The security firm once known as Blackwater overbilled the federal government for services in Iraq and Afghanistan and submitted phony reimbursements and other bogus expenses, a lawyer said Tuesday in opening statements of a whistleblower lawsuit brought by two former employees.
A lawyer for the company, which now operates under the name Xe Services, denied the fraud accusations and said the firm's employees had always strived to be scrupulous in its accounting.
"The State Department continues to receive invoices from us, for our work," said the company's lawyer, David O'Brien. "They continue to pay it and they continue to do business with us."
The 2008 lawsuit from ex-employees Brad and Melan Davis accuses the company of submitting fraudulent bills to the State Department on its $1 billion contract for security work in Iraq and Afghanistan. If the jury agrees, the Davises would be eligible to collect a share of any money that the government lost to fraud.
Their attorney, Susan Burke, told a jury in U.S. District Court in Alexandria, Va., that Blackwater employees falsified records of how many workers were actually providing security services in Iraq and Afghanistan at any given time and also submitted inflated reimbursement amounts for travel.
"They didn't want to alert the State Department to that fact," Burke said. "The State Department had put an enormous amount of trust into them."
Melan Davis, who was responsible for pulling together travel expenses to submit to the State Department, had direct knowledge of the fraud because she participated in it herself, Burke said. Court papers allege the company overbilled the government by more than $123 million in labor and travel expenses, though a judge precluded the Davises from sharing that estimate with the jury after defense lawyers challenged it.
Melan Davis was the first witness. Asked by her attorney why she was there, she replied, "Myself, along with others, committed fraud."
U.S. District Judge T.S. Ellis III has already dismissed several of the lawsuit's claims, including a salacious allegation that Blackwater billed the government for prostitutes. The judge said there was no evidence that Blackwater sought out prostitutes.
Ellis also struck a claim that Blackwater overbilled on a security contract it was awarded in Louisiana in the aftermath of Hurricane Katrina.
O'Brien, the company's lawyer, said Blackwater had not engaged in fraudulent billing and that he would call State Department officials as witnesses to vouch for the company. He showed jurors emails between Melan Davis and Blackwater management discussing the importance of accurate billing and accounting.
"No one ever told them to falsify any documents _ nor would they have falsified any documents," he said.
He also said the State Department was more concerned with having the appropriate number of independent contractors in Iraq and Afghanistan than it was with the specific dates of travel listed on records.
The trial is expected to last about two weeks.
The Davises' lawsuit is one of several legal skirmishes Blackwater has fought following its contract work. A lawsuit unsealed this month from a current and former employee also accuses Blackwater of overbilling the government for work protecting State Department employees in Iraq and Afghanistan.
Blackwater founder Erik Prince was dismissed as a defendant last month. The lawsuit names as a defendant the U.S. Training Center, a business unit of the former Blackwater.