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Jury rules in favor of Blackwater in lawsuit

Friday - 8/5/2011, 9:48pm  ET

Associated Press

ALEXANDRIA, Va. (AP) - A jury ruled Friday in favor of the security firm once known as Blackwater, rejecting two former employees' claims that the company overbilled the State Department for its work in Iraq and Afghanistan.

Ex-employees Brad and Melan Davis alleged that Blackwater, now known as Xe Services, falsified travel and labor records so it could defraud the government. Blackwater's lawyers argued the Davises irresponsibly claimed fraud without evidence.

Company spokesman John Procter referred to the lawsuit as a "legacy matter."

"Xe's new leadership team is gratified by the result in this case, which from the beginning has been based on false and unfounded allegations," he said in a statement.

Many of the allegations in the lawsuit, first filed in 2008, were tossed out by the judge before they even got to the jury, including a claim that Blackwater billed the government for prostitutes. Federal Judge T.S. Ellis III said there was not enough evidence to support the claim.

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 Davises' lawyer, Susan Burke, argued that Blackwater cheated the government out of an unspecified sum of money by submitting phony invoices for travel and labor to the State Department. Specifically, she alleged that some records show Blackwater double-billed for flights in and out of Iraq and billed the government for the services of contractors when travel records showed they weren't even in the country where they were supposedly working.

Blackwater's lawyers said the Davises and their lawyer fundamentally misunderstood the company's billing and personnel records, which documented when contractors were in and out of country.

And the alleged double-billing, they argued, resulted when some contractors innocently missed scheduled flights because of the unpredictability of life in a war zone _ everything from sandstorms to sniper fire.

Burke was barred from presenting much of the evidence she sought to put in front of the jury. She had hoped to present testimony about an alleged threat a Blackwater employee made to State Department auditors. But Ellis barred the testimony because he said there was no evidence that the confrontation between the two men had anything to do with the auditors' work.

The case was initially filed in 2008 under the False Claims Act, a sort of whistleblower statute that allows people to sue on behalf of the U.S. when they have knowledge that the government is being defrauded.

While the jury rejected the lawsuit's claims of fraud and overbilling, a 2009 State Department audit found that Blackwater overbilled the State Department by as much as $55 million on a contract that produced roughly $1 billion in revenue.

Burke was barred in her lawsuit from specifying to the jury the exact amount of the alleged fraud but had argued in court papers that it could have been as much as $300 million.

Burke said in email to the Associated Press on Friday evening: "We will be filing the appeal on Monday. We believe the Court erred by excluding the majority of the evidence."

She is also representing two other former Blackwater employees who have filed a similar False Claims Act lawsuit against the company.
