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updated 6/17/2004 3:02:05 PM ET 2004-06-17T19:02:05

Titan Corp, the San Diego- based defense contractor, has decided to withhold $178,000 in billings to the Pentagon for translators working at the Abu Ghraib prison near Baghdad, where Iraqi detainees were tortured by U.S. forces.

A former Titan employee was implicated in the abuses in a report filed by General Antonio Taguba. The company, along with a competitor — CACI International, which supplied contract interrogators — is being investigated by the army and Department of the Interior in connection with the scandal.

"The reason we did this is we don't know what the investigation entails, so we took the initiative to be conservative," a Titan spokesman said.

The company has repeatedly said that its employees served only as translators and did not manage or oversee Iraqi prisoners at Abu Ghraib.

The payment in question is a fraction of a $402 million contract the company was awarded to supply linguists for the U.S. military, under which it employs more than 4,000 workers in Iraq.

Titan's decision is also not the first time a dollar value has been tied to the Abu Ghraib scandal: U.S. lawyers launched a class action lawsuit last week against Titan and CACI, to seek restitution for Iraqi victims. Both companies have strongly denied the claim, which CACI has called "a malicious recitation of false statements."

Nonetheless, the decision to adjust the bill is another poignant illustration of how closely the private sector has become entwined with the uniformed military and what were once considered to be its core functions.

The dangers of such a policy were on display in Washington this week during a congressional hearing that found "serious problems" with the way the government manages private contractors in Iraq, leading to billions of dollars of waste.

The issue of private military contractors is also being debated in Iraq. As the transfer to sovereignty approaches on June 30, authorities there are pushing to bring foreign contract workers — many of whom are armed security guards — under local law.

Foreign contractors, including the interrogators and interpreters at Abu Ghraib, have enjoyed effective immunity, critics say, because of a decree passed by the U.S.-led coalition provisional authority, which exempted them from Iraqi law.

A CACI spokesperson could not immediately say whether the company would follow Titan's lead and withhold any of its Iraq billings — amounting to nearly $13 million so far — as a result of the Abu Ghraib scandal.

Copyright The Financial Times Ltd. All rights reserved.

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