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Blackwater rebuilding seen facing challenges

Lawsuits, US probes could slow expansion

A firearms instructor at Blackwater Worldwide demonstrates a weapon on the company's grounds in Moyock, N.C. Blackwater executives say the company will survive as it shifts focus more toward aviation and logistics. A firearms instructor at Blackwater Worldwide demonstrates a weapon on the company's grounds in Moyock, N.C. Blackwater executives say the company will survive as it shifts focus more toward aviation and logistics. (Gerry Broome/Associated Press)
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Associated Press / July 23, 2008

MOYOCK, N.C. - The world over, guns for hire are known as "Blackwater guys" - and that's the reason Blackwater Worldwide wants to move beyond the business of private security contracting.

But Blackwater's breakneck growth in the past decade has come largely from successfully protecting the nation's top diplomats on the world's most volatile streets. The company has earned more than $1 billion since 2001 in government contracts, much of it providing security and protective services for US diplomats working in Iraq.

There's no guarantee a change in focus to more conventional contracting, including the privately held company's roots in combat training, will allow Blackwater to reach its revenue target of $1 billion a year by 2010. Meanwhile, the company faces federal investigations and civil lawsuits that could disrupt its work and the money it needs to expand.

"All we can do to save ourselves in crisis and to grow our business is to make sure that every contract we get, we execute flawlessly," said Bill Mathews, Blackwater's executive vice president.

The company's leadership team said this week that the current "crisis" stems from the damage its work in private security contracting has inflicted on the Blackwater name, and they blame both the media and the politics of war.

More than a dozen federal agencies have investigated the company for its security contracting work, Blackwater said, a list that includes the Transportation Security Administration and the Department of Agriculture. Company officials don't mention the FBI, which is leading a probe into a September 2007 shooting at a crowded Baghdad intersection involving Blackwater guards. Seventeen Iraqis were killed.

Blackwater has two large protection contracts - one with the State Department and one that's classified - and company president Gary Jackson said they're not bidding for any others because the cost of doing business is too high.

Industry observers say Blackwater's decision to scale back security work is not a ruse to cover up a decline in business.

Blackwater officials stress that the company will honor its current security contracts and take on those sought by the US government.

But chief executive and founder Erik Prince said his company is focused on building its brand name in other businesses - each with their own challenges.

"The security business is what it is," Prince said. "I don't see that growing a lot. Iraq is getting progressively better. So, that total demand from the US government will probably stay the same or decrease slightly. We're just growing other parts of the business around it."

Blackwater has designed prototypes for a vehicle for border patrol agents and has been pumping out versions of its Grizzly armored vehicle.

Blackwater is also building an air force of sorts. The company and its affiliates have more than 50 aircraft at its disposal, many with the flexibility to land in remote airstrips.

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