Thread: Exclusive: Investment Giant Ends Talks With Blackwater

Exclusive: Investment Giant Ends Talks With Blackwater

Private Equity Firm Was Pondering $200 million Investment Into Controversial Security Firm

By MADDY SAUER
April 30, 2008

The chairman of Cerberus is former Treasury Secretary John Snow, and former Vice President Dan Quayle is also a prominent figure in the company.

After news broke this morning on the Blotter on ABCNews.com of the ongoing talks between the investment giant Cerberus and the controversial security firm Blackwater, the talks have now ceased, and there will be no deal.

Late today a spokesperson for Cerberus told ABCNews.com that they have decided not to pursue a transaction with Blackwater. The spokesperson declined to reveal the reasoning behind the decision.

Cerberus, which owns a controlling stake in Chrysler, had been in negotiations to buy the controversial security firm Blackwater USA, which has millions of dollars in U.S. government contracts in Iraq, according to sources familiar with the talks. Other sources said auditors from Cerberus had been examining Blackwater's books since the beginning of the year.

Related
Despite Investigations, Blackwater to Keep Working in IraqBlackwater 'Blood Money' Angers IraqisPHOTOS: 1st Look: Blackwater Shooting IncidentBlackwater did not immediately respond to a request for comment.

The reclusive founder of Cerberus, Stephen Feinberg, reportedly told his investors in a letter earlier this year that he hated all the attention the company was getting.

"We do our best to avoid the spotlight," wrote Feinberg, "but unfortunately, when you do some large deals, such as Chrysler and GMAC, it is hard to avoid."


Owning control of Blackwater would certainly have attracted even more attention to Cerberus. Blackwater has been accused of tax fraud, improper use of force, arms trafficking and overbilling connected to its work for the U.S. government in Iraq. A grand jury, federal prosecutors and congressional investigators are all currently probing allegations against the company.

Despite the controversy, however, Blackwater was recently renewed for a $1.2 billion private security contract with the State Department. The one-year extension is worth an estimated $240 million.

The chairman of Cerberus is former Treasury Secretary John Snow, and former Vice President Dan Quayle is also a prominent figure in the company. Cerberus holds controlling or significant minority interests in companies around the world that in aggregate currently generate more than $60 billion in annual revenues, according to their Web site.

http://abcnews.go.com/Blotter/story?id=4756462

Dem: Blackwater Dodged Millions in Taxes

October 22, 2007 1:29 PM

Justin Rood Reports:

A controversial U.S. private security company under intense scrutiny for its aggressive use of force has a new problem: an allegation it illegally avoided paying millions of dollars in taxes.

In a letter to Blackwater security firm president Erik Prince, Rep. Henry Waxman, D-Calif., charged that the company illegally dodged "millions" in payroll taxes by misclassifying its security guards as "independent contractors" rather than employees.

That way, Blackwater guards were responsible for paying their own Medicare, Social Security and unemployment taxes -- an "illegal scheme," according to Waxman, chairman of the House Committee on Oversight and Government Reform. If the firm had classified its armed guards as employees, which Waxman says it was required to do, it would have been responsible for covering those taxes.

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Since May 2006, the company should have paid more than $16 million in taxes and withheld another $16 million from guards' paychecks, Waxman said.

The company disagreed.

"The Chairman's contention is incorrect," Blackwater spokesperson Anne Tyrrell said in an e-mailed statement. "It is unfortunate that the Chairman has relied upon a one-sided description of the issue to color public perception without all the facts being presented."

As evidence of Blackwater's apparent wrongdoing, Waxman pointed to an IRS ruling from March that Blackwater's classification of a guard employee as a contractor was "without merit." While that ruling came in the case of an individual Blackwater guard, the agency warned that the ruling could be expanded to cover other Blackwater personnel, according to Waxman.

In her statement, Blackwater's Tyrrell noted that the company has appealed the IRS decision, and cited a different ruling, by the U.S. Small Business Association, which she said found that "Blackwater security contractors are not employees."

Blackwater is one of three private security firms operating on behalf of the U.S. government in Iraq, but the only one to classify its guards as independent contractors, Waxman said. With more than 920 personnel in Iraq and over $1 billion in work with the U.S. government since 2001, Blackwater is the largest private security firm operating in that country on behalf of the United States.

In recent weeks, the company has been called to answer for repeated aggressive acts by its guards that have left Iraqi civilians dead and wounded. The FBI is investigating the firm, and the Iraqi government has attempted to ban it from operating in its country. The company has said its personnel have acted properly, and that it welcomes the FBI investigation.

If Waxman's allegations are true, they could be embarrassing to others besides Blackwater. Its founder, Erik Prince, has reportedly given more than $225,000 to Republican groups and candidates. Prince's vice chairman, former CIA and State Department official Cofer Black, is a senior adviser to the presidential campaign of Mitt Romney, former Republican governor of Massachusetts.

http://blogs.abcnews.com/theblotter/200 ... ater-.html

Blackwater Overseers to Get Bonuses
December 04, 2007 2:41 PM

Brian Ross and Justin Rood Report:

U.S. government officials who have overseen the controversial Blackwater security firm's activities in Iraq are slated to receive thousands of dollars in performance bonuses, despite controversy surrounding the company.

A State Department document obtained by ABC News shows Diplomatic Security officials Kevin Barry and Justine Sincavage will receive between $10,000 and $15,000 for their "outstanding performance." Barry and Sincavage, who managed Blackwater's contract for the department, recently received promotions as well, ABC News reported in October.

Blackwater has denied the allegations against it, including charges it improperly fired upon and killed Iraqi civilians, smuggled weapons into Iraq, and dodged payroll taxes. Company founder Erik Prince called the shooting allegations "negative and baseless."

A State Department review released in October found serious problems with the operations of the Diplomatic Security Service (DSS), including lax oversight of Blackwater USA and other private security contractors.

Ambassador Richard Griffin resigned his post as head of DSS in October, immediately following the report's release.

The monetary awards for Barry and Sincavage were recommended by the 2007 Senior Foreign Service Performance Pay Selection Boards, which met this summer. They are to receive the awards Dec. 20, according to the State Department document. News of the awards was first reported by the Web site TPMmuckraker.com.

The State Department did not immediately respond to a request for comment.

http://blogs.abcnews.com/theblotter/200 ... -over.html

Baghdad Blood Money; How Much for a Dead Son?

Victim's Father Tells ABC News He's Been Offered Compensation for the Death of His Son on Sept. 16

By AADEL FAIQ and BRIAN ROSS
Feb. 8, 2008

The father of a 9-year-old Iraqi boy who says his son was killed by Blackwater security guards tells ABCNews.com the company has offered to build a monument and make an unspecified cash payment to compensate him for the death of his son, Ali.

The father of a 9-year-old Iraqi boy who says his son was killed by Blackwater security guards tells ABCNews.com the company has offered to build a monument and make an unspecified cash payment to compensate him for the death of his son, Ali.



Ali, 9, was one of 17 civilians killed when Blackwater security guards, escorting a diplomatic convoy, opened fire at Baghdad's Nisour square Sept. 16.
(ABC News)

More PhotosThe father says his son was one of 17 civilians killed when Blackwater security guards, escorting a diplomatic convoy, opened fire at Baghdad's Nisour square Sept. 16.

A lawyer for Blackwater says the company has no information that its guards were responsible for the boy's death and believe he was killed "by a stray bullet fired by someone not associated in any way with Blackwater" an hour after its guards left the square.

While a federal grand jury in Washington, D.C. investigates the deaths, Blackwater has been operating behind the scenes in Iraq to settle with the survivors and families of the dead.

Officials familiar with the case told ABCNews.com that Blackwater had resisted U.S. government demands that the company pay at least $100,000 per death, claiming the U.S. government has not paid that much in similar situations in Iraq.

Iraqi prosecutors reportedly are urging Blackwater to pay at least between $20,000 and $80,000.

The dead boy's father, Mohammed Hafiz, told ABCNews.com he had been approached by an Iraqi prosecutor, Jaafar al Musawi, who conveyed Blackwater's offer.

Blackwater lawyers say they believe the prosecutor has never spoken to the boy's father about any payment or negotiation.

In a letter to ABC News, Blackwater said a U.S. Army unit, the 1st Battalion, 64th Armor Regiment (Task Force 164) reported an incident involving "a warning shot that ricocheted and killed the nine year old boy."


A U.S. official says the incident report Blackwater refers to involves a different victim, a 9-year-old girl.

Blackwater complained to U.S. Army officials in October that it was being "falsely associated" with the death of Ali.

The father of the boy said the offer conveyed to him by the prosecutor involved Blackwater building a monument in the square to all of the victims, paying medical costs for those injured and making cash payments.

A Blackwater spokesperson declined comment on any negotiations involving the Sept. 16 incident but pointed to a U.S. government document indicating U.S. personnel would help with the distribution of "condolence payments."

The document states "such payments will be based on Iraqi cultural norms and will not be viewed as an admission of guilt."

Another victim, Adel Jabur Shamma, says he too has been contacted by the same Iraqi prosecutor, Jaafar al Musawi, who assured him Blackwater would cover his medical expenses.

Shamma says he cannot understand why it has taken so long for Blackwater to help him. He says he has been bed-ridden and is nearly handicapped after being shot in both legs during the incident.

(ABC News)
More PhotosAs ABCNews.com has reported, the federal grand jury criminal investigation is focusing on two or three Blackwater guards who opened fire, claiming they perceived a threat.

Other Blackwater guards have testified to federal agents, however, they saw no such threat.


Several of the Iraqi families have already filed lawsuits against Blackwater in U.S. courts, alleging Blackwater guards were guilty of "war crimes."

This post has been updated.

http://abcnews.go.com/Blotter/story?id=4256679&page=1

Cerberus was the monster that guarded the gates of hell.

[quote]In Greek mythology, Cerberus or Kerberos (Greek ΚÎ*Ï