WASHINGTON -- The security contractor Blackwater Worldwide tried for two years to secure lucrative defense business in Southern Sudan while the country was under U.S. economic sanctions, according to current and former U.S. officials and hundreds of pages of documents reviewed by McClatchy.

The effort to drum up new business in East Africa by Blackwater owner Erik Prince, a former Navy SEAL who had close ties with top officials in the George W. Bush White House and the CIA, became a major element in a continuing four-year federal investigation into allegations of sanctions violations, illegal exports and bribery.

The Obama administration, however, has decided for now not to bring criminal charges against Blackwater, according to a U.S. official close to the case.

Instead, the U.S. government and the private military contractor are negotiating a multimillion-dollar fine to settle allegations that Blackwater violated U.S. export control regulations in Sudan, Iraq and elsewhere. Mr. Prince renamed the company Xe Services in an apparent attempt to shake off a reputation for recklessness, and this month put it up for sale.

Had the company been indicted, it could have been suspended from doing business with the U.S. government, and a conviction could have brought debarment from all government contracts, including providing guard services for the CIA and the State Department in war zones. In recent weeks the Obama administration awarded the company a $120 million State Department security contract, and about $100 million in new CIA work.

The story of Blackwater's efforts in Sudan is a tale of mixed motives that echo an earlier era of overseas empires, of evangelical Christians who offered to help defend Christian and animist Southern Sudan from the Muslim Arab military dictatorship in the north, but also sought to exploit the region's oil and mineral wealth.

According to two former senior U.S. officials, the company headed by Mr. Prince, who has long been active in evangelical groups, at one point proposed a broad defense package that would have required Southern Sudan to pledge as much as half its mineral wealth to pay for Blackwater's services.

It's also a story of a divided Bush administration. Mr. Prince personally lobbied Vice President Dick Cheney to lift the sanctions on Southern Sudan, according to the documents and a former senior U.S. official, who said that one meeting took place aboard Air Force Two. Mr. Prince's aides also helped draft a letter from Southern Sudan's leader, Salva Kiir, to President George W. Bush seeking an end to the sanctions.

Mr. Cheney supported Blackwater's sales pitch, according to the documents. The State, Justice and Commerce departments, however, investigated whether Blackwater had violated the sanctions that were imposed on Sudan beginning in 1997, some of which the Bush administration lifted in late 2006.

McClatchy reporters reviewed the documents on Blackwater's drive for a security contract with Sudan and interviewed more than a dozen senior officials who were involved in Sudan policy decisions in the Bush and Obama administrations. None would speak on the record due to the sensitivity surrounding an ongoing law enforcement investigation. The company didn't respond to repeated requests for comment.

Perhaps the most unique character in the story is Bradford Phillips, a Christian evangelical activist and former congressional aide who runs the Persecution Project Foundation, a Culpeper, Va., nonprofit that works to publicize and alleviate the plight of Sudan's Christians.

At Mr. Prince's request, Mr. Phillips called on the government of Southern Sudan and recommended Blackwater's protective services. He helped set up meetings between Mr. Kiir and Mr. Prince in Africa and Washington. The Washington session took place in November 2005 at the J.W. Marriott Hotel, a few blocks from the White House, the documents show.

The chief salesman to the Sudanese during the Washington meeting appears to have been Cofer Black, a former top CIA and State Department official who in 2001 famously demanded that a CIA subordinate kill terrorist leader Osama bin Laden and deliver his head in dry ice.

Southern Sudan had emerged in 2005 as an autonomous region after a U.S.-brokered peace deal ended a 22-year war with the North. Weeks after he took the helm of the new Southern Sudan government, Mr. Kiir's predecessor, John Garang, was killed in an unexplained helicopter crash, and Blackwater's sales pitch to the Bush administration was that protecting the new leader would support U.S. policy objectives.

The company, however, also saw huge potential profits.

After negotiating a $2 million draft contract to train Mr. Kiir's personal security detail, Blackwater in early 2007 drafted a detailed second proposal, valued at more than $100 million, to equip and train the south's army. Because the south lacked ready cash, Blackwater sought 50 percent of the south's untapped mineral wealth, a former senior U.S. official said.

In addition to its well-known oil and natural gas reserves, Southern Sudan has vast untapped reserves of gold, iron and diamonds.

"Most people don't know this stuff exists. These guys did," said a second former senior official who saw the document, which apparently was never signed.

Ultimately, though, Blackwater's venture in Southern Sudan foundered, U.S. officials said.

"Blackwater had some problems in Iraq," said Deng Deng Nhial, the deputy chief of Southern Sudan's Washington office. "Nothing really materialized. No services were performed."

Mr. Deng said he had "no knowledge" that any contracts had been negotiated or signed.

Federal investigators, however, found evidence that Blackwater's sales campaign had violated U.S. sanctions, export control laws and the Foreign Corrupt Practices Act, which is designed to prevent U.S. companies from bribing foreign officials in return for business, according to the officials and documents.

The suspected violations included brokering for defense services without a U.S. government-approved license; transferring satellite phones and encrypted e-mail capabilities to Southern Sudanese officials; and attempting to open a joint escrow account with the south's government at a Minnesota bank.

The focus on Sudan was part of a broader federal probe of Blackwater that began in 2006 and also examined the alleged bribery of foreign officials in Jordan, Iraq and Sudan and the alleged illegal exports of rifles, silencers and other military hardware to the Middle East, some of it hidden in pallets of dog food.

The U.S. attorney for the Eastern District of North Carolina, where Xe Services is based, established a special task force that at times comprised as many as two dozen federal agents from at least eight U.S. agencies. They included the Justice, State, Defense, Homeland Security, Treasury and Commerce departments, and the FBI and CIA Inspector General's office.

Prosecutors convened a grand jury in North Carolina to consider the case.

In April, a federal grand jury in that state indicted former Blackwater president Gary Jackson, former general counsel Andrew Howell and three other ex-employees for violating U.S. firearms laws, including falsifying federal paperwork to conceal a gift of firearms to King Abdullah II of Jordan, with whom the company had extensive ties.

No charges have been brought against the company itself, or against Mr. Prince or current executives.

Mr. Prince, who founded the firm in 1997 and won more than $1.6 billion in unclassified federal contracts and an unknown amount of secret work, announced in early June that he plans to sell Xe Services.

First Published: June 28, 2010, 4:00 a.m.