troops were not disrupted. Many other contractors did the

same.

ESS also used private security firms to escort our managers and

staff as they drove to and from DFACs and other sites. I traveled

between sites with our private security providers on many occasions.

The military escorted convoy system was intended to move supplies, not people. We had over 100 ESS managers and over 1,000

ESS staff getting the job done at more than a dozen sites in Iraq.

We could not have fed the troops if we could not get our people to

and from the DFACs. We were determined to never compromise

the safety of our personnel when they traveled between sites.

ESS used a number of different private security firms between

2003 and 2006, including Blackwater. We always made it clear to

KBR and other parties that contracted with ESS that we were

using private security firms.

I am proud of the work that I have performed for ESS and my

country during my time in Iraq. I am glad to be here today to help

this committee sort out the facts for the American people.

Thank you.

[The prepared statement of Mr. Murray follows:]

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Chairman WAXMAN. Thank you very much.

Mr. Howell.

STATEMENT OF ANDREW HOWELL

Mr. HOWELL. Chairman Waxman, Congressman Davis, members

of the committee, my name is Andrew Howell, and I am general

counsel of Blackwater USA, dedicated security professionals whose

primary mission is to protect the lives of Americans in very dangerous places. More specifically, Blackwater professionals, most of

whom are military veterans, voluntarily go in harm’s way at the

request, direction, and control of the U.S. Government. Chances are

if and when you, as Members of Congress, and your staffs travel

into Iraq, your lives will be protected for at least part of the trip

by Blackwater.

Areas of Iraq are among the most dangerous places on Earth,

where violence against Americans is endemic. Our people choose to

put their lives on the line daily in the service of our country. On

behalf of Blackwater, I thank them for their service, especially

those wounded or killed in the line of duty. I express again our

deepest condolences to the families of our fallen colleagues, both

those who appeared here today and those who did not. Losing our

teammates is the hardest reality of our profession.

Just 2 weeks ago we lost five good men who were shot down in

Iraq protecting a diplomatic convoy. Our thoughts and prayers are

with their familys. The U.S. Ambassador to Iraq said of the incident, ‘‘These five American citizens were our colleagues and worked

on behalf of the U.S. Government. They represent the best of

America, showing valor and courage in the work they did each

day.’’

The State Department noted that, ‘‘These men played a critical

role in our effort to bring a better way of life to the people of a

country who had never experienced freedom and opportunity. We

will always remember their courage, commitment, and ultimate

sacrifice for their country.’’

Like the other good men we have lost in the line of duty, these

men are heroes who embody the best of who we are and who we

strive to be.

Our professionals serving today in Iraq are part of our Nation’s

total force. Just last month, before the Senate Armed Services committee, Lieutenant General Petraeus, the new commander in Iraq,

said he counts contract security forces among the assets available

to him to deal with the enemy insurgency.

To be clear, we do not engage in offensive operations, but our defensive security function helps to unburden more of those in uniform to do so.

With regard to the important policy issues we will discuss here

today, we look forward to working with Congress so that the right

laws, policies, and procedures are in place to ensure that private

security contractors can support our Nation’s essential security

missions.

I hope you will understand that there are matters that I cannot

discuss in an open forum such as this, especially matters relating

to operational security or matters that our Government has classified.

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I will endeavor to answer your questions as fully as possible with

these restrictions in mind. However, my task is even more complicated. Our company comes before this committee today facing a

lawsuit. As you know, committee staff provided us with a copy of

a December 13th letter from plaintiff’s counsel to Speaker Pelosi effectively requesting that Congress hold this hearing. I respectfully

request careful consideration of the impact of asking in an open

oversight hearing questions that were requested by one party in

ongoing litigation.

Our hope is that this hearing will not delve into an incomplete

and one-sided exploration of a specific battlefield incident, but rather will explore the important policy issue of whether death and

should be benefits of contractors and service members should remain roughly the same as current congressional policy dictates.

At Blackwater we are proud to serve the United States. Our professionals are highly skilled and experienced. Yet, for all of the experience and training, no one can guarantee that they will be safe

when they step into a war zone. Our enemy has ensured that.

Although our teammates have bled and even died in our mission

of protecting other Americans, we have never lost a protectee, and

our support for and dedication to our Nation remain strong.

I am prepared to answer whatever questions I can under these

unfortunate circumstances.

[The prepared statement of Mr. Howell follows:]

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Chairman WAXMAN. Thank you very much, Mr. Howell.

Mr. Seagle.

STATEMENT OF GEORGE SEAGLE

Mr. SEAGLE. Thank you. Chairman Waxman and members of the

committee, my name is George Seagle. I am the director of security

for KBR’s Government and Infrastructure Division. From October

2003, to May 2006, I was the director of security for KBR’s Middle

East operations. In that role I oversaw all of security measures for

150 project locations and more than 50,000 employees and subcontractors. I was in Iraq an average of once a week for the 32

months I was in that job. Let me say my heart goes out to the families of all of those who have lost their lives in brutal attacks in

Iraq. My own friends and colleagues, both members of the military

and civilian contractors, have been killed in support of operations

in the region.

We know how difficult the situation on the ground is, and the situation the troops face is a very, very tough challenge.

We are proud to provide food, housing, and other necessities to

them. We support U.S. and Coalition troops at 55 sites in Iraq, 70

other sites in the region. Since 2003, we have served more than

490 million meals, transported more than 675 million gallons of

fuel, delivered more than 220 million pounds of mail, washed more

than 30 million bundles of laundry, and hosted more than 80 million visits to morale, welfare, and recreation facilities.

Whether building mess halls, providing food service, or setting

up housing, our goal is to provide the soldiers with the basic necessities—a hot meal, clean clothes—when they are back on base returning from dangerous missions. The feedback we have received

from the troops on the ground has been overwhelmingly positive,

and we are proud of the work of our courageous employees.

Like me, many of my KBR colleagues served in the Armed

Forces. We understand the importance of our work to support the

brave men and women of our military. I followed my father into the

Marines, and I am proud to say that my son followed me and also

joined the Corps. I served for 26 years, and my career culminated

with nearly 31⁄2 years as a White House liaison officer for the unit

that includes Marine One, securely transporting both Presidents

Bill Clinton and George W. Bush.

The focus of today’s hearing is the use of private security contractors. To my knowledge, every foreign company working in Iraq

uses private security in one capacity or another. KBR uses private

security on our non-LOGCAP work, and in certain circumstances

our LOGCAP subcontractors did, as well. Military security was not

guaranteed for all of the work the company did in the region, and

traveling without security is exceptionally dangerous.

Since 2003, there have been approximately 400 injuries and fatalities to KBR employees and subcontractors through the hostile

acts. Those injuries and fatalities were due to improvised explosive

devices, mortar and rocket attacks, small arms fire, and kidnapping. At Christmas time in 2004 a suicide bomber blew himself up

during lunch time in a KBR-run dining facility, killing 13 troops,

4 of our employees, and 3 subcontractors.

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To date we have lost 98 people in Iraq, Kuwait, and Afghanistan.

According to this morning’s news reports, overall more than 770 civilian workers have been killed in Iraq and more than 7,000 injured. These are the realities our employees and subcontractors

face every day.

Amid such dangerous conditions, KBR operates a fleet of trucks

that transports military fuel, military parts, medicine, hospital

supplies, food, and mail to Coalition troops. They have logged more

than 100 miles with more than 700 trucks on the road on any

given day. Our mission has required us to be extremely flexible.

In 2003 KBR was initially directed by the Army to plan to support between 25,000 and 50,000 troops. The scope and nature of

our task changed dramatically. This is not a criticism. Ever-changing priorities are a reality of war, and the reality was that our mission grew to supporting more than 185,000 troops.

This dramatic change in the scope of services presented significant challenges. KBR first faced difficulties in mounting such a

large enterprise in a hostile environment. As with any endeavor of

this size and magnitude, there have been times when our company

and those that we work with have made mistakes. A handful of our

50,000 individuals on the ground have acted improperly. When we

had questions about the actions of certain individuals, we investigated and reported them to the Army.

The rapid growth of our assignment and constant changes taxed

our systems, but we adapted and developed systems that work.

In conclusion, for more than 60 years KBR has undertaken demanding assignments in dangerous regions to support the U.S.

military. I speak for everyone in our company when I say we are

extremely proud to support the courageous men and women of our

armed forces. With each meal we serve, we try to bring them some

small sense of the comforts of home. And when a soldier does have

a few extra hours, the fitness centers we run and the activities we

host at our morale, welfare, and recreation facilities offer a brief

refuge from the strain of combat.

As the Congress continues its oversight of the war effort and contracting, I want to assure you that we are fully committed to cooperating with the Congress as it fulfills its oversight responsibilities. As a Government contractor, we take very seriously our responsibility to assist in the proper oversight of our work.

Mr. Chairman and members of the committee, I look forward to

your questions and will do my best to provide you with the information you need.

Thank you.

[The prepared statement of Mr. Seagle follows:]

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Chairman WAXMAN. Thank you, Mr. Seagle.

Mr. Flores.

STATEMENT OF TOM FLORES

Mr. FLORES. Mr. Chairman and members of the committee, my

name is Tom Flores. I am the senior director of corporate security

for Fluor Corp.

After a nearly 25-year career in the U.S. Army, I joined Fluor in

1998 and have since been responsible for Fluor security programs

around the world. In 2003 I was assigned to oversee Fluor’s security programs in Iraq.

Fluor began working in Iraq under a contract with the U.S.

Army Corps of Engineers, through which we provided services

throughout the entire U.S. Army Central Command region, including Iraq. Subsequently, Fluor and its joint venture partner country,

AMEC, a U.K.-based engineering and construction company, also

competitively bid on and were awarded three of the reconstruction

contracts. These contracts covered water programs in the north and

south of Iraq and restoration of electricity.

In the course of executing that work, Fluor had no contractual

arrangement with Blackwater USA and Regency Hotel and Hospital Co. for security or other services, a fact acknowledged by

Blackwater in a letter provided to the committee.

With respect to ESS, Fluor and Fluor/AMEC contracted with

ESS at three separate locations in Iraq. In two locations, ESS provided dining and/or camp facilities to Fluor and Fluor/AMEC.

Those locations were Baghdad’s international zone, where ESS provided dining facilities for employees working on our two water contracts, and Buzurgan power station in southern Iraq, where ESS

provided camp services. In a third location at Camp Cooke in AlTaji, under a subcontract to Fluor ESS provided planning, field engineering, procurement, transportation, construction, and rapid

setup of housing and latrine units.

Thank you for the opportunity to testify before the committee. I

stand ready to answer your question about Fluor’s work in Iraq.

Thank you.

[The prepared statement of Mr. Flores follows:]

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Chairman WAXMAN. Thank you very much for your testimony.

Mr. Chvotkin.

STATEMENT OF ALAN CHVOTKIN

Mr. CHVOTKIN. Mr. Chairman, thank you very much for the invitation. My name is Alan Chvotkin and I am the senior vice president and counsel for the Professional Services Council. The Professional Services Council is the leading national trade association

representing more than 200 companies of all sizes that provide professional and technical services to the Federal Government. Many

of our member companies are operating in Iraq under contracts

awarded by the departments and agencies of the Federal Government. These firms are purchasers of security services, and we have

worked with them to highlight and address their concerns.

Several of our member companies provide security services in

Iraq, in the United States, and around the globe. Some also have

contracts directly with the U.S. Government, and we are working

with them on a myriad of issues, as well.

We share the outrage at some of the events taking place in Iraq;

however, we must be realistic about the circumstances in which the

events are taking place and the options that may be available to

address them.

We share the outrage at the unfortunate loss of life in Iraq.

Thousands of American troops have been killed in the line of duty,

and many thousand more wounded. U.S. contractor employees have

also been killed while performing their work, with several thousand more wounded. We offer our condolences and prayers for their

recovery. Yet, we must be realistic about the missions that they are

asked to perform and the risk that all who are working in that hazardous environment take on a daily basis.

Iraq is a unique foreign policy event in our Nation’s experience.

To our knowledge, it is the first time that the U.S. Government has

attempted three simultaneous activities: a military action, a massive reconstruction effort across 10 sectors, and extensive developmental assistance effort. There was an initial massive surge of resources into Iraq, often in uncoordinated and overlapping activities,

that led good people with good intentions to make their best judgments under trying circumstances in the middle of a war zone.

While we share the outrage about the dollars spent in Iraq for

the results achieved to date, we must also be realistic about the

reasons for those dollars spent and the results achieved.

In the contracting environment, for example, the U.S. Government made a conscious decision to be a good steward of the contracts awarded and applied the full scope of the Federal acquisition

regulations to the preponderance of the contracts awarded there.

The U.S. Government made a decision to impose U.S. health and

safety requirements on those contractors. The U.S. Government

made a decision to require its contractors operating in Iraq to have

liability insurance. Each of these steps in isolation may have been

the right decision for the right reason, and we don’t have any objection to the Government imposing them in a planned and consistent

manner. But imposing these additional contractual requirements

increases the cost of contract performance, so every dollar awarded

by an agency or spent by a contractor in performance of these conVerDate 11-MAY-2000 10:54 Aug 15, 2007 Jkt 000000 PO 00000 Frm 00139 Fmt 6633 Sfmt 6633 C:\DOCS\36546.TXT HGOVREF1 PsN: HGOVREF1
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tractual requirements is not waste and is not abuse, as those terms

have been commonly used.

We share the outrage about the appearance of a lack of accountability for certain behaviors in Iraq and strongly endorse holding

all participants in the contracting process equally accountable for

their responsibilities. We strongly support a robust oversight function, and, where fraud is found, we strongly support vigorous prosecution. But we must be realistic about the activities that are taking place and the root cause for them.

Companies don’t set the mission. The nature of the contracting

arrangements in Iraq, particularly at the earliest stages of the war,

was driven exclusively by the Government’s choice and the Government’s requirements. So, while it is legitimate to talk about the appropriate roles and assignments for contractors, the use of code

words for their work mask the real issues and diminishes the opportunities for serious discussion.

Contractors are playing critical roles in each of the concurrent

operational areas taking place in Iraq today. It would be impossible

to execute the number and scope of projects underway without

them.

We share the outrage about the cost of security, but we must be

realistic about the factors that are driving such behaviors. For

those contracts awarded by the Defense Department to directly

support the military’s activities, the contractors that accompany

the force, for them force protection and other life cycle support

functions have traditionally been the responsibility of the military.

We strongly support that formulation. But in a significantly and

little-discussed June 16, 2006, change to the Defense Department’s

acquisition regulations, the Defense Department has made force

protection the primary responsibility of the contractors performing

unless the military accepts the responsibility directly in the contract. We strongly oppose that reversal of policy, but our companies

are adjusting to it, including addressing the cost of performance to

reflect these changes.

For contractors who are supporting the reconstruction activities

or are under contract to other Federal agencies, force protection

has traditionally been the responsibility of the contractor performing that work and we support that. A July 18, 2006, proposed acquisition regulation has reconfirmed the U.S. Government policy to

impose this responsibility and the expense on contractors. So, while

we can be outraged about the security instability in Iraq and the

cost of security spent by contractors to support the activities, we

must be pragmatic about understanding the costs that are driving

such costs.

In conclusion, hiring private security is common in overseas operations. Iraq is not new in that regard. However, the magnitude of

the work and the concurrent operations taking place there create

unique challenges we see. The security situation is highly volatile

and contributes to the unique challenges, but any solution must be

addressed carefully, with full consultation to address the real

issues without creating new problems.

The Professional Services Council would welcome the opportunity

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ters. Thank you for the opportunity to provide this information. We

look forward to your questions.

[The prepared statement of Mr. Chvotkin follows:]

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Chairman WAXMAN. Thank you. I want to thank each of you for

your testimony.

Before we proceed to questions, there was a motion by Mr. Issa

to take down the words of the gentlelady from Illinois, and I want

to recognize Mr. Issa on this point.

Mr. ISSA. Thank you, Mr. Chairman. It was unfortunate that I

was out of the room when the words were spoken. After reviewing

the words, which I will read just to be sure we all understand

them: ‘‘I also wanted to take exception to the question about who

wrote the testimony, because I think clearly the implication was

that somehow these wonderful women couldn’t have possibly written that wonderful, heartfelt testimony, and that it took a lawyer

in order to put it together, and I resent that very much and I just

wanted to put that in the record.’’

Mr. Chairman, although these words I think are inappropriate

and they set the wrong tone for the business that we must do on

a bipartisan basis, after reviewing them and after believing that

this was an anomaly on this committee and not something that

would be regularly repeated, I would like to withdraw my motion

and I appreciate the time.

I yield back.

Chairman WAXMAN. I appreciate that. The gentleman has withdrawn his motion and therefore there is nothing pending before us.

I was going to read the words, but the gentleman did accurately

read the words in question.

Let me start with my questions. Without objection, the Chair and

the ranking member will have 10 minutes each and all Members

will get 5 minutes to pursue the matters.

Mr. Howell, let me start with you. I want to begin by extending

my thanks for you to be here. We heard very emotional testimony

from people who lost their loved ones that worked for your company. Their pain is very personal, but there is pain for your company, as well, when any of your employees lose their lives, and I

want to acknowledge that fact. You pointed that out in your testimony. I think I am speaking for all the members of the committee

that we are sorry for your losses.

Mr. HOWELL. Thank you, sir.

Chairman WAXMAN. At a company providing security services,

you have a job to do, and as Members of Congress we have a job

to do. Our job is to provide oversight to make sure Government is

working effectively and efficiently and to identify and eliminate

any waste in taxpayers’ dollars.

We have heard allegations that call into question the job that

Blackwater was performing in Iraq. The family members raised

questions, I think legitimate questions, that deserve answers about

whether Blackwater is endangering the lives by skimping on protective equipment. That was the issue raised. The contracts and

audits we have received have raised questions about whether

Blackwater is overcharging and double billing the Government. I

don’t know what is true or not. I haven’t reached any conclusions

on these allegations, but they are important allegations and I think

they should be fully investigated.

I want to focus on an e-mail you provided to us. It is an e-mail

from Tom Powell, who we understand was operations manager for

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Blackwater in Baghdad. It is dated March 30, 2004, 1 day before

the attack in Fallujah that killed the four Blackwater contractors.

In hindsight, it is a pretty chilling communication. The e-mail begins, ‘‘Ground truth, guys, this is reality.’’ The e-mail was sent to

Brian Berry. I understand he’s a senior Blackwater executive. My

understanding is he is the director of Blackwater’s security consulting. Am I correct that Mr. Berry was a director of Blackwater’s security consulting?

Mr. HOWELL. My understanding is that he was not director at

that time, but he was certainly a Blackwater official.

Chairman WAXMAN. OK. Another recipient of the e-mail was

Mike Rush. Can you tell us what position he had at attachment

time?

Mr. HOWELL. I believe that he was the director at that time.

Chairman WAXMAN. He was the director of operations for

Blackwater?

Mr. HOWELL. He was the director of Blackwater security is my

understanding. Yes, sir.

Chairman WAXMAN. The third recipient of the e-mail was named

Justin, and we presume this is a reference to Justin McGuown,

who was the program manager in charge of Blackwater’s contract

with ESS and Regency; is this right?

Mr. HOWELL. I believe that is correct. If I could, chairman, those

names have all been made public, but to the extent that our personnel, publishing the names of Blackwater personnel that are not

public information could possibly place them at risk. I would ask

that if we could find a way to identify them without publicly stating the names, or perhaps go into closed session, I am certain that

they would appreciate that respect for their safety.

Chairman WAXMAN. I appreciate what you are saying.

Mr. HOWELL. Yes, sir.

Chairman WAXMAN. This is a disturbing e-mail, because if it is

correct, if it is accurate, it shows that Blackwater personnel working on the contract with Regency and ESS, which is the contract

involved in the Fallujah incident, did not have adequate equipment

or vehicles, and it also shows that Blackwater may have been circulating situation reports that were ‘‘smoke and mirrors show’’ and

‘‘not reality-based information.’’

Let me read you a passage from the e-mail. ‘‘I need new vehicles.

I need new COMs—’’ which means communication devices—‘‘I need

ammo, I need Glocks and M–4s—’’ which are types of weapons—

‘‘All the client body armor you’ve got. Guys are in the field with

borrowed stuff and in harm’s way. I have requested hard cars from

the beginning, and from my understanding an order is still pending. Why, I ask. It is my understanding that someone in Kuwait

made a decision to go with Suburbans that are used. Bad idea.’’

The e-mail ends, ‘‘Ground truth is appalling.’’

Well, my understanding is that this e-mail was addressing the

lack of equipment available for Blackwater personnel working on

the Regency and ESS contract, which is the current contract involved in the Fallujah incident; is that correct?

Mr. HOWELL. If you would like me to comment on specific text

from the e-mail, I would like to have it in front of me, sir, but the

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general subject of the e-mail was overall equipment requirements.

That is correct.

Chairman WAXMAN. OK. We will be glad to give that to you. But

the question I have sort of preliminarily is whether the e-mail was

addressing the lack of equipment available for Blackwater personnel working on the Regency and ESS contract, which is the contract involved in Fallujah.

Mr. HOWELL. It was discussing a lack of equipment as to the contract as a whole. It doesn’t follow therefrom that any individual

who set out to accomplish a task didn’t have the equipment that

he needed.

Chairman WAXMAN. OK. Mr. Howell, have you investigated the

circumstances surrounding the Fallujah incident?

Mr. HOWELL. I am familiar with them. Yes, sir.

Chairman WAXMAN. Have you determined whether the conditions described in the e-mail are accurate as it relates to that incident? Were your forces sent on missions in used Suburbans rather

than hardened vehicles, as the e-mail describes?

Mr. HOWELL. Yes. Our forces did go on missions, some of which

were in soft-skinned vehicles. But the nature of what we were

doing there is that it was not a single task. It was not a single mission that our men did, so different equipment was appropriate for

different missions, given the threat as it was known at the time on

the ground in Iraq.

Chairman WAXMAN. Were your forces short on communications

devices, as the e-mail describes?

Mr. HOWELL. There was not sufficient communication gear for

the team on the day of this memo had it been fully manned; however, there was sufficient communication gear for the teams that

would have been operational at this time.

Chairman WAXMAN. You answered my question about the

Suburbans as opposed to hardened vehicles, and you said on certain missions that was the case. On the mission in Fallujah that

we heard about this morning, was it the case for that incident?

Mr. HOWELL. I am not following your question, sir. Was it the

case that a Suburban was appropriate?

Chairman WAXMAN. No. Did they use a Suburban as opposed to

a hardened vehicle?

Mr. HOWELL. They used something equivalent to a Suburban,

which was a Mitsubishi Pajero. It is the equivalent in the United

States of a Montero, and the idea behind using that vehicle was

that it was a sort of a local vehicle that was a low-key approach.

It sort of blended in, if you will.

Chairman WAXMAN. Was it hardened?

Mr. HOWELL. It had been outfitted with some steel plate. Yes,

sir.

Chairman WAXMAN. And on the issue of communication devices

which the e-mail described, in this program Fallujah incident did

they lack communication devices?

Mr. HOWELL. They did not. If we are going to inquire into specific facts that are under litigation, I know propose that we do so

not in an open session. But I can answer that question. Yes, sir.

Chairman WAXMAN. You cannot answer?

Mr. HOWELL. I can answer the question.

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Chairman WAXMAN. OK. Well, I would like you to answer the

question.

Mr. HOWELL. Yes, sir. The men that day did have communication

devices.

Chairman WAXMAN. They did? OK. Were they short on ammunition and weapons, as the e-mail describes?

Mr. HOWELL. The e-mail describes the situation for the project as

a whole. The men who went on the mission on March 31st each

had their weapons and they had sufficient ammunition.

Chairman WAXMAN. OK. Mr. Murray, you work for ESS, which

is the contractor that hired Regency, which is the contractor that

hired Blackwater. I would like to ask you about this e-mail.

At one point in the e-mail chain, Laurens Badenhorst receives a

copy of Mr. Powell’s e-mail. Mr. Badenhorst is an executive director

at ESS, as I understand it; is that accurate?

Mr. MURRAY. Chairman Waxman, yes, Laurens Badenhorst at

the time was our CEO of our design and build division.

Chairman WAXMAN. And, Mr. Murray, what information does

your company, ESS, have about the conditions described in Mr.

Powell’s e-mail?

Mr. MURRAY. Chairman, I would like to first say that ESS’ relationship was with Regency. We had contracted with Regency to

provide ESS with our private security as a turnkey service. What

I mean by turnkey is we relied on Regency to tell ESS what equipment, what routes, and such were safe for us to move throughout

Iraq. We relied on them exclusively. And in our contract with Regency, we gave them the ultimate authority for go or no-go scenarios, so if they determined it was unsafe, they had the ability to

do that. We indemnified them for that fact.

Chairman WAXMAN. But one of your executives received this email. Do you have any information that corroborates the complaints about lack of equipment and vehicles that Mr. Powell describes?

Mr. MURRAY. No, I don’t, Chairman.

Chairman WAXMAN. OK. Perhaps the most disturbing parts of

the e-mail involve what Mr. Powell had to say about the situation

reports that were being prepared by Justin McGuown of

Blackwater and Regency. Let me read you some excerpts of this

part of the e-mail. ‘‘The sitreps by Regency/RHHC I am reading are

very misleading and bogus on the surface. My only hope is that

Justin sees through the smoke and mirrors show and believes me

when I am telling him that all is not what it seems. Justin knows

what has to forward and realizes that it is just enough to sustain

the appearance of gear and an operational capacity. Please, Justin,

send your sitreps to the client with reality-based information.’’

Mr. Howell, have you investigated the situation reports that Mr.

McGuown was preparing?

Mr. HOWELL. No, sir.

Chairman WAXMAN. Do you agree with the description in the email that they were smoke and mirrors and not reality based?

Mr. HOWELL. Not having seen them, I can’t comment one way or

the other, sir.

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Chairman WAXMAN. Mr. Murray, do you have any information

about whether ESS believes it was getting accurate information

from Blackwater and Regency about the ground truth?

Mr. MURRAY. Chairman, ESS had confidence in Regency to provide us with accurate intelligence, accurate movement guidance, so

the answer is yes, we relied on Regency to provide that to us.

Chairman WAXMAN. We also have a response from Mike Rush,

who is deputy director of operations for Blackwater. It is dated

March 30th, the day before the fatal attacks. As I read it, Mr. Rush

is telling Mr. Powell that the problems he has identified are not

Blackwater’s responsibility to fix. Let me read you some excerpts

of what Mr. Rush told Mr. Powell, the author of the ground truth

e-mail. ‘‘You are right about vehicles and coms being the responsibility of RHHS—’’ which, of course, stands for Regency Hotel and

Hospitality. ‘‘There is no order for hard cars. The contract only allows for hardening, and yes, I realize that is not optimum. Body

armor for the clients is not our responsibility, either. It is, in fact,

up to RHHS, Regency, to fix some of the things you mentioned,

particularly reliable vehicles.’’

Mr. Howell, the e-mail from Mr. Rush reads to me like someone

is passing the buck. Do you agree?

Mr. HOWELL. I don’t agree, Mr. Chairman. And the reason is Mr.

Rush is just correctly noting that it was—under our contract with

Regency, it was the responsibility of Regency to fund the acquisition of that equipment. It does not mean that Blackwater was not

actively seeking to assist in identifying and obtaining the required

equipment, as the other e-mails would indicate.

Chairman WAXMAN. Well, there are three issues and questions

whether the vehicles were hardened sufficiently to protect them,

whether they had the ammunition and equipment needed to protect themselves, and third the question also is whether they had

the third person to be a tail gunner. Can you tell us whether they

had what they needed in all three of those areas?

Mr. HOWELL. Yes, sir. With regards to the armored vehicle question, there was certainly desire to have some sort of armored vehicles on this project, meaning the ESS project as a whole, but,

again, it doesn’t follow therefrom that each mission involved an armored vehicle. In fact, close review of the contracts revealed that

it was specifically contemplated that there would be other vehicles

which had some sort of protection added that would be used on the

project. Beyond that, the armored vehicle question, the vehicle that

they went out in that day was believed appropriate, based on the

mission by everyone involved, or the mission. I don’t believe that

it would have been carried out at that point, and the armored vehicle, whether it would have affected that day is not a question. With

regard to the third person, the protocol for the type of mission the

men were on that day—and, again, we are bordering on things that

could involve operational security of not only our folks but service

members—the mission they were on that day at that point in time,

given the threat as it was known on the ground in Iraq, the norm

was not to have the third person.

Chairman WAXMAN. Well, Mr. Powell obviously in his e-mail was

expressing concern. I guess my general question is: When

Blackwater sends private forces into a war zone, do you have an

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obligation to equip them adequately? I assume you would have to

say yes. Then my next question is: Did Blackwater meet this obligation in Fallujah?

Mr. HOWELL. Yes, we did.

Chairman WAXMAN. OK. I just want to conclude by reading this

quote again. ‘‘But guys are in this field with borrowed stuff and in

harm’s way with the client which I am very uncomfortable with

given the upcoming events with five million Shia moving in

Karbulah in 5 days. I have requested hard cars from the beginning,

and from my understanding an order is still pending. Why, I ask.’’

Thank you.

Mr. Davis.

Mr. DAVIS OF VIRGINIA. Thank you.

Ms. Ballard, I am going to start with you. You note that the

Army will take steps to recoup funds paid under LOGCAP for private security contractors, but, as I understand the law, these security services were likely performed under a fixed price subcontract.

As far as you know, has the Army ever been able to recoup funds

in a situation like these where the costs appear to have been

imbedded within a fixed price subcontract?

Ms. BALLARD. As far as I know they have not.

Mr. DAVIS OF VIRGINIA. OK. How would you be able to do that

if it was competitively bid?

Ms. BALLARD. In a competitive, fixed price contract we don’t have

access to the subcontractor’s data. The regulation prohibits us from

getting cost and pricing data in a fixed price competitive contract

from the prime, and it also prohibits the prime from getting that

data from the subcontractor.

Mr. DAVIS OF VIRGINIA. Does the Army have enough personnel

on the ground to support military convoys for LOGCAP subcontractors? Do you know the answer to that?

Ms. BALLARD. I don’t have the answer to that, sir.

Mr. DAVIS OF VIRGINIA. OK. The majority says that the cost of

security services provided by private firms are substantially higher

than the direct costs that would be incurred by the military. Do

you have any comment on that?

Ms. BALLARD. No, sir, I don’t. The GAO and CIGAR have estimated that our security costs on the ground are between 9.8 and

12.55 percent.

Mr. DAVIS OF VIRGINIA. Now, we hear a lot about the so-called

evils of tiering. Now, as I understand the practices of using a number of levels of subcontractors to perform various functions under

a prime contract which is larger and has myriad features, of which

one company may not be able to deliver all of those services, I

guess the alternative would be to just have more direct contracts,

which would entail much higher aggregate costs to the Army in

terms of overseeing it. But do you think the practice is, in general,

wasteful and inefficient, as is portrayed?

Ms. BALLARD. Sir, the practice of having subcontract tiers is a

practice, according to our research, that even occurs in commercial

construction in the United States.

Mr. DAVIS OF VIRGINIA. Of course. So, from your perspective,

there is no reason to outlaw it or anything? Obviously, oversight

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is important to make sure that they are subcontracting appropriately in this competition? Is that fair to say?

Ms. BALLARD. We don’t have anything in the regulation that allows us to prohibit subcontract tiers.

Mr. DAVIS OF VIRGINIA. And, in fact, if a prime contractor didn’t

have the in-house capability to perform that, they would have to

subcontract it, or the alternative would be to have a myriad of additional contracts directly with the government, where the government would, in a sense, be the integrator?

Ms. BALLARD. Yes, sir.

Mr. DAVIS OF VIRGINIA. OK. Mr. Howell, we have heard that the

cost of security services provided by firms such as yours are much

substantially higher than the direct costs that would be incurred

by the military. Do you have any comment on that? You are not

the decisionmaker here, but you are on the ground delivering.

Mr. HOWELL. I am not qualified to comment on the costs, the direct costs of military services.

Mr. DAVIS OF VIRGINIA. Let me ask you this. You noted that 99

percent of your contracts in Iraq are fixed price contracts; is that

correct?

Mr. HOWELL. Yes, sir. The vast major are of the firm fixed price

nature. If I may clarify, sir?

Mr. DAVIS OF VIRGINIA. Sure.

Mr. HOWELL. In some contracts there are mandatory provisions

for a pass-through of costs, but there is no markup or profit on

those costs. The general nature of those contracts is very limited

number of specific items are passed through at cost.

Mr. DAVIS OF VIRGINIA. How many of your contracts were awarded under competitive acquisitions?

Mr. HOWELL. Of our contracts in Iraq—and, again, I understand

that the nature of today’s hearing is only on unclassified contracts.

I am not prepared to—I don’t know the answer regarding any classified work at the moment. But, in terms of unclassified work, of

approximately—out of all our contracts in Iraq, one, to my knowledge, was not competitively bid, and it was issued on an urgent

and compelling basis after the incumbent was unable to provide

the services, and we were asked on short notice to provide those

services.

Mr. DAVIS OF VIRGINIA. OK. But that is not the contract that has

been at issue today?

Mr. HOWELL. That is not the contract at issue, and ultimately

that is not a contractor decision. That is a Government decision.

Yes, sir.

Mr. DAVIS OF VIRGINIA. We have heard that your people are paid

anywhere from $600 to $1,500 a day for these dangerous assignments. I wonder if you could give us, explain the various payment

structures you have with your employees.

Mr. HOWELL. Yes, sir. First of all, I think there is a great deal

of myth about the exorbitant pay rates. Certainly our people face

grave danger and that is well recognized, but in terms of the rate

structure, which is your real question, the general nature of these

sorts of Government contracts for security services involve breaking

it down into classes. They are typically called tiers. In a given tier,

there are very specific requirements by the Government client on

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the experience level and capabilities of the individual, and the individual’s services are filled out at a firm, fixed price per day based

on which tier they lie in. So, for example, a special forces veteran

with extensive experience is billed at a much different rate than

someone who just had more general military experience and less

time.

Mr. DAVIS OF VIRGINIA. What kind of markup do you get over the

direct costs on a basis? Does that also vary with the tier?

Mr. HOWELL. Well, the nature of our contracts is a fixed price

basis.

Mr. DAVIS OF VIRGINIA. Right. And it is competitively bid, so I

am not——

Mr. HOWELL. It is competitively bid, yes, sir. So our pricing is

really based on its——

Mr. DAVIS OF VIRGINIA. The marketplace.

Mr. HOWELL [continuing]. Pricing, not cost.

Mr. DAVIS OF VIRGINIA. But I am just curious.

Mr. HOWELL. I don’t want to be unresponsive, sir, but it is a

question that is sort of mixing apples and oranges. Cost contracts

involve markups over cost.

Mr. DAVIS OF VIRGINIA. I understand the business.

Mr. HOWELL. Yes, sir.

Mr. DAVIS OF VIRGINIA. Basically, you don’t want to give away

your cost data?

Mr. HOWELL. I am sorry?

Mr. DAVIS OF VIRGINIA. Basically, you don’t want to give away—

you are not compelled to give it away, and you don’t want to give

it away.

Mr. HOWELL. Right. It would harm competition on future contracts.

Mr. DAVIS OF VIRGINIA. Obviously, it is a question, even though

these are fixed prices, that is of interest to us, but I am not going

to pressure you at this point.

Mr. HOWELL. Yes, sir.

Mr. DAVIS OF VIRGINIA. What death benefits do you provide to

the survivors when the enemy kills a contract employee?

Mr. HOWELL. Well, all Government contractors are mandated by

statute to provide benefits under the Defense Base Act, and that

is a program that was set up. It goes back actually to World War

II, and it was set up in order to provide what is, in effect, a worker’s compensation benefit for those who are injured or killed in the

service of their country, contractors overseas working for the Government.

Mr. DAVIS OF VIRGINIA. You don’t do anything in addition to

that? Is that right?

Mr. HOWELL. Well, we are always looking for additional ways to

protect our folks. We currently have an additional insurance policy

that is above and beyond that we acquire because we want to provide for our folks.

Mr. DAVIS OF VIRGINIA. In the contract at issue—we heard from

the first panel—who was Blackwater’s clients? Were you contracting with Regency or ESS?

Mr. HOWELL. Our contract was with Regency.

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Mr. DAVIS OF VIRGINIA. OK. Regency. And I have seen some tiers

that have been introduced and some charts and the like. And who

was Regency contracting with above that?

Mr. HOWELL. My understanding is that Regency’s contract was

with ESS.

Mr. DAVIS OF VIRGINIA. OK. There has been a lot of attention to

the cost of providing security services. Let me just ask in a general

question, who wants to take it, why are these costs—these costs

seem to be very, very large over there. Obviously, there is a huge

premium whenever you are doing this kind of thing. Could somebody explain to me what goes into your marketing of this and your

costing of this, your pricing? How do you price a security provision

into a contract? Is it a marketplace based, or is it your costs, being

able to recruit people to go over? What goes into that?

Mr. HOWELL. These are competitively I don’t contracts, so, yes,

it is ultimately driven by the marketplace. There is high competition for the individuals, security provisionals with the expertise

that is needed.

Mr. DAVIS OF VIRGINIA. OK.

Mr. HOWELL. We have to account for that, as well as the many

expenses that we incur in training them, often providing weeks of

training at Moyak, transportation on many contracts. There is

lodging, subsistence travel to and from Iraq. The list of factors that

go into it vary with each contract.

Mr. DAVIS OF VIRGINIA. Is it hard to find people that are willing

to do this, qualified people?

Mr. HOWELL. It is always a challenge to find the most qualified

people. Yes, sir.

Mr. DAVIS OF VIRGINIA. Mr. Murray, let me ask you, the military

convoy system for LOGCAP contractors has been described to us as

unreliable. Could you address some of the choices your company is

faced with when the military convoy system doesn’t work as it

should?

Mr. MURRAY. Yes, I can. We face many challenges moving our

cargo. It is actually two aspects. We move cargo and we move people. I mentioned in my statement the convoy system wasn’t designed to move people. We had over in excess of 1,000 ESS employees in the country of Iraq. Primarily, we had to move them from

Kuwait into Iraq, and it was a challenge to move them into Iraq

into Coalition camp, either a KBR site or another site, safely.

The convoy system, itself, the rules to put our non-tactical vehicles [NTVs]—those are the vehicles that would carry our civilian

employees—into a convoy would change virtually on a daily basis.

Some days we would be allowed to put a non-tactical vehicle in a

convoy. Some days we would arrive with one or two of these vehicles and we would be told at that point, ‘‘Well, the rules have

changed. We can’t accept your vehicles to day.’’ How does that impact us? That prevented us from moving our chefs, our cooks, our

laborers up to the site. That was one impact on us. That caused

and could have caused delays in our performance.

Another impact, another extenuating circumstance, perhaps, is

the border crossing between Kuwait and Iraq called Nazca was an

assembly point for all the contractors that crossed our vehicles into

Iraq. We would ship, at the peak, in excess of 300 to 350 trucks

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per week. Convoys in the early days would take 5 to 10, perhaps

20 of these trucks. We would be queued up or lined up at the border 3, 2 a.m. in hopes of getting in a convoy, and it may take 2

or 3 days to have one truck slotted into that convoy. That, again,

caused further delays to us.

Mr. DAVIS OF VIRGINIA. Let me ask you this. On the contract at

issue that you heard the first panel, where the individuals lost

their lives, were you contracting at that point with KBR under

LOGCAP or with Fluor?

Mr. MURRAY. For the particular contract at issue, we engaged—

actually, I can answer by saying both. We employed private security. You asked about the contract at issue, which is the ESS Regency contract for private security. We used that private security

attachment team, the private security to move our people throughout Iraq across all contracts.

Now, the specific incident on March 31st, if you would like me

to address that——

Mr. DAVIS OF VIRGINIA. That is what I want to address.

Mr. MURRAY. OK. That particular incident——

Mr. DAVIS OF VIRGINIA. We have been having a hard time figuring out, I think, up here.

Mr. MURRAY. OK. On March 31st, that particular incident was

a movement of ESS cargo. We had a convoy that was moving from

Taji, Camp Taji, which was going to Al-Asaad. Al-Asaad was on the

far side of Fallujah, the western side of Fallujah. We were picking

up cargo, and that was a KBR site, and we were going to return

that cargo and supplies and construction equipment to Camp Taji,

where we were building, had a construction contract with Fluor.

The attack occurred en route from Taji through Fallujah to AlAsaad. They never reached their destination, but they were moving

cargo under our Fluor contract.

Mr. DAVIS OF VIRGINIA. So it was so intermingled at this point.

Let me just ask one question, then, Mr. Flores, from you. Were you

aware that Blackwater was apparently performing security services

for ESS, as well?

Mr. FLORES. No, sir, I was not.

Mr. DAVIS OF VIRGINIA. You were not? OK. Thank you very

much.

Chairman WAXMAN. Thank you, Mr. Davis.

Mr. Cummings.

Mr. CUMMINGS. Thank you very much, Mr. Chairman.

You know, these accounts that we have heard about with

Blackwater and the private security contractors are very troubling,

and I am concerned about the profit motive they have and the lack

of insight. Some reports have estimated that there are as many as

50,000 private security contractors in Iraq right now, but I have

yet to see the data from the Defense Department.

Ms. Ballard, how many private security contractors are there in

Iraq right now? You know, the President just asked us in the State

of the Union—I have heard some discussion here—the President

has said during the State of the Union that he wanted more civilians. I think he was talking about volunteers. But I am just curious. How many security contractors do we have?

157

Ms. BALLARD. Congressman, I can take that question for the

record. I don’t have that number. The security contractors on the

ground aren’t all for the Department of Defense. There are contractors on the ground providing security for other agencies, as well.

So I would have to take that question for the record. I don’t have

it for DOD or the total number.

Chairman WAXMAN. We will hold the record open to receive that

information. How long will it take? Will we get that within a week?

Ms. BALLARD. I can go back and request the information be provided in a week, Mr. Chairman.

Chairman WAXMAN. OK.

Mr. CUMMINGS. On a larger question—I really appreciate that,

Ms. Ballard—why does the administration rely on so many private

contractors? Do you know? And we can’t even count them? I take

it from the testimony here the American people end up one way or

another paying for them, and I am sure we all would want to know

how many we have. I know you are going to get that information

for me, but why do we have to do that?

We have the President asking for another 21,500 troops. There

is debate as to whether it is that number or more. I guess what

we are trying to do here, too, is just trying to get to the bottom line

of exactly who is over there in Iraq, what they are doing, and how

much are the American people paying for them to do whatever they

do, and are they doing the things that are lawfully—that they can

do lawfully?

Chairman WAXMAN. Mr. Cummings, you had asked the question

about the number of contractors. Ms. Ballard said she has to check

those other agencies, but you should know for the Department of

Defense. Do you have that information, please?

Ms. BALLARD. No, sir, I do not.

Chairman WAXMAN. OK.

Mr. CUMMINGS. How soon can you get that to us?

Ms. BALLARD. The question on how many security contractors in

the Department of Defense?

Mr. CUMMINGS. Yes.

Ms. BALLARD. I am taking that for the record and, as the chairman requested, I will go back and ask if we can provide it in a

week.

Mr. CUMMINGS. And would you also get us the number of subcontractors, too?

Ms. BALLARD. I will ask for that information, sir.

Mr. CUMMINGS. And can you find out for us how much, as best

you can, the citizens of the United States of America are paying for

these contractors and subcontractors, so as we try to assess how we

vote on more money for Iraq so we can, you know, just have to total

picture? Will you do that for us?

Ms. BALLARD. I will certainly ask and take that as a question for

the record, sir.

Mr. CUMMINGS. All right. That is all I have, Mr. Chairman.

Chairman WAXMAN. Mr. Cummings, it just strikes me as amazing that this kind of information wouldn’t be readily available.

That is the purpose of this hearing. The Department of Defense—

I can understand you might not know other agencies, but you certainly should know what is going on in the Department of Defense.

158

We did invite you to come and talk about this topic. Did you not

think you would be asked, Ms. Ballard?

Ms. BALLARD. Mr. Chairman, we appreciate the invitation to

come and speak on this topic; however, in the case of the KBR contract, there were no provisions allowing security, so in our estimation there should not have been any security provided.

Chairman WAXMAN. No. The question that——

Ms. BALLARD. In terms of the——

Chairman WAXMAN. That wasn’t the question that Mr.

Cummings had asked.

Ms. BALLARD. In terms of——

Chairman WAXMAN. Mr. Cummings wants to know how many

contractors and subcontractors——

Ms. BALLARD. I understand, sir.

Chairman WAXMAN [continuing]. Do we have out there under the

Defense Department, how many under other departments. He

asked you generally. You said, ‘‘Well, I have to check those other

departments.’’ But you also have to check it for the Defense Department?

Ms. BALLARD. I can’t speak for the Defense Department, sir, because I work for the Department of the Army, and in the case

of——

Chairman WAXMAN. Well, tell us about the Department of the

Army. How many do you have?

Ms. BALLARD. In the case of the Department of the Army, we

have the design/build contracts where the contractors were required to provide their own security. Those costs would be subcontracted, so we would have to go back and ask those prime contractors to provide that information because we do not have privity of

contract with the subcontractors.

Chairman WAXMAN. How many contractors do you have with the

Department of the Army that are involved in Iraq?

Ms. BALLARD. Sir, I did not come prepared to answer that question. I will take it for the record.

Chairman WAXMAN. Well, we will hope that you get that information to us and break it down. Thank you.

We now go to Ms. Foxx. Do you have any questions?

Ms. FOXX. I do.

You mentioned that there is a prohibition on the contractors having security. That is in the contract. Does that apply to other

groups? And if there is that prohibition, then how do you all expect

people to provide security for the people there, if there is a prohibition?

Ms. BALLARD. There is a specific clause in the LOGCAP contract

that addresses security. That clause stipulates that the theater

commander will provide force protection commensurate with that

provided to the service and agency civilians, unless otherwise stipulated in the task order.

On the design/build contracts, which are different from the

LOGCAP contracts, the contractors were expected to provide their

own security.

So there are different contract vehicles and different terms and

conditions.

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Mr. CHVOTKIN. Ms. Foxx, if I may, Ms. Ballard makes an important point and I wanted to reiterate a point I made in my testimony. There are three simultaneous actions taking place. There is

a military action, and for the military action the military is supposed to provide force protection for its contractors. But for everybody else that is operating in Iraq, and that is the reconstruction

contractors, those supporting the Department of Justice, USAID,

the Department of Agriculture, Health and Human Services, all of

those contractors are required to provide their own security, and

that is why the difficulty of understanding. That is why you have

a lot of security operations in Iraq unrelated to the military activity.

Ms. FOXX. Mr. Chairman, I want to followup with a question, but

I want to make a comment about the direction in which this hearing has gone. I have been here from the beginning. I have read a

lot of the material. I am, again, a person who is very much opposed

to waste, fraud, and abuse, and I like to think in system issues.

It seems to me that if we are interested in waste, fraud, and abuse

and we want to do something about it what we should be doing is

being focused on the way the systems operate in all these areas.

What we’ve got here is a gotcha situation, it seems to me. There

is a tragic loss of life that has occurred, and every life that has

been lost in any of our wars I am sorry for. What has been happening in Iraq and the war on terror I am very, very sorry for, and

the people who were working for Blackwater I am extremely sorry

they lost their lives. But particularly in Iraq, everybody is going

there as a volunteer, and I understand that. But what we ought

to be about is asking for how the systems work, what is wrong with

the systems now, and how do we get at it, instead of spending all

this time trying to get people on issues that are irrelevant to much

of what we should be concerned about.

So I want to ask one question, and I will ask you to answer with

a yes or no. Has anybody associated with the Congress or with any

of the departments that you work with asked you in any formal

way or any organized way to give suggestions on how we can make

these systems better, because it seems to me that is what our focus

ought to be. So a real simple answer, yes or no. And if you answer

yes, then I will ask you to followup with some information, but I

won’t burden us with a lot of time.

I will start down here. Has anybody in your group looking at

this, has anybody asked you that question?

Ms. BALLARD. Yes, ma’am.

Ms. FOXX. Yes, they have. OK. Can I ask each one and then come

back?

Chairman WAXMAN. It is up to you, whatever you want to do. It

is your time.

Ms. FOXX. Let’s go down the line, and then we will come back

to whoever says yes.

Ms. BALLARD. Ma’am, we have consistently——

Ms. FOXX. Hold on 1 second. Next person?

Mr. MURRAY. No, they have not.

Ms. FOXX. Mr. Howell.

Mr. HOWELL. Yes, they have.

Ms. FOXX. OK.

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Mr. SEAGLE. No, ma’am.

Mr. FLORES. Would you rephrase that question please, Congresswoman?

Ms. FOXX. Has anyone in a position of authority—and I am not

going to try to name departments and that sort of thing—asked

you to make suggestions on how the systems within which you are

working, how could they be made better so that we cut down on

waste, fraud, and abuse, and certainly cut down on the potential

for loss of life.

Mr. FLORES. Yes, ma’am.

Mr. CHVOTKIN. Yes.

Ms. FOXX. Then let’s go back up here and see. Can you tell us

briefly, have those suggestions been taken? Are they still in the

mill? Tell me just a little bit about that, without going into too

great detail.

Ms. BALLARD. Yes, ma’am. Several of the suggestions have been

taken. As a result, over the years we have evolved significantly in

our contracting operations in the theater. And the Army has also

made a significant change in the structure. We have established

the contingency contracting officer battalions that are under the

Army Field Support Brigades, and this will enable our contracting

officers to interface with the combatant commanders in the planning stages for contingency operations. So we have made several

significant changes.

Ms. FOXX. Let me followup real quickly. Has anybody from the

Congress asked you for any suggestions before today?

Ms. BALLARD. No, ma’am.

Ms. FOXX. No. OK. Would each one of you respond to that part

as you go down the line. Let’s see. Who else said yes? I am sorry.

Who else said yes? Mr. Howell.

Mr. HOWELL. Yes, Congresswoman. On hearing you restate that

question, I can’t say definitively that we have been asked, but I

would say we’ve discussed that issue with one of our largest clients,

and it has been more in the nature of us and the client seeking to

provide the best protection possible for the folks that we are protecting and to agree on—our billing is closely scrutinized, and we

make sure we are in agreement that the bills are correct.

Ms. FOXX. But no one from Congress has asked you that question

before today?

Mr. HOWELL. No, ma’am.

Ms. FOXX. Mr. Flores, did you say yes?

Mr. FLORES. No one from Congress has asked me anything about

this, but a gentleman named Lawrence——

Chairman WAXMAN. Before you get into details, the time has expired. You basically want to know if anybody in the Congress has

asked?

Ms. FOXX. Right.

Chairman WAXMAN. And your answer is no. Does anybody have

an answer in the affirmative that anybody in the Congress has

asked? You essentially, Mr. Howell?

Mr. HOWELL. Yes, for us. We worked closely with the House

Armed Services Committee in 2005 to develop the oversight work

that they were doing, the development of some legislation. Similar

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work with the Senate. And also, of course, this committee in the

past years.

Chairman WAXMAN. Thank you, Ms. Foxx.

I do want to point out that now is the time Congress should be

asking these questions. We should have been asking them in the

past, and asking questions and trying to get accountability is not

gotcha. It is trying to do our job, and I think we need to work together on a bipartisan basis to do that.

Mr. Tierney.

Mr. TIERNEY. Thank you, Mr. Chairman.

Mr. Howell, I am going to ask you some questions. You, in your

comments, I think inferred the fact that you thought the gentlemen

that went into Fallujah and lost their lives were outfitted and situated in such a way as warranted by the general conditions at that

time. I want to ask you if you are aware of an agreement for security services dated March 8th, I believe, of 2004 between ESS and

Regency?

I would draw your attention to Appendix A of that document,

second paragraph reads, ‘‘Further, to Regency’s analysis of ESS requirements and the current threat in the Iraq theater of operations, as evidenced by the recent incidents against civilian entities

in Fallujah, Aramadi, Al-Taji, and Al-Halla, there are areas in Iraq

that will require a minimum of three security personnel per vehicle. The current and foreseeable future threat will remain consistent and dangerous. Therefore, to provide tactically sound and fully

mission capable protective security details, the minimum team size

is six operators, with a minimum of two armed vehicles to support

ESS movements.’’

Were you aware of those contract provisions, sir?

Mr. HOWELL. Yes, I was.

Mr. TIERNEY. Now, does that change your testimony earlier that

you thought having two people per vehicle, with plated vehicles, as

opposed to armored vehicles, was sufficient on the date in question?

Mr. HOWELL. It does not, and there are a number of reasons

why. First of all, this agreement is, as you said, was executed

March 8th between ESS and Regency. On March 11th, during a

meeting between Regency, ESS, and Blackwater, my understanding is ESS confirmed that armored vehicles were not appropriate

or not expected, not requested for all missions.

Mr. TIERNEY. So what you are saying is they told you verbally

something that absolutely contradicts this statement here that ESS

had requirements that for the current and foreseeable future threat

will remain consistent and dangerous and recommending a minimum of six operators and a minimum of two armored vehicles? So

3 days after this contract was executed you say they said exactly

the opposite thing?

Mr. HOWELL. This contract was between Regency and ESS.

Mr. TIERNEY. That is correct.

Mr. HOWELL. Three days after that, my understanding is that

ESS stated that was not required, and the requirement imposed by

Regency on Blackwater was that it was not a requirement for armored vehicles.

Mr. TIERNEY. Do you agree or disagree with the threat assessment as stated in that paragraph?

162

Mr. HOWELL. That statement in the paragraph just reflects the

fact that it was a dynamic and dangerous environment in Iraq. It

is not a statement as to the specific conditions in any particular

place on any given day.

Mr. TIERNEY. Well, it talks about civilian entities in Fallujah,

Aramadi, Al-Taji, Al-Halla. Those are fairly specific places. It talks

about a consistent and dangerous threat remaining for the current

and foreseeable future, and it talks about the type of capabilities

they think are necessary to deal with those, a minimum team of

six operators and a minimum of two armored vehicles. Do you

agree or disagree with that assessment?

Mr. HOWELL. I disagree with part of that, sir. It notes specific

incidents to reinforce the general point that Iraq was a dangerous

place, and, with regard to the armor requirement that is discussed

in Appendix A of the Regency ESS contract, my understanding is

that is with regard to personal protective services, which is a different mission than convoy operations.

Mr. TIERNEY. Mr. Murray, do you agree or disagree with that

threat assessment in that paragraph?

Mr. MURRAY. I would like to make a couple of points, if I may.

Mr. TIERNEY. No, I really just wanted your answer. I’ve got a

limited time, so yes or no would be sufficient, thank you.

Mr. MURRAY. Yes. I would agree with that.

Mr. TIERNEY. Thank you. You do.

Mr. Howell, I am aware that you asserted earlier that Mr. Powell’s e-mail may have been speaking generally about conditions, but

are you aware that e-mail was written at 1 a.m. on March 30th,

which is, in fact, the morning of the day in which the gentlemen

were sent out on their mission? Are you aware of that date?

Mr. HOWELL. Yes, sir, I am aware of that.

Mr. TIERNEY. OK. And are you aware that Mr. Powell is, in fact,

the one that directed those men on those mission, he was their direct supervisor that day?

Mr. HOWELL. Yes, sir.

Mr. TIERNEY. And you still think that was only generally, that

he was not contemplating those men and those conditions specifically on the morning when he wrote that?

Mr. HOWELL. I can’t know. I can’t read his mind, sir, but, given

what I know, the status of the program, the problems, I would say

the challenges faced by the program were the same challenges

faced by everyone in Iraq, which was acquiring enough equipment.

But the fact that there—the question whether there was enough

equipment for the program had it been fully manned that day is

a very different question from whether the team was equipped.

Mr. TIERNEY. Thank you. I yield back, Mr. Chairman.

Chairman WAXMAN. Thank you, Mr. Tierney.

Mr. Shays. Mr. Issa. Mr. Cannon.

Mr. CANNON. Thank you, Mr. Chairman.

Mr. Howell, when did Blackwater enter its first Government contract?

Mr. HOWELL. I believe that was in 1998. I think we have contracts for training in the United States and contracts for security

services overseas, and those are two different animals.

163

Mr. CANNON. And that was under the Clinton administration

then?

Mr. HOWELL. Yes, sir.

Mr. CANNON. And do you have staff or contracts with people who

have been employed by the Clinton administration?

Mr. HOWELL. I am sorry?

Mr. CANNON. In a political capacity?

Mr. HOWELL. I don’t——

Mr. CANNON. For instance, you are accompanied by counsel

today. Do you know what is her name and what was her political

experience?

Mr. HOWELL. Yes, sir. Her name is Ms. Beth Nolan, and she was,

indeed, part of the Clinton administration, to my understanding.

Mr. CANNON. And do you know what her title was there?

Mr. HOWELL. I am sorry, sir, I don’t recall it at the moment.

Mr. CANNON. That is fine. I guess my point is that you are not

exactly what you would call a Republican company then, are you?

Mr. HOWELL. No, sir. We have folks in our company of many persuasions.

Mr. CANNON. And, therefore, it would follow that you are not an

extremely Republican company, and at this point I would like, Mr.

Chairman, to introduce or ask unanimous consent to introduce into

the record a letter from Callahan and Blain dated December 13,

2006, to the Honorable Nancy Pelosi, wherein the——

Chairman WAXMAN. Let me point out to the gentleman that letter is already part of the record.

Mr. CANNON. Thank you. Then, referring to that letter that is

part of the record, the lawyer who drafted that letter referred to

you as an extremely Republican company and went on to demand

that this committee proceed to investigate issues, presumably to

help them with their discovery. They also accuse you of being profiteering from the war in Iraq, but your company existed before the

war in Iraq came into being, did it not?

Mr. HOWELL. Yes, sir.

Mr. CANNON. And are you, in fact, profiteering from that war?

Have you skimped on equipment?

Mr. HOWELL. We have not skimped on equipment. No, sir.

Mr. CANNON. Thank you. Let me just say here, Mr. Chairman,

that I personally don’t think it is wrong for committees to investigate issues where there is litigation. In fact, I think that is appropriate on occasion. but I think it is highly inappropriate to have the

perception that this committee or any organ of Congress is used to

beat up a company to discover information that lawyers can’t discover in the ordinary course of litigation, and that the purpose of

this committee should be, in fact, to find out what is wrong and

then help fix those things that are wrong.

I think it is absolutely clear that things have not gone perfectly

well in Iraq, but to victimize any particular company, especially

when that company is undergoing litigation under tragic circumstances, is, I think, just something we need to be very careful.

Now, of course, this committee is not at fault for a letter written

by a law firm, but I would hope that the committee would be extraordinarily careful to not be the instrument of a law firm like

that.

164

Now, Mr. Howell, you had five employees that were tragically

killed recently. Would you like to talk a little bit about the circumstances, what they were doing that day, and what was behind

the decision? Are there statements you would like to make so that

we can understand that a little better?

Mr. HOWELL. Yes, sir, I would very much like to discuss that, but

I am unable to do so in an open hearing.

Mr. CANNON. Because what they were doing was classified. The

fact is, much of your work is very, very difficult, driven by sensitive

information, by information that can’t be made known. Thank you.

I appreciate your being here and your undergoing these questions.

War is difficult, especially when it is as expensive and complex and

with so many issues at hand as we have in this war. I want to just

let you know I appreciate your being here.

I yield back the balance of my time.

Chairman WAXMAN. I thank the gentleman for his questions.

I do want to state to you that I strongly agree with that statement that it is not appropriate for committees to be getting information for private lawsuits. I resented it when I saw it take place

when the Republicans were in charge of the Congress. That is the

last thing this committee should be doing. But we need to ask

questions, even if a lawsuit is pending, and, as I heard from the

family members this morning, there is a lot of information that I

think they are entitled to know. I have been working on this particular investigation for a couple of years. It is about time we got

all the information out.

Mr. Lynch.

Mr. LYNCH. Thank you, Mr. Chairman.

I agree with the gentleman, but I think that part of the problem

is that we’ve got this perception because Vice President Cheney’s

connections with Halliburton just put a flavor of, I don’t know,

complicity there, of, you know, a political one. Appropriate or not,

it is there, so we just have to address it.

Mr. CANNON. Would the gentleman yield? Is the gentleman suggesting that complicity is a term that means the Vice President——

Mr. LYNCH. Connection.

Mr. CANNON [continuing]. Is involved with illegal dealings. I

don’t think that anybody in this hearing is——

Mr. LYNCH. Connection.

Mr. CANNON. But connection to illegal activity?

Mr. LYNCH. I am sorry?

Mr. CANNON. Is the gentleman suggesting improper illegal activity on the part of the Vice President?

Mr. LYNCH. No. I am saying that the perception of a connection

between Republican efforts and some of the industrial complex, the

military industrial complex is because of that perception. He is a

former CEO. And so I think that flavor is just out there. It is

something——

Mr. CANNON. It is certainly something, if the gentleman would

yield, it is something we ought to look at. I agree.

Mr. LYNCH. Reclaiming my time——

Mr. CANNON. Complicity is not the word.

Mr. LYNCH. Mr. Howell, can I just say that I want to followup

on Mr. Tierney’s question. He referred to a document that indicated

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that between ESS and Regency there was a requirement that a

minimum of three security personnel be added to each vehicle. It

also refers to two armored vehicles to support ESS movements.

Now, based on your earlier response, you were saying that between March 8th, the date that this document was executed, and

in fairly rigorous detail, saying that the current and foreseeable future threat will remain consistent and dangerous on March 8th, I

want to clarify something. You are saying that this document was

changed after the 8th?

Mr. HOWELL. I am not certain whether a subsequent contract

was ever executed between ESS and Regency or not, sir. I don’t

know the answer to that.

Mr. LYNCH. But you were saying that was not the case on the

11th? You referred to another meeting on the 11th. I am just asking, if you have documents that change this contract that we were

given, then I would just ask you to produce it, that is all.

Mr. HOWELL. My understanding is that the minutes of the meeting that I mentioned have been produced to the committee. I don’t

know if a subsequent written agreement between Regency and ESS

exists.

Mr. LYNCH. OK. All right. I do want to refer to there was one

audit that was actually produced. We asked for all audits, but

there was one audit that was produced regarding the provision of

security personnel. In this audit it indicates that there were duplication of labor costs in connection with personnel hired by

Blackwater. What it essentially says here is that you were double

billing. You were putting three people, including the driver, in

some of these vehicles, and then you were charging the Government for a driver and three security people because a security person was driving. Do you get what I am saying? They are saying in

here there were costs, $1.25 million for drivers at $750 a day, but

those costs were already included in the security contract, and they

are saying that it is, in effect, a duplication of labor costs, and consequently they question the costs included in Blackwater’s proposed dedicated overhead and total.

What they say further on is that Blackwater applied profit to

profit. In other words, you applied your percentage of profit to profit that had already been accumulated.

Last, they indicate in this audit that the proposed profit by

Blackwater represented 23.6 percent of total proposed cost, which

is significantly higher than what we have seen for similar contracts

in dealing with the Department of Defense, which is usually 1 to

5 percent profit margin, maybe 10 percent at the most.

I just want to know, 23.6 percent profit on this, I just want to

know do you think that is reasonable? Is that customary for the

way you do business?

Mr. HOWELL. First, with regard to production, I would just like

to note that we are a small business and we have been seeking to

produce as much as possible. In connection with the committee

staff, agreement was reached to focus on the hearing today. We

have produced close to 7,000 documents and we are continuing to

produce documents. I don’t know which if our audits you are referring to, so there is some speculation inherent here.

Mr. LYNCH. This is the State Department contract.

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Mr. HOWELL. OK. I came here prepared to talk about ESS, but

what I can say about that audit that I know as of today is that

when that report was issued it was not a final report. There were

subsequent review of documents by the auditors and by our financial team, and when all of the concerns had been fully investigated,

most of those concerns were determined to be based on misunderstandings.

Mr. LYNCH. Well, I understand my time has expired. I just want

to say that the last time we had a hearing we were told that there

was no contract between Blackwater and Regency and ESS, and

that was confirmed by the Department of the Army, I believe. And

now we come here today and we find out all that was wrong and

that there were, indeed, contracts between the parties. So it is getting a little frustrating not getting straight information. I can tell

you that. I don’t know what we are going to hear at the next hearing. It may delete everything that we’ve heard here today.

Mr. HOWELL. Sir, we are seeking to answer your questions today

as best we can, and from what I know of the prior hearing I do not

believe that the question of whether there was a contract between

Blackwater and Regency was questioned. There was a contract,

and I believe that was the understanding during the hearing. I

can’t answer for the other companies that would have been in the

chain.

Mr. LYNCH. OK. I yield back.

Mr. VAN HOLLEN [presiding]. Mr. Issa.

Mr. ISSA. I thank the chairman.

You know, I apologize if I don’t ask enough questions to quite everyone on the panel, but this appears to be mostly about

Blackwater, so I will focus my questions somewhat on them.

Mr. Howell, I know that there is a lot of proprietary information,

but I hope that you can at least answer a couple of questions related specifically to this contract.

One, have you been paid on this contract?

Mr. HOWELL. None of the invoices that we submitted to Regency

were ever paid. There was an initial mobilization payment, but it

was a small portion, relatively small portion of the overall work

that we did.

Mr. ISSA. And how much have you spent on this contract, if you

can tell us?

Mr. HOWELL. I believe it was approximately $2.3 million, but

that is a rough number.

Mr. ISSA. If you get paid some day?

Mr. HOWELL. If we had been paid, I believe it would have been—

the total billings were $2,290,000 and some dollars.

Mr. ISSA. And earlier there was a statement about a 35 percent

up-charge contractor fee, if you will, that gets marked up, not just

at your level but at each level. To the extent you can, without revealing classified information or confidential, proprietary information, is 35 percent anywhere close to an accurate number?

Mr. HOWELL. If we had been paid—and I can discuss this because it is a contract that is closed. The market has changed significantly and it doesn’t affect our Government bids going forward.

Had we been paid, our profit would have been significantly less

than that. I have a pie chart that would show exactly where the

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payments to us that we didn’t receive would have gone, and our

profits were approximately—they would have been slightly over 1

percent.

Mr. ISSA. So if you got paid, it would have been slightly over 1

percent. If they pay you today without interest, you are in the hole

for the amount, cost of the interest.

I am particularly concerned about the allegations that in a

strange way had nothing to do with the previous panel. You were

in the audience for the previous panel?

Mr. HOWELL. Yes, sir, I was.

Mr. ISSA. The previous panel seemed to say unequivocally that

the four men who died in March 2004 were highly qualified, highly

skilled professionals that you induced, offered $200,000 roughly a

year to come there because of their security expertise, their training, their Seal training and so on. But then they alleged that, in

fact, you hire people from Africa for a few hundred dollars a month.

can you tell us how—because they referred to it, but they didn’t

have first-hand knowledge. Tell us about how that would work and

what they would be used for, if you do it.

Mr. HOWELL. Yes, sir. It goes back to the issue of there being

multiple tiers of security professionals. Some may be required that

they are cleared in terms of security clearance, special forces veterans with a required number of years, all the way down to where

the requirement may simply be for a third country national who

has received training in firearms and security procedures and

things like that.

The level of training and the category within which a given individual will fit is specified by the customer. In terms of U.S. Government contracts, it is normally specified by tier, how many people

by tier by the customer. So we are directed, effectively, to use some

folks who are third country nationals. That being said, they are

cleared and vetted by the U.S. Government and they have met the

minimum required training standards.

Mr. ISSA. OK. So if you were using third party—and I guess we

will kind of call them second or third tier, compared to these four

men that we met with today, or their widows and parents and so

on, you pay them less. Does the Government pay you less for them?

Mr. HOWELL. Sir, I believe the category would be fifth tier, and

fifth tier personnel, third country nationals, they are paid a different wage commensurate with the skills that they bring to the

project, and the Government accordingly——

Mr. ISSA. Just recapping, lower skills, lower expectation because

of home wages, and lower cost to the Government?

Mr. HOWELL. Lower cost to the Government, and they are also

used for fundamentally different tasks.

Mr. ISSA. Would these third country nationals, would they tend

to be, you know, selected because they were Muslim, because they

could speak Arabic, because they had sensitivity, and/or because

they were not Iraqis and, as a result, would be less likely to align

with insurgent groups? That is a combined question, but I think

you get the gist.

Mr. HOWELL. Yes, sir. I think it is very much driven by the contract. We do use some third country nationals to provide interpreVerDate 11-MAY-2000 10:54 Aug 15, 2007 Jkt 000000 PO 00000 Frm 00171 Fmt 6633 Sfmt 6633 C:\DOCS\36546.TXT HGOVREF1 PsN: HGOVREF1
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tation, interpreting services. That is a very complex question. It is

difficult to answer briefly, sir.

Mr. ISSA. OK. I thank the Chair. Hopefully we can followup further. I yield back.

Mr. VAN HOLLEN. Thank you.

Mr. Yarmuth.

Mr. YARMUTH. Thank you, Mr. Chairman.

I would like to follow this whole tier billing system so we can get

a clear picture of what this is costing the American taxpayer. We

have some slides that we want to show to illustrate this.

As we have all heard many times before, the initial level, the

first level, we have four tiers of contractors, the individual contractor, Blackwater, Regency, ESS, and then KBR, and then finally the

Army above that, so six tiers altogether. We know from the first,

all the original testimony, that the individual contractor is being

paid, in the one case we heard about earlier, $600 per day. And

then in the next slide we will show that Blackwater billed $815 for

that same $600 employee or contractor, which represents a 36 percent markup, and then Regency billed ESS $1,100 for that same

contractor.

Mr. Murray, ESS was paying $1,100 for the same contractor who

originally was being paid $600, supposed to be paid $600 a day.

That figure does not include housing, food costs, those types of support services; is that correct?

Mr. MURRAY. First, in that $1,100 you referred to does not include accommodations, which would include food. It does not include fuel, as one of the items mentioned that is cost reimbursable,

that is fuel. It did not include the d/b/a insurance that was a cost

reimbursable item, itself. That $1,100 you see there refers to just

the—I think that is a T–3 perhaps security person.

Mr. YARMUTH. Personnel. So essentially you paid $285 more to

Blackwater than they paid the contractor. What does that $285

represent?

Mr. MURRAY. Congressman, that——

Mr. YARMUTH. Where was the value added for that $285?

Mr. MURRAY. I had no visibility on the pricing between Regency

and Blackwater. Our contract was clearly with Regency for security

services, and that was the quoted rate that we obtained. Their

rates with their subcontractor, Blackwater, I had no visibility of.

Mr. YARMUTH. OK. Do you know what percent of your contract

with KBR comprised labor costs?

Mr. MURRAY. Pardon me, Congressman?

Mr. YARMUTH. What percent of your contract with KBR comprises labor costs, the cost of personnel of the total?

Mr. MURRAY. We provided a detailed letter to KBR on this. Approximately 45 percent.

Mr. YARMUTH. So 45 percent. And do you know what percent of

your labor costs are on security?

Mr. MURRAY. Approximately 12.5 percent.

Mr. YARMUTH. OK, 12.5 percent. So you are talking about probably somewhere around 5 percent of the total cost would have been

represented on private security contracts?

Mr. MURRAY. That is approximately right.

169

Mr. YARMUTH. Does that have an impact on the price you can

quote to a potential contractor?

Mr. MURRAY. Congressman, our prices are, as we mentioned,

fixed price, firm fixed price. During the time that this scenario developed, we were already involved in our contracting with all of our

clients. This actually came in mid-term in our clients, so we had

already budgeted our security costs.

Mr. YARMUTH. I am saying is that an element that is an important element in your bidding, the construction of your bids and

your competition for bids, the security costs?

Mr. MURRAY. Is it an important element? Yes, it is a very important element.

Mr. YARMUTH. And do you know has ESS ever lost a bid because

of the difference in cost of security?

Mr. MURRAY. Congressman, it is hard to say if we have lost a

bid because of the difference in our security cost. We have certainly

won and lost bids in Iraq. Bids are based on either the best value

or, in some cases, the lowest price, so we have lost some business,

but I can’t tell you if it is attributable to our security factor or not.

Mr. YARMUTH. As you go up that chain, is there a place where

you can tell me, just based on your knowledge of the whole process

of the industry, where there was any value added to that initial

$600 paid to that individual contractor along the chain?

Mr. MURRAY. Well, yes, I can, Congressman.

Mr. HOWELL. Sir, I am the one best suited to answer that with

regard to Blackwater, if I may.

Mr. YARMUTH. Sure.

Mr. HOWELL. There are two serious areas of possible misunderstanding on that slide. The first is the fact that the contract chain

is reflected as being KBR on LOGCAP work. My understanding,

which may not be correct, is that has not been definitively determined.

More to your question, the numbers that keep coming up, the

600 and 815, that is not the correct calculus, because the assumption that anything other than the amount paid in labor cost is pure

markup and pure profit is wrong because this is a firm fixed price

per day situation.

The amount of profit out of the services——

Mr. YARMUTH. Well, that is the question I was asking.

Mr. HOWELL. Yes, sir.

Mr. YARMUTH. Where is there value added to that $600 as it goes

up the chain, because ultimately the taxpayer is paying a lot more

than that.

Mr. HOWELL. Yes, sir. I will try to answer your question directly.

The 815 is not the right number because there were multiple labor

rates involved. The average labor rate I think is more reflective because the costs were spread among different categories equally. So

the blended labor rate of approximately $885 per day per man I

think is a more useful way to discuss this. Out of that $885 per

day that Blackwater invoiced to Regency, the average labor cost

was $683 per day, and that went to the individual security professional, $51.78 per day went to air fare. Blackwater was responsible

for the initial movement, the initial mobilization of security professionals into Iraq. Supplies, including the personal weapons, ammuVerDate 11-MAY-2000 10:54 Aug 15, 2007 Jkt 000000 PO 00000 Frm 00173 Fmt 6633 Sfmt 6633 C:\DOCS\36546.TXT HGOVREF1 PsN: HGOVREF1
170

nition, personal gear for our men, that sort of thing, was another

$18-plus per day. Other costs, such as lodging and transportation

in the United States—that would be from their home of record to

Moyak—housing, and berthing while they were receiving training

in Moyak, freight, Internet access, that sort of thing accounted for

another——

Mr. YARMUTH. Well, if I could interrupt you for a second, we had

testimony that ESS didn’t pay that. That was added cost, so not

necessarily from you but along the whole chain housing costs and

food wouldn’t have been included. It might have been included at

your level, but not subsequently.

Mr. HOWELL. There are two different categories of housing costs,

sir: that that Blackwater incurred for the men prior to their arrival

in theater and that which was the responsibility of Regency after

they were in theater.

Mr. YARMUTH. My time has expired. Thank you.

Mr. VAN HOLLEN. Thank you, Mr. Yarmuth.

Mr. Westmoreland.

Mr. WESTMORELAND. Thank you, Mr. Chairman.

What I would like, Mr. Chairman, if I could—and maybe you

could get some answers from staff for me, but I was reading the

memorandum that we got today and I found it interesting. I am a

little slow, but it says today’s hearing provides an opportunity for

the committee members to ask three basic questions about the extensive use about private security services. The first one says: Are

private security contractors operating in Iraq doing an adequate

job? I haven’t seen anybody from any of the two panels that could

really testify to that, and I don’t think any of them have ever been

protected by one of these private security companies. So I was wondering why that statement is in there.

The second statement says: How much are they costing the Federal taxpayer? I haven’t seen anybody from either panel that works

for the GAO who would know the answer to that.

And then it says: And is the Federal Government providing sufficient oversight, which I think the majority staff pretty much answered, itself. On page 3 it says, ‘‘U.S. contract employees may be

prosecuted under American criminal law.’’ And then in the next

line it says, ‘‘All security contractors in Iraq are under the Uniform

Code of Military Justice.’’

So I am kind of confused about the panels that we had today

based on what the committee staff said we were supposed to find

out. So if you could just find out those answers, I think it would

help us all.

Mr. VAN HOLLEN. Well, we do have Ms. Ballard here today, who

has actually been intimately involved in the issue of the use of taxpayer money, especially as it pertains to the contracts that we are

dealing with today. In fact, there has been lots of correspondence

between this committee and Ms. Ballard and the Secretary of the

Army, including a number of letters that I have sent, that Mr.

Waxman has sent, and others.

The focus of this hearing has been to try to put a lens on these

contracting issues by looking at this particular case, and so I think

these are the appropriate individuals and witnesses to have to answer those questions.

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Mr. WESTMORELAND. OK. So the gentlelady from the Army would

be who we would need to address the questions to as far as the

cost? I am asking. Is that what I am hearing you say?

Mr. VAN HOLLEN. Feel free to address any question.

Mr. WESTMORELAND. The other point I wanted to make—and I

am glad you are in the Chair, because I wanted to continue on with

what Mr. Cannon talked about. The letter from Callahan and Blain

continually used the word profiteering. I thought it was also interesting that they did copy you, as the DCCC chairman, with the letter. I know that the chairman previously stated—and I believe

him—that these hearings have no political ties. And I found it interesting, as I was sitting here, I went to the waste, fraud, and

abuse hotline and saw where the chairman had introduced a bill

that was to do away with cronyism. As I look at this letter from

this attorney and who he addressed it to and all the contributions

that he had made and his former law partner, I can hardly wait

until we get into those cronyism hearings.

But I think that we are walking on very thin ice when we start

having public hearings with panels that are both the defendant

and the plaintiff in something that is in a civil action.

But I have a question for Mr. Howell. In the letter I referenced—

and it has been submitted for evidence—from Callahan and Blain

they keep talking about profiteering. I was a contractor before I got

into politics, in the building business, and I used many subcontractors. In fact, I have been a subcontractor before from another subcontractor. If I understand profiteering—and Blackwater was specifically picked out in this letter, and I am sure it was not for political reasons, even though it mentioned Blackwater as being a Republican company, and then the copy going to Mr. Van Hollen, the

DCCC chairman, but it keeps talking about profiteering.

Now, on this program contract the thing that I’ve got says the

Federal Government contracted with KBR that then contracted

with ESS Support Services that then contracted with Regency

Hotel Services that then contracted with Blackwater. Now, being in

the contracting business and talking about profiteering, how can

the last person, or how can the person at the bottom of the totem

pole be profiteering? Can you explain that to me?

Mr. HOWELL. Sir, I don’t see how they can be, and I also think

that the notion of profiteering is inherently incompatible with a

competitively bid contract.

Mr. WESTMORELAND. What would your definition of profiteering

be?

Mr. HOWELL. My understanding of the definition under the

English language is someone seeking to make an excessive profit,

when the person desiring the services is somehow in dire straits,

if you will.

Mr. WESTMORELAND. OK. And I think that is a pretty good definition. As Mr. Issa was questioning you, I understand that you

never got paid from Regency Services, is that true, on this particular contract? It was a little over $2 million?

Mr. HOWELL. None of our invoices were paid. We did receive the

initial mobilization payment.

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If I may, I forgot to mention earlier, would it be possible to make

this chart that we discussed at length part of the record, just so

it is clear. It has been previously provided to the committee.

Mr. VAN HOLLEN. Without objection.

Mr. HOWELL. Yes, sir.

Mr. WESTMORELAND. And just one further question. You are sitting there with your friend from ESS. Did they get paid?

Mr. HOWELL. I am not certain, sir. I think they can answer that.

Mr. WESTMORELAND. Did ESS get paid on the contract that specifically is mentioned so many times here today, where the four

brave Americans lost their lives?

Mr. MURRAY. Are you asking me if ESS brought value? I am not

understanding your question, Congressman.

Mr. WESTMORELAND. Did KBR pay you for the services rendered

that you subcontracted to Regency Hotel Services who then contracted with Blackwater? Did you get paid for the services that

Blackwater and Regency Hotel Services subcontracted from you?

Mr. MURRAY. Congressman, I would like to address that kind of

two-fold. No. 1, I think, understand our contract was with Regency

to provide security services for ESS——

Mr. WESTMORELAND. Did you get paid from Kellogg, Brown, and

Root for that contract?

Mr. MURRAY. That contract was not with Kellogg, Brown, and

Root, so the answer to that would be no.

Mr. WESTMORELAND. OK. So I got some bad information that

KBR did not subcontract to you on that particular contract?

Mr. MURRAY. On that particular contract I indicated earlier it

was a contract we ran out of Taji, which was not a KBR contract.

Mr. WESTMORELAND. I cannot hear you. Would you speak up? I

am a little slow and hard of hearing.

Mr. MURRAY. Yes. As I mentioned earlier, that particular contract was run out of Taji, and that was not the KBR contract that

ESS had.

Mr. VAN HOLLEN. All right. We are going to have to wrap it up.

I thank you.

Are there going to be further questions for other members of the

panel, because we are going to have to——

Ms. MCCOLLUM. Mr. Chair, if you are not coming back again I

would just like to——

Mr. VAN HOLLEN. No, we can come back.

Ms. MCCOLLUM. But if we were not, you are not referred to as

the DCCC Chair on this letter. You are a Member of Congress.

Mr. VAN HOLLEN. Thank you.

Mr. MCHENRY. Mr. Chairman, I have been here for about 21⁄2

hours waiting for questions, so I would like to come back.

Mr. VAN HOLLEN. We will do that.

Just for the record, let me say my understanding—and I hadn’t

seen that letter—that they essentially copied Members of the

Democratic leadership, including Ms. Pelosi. And I am also informed apparently that this firm has contributed also to Republicans, as well. I just think it is important for the record to reflect

that this hearing has been designed to get at the facts on the

ground. I think it has done a good job of doing that. And to suggest

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that there is some sort of political motivation behind it other than

trying to get to the truth of the matter I think is unfortunate.

We will now recess the committee until after the voting. We will

recess until 2:45.

[Recess.]

Mr. WAXMAN [presiding]. The meeting of the committee will come

back to order.

To continue questioning of this panel, the chair recognizes the

gentleman from Maryland, Mr. Sarbanes, for 5 minutes.

Mr. SARBANES. Thank you, Mr. Chairman.

We have heard a lot about the contracting, and I have done a fair

amount of contracting in my life as an attorney, so I know when

there is this multi-tier contracting it can get very, very confusing.

It can be hard to pin down exactly what happened, and we are

talking about cost-plus contracts, we are talking about fixed price

contracts, we are talking about turnkey contracts, etc.

Depending on what goes into developing a bid or how you load

up a contract on the pricing side, whether profiteering or markups

that are more generous than they should be is occurring, that can

happen. I think the inquiry will continue on whether the particular

contract that we are looking at today had those characteristics, or,

more generally, whether the environment in which private contracting was being engaged in Iraq allowed for that kind of thing

to occur. But that is actually what I am more interested in.

I am more interested in the larger environment, because I, frankly, believe that a lot of the things that you do, Blackwater, ESS,

Regent, whatever, are things that you should not be doing. I think

that this is symptomatic of a situation in which the Secretary of

Defense’s ideology, philosophy, sort of new notions of tactical warfare were pushing this notion so that we were on a mad dash to

slimming down our military, and most people agree that the initial

response in terms of the number of troops in Iraq was inadequate.

That meant that there was space that our military should have occupied that now had to be occupied by someone else, and that is

when people turned to the private contracting community to fill

that space, with the kinds of tragic results that can occur.

So I really just have one question. I invite any of you who wish

to answer it. Did you, yourselves, ever reflect on whether you were

in a space where you didn’t belong? Did you ever say to yourselves,

‘‘We shouldn’t be doing this? This is something that the armed

forces should be engaged in. We are being put in an untenable position?’’ Anyone can answer that if they would like. Maybe you would

like to start, Mr. Howell.

Mr. HOWELL. I think the best answer I can give is one based on

my nearly 20 years as a Naval officer, informed, if you will, by my

time at Blackwater. I have to say that it is ultimately a policy decision that is set by Congress, but I think that the idea of using contractors to supplement and to aid the armed forces is a valid one.

We have a role to play. We have a contribution to make. There are

certain functions that we can do at a cost efficiency when it is properly executed to the Government that free up soldiers to do—soldiers, Marines, airmen, and sailors—to do service member tasks.

Mr. SARBANES. I allow that there will be situations where you

have an appropriate role. I guess I am asking whether you believe

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that in this situation at all times you think the role that you

played was appropriate, not the way you executed it, because I understand that once you have the assignment you are going to try

to execute it, and whether you executed it well or not has been a

subject of the discussion today, but whether the assignments that

you were being asked to execute were appropriate in this larger

context of what our military should have been doing versus what

the private contracting community should be doing.

Mr. HOWELL. I believe that escorting personnel in convoys in a

purely defensive role is an acceptable task for private security.

That said, I believe and Blackwater supports appropriate Government control thereover. And if I could add one other thing that sort

of slipped out of my mind, I had a massive amount of information

that I tried to bring here today, and I don’t want to not provide

proper respect to Ms. Nolan, and I wanted to clarify she was a

former White House counsel for the Clinton White House.

Mr. SARBANES. Does anyone else have a response?

Mr. CHVOTKIN. Mr. Sarbanes, just to remind you what I said earlier—I don’t know if you were here for that—the unusual situation

taking place in Iraq today is three simultaneous actions. There is

a military action, and the work that is supporting—the contractors

that are supporting the military, accompanying the force. That has

been longstanding, weapons system support, logistics support, traditional.

There is the reconstruction activity, and that has usually followed a military activity. We are now doing that simultaneously.

And an economic development or developmental assistance activity.

All taking place in a very confined space. That has created some

ambiguity about who is there doing what, for what purposes. I

think that clarity is very important in your thought process about

the appropriate role of contracts.

Mr. SARBANES. And do you agree that having that kind of ambiguity can create dangerous situations——

Mr. CHVOTKIN. Absolutely.

Mr. SARBANES [continuing]. To people on the ground?

Mr. CHVOTKIN. It absolutely creates difficult situations, confusion, unclear lines of authority and responsibility, and questions on

both parts.

Mr. SARBANES. And confusion, would you agree, can lead to situations both where there is abuse, in terms of the way contracts and

assignments come together, and clearly can also lead to situations

where there is tragedy, as well?

Mr. CHVOTKIN. There is clearly tragedy. I am not sure that, by

definition, you have abuse. Confusion could create ambiguity, ambiguity could create a variety of situations that may not be abuse of

the process.

Mr. WAXMAN. The gentleman’s time is up. Thank you.

Mr. SARBANES. Thank you.

Mr. WAXMAN. Thank you, Mr. Sarbanes.

Mr. McHenry.

Mr. MCHENRY. Thank you, Mr. Chairman.

Under Secretary Ballard, I have a simple question. I assume you

will be able to answer this, because of your position. How many

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private security contractors are currently working for the U.S. Government in Iraq?

Ms. BALLARD. Sir, that is a very broad question and I am unable

to answer that question. It is a very complex situation on the

ground. There are many organizations over there that may have

private security contractors. A lot of these security contracts are

subcontracts under——

Mr. MCHENRY. Thank you. There are approximately 60, according to the research we have done.

I ask Mr. Howell, Blackwater is one of those 60 currently working in Iraq providing security services; is that not correct?

Mr. HOWELL. We are currently providing security services in Iraq

to the U.S. Government. Yes, sir.

Mr. MCHENRY. All right. What year was the company founded?

Mr. HOWELL. In 1997.

Mr. MCHENRY. What year did the company receive its first contract from the U.s. Government?

Mr. HOWELL. In 1998.

Mr. MCHENRY. Who was in the White House in—pardon me. I

know that is a bit ridiculous to ask. It was obviously William Jefferson Clinton, a Democrat. It seems that the questioning here

today is that these are sort of a Republican scandal that we have

contractors working for the U.S. Government, providing essential

security services for us in war zones. It is actually something very

common for the last 200 years working with firms, private security

firms to provide needed resources for our military and for our diplomats overseas. So I apologize for asking that question, because it

was obviously a Democrat administration that gave you your first

contract.

I think it is also ironic that there is a big discussion from the

chairman of this committee and Democrat leadership about a company called Halliburton and how it is this Republican scandal that

Halliburton is getting contracts from the U.S. Government.

I think today Mr. Seagle, you work for what firm?

Mr. SEAGLE. I work for KBR.

Mr. MCHENRY. Which Kellogg, Brown——

Mr. SEAGLE. Which is a subsidiary——

Mr. MCHENRY [continuing]. And Root, which is a subsidiary

of——

Mr. SEAGLE. That is correct, of Halliburton.

Mr. MCHENRY. Of Halliburton. How many questions have you

been asked today by this panel?

Mr. SEAGLE. One question, I believe.

Mr. MCHENRY. One question. Was it just now?

Mr. SEAGLE. No. It was a simple yes or no question that was earlier.

Mr. MCHENRY. Very good. How long have you been here?

Mr. SEAGLE. For about 3 hours.

Mr. MCHENRY. Three hours. That is kind of interesting. I find a

lot of vitriol is heaped on your organization, but there is not even

a question asked of you.

But back to you, Mr. Howell. I understand there is an ongoing

lawsuit which Callahan and Blain have filed on behalf of families

that were taken down in action. It is a very sad thing. I also know

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that a letter that has already been admitted to the record here refers to you and other contractors as extremely Republican companies. It is ironic, coming from a law firm that is extremely Democratic, and it is ironic that they send this letter to the Speaker of

the House and cc the committee chair here, but also copy the Democrat Campaign Committee Chair. Well, it might not be ironic because, after all, this law firm has given over $60,000 to Democrats

over the years, so this might be another pay to play prospect here

in Washington, DC, where Democrat donors get the investigations

that they wish in order to help their law firm win a lawsuit.

So if you could comment, just in legal terms, about this idea of

turning a private lawsuit into a legislative show trial?

Mr. HOWELL. Sir, I think the best answer I can give is to refer

to a U.S. Supreme Court case that has been around for a large part

of the existence of our Republic. It is a case that is known by the

name Kilborn. It goes back to 1880 and it established the longstanding principle that, in certain circumstances, congressional involvement in private litigation can be unlawful, and obviously it is

a very complex issue, a lot of subsequent case law, but that is the

general principle that I think you are asking about.

Mr. MCHENRY. Thank you, sir. I think it is also interesting and

important to note that this committee hearing that we have here

today and the original—according to House rules, the minority side

is entitled to receive notification about what the hearing is intended to be about, and then the night before we receive a supplemental document that completely changes the notion of this hearing. So I want to apologize to you individuals working in the private security and Under Secretary Ballard who works for the Government for having to waste a full day on a hearing that is nothing

more than a show trial for a Democrat trial lawyer firm. I apologize to you for that. I think it shows that, you know, the new majority and the new leadership of this committee is intent on making

political hay out of something that simply is not a valid point, and

I apologize that you have to be brought in to be a part of this spectacle.

Mr. WAXMAN. The gentleman’s time has expired, and I must say

that he just was so partisan in what you had to say, without a

foundation for it. I have no idea who is a Democrat and who is a

Republican. I know that the four people, four men who lost their

lives, were Americans. I don’t know whether they are Democrats or

Republicans. I know Americans, Democratic and Republican, are

paying taxes, and they don’t want their taxes wasted. And I think

Congress should be following up on these investigations and asking

witnesses questions.

I must say I am outraged at Ms. Ballard coming here to represent the Army coming here and not being able to give us an answer to the simple question of how many contractors and subcontractors have contracts with the Army. I mean, that is what this

hearing was all about, and we couldn’t even get an answer from

that on that point.

So I know the gentleman wants to look at partisanship under

every rock, but I suggest that he return under that rock and look

at his own reasons for trying to make everything partisan. This is

not a partisan investigation nor it should be——

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Mr. MCHENRY. I think it is rather partisan for the Chair to say

I should crawl under a rock.

Mr. WAXMAN [continuing]. And I resent that you are going to

make it one. I resent that you are trying to make it a partisan one.

The gentleman from Ohio, Mr. Kucinich, is now recognized.

Mr. KUCINICH. Secretary Ballard, the President recently gave an

order that was basically a shoot to kill order for anybody who was

coming in from Iran who was thought to be an operative of the Iranian government. Does that order extend to the personnel hired by

the companies who are here? Private contractors, are they given

the authority to go and shoot to kill Iranian operatives in Iraq?

Ms. BALLARD. Congressman, those orders are Executive orders

that deal outside my area, which is strictly contracting.

Mr. KUCINICH. OK. Well, this is contracting in a sort.

Mr. Howell, we have heard from the families on the first panel

that they had to sue Blackwater to get information about what

happened to their relatives. Then we heard something else that I

have to say astounded me in its callousness, and that is that

Blackwater filed a countersuit against the families for $10 million.

Now, Mr. Howell, you are the general counsel for Blackwater. Why

did the company sue the families that lost two sons, a husband,

and a father?

Mr. HOWELL. First, let me say that, once again, extend our deepest condolences to the family, that their loss is——

Mr. KUCINICH. Is the lawsuit part of those condolences?

Mr. HOWELL. The lawsuit was not against the families. We seek

nothing from the families. We have sought to support them. The

lawsuit was against a North Carolina attorney who established hollow estates that did not contain any assets of the fallen men, their

homes, their cars. They were just shell estates established for the

purpose of personal injury litigation, and the lawsuit—the claim

against that attorney was for a violation of our agreements with

the men.

Mr. KUCINICH. So you are saying that attorney violated your

agreement? What did they do? Did they make a mis-statement?

How did they violate your agreement?

Mr. HOWELL. Our agreement with the men provided that any

dispute that involved Blackwater would be resolved via arbitration,

and that is where we are seeking to have this matter addressed.

Mr. KUCINICH. Did you have a contract with the men who fought

for your company there? Did they have a contract with you that

they had no right to sue, couldn’t seek publicity, had to protect certain information, and that they would have to assume all risks of

being shot, killed by a firearm, terrorist activity, hand-to-hand

combat? Did you have a contract with them to that effect?

Mr. HOWELL. The terms of the contract included a waiver regarding certain injuries or death in certain circumstances, and it also

contained provisions regarding confidentiality.

Mr. KUCINICH. But aren’t you, in effect, suing the estates of the

decedents? Isn’t that what you are doing?

Mr. HOWELL. None of the property that is in the meaningful estates, the actual estates of the decedents, is involved in what we

are——

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Mr. KUCINICH. There is no connection whatsoever with the action

you are taking and the decedents’ property, their estates?

Mr. HOWELL. The estates that are in issue in the Norton litigation, as I understand it, have no assets at all. They were established solely for the purpose of personal injury litigation.

Mr. KUCINICH. And could you tell me then, is it your position

that this attorney you are talking about has violated an agreement,

and that is why you are suing?

Mr. HOWELL. As the shortest possible answer, that is a summary

of the gist of the argument. Yes, sir.

Mr. KUCINICH. I would like to raise an issue regarding

Blackwater’s prior testimony in front of Congress, Mr. Waxman.

Blackwater testified before a National Security Subcommittee of

this committee, Blackwater testified on June 13, 2006, and I had

asked questions about their contracts. The Blackwater’s vice president testified that Blackwater charges $815 per day for the services

of independent security contractor working in Iraq, and he testified

that the $815 charge was fully burdened. Specifically, he provided

the following response to me.

I asked, ‘‘In those contracts is it true you were paying your men

$600 a day but billing Regency $815 a day?’’ He said, ‘‘Per the presentation, Mr. Kucinich, $815 a day is the right figure, but it is a

fully burdened figure that includes travel, training, gear, housing,

food, the works, fully burdened number.’’ But the documents obtained by this committee, Mr. Chairman, refute the claim that

these were fully burdened. We received the contract between Regency and Blackwater which clearly provide information contrary

to Mr. Taylor’s claims: one, that housing costs were the responsibility of ESS, not Blackwater; two, that food, subsistence for the contractors, was the responsibility of ESS, not Blackwater; and, three,

insurance was to be paid by ESS, not Blackwater.

Now, Mr. Chairman, I know my time has expired. I think that,

since I have information here that Mr. Taylor presented misleading

testimony under oath to our committee, and I am going to ask that

this committee look further into that to try to reconcile what he

said and what the facts are, as this committee has been able to determine them.

Mr. WAXMAN. The gentleman will permit, we will take a look at

that issue with you and pursue further clarifications for the people

involved.

Mr. KUCINICH. I think it would be good to get it clarified, because

the exchange that we had really didn’t leave a positive impression.

It seems to me there may have been an effort by Blackwater to

mislead or conceal relevant information from the Congress.

I thank the Chair for his willingness to look at it further. Thank

you.

Mr. WAXMAN. Thank you.

Mr. HOWELL. Mr. Chairman, if I may, I believe there is a grave

misunderstanding here, that I would like just a moment to address.

I respect the time constraints, but this is a fundamental misunderstanding.

Mr. WAXMAN. We want to be fair. Go ahead and say what you

have to say.

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Mr. HOWELL. If we could put up this graph that reflects the approximately $885 per man per day that was invoiced by

Blackwater, if we could put that up on the overhead I believe it

will help clarify this.

The testimony that Mr. Taylor gave, as I understand it, is that

Blackwater’s costs, meaning things such as weapons, ammo, personal gear, to go directly to Congressman Kucinich’s point, housing

provided while at Blackwater prior to the men going in theater,

food provided to men while at Blackwater, that sort of thing, those

were costs that Blackwater had to pay. They came out of the

$884.97 per day average daily rate that was invoiced to Regency,

and the amount that was the markup or the profit, if you will, was

approximately $10.61 per day out of that $885, so it is approximately 1 percent.

There are basically two different categories of expenses, if you

will. There are in-theater expenses, which Mr. Kucinich is absolutely correct in stating that Regency was responsible for providing

housing, food, things like that when the men were in theater, but

there were similar expenses that were incurred by Blackwater

prior to the men going in theater—for example, when they were receiving training in Moyak—that were Blackwater costs that were

borne by Blackwater or incorporated into our invoices, although,

again, the invoices were never paid.

Mr. KUCINICH. Mr. Chairman, I am asking unanimous consent to

be able to have 5 minutes of time to continue the questioning, because he said something that does not square with some facts here,

and I would like to just know if I could have a unanimous consent

to ask some questions.

Mr. WAXMAN. I’d like to see if the gentleman can handle it in 3

minutes, and if not——

Mr. KUCINICH. Fine.

Mr. WAXMAN. Mr. Shays has been kind enough to reserve his opportunity for questioning until you have completed yours.

Mr. KUCINICH. I thank you. I thank the Chair.

I would just like to ask Mr. Murray, did ESS pay for the housing

costs?

Mr. MURRAY. Congressman, ESS was responsible for the

housing——

Mr. KUCINICH. Did ESS pay for the housing costs? Could you answer yes or no?

Mr. MURRAY. ESS paid for the housing costs——

Mr. KUCINICH. Did ESS pay for the food costs?

Mr. MURRAY. While they were in theater, yes.

Mr. KUCINICH. Did ESS pay insurance?

Mr. MURRAY. Yes.

Mr. KUCINICH. OK. Mr. Chairman, that doesn’t square with the

impression Mr. Howell is trying to give this committee.

Now, Mr. Murray, the same contract also shows that Regency,

not Blackwater, paid the cost of rotation travel; is that correct?

Mr. MURRAY. I can’t answer that. I am not aware of that.

Mr. KUCINICH. The same contract shows that Regency, not

Blackwater, paid for the individual body armor, heavy weapons, vehicles, navigational devices, and personnel radios; is that correct?

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Mr. MURRAY. Congressman, our contract was with Regency. ESS’

contract was with Regency, not with Blackwater. We had turnkey

service with Regency to provide all of our security services except

for those few items that were cost reimbursable or those items that

ESS would provide. ESS would provide the accommodations and

food.

Mr. KUCINICH. Right.

Mr. MURRAY. While in theater. We pay for the d/b/a insurance

and we pay for fuel and a few other items that were cost reimbursable. All of the services were turnkey services.

Mr. KUCINICH. Thank you for answering that. And the point is

that, Mr. Howell, it does not appear that Mr. Taylor’s testimony

was accurate. You know, he said $815 per day charge was so high

because Blackwater had to pay for housing and meals and insurance, when, in fact, this was not the case, according to the contract

documents. What made it worse was that Mr. Taylor was given a

chance to go back and consult with the company, provide a followup response in writing, and when he did so, he sent a letter dated

July 14, 2006, reaffirming his testimony stating, ‘‘$815 is what is

known as the fully burdened rate.’’ Now, Mr. Howell, do you know

why Mr. Taylor would continue to insist on this information which

appears to be erroneous and misleading, twice in communicating

with this committee?

Mr. HOWELL. Sir, Blackwater incurred housing costs, subsistence

costs, travel costs, and things like that that were properly its expenses under the contracts. The Blackwater Regency contract did

provide that Regency would pay for some housing, some subsistence, some travel, but Blackwater also paid for some of those expenses.

For example, the initial deployment of the personnel into Iraq

was Blackwater’s responsibility, so Blackwater did pay for some

travel, and I believe that is clear from the contracts.

Mr. KUCINICH. Mr. Chairman, I don’t think that is responsive.

You know, I would just like to conclude by saying that, you know,

they only got paid when the troops were in theater, and I think it

is important to keep that in mind, because it goes back to the question of whether, in fact, the taxpayers of the United States have

been overcharged.

Thank you, Mr. Chairman.

Mr. WAXMAN. Thank you, Mr. Kucinich.

Mr. Shays.

Mr. SHAYS. Thank you, Mr. Chairman.

Mr. Chairman, I really appreciate your having this hearing, and

I have a lot of questions pretty much because I don’t understand

certain relationships. But what I do understand is this: we need

contractors. They enable our troops to focus on being the tip of the

spear and not setting up housing, not manning the kitchens, and

contracted out, so that part makes sense to me. And I understand

that Kellogg, Brown and Root, their LOGCAP contract that they

were under during this phase of the war was actually negotiated

under the previous Presidency; is that correct?

Mr. SEAGLE. That is correct.

Mr. SHAYS. So that contract—and I hate to say it. It is the kind

of contract I see with FEMA. In other words, you are contracted,

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and when an emergency arises you are on board and you take over.

There is logic to doing that. So let me understand this. When you

negotiate a contract, it may involve a lot of work or not all that

much work. You never know; is that correct?

Mr. SEAGLE. That is correct.

Mr. SHAYS. How long do the contracts usually last, Mr. Seagle?

Mr. SEAGLE. This contract was a 1-year base contract with 10 option years.

Mr. SHAYS. So you had the right to roll it over for 10 years?

Mr. SEAGLE. No, the Army has the right to continue.

Mr. SHAYS. So they contracted it under the Clinton administration, but it was renewed under the Bush administration; is that

correct, if you do it every year?

Mr. SEAGLE. Yes, correct.

Mr. SHAYS. OK. I understand why, if you hire someone for food

service, they may want to engage someone who has a service that

they don’t provide, like security, so I can understand the subcontract there, and I understand in the LOGCAP that they have

to eat that cost; is that correct, that ESS, for instance, would have

to eat the cost of security if it is a LOGCAP contract?

Mr. SEAGLE. LOGCAP contract states that the military will provide our force protection. We think——

Mr. SHAYS. And you don’t think it is being provided adequately

and you choose to get security, contract out security, you are allowed to do that, but then you have to pay the cost?

Mr. SEAGLE. We haven’t asked any subcontractors to subcontract

for security.

Mr. SHAYS. Well, let me understand——

Mr. SEAGLE. We ask for a turnkey price to provide a service.

Mr. SHAYS. OK. Now, when you subcontracted—when ESS contracted with Regency, Regency then negotiated with Blackwater,

correct?

Mr. SEAGLE. I don’t know, sir. We contracted with ESS for a

turnkey job. It was not an itemized bid.

Mr. SHAYS. OK. I understand you don’t know, but it is not comforting, because what it is like is you can be Pontius Pilate and

wash your hands of it. In other words, you contract with someone

else, they get the job done, and it is their responsibility and not

your responsibility? That is what you are saying?

Mr. SEAGLE. We certainly don’t wash our hands. It is a competitively bid project.

Mr. SHAYS. Right, but they bid the contract and then it is theirs,

but it was yours, and you sub-bid it, correct? You subcontracted?

Mr. SEAGLE. Yes, sir, we subcontracted.

Mr. SHAYS. You subcontracted to ESS?

Mr. SEAGLE. Correct.

Mr. SHAYS. Then ESS subcontracts to Regency to provide——

Mr. SEAGLE. Any service they need to meet those contract requirements.

Mr. SHAYS. And then Regency then engaged Blackwater?

Mr. SEAGLE. I don’t know who our subcontractors determine they

need to perform the contract. They give us a——

Mr. SHAYS. I understand you don’t. I am going to just tell you

what I think. I think you should know. I think the system should

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somehow require it. I think there should be some responsibility to

it. My analogy of Pontius Pilate is you just wash your hands of it.

It is not your responsibility. I just can’t believe that if I were doing

a contract for a building and I was subcontracting that I would be

oblivious to who my subcontractors were dealing with. So it just

strikes me as something I am surprised by. That is all. Maybe I

shouldn’t be. Maybe that is the way it works. But we did good

things with contractors and we did some bad things with contractors, and the bad things have given the good concept a bad name.

Ms. Ballard, I am surprised that you can’t give us an idea of the

number of contracts and number of contractors in theater. Is that

because you just hire out from the first and then from then on you

don’t feel you have an interest in or responsibility to know who was

subcontracted? In other words, once you put out that contract, whoever is subcontracted is not your interest or responsibility?

Ms. BALLARD. I can tell you how many contract actions have

been awarded in Iraq. How many subcontracts you are correct, the

prime has responsibility for the subcontract. We do not have privy

of contracts with the subs.

Mr. SHAYS. And so you don’t know who they hire, you don’t know

the quality of who they hire, and so on?

Ms. BALLARD. We have with the primes a quality surveillance

plan and a quality plan that is monitored by the Defense Contract

Management Agency to ensure that——

Mr. SHAYS. I don’t know what that means. I honestly don’t

know——

Ms. BALLARD. We have quality plans in place that are monitored

to ensure that the prime is doing what he committed to do in terms

of monitoring his subcontractors.

Mr. WAXMAN. Would the gentleman yield?

Ms. BALLARD. We don’t actually monitor the subs.

Mr. SHAYS. I will yield.

Mr. WAXMAN. You say you do know the number of prime contracts you have?

Ms. BALLARD. I know how many actions that we had in Iraq. In

JCCI in fiscal year 2006 we had 26,994 contract actions. I can’t tell

you that those were all security contract actions. In fact——

Mr. WAXMAN. Can you tell us whether they are all prime?

Ms. BALLARD. Those are all prime contract actions.

Mr. WAXMAN. So 26,000?

Ms. BALLARD. It is 26,994 actions out of JCCI, the Joint Contracting Command Iraq.

Mr. WAXMAN. Actions means a contract?

Ms. BALLARD. Yes.

Mr. WAXMAN. So you had close to 27,000 contracts, and then you

don’t know how many of those contractors had subcontractors?

Ms. BALLARD. Correct.

Mr. WAXMAN. And you don’t know how many of those subcontractors had subcontractors?

Ms. BALLARD. Correct.

Mr. SHAYS. I mean, tell me why I shouldn’t be concerned by that.

I mean, maybe you could tell me. Tell me. You are smiling, but it

is a concern to me.

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Mr. CHVOTKIN. You should be concerned. A contract action is not

a contractor, so there may be—my guess, and Ms. Ballard would

know, there are fewer contractors, many of whom are receiving

multiple transactions, so the number of contract actions does not

equal on a one-to-one basis the number of contractors. The subcontract relationships, there is elements of transparency, elements

of visibility on the ground. Some of that may not be known in a

data base where it is easily obtainable, either at higher level or at

headquarters or here.

Mr. SHAYS. Well, let me just conclude. What I know is this: that

this would be something I would recommend to the subcommittee

on Government Reforms Oversight for National Security, because

I think, you know, just a few Members who could ask questions for

10 or 15 minutes, we could get a better understanding. But I was

always left with the feeling that our Government would know who

the contractors were, who were the subcontractors, who got a subcontract from a subcontractor. I just thought it would be intuitive

that we would know how many people, and so on. And the fact that

once the major contractor subcontracts, they don’t care who is subcontracting that is of concern to me, and it tells me that we are

not going to have good quality control and that we are going to

have pretty serious mistakes.

I would just add to this that if, in fact, anybody who is a contractor was told he had better get his butt out there, even without

proper protection, weapons, and so on, I think the company has to

be held responsible.

Ms. BALLARD. Congressman Shays, if I may, I don’t want to leave

you with the impression that we don’t have any visibility at all of

the subcontracts. We do have a consent to subcontract process, and

there are clauses in the contract that require the contractor to notify us when they are taking certain subcontract actions at certain

dollar thresholds. But that regulation is very clear as to what that

information will be, and it says specifically that we are not, in our

consent to that subcontract, consenting to the terms and conditions

of those contracts, the price of those subcontracts, or the allowability of cost under those contracts. But the contractor does come

to us and tell us that they are subcontracting based on what the

contract specifically asks.

But to my knowledge, we don’t have any system where we automatically keep track of then every subcontract that a subcontractor

or a prime contractor lets.

Mr. SHAYS. Thank you, Mr. Chairman.

Mr. WAXMAN. Thank you, Mr. Shays.

This point leads into some questions I had, so if the gentleman

from Maryland would allow me to go ahead, I will.

The question of oversight over the activities of the private security contractors, this problem is illustrated by the clear indications

that there was unauthorized private security work under Government contracts with the Defense Department, and prime contractors were not even aware of it or did nothing to address it.

Mr. Flores, Fluor Corp. has a similar provision in its contract

with the Air Force, contractor force protection. The U.S. Government will provide for the security of contractor personnel in convoys and onsite commensurate with the threat and in accordance

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with the applicable theater anti-terrorism/Fluor protection guidelines.

Do you agree that this provision bars not just Fluor but its subcontractors from using private security contractors?

Mr. FLORES. In the case that you are speaking of and in all those

cases where we have to use Government for those security requirements, we have never acquiesced to our subs to have private security, at least on the site and working with us in getting that particular task done.

Mr. WAXMAN. What would you do if you determined that one of

your subcontractors had violated this provision? Would you report

it to the Army or to the Defense Department?

Mr. FLORES. What we would certainly do, I think a good example

was at Taji. We recognized that the Army was having trouble supporting ESS, and Lourens Baddenhorst coordinated with our

project director, and we went back to the Army and said it is not

working, we are anxious to get this bid down project completed for

soldiers so that we will improve their quality of life on this base.

But the Army said no, you can’t use private security on this.

We kept beating on the Army because of this, but if the Army

determines that their soldiers are living in certain conditions and

they don’t have the personnel, or other missions come up that preclude them from providing that convoy escort, we are not going to

go past the provisions of our contract and suggest to our subs that

they need to get private security.

Mr. WAXMAN. In a letter to Congressman Shays dated July 14,

2006, the Secretary of the Army stated, ‘‘Under the provisions of

the LOGCAP contract, the U.S. military provides all armed forces

protection for KBR, unless otherwise directed. Additionally, the

LOGCAP contract states that KBR personnel cannot carry weapons

without the explicit approval of the theater commander.’’ In your

written testimony, Mr. Seagle, you acknowledge that KBR contractors have used private security contractors. Doesn’t that violate the

terms of the LOGCAP contract?

Mr. SEAGLE. To clarify, I said we had other non-LOGCAP contracts in which we subcontracted for armed security. KBR has

never directly subcontracted for armed security under the LOGCAP

contract. KBR has never directly subcontracted for armed security

under the LOGCAP contract.

Mr. WAXMAN. You have done it through ESS, though?

Mr. SEAGLE. We have not required or directed any of our subcontractors to subcontract for security, either.

Mr. WAXMAN. Well——

Mr. SEAGLE. The majority of our contracts are firm fixed price,

competitively bid. We award them on best value to the Government, fully understanding that——

Mr. WAXMAN. Are you now aware that you did subcontract with

ESS for private security?

Mr. SEAGLE. Was I aware that ESS had—at this time I understand. When we initially had this conversation with the Army we

were focused on had Blackwater ever worked for KBR, to which the

response was no. We were initially told by ESS and Blackwater,

both, that Blackwater was not contracted to KBR.

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Mr. WAXMAN. Well, let me ask you about this. James Ray of KBR

wrote this e-mail on June 3, 2004, and it says, ‘‘We should not attempt to effect a material change in our contract with the Government by hiring a company that we know uses armed escorts. That

company is an agent of KBR, and if anything happens KBR is in

the pot with them. Even with lipstick, a pig is a pig.’’

Ms. Ballard, there seems to be a disagreement here on whether

the Defense Department prohibits the use of private security contractors on these contracts. Why is there so much confusion about

such a simple issue?

Ms. BALLARD. Contracts contain different provisions. In the case

of the LOGCAP contract, there was a specific provision that prohibited the use of private security contractors. There are others, the

design/build contracts, for example, that expressly say that the contractors would be providing their own security, and the proposals

included those security costs.

Mr. WAXMAN. Well, LOGCAP has an agreement they won’t have

these private security people, but they did it. Now what happens?

Ms. BALLARD. What happened when we had all the data that

demonstrated that they had, in fact, incurred these costs and

passed them on to the Government, the contracting officer issued

a payment adjustment and yesterday withheld $19.6 million. I am

sorry, they didn’t withhold it, they removed it from the KBR payments.

Mr. WAXMAN. It seems to me that the Defense Department and

the prime contractors sometimes don’t seem to have an idea of

what is going on lower down on the contracting chain, and it may

be acceptable not to have any oversight over subcontractors who

provide paper clips, but it is not acceptable when the subcontractors are putting armed forces in the field. That is my big concern.

I think it should be all of our concern. If the contracts don’t allow

it, those contracts need to be enforced.

Mr. Van Hollen.

Mr. VAN HOLLEN. Thank you, Mr. Chairman. And let me thank

all of our witnesses today. You covered a lot of the material I was

going to go over, and so I am not going to go back over it in great

detail, but, as you know, we sort of launched on this effort many,

many months ago in terms of looking at some of the subcontracts,

and it began as an effort to try and determine whether, from the

taxpayers’ perspective, some of this layering of subcontracts, costplus subcontracts, was a good deal for the taxpayer or not a good

deal for the taxpayer, because there did appear to be lots of markups that accumulated, and with a big price tag at the end of it.

During that process, we looked into whether or not the contracts

between KBR and the others in the subcontractor chain permitted

the contracting for private security personnel. As was testified to

by Ms. Ballard, the contracts with KBR prohibited, essentially,

both KBR and, as I understand it—and correct me if I am wrong—

your view also remains that it also prohibits subcontractors under

that prime contract from essentially engaging private security; is

that right, Ms. Ballard?

Ms. BALLARD. That is correct.

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Mr. VAN HOLLEN. OK. And it was on that basis that you made

the decision, as I understand, just yesterday to at least withhold

or—did you withhold it or you took back $19.6?

Ms. BALLARD. We took back $19.6 million.

Mr. VAN HOLLEN. And that was your estimate, I take it, of the

amount of moneys under this KBR LOGCAP contract that had

gone for the private security component; is that right?

Ms. BALLARD. Yes.

Mr. VAN HOLLEN. OK. I am just trying to get a better sense of

the Blackwater. Was that most of it going through this process to

the Blackwater private security?

Ms. BALLARD. What we relied on was a letter that was referred

to earlier from ESS to KBR that said there was a factor applied

to their direct labor costs, and our analysts then did the climate

changes against that to take the funds back from KBR.

Mr. VAN HOLLEN. OK. So that was done through your discussions with ESS?

Ms. BALLARD. It was KBR that notified us that this had occurred.

Mr. VAN HOLLEN. OK. With respect to the Blackwater private security folks, you were operating under this in your contract. Did

you understand that you were operating under the LOGCAP contract with KBR?

Mr. HOWELL. No, sir. We have not been certain which contract

applied. What we did know was two key facts: we were subcontracted to Regency, and ultimately we were providing services to

the U.S. military.

Mr. VAN HOLLEN. OK. So the personnel whose family members

we heard from earlier you hired pursuant to your contract with Regency, right?

Mr. HOWELL. Yes, sir.

Mr. VAN HOLLEN. OK. And I guess for the Regency representative here, was that contract, the KBR contract that we are talking

about today, that LOGCAP contract?

Mr. MURRAY. Well, Congressman, I don’t think there is a representative from Regency.

Mr. VAN HOLLEN. I am sorry.

Mr. MURRAY. I am with ESS.

Mr. VAN HOLLEN. I am sorry.

Mr. MURRAY. We contracted Regency to do our security services.

Turnkey service we contracted for all of our contracts. It wasn’t

targeted for KBR or non-KBR. It was across all of our contracts,

both with KBR direct with the military and commercial contracts.

When we had a security mission going to one of those camps or

sites, Regency would carry that mission for us.

Mr. VAN HOLLEN. Right. But let me just make sure I understand.

The $19 million that was withheld yesterday, or taken back yesterday, was essentially part of the funds that you initially charged the

Government under this contract; is that right?

Mr. MURRAY. I am not aware of that, Congressman. I am not

aware of the withhold or the action the Army has taken.

Mr. VAN HOLLEN. OK. Well, let me ask, I guess, Ms. Ballard.

Was that pursuant to this chain of contracts that we have been

talking about today?

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Ms. BALLARD. Yes, sir, it was.

Mr. WAXMAN. And if I might further inquire on that, may I assume that has to do with the fact that you were going to be coming

before this hearing today, and therefore punitive action was warranted and you took it?

Ms. BALLARD. No, sir. We received our positive confirmation on

January 30th, and from then until yesterday we accumulated the

documentation to solidify our decision. We consulted with counsel

and other agencies that bear upon that decision, and then we were

able to take action. This was important because KBR has the right

to dispute this, so it was important that we have our facts in order

before we take action.

Mr. WAXMAN. Well, I am pleased that you have your facts in

order, you took action, but I haven’t heard too much action taken

by the Defense Department in actually denying money to KBR and

some of these contractors. So, even if you don’t want to acknowledge this, I think that the fact we are holding this hearing today

might have saved the Government $20 million.

Mr. VAN HOLLEN. Thank you. I again appreciate the letter we received yesterday. I think Mr. Waxman and I both received a letter

yesterday.

With respect to the KBR contract here, is the reason that the

U.S. Government takes the position that they cannot subcontract

out for private security services because the expectation is that the

U.S. military will provide for that security?

Ms. BALLARD. The clause in the contract does stipulate that the

U.S. military will provide that security.

Mr. VAN HOLLEN. OK. To your knowledge, did any of the entities, the subcontractors in this chain of subcontracts we are talking

about today, did they request that the U.S. military provide security?

Ms. BALLARD. We have in writing from KBR that they nor any

of their subs ever requested in writing for this security.

Mr. VAN HOLLEN. OK. Thank you, Mr. Chairman.

Mr. WAXMAN. Thank you, Mr. Van Hollen.

Mr. Kucinich had just one question he wanted to ask and get an

answer for the record.

Mr. KUCINICH. Yes, Mr. Chairman. I am going to submit for the

record a story that was in the January 11, 2007, edition of the Pilot

Newspaper. The headline says, ‘‘Iraq Killing Contractor Could Test

Laws.’’ The question is this: Mr. Howell, are you familiar with a

December 24th shooting involving one of your employees who shot

and killed an Iraqi security officer? Are you familiar with that?

Mr. HOWELL. I am familiar with some aspects of it, yes, sir.

Mr. KUCINICH. Did your company order that man back to the

States?

Mr. HOWELL. That gentleman, on the day the incident occurred,

he was off duty. Blackwater did bring him back to the United

States and our client also understandably directed that he be off

the project immediately. His security clearance was revoked, and

there is other activity going on, sir.

Mr. KUCINICH. Is he going to be extradited back to Iraq for murder? And if not, why not?

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Mr. HOWELL. Sir, I am not law enforcement. All I can say is that

there is currently an investigation by, as I understand it, the FBI

and the Department of Justice of the incident that day, and we are

fully cooperating and supporting that investigation. What action

they will take, sir, I can’t say.

Mr. WAXMAN. Thank you, Mr. Kucinich. Mr. Welch has been

waiting. If you have further questions, if you would submit it in

writing, and we would appreciate responses in writing.

Mr. KUCINICH. Mr. Waxman, I appreciate your indulgence, and

I just want to point out that there is a question that could actually

make their corporate officers accessories here in helping to create

a flight from justice for someone who has committed a murder, and

so that is why I feel it is important that we get these answers.

Thank you.

Mr. WAXMAN. Well, let’s get the answers before we make the

charges. We would certainly welcome further responses to questions that either Mr. Kucinich or any member of the committee

may further want to ask, and have you respond to in writing for

the record. We will keep the hearing record open for another week.

Mr. Welch, you are going to conclude the questioning.

Mr. WELCH. Thank you, Mr. Chairman.

Mr. Howell, Blackwater has multiple contracts with the Federal

Government, including the Defense Department, State, and other

agencies, and it has contracts, of course, with other companies. I

want to ask you about whether Blackwater will be getting any additional contracts in the hear future. And specifically, to your

knowledge is Blackwater currently under consideration for any sole

source or no-bid contract from the Defense Department or any

other Federal agency?

Mr. HOWELL. Not to my knowledge, sir. At any given time we

have a number of business initiatives in progress, including U.S.

Government work, and to my knowledge no, but we may. I can’t

say definitively, sir.

Mr. WELCH. So you will confirm yes or no and get back with a

specific answer?

Mr. HOWELL. Yes, sir. And if I could caveat, if we could make it

with regard to unclassified matters?

Mr. WELCH. Has Blackwater had any communications with the

Defense Department or any other agencies in the past several

months regarding a contract to provide emergency evacuation services?

Mr. HOWELL. I don’t know, sir.

Mr. WELCH. And you will check?

Mr. HOWELL. I will check.

Mr. WELCH. And does Blackwater currently own any helicopters

that are designed for defensive purposes or for evacuating people

quickly?

Mr. HOWELL. A helicopter designed for defensive purposes, as I

as a military person understand it, would be like an Apache attack

helicopter. We don’t own anything in that nature. In terms of evacuation, any utility helicopter that would be normally used for personnel movement would be suitable for evacuation.

Mr. WELCH. And has Blackwater been trying to raise capital, to

your knowledge, to purchase or lease helicopters of this sort in

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order to potentially provide services to the United States Government?

Mr. HOWELL. Mr. Congressman, answering that question necessarily would harm a competitive U.S. Government bidding process that is underway. I am happy to answer it, but I would ask

that, in the interest of preserving competition, we do so in a closed

session or in writing.

Mr. WELCH. You will do that in writing?

Mr. HOWELL. Yes, sir.

Mr. WELCH. I want to ask you about the Fallujah incident. I

heard you testify about Blackwater’s concern for its employees,

members of the team, and all of us take seriously the genuineness

of that statement. But you heard the four women who were here,

and they had a question about what happened and why. My understanding is that your company has done an incident report.

Mr. HOWELL. As I understand it, there was more than one inquiry into the events of that day.

Mr. WELCH. So your company has done an inquiry, not just one

but several, correct?

Mr. HOWELL. I was not referring solely to Blackwater, sir.

Mr. WELCH. Well, I am asking you about Blackwater. You are

Blackwater?

Mr. HOWELL. Yes, sir.

Mr. WELCH. And I am asking you about Blackwater. Have you

done an incident report?

Mr. HOWELL. There was an investigation. Yes, sir.

Mr. WELCH. Is my question complicated? Have you done a report

or not?

Mr. HOWELL. No, sir. I am just trying to be clear. Yes, sir, we

have done a report.

Mr. WELCH. And you understand that—you were a member of

the military?

Mr. HOWELL. Yes.

Mr. WELCH. And obviously when the military loses one of their

sons or daughters, they provide information to the family, as much

as they have, about what happened, correct?

Mr. HOWELL. With one important caveat, sir, that there are instances where the military does not, and I can discuss that not in

a public forum.

Mr. WELCH. Well, the military takes seriously its ability to help

families who are grieving come to terms with their loss by doing

one of the most basic and human steps that an organization can

take, and that is to provide as much information as they can, correct?

Mr. HOWELL. Yes, sir.

Mr. WELCH. What is the problem about answering the question

to these four people who lost their loved ones by telling them everything you know about what happened and how it happened so they

can have the one thing they are requesting, and that is the truth?

Mr. HOWELL. Sir, some of the facts of that day were classified by

the Government and we are not permitted to discuss them.

Mr. WELCH. Well, let me ask you this. This committee has requested copies of that report or reports, correct?

Mr. HOWELL. Yes, sir.

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Mr. WELCH. Will you turn over to this committee those reports?

Mr. HOWELL. Sir, we cannot turn over classified information. It

would be a criminal act.

Mr. WAXMAN. If the gentleman would permit, that is not an accurate statement. We are entitled to receive classified information in

this committee. This was requested in our document request to

you, and we are expecting to receive that information from you.

Mr. HOWELL. I understand, sir.

Mr. WELCH. Ms. Ballard, are you aware of whether there was a

report that was done in the Pentagon concerning this incident?

Ms. BALLARD. No, sir, I am not.

Mr. WELCH. Is that anything within your knowledge that you

could respond to questions from me about, or do I have the wrong

person here?

Ms. BALLARD. Wrong person, sir.

Mr. WELCH. OK. Thank you.

Mr. Chairman, I just want to be certain I understand. You have

made it clear that this committee has requested the Fallujah incident reports from Blackwater.

Mr. WAXMAN. We have. Mr. Howell was not fully responsive to

my statement that we are entitled to receive information even if it

is classified, and we want you and expect you to turn over that document to us. Will you comply?

Mr. HOWELL. I want to ensure that we comply with the law, sir,

and I want to fully respond to the committee as much as possible.

We will turn over everything that we are permitted to without affecting attorney/client privilege and Government classification interests, and if that is not a sufficient answer I would have to provide one in writing, sir.

Mr. WAXMAN. Well, let me suggest this to you, in case there is

any vagueness of the law.

Mr. HOWELL. Yes, sir.

Mr. WAXMAN. We will supply you with the information about our

entitlement to information, notwithstanding its classification, and

that should eliminate the objection that you have raised to us. Attorney/client privilege, we will talk further about that, but matters

that Congress are entitled to receive, we expect to receive unless

you have some argument against it that fits into exceptions that

are recognized.

Mr. HOWELL. Yes, sir.

Mr. WAXMAN. We will both look at that together.

Mr. SHAYS. Mr. Chairman.

Mr. WAXMAN. Yes, Mr. Shays?

Mr. SHAYS. If I could just make a comment or two and just a

question?

Mr. WAXMAN. Sure.

Mr. SHAYS. One, I don’t have a lot of sympathy, frankly, for the

position of Blackwater right now, but I do have a concern and I just

want to express it. If information is provided to the committee that

is important for the committee to know, is it then transferred to

the parties that are in a lawsuit, and then does it become available

to either side? And is that a role we should be playing?

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Mr. WAXMAN. Absolutely not. It is not a role we should be playing and it would not be transferred for purposes of litigation, especially if it is classified information.

Mr. SHAYS. And then, just if I could make a closing comment

about this hearing, I just think it really has set the stage, I think,

for a very real dialog about a lot of things. For instance, I just

didn’t know the disinterest of one contractor of the Government

contracting out and then subcontractors, and then the further down

the chain you get there doesn’t seem to be this interest, either by

the original contractor or by the Government, in my judgment.

That concerns me.

And I would also like to know what is the policy of our Government? I consider contractors who die in Iraq as much heroes as

anyone else who has risked their life in Iraq. They are contractors.

And it just strikes me that the family should have the same courtesies that exist for military families. I am struck by the fact that

we may want to get into providing advice, counsel, whatever, in the

course of our hearing as to a uniform practice that should be provided, because I am left with the impression from our first four witnesses that they were treated in a very shabby way, and I would

like to think no one would be treated like that. That is the impression I am left with.

I thank my chairman for allowing me to close with those comments.

Mr. WAXMAN. I appreciate your comments. I certainly feel that

way. They expressed a great deal of emotion and very powerful testimony today.

Mr. Shays, I am pleased that you stayed here for the whole hearing. You, more than any other Member of Congress in the last Congress, actually actively got into many of these issues, and we look

forward to working with you and Mr. Davis on a bipartisan basis.

These are not partisan issues. I resent it when people try to make

this into a partisan issue, and I particularly resent it when it suggests that the family members came before us as partisans. It is

such an outrage. They are the ones who lost people in Iraq, and

we have no idea what their party affiliation, nor do we have any

interest in knowing what their party affiliation is.

To this panel, I thank you very much. We will have possible

questions——

Mr. MURRAY. Excuse me, Chairman Waxman?

Mr. WAXMAN. We will have possible questions for the record, and

we would ask you to respond.

Yes, Mr. Murray?

Mr. MURRAY. Yes. I would like to just make, if I may, one

clarification——

Mr. WAXMAN. Yes.

Mr. MURRAY [continuing]. On comments that were discussed in

the earlier session. There were discussions around our contract,

ESS’ contract with Regency, which is dated March 8th, and a subsequent meeting to that on March 11th whereby ESS and Regency

and Blackwater attended a joint implementation meeting. I just

wanted to advise the committee that our contract dated March 8th

did not change. None of the terms or none of the conditions of that

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contract changed as a result of that meeting or any other reason.

The contract on March 8th stood as it is.

Mr. WAXMAN. We appreciate that clarification.

Thank you all. You have been very helpful to us and we appreciate your being here and giving of your time and your answers to

us.

That concludes our hearing. We stand adjourned.

[Whereupon, at 3:55 p.m., the committee was adjourned.]

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