Xe tries to leave history of Blackwater behind

The Blackwater name is gone. So is the focus on the security business that made it famous. Now the founder who built the private company into one of the world's most respected — and reviled — defense contractors is stepping aside as its chief executive.

Erik Prince's decision Monday to relinquish his role as president and CEO underscored how hard the company now called Xe — pronounced like the letter "z" — is working to bury the Blackwater brand and move its focus further away from the security contracting that severely tarnished its reputation.

Prince appointed a new president and chief operating officer in a management shake-up that he said was part of the company's "continued reorganization and self-improvement." It comes less than a month after changing the company's name to Xe in an effort at re-branding.

"As many of you know, because we focus on continually improving our business that Xe is in the process of a comprehensive restructuring," Prince wrote in a note to employees and clients. "It is with pride in our many accomplishments and confidence in Xe's future that I announce my resignation as the company's Chief Executive Officer."

Although Prince will retain his position as chairman of the company, the company said he is removing himself from the day-to-day operations. Spokeswoman Anne Tyrrell said he plans to spend more time with his family and seven children, adding he plans to open a private-equity venture.

Joseph Yorio, recently a vice president at DHL and a former Army special forces officer, will serve as president, replacing retiring executive Gary Jackson. Danielle Esposito, who has worked within Xe for nearly 10 years, will be the new chief operating officer and executive vice president, the company said.

The CEO position remains open.

With an auto parts inheritance, Prince founded Blackwater in 1997 with some of his former Navy SEAL colleagues. They initially envisioned a world-class training facility to support law enforcement and military. But after Sept. 11, the bombing of the USS Cole and the start of the Iraq War, the company developed a large presence in providing private security.

The company's lucrative contract to protect U.S. diplomats in Iraq comprises about one-third of Xe's revenues, but the State Department announced it would not rehire the firm after its current contract with the company expires in May. The company has one other major security contract, details of which are classified, and executives have said it will continue doing such work at the U.S. government's request.

Prince said in an interview in January that losing the contract would be damaging.

"It would hurt us," Prince said at the time. "It would not be a mortal blow, but it would hurt us."

That said, executives have long bemoaned what the work in Iraq has cost the company. A 2007 shooting in Nisoor Square involving Blackwater guards drew outrage from politicians in Baghdad and Washington and demands that the company be banned from operating in Iraq.

Late last year, prosecutors charged five of the company's contractors — but not Blackwater itself — with manslaughter and weapons violations. In January, Iraqi officials said they would not give the company a license to operate.

Xe has already been expanding into other lines of business. It has built a fleet of 76 aircraft that it has deployed to such hotspots as West Africa and Afghanistan.

The firm continues to expand training for law enforcement, with a renewed focus on international clients. Last year, some 25,000 civilians, law enforcement and military personnel were trained by the company.

The company is headquartered in Moyock, about 150 miles northeast of Raleigh.

Oil services sector falls on oil prices

The oil services sector fell on Monday as oil prices plunged on increasing doubts that energy demand will recover amid a battered economy and as rig counts continued to tumble.

Crude oil prices fell $4.26, or 9.5 percent, to $40.50 a barrel on the New York Mercantile Exchange.

Shares of Schlumberger Ltd., the world's largest oilfield services provider, fell $2.18, or 5.7 percent, to $35.90. Halliburton Co. shares dropped $1.48, or 9.1 percent, to $14.83.

Mark Brown, an analyst with Pritchard Capital Partners, said the rapidly declining rig count among oil service companies signals one of the worst downturns.

The Baker Hughes' U.S. rig count fell by 57 rigs last week to 1,243 rigs. This level is 39 percent below its peak of 2,031 24 weeks ago. This decline has outpaced that of even the 1983 cycle, which was down approximately 35 percent during the first 24 weeks, Brown said.

"Exploration and production companies were the first to estimate that the rig count will come down below 1,000 rigs before it bottoms, but services companies now appear to be crossing that psychological line as well," said Brown, noting that exploration and production companies generally hold more bearish views than drilling contractors.

Helmerich & Payne Inc. crossed that threshold on Friday when Chief Executive Hans Helmerich offered a forecast of 800 active rigs at the end of the year, said Brown.

Shares of Helmerich & Payne fell $3.06, or 12.9 percent, to $20.59 in Monday afternoon trading.

"Pessimism reigns supreme, but most of the downside appears to be priced in," Brown added. He reiterated "Buy" recommendations for Helmerich & Payne, Nabors Industries Ltd., Pioneer Drilling Co. and Patterson-UTI Energy Inc.

Shares of Nabors fell $1.16, or 12 percent, to $8.55. Pioneer Drilling shares lifted 4 cents, or 1 percent, to $3.88. Patterson-UTI shares hit a 52-week low in Monday trading and by mid-afternoon shed 80 cents, or 9.3 percent, to $7.79.

Brown advised investors to sell shares of Union Drilling Inc. and Bronco Drilling Co. Shares of Union Drilling fell 28 cents, or 8.2 percent, to $3.15. Bronco shares dropped 29 cents, or 7.1 percent, to $3.77.

AIG’s Liddy Says Greenberg Responsible for Losses

American International Group Inc. Chief Executive Officer Edward Liddy said ex-CEO Maurice “Hank” Greenberg, credited with building the company into the largest insurer, was partially to blame for the firm’s woes.

“I think he’s responsible” for some of the insurer’s struggles, Liddy said today in an interview. “The formation of the AIGFP unit, which has literally brought us to our knees, that happened on his watch. The compensation systems that have gone astray, happened on his watch. I don’t think it’s as clean and simple as sometimes Hank would like to portray.”

Greenberg was at the helm during the formation of AIG’s financial products unit, which sold derivatives that cost the company more than $30 billion in writedowns and prompted a government rescue, Liddy, 63, said today on Bloomberg Television. New York-based AIG today reported the biggest loss by a publicly traded U.S. firm and announced that it reached an agreement to restructure its federal bailout.

Greenberg, who led AIG for almost 40 years before being forced to retire in 2005, has said Liddy is not equipped to run the company and called the sale of the firm’s insurance units to repay the government a “tragedy.” Greenberg told Congress last year that risk controls he put in place were weakened or eliminated after he left.

Liddy, the former CEO of home and auto insurer Allstate Corp., was appointed in September to run AIG after the insurer agreed to turn over an 80 percent stake to the government in exchange for an $85 billion loan.

Greenberg’s Response

The financial products unit was profitable until after Greenberg left, his spokeswoman, Liz Bowyer, said in a statement today.

The losses “never would have happened - and in fact did not happen,” while Greenberg was in charge, Bowyer said. “Under Mr. Greenberg’s leadership, AIG grew from a modest enterprise into the largest and most successful insurance company in the world. Its market capitalization increased approximately 40,000 percent between 1969, when AIG went public, and 2004, Mr. Greenberg’s last full year as chairman and CEO.”

AIG was unchanged at 42 cents in New York Stock Exchange composite trading at 4:15 p.m. after the U.S. committed as much as $30 billion in additional capital. The insurer, which posted a fourth-quarter loss of $61.7 billion, has plunged 99 percent in the past 12 months.

Credit Guarantees

The financial products unit was founded in 1987 by ex- employees of Drexel Burnham Lambert, the securities firm that helped popularize “junk-bond” investing. It was headed by Joseph Cassano, who built the business into one that provided guarantees on more than $500 billion of assets at the end of 2007, including $61.4 billion in securities tied to subprime mortgages.

Cassano stepped down in March 2008, agreeing to stay on as a consultant earning $1 million a month until U.S. lawmakers lambasted the arrangement in October.

Liddy was appointed by the U.S. to run AIG after it needed an $85 billion federal loan to stave off bankruptcy in September. He is AIG’s third CEO since Greenberg, who was forced to retire four years ago amid state and federal probes into accounting and sales practices.

Greenberg denies any wrongdoing in a New York State civil lawsuit filed against him in May 2005, which is still pending. Then-New York Attorney General Eliot Spitzer dropped portions of the lawsuit in 2006 that included four other allegations tied to the investigation.

Greenberg still controlled the largest stake of AIG shares before the government takeover through personal holdings and investment firms C.V. Starr & Co. and Starr International Co.