Xe returns to training roots after 'implosion in the swamp'

Facing stiff headwinds from the new administration in Washington and the impending loss of its biggest government contract, the company formerly known as Blackwater is remaking itself into a smaller, more narrowly focused enterprise.

Having renamed itself Xe (pronounced "zee") and shed virtually all of its top executives, the Moyock, N.C.-based military contractor is going back to basics, refocusing on the core lines of business that launched it a decade ago: training and logistics.

Conspicuously de-emphasized in this new, leaner business model is the kind of work that made Blackwater famous: providing armed security teams for hire in war zones.

That work vaulted the company into worldwide headlines when its men repeatedly found themselves embroiled in violent incidents in Iraq. Six of them now face criminal charges after being accused of unprovoked killings of Iraqi civilians.

Fed up with its inability to hold the company accountable, the Iraqi government denied Blackwater a license to operate. And in Washington, a shift in political power has brought multiple initiatives to rein in the use of private soldiers.

Blackwater founder Erik Prince announced earlier this month that he was stepping down as chief executive and bringing in a new leadership team.

Other than Prince, who will remain as chairman but is stepping away from daily oversight of the company, all of the top-level executives who steered Blackwater through its tempestuous first decade are gone.

"The implosion in the swamp." That's what ex-Blackwater Vice President Jamie Smith calls the mass exodus from the company's executive suite in Moyock, on the edge of the Great Dismal Swamp.

Smith, a former CIA operative, spent two years at Blackwater in the early 2000s and helped start up the personal security business that would later become so controversial.

He believes the company didn't have the proper management to handle the rapid, exponential growth that came with the Bush administration's large-scale outsourcing of security work in Iraq.

Blackwater has earned nearly $1.3 billion from federal contracts since 2000, according to the Web site FedSpending.org. Nearly 80 percent of that came from the State Department, which hired the company to protect its diplomatic personnel in Iraq.

Prodded by complaints about Blackwater from the Iraqi government, the Obama administration said in January that the contract will not be renewed when it expires in May.

Smith said he expects that work to be split between two other security firms already doing similar work in Iraq, Triple Canopy and DynCorp.

Smith is now chief executive of a Virginia Beach-based security firm, SCG International. He said the re making of Blackwater into Xe has not immediately meant more business for him, but he has hired a few of the Xe employees laid off in recent months.

Anne Tyrrell, a Xe spokeswoman, said the company eliminated 13 positions in the latest downsizing.

On Xe's revamped Web site, the company bills itself as a training and logistics provider. There is scarcely any mention of personal security services.

Deborah Avant, a professor at the University of California-Irvine who has written a book on the private military industry, said the company appears to be returning to its roots.

Xe provides training for every U.S. military branch and many state and local law enforcement agencies at its 7,000-acre Moyock complex and two satellite locations in California and Illinois.

The company also has an aviation division with a fleet of nearly 80 aircraft. For several years it has had a Pentagon contract for air transportation services in Afghanistan. In addition, it is seeking contracts for a 183-foot ship and an unmanned blimp.

As for the name change, Avant said, it's not the first time a security company has resorted to that tactic when it got into political hot water.

"They just kind of melt," she said. "They change their name, they get new leadership and hope that people forget." But she added: "I don't know how successful it'll be, because they're so big and splashy and public."

Erica Razook, policy director for economic relations at Amnesty International USA, a longtime Blackwater critic, said it's too soon to tell how far the company's transformation will go.

"We'll wait and see if this new group taking the lead within the company actually makes real changes, adopts meaningful standards on training and vetting of employees, and adopts a comprehensive human rights policy," she said. "They might be operating in capacities that are less visible to the public now than their security contracts. But that only means that we have to watch them even closer."

Robert Young Pelton, an author who has interviewed Prince and traveled with Blackwater convoys in Iraq, thinks Prince is hoping to sell the company.

"My take is that the renaming is just his way of trying to rebuild the brand so he can dump it and get some of his money out," Pelton said.

One big thing clouding Xe's future is the change of control in Washington. Blackwater was known for its close ties to the Republican administration and Congress. Now both have turned Democratic, and some of the company's harshest critics have ascended to positions of power.

When he was in the Senate, Barack Obama sponsored a bill to expedite prosecution of private contractors for criminal misconduct in combat zones. As president, he has called for a government-wide examination of outsourcing. In particular, he has said he wants to make sure that "inherently governmental" tasks are not privatized.

Secretary of State Hillary Rodham Clinton went even further as a senator, co-sponsoring legislation that would have explicitly banned private security contractors from the war zone.

Meanwhile, Xe must still contend with a variety of long-running legal challenges:

n The six contractors charged with manslaughter in the September 2007 shootings in Baghdad's Nisoor Square are slated for trial early next year. In addition to the criminal case, the company faces a civil lawsuit brought by families of the victims.

n Federal prosecutors have not yet said whether they will seek an indictment against a Blackwater employee who killed an Iraqi vice president's bodyguard in an alcohol-fueled confrontation on Christmas Eve 2006.

n The company faces a wrongful-death lawsuit brought by the families of three U.S. servicemen killed in a Blackwater plane crash in Afghanistan in 2004.

n A lawsuit brought by survivors of four Blackwater contractors killed in a grisly convoy ambush in Fallujah, Iraq, in 2004 has been diverted into private arbitration.

Pilot writer Louis Hansen contributed to this report.

Bill Sizemore, (757) 446-2276, bill.sizemore@pilotonline.com