WASHINGTON  2 October 07- A House chairman on Tuesday questioned whether the State Department acted as an "enabler" to Blackwater USA security to cover up Iraqi civilian deaths, and he cast the company as a rogue mercenary force that may be overcharging the government.

"Privatizing is working exceptionally well for Blackwater," said Rep. Henry Waxman, D-Calif. "The question for this hearing is whether outsourcing to Blackwater is a good deal to the American taxpayer."

The House Oversight and Government Reform convened the hearing amid an FBI investigation into a Sept. 16 shootout involving Blackwater personnel that resulted in 11 Iraqis killed. The Justice Department sent the panel a letter Tuesday asking members not to address the incident during the hearing, citing a need to conclude first its investigation.

Waxman, the panel chairman, said he agreed not to probe the specifics of the incident, but that it was within the committee's right to raise questions about the company's overall performance in Iraq.

The founder of Blackwater USA vigorously defended his private security company against charges of covering up Iraqi civilian deaths, saying 30 of its contractors have been killed while protecting U.S. diplomats and no Americans have died while under its watch.

"I believe we acted appropriately at all times," Erik Prince told the committee, after praising the skill and dedication of Blackwater employees.

Prince sat at the witness table alone. Sitting directly behind him was Stephen Ryan, an attorney with the law firm McDermott Will & Emery.

Prince, a former Navy seal, specifically disputed a congressional report's finding that Blackwater is an out-of-control outfit that's indifferent to Iraqi civilian casualties. And he maintained that his guards were responding to hostile fire when they engaged in a Sept. 16 shootout while protecting a U.S. convoy. At least 11 Iraqis died as a result of that incident. Prince's contention about the nature of the gunfire exchange is hotly disputed by witnesses and the Iraqi government, and the incident remains under U.S. and Iraqi investigation.

"To the extent there was loss of innocent life, let me be clear that I consider that tragic," Prince said in his prepared opening statement to the congressional panel. "Every life, whether American or Iraqi, is precious." But, he added, "based on everything we currently know, the Blackwater team acted appropriately while operating in a very complex war zone."

Prince, 38, said existing laws and regulations provide an adequate level of accountability and oversight for contractors in battle zones. But, "Blackwater believes that more can and should be done to increase accountability, oversight and transparency," he said.

Prince said the company supports legislation written by North Carolina Democratic Rep. David Price, a longtime advocate of increasing the legal oversight of contractors. This week, the House will consider a bill from Price that would make all contractors subject to prosecution in U.S. courts.

Waxman said at least one incident raises questions about the State Department's involvement. In December 2006, after a drunken Blackwater contractor shot an Iraqi guard, the State Department advised the company how much to pay the family and then allowed the contractor to leave Iraq 36 hours after the shooting. Internal e-mails later revealed a debate within the State Department on the size of the payment.

"It's hard to read these e-mails and not come to the conclusion that the State Department is acting as Blackwater's enabler," Waxman said.

Rep. Tom Davis, R-Va., the committee's top Republican, said the State Department is "trying to get it right," but its oversight of security contractors "seems to have some blind spots as well," according to his opening statement.

There's little data on contractor performance, Davis said, "so it's impossible to know if one company's rate of weapons related incidents is the product of a dangerous 'cowboy' culture or the predictable result of conducting higher-risk missions."

Davis said concentrating only on Blackwater won't answer the complex questions surrounding the use of security contractors.

"Nor are we likely to learn much by focusing on one sensational incident still under investigation," Davis said.

Blackwater has nearly 1,000 personnel working in Iraq.

Prince rejected a claim in a congressional report released Monday, saying Blackwater does not engage in "offensive or military missions, but performs only defensive security functions."

While noting that the Sept. 16 incident remains under investigation, Prince said Blackwater guards acted properly after a car bomb exploded near a diplomatic convoy they were protecting.

After the bomb detonated the guards came under small-arms fire and some of them returned fire at "threatening targets," which included vehicles that appeared to be suicide car bombers. Only five of approximately 20 Blackwater guards involved fired their weapons, Prince said.

Blackwater helicopters did assist in directing the convoy to safety, but the choppers did not fire their weapons, he said.

"Despite the valiant missions our people conduct each day with great success, in this September 16 instance, Blackwater and its people have been the subject of negative and baseless allegations reported as truth," Prince said.

On Monday, the FBI opened an investigation of the Sept. 16 incident - the latest fatal shootings in Iraq involving Blackwater guards. The FBI team was sent at the request of the State Department and its findings will be reviewed for possible criminal liability.

Blackwater, founded in 1997 by Prince and headquartered in Moyock, N.C., is the largest of the State Department's three private security contractors. The others are Dyncorp and Triple Canopy, both based in Washington's northern Virginia suburbs.

Blackwater has had more shooting incidents than the other two companies combined, according to a report written by the House Oversight and Government Reform Committee ahead of Tuesday's hearing.

Blackwater, which has been paid more than $1 billion in federal contracts since 2001, is embroiled in a host of controversies over the conduct of its guards.

Among the Monday report's most serious charges was that Blackwater contractors sought to cover up a June 2005 shooting of an Iraqi man and the company paid - with State Department approval - the families of others inadvertently killed by its guards.

Story from Military.Com