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When asked, "Why do you rob banks?" Willie Sutton, the infamous bank robber, replied "Because that's where the money is."

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"Follow the dollar"

"Follow the dollar" is the slogan of investigative journalists who know that any time large sums of money are involved -- such as in wartime, defense spending, homeland security, reconstruction, humanitarian aid -- there will be corruption, by self-serving individuals and organizations after the money. "Because that's where the money is."

Learning to read budgets is not an easy matter because of their innate complexity and often confusing language (obfuscation by jargon, statistics), but it is vital. In 1977, for example, the Orwell Award ("for distinguished contributions to honesty and clarity in public language") went to Walter Pincus (Washington Post) for his expose of the unauthorized "neutron bomb" program which the Pentagon tried to slip by Congress by fragmenting and trying to conceal it within the budgets of other programs. But, Pincus noticed a lot of vague or confusing "little" expenditures hidden within different budgets, and he "followed the dollar" -- a synthesis made by "putting two and two together" or "putting the dots together."

In a free society, we should expect the role of a free press is to investigate and to report on the concealed bad of all parties. If reporters simply reported "what was said" at a press conference or what happened "on the surface," they would simply be acting as press agents, helping to get out a one-sided story, as edited and presented by the speaker.

Free choice in a democracy depends on our full knowledge and on the full disclosure of all relevant issues, good and bad. Thus, it's wrong to criticize "the press" (or "the media") categorically, if their information, however unpleasant, is true and relevant. This adversarial role should always put the press as a watchdog, not as a lap dog.

As the famous investigative reporter, Jack Anderson wrote: "There are no press secretaries to brief those who search after concealed facts, no hucksters to package the suppressed details in attractive press kits. We have never known a government official to call a press conference to confess his wrong-doing, nor a government agency to issue a press release citing its mistakes."

Two Recent, Relevant Court Decisions: On May 30, 2006, the Supreme Court 5-4 ruled that government employees do not have 1st Amendment "Free Speech" protection as whistleblowers. On August 18, 2006 a federal judge threw out all fraud charges against contractors defrauding the Coalition Provisional Authority in Iraq on the basis that technically the crimes were not against the United States of America. See: Pentagon reporter Thomas Ricks' Fiasco for more details of the complicated legal structure of the CPA.

Iraq War Profiteering During the Iraq War and Occupation,, most of the attention (using google search terms) related to war profiteering, Pentagon waste or privitizing or outsourcing by spy agencies; specific companies (e.g. Halliburton); or related to the advocates of the war; but, even conservative pundit Max Boot used Peter Singer's quip to describe it as the "coalition of the billing." Yet, there were also other issues (such as the UN Oil for Food scandal, homeland security contracts, ) and unauthorized free-lancers. Available on DVD (Netflix) is the 2006 documentary film, "Iraq for Sale." In 2007, Captain Luis Montalvan wrote:"The level of corruption in the Iraq Security Forces is staggering. The Iraq Study Group found that $5 billion to $7 billion is lost annually to different types of corruption." Furthermore, "... as President Bush is pressing Congress to approve $1.2 billion in new reconstruction aid as part of his broader plan to stabilize Iraq by sending 21,500 more U.S. troops to Baghdad and Anbar province. Stuart Bowen Jr., special inspector general for Iraq reconstruction, found the $300 billion U.S. war and reconstruction effort continues to be plagued with waste, spiraling violence and corruption. Another related "gold rush" for big private contractors in 2007 was the millions to be spent of Homeland Security funds erecting a fence along the Mexican border.. In 2007, after a six year investigation and trial, ITT was found guilty and fined $100 million dollars for selling classified high-tech night-vision equipment abroad: "The criminal actions of this corporation have threatened to turn on the lights on the modern battlefield for our enemies and expose American soldiers to great harm," U.S. Attorney John Brownlee said in a statement.

For a general overview of the issues, see Stuart Brandes, Warhogs: A History of War Profits in America (1997) whose book "defines profiteering as price gouging, quality degradation, trading with the enemy, plunder, and fraud, among others, in order to examine the different guises of war profits and the degree to which they existed from one era to the next. Brandes traces the complex and evershifting issue of war profits across nearly the entire scope of American history through the four major military mobilizations (Revolution, Civil War, and World Wars I and II) and such smaller conflicts as the colonial wars, the Indian campaigns, the War of 1812, the Mexican War, and the Spanish-American War. His even-handed discussion of wartime profit-seeking culminates with profiteering as a continuing cultural issue during the Cold War. No other study so thoroughly surveys the history of war profits in America. By examining this particular category of semi-legitimate wealth -- not specifically illegal, but not entirely ethical -- Brandes provides an in-depth analysis of American thought and culture as it has evolved over the past four centuries."

For the Iraq war: T. Christian Miller's Blood Money: Wasted Billions, Lost Lives, and Corporate Greed in Iraq (2006) notes The Washington Post: "When future historians sift through the wreckage of the Bush administration's Iraq policy, they will rely in large part on a handful of books by brilliant reporters who watched the debacle unfold. George Packer's The Assassins' Gate is one such book, and Thomas E. Ricks's Fiasco is certain to be another. To this short list of indispensable accounts detailing how what was supposed to be a liberation became a quagmire, I would now add T. Christian Miller's Blood Money.... Miller, an investigative reporter for the Los Angeles Times, fills in the missing piece: the staggering incompetence and corruption of the U.S.-led reconstruction effort, which may have done almost as much as anything else to turn the Iraqi population against its occupiers. Despite headlines in recent years about Halliburton's hefty revenues, this has been, in general, the less-covered dimension of the Iraq adventure. At its heart, Blood Money is the tale of how Washington left a country desperately in need of rebuilding to the whims of money-hungry private contractors, and of how the lack of clear lines of authority doomed efficiency, effectiveness and accountability from the start.

For a 2007 update about the amount of global weapons sales by the Pentagon, see Frida Berrigan, "Arms Pusher to the World." For a mid-2008 commentary, see "The Lucrative Art of War."

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Pentagon Waste in Iraq May Total Billions, Investigators Say
T. Christian Miller. Los Angeles Times. Los Angeles, Calif.: Jun 16, 2004

The Pentagon may have wasted billions of dollars in Iraq because of a lack of planning and poor oversight, top congressional and Defense Department invesitigators said Tuesday.... The agencies singled out Halliburton Co. - a Houston-based oil services giant that supplies food, housing and other logistics services to the military -- as a particulary egregious example of both poor oversight by the government and overcharging by the company.

For example, a GAO report says, the military did not develop adequate plans to support its troops in Iraq until May 2003, two months after the invasion, when Halliburton was ordered to supply more dining facilities and housing. Since then, Halliburton's contract to supply the troops in Kuwait and Iraq has been adjusted by the Army more than 176 times, or more than once every two days....

"David Wilson, a convoy commander for Halliburton, and James Warren, a Halliburton truck driver, stated that new $85,000 Halliburton trucks in Kuwait were "torched" if they got a flat tire. According to Wilson, the company "removed all the spare tires in Kuwait," presumably so the entire truck would have to be replaced after a blowout. In addition, they said, they were instructed not to change ...

Halliburton, Once Again The following 4 examples relate to Halliburton: For much more, google: Halliburton
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GOP blocks war-profiteering amendment
By John Stanton, CongressDaily

Republicans Wednesday blocked an effort by Senate Minority Leader Tom Daschle, D-S.D., and Judiciary ranking member Patrick Leahy, D-Vt., to create stiffer criminal penalties for war profiteering.

The Leahy/Daschle amendment to the fiscal 2005 defense authorization bill would have created new penalties -- including up to 20 years in jail -- for government contractors convicted of inflating the cost of goods or services. It was defeated 52-46.

Senate Majority Leader Bill Frist, R-Tenn., later filed a motion to invoke cloture on the defense authorization bill, setting a deadline of 1 p.m. Thursday for any further amendments to be filed. The cloture vote could be held as early as Friday.

Daschle and Leahy introduced the war-profiteering amendment in response to growing accusations by Defense Department whistleblowers and House and Senate Democrats that Halliburton, Vice President Dick Cheney's former company, has overcharged the government for a host of services provided to the military in Iraq and Afghanistan.

A clearly uncomfortable Armed Services Committee Chairman John Warner, R-Va., rallied Republicans against the amendment, warning the provisions were simply too vague to be placed into federal law.

Democrats appear to have renewed their interest in controversies around Halliburton's activities in Iraq and Afghanistan in the last several weeks. Sen. Frank Lautenberg, D-N.J., and Rep. Henry Waxman, D-Calif., have led the growing chorus of Democratic voices in Congress seeking investigations into whether Cheney played a role in granting a $2.5 billion contract to Halliburton, as well as into the accusations that the company bilked the government out of millions of dollars in their contracts.
Sen. Zell Miller, D-Ga., was the sole Democrat to vote with Republicans. Sens. Lincoln Chafee, R-R.I., and Olympia Snowe, R-Maine, reluctantly voted against the amendment after being lobbied by GOP colleagues on the Senate floor.

Although presidential hopeful Sen. John Kerry of Massachusetts was making a rare appearance in the Capitol during the vote, he did not vote on the amendment, saying he "had some meetings."
Top

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The next time Vice-President Cheney met Senator Leahy,
the VP said that he had a "frank exchange of views":
Cheney curses senator over Halliburton criticism
(CNN) Friday, June 25, 2004 WASHINGTON

Typically a break from partisan warfare, this year's Senate class photo turned smiles into snarls as Vice President Dick Cheney reportedly used profanity toward one senior Democrat, sources said.

Sen. Patrick Leahy of Vermont, who was on the receiving end of Cheney's ire, confirmed that the vice president used profanity during Tuesday's class photo.
A spokesman for Cheney confirmed there was a "frank exchange of views."

Using profanity on the Senate floor while the Senate is session is against the rules. But the Senate was technically not in session at the time and the normal rules did not apply, a Senate official said.

The story, which was recounted by several sources, goes like this:

Cheney, who as president of the Senate was present for the picture day, turned to Leahy and scolded the senator over his recent criticism of the vice president for Halliburton's alleged war profiteering.

Cheney is the former CEO of Halliburton, and Democrats have suggested that while serving in the Bush administration he helped win lucrative contracts for his former firm, including a no-bid contract to rebuild Iraq.

Cheney's office has said repeatedly that the vice president has no role in government contracting and has severed all financial ties with the Texas-based oil services conglomerate.

Cheney was chief executive officer of Halliburton from 1995 to 2000. He resigned when he became George Bush's running mate.

In response to Cheney, Leahy reminded Cheney that the vice president had once accused him of being a bad Catholic, to which Cheney replied either "f--- off" or "go f--- yourself."

Leahy was referring to charges leveled by some conservatives during the confirmation battle of Bush judicial nominee William Pryor last August. Some supporters of Pryor, who is Catholic, claimed Senate Democrats were "anti-Catholic" for opposing the Alabama attorney general's nomination to the federal bench.

Leahy would not comment on the specifics of the story Thursday, but did confirm that Cheney used profanity.

"I think he was just having a bad day," said Leahy, "and I was kind of shocked to hear that kind of language on the floor."

Kevin Kellems, a spokesman for the vice president, said, "That doesn't sound like the kind of language that the vice president would use, but I can confirm that there was a frank exchange of views."
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Grand Jury Steps Up Inquiry Into Possible Halliburton Ties to Iran
By T. Christian Miller and Peter Wallsten Los Angeles Times Staff Writers July 21, 2004

WASHINGTON — A Halliburton controversy erupted Tuesday, fueled by a grand jury investigation into whether the oil services giant violated federal sanctions by operating in Iran while Vice President Dick Cheney was running the company.

The investigation centers on Halliburton Products and Services Ltd., a subsidiary registered in the Cayman Islands and headquartered in Dubai that provided oil field services in Iran. The unit's operations in Iran included Cheney's stint as chief executive from 1995 to 2000, when he frequently urged the lifting of such sanctions.
Numerous U.S. companies operate in Iran, but under strict guidelines requiring that their subsidiaries have a foreign registry and no U.S. employees, and that they act independently of the parent company.

At issue is whether Halliburton's subsidiary met those criteria.

The Treasury Department has been investigating the matter since 2001. But Halliburton disclosed in public financial filings this week that the department had forwarded the case to the U.S. attorney in Houston for further investigation. The company said a federal grand jury had subpoenaed documents on its Iranian operations.

The Treasury Department refers such complaints only after finding evidence of "serious and willful violations" of the sanctions law, a government official said.
Sen. Frank R. Lautenberg (D-N.J.), whose office has provided information on the case to the Treasury Department, said Tuesday that Halliburton Products and Services was a sham that existed only to circumvent the sanctions.

"It's unconscionable that an American company would skirt the law to help Iran generate revenues," Lautenberg told reporters during a conference call arranged by the campaign of the presumed Democratic presidential nominee, Sen. John F. Kerry of Massachusetts.

Bush campaign spokesman Steve Schmidt called the allegations against Cheney baseless, and accused Democrats of trying to use Halliburton as a distraction. Cheney's office and the White House characterized the latest criticisms of Halliburton as political.

"The Democrats have made clear that their all-purpose strategy, no matter the issue, whether it's healthcare or John Kerry's plans to raise taxes or John Kerry's votes against our men and women in uniform or John Kerry's proposals to cut the intelligence budget, will be met by one word: Halliburton," Schmidt said. "The Kerry campaign has become increasingly flailing in their attacks as there has been increasing focus on John Kerry's record."

Democrats have long criticized Cheney for his connections to Halliburton, hoping to link the vice president to the company's contracts for Iraq reconstruction and its overbilling for services in that country. Cheney has denied any connection to the contracts.

The company has repeatedly found itself at the center of government investigations.

The Securities and Exchange Commission and the Justice Department are looking into allegations that top officials in a consortium that included a Halliburton subsidiary paid millions of dollars in bribes to win contracts in Nigeria. The Justice Department is also looking into reports that Halliburton officials took $6.3 million in kickbacks in Iraq. The Pentagon is examining whether the company overcharged U.S. taxpayers by more than $186 million for meals never served to U.S. troops abroad.

Treasury and Justice officials declined to comment on their inquiry into the Halliburton subsidiary.

Violation of the sanctions can result in criminal charges, and those found guilty can face 10 years in prison. A company can be fined as much as $500,000.
Lautenberg said that in the Iran case, the actions taken by the Republican-controlled Justice and Treasury departments showed that the accusations against Cheney were more than political.

He noted that the grand jury investigation comes amid a flurry of questions about Iran's role in terrorism against the United States.

The independent commission investigating the 2001 terrorist attacks is expected to conclude in a report due Thursday that several of the Sept. 11 hijackers passed through Iran on their way to the United States.

Lautenberg's office distributed copies of four letters from 1997 sent from a London arm of the Iranian state oil company to Halliburton Products and Services in Dubai.
The four letters, all requests for goods and services from the Halliburton subsidiary, included handwritten notations to specific individuals. Lautenberg's staff questioned whether the individuals worked for the foreign subsidiary or for a U.S. subsidiary, in violation of the sanctions.

Halliburton confirmed the authenticity of the documents, but said that two of the individuals were British citizens who had never worked for any U.S. Halliburton subsidiary.

The other two handwritten notations did not list first names of the individuals, and Halliburton said it was unable to locate records for them.

"These documents do not suggest that any violation of the applicable regulations occurred," Halliburton spokeswoman Wendy Hall said in a statement.
Hall said Halliburton's business in Iran had not violated any sanctions, and pledged full cooperation with the government's inquiry.

"It is important to understand, especially in the current political environment, that this is not a condemnation of the company, but a method of further studying the facts," Hall said of the grand jury subpoena. "We welcome a thorough review of any and all of the company's business."

The law forbids U.S. companies from doing business with countries considered by the U.S. government to be sponsors of terrorism. The list includes Iran, North Korea, Cuba and Sudan.

An executive order signed by President Clinton in 1995 specifically prohibits U.S. firms from activities that would benefit the Iranian petroleum industry. The order accuses Iran of sponsorship of international terrorism, undermining the Middle East peace process and developing weapons of mass destruction.

Development of petroleum resources, Clinton said at the time, "would provide new funds that the Iranian government could use to continue its current policies."
Halliburton's Iran operations are virtually all related to oil and gas, and generated at least $39 million in revenue last year, the company said.

The policy allowing U.S. firms to indirectly operate in prohibited countries has come under increasing attack.

One leading critic is New York City Comptroller William C. Thompson Jr., a Democrat who oversees the city's pension fund. He has launched an effort to persuade Halliburton and other firms he invests in to cut all ties to countries that sponsor terrorism.

A January report by CBS' "60 Minutes" featured Thompson and raised questions about the Halliburton subsidiary that does business in Iran.

In that report, a CBS reporter traveled to the company's Cayman Islands operations, only to find no such company there. Instead, the building is owned by a local bank.
A bank employee told the reporter that when mail arrived for the Halliburton subsidiary, it was forwarded directly to Houston.

Copyright Los Angeles Times | Top

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Halliburton Fraud Lawsuit Details Super Bowl Party
By T. Christian Miller | Los Angeles Times | September 9, 2006

WASHINGTON — Halliburton Co. executives ordered a big-screen television and 10 large tubs of tacos, chicken wings and cheese sticks delivered to Iraq for last year's Super Bowl, then billed U.S. taxpayers for their party, according to a lawsuit unsealed Friday.

The Houston-based company also defrauded the government by double- and triple-billing for Internet, food and gym services for soldiers, according to the lawsuit by a former employee for KBR, the Halliburton subsidiary that runs dining halls for troops in Iraq.

"The administration is not enforcing the laws against fraud when it comes to contractors in Iraq," said Alan Grayson, the attorney who filed the suit. "When it comes to seeing that the law is executed, the Bush administration is a no-show."

Halliburton denied the allegations, filed under the False Claims Act. Designed to prevent war profiteering, such lawsuits allow citizens to sue on behalf of the government and recover a portion of any damages.

The company did not deny ordering the TV and the food; it set up snack buffets and screenings at military bases throughout Iraq for the 2005 Super Bowl. But KBR noted that its contract allowed the firm to provide recreation and morale-boosting services for its employees and for American soldiers.

"The claims included in this lawsuit clearly demonstrate a complete misinterpretation of facts as well as a lack of understanding of KBR's contractual agreements with its customer, the U.S. Army," Halliburton spokeswoman Melissa Norcross said.

The accusations in the lawsuit are the latest involving Halliburton's controversial multibillion-dollar contract to feed and house American soldiers in Iraq. Democrats have been quick to criticize the company, which was run by Vice President Dick Cheney from 1995 to 2000.

In June, a KBR subcontractor was indicted on kickback charges involving the dining halls, which feed tens of thousands of soldiers a day in camps throughout Iraq and Kuwait. The U.S. Army Corps of Engineers has withheld $55.1 million out of a total of $13.7 billion in payments on the contract as a result of disputed costs.

The Department of Justice chose not to join the lawsuit against Halliburton after conducting an investigation. Justice officials declined to elaborate Friday, but in legal circles such a decision is usually considered indication of a weak case.

Grayson accused the department of shirking its duties in the middle of a political season. Several dozen lawsuits alleging fraud in Iraq are believed to have been filed, but they remain under seal until the department completes its investigations.

Grayson is best known for having won another fraud case, which Justice officials also passed up, against a private security company named Custer Battles. That decision was recently overturned by a federal judge and is now on appeal.

Grayson, who recently lost a primary race for a House seat in Florida running as a Democrat, denied any political motivations in pursuing the case against Halliburton, noting that he had filed it before deciding to run for office.

He said that the whistle-blower in the case, Julie McBride, came forward only after KBR officials ignored her complaints. McBride said in the lawsuit that she was placed under armed guard and then fired after she raised questions about Halliburton's billing practices. She could not be reached for comment Friday.
Justice Department officials "are stonewalling and keeping these cases under seal unnecessarily," Grayson said.

Rep. Henry A. Waxman (D-Los Angeles), who has been the leader in Congress in attacking Halliburton, said that the charges were further proof of war profiteering by the oil services giant.

"One former Halliburton employee after another tells the same story of outrageous and intentional overcharging," Waxman said in a statement. "Yet no one in the Bush administration seems to care."

Copyright 2006 Los Angeles Times | Top

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Pricey War for Grunts' Families
Patt Morrison Los Angeles Times (Commentary) August 25, 2004

The price of war -- the White House budget office figures that for the Iraq conflict it's $175 billion and counting. But it's the little numbers right here in California that really get to Mike Ryan.

Ryan is a respiratory therapist who lives in West L.A., and he didn't even own a cellphone until his son Rick went to Iraq in March as an Army combat medic. Enter the phone bills: $120, $140 a month, a hundred or two more put on the plastic to "charge up" Rick's phone card. A single call just after Rick landed in Iraq ran $130.
Then there's the food and the cost of sending it. Rick's not keen on Army cooking (who is?). "We brought him up eating well," said his father. So twice a month, a package leaves the Ryan house for Iraq -- Trader Joe's fruits and nuts, protein drinks, canned salmon. Sixty or 70 bucks' worth of food, times two, plus $25 for postage, times two again. Almost $200 a month more.

As the war warmed up, stories abounded about how much it was costing military families to keep reaching out to touch their loved ones. There were tales of disconnection notices because of unpaid bills. A Massachusetts soldier racked up a $7,600 phone bill; his entire savings account paid just half. Arizona Sen. John McCain sponsored a bill that gives those in combat access to a free monthly calling card worth $40. Which goes only so far, as Ryan can attest. Last October, in Colorado, a soldier's wife was applauded when she stood up at a town hall meeting and asked Defense Secretary Donald Rumsfeld about the ruinous cost of phone calls. "As enlisted soldiers," she said, "we can't afford this."

For a while, Mike Ryan worked overtime to pay his overseas phone bills. Then, his cousin, an Army Reserve coordinator, put him on to a military website selling phone cards.

It's run by the same people who've been selling goods to the military for 109 years, through PXs and now websites. They buy phone cards wholesale from AT&T, which holds the contract, and sell them to soldiers with a "small margin to cover costs and overhead."

It works out to $39 for 139 minutes, which has helped, said Ryan. But for families that don't know about the website and may be calling soldiers via other means (different companies' phone cards, for example), the phone bills are likely to be much bigger.

Not that the Mike Ryans of the world begrudge their kids the cost. "I would have paid 10 bucks a minute," he said.

But those bills, those relentless bills, and for families living on a military paycheck of $2,000 or $3,000 a month. The soldiers weren't drafted, of course; they signed up by choice, and they and their families will make do.

With his own hard bills to pay, Mike Ryan can't help but think about that other figure, the one in the billions of dollars. It makes him wonder about the profits being made on phone cards or on feeding his son in Iraq.

It leaves him thinking it's soldiers' families that are paying to subsidize this war, a couple of hundred dollars and a care package at a time: "When you think of Halliburton and Bechtel and how they've pretty much opened [Iraq] up to free enterprise. [Can] American companies come in there and profiteer off the soldiers?"
Of course, the line between legitimate profits and profiteering in wartime is always a flimsy and flexible one, and accusations surface in every war. The man who wrote the book on it is Stuart Brandes, author of the 1997 "Warhogs: A History of War Profits in America."

"In conflict of this kind," said Brandes, "there's great difficulty in evening out the sacrifices made by the warriors, and those who are the suppliers."

Profiteering is sometimes in the eye of the beholder, especially, Brandes said, given the "unusual economic circumstances that develop during wartime [when] the inequities in compensation are magnified by the awful sacrifice that a soldier would make."

Today there's Halliburton, the uber-contractor in Iraq, in line to get paid a little more than $18 billion to feed and house troops and to restore the Iraqi oil infrastructure.
And there are accusations that can't help but hit home on the home front: like reports that Halliburton may have billed $186 million for troop meals that were never served. Or that it is paying $7,500 a month to rent a truck that you or I could rent for $2,000, and $7.50 each for monogrammed bath towels. (Monogrammed with what? Dollar signs?)

It costs a lot to go to war, but it surely would help the warriors and their families to know that the billions are being spent as carefully as their $39 for a phone card.

Thirty-eight years ago this very month, a young congressman told his colleagues that something was seriously amiss about huge wartime contracts awarded to a company with a big friend in a high place. "The potential for waste and profiteering under such a contract is substantial," he warned. It is "beyond me," he went on, why the contract "has not been and is not now being adequately audited." The war was Vietnam. The company was Brown & Root, a subsidiary of Halliburton that is now known as KBR. The big friend in a high place was Democratic President Lyndon B. Johnson. And the impassioned young congressman was Donald Rumsfeld.

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Copyright 2004 Los Angeles Times
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UN scandal tests investigators
Critics say the probe of the world body's Oil for Food
program will face resistance from the US and UN.
By Michael J. Jordan | Correspondent of The Christian Science Monitor | July 15, 2004

UNITED NATIONS, N.Y. - Former Federal Reserve Chairman Paul Volcker leads just one of nine separate investigations into a United Nations humanitarian program that may have enriched Saddam Hussein and UN officials.

But Mr. Volcker's inquiry is arguably the most significant, as he heads the UN's internal probe into what some critics describe as "the biggest financial scandal in history." An estimated $10 billion was siphoned from the $65 billion Oil for Food program.

Volcker recently finished assembling his investigative team and vowed to produce a "truly definitive report" in six to eight months. "The chips will fall where they may," he wrote in The Wall Street Journal earlier this month.

Yet some critics question the UN's ability to investigate itself and how effectively Volcker will be able to examine the 270 companies and individuals from 46 countries - including the UN official who ran the program - implicated in scheming with Mr. Hussein. Critics suggest the findings will reveal that some of the countries most opposed to sanctions and military action - like Russia and France - were some of the greatest beneficiaries of the sweetheart deals and essentially did Hussein's bidding.

"If Russian companies were recipients of billions of dollars worth of contracts, then what distortion, if any, did it have on Russian policymaking at the UN?" asks a congressional aide to the US House of Representatives Committee on International Relations, which is also investigating the program. "That's a steep charge, but as we go further, it's something we'll have to consider."

It is unclear how much access Volcker and his team will have to internal UN audits from the program. And some critics suggest that the US might try to stall any investigation to avoid embarrassing the UN and fellow member states in order to garner more support for Iraq.

Oil for food is born
In 1991, he UN Security Council slapped sanctions on Iraq for invading Kuwait and to force Iraq's full disarmament of its unconventional weapons. But the sanctions appeared to hurt ordinary Iraqis and not Hussein. So the Oil for Food program was hatched in 1996, which allowed Iraq to sell oil and use the proceeds to purchase food and humanitarian supplies. Over the next seven years the UN says the program fed 27 million Iraqis, saved a least a half a million children from malnutrition, helped fight diseases, and cleared 135 million square feet of land of mines.

But Hussein was allowed to choose his own business partners for the program. This allegedly enabled him to game the system. He is said to have hauled in $5.7 billion from illicit oil sales and $4.4 billion more in kickbacks, while his partners skimmed a portion as well, the US General Accounting Office reported in March. Analysts say he used some of the money to buy weapons.

The assorted investigations will try to determine who's to blame and who took what. In addition to the Volcker inquiry, there are three congressional investigations, one by both the Treasury Department and US Customs, one in New York courts, and one by the Iraqi Board of Supreme Audit. In a sign that powerful interests may work to prevent the facts from coming to light, the board's chief auditor, Ehsan Karim, was killed in a car bombing in Baghdad on July 1.

Documents from several of the banks and oil companies involved have been subpoenaed - including US concerns Exxon Mobil, ChevronTexaco, and Valero Energy. Outside critics and investigators charge that UN Secretary- General Kofi Annan has been slow to release internal audits, though he has officially instructed all UN personnel to cooperate with Volcker's inquiry.

Mr. Annan and Benon Sevon, who oversaw the oil-for-food program and is accused of accepting $3.5 million worth of Iraqi oil vouchers, are in the two hottest seats. Annan's son, Kojo, was briefly employed as a consultant by Cotecna Inspections, which in December 1998 - just after he left the company - won the UN contract to check all goods coming into Iraq. Both Mr. Sevon and the secretary-general, on behalf of his son, have denied any wrongdoing.

Conservative lawmakers and commentators have been adamant in their criticism of the UN over the alleged scandal.

"Here's why I take aim at the Secretariat," says Claudia Rosett, a fellow at the Foundation for the Defense of Democracies and columnist for the Wall Street Journal. "They actually had the people on the ground in Iraq - 800 international staff plus 3,500 Iraqi staff.... They handled the paperwork, the bank accounts, and gathered the anecdotal evidence. At some point, the job of the secretary-general is to rise above the factional interests of member states and do what's right. I don't think Kofi Annan did that."

Even supporters are skeptical
UN defenders, meanwhile, suggest that right-wing forces are once again trying to discredit the world body.

"If money was misspent or somehow ripped off, people need to know why," says James Paul, executive director of Global Policy Forum, a UN watchdog. "But this story is being framed that the UN as an institution is guilty of malfeasance, this bloated bureaucracy full of grasping people who are in it to feather their own nest. We know to be suspicious of who tell this story because we see what their interest is - to discredit the UN and keep the UN out of Iraq."

UN spokesperson Stephane Dujarric chastised critics for "jumping to conclusions without facts." However even some UN supporters expect the probes to reveal serious problems.

"This was a well-intended program that went badly wrong," says Nina Bang-Jensen, executive director of Washington's Coalition for International Justice, which first detailed the oil-for-food scandal in September 2002. "What disturbs us is that this is becoming a partisan issue, when there are serious culpability issues that need to be investigated. For a program that was supposed to aid Iraqis, whom Saddam was starving, to wind up in his hands is a travesty."

Copyright © 2004 | The Christian Science Monitor. | Top

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"We see no conflict of interest in using our knowledge and contacts in Iraq that we developed through our previous work with the INC to support economic development in Iraq. As a matter of fact, we see this as complementary to a shared goal to build a democratic country."
Advocates of War Now Profit From Iraq's Reconstruction
Lobbyists, aides to senior officials and others encouraged invasion
and now help firms pursue contracts. They see no conflict.
By Walter F. Roche Jr. and Ken Silverstein | Los Angeles Times | July 14, 2004

WASHINGTON. In the months and years leading up to the U.S.-led invasion of Iraq, they marched together in the vanguard of those who advocated war.
As lobbyists, public relations counselors and confidential advisors to senior federal officials, they warned against Iraqi weapons of mass destruction, praised exiled leader Ahmad Chalabi, and argued that toppling Saddam Hussein was a matter of national security and moral duty.

Now, as fighting continues in Iraq, they are collecting tens of thousands of dollars in fees for helping business clients pursue federal contracts and other financial opportunities in Iraq. For instance, a former Senate aide who helped get U.S. funds for anti-Hussein exiles who are now active in Iraqi affairs has a $175,000 deal to advise Romania on winning business in Iraq and other matters.

And the ease with which they have moved from advocating policies and advising high government officials to making money in activities linked to their policies and advice reflects the blurred lines that often exist between public and private interests in Washington. In most cases, federal conflict-of-interest laws do not apply to former officials or to people serving only as advisors.

Larry Noble, executive director of the Center for Responsive Politics, said the actions of former officials and others who serve on government advisory boards, although not illegal, can raise the appearance of conflicts of interest. "It calls into question whether the advice they give is in their own interests rather than the public interest," Noble said.

Michael Shires, a professor of public policy at Pepperdine University, disagreed. "I don't see an ethical issue there," he said. "I see individuals looking out for their own interests."

Former CIA Director R. James Woolsey is a prominent example of the phenomenon, mixing his business interests with what he contends are the country's strategic interests. He left the CIA in 1995, but he remains a senior government advisor on intelligence and national security issues, including Iraq. Meanwhile, he works for two private companies that do business in Iraq and is a partner in a company that invests in firms that provide security and anti-terrorism services.

Woolsey said in an interview that he was not directly involved with the companies' Iraq-related ventures. But as a vice president of Booz Allen Hamilton, a consulting firm, he was a featured speaker in May 2003 at a conference co-sponsored by the company at which about 80 corporate executives and others paid up to $1,100 to hear about the economic outlook and business opportunities in Iraq.

Before the war, Woolsey was a founding member of the Committee for the Liberation of Iraq, an organization set up in 2002 at the request of the White House to help build public backing for war in Iraq. He also wrote about a need for regime change and sat on the CIA advisory board and the Defense Policy Board, whose unpaid members have provided advice on Iraq and other matters to Defense Secretary Donald H. Rumsfeld.

Woolsey is part of a small group that shows with unusual clarity the interlocking nature of the way the insider system can work. Moving in the same social circles, often sitting together on government panels and working with like-minded think tanks and advocacy groups, they wrote letters to the White House urging military action in Iraq, formed organizations that pressed for invasion and pushed legislation that authorized aid to exile groups.

Since the start of the war, despite the violence and instability in Iraq, they have turned to private enterprise.The group, in addition to Woolsey, includes:

> Neil Livingstone, a former Senate aide who has served as a Pentagon and State Department advisor and issued repeated public calls for Hussein's overthrow. He heads a Washington-based firm, GlobalOptions, that provides contacts and consulting services to companies doing business in Iraq.
>Randy Scheunemann, a former Rumsfeld advisor who helped draft the Iraq Liberation Act of 1998 authorizing $98 million in U.S. aid to Iraqi exile groups. He was the founding president of the Committee for the Liberation of Iraq. Now he's helping former Soviet Bloc states win business there.
>Margaret Bartel, who managed federal money channeled to Chalabi's exile group, the Iraqi National Congress, including funds for its prewar intelligence program on Hussein's alleged weapons of mass destruction. She now heads a Washington-area consulting firm helping would-be investors find Iraqi partners.
>Riva Levinson, a Washington lobbyist and public relations specialist who received federal funds to drum up prewar support for the Iraqi National Congress. She has close ties to Bartel and now helps companies open doors in Iraq, in part through her contacts with the Iraqi National Congress.

Other advocates of military action against Hussein are pursuing business opportunities in Iraq. Two ardent supporters of military action, Joe Allbaugh, who managed President Bush's 2000 campaign for the White House and later headed the Federal Emergency Management Agency, and Edward Rogers Jr., an aide to the first President Bush, recently helped set up two companies to promote business in postwar Iraq. Rogers' law firm has a $262,500 contract to represent Iraq's Kurdistan Democratic Party.

Neither Rogers nor Allbaugh has Woolsey's high profile, however.

Soon after the Sept. 11 attacks, he wrote an opinion piece in the Wall Street Journal saying a foreign state had aided Al Qaeda in preparing the strikes. He named Iraq as the leading suspect. In October 2001, Deputy Secretary of Defense Paul D. Wolfowitz sent Woolsey to London, where he hunted for evidence linking Hussein to the attacks.

At the May 2003 Washington conference, titled "Companies on the Ground: The Challenge for Business in Rebuilding Iraq," Woolsey spoke on political and diplomatic issues that might affect economic progress. He also spoke favorably about the Bush administration's decision to tilt reconstruction contracts toward U.S. firms.

In an interview, Woolsey said he saw no conflict between advocating for the war and subsequently advising companies on business in Iraq.
Booz Allen is a subcontractor on a $75-million telecommunications contract in Iraq and also has provided assistance on the administration of federal grants. Woolsey said he had had no involvement in that work.

Woolsey was interviewed at the Washington office of the Paladin Capital Group, a venture capital firm where he is a partner. Paladin invests in companies involved in homeland security and infrastructure protection, Woolsey said.

Woolsey also is a paid advisor to Livingstone's GlobalOptions. He said his own work at the firm did not involve Iraq.

Under Livingstone, Global- Options "offers a wide range of security and risk management services," according to its website.

In a 1993 opinion piece for Newsday, Livingstone wrote that the United States "should launch a massive covert program designed to remove Hussein."

In a recent interview, Livingstone said he had second thoughts about the war, primarily because of the failure to find weapons of mass destruction. But he has been a regular speaker at Iraq investment seminars.

While Livingstone has focused on opportunities for Americans, Scheunemann has concentrated on helping former Soviet Bloc states.

Scheunemann runs a Washington lobbying firm called Orion Strategies, which shares the same address as that of the Iraqi National Congress' Washington spokesman and the now-defunct Committee for the Liberation of Iraq.

Orion's clients include Romania, which signed a nine-month, $175,000 deal earlier this year. Among other things, the contract calls for Orion to promote Romania's "interests in the reconstruction of Iraq."

Scheunemann has also traveled to Latvia, which is a former Orion client, and met with a business group to discuss prospects in Iraq.
Few people advocated for the war as vigorously as Scheunemann. Just a week after Sept. 11, he joined with other conservatives who sent a letter to Bush calling for Hussein's overthrow.

In 2002, Scheunemann became the first president of the Committee for the Liberation of Iraq, which scored its biggest success last year when 10 Eastern European countries endorsed the U.S. invasion. Known as the "Vilnius 10," they showed that "Europe is united by a commitment to end Saddam's bloody regime," Scheunemann said at the time.

He declined to discuss his Iraq-related business activities, saying, "I can't help you out there."
Scheunemann, Livingstone and Woolsey played their roles in promoting war with Iraq largely in public. By contrast, Bartel and Levinson mostly operated out of the public eye.

In early 2003, Bartel became a director of Boxwood Inc., a Virginia firm set up to receive U.S. funds for the intelligence program of the Iraqi National Congress.
Today, critics in Congress say the Iraqi National Congress provided faulty information on Hussein's efforts to develop weapons of mass destruction and his ties to Osama bin Laden.

Bartel began working for the Iraqi National Congress in 2001. She was hired to monitor its use of U.S. funds after several critical government audits. After the war began, Bartel established a Virginia company, Global Positioning. According to Bartel, the firm's primary purpose is to "introduce clients to the Iraqi market, help them find potential Iraqi partners, set up meetings with government officials � and provide on-the-ground support for their business interests."

Bartel works closely with Levinson, a managing director with the Washington lobbying firm BKSH & Associates. Francis Brooke, a top Chalabi aide, said BKSH received $25,000 a month to promote the Iraqi National Congress, and Levinson "did great work on our behalf."

In 1999, Levinson was hired by the Iraqi National Congress to handle public relations. She said her contract with the congress ended last year. Before the invasion and in the early days of fighting in Iraq, Chalabi and the congress enjoyed close relations with the Bush administration, but the relationship has cooled.

Levinson told The Times: "We see no conflict of interest in using our knowledge and contacts in Iraq that we developed through our previous work with the INC to support economic development in Iraq. As a matter of fact, we see this as complementary to a shared goal to build a democratic country."
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Copyright 2004 Los Angeles Times

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"This year, the United States will spend $275 billion -- more than 10% of the federal budget -- buying goods and services from private contractors, often through contracts never fully opened to competitive bidding."
Civil Service Has Morphed Into U.S. Inc.
Diminishing the government workforce increases the
role of private contractors, and the mixed results go undebated.
By Linda Bilmes, Assistant Secretary of Commerce during the Clinton administration,
teaches public policy at the Kennedy School of Government at Harvard University. | Los Angeles Times July 18, 2004

BOSTON- For two decades, Congress has been engaged in a bipartisan effort to shrink the size of government. But today, although fewer people appear on federal payrolls, more people than ever work for the U.S. government.

This seeming paradox has been achieved by hiring private contractors to perform many of the tasks previously performed by federal employees. And although it may not have resulted in a true downsizing of government, it has radically transformed the way public services are provided.

The war in Iraq has turned the spotlight on the shift. Government contractors are working in Iraq as prison interrogators, bomb defusers and armed bodyguards for U.S. officials. They've landed lucrative contracts to rebuild infrastructure and to feed American troops. And some of them have paid dearly for their service.

Paul Johnson, beheaded last month by Islamic militants in Iraq, worked as an engineer for Lockheed Martin. The four Americans whose bodies were mutilated by a mob in Fallouja worked for Blackwater Security, a "strategic support" firm that, among other things, was responsible for protecting U.S. administrator L. Paul Bremer III. More than 100 other contract employees, including about 40 Halliburton employees, have lost their lives while driving trucks, cooking dinner or cleaning up damaged oil wells.
This year, the United States will spend $275 billion -- more than 10% of the federal budget -- buying goods and services from private contractors, often through contracts never fully opened to competitive bidding. Much of this work will be poorly managed and inadequately monitored, and yet private contractors have become indispensable to the workings of the government.

Nobody knows exactly how many contractors the government employs. Paul Light of the Brookings Institution estimates that the federal budget funds a "shadow government" of nearly 6 million contractors, about half of them in defense. That means contractors outnumber civil servants and military personnel by a ratio of 2 to 1.
In Iraq, there are at least 50,000 private security contractors working for KBR (a Halliburton subsidiary), Bechtel, Kroll, Blackwater and others. In some cases, U.S. companies have recruited these workers from the ranks of mercenaries in Chile, South Africa and other countries.

Contractors are so integral a part of U.S. government operations that it is hard to imagine federal agencies running without them. They provide support services, like processing claims and running computer systems. And they do more exotic jobs: gathering top-secret intelligence for the CIA, investigating fraud and abuse, building warships and helicopters and launching weather satellites. It was a government contractor who issued student visas to two Sept. 11 hijackers and notified a Florida flight school of the issuance six months after they crashed their planes into the World Trade Center.

The privatization juggernaut was launched by Ronald Reagan, who took aim at what he felt was a bloated federal workforce. The mission has been embraced by every subsequent administration and, in 1998, was codified by Congress with the Federal Activities Inventory Reform Act. The law requires government agencies and departments to publish an annual accounting of which tasks under their auspices "are not inherently governmental functions" and could therefore be put out to private bid. President Bush has made implementation of this law a cornerstone of his management agenda.

But perhaps it is time to stop and ask some questions.

First, how much does it matter that contractors are motivated by different incentives than civil servants? Whether they are giant corporations like Bechtel and General Electric or individual security guards who can earn $16,000 a month in Iraq, contractors are driven by making money. It is unrealistic to assume that they will be motivated by the same concern for the public interest as civil servants or soldiers. The current system relies on civil servants to manage contractors and hold them accountable. But, as has become painfully evident in Iraq, few civil servants, even in the military, have the training or skills to do this effectively.

Second, does the taxpayer get value for money? One of the main reasons for outsourcing is that the private sector is widely assumed to be more efficient. But in Iraq, much of the $21 billion being spent on reconstruction is going to high-priced foreign contractors rather than low-cost local labor. As Rep. Henry A. Waxman (D-Los Angeles) has pointed out, non-Iraqi contractors charged $25 million to repaint 20 police stations — a job that the governor of Basra claims could have been done by local firms for $5 million.

Third, where do we draw the line on which jobs are so "mission-critical" that they simply must be done by government employees? In some areas, the risks of losing control may well outweigh budgetary considerations — as, say, in the interrogation of military prisoners. But the pendulum has swung so far in favor of contracting out that departments typically even hire outside companies to perform audits of other government contractors.

In Iraq, this issue is compounded by contractors' murky legal status. Under the Geneva Convention, they are noncombatants, but many of those working in Iraq carry arms and work as paramilitary security forces, or they are involved in training military security forces. Employees from at least two military contractors (CACI of Arlington, Va., and Titan of San Diego) are being investigated for their possible role in alleged torture at Abu Ghraib prison. The CACI contract has riled the procurement community because it was not even purchased directly by the Pentagon but was part of a larger contract negotiated by the Department of the Interior to provide computer network solutions.

Finally, how should this large and growing army of workers be managed? The rules governing how and what the government buys are designed to ensure fair competition. But more than half of government contracts are awarded without full competition, according to Taxpayers for Common Sense, a nonpartisan budget analyst. Giant contractors have become adept at gaming the system. Once firms win big contracts — often using low-ball initial cost estimates — the government becomes so dependent on their services that it's almost impossible to get rid of them.

This trend toward privatization of government is likely to accelerate even more. At the Department of Defense, 50% of civilian military workers will soon be eligible to retire. Many of those retirees, still in their mid-50s, will end up in the "revolving door," working for contractors after their obligatory one-year abstinence from government-related work.

The war in Iraq is proving to be a wake-up call regarding the role of contractors. Last month, the Senate approved amendments to the 2005 defense appropriations bill that would place controls on the Pentagon's use of outside companies. But that's unlikely to be enough.

It is time to stop the hypocrisy of claiming to shrink government while hiring an ever-larger contingent of private contractors. If these employees are performing work crucial to the function of government, then we should integrate them more fully into the government workforce — with the same responsibilities and benefits as other government employees.
Copyright | Los Angeles Times |July 18, 2004 | Top

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Pentagon Deputy's Probes in Iraq Weren't Authorized, Officials Say
By T. Christian Miller Los Angeles Times Staff Writer July 7, 2004
WASHINGTON - A senior Defense Department official conducted unauthorized investigations of Iraq reconstruction efforts and used their results to push for lucrative contracts for friends and their business clients, according to current and former Pentagon officials and documents.

John A. "Jack" Shaw, deputy undersecretary for international technology security, represented himself as an agent of the Pentagon's inspector general in conducting the investigations, sources said.

In one case, Shaw disguised himself as an employee of Halliburton Co. and gained access to a port in southern Iraq after he was denied entry by the U.S. military, the sources said.

In that investigation, Shaw found problems with operations at the port of Umm al Qasr, Pentagon sources said. In another, he criticized a competition sponsored by the U.S.-led Coalition Provisional Authority to award cellphone licenses in Iraq.

In both cases, Shaw urged government officials to fix the alleged problems by directing multimillion-dollar contracts to companies linked to his friends, without competitive bidding, according to the Pentagon sources and documents. In the case of the port, the clients of a lobbyist friend won a no-bid contract for dredging.

Shaw's actions are the latest to raise concerns that senior Republican officials working in Washington and Iraq have used the rebuilding effort in Iraq to reward associates and political allies. One of Shaw's close friends, the former top U.S. transportation official in Iraq, is under investigation for his role in promoting an Iraqi national airline with a company linked to the Saddam Hussein regime.

The inspector general's office -- which investigates waste, fraud and abuse at the Pentagon-- has turned over its inquiry into Shaw's actions to the FBI to avoid the appearance of a conflict of interest, the sources said.

The FBI also is looking into allegations, first reported by the Los Angeles Times, that Shaw tried to steer a contract to create an emergency phone network for Iraq's security forces to a company whose board of directors included a friend and one of Shaw's employees.

Shaw, who held top positions in the Reagan and George H.W. Bush administrations, declined to comment for this article. In previous interviews, he has denied any financial links to the companies involved or receiving any promises of future employment or other benefit.

Shaw justified his investigations under a special agreement with the Pentagon inspector general, Joseph E. Schmitz. The August agreement created a temporary office headed by Shaw called the International Armament and Technology Trade Directorate. Its mission was to cooperate with the inspector general on issues related to the transfer of sensitive U.S. technologies or arms to foreign countries.

Shaw frequently cited the agreement in his dealings with reporters and the military, telling them it allowed him to "wear an IG hat" to conduct investigations. In a recent letter to the inspector general, he said the agreement gave him "broad investigatory authority."

That contention is the subject of dispute, however. The agreement states that Shaw "may recommend" that the inspector general initiate audits, evaluations, investigations and inquiries, but it does not appear to give him investigative powers.

"Jack Shaw was never authorized to do any kind of investigation or auditing on his own," said one source close to Schmitz. "The agreement was not for that. He's trying to cram more authority into that agreement than it gives him."

Schmitz canceled the agreement two weeks after Shaw was first accused of tampering with the emergency phone network contract. Schmitz declined to comment, but in his letter canceling the arrangement, he praised Shaw for "outstanding leadership."

Shaw used the agreement to win permission to visit Iraq last fall. In an Oct. 28 letter to Army Gen. John P. Abizaid, head of the U.S. Central Command, Shaw said he wanted to "investigate those who threatened the national security of the United States through the transfer of advanced technologies to Iraq."

Specifically, Shaw said he planned to identify countries that had smuggled contraband weapons into Iraq and catalog existing conventional weapons stockpiles.
Although he did not mention it in the letter, Shaw also was interested in investigating operations at the port of Umm al Qasr.

Last summer, Shaw was visited by Richard E. Powers, a longtime friend and lobbyist. Powers was representing SSA Marine, a Seattle-based port operations company that had won a controversial limited-bid contract in the early days of the war to manage the troubled port.

He also was representing a small business owned by Alaskan natives called Nana Pacific. Under federal regulations, small companies owned by Alaskan Native Americans can bypass the normal process and receive unlimited, no-bid contracts.

Powers suggested there were serious problems with dredging at the port that could be quickly remedied by having a no-bid contract awarded to Nana, which then could subcontract to SSA Marine, sources said.

Powers did not respond to requests for comment. Public lobbying records show that Nana and SSA Marine paid Powers $80,000 last year for his work.
In December, Shaw flew to Kuwait to inspect the port. The military refused to allow him into the facility, however, because of the danger involved, Pentagon sources said.
Shaw and several staffers then went to the port dressed like employees of KBR, the Halliburton subsidiary that has a contract to supply the military with food and other items.

In a KBR hat, Shaw and his staff spent less than an hour at the port, taking pictures and talking with soldiers, current and former Pentagon sources said. The group documented well-known problems there, including the presence of unexploded mines.

A Defense official in Shaw's office acknowledged that they had entered the port despite the military's concerns. He described the disguise as an attempt to conceal Shaw's status, for safety reasons.

He said the military's negative reaction to the proposed visit convinced him that there was serious trouble at the port.

"This Army two-star said, 'We won't let you in the country.' I said, there's something there," said the Defense official, who did not want to be identified. "Everybody had declared victory at the port�. We looked at the port and there were still tremendous problems."

When coalition officials learned that Shaw was at the port, they made a frantic effort to locate him, but didn't reach him until after his return to Kuwait.
"I get this call from [the U.S. military command in Iraq] that said: 'We have an undersecretary of Defense roaming the countryside. We need to locate and secure him,' " recalled a former CPA official. "He's in the country illegally, but we can't arrest him, so we let him finish the tour."

Shaw spent about a week in Iraq, meeting with top U.S. and Iraqi officials. He told several officials that the trip to Umm al Qasr had convinced him that work at the port had to be accelerated. He then suggested that the work could be expedited by awarding the contract to Nana, several former CPA officials said.

"The only time I heard Nana's name was when [Shaw and his team] were in Baghdad," said a former CPA official involved in the ports. "The notion was that this might well be a vehicle where you could in fact get things moving quickly that needed to be done, such as dredging and so forth."

Soon after Shaw's visit, the CPA granted Nana a construction and communications contract worth up to $70 million. Nana then subcontracted $3.5 million in work to SSA Marine, which recently completed the dredging.

Nana also is linked to Shaw's other investigation.

Late last year, Shaw began looking into the award of cellphone licenses in Iraq after receiving complaints from a longtime friend, Don DeMarino, who had worked under Shaw at the Commerce Department.

DeMarino was a director of a consortium called Liberty Mobile, one of the losing bidders in the contest that awarded the cellphone licenses, potentially worth hundreds of millions of dollars, to three other firms.

Relying on information from DeMarino and Liberty Mobile's president, Declan Ganley, Shaw cast doubt on the validity of the awards by leaking to several media outlets information that he said showed corruption in the process, said current and former Pentagon sources. He also provided the evidence he had gathered to the inspector general.

In December, the inspector general's office released a report saying that no basis had been found for Shaw's accusations. The office referred part of the complaint to the British government for further investigation of two British CPA officials involved in the licensing process, according to a copy of the report obtained by The Times.
British authorities exonerated the men. Later, Deputy Defense Secretary Paul D. Wolfowitz wrote to the British ambassador clearing them.

"The British ambassador in the U.S. has received notification that no British citizens are under investigation by the U.S." in the contract matter, a British Embassy spokesman said.

Soon after Liberty Mobile lost the bidding war last fall, Shaw began pushing Nana to win a no-bid contract to build a communications system for the Iraqi police, fire and security forces, according to officials with the now-dissolved CPA and documents obtained by The Times. He then tried to change the language of the contract to allow the creation of a cellphone network, according to interviews and documents.

Nana planned to subcontract the construction of the communications system to a company called Guardian Net. Guardian Net's board of directors was nearly identical to that of Liberty Mobile. It included DeMarino, Ganley and Julian Walker, who works for Shaw as a researcher, according to the documents.

Ganley and DeMarino have acknowledged participating in the attempt to win a cellphone license. Walker could not be reached for comment.
When CPA officials reported their concerns about the Guardian Net plan to Pentagon investigators, Shaw stepped up his investigation of the role of the CPA officials in the licensing process, Pentagon sources said.

Even after the Pentagon canceled the agreement that Shaw had used to justify his probe, he unilaterally continued the investigation, Pentagon sources said.
On May 11, Shaw delivered his report, which concluded that there was "serious, credible evidence of criminal wrongdoing by U.S. government employees pertaining to taking official acts in exchange for bribes."

He acknowledged that the report "directly conflicts" with the December report by the inspector general, which he dismissed as "worthless."

Shaw's report, which The Times has reviewed, claims evidence of a conspiracy to take over Iraq's cellphone service led by Nadhmi Auchi, a British businessman who has been accused of links to Hussein and who was convicted last year in a French court in an unrelated kickback scheme. Auchi maintains his innocence and is appealing.
Auchi, according to the report, paid bribes through a series of surrogates to win the three cellphone licenses and gain control of Iraq's cellular system.

A spokesman for Auchi denied Shaw's claims. He acknowledged that Auchi has an indirect, minor stake in Orascom, one of the cellphone operators. He denied any ownership interest in the other phone companies.

Shaw's report relies mainly on newspaper articles, rumors and secondhand conversations reported by the losing bidders or anonymous sources and "the Arab street," which Shaw calls "a reasonable sounding board for accepted truth."

In the conclusion to his report, Shaw recommends that all the cellphone licenses be canceled and that the contract be awarded to one of the original bidders — as long as the bidder uses a technology known as CDMA, which Shaw describes as superior to other cellular technologies.

Shaw sent his report to the inspector general's office, which turned it over for further investigation to the FBI. An FBI official confirmed that the agency had received the report and had just begun looking into the allegations of bribery.

"While some of the evidence in this report is fragmentary, the dots are connected in convincing and important ways," Shaw said in the report. "Below the deadly serious efforts to restore security and legitimacy to Iraq lies a muted gold rush mentality."

Copyright 2004 Los Angeles Times | Top

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The Iraq War's Outsourcing Snafu
The coalition of the billing has real limits.
Max Boot | Op Ed | Los Angeles Times | March 31, 2005

Ever since Ronald Reagan proclaimed in his 1981 inaugural address that "government is not the solution to our problem; government is the problem," leaders at all levels of government, Democrats and Republicans alike, have been outsourcing as much work as possible to the private sector. This is generally a good idea, but when it comes to the military, this trend may have gone too far.

Peter W. Singer, a fellow at the Brookings Institution and author of "Corporate Warriors," estimates that there are 20,000 to 30,000 civilians in Iraq performing traditional military functions, from maintaining weapons systems to guarding supply convoys. If you add foreigners involved in reconstruction and oil work, the total soars to 50,000 to 75,000. To put this into perspective: All of Washington's allies combined account for 23,000 troops in Iraq. In the latest issue of Foreign Affairs, Singer quips that "President George W. Bush's 'coalition of the willing' might thus be more aptly described as the 'coalition of the billing.' "

Let us stipulate that most contractors are upstanding, hardworking individuals who perform valuable and dangerous work. At least 175 have been killed and 900 wounded in Iraq. But their labor has been tarnished by scandals and snafus too numerous to ignore.

Oil-services giant Halliburton and the security firm Custer Battles, among others, have been accused of swindling U.S. taxpayers. Other contractors are said to have been simply ineffective. Vinnell Corp. did such a poor job of training Iraqi army recruits that half of its first battalion walked off the job. The Army had to step in to perform the work itself.

Other companies have been accused of human rights violations: Interrogators from CACI International were in the middle of the Abu Ghraib mess. And still others have caused major problems by failing to coordinate with the military chain of command. The most notorious example was the decision by four Blackwater employees to enter Fallouja on March 31, 2004, without notifying the local Marine garrison. Their well-publicized deaths in an ambush forced the Marines into a costly offensive to try to regain control of the city.

There is nothing new or nefarious about privatizing military support functions. But, in Iraq, the contractors aren't just building latrines or staffing mess halls. They're also running around with assault rifles and black body armor performing "tactical" functions. Many are well-trained U.S. or British veterans, but others are Rambo wannabes or sordid desperados. Among the mercenaries who have surfaced in Iraq are South Africans who were members of apartheid-era death squads and Chileans who served in Pinochet's security services.

When U.S. service members are accused of wrongdoing, they are investigated and, if necessary, court-martialed. That's not the case with civilians who are generally not covered by the laws of their home countries for crimes committed abroad. The Iraqi legal system could hold them to account, but in practice Baghdad won't do anything that might lead to an exodus of foreign firms. Dozens of U.S. and British soldiers have been prosecuted for misconduct in Iraq — but not a single contractor.

A lack of accountability leads to occurrences such as those described by four former Custer Battles employees who claim that poorly trained Kurds on the firm's payroll killed innocent motorists. In one incident, a guard supposedly fired his AK-47 into a passenger car to clear a traffic jam. In another, an aggressive driver in a giant pickup truck allegedly pulverized a sedan with children inside. When true (the firm denies any wrongdoing), such incidents only create more insurgent recruits.

U.S. policymakers argue that they have to rely on private help because the U.S. armed forces simply aren't big enough to do everything, and allies have not made up the shortfall. But that's an argument for expanding the armed forces, not for hiring a lot of freelance gunslingers. Administration officials complain that a bigger army is too expensive, but are they really saving money by relying on privateers?

The most valued contractors are experienced former U.S. Special Forces operatives whose training cost the Pentagon hundreds of thousands of dollars. They are being lured out of uniform by the promise of making $500 to $1,000 a day. (If they stay in the service they'll be lucky to make $140 a day.) And where does that money come from? Pretty much all the foreign firms in Iraq are paid by the U.S. Treasury. So the government is in competition with itself for its most skilled and hard-to-replace soldiers. Does this sort of outsourcing really make sense?
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Copyright 2005 | Los Angeles Times | Top

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Pentagon Aided Halliburton, Official Charges
The company's no-bid contracts in Iraq are cited as examples of favorable treatment.
By Steven Bodzin | Los Angeles Times | June 27, 2005

WASHINGTON — A top Army Corps of Engineers official charged Monday that Halliburton Co. was able to receive no-bid contracts for work in Iraq because of repeated assistance by the office of the secretary of Defense.

Bunnatine Greenhouse, a longtime senior procurement executive for the Army Corps of Engineers, made the accusation to Democratic lawmakers looking into allegations of war profiteering by the Texas oil services company.

She called the multiple interventions "the most blatant and improper contract abuse I have witnessed during the course of my professional career."
"Essentially every aspect of the RIO contract remained under the control of the office of the secretary of Defense," she said, referring to the acronym for the contract known as Rebuild Iraqi Oil. "That troubled me and was wrong."

Rebuild Iraqi Oil was just one of eight examples Democrats cited as "favorable treatment" for Halliburton since 2002.

Democrats also released a report that added up findings from previously undisclosed Defense Department audits. Together, they show more than $1 billion in possible overcharges and $422 million in billing that lacked the kind of documentation the auditors needed to determine whether the charges were proper.

The vast scale goes well beyond previously released figures. In earlier public reports, auditors had identified about $400 million in questioned costs.

A spokeswoman for the Department of Defense said Monday that officials had not had time to examine the Democrats' report, which was released in the afternoon. "The department is committed to an integrated, well-managed contracting process in Iraq," Marine Corps Lt. Col. Roseann Lynch said in an e-mail.

In a written statement, Cathy Gist-Mann of Halliburton called the alleged overcharges "a gross mischaracterization" and described the hearing as politically motivated.

Possible excessive charges for the oil services contract have been released previously. But Monday's report described possible overcharges of $800 million on "logistical" services, such as food service and trash hauling, conducted in Iraq by KBR, a Halliburton subsidiary formerly known as Kellogg, Brown & Root.

Rory Mayberry, a former KBR food service manager, discussed some of the overcharges in a videotaped statement. He said the company served troops food that had been expired for as long as a year, provided Turkish and Filipino workers with leftovers in trash bags rather than culturally appropriate food, and overcharged for 10,000 meals per day in order to make up for a financial sanction imposed by the Pentagon.

Mayberry's clams could not be independently corroborated.

"KBR's dining facilities are thoroughly inspected every month by the Army's Preventive Medicine Services division, and one of the main things they check is the expiration dates on various food products," Gist-Mann wrote. "If at any point food is deemed unfit to serve, KBR follows the government-approved processes and procedures to destroy it."

Sens. Byron L. Dorgan (D-N.D.), Frank R. Lautenberg (D-N.J.) and Mark Dayton (D-Minn.) and Rep. Henry A. Waxman (D-Los Angeles) questioned the Iraq oil contract, which Greenhouse said Halliburton should never have been offered because of the company's inside knowledge of the project budget.

Another possible impropriety was a waiver, apparently given by top Defense Department officials, that allowed Halliburton to bill the department without providing cost and pricing data. Greenhouse said she normally would have been required to sign any such waiver, but this one "didn't even appear in my system."

The waiver allowed the company to pay a politically connected Kuwaiti oil company more than $1 per gallon to transport gasoline — work now being done, under worse security conditions, for 18 cents a gallon, according to executives of Lloyd-Owen International, which transports the fuel under contract with the Iraqi government.
Alan Waller, the chief executive officer of Lloyd-Owen, said at the hearing that the refineries had "no proper hoses, pumps or connectors. We have had to leave trucks as long as 15 days" before they can be unloaded because of broken-down and dangerous equipment.

Lautenberg pronounced himself shocked. "Profiteering is traitorous behavior," he said.

Greenhouse and Mayberry said they faced retribution for speaking out.

Greenhouse said she had been told by the acting chief counsel of the Corps of Engineers that appearing at the hearing "would not be in my best interest." Mayberry said that after he spoke to auditors in Iraq, he was transferred to a more dangerous assignment in Fallouja.

In response, Halliburton spokeswoman Gist-Mann wrote: "Audits are part of the normal contracting process and KBR and its employees routinely cooperate with all of these reviews of the company's operations. The company does not prohibit any employee from speaking with any auditor."
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Copyright 2005 Los Angeles Times | Top

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Spy Agencies Outsourcing to Fill Key Jobs
Contractors, many of them former employees, are doing sensitive work,
such as handling agents. A review of the practice has been ordered.
By Greg Miller | Los Angeles Times | September 17, 2006 Bold font added here for visual emphasis online.