Four former executives described the plan under the condition of anonymity, the newspaper said.
Iraqis had long complained about ground operations by the North Carolina-based company, now known as Xe Corp. Then thein Baghdad's Nisoor Square in September 2007 left 17 civilians dead, further strained relations between Baghdad and Washington and led U.S. prosecutors to bring charges against the Blackwater contractors involved.
The State Department has sinceand another private security firm, Triple Canopy, to handle diplomatic protective services in the country. But for diplomats in other nations, most notably in Afghanistan.
The former executives told the Times that the payments were approved by the company's then-president, Gary Jackson. They did not know if he came up with the idea.
It's also not clear whether the payments were actually delivered, or which Iraqi officials were intended to receive them. Any payments would have been illegal under the U.S. Foreign Corrupt Practices Act, which bans bribes to foreign officials. The company has paid legitimate compensation to several victims of the shootings, the Times reported.
Two of the former executives said they were directly involved in discussions about paying Iraqi officials, and the other two said they were told about the discussions by others at Blackwater.
Jackson, who resigned as president of Blackwater early this year, criticized the newspaper when reached by phone and said, "I don't care what you write."
Xe spokesman Mark Corallo said the company disputes "these baseless allegations" and had no comment on former employees.
The plan to pay Iraqi officials caused a rift within the company, the former executives said.
They said ex-Blackwater vice chairman Cofer Black, a former top CIA and State Department official, learned of the plan while in Baghdad discussing compensation with U.S. Embassy officials. The sources said he confronted Prince, who acknowledged the plan, and Black resigned the next year.
But in a statement to The Associated Press late Tuesday, Black said he never confronted Prince "or any other Blackwater official regarding any allegations of bribing Iraqi officials and was unaware of any plot or guidance for Blackwater to bribe Iraqi officials."
Five Blackwater guards involved in the Nisoor Square shooting are scheduled to face trial on federal manslaughter charges in February in Washington. A sixth guard pleaded guilty in December. Iraqi victims are also suing the company and its founder, Erik Prince.
The Iraqi government suspended the firm's license after the shooting and demanded that Blackwater be expelled from the country within six months. Iraqi authorities denied Xe an operating license in early 2009, but the company has continued to have some presence in the country. In September, the State Department announced it had extended a contract with a Xe subsidiary to provide air support for protecting U.S. diplomats in Iraq.
A wide-ranging federal grand jury investigation is being conducted on Xe's operations. The U.S. Attorney's Office in Raleigh declined to comment to the Times on the probe and did not return calls seeking comment Tuesday evening by The Associated Press.
Several former Blackwater employees told the Times they have been interviewed by prosecutors or the grand jury on various topics, including alleged weapons smuggling. Two former employees have pleaded guilty to weapons charges and are believed to be cooperating with prosecutors.