WASHINGTON (Reuters) - Private U.S. security contractor Blackwater USA denied on Saturday it was involved in illegally shipping automatic weapons and military goods to Iraq.

The statement by the company, whose contractors were accused by the Iraqi government of killing 11 people in Baghdad this week, came after a newspaper report that federal officials were investigating whether Blackwater exported unlicensed military hardware into Iraq.

“Allegations that Blackwater was in any way associated or complicit in unlawful arms activities are baseless. The company has no knowledge of any employee improperly exporting weapons,” the company said in a statement.

“This issue is completely unrelated” to Blackwater’s U.S. government programs in Iraq, said the company, based in Moyock, North Carolina. It employs about 1,000 contractors to protect the U.S. mission in Iraq and its diplomats from attack.

The News & Observer of Raleigh, North Carolina, reported that two former Blackwater employees had pleaded guilty in Greenville, North Carolina, to weapons charges and were cooperating with the federal investigation.

Court records showed Kenneth Wayne Cashwell and William Ellsworth Grumiaux pleaded guilty earlier in the year to possessing, receiving and concealing between May 2003 and August 2005 stolen firearms that had been “shipped or transported in interstate or foreign commerce.”

The records, which showed both men agreed to cooperate with authorities and testify about any crimes they knew of in plea deals filed last November, did not name Blackwater or Iraq.

The newspaper also quoted two unidentified sources as saying federal officials were probing whether Blackwater was shipping weapons, night-vision scopes, armor, gun kits and other military goods to Iraq without the required permits.

A U.S. Justice Department spokesman declined comment on the investigation.

SMUGGLING ALLEGATIONS

Iraqi Prime Minister Nuri al-Maliki has suggested the U.S. Embassy stop using Blackwater after what Iraq called a flagrant assault by the firm’s contractors in which 11 people were killed last Sunday while the firm was escorting an embassy convoy through Baghdad.

The Washington Post reported in Saturday’s edition the Iraqi government’s investigation into the shootings had expanded to include allegations about Blackwater’s involvement in six other violent incidents this year that left at least 10 Iraqis dead.

Asked at a news conference at the United Nations on Saturday about whether Iraqi investigators had videotape of Blackwater security men firing unprovoked on Iraqi civilians, Maliki said, “We’ve asked the Americans to deal with the investigation through an investigation committee to see whether there is a video about this (Baghdad) incident.”

The issue of suspected weapons smuggling by a U.S. contractor in Iraq surfaced earlier in the week in a letter from a congressional committee chairman, Democratic Rep. Henry Waxman of California, to Howard Krongard, the State Department’s inspector general.

“You impeded efforts by your investigators to cooperate with a Justice Department probe into allegations that a large private security contractor was smuggling weapons into Iraq,” Waxman told Krongard in a letter dated September 18.

Waxman’s letter did not name Blackwater.

Waxman has asked the head of Blackwater USA, Erik Prince, to testify before his committee on October 2 on its work in Iraq.

The State Department said on Friday it would thoroughly examine the use of private security contractors to protect American diplomats in Iraq.

In its statement, Blackwater said that when it was uncovered internally that two employees were stealing from the company, it immediately fired them and invited the federal Bureau of Alcohol, Tobacco, Firearms and Explosives to conduct a thorough investigation.

“The employees, who were former Marines and law enforcement, have been convicted and are currently negotiating sentencing in Raleigh with federal prosecutors,” the company said.