From prostitutes to Super bowl tickets,
a federal probe reveals how contractors
in Iraq cheated the U.S.
By David Jackson and Jason Grotto
ROCK ISLAND, Ill.—Inside the stout federal
courthouse of this
of Iraq war profiteering keep pouring out.
Hundreds of pages of recently unsealed court records detail
how kickbacks shaped the war's largest troop support
contract months before the first wave of U.S. soldiers
plunged their boots into Iraqi sand.
The graft continued well beyond the 2004 congressional
hearings that first called attention to it. And the massive fraud
endangered the health of American soldiers even as it lined
contractors' pockets, records show.
Federal prosecutors in Rock Island have indicted four former
supervisors from KBR, the giant defense firm that holds the contract,
along with a decorated Army officer and five executives from
KBR subcontractors based in the U.S. or the Middle East.
Those defendants, along with two other KBR employees who
have pleaded guilty in Virginia, account for a third of the 36
people indicted to date on Iraq war-contract crimes,
Justice Department records show.
On Wednesday, a federal judge in Rock Island sentenced
the Army official, Chief Warrant Officer Peleti "Pete" Peleti Jr.,
to 28 months in prison for taking bribes. One Middle Eastern
subcontractor treated him to a trip to the 2006
a defense investigator said.
Prosecutors would not confirm or deny ongoing grand jury
activity. But court records identify a dozen FBI, IRS and
military investigative agents who have been assigned to the
case. Interviews as well as testimony at the sentencing for
Peleti, who has cooperated with authorities,
suggest an active probe.
Rock Island serves as a center for the probe of war profiteering
because Army brass at the arsenal here administer
KBR's so-called LOGCAP III contract to feed, shelter and
support U.S. soldiers, and to help restore Iraq's oil infrastructure.
In one case, a freight-shipping subcontractor confessed to
giving $25,000 in illegal gratuities to five unnamed KBR
employees "to build relationships to get additional business,"
according to the man's December 2007 statement to a
federal judge in the Rock Island court. Separately,
Peleti named five military colleagues who allegedly
accepted bribes. Prosecutors also have identified three
senior KBR executives who allegedly approved inflated
bids. None of those 13 people has been charged.
A common thread runs through these cases and other
KBR scandals in Iraq, from allegations the firm failed
to protect employees sexually assaulted by co-workers
to findings that it charged $45 per can of soda:
The Pentagon has outsourced crucial troop support jobs
while slashing the number of government
contract watchdogs.
The dollar value of Army contracts quadrupled from
$23.3 billion in 1992 to $100.6 billion in 2006, according
to a recent report by a Pentagon panel. But the number of
Army contract supervisors was cut from 10,000 in 1990
to 5,500 currently.
Last week, the Army pledged to add 1,400 positions to its
contracting command. But even those embroiled in the
frauds acknowledge the impact of so much war privatization.
"I think we downsized past the point of general competency,"
said subcontractor Christopher Cahill, who for a decade
prepared military supply depots under LOGCAP. Now
serving 30 months in federal prison for fraud, Cahill added:
"The point of a standing army is to have them equipped."
KBR, a former subsidiary of
been paid $28 billion under LOGCAP III. The firm says it
quickly reports all instances of suspected fraud and has
repaid the Defense Department more than $1 million for
questionable invoices.
In a statement, KBR said its roughly 20,000 employees and
40,000 subcontractors have performed laudably in a war
zone where Army demands shift rapidly and local suppliers
don't always maintain ledger books. Spokeswoman Heather
Browne wrote: "Ethics and integrity are core values for KBR."
But a wiretapped transcript recently released in Rock
Island underscores the brazen nature of the exceptions.
In October 2005, with federal agents tailing them, three
war contractors slipped through London's posh Cumberland
hotel before meeting in a quiet lounge. For the rest of that
afternoon, the men sipped cognac and whiskey and discussed
the bribes that had greased contracts to supply U.S.
troops in Iraq.
Former KBR procurement manager Stephen Seamans,
who was wearing a wire strapped on by a Rock Island
agent, wondered aloud whether to return $65,000 in
kickbacks he got from his two companions, executives
from the Saudi conglomerate Tamimi Global Co.
One of the men, Tamimi operations director Shabbir
Khan, urged him to hide the money by concocting
phony business records.
"Just do the paperwork," Khan said.
Party houses, prostitutes
In October 2002, five months before the U.S.-led invasion ofIraq, Khan threw a birthday party for Seamans at a Tamimi "
party house" near the Kuwait base known as Camp Arifjan.
Khan "provided Seamans with a prostitute as a present,"
Rock Island prosecutors wrote in court papers. Driving
Seamans back to his quarters, Khan offered kickbacks
that would total $130,000.
Five days later, with Seamans and Khan hammering out the fine
print, KBR awarded Tamimi the war's first $14.4 million mess
hall subcontract, court records show.
In April 2003, as American troops poured into Iraq,
Seamans gave Khan inside information that enabled Tamimi
to secure a $2 million KBR subcontract to establish a mess
hall at a Baghdad palace. Seamans submitted change orders
that inflated that subcontract to $7.4 million.
By June, Seamans and fellow KBR procurement manager
Jeff Mazon, a Country Club Hills resident, had executed
subcontracts worth $321 million. At least one deal put
U.S. soldiers at risk.
The Army LOGCAP contract required KBR to medically
screen the thousands of kitchen workers that subcontractors
like Tamimi imported from impoverished villages in Nepal,
Pakistan, India and Bangladesh.
But when Pentagon officials asked for medical records in
March 2004, Khan presented "bogus" files for 550 Tamimi
workers, Assistant U.S. Atty. Jeffrey Lang said in a court
hearing last year.
KBR retested those 550 workers at a Kuwait City clinic
and found 172 positive for exposure to hepatitis A, Lang
told the judge. Khan tried to suppress those findings,
warning the clinic director that Tamimi would do no more
business with his medical office if he "told KBR about
these results," Lang said in court. The infectious virus can
cause fatigue and other symptoms that arise weeks
after contact.
Retesting of the 172 found that none had contagious
hepatitis A, Lang said, and Khan's attorneys said in court that
no soldiers caught diseases from the workers or from meals
they prepared. It remains unclear if that is because the workers
were treated or because they did not remain infectious
after the onset of symptoms.
Still, the incident shows how even mundane meal contracts
can put troops at risk. Similar disease-testing breaches
cropped up at cafeterias outsourced to firms besides
Tamimi, former KBR Area Supervisor Rene Robinson
said in a Tribune interview.
"That was an ongoing problem," Robinson said.
"When the military asked for paperwork, it was spotty."
KBR was forced to begin vaccinating the employees
at their work sites, he added.
Tamimi and its U.S. lawyers did not respond to requests for
comment. The company has said it is cooperating with
federal authorities.
By July 2005, Tamimi had secured some 30 KBR troop
feeding subcontracts worth $793.5 million, records show
Khan continued to negotiate Iraq war subcontracts for
Tamimi until shortly before he was arrested in Rock Island
in March 2006.
He is now serving a 51-month prison sentence for lying to federal
agents about the kickbacks he wired to Seamans, who pleaded
guilty and served a year and a day in prison. Both declined
to comment.
Seamans, a 46-year-old Air Force veteran, once taught
ethics to junior KBR employees. At his December 2006
sentencing hearing, he expressed remorse for taking the
kickbacks, telling the judge: "It is not the way that
Americans do business."
It was another repentant LOGCAP veteran standing before a
Rock Island judge on Wednesday. Peleti, formerly the military's
top food service adviser for the Middle East, wept as he admitted
taking bribes from Tamimi and three other subcontractors
between 2003 and early 2006.
Ribbons and badges glittered across Peleti's pressed green
Army shirt. "I stand here before you today to convey my remorse
and sincere regret," he said, then broke down.
One subcontractor, Public Warehousing Co., took Peleti
and another top Army official to the Super Bowl, a defense
investigator said in court Wednesday. The firm has denied
wrongdoing. Khan also bribed Peleti to influence LOGCAP
contracts with cash. Peleti was arrested in 2006 while re-entering
the U.S. at Dover Air Force Base with a duffel bag stuffed with
watches and jewelry as well as about $40,000 concealed
in his clothing.
While prosecutors documented kickbacks in only the first
two of Tamimi's mess hall subcontracts, they contend that
the tone was set to corrupt the system.
"Tamimi and Mr. Khan have their hooks into Mr. Seamans,
they have their hooks into KBR," Lang said in court last year.
"It is difficult to assess the kind of damage that did to the
integrity of the subcontracting process when the first two
subcontracts are corrupted."
Auditors in the basement
Military auditors say they closely monitor the layers of KBR
subcontractors who actually perform most of the LOGCAP
work, stationing teams in Iraq. But one Rock Island search
warrant said auditors working back in the U.S. could manage
only limited reviews of the cascade of deals.
In the basement of one of KBR's Houston office buildings,
a 25-member team from the Defense Contract Audit Agency had
"no communications" with "personnel on the ground," so they
could not confirm whether goods and services actually were
delivered, the search warrant application said.
In the absence of oversight, some Middle Eastern businessmen
would offer "Rolex watches, leather jackets, prostitutes, and the
KBR guys weren't shy about bragging about the fact that they
were being treated to all that stuff," said Paul Morrell, whose
firm The Event Source ran several mess halls as a KBR
subcontractor.
Such questionable relationships continued long after early
procurement managers like Seamans had been rooted out.
Early subcontractors such as Tamimi became almost
indispensable in part by outfitting Army cafeterias with expensive
power generators and refrigeration systems, records and
interviews show.
"If you ever gave Tamimi a hard time, you'd get a call," former
KBR subcontract manager Harry DeWolf told the Tribune.
When subcontracts came up for renegotiation, DeWolf said,
companies like Tamimi "would say, 'Fine, we're going to pull
out all of our people and equipment.' They really had KBR
and the government over the barrel."
Complicating the investigation of war-contract crimes,
the government of Kuwait has denied a U.S. request to
extradite two Middle Eastern businessmen accused of
LOGCAP fraud. The country's ambassador last year sent
letters to the Justice Department asking the U.S. to drop its
case against one of them, arguing that international agreements
forbid U.S. prosecution of Kuwaiti residents for crimes allegedly
committed on Kuwaiti soil. Prosecutors disagree, but a judge is
considering Kuwait's assertion.
Investigators also have faced challenges in dealing with KBR.
The company has withheld some internal company documents
relating to Mazon, Seaman's fellow KBR procurement manager,
the firm's attorneys wrote in court filings.
In response to one subpoena, the firm gave agents
about 2,760 of Mazon's computer files but withheld 398 others,
saying they were covered by
attorney-client privilege or other protections.
Federal prosecutors say they have given KBR no special
treatment and that the company has legal rights afforded to
all firms whose employees have been charged with wrongdoing.
"We did withhold some documents as being privileged," a KBR
spokeswoman wrote, but added that the company has provided
statements and grand jury testimony.
Mazon has pleaded not guilty to charges that he inflated a fuel contract.
His attorneys say the fuel subcontract was accidentally inflated when
figures were converted from U.S. dollars to Kuwaiti dinars then
back again. At least 22 KBR troop support subcontracts were
inflated through similar errors, Mazon's attorney J. Scott Arthur
wrote in papers filed in Rock Island.
KBR attorneys said the company informed federal officials
of three similar "double conversions" on other subcontracts.
But KBR said it "has not undertaken an exhaustive search of its
millions of pages of procurement documents" to determine
whether other such errors exist.
dyjackson@tribune.com - jgrotto@tribune.com
0 Have Your Say!:
Post a Comment