During his testimony at Camp Pendleton in California, Shumate said that the squad had been looking for Iraqis planting bombs when all eight men agreed a plan to kill a known fighter.
The shooting was one in a series of incidents in which the conduct of American troops in Iraq came under scrutiny
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Four of the squad left to abduct him, Shumate said. When they returned with a prisoner, Shumate said he was "told to fire" by the squad leader.
He learned later that it was Awad, whom prosecutors have described as a disabled father of 11.
The eight men are also accused of planting a gun and a shovel next to the body to make him look like he was planting bombs. The shooting was one in a series of incidents in which the conduct of American troops in Iraq came under scrutiny.
Other US marines based at Camp Pendleton are under investigation over a separate incident in November 2005 in which 24 civilians were killed in the Iraqi town of Haditha.