WASHINGTON—Canada is severing ties with a controversial Afghan security firm blacklisted last year by the U.S. military amid allegations of corruption and excessive violence, the Star has learned.

Watan Risk Management, which safeguards Canada’s signature Dahla Dam restoration project in Kandahar, is being replaced by an as-yet-unnamed firm, as engineering giant SNC-Lavalin scrambles to finish the job.

“Watan will no longer provide security services to this project and we have taken measures to have an alternate security supplier in place,” SNC-Lavalin spokeswoman Leslie Quintan confirmed in an email to the Star.

“Because this is an issue of security, we are not at liberty to go into any further detail.”

Mired in controversy for more than a year, Watan Risk Management and its parent firm, the Watan Group, are led by two of President Hamid Karzai’s cousins: Ahmed Rateb Popal and Rashid Popal. Billed as “Afghan owned, British led” — a reference to the British former commandos who supervise the mostly Afghan rank and file — Watan is also believed to be under the sway of Ahmed Wali Karzai, or “AWK,” the president’s younger half-brother and the pre-eminent power broker in southern Afghanistan.

Canadian concerns over Watan were exposed last year in a Toronto Star investigation into setbacks surrounding the $50 million Dahla Dam project, regarded by many as Canada’s best chance for a lasting legacy in Afghanistan.

Among the revelations were details of a dramatic confrontation between Watan security guards and their Canadian overseers in February 2010, at the project’s management compound in Kandahar City. The guns hired to protect the project turned on each other in a “Mexican standoff” that ended with two private Canadian security officials fleeing for their lives on the next plane home.

Those revelations were later reinforced in a wave of WikiLeaks cables, which exposed U.S. worries that AWK was “widely understood to be corrupt and a narcotics trafficker,” and was seeking to profit from the Dahla Dam and other projects.

AWK has “aggressively lobbied the Canadians to have his security services retained for the Dahla Dam refurbishment,” said a 2009 U.S. diplomatic cable summarizing the concerns.

Watan officials have denied any wrongdoing.

Canada’s decision to sever ties with the firm is curious, given that SNC officials staunchly backed Watan late in 2010, despite a U.S. military decision banning the company from future contracts as part of American efforts to stop aid dollars from slipping into the hands of corrupt officials and Taliban commanders.

The move is expected to require the SNC expat team leading the Dahla Dam work to relocate from its base of operations inside a protected enclave of Kandahar City under the control of AWK, who lives next door.

Curtis Desrosiers, a private Canadian security manager who was forced off the project last year after the confrontation with Watan’s gunmen, welcomed the development as a victory for Canadian taxpayers.

“All I can say is, it’s about time,” Desrosiers told the Star. “The hope now is all the problems are behind them and SNC will complete this project in a way that can make the Afghans happy and Canadians proud.”

Other security sources in Canada and Afghanistan, however, speaking on condition their names not be published, told the Star the decision to fire Watan was forced upon the Canadians by President Karzai himself. They said the move was part of the Afghan leader’s long-standing efforts to reorganize the lucrative security contracting industry that has sprung up during NATO’s decade-long mission in Afghanistan.

Work on the multi-faceted Dahla Dam rehabilitation project has improved in recent months, security sources said. But despite the momentum, the job is expected to stretch into 2012 unless Canada’s international development agency lowers its expectations and fashions a shortcut to the finish line to coincide with the end of Canada’s combat operations in Kandahar.

“People are waiting for Ottawa to decide what happens next. Either they somehow wrap this thing up in August, or SNC-Lavalin gets an extension for another six to 12 months to do the rest of the work as originally planned,” one highly placed source said.

Amy Mills, a spokesperson for the Canadian International Development Agency, noted that significant work has been completed on the dam, and that the project is “on track to declare success” on goals set out in 2008.

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More than 65% of the main canal has been rehabilitated, she said, along with approximately 600 of the estimated 800 kilometres of sub-canals.

Mills said Ottawa has facilitated a study on possible further enforcements to the dam, as well as supporting the Afghan government in efforts to find future partners.

“The impacts on agriculture in Kandahar of the dam and irrigation system rehabilitation are already being felt,” Mills said. “It is facilitating the growth of food and crops for farmers and families to sell at local markets.”

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