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Blackwater Worldwide is facing a “multimillion-dollar” fine from the State Department for allegedly shipping illegal weapons to its contractors in Iraq, McClatchy reports. The fine could be levied in the next few days. State officials charge that Blackwater, which holds a lucrative personnel-protection contract for US diplomats in Iraq, hid the arms inside shrink-wrapped pallets that were shipped directly from the company’s sprawling Moyock, North Carolina, headquarters. About 900 weapons were sent to Iraq without permits, 119 of which were especially “erroneous,” says a State Department official familiar with the shipments. Some of the weapons are thought to have wound up on Iraq’s thriving black market.

The illegal weapons were first discussed publicly at a September 2007 congressional hearing about State Department inspector general Howard Krongard’s alleged obstruction of a Justice Department investigation of Blackwater’s activities in Iraq. It was revealed at the hearing that Krongard’s brother “Buzzy,” a former CIA official, had recently been recruited to Blackwater’s board of advisors. Since then, former Blackwater contractors Kenneth Wayne Cashwell and William Ellsworth (Max) Grumiaux have plead guilty to illegal weapons charges and are now cooperating with federal investigators.

For its part, Blackwater says its cooperating with the investigation and has even hired a “vice president of export compliance” and appointed a three-member independent oversight panel, including former Republican congressman Asa Hutchinson of Arkansas. “Our work for the US government around the world, and the nature of teh services we offer have created compliance challenges,” Blackwater founder and president Erik Prince said in a statement.