He was wandering drunk around the Green Zone after a party last Christmas Eve when he encountered - and fatally shot - a 32-year-old guard to Iraqi Vice President Adel Abdul-Mahdi, according to a congressional report released this week.
Blackwater immediately arranged to have the U.S. State Department fly the 26-year-old contractor back to the United States, fired him and fined him, and paid the slain guard's family $15,000.
But federal officials say he is not in custody. They barely acknowledge his existence, let alone release his name or discuss the status of the investigation.
The shadowy case highlights the murky legal issues surrounding the controversial security firm's Iraq-based employees, who may be exempt from both U.S. and Iraqi law.
Since founding Blackwater USA a decade ago, Erik Prince, 38, has gone to great lengths to avoid attention, trying to prevent photographers from taking his picture and demanding that his contractors never speak with reporters.
The veil of secrecy was lifted Tuesday as the former Navy Seal was called to Congress to defend his security company against allegations it covered up the killings of Iraqi civilians.
Pentagon officials say the 10,000 private security contractors working for the United States in Iraq are so indispensable that as long as they were getting the job done, no one questioned their tactics, even though senior military officers personally witnessed them overreact, reports CBS News national security correspondent David Martin.
"I can certainly say I've seen them do some tactics that I thought were over the top," said Brig. Gen. Joseph Anderson.
At Blackwater, contractors earn about $90,000 for six months' work, significantly more than they earned as U.S. soldiers.
"What normally would be a major option would be to have [the former contractor] prosecuted in Iraq," said Ron Slye, director of the international comparative law program at Seattle University Law School. "The problem is of course, under Iraqi law as put into place by the U.S., there's no jurisdiction over these people."
Amid an outcry from Iraqis who questioned how an American could kill someone in those circumstances and return to the U.S. a free man, the U.S. Justice Department announced it would investigate.
The case has been turned over to the U.S. attorney's office for western Washington state, where the man lives, Bush administration officials told The Associated Press, speaking on condition of anonymity to describe an ongoing investigation.
Mark Bartlett, the first assistant U.S. attorney in Seattle, said Tuesday he had no comment, joining a long list of federal officials here who would not confirm or deny anything about the former contractor's case. Robbie Burroughs, a spokeswoman for the FBI, said she could say only that the man is not in custody.
Prince was questioned Tuesday on Capitol Hill by lawmakers looking into the role his company's personnel played in a Sept. 16 shootout that left 11 Iraqis dead and the slaying of the Iraqi vice president's guard.
The State Department has asked the FBI investigate the Sept. 16 shootings. Eight FBI agents, all trained in evidence response, departed Tuesday for Iraq and hope to wrap up their on-site investigation within days.
On Sept. 16, a bullet, apparently fired by a Blackwater guard, killed an Iraqi man who had been driving in Baghdad's Nisour Square. The car continued to roll toward a Blackwater convoy, which responded with an intense barrage of gunfire in several directions, striking Iraqis who were desperately trying to flee, according to The New York Times.
As the gunfire continued, at least one of the Blackwater guards screamed, "No! No! No!" and gesturing to his colleagues to stop shooting, according to an Iraqi lawyer who was stuck in traffic and was shot in the back as he tried to flee. The account of the struggle among the Blackwater guards corroborates preliminary findings of the American investigation, reported the Times.
When testifying before Congress, Prince made one point over and over again, that not a single U.S. Official under the protection of Blackwater has been killed or seriously injured, reports CBS News correspondent Chip Reid.
"It's been 10 months and the Justice Department has not done anything to him," lawmaker Carolyn B. Maloney, a New York democrat, said in questioning Prince about the Christmas Eve shooting. "If you work for Blackwater, you get packed up and you leave within two days and you face a $1,000 fine."