Investigators Look into Bribery by Senior Military Officers but Need to Look Higher

by Deb Cupples |  Yesterday, the New York Times reported:

"Federal authorities examining the early, chaotic days of the $125 billion American-led effort to rebuild Iraq have significantly broadened their inquiry to include senior American military officers who oversaw the program, according to interviews with senior government officials and court documents.

"Court records show that last month investigators subpoenaed the personal bank records of Col. Anthony B. Bell, who is now retired from the Army but who was in charge of reconstruction contracting in Iraq in 2003 and 2004 when the small operation grew into a frenzied attempt to remake the country’s broken infrastructure. In addition, investigators are examining the activities of Lt. Col. Ronald W. Hirtle of the Air Force, who was a senior contracting officer in Baghdad in 2004, according to two federal officials involved in the inquiry.

"It is not clear what specific evidence exists against the two men, and both said they had nothing to hide from investigators.Yet officials say that several criminal cases over the past few years point to widespread corruption in the operation the men helped to run. As part of the inquiry, the authorities are taking a fresh look at information given to them by Dale C. Stoffel, an American arms dealer and contractor who was killed in Iraq in late 2004.

"Before he was shot on a road north of Baghdad, Mr. Stoffel drew a portrait worthy of a pulp crime novel: tens of thousands of dollars stuffed into pizza boxes and delivered surreptitiously to the American contracting offices in Baghdad, and payoffs made in paper sacks that were scattered in “dead drops” around the Green Zone, the nerve center of the United States government’s presence in Iraq, two senior federal officials said.

"Mr. Stoffel, who gave investigators information about the office where Colonel Bell and Colonel Hirtle worked, was deemed credible enough that he was granted limited immunity from prosecution in exchange for his information, according to government documents obtained by The New York Times and interviews with officials and Mr. Stoffel’s lawyer, John H. Quinn Jr. There is no evidence that his death was related to his allegations of corruption.

"Prosecutors have won 35 convictions on cases related to reconstruction in Iraq, yet most of them involved private contractors or midlevel officials. The current inquiry is aiming at higher-level officials, according to investigators involved in the case, and is also trying to determine if there are connections between those officials and figures in the other cases. Although Colonel Bell and Colonel Hirtle were military officers, they worked in a civilian contracting office." (See the rest of the NY Times article here).

I'm glad that investigators are looking into the widespread corruption that infected the Bush Administration's handling of the Iraq reconstruction effort -- and private contractors generally.

I'm glad they're going higher up the military chain, because it doesn't seem likely that all of those underlings simply acted on their own.

But if reducing the masses of taxpayer money that gets wasted or stolen is the goal, then investigators should be looking even higher than military colonels: i.e., at politicians, the folks who run executive-branch agencies, and the multi-millionaires who run private contracting firms.

Evidence of severe systemic problems in government officials' handling of private contracts has been mounting for years.

One of my favorite stories involved a contract to build a small hybrid submarine for the Navy SEALS [the Advanced Seal Delivery System (ASDS)].  It started in 1994 as a $70 million contract.  By May 2007, we taxpayers had paid $885 million to the contractor (Northrup Grumman) for a submarine that didn't work. (See GAO report)

According to the GAO, the contractor kept missing deadlines and asking for more money.  Navy officials kept giving extensions and more money -- and the contractor kept failing to deliver a submarine that actually worked. 

In July 2003, the Navy ultimately accepted the non-functioning submarine "as is," meaning that we taxpayers could not sue the contractor for a refund of any size.  This wasn't even the first time that Northrup Grumman had reportedly performed poorly while under government contract:

In 2003, Northrup Grumman settled for $80 million government fraud suits alleging: 1) that a Northrop subsidiary had overcharged the government for research and design work, and 2) that Northrop knowingly sold the Navy unmanned aerial vehicles that had defective parts

The story gets better: despite Northrup Grumman's multiple apparent failures, the Navy signed another contract with Northrup in October 2003.  In short, Defense Department officials had rewarded bad contractor-performance.

More recently, former Halliburton subsidiary KBR got a $35 million contract in 2009 for electrical work -- despite the fact that KBR allegedly did shoddy electrical work in Iraq that seems to have led to 283 fires and the death of 16 U.S. soldiers since 2004: some soldiers were electrocuted in showers, some in swimming pools, some while washing military vehicles.

A 2004 Pentagon report found that Halliburton/KBR apparently tried to overcharge the taxpayers $108 million for importing fuel into Iraq.  KBR asked the Pentagon to redact the report before publicizing it, and the Pentagon did.  See the redacted report (to see what was redacted, click on the blackened text).

In 2003, Halliburton/KBR reportedly over-billed us taxpayers $67 million for troops' meals. (CNN) In 2008, Army auditors found that KBR did not have credible records to support about $1 billion in spending. (NY Times)

Just a couple months ago, the Army Times reported that an ex-civilian contractor who worked in Iraq filed suit against Halliburton/KBR for having "exposed everyone at Joint Base Balad in Iraq to unsafe water, food and hazardous fumes from the burn pit" back in 2006.

And just two days ago, the Financial Times reported that KBR agreed to pay $579 million to settle criminal and civil allegations relating to KBR's alleged bribery of Nigerian officials in order to get contracts.

With such things in KBR's track record, how on earth is that company still pulling down mult-million-dollar government contracts?

KBR and Northup Grumman are far from alone in their questionable performance.  In 2006, General Electric (and 2 subcontractors) paid $11.5 million to settle a government suit alleging that GE had sold defective blades for the engines of U.S. military planes and helicopters.

In 2000, Boeing settled a fraud suit for $54 million after allegedly putting defective gears in Chinook helicopters sold to the Army.  One Chinook crashed during a 1988 mission in Honduras, killing five service men. Another crashed in Saudi Arabia during Operation Dessert Shield, injuring 2 people. In 2000, the Chinook fleet was partially grounded.

In 1998, the DoJ sued Hunt Building Corp. for $45 million after Hunt allegedly built uninhabitable housing at a South Dakota Air Force base. According to Texans for Public Justice, Hunt settled the case for $8.8 million.

Those are just a few of many examples of contractors that performed questionably yet got more contracts -- and it's not just defense contractors.

In 2002, according to the Washington Post, contractor UNISYS got a $1 billion contract from the Homeland Security department to build and secure computer networks.  In 2005, UNISYS got a $750 million follow-up contract.  In 2006, despite all the tax dollars UNISYS had received to secure computer networks, hackers managed to get into 150 computers.  In short, UNISYS didn't seem to succeed at the job it was hired to do.

Even before it got the $1 billion contract in 2002, UNISYS had several times been in hot water with the Justice Department :

In 2002, a unit of Lockheed Martin called TDS agreed to pay $2.1 million to settle Justice Department allegations that TDS (while still owned by UNISYS ) had submitted to the Navy  false claims for payment from 1988-96 relating to the Trident Missile Program (see DoJ-1).

In 2001, UNISYS agreed to pay $1.4 million to settle Justice Department allegations that UNISYS failed to disclose during contract negotiations that it intended to subcontract some work (DoJ-2).

In 1998, UNISYS settled a Justice Department suit for $2.25 million after allegedly supplying refurbished computer products to federal government agencies in the early 90’s (DoJ-3). The contract specified -- and the government paid for -- new equipment.

Earlier in 1998, UNISYS (and Lockheed Martin) jointly settled a Justice Department suit for $3.1 million after allegedly selling spare parts at inflated prices to the Commerce Department for the NEXRAD Doppler Radar System (DoJ-4).

The big question: who decided to roll the dice on UNISYS again, and why? 

Back to the Defense Department (DoD): in July 2007, my co-blogger Damozel summarized a long GAO report that listed some of the major contracting failures that our nation's Defense Department sorely needed to resolve:

1) DoD officials didn't truly analyze the DoD's actual needs or coordinate them among DoD's sub-entities -- which led to duplicated or inconsistent purchases.

2) DoD officials didn't accurately assess the cost, time, feasibility, or objectives of its costly programs.

3) DOD officials failed to draft contracts with the taxpayers' interests in mind, and the arrangements tended to shift the risk to the taxpayers rather than to the private contractors.

4) DoD failed to adequately monitor contractors

5) DoD and Congress failed to exercise proper oversight.

6) The "revolving door" created potential conflicts of interest for government officials who planned to go work for private contractors.

In other words, government officials at many levels simply failed to watch the taxpayers' backs -- which created a system rife with the potential for waste, fraud and abuse.

It gets worse: some government officials -- whose jobs it was to hold contractors accountable -- seemed to refuse to do that job.

In September 2007, for example, the House Oversight Committee released a letter listing evidence against a then-State Department Inspector General, who was accused of blocking investigations into Iraq-related contractors that might have committed fraud.

As of September 2007, the Justice Department (under President Bush) had reportedly refused to pursue any whistle blower cases against private contractors that might have committed fraud while working in Iraq -- though it was the Justice Department's job to investigate such cases. 

It's good to go after blatant acts of corruption, like bribery, and it's good to go higher up the chain in search of culprits.

But what our officials in Washington really need to do is fix the root problems in our private-contracting system. 

If they continue failing to do that, then we taxpayers will continue to suffer massive waste, fraud and abuse.

Memeorandum has commentary.

Other Buck Naked Politics Posts:

* High Cost of Private Contacting

*  Inspector General Blocked Investigations into Waste & Fraud?

* Have U.S. Officials Protected Blackwater?

* Time to Get Really Serious about Contractor Fraud

* Billions over Baghdad: Poor Accounting Allowed Waste & Fraud

* Yet Another Contractor Bilks Taxpayers

* Contractor Fraud: Driving Up Healthcare Costs?

* How the Energy Dept. Incinerated Tax Dollars

* New Orleans Still Suffering after 2 Years and Billions of Tax Dollars

* How the Defense Dept. Flushes Dollars Down Latrine   

* U.S. Embassies: Still More Examples of Contractor Problems

* Contractors Offering Bribes to Army Personnel?

* Taxpayers Losing Money to Engorged Contractors

* Audit Red-Flags Contractor in Iraq

* Defense Dept. Rewarding Bad Contractor Performance?

* Insurance Companies Get Away with Over-billing Medicare

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Comments

[B. G.]

Yes, Look at the retired Generals who go work for Middle Eastern owned companies after they retire from the US military. That in itself is a conflict of interest. (Check into Gen. Dan Mongeon)

[deb]

You make a good point, B.G.

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