The group is urging Clinton to launch an investigation of the contract with ArmorGroup North America. It also recommends that she ask the Pentagon to provide "immediate military supervision" of the private security force at the embassy.
The oversight group's findings are based on interviews with ArmorGroup guards, documents, photographs and e-mails.
One e-mail from a guard describes lurid conditions at Camp Sullivan, the guards' quarters a few miles from the embassy. The message depicted scenes of abuse including guards and supervisors urinating on people and "threats and intimidation from those leaders participating in this activity."
Multiple guards say these conditions have created a "climate of fear and coercion." Those who refuse to participate are often ridiculed, humiliated or even fired, they contended.
The group's investigation found sleep-deprived guards regularly logging 14-hour days, language barriers that impair critical communications, and a failure by the State Department to hold the contractor accountable.
Wackenhut Services, ArmorGroup's parent company, had no immediate comment on the allegations. The State Department also had no immediate comment.
The State Department has been aware of ArmorGroup's shortcomings, the letter says, but hasn't done enough to correct the problems.
It cites a July 2007 warning from the department to ArmorGroup that detailed more than a dozen performance deficiencies, including too few guards and armored vehicles. Another "cure notice" was sent less than a year later, raising other problems and criticizing the contractor for failing to fix the prior ones.
In July 2008, however, the department extended the contract for another year, according to the notice. More problems surfaced and more warning notices followed. Yet at a congressional hearing on the contract in June, State Department officials said the prior shortcomings had been remedied and security at the embassy is effective.
The contract was renewed again through 2010.
Nearly two-thirds of the embassy guards are Gurkhas from Nepal and northern India who don't speak adequate English, a situation that creates communications breakdowns, the group says. Pantomime is often used to convey orders and instructions.
On the Net:
Project on Government Oversight: http://www.pogo.org/