Private military contractor Blackwater and its affiliates may have wrongly received more than $100 million in contracts that were supposed to be set aside for small businesses, according to an inspector general's report released today.

At issue was a November 2006 determination by the Small Business Administration that a Blackwater affiliate, Presidential Airways, was a small business with less than 1,500 employees.

Blackwater contended, and the agency agreed, that its more than 1,000 workers providing security for the State Department overseas were not employees, but independent contractors. That made the company appear smaller on paper than it actually is.

The SBA Inspector General said that assessment was incorrect, based on SBA regulations.

How the agency made that determination regarding Blackwater is unclear, the report concluded.

"We're not sure how that happened," Glenn Harris, chief counsel for the SBA inspector general's office, said in an interview with TPMmuckraker. "We're not saying there was misrepresentation. ... It could be contracting-officer error."

Although Blackwater did provide some information indicating the size of the company, the SBA appears to have overlooked evidence that the company was too large to qualify as a small business.

SBA did not follow-up on or attempt to reconcile conflicting information in its files that the total number of Blackwater employees -- even excluding the security personnel hired under Federal contracts -- exceeded the applicable size standard.

The SBA IG forwarded its report to the Department of Defense and the Department of Veterans Affairs, which together awarded Blackwater some 39 contracts that were set aside for small business. SBA only accesses whether a company is eligible for small-business contracts.

Rep. Henry Waxman (D-CA), chairman of the House oversight committee, questioned Blackwater's conduct.

"The SBA IG report raises serious concerns about whet her Blackwater made false statements about its small business status to the federal agencies that awarded these contracts," wrote in a memo to his committee today.

A spokeswoman for Blackwater denied any wrongdoing by the company.

"Over the past several years, expert accounting and outside legal counsel have determined that Blackwater's classification of security personnel as independent contractors is reasonable, correct and legally protected," said Anne Tyrell, the spokeswoman.

She said the IG's report "draws no conclusions" and was "unnecessarily speculative."

The Small Business Administration did not respond to a request for comment.

Late Update: The SBA issued a statement noting that the the IG report questions its reasoning in the size determination but did not declare it incorrect.

The lack of clarity, the report says, depends on various interpretations of whether nearly 1,000 security personnel hired for a Department of State contract were employees and should have been counted against the 1,500-employee limit, or whether they were contractors and should not have been counted.

"As a legal matter, some factors suggested Blackwater's security personnel were employees; other factors suggested they were independent contractors. The company also represented that those staff were considered independent contractors for IRS purposes," the statement said.

Attorney General Michael Mukasey is having a lovely time in front of the House Judiciary Committee today, bantering about college football with Rep. Steve Cohen (D-TN) and quoting America's archetypal socialist during questioning with Rep. Ric Keller (R-FL):

KELLER: Back to my original questions. You've got less than six months on the clock here with the end of the Bush administration, uh, will you commit today to sitting down with our congressional leaders to try to fashion a compromise relating to these national security issues that would ultimately result in you being able to reccomend that the president sign the bill or in the alternative is there no bill that you would recommend being signed?

MUKASEY: Um, I'm in the same position as, um, a Socialist candidate for president named Eugene Debs who said, "I'll talk to anybody who'll talk to me." I'll sit down with anybody that wants to sit down and have a serious conversation about what can be done and what can't be done, but first we need to talk about what's there and what's there is not acceptable.

Before that, Keller asked the AG some questions about the Media Shield Bill -- which is a really, really, really bad idea according to Mukasey. Not even ten angels could save it, nevermind presidential candidates Sens. Barack Obama and John McCain:

KELLER: . . . Obama and Senator McCain said they would sign the bill and I think we can agree that one of those two men is going to be the president of the United States. And so, you would agree with all three of those facts?

MUKASEY: I would agree with all of those facts and I would also agree that ten angels swearing on bibles that that bill was harmless would not change the provisions that are in it.

We've seen a lot of assertions of executive privilege in the last few months-- from Karl Rove to Stephen Johnson -- but now Attorney General Michael Mukasey has claimed executive privilege on behalf of President Bush.

Mukasey's letter to House Oversight Committee Chairman Henry Waxman (D-CA) last night, pre-empted a vote this morning on contempt of Congress stemming from the White House's refusal to release FBI documents relating to the Valerie Plame leak scandal. The documents were subpoenaed by Committee on June 16.

From the Mukasey's letter to Bush:

I am greatly concerned about the chilling effect that compliance with the Committee's subpoena would have on future White House deliberations and White House cooperation with future Justice Department investigations.

Hmmm. Where have we heard that before?

House Oversight Committee Chairman Henry Waxman (D-CA) is wielding more than his gavel against Attorney General Michael Mukasey.

In a letter to the AG today, Waxman brought out the big guns, stating that the Committee would vote to hold him in contempt on July 16, if he failed to produce a report on an interview with Vice President Cheney regarding the Valerie Plame leak scandal.

From Waxman's letter:

Despite the Committee's repeated requests, you have consistently refused to provide these reports to the Committee or unredacted versions of the reports of FBI interviews with White House staff. In response to the Committee's June 16 subpoena, you wrote: "we are not prepared to provide or make available any reports of interviews wi t h t he President or Vice President from the leak investigation" because of "core Executive Branch confidentiality interests and fundamental separation of powers principles."

. . .I regret that your failure to produce responsive documents has created this impasse, but Congress has a constitutional duty to conduct oversight of the executive branch. Therefore, unless all responsive documents, with the exception of the FBI interview report of President Bush, are provided to the Committee or a valid assertion of executive privilege is made, the Committee will meet on July 16 to consider a resolution citing you in contempt. I strongly urge you to reconsider your position and comply with the duly issued subpoena.

As we reported earlier, Chairman Waxman of the House Oversight Committee claimed today that the Bush Administration knew about the Hunt Oil deal way before it happened-- something the administration has denied regularly.

According to Waxman, there were nearly a dozen contacts between various levels of the administration and Hunt Oil as the deal was taking place. Hunt regularly informed the President's Foreign Intelligence Advisory Board of his intentions to seek a deal with the Kurdistan government. Management at Hunt also regularly met and communicated with the U.S. Regional Reconstruction Team (RRT), as well as State Department personnel.

So let's go through a little time line of the events and communication leading up to Sept. 8, 2007-- the day the Hunt Oil deal was finalized with the Kurdistan government.

June 12 and 15: Hunt Oil officials meet with officials from the RRT for the Kurdistan region, "to investigate investment prospects" in the Kurdish region. Hunt Oil General Manager Ken McDonald, asks RRT members if the deal between Hunt Oil and Kurdistan is in violation of U.S. policy:

I specifically asked if the USG had a policy toward companies entering into contracts with the KRG and [redacted] replied that there was no policy, neither for nor against.

July 12, 2007: Ray Hunt, president and CEO of Hunt Oil sends a letter to the President's Foreign Intelligence Advisory Board, letting them know he is pursuing an oil deal in Kurdistan:

We were approached a month or so ago by representatives of a private group in Kurdistan as to the possibílity of our becoming interested in that region. We had one team of geoscientists travel to Kurdistan several weeks ago and were encouraged by what we saw. We have a larger team going back to Kurdistan this week but who they will actually meet with while they are there and what the relationships of those people might be with the Government of Kurdistan are both unclear at this time.

August 2007: Hunt Oil representatives exchange a series of emails with State Department personnel discussing their return to Kurdistan.

August 30, 2007: Ray Hunt sends another letter to the Advisory Board to let them know he will be in Kurdistan the week of September 3:

While my schedule is still fluid, there is a high likelihood that I will meet with President Masoud Barzani, the Prime Minister, the Oil Minister and various other individuals associated with the government of Kurdistan.

September 5, 2007: McDonald informs the RRT in Erbil that "Hunt is expecting to sign an exploration contract" with the Kurdistan Regional Government. That same day, the RRT leader sends an e-mail summary of the meeting to the Embassy in Baghdad and the State Department headquarters in Washington. A second synopsis of the meeting is sent to the Embassy in Baghdad in a situation report the following day.

September 8, 2007: The Hunt Oil contract is finalized with the Kurdistan Regional Government.

September 13, 2007: A State Department official contacts Hunt Oil to describe another "good opportunity for Hunt" in Iraq, prompting a Hunt Oil official to write Ray Hunt: "This is really good for us. . .I find it a huge compliment that he is 'tipping' us off about this . . .This is a lucky break."