If it Looks Like Blackwater and Acts Like Blackwater...

| Wed Feb. 24, 2010 4:32 PM EST

Why did Blackwater set up a new corporate identity when it inked a subcontract with Raytheon to train Afghan troops? Masking its scandal-tainted brand was the brainchild of its defense contractor client, according to a top executive for Xe Services (as Blackwater is now known).

Testifying before the Senate Armed Services Committee on Wednesday, Fred Roitz, an executive vice president at Xe, pulled back the curtain on the creation of Paravant, LLC. He suggested that Raytheon wanted to do business with Blackwater—so long as it didn't appear that it was actually doing business with the controversial security firm. Roitz said it was his "understanding... that the request for a company other than Blackwater came from Raytheon."

So Paravant was born. As Brian McCracken, a former Paravant vice president who now works for Raytheon, acknowledged, the subsidiary and Blackwater were effectively "one and the same." Along with a bank account and address, Paravant also shared its corporate parent's propensity for stirring up controversies. In May, two of the firm's trainers, Justin Cannon and Christopher Drotleff, opened fire on an oncoming car, killing two Afghan civilians and wounding a third. The men are currently being prosecuted by the Justice Department on second-degree murder and weapons charges. A months-long investigation by the armed services committee followed, unearthing evidence [PDF] that Paravant personnel had acted recklessly, disregarded military regulations, and improperly acquired hundreds of AK-47s and other firearms that were intended for use by the Afghan National Police. The probe also indentified a series of vetting lapses by Blackwater and major oversight failures by the army officials that were supposed to be supervising its work.

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Paravant's two-year contract, which was worth about $20 million and expired last fall, was part of a 10-year, $11.2 billion Raytheon program called Warfighter FOCUS that is overseen by the Army's Program Executive Office for Simulation, Training, and Instrumentation (PEO STRI).

Sen. Claire McCaskill (D-Mo.), a member of the committee, described Paravant as a "classic example of a cover corporation," created to deceive government contracting personnel about the true corporate governance of Paravant.

Apparently, it worked. Both the PEO STRI contracting officer overseeing Paravant's work, Steven Ograyensek, and the head of its contracting office, James Blake, testified on Wednesday that they were unaware that Paravant was linked to Blackwater. That is, until the connection became public following the May shooting involving Cannon and Drotleff. (A source close to Blackwater, however, scoffed at the suggestion that PEO STRI was unaware of Parvant's corporate parent. "All they had to do was look at the address," he said.)

McCaskill said Raytheon's apparent attempt to "cover the fact that they were actually contracting with Blackwater" was "very troubling." And she hinted that Raytheon officials may be called upon to answer for this. (A Raytheon spokesman did not respond to a request for comment.)

In a statement, Raytheon spokesman Jon Kasle declined to directly address Roitz's claim, but said the company's client, PEO STRI, had been "involved" in the "evaluation and selection process" of subcontractors, including Paravant. "Paravant employees subsequently violated policies of their contract which led to our termination of the relationship for cause last year. Raytheon has been working closely with our customers to enhance controls, procedures and oversight of contractor and subcontractor personnel. We will continue to work with our customers to ensure that strong oversight supports the success of our training services programs."

"There's clearly an effort to coverup that Blackwater was the real contractor here," said Sen. Carl Levin (D-Mich.), the committee's chairman. He added later, "This is some very serious business we're talking about here...This is deception."

During the hearing, McCaskill grilled Roitz about Xe's infamously opaque corporate structure. Under Blackwater founder Erik Prince, who stepped down as the company's CEO last March, the firm created an ever expanding network of subsidiaries and related entities, incorporating some of them in tax havens like the Bahamas.

When McCaskill asked Roitz how many names Blackwater/Xe is actually operating under, he was unable to enumerate the extent of Prince's corporate holdings. He told the Senator he would have to get back to her so he didn't "forget any." He added, "We have many names."