A federal judge on Friday tossed out parts of a lawsuit filed by two former employees against the security company once known as Blackwater but is allowing key claims to proceed to trial.
The rulings from U.S. District Judge T.S. Ellis III mean that, absent a last-minute settlement, a jury trial will likely commence June 7 on claims that Blackwater submitted fraudulent bills to the State Department on its $1 billion contract for security work in Iraq and Afghanistan.
Former employees Brad and Melan Davis filed the lawsuit under a whistleblower law that allows them to collect a share of any money that the government lost to fraud.
Blackwater denies the allegations.
At Friday's hearing, Ellis tossed out one of the more salacious claims in the Davises' lawsuit. The suit alleged that Moyock, N.C.-based Blackwater, now known as Xe Services, billed the government $1,400 for a prostitute who provided services in Afghanistan, under the category of "morale, welfare and recreation."
The court papers detailing each side's view of the evidence remain under seal, but Ellis said there is no evidence that Blackwater sought out prostitutes. Instead, Ellis said it appeared that a laundry supervisor was fired less than two weeks into her job, apparently for prostituting herself. Melan Davis was told by a supervisor _ perhaps in jest _ to bill the woman's laundry services under the morale category, but the government was never billed the $1,400.
Ellis also struck in its entirety a claim that Blackwater overbilled on a security contract it was awarded in Louisiana in the aftermath of Hurricane Katrina.
But Ellis is allowing the claims on the Iraq and Afghanistan contract to proceed to trial. And that contract is significantly larger _ $1 billion, compared to roughly $33 million for the Katrina contract.
It is not clear exactly how much the Davises allege was lost in the fraud. Their lawyer, Susan Burke, declined comment after Friday's hearing.
The Davises allege that Blackwater overbilled the State Department for security it provided in Iraq and Afghanistan. The contract allowed Blackwater to bill a specific amount for personnel in the country on any given day. Burke says the spreadsheets showing who was in country do not match the bills submitted by Blackwater to the State Department and that employees were ordered to alter paperwork to ensure that "no money was left on the table."
At Friday's hearing, Xe's lawyer, Richard Beizer, said the spreadsheets provide an incomplete picture of the boots on the ground in those countries and do not reflect, for instance, people who arrived in country late in the day after roll call was taken.
The Davises' lawsuit is one of several legal battles that Blackwater has fought following its contract work in Iraq and Afghanistan. The company has been trying to rehabilitate its image since a 2007 shooting in Baghdad that killed 17 people, outraged the Iraqi government and led to federal charges against several Blackwater guards.
Those accusations were thrown out after a judge found prosecutors mishandled evidence, but the case was resurrected last month by a federal appeals court.
The Davises' lawsuit was filed in 2008 and has produced a deluge of legal paperwork, much of it under seal and inaccessible to the public.
Ellis said Friday that in his 25 years on the bench he was "not sure I can quickly recall another case that can be said to be responsible for the destruction of vast forests in the Northwest. The amount of paper in this case has been staggering."