Judge says lawsuit against former Blackwater tenuous

By Matthew Barakat Associated Press ALEXANDRIA, Virginia (AP) -- A jury will continue to hear a civil lawsuit alleging fraud by the security contractor once known as Blackwater, but a judge said Tuesday the case "hangs by a thread." Lawyers for Blackwater, now known as Xe Services, asked the judge to dismiss the case. It alleges Blackwater overbilled the government for labor and travel expenses while protecting State Department workers in Iraq and Afghanistan. Their motion Tuesday came after the plaintiff, former Blackwater employee Melan Davis, and her lawyer presented a week's worth of testimony to a federal jury in Alexandria. U.S. District Judge T.S. Ellis III did toss out some of Davis' allegations but ultimately ruled the case should continue. The defense was to present its evidence beginning Wednesday. But Ellis warned that the evidence of fraud is flimsy. Ellis told Davis' lawyer, Susan Burke, that "it's by grace, more than anything else," that he's allowing the trial to continue. He said that the chief claim by the plaintiff "hangs by a thread." After sending the jury home for the day Tuesday, Ellis said repeatedly that the case had major holes and that he was unsure how it could ultimately survive. Burke argues 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 knowingly 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. But Blackwater's lawyers said Davis and her lawyer fundamentally misunderstood the spreadsheets that 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. "There is no evidence of falsity" in the bills Blackwater submitted to the State Department, said defense lawyer Richard Beizer. 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. The plaintiff, or relator, is allowed to keep a portion of any judgment awarded to the government. Davis' case has been significantly whittled down by the judge from its initial allegations, both before and during the trial. Some of the most eye-catching allegations were tossed out before trial. For instance, a claim that Blackwater billed the government for prostitutes under the category of morale and welfare was tossed out by Ellis, who said there was no evidence to support it. 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 suit is one of several legal battles that Blackwater has fought following its contract work in Iraq and Afghanistan. The company has been trying to rehabilitate its image since a 2007 shooting in Baghdad that killed 17 people, outraged the Iraqi government and led to federal charges against several Blackwater guards. Those accusations were thrown out after a judge found prosecutors mishandled evidence, but the case was resurrected earlier this year by a federal appeals court. Published: Thu, Aug 4, 2011