WASHINGTON -- The Senate Armed Services Committee released a scathing report Wednesday on the state of the U.S. military's private security contracts in Afghanistan, concluding U.S. taxpayer dollars are being funneled to Afghan warlords, strongmen linked to murder, and in many cases the Taliban.

Committee Chairman Senator Carl Levin rolled out the report in a press conference Thursday morning, saying there is "significant evidence that some security contractors even work against our own coalition forces, creating the very threat that they are hired to combat."

The Department of Defense has roughly 19,000 private security contractors working in Afghanistan, compared to 95,000 U.S. troops. The State Department employs an additional 7,000. Up until now this supplemental force has been considered critical to the mission.

But the results of Senator Levin's year-long investigation reveals serious flaws with the system.

In one instance the corruption was found to be so bad that a private security contractor used rocks to simulate security personnel who had been paid to stand guard at a U.S. base in the Nangarhar province. In another case, the military hired guards who worked directly for the local Taliban. As a result, $12,000 a month in salaries funded by U.S. taxpayers were going directly into enemy hands.

The report details the story of a 2007 contracting fiasco where a private security firm named ArmorGroup hired local warlords to run security around construction at Shindand Airbase.

ArmorGroup dubbed the warlords: Mr. Pink, Mr. White, Mr. White II and Mr. White III, all drawn from fictional characters in Quentin Terantino's movie "Reservoir Dogs." It turns out they were real life Mafiosi who caused serious problems.

Senator Levin smirked as he told of story of when Mr. Pink had Mr. White murdered, and how the guards loyal to both of these warlords abandoned their posts and went to battle. If that's not bad enough, it was later discovered Pink was a member of the Taliban and had been reporting the movement of NATO forces to the enemy.

In a statement released late Thursday the Department of Defense admits it has problems with contracting, and that it's working to correct them. "DoD has revamped the hiring, training and deployment of those individuals responsible for operational contingency contracting services," the statement reads. It goes on to say "contracting has become a command responsibility requiring military leaders to be aware of those who will benefit from U.S. taxpayer dollars."

The report leaves open many questions about the future of security contracts in Afghanistan. It concludes that the use of private security personnel is "inconsistent with counterinsurgency strategy." This gives credence to Afghan President Hamid Karzai's recent demand for all private security firms to disband by the end of the year. But who will take their place?

President Obama has made clear he has no plans to go above the current number of troops, and wants to start withdrawing in July 2011. NATO is also stretched to the max. The only option is for these hired guards to take government jobs and join the Afghan Security Forces. But according to the report, no such plan exists.