AMY GOODMAN: A landmark lawsuit, whose outcome could have wide-ranging implications on issues of accountability for the entire private military industry, has been partially derailed. At the center of it all is the private security firm Blackwater USA.

The lawsuit was brought by the families of four Blackwater employees killed in Iraq three years ago. The four men died in a convoy ambush in March of 2004 in the city of Fallujah. After being shot, the men’s bodies were dragged through the streets and mutilated. Two of the corpses were strung from a bridge. The lawsuit says Blackwater broke its contractual obligations to the four men by sending them into hostile territory unprepared, namely in unarmored vehicles and without automatic weapons or a rear gunner.

Blackwater appealed the case unsuccessfully all the way to the Supreme Court, but this week a federal judge ordered the lawsuit to be decided behind closed doors in arbitration. This will allow Blackwater to avoid public examination of its practices in Iraq, and the outcome of the arbitration will be confidential.

The news was first reported by The Virginian-Pilot. The paper reports one of the three arbitrators could be William Webster, who served as head of the FBI and CIA under President Reagan and has personal and business ties to several Blackwater lawyers.

Bill Sizemore is an investigative reporter with The Virginian-Pilot. He was a finalist for the 2006 Pulitzer Prize in explanatory reporting for his coverage of Blackwater. He joins me from Norfolk, Virginia. Here in our firehouse studio, Jeremy Scahill, author of The New York Times best-seller, Blackwater: The Rise of the World’s Most Powerful Mercenary Army. Jeremy is a Puffin Foundation writing fellow with the Nation Institute and correspondent for Democracy Now! He testified two weeks ago before the House Appropriations Subcommittee on Defense at a hearing on defense contracting. We invited Blackwater USA on the program, but they did not respond to our request.

Bill Sizemore, let’s begin with you. Explain exactly what has happened to the Blackwater lawsuit.

BILL SIZEMORE: Well, this is a pretty major development, Amy. It’s two-and-a-half years now since this lawsuit was filed. Blackwater has been fighting it every step of the way. They even hired Ken Starr, the Clinton prosecutor, to argue before the Supreme Court. They were trying to get it moved from state court to federal court. They failed in that effort, but now they appear to have found another way to derail this case.

This federal judge in North Carolina last week ruled that the lawsuit is barred by the contract that these four men signed with Blackwater. This is an 18-page document in which they gave up all kinds of rights, including the right to sue Blackwater. The contract provides that in the event of any dispute with Blackwater they have to go to arbitration, which is, of course, a non-judicial process. And it has a number of advantages for Blackwater. There is no right to a trial by jury. The verdict is final and binding. There’s no appeal. There’s no right to discovery, which means the plaintiffs don’t have the same access to internal documents, Blackwater documents. And not least, as you mentioned, it all goes on behind closed doors. The proceedings are confidential, the outcome is confidential. Actually, this is the reason that this process is chosen in a lot of cases, to keep the proceedings private.

AMY GOODMAN: Jeremy Scahill, the significance of this?

JEREMY SCAHILL: Well, this is not just a case about one company, and it’s not just a case about this lawsuit. We have to remember that when those four men were killed in Fallujah, dragged through the streets, strung up from a bridge, the Bush administration responded by laying siege to the Iraqi city of Fallujah, carrying out some incredible 37,000 airstrikes. Hundreds of people were killed. Thousands were displaced from their homes. In many ways, it was the week that the war turned and that the anti-occupation resistance exploded. And so, examining this incident that would prove so definitive in the course of the Iraq War becomes much greater than just the lawsuit itself.

And what always has been at the center of this case is, what was the truth of the matter? What happened there? This wasn’t a retaliatory strike against these four families. They spent months trying to get Blackwater to be straight with them on how their loved ones ended up in the city of Fallujah, a place where the U.S. military wouldn’t even go, not to mention without an armored vehicle and heavy backup. And the families say that they filed the lawsuit only after Blackwater refused to be transparent with them.

I mean, what has happened is that since this lawsuit was filed in January of 2005, Blackwater has enlisted a high-powered team of very well-connected lawyers. Originally the lawyer on the case was Fred Fielding, who now is President Bush’s White House counsel. As Bill said, more recently it’s been Ken Starr.

And what’s interesting is that Blackwater hasn’t made much of disputing the specific allegations of the lawsuit. Instead, they have sort of taken a legal tactic that says, “We can’t be sued.” Blackwater has made this argument that the company, because it’s a part of the U.S. total force, the U.S. war machine, should be entitled to the same immunity from civilian litigation for wrongful death enjoyed by the U.S. military. At the same time, Blackwater’s high-powered lobbyists and PR specialists from — at the time, it was the Alexander Strategy Group, the Republican lobbying firm founded and staffed by former senior staffers of Tom DeLay — they were in the media waxing poetic about how it would be inappropriate to apply the Uniform Code of Military Justice, the court-martial system, to Blackwater operatives, because they’re civilians.

And so, now Blackwater failed to get the case removed from state court, where it was originally brought, and into federal court. They failed to get it thrown out entirely. They twice were rejected by the Supreme Court. And so, now they go to a senior judge who doesn’t even sit five days a week, I understand, in the Northern District of North Carolina. And they get him to order the case into arbitration. This really appears to be some incredible 11th-hour legal maneuvering on the part of Blackwater’s very high-powered legal team, and it raises serious questions about jurisdictional issues. I mean, a federal judge going in and snatching a case out of state court and sending it into arbitration raises a lot of serious questions.

The other thing that hasn’t been reported on this is that the families’ lawyers have been trying to depose a number of witnesses who worked for Blackwater that they believe will be able to bring forward information that will show that there are questionable activities that took place in the days leading up to those four men being killed in Fallujah. Last Christmas, Blackwater successfully appealed to the U.S. attorney to effectively step in and block a deposition of a former Blackwater manager. And the reason that Blackwater was able to do that is they said that it could potentially jeopardize national security, that this former Blackwater employee potentially was in possession of information that, if it was revealed publicly, could damage the national security of the United States. Well, just as this judge was ordering it into arbitration, the U.S. Army and the U.S. district attorney determined that wasn’t the case, and so the deposition theoretically could have gone forward. Now, as Bill said, it’s been removed to a venue where such depositions won’t take place.

And the other thing that we have to say here is that Congress has been investigating this issue, and when Henry Waxman asked Blackwater’s lawyer Andy Howell to hand over some key documents, Andy Howell sort of stuttered on it and said the company would have to get back to him. If this case goes into arbitration, the odds are, overwhelmingly, that it will not be open to the public, that a lot of the materials that would come out on this crucial incident will forever be locked away. And so, the stakes are very, very high here. It has everything to do with what’s happened in Iraq since that incident took place.

AMY GOODMAN: Bill Sizemore, the arbitration panel — William Webster, former CIA and FBI director, he is one of them?

BILL SIZEMORE: That’s right. He is one of the three.

AMY GOODMAN: His significance?

BILL SIZEMORE: Well, he was challenged unsuccessfully by the plaintiffs because of his connections to Blackwater. On his disclosure form that he filed, he mentioned that his law firm has business relationships with three of Blackwater’s law firms. He is personally and professionally acquainted with a couple of the high-profile lawyers that Blackwater has employed, including Kenneth Starr and Fred Fielding. He also sits on a corporate board with Joseph Schmitz, who is the chief operating officer and general counsel of Blackwater’s parent company. But, as I say, the challenge was unsuccessful. It appears that he is going to be allowed to sit on this three-man panel.

AMY GOODMAN: Jeremy Scahill?

JEREMY SCAHILL: Just to clarify something here, and Bill is well aware of this, but this is kind of the muckety-muck of this situation. This panel was a panel that was created at Blackwater’s request. Essentially, what happened is that late last year, Blackwater filed a counter-claim against the ancillary administrator of the estates of these four men — Wes Batalona, Mike Teague, Jerry Zovko and Scott Helvenston — and Blackwater sought $10 million in damages. Now, it still remains unclear: Is Blackwater individually suing this lawyer, Richard Nordan, or are they suing Richard Nordan in his capacity as the administrator of the four estates?

So Blackwater goes and they ask for an arbitration panel. And they ask for a panel to consist of this. The three arbitrators should be knowledgeable in both military and government contract law, preferably with personal battlefield experience. And so, that’s how you get William Webster. And then, originally, William Sessions, the former head of the FBI, was one of the panelists, but he was disqualified. My understanding is that his law firm had done some work for Blackwater, and so he was disqualified. So this was the panel that Blackwater sought out and got for this case against this lawyer representing the four estates.

Blackwater, one can assume, is going to try to get these two cases joined together so that this will also be the panel, William Webster’s panel, that hears the wrongful death case in arbitration. And that’s going to be a battle that’s going to unfold in the next — it could unfold this week or in the — certainly in the coming weeks. And what I would imagine — I mean, the lawyers, the families’ lawyers, are not speaking publicly about this, but what I would imagine could take place is that they would challenge that and say, you know, “We’re filing our own claim for arbitration, and we want a more impartial panel.”

AMY GOODMAN: Can you talk more about the former director of the CIA and FBI under Reagan, William Webster, and his links to Blackwater, since he wasn’t disqualified?

JEREMY SCAHILL: Right. I mean, first of all, he serves on a corporate board, as Bill said, this company called Singlepoint with Joseph Schmitz, who’s one of the key people now at Blackwater’s parent company, the Prince Group.

The other thing that I find curious is that he didn’t disclose that when he was director of the Central Intelligence Agency, Cofer Black was a major figure at the CIA. Cofer Black has been the vice chairman of Blackwater. He was the man who led the hunt for Osama bin Laden, a major CIA heavy hitter. And, to my knowledge, that didn’t come out on William Webster’s disclosure form. This is a very small world of people that operate in that Central Intelligence Agency circle, particularly when you’re talking about people who rise to the ranks of director of Central Intelligence or director of the Counterterrorism Center. And I find it curious that that relationship with Cofer Black apparently wasn’t relevant to the panel.

AMY GOODMAN: Cofer Black, a top official in Blackwater, also one of the heads of a spin-off, and he has a new position, as well.

JEREMY SCAHILL: Right. I mean, Cofer Black, just to remind people, was the man who stood before Congress and said there’s a before-9/11 and an after-9/11, and after 9/11 the gloves come off. He was a key figure in the extraordinary rendition program, the government-sanctioned kidnap-and-torture program, where prisoners like Maher Arar are sent to third-country hellholes to be tortured. He’s now a major figure at Blackwater USA. He’s been the vice chairman of the company. He’s now one of the key people behind a new privatized intelligence company called Total Intelligence Solutions that’s being bankrolled by Erik Prince, the head of Blackwater.

Another figure from Blackwater involved with that is Robert Richer, the former deputy director of operations at the Central Intelligence Agency, Enrique Rick Prado. And Cofer Black, more recently, Amy, has been tapped by Mitt Romney, who now is leading the GOP field in the Iowa polls. Mitt Romney has tapped him as a senior adviser on counterterrorism. So, o, what a tangled web we weave. But I find it’s very interesting that William Webster didn’t find it relevant to disclose that he was head of the CIA when Cofer Black was a major figure at the agency.

AMY GOODMAN: We’re talking to Jeremy Scahill, author of the book Blackwater: The Rise of the World’s Most Powerful Mercenary Army. And we’re talking to Bill Sizemore, investigative reporter for The Virginian-Pilot. He’s in Norfolk, Virginia. We’ll be back with them in a minute.

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AMY GOODMAN: We’re talking to Jeremy Scahill, author of The New York Times best-seller, Blackwater: The Rise of the World’s Most Powerful Mercenary Army, Democracy Now! correspondent, Puffin writing fellow at the Nation Institute; and Bill Sizemore, investigative reporter for The Virginian-Pilot, one of three finalists nominated for the 2006 Pulitzer Prize in explanatory reporting for his coverage of Blackwater.

Bill, as you talk to us from Norfolk, Virginia, can you talk about this other case where a Blackwater employee is being sued?

BILL SIZEMORE: Yes. Actually, there is a development going on today in that case. Blackwater is being sued by the families of three U.S. servicemen, soldiers who were killed in a plane crash in Afghanistan in November of 2004. This was a plane operated by Blackwater’s aviation affiliate. All six people aboard died, the three civilian crewmen and the three soldiers. And there are a lot of parallels.

And they’re actually in federal appeals court in Miami today trying to get that case thrown out. They’re arguing before a three-judge panel of the 11th Circuit in Miami, so it will be interesting to see how that goes.

AMY GOODMAN: And also, Bill Sizemore, you have written about the Blackwater employee who Blackwater is suing over exposing trade secrets.

BILL SIZEMORE: Yes. They are in court all over the place. This is a case where they are suing a former employee, a man that they fired, for giving away trade secrets. He was a cost analyst for the company. They say that he gave away cost modeling data, which was used in bidding for government contracts. He was fired by the company and now works for one of their competitors, a small startup company based in northern Virginia.

It’s an interesting case. It goes beyond your normal corporate trade secrets case in some ways. And it sort of reflects the culture of these private military companies. This man claims that — Blackwater actually has an affidavit from him in which he admits giving away trade secrets. He says that that statement was induced under duress, that he was essentially shut up in a room, a conference room, at Blackwater and not allowed to leave until he signed the statement. He says that — he accuses one of the Blackwater executives, who was a former Navy SEAL, of making threatening moves, of sitting very close and leaning in and pressuring him.

AMY GOODMAN: Well, Bill, we’re going to have to leave it there, because I know we’re going to lose the Norfolk satellite. Bill Sizemore, investigative reporter for The Virginian-Pilot, again, one of the three finalists for the Pulitzer Prize for his coverage of Blackwater. Jeremy Scahill, if you could take it from there on those two cases, just elaborate.

JEREMY SCAHILL: Well, as Bill said, with this Afghanistan case, I mean, we’ll have to wait and see what happens today. But these are perhaps the two major cases involving well-known war contractors in the — not only the so-called global war on terror, but the invasion and occupation of Iraq. I mean, KBR, for instance, the largest war contractor in Iraq, has filed an amicus brief supporting Blackwater. I think the industry views this as the tobacco litigation of the '90s. Once that first domino goes down, it can set off a chain reaction. And in the case of the Afghanistan crash, it's not Blackwater contractors’ families that are suing; as Bill said, it’s active-duty U.S. soldiers. So this raises a whole slew of other issues, and, very similar to the Fallujah case, Blackwater has been defeated at a number of points in this process by the federal judge who has been hearing the case. He has been very skeptical of Blackwater’s arguments that they’ve been making. And so, the stakes are very high. And as Bill says, Blackwater finds itself in courtrooms and battles around the country.