A company based in Malta that was hired by insurance giant AIG to investigate US federal contract workers injured in war zones, is itself under scrutiny after an employee brandished an ID card that falsely suggested he was a government agent.

The US Department of Labour has asked the agency’s inspector general to investigate the actions of Tangiers International, a Maltese insurance services firm that AIG uses to document or dispute injury claims filed by wounded contract workers, labour officials said.

The inquiry arose after a video surfaced on YouTube in which a Tangiers employee operating in Australia is seen displaying an ID card with an official-looking seal that identifies him as an “international investigator” for the “United States DoL.”

“Tangiers has no authority to make such claims or use DOL’s name or indicia on its badges,” Shelby Hallmark, the Labour Department official who oversees the federal workers’ compensation programme for injured contractors, said in a statement.

He added that the Labour Department has never had a relationship of any kind with Tangiers, the propublica.org website reported on Friday.

Chris Catrambone, Tangiers’ CEO, declined to comment on the investigation. Labour Department officials said Catrambone told them in an e-mail that the ID card was supposed to refer to ‘Division of Loss’ as opposed to ‘Department of Labour’, and said the card had been “approved for use by the US Embassy in Malta”.

The embassy in Malta, however, says it has not approved the use of any such identity cards for the Malta-based Tangiers International.

Under US federal law, it is illegal to impersonate a government official – a crime punishable by up to three years in prison. The government’s inquiry into the major insurance company’s investigative partner comes amid growing controversy about the care of injured contract workers and their families.

Insurance carriers dispute more than 40 per cent of claims for serious injuries filed by contractors injured in Iraq and Afghanistan, according to an investigation by ProPublica, ABC News and the Los Angeles Times. Congress held hearings on the issue in June, and the Pentagon’s inspector general has begun an examination of the system.

In fighting claims, insurance carriers typically rely on investigative firms such as Tangiers. Company employees, often licensed private investigators, gather evidence to support or deny payment of disability benefits or medical treatments. They videotape contractors suspected of faking injury and interview friends and family to determine the circumstances of an injury.

Tangiers has made a speciality of investigating claims arising from the wars in Afghanistan and Iraq – a growth industry with claims soaring from fewer than 100 per year to more than 7,000 in 2008.

Contractors now outnumber soldiers in Iraq and Afghanistan, according to Pentagon figures.

If Tangiers’ business ethics were put into doubt, scores if not hundreds of claims could be affected. The authenticity of documents produced by the firm could come under legal question, adding time to an already lengthy claims process in which contractors spend months and sometimes years battling for benefits.

Labour Department officials said they had not ruled out using information gathered by Tangiers employees, and the company’s website states it has investigated more than 240 cases in Iraq and 24 in Afghanistan.

The video leading to the investigation was taken by Mark Munro, an Australian security contractor wounded in Iraq when a suicide bomber attacked his convoy in 2005. In an interview, Munro said that in September 2008 he answered a phone call early one morning from someone with an American accent who immediately hung up. Later, a person claiming to be from AIG set up a meeting with Munro’s attorney but never turned up and provided a phone number as a contact, but it was not a working number.

Finally, Munro noticed that someone appeared to be following him as he drove around town. Munro said he confronted the man and demanded identification.

In the video, the person in the car appears reluctant, denying any knowledge of Munro. Then he pulls out a card and shows it to the camera. It identifies him as Cabot Goslin, a Tangiers employee. The card displays Goslin’s mug shot, and under the heading “Agency/Department” is the phrase “United States DoL.”

In his e-mail to Labour Department officials, Catrambone said that Goslin no longer works for Tangiers and that the company no longer uses such an identity card.

Munro, who has been diagnosed with severe post-traumatic stress disorder, or PTSD, said he was upset that someone would follow him and his family around town.

It is not clear why Goslin was following Munro. AIG has not disputed Munro’s claim and has paid his doctors’ bills and disability benefits. Munro is seeking to sign a settlement with the company, although AIG has not responded to Munro’s attorney’s letters in nearly a year.