WASHINGTON (CNN) -- A quarter of Blackwater security guards in Iraq use steroids and other "judgment-altering substances," according to a lawsuit filed by the families of several Iraqis killed or wounded in a Baghdad shooting in September.

A car burned in the September 16 Blackwater incident sits on a Baghdad street a week later.

Blackwater denies the charges.

The suit, filed Monday in Washington, accuses the company of fostering "a culture of lawlessness" among its guards and says the use of excessive force helps the company preserve a key selling point -- the fact that none of its protectees have been killed during the four-year-old war.

"I think there is a whole corporate culture there that essentially rewards the use of excessive force -- shooting first, asking questions later," said Susan Burke, the lead attorney in the case.

The lawsuit accuses Blackwater of war crimes, wrongful death, assault, negligent hiring and emotional distress. The plaintiffs include two wounded survivors of the September 16 shootings around Nusoor Square, in western Baghdad, and the families of five people killed in the incident. Iraqi authorities say the guards killed 17 people in an act of "premeditated murder."

Blackwater has denied any wrongdoing, arguing its contractors used necessary force to protect a State Department convoy that came under fire from insurgents. Watch report on steroid allegations »

The lawsuit accuses Blackwater of failing to control the use of steroids among its guards -- an allegation Burke said came from "people in that community," and one she said would be backed up as the case progresses.

"The reality is that Blackwater has indeed fired people for steroid use, so they're on clear notice that there's steroid use," Burke said. She said Blackwater has marketed the idea "that their people are kind of tougher and bigger than anybody else," and has turned a blind eye toward "serious, repeated situations of excessive use of force."

Blackwater spokeswoman Anne Tyrrell rejected the steroid allegations, saying all company workers face drug tests during their application process and on a quarterly basis while working for the firm.

"Steroids and performance enhancement drugs, both illegal and prescribed, are absolutely in violation of our policy," Tyrrell told CNN. "Blackwater has very strict policies concerning drug use, and if anyone were known to be using illegal drugs, they would be fired immediately."

The lawsuit states that the guards involved in the September 16 killings violated orders from their Baghdad supervisors by leaving a secure area where they had dropped off a State Department official under their protection.

The guards opened fire "without provocation," the suit states, and continued firing even after one of their comrades tried to stop them from shooting.

The lawsuit also accuses the North Carolina-based military contractor of hiring ex-Chilean commandos who were barred from security or military work in their home country after admitting to human rights violations, and of hiring mercenaries -- a term the company rejects -- from a variety of countries.

The U.S. government has paid the company nearly $1 billion for diplomatic security since the invasion of Iraq, a House committee reported in September.

The Nusoor Square killings spurred Iraqi threats to bar the company from operating in Iraq and a push to lift the legal immunity conferred on contractors by the U.S.-led occupation government in 2004.

The lawsuit does not request a specific amount in damages, but Burke said her clients want both compensation for their own losses and punitive damages against the firm "for having failed to take the reasonable and adequate corporate steps that they should have taken ages ago."

"Blackwater encourages and fosters a culture of lawlessness amongst its employees, encouraging them to act in the company's financial interest at the expense of innocent human life," the lawsuit says. E-mail to a friend

CNN's Jamie McIntyre and Laurie Ure contributed to this report.

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