Overseas Civilian Contractors

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Iraq rebuilding fund thefts investigated

By Joe Gould – Staff writer Army Times April 12

A special task force is analyzing every transaction and person connected to Iraq reconstruction funding in order to hold people accountable for “hundreds of millions of dollars” lost to fraud, bribery and theft.

Stuart Bowen Jr., special inspector general for Iraq reconstruction, is part of a multi-agency task force that is using automated data mining to sift through the $50 billion spent on reconstruction by various military and civilian agencies.

SIGIR is working with federal law enforcement agencies and the U.S. Treasury Department’s Financial Crimes Enforcement Network, or FinCEN.

“It’s a coordinated, concerted interagency forensic review that has been ongoing for over a year and is now yielding significant fruit,” Bowen told Army Times. “We will continue to implement the program until we have reviewed all of the money used for Iraq reconstruction and all of the personnel that had access to it.”

The task force is required to report its findings to Congress.

As of its January report, SIGIR has examined 73,000 records that represent $28 billion and identified $340 million in suspicious transactions involving 800 vendors. These include duplicate payments, and payments to possibly fictitious contractors or vendors listed simply as “vendor” or “cash.”

SIGIR has launched 500 investigations since it opened shop in Iraq in 2004, resulting in 27 convictions and the court-ordered forfeiture of $69.5 million. Bowen said cases tend to involve contracting officers in Iraq and Camp Arifjan in Kuwait who funneled contracts to specific contractors in return for kickbacks and bribes, or the simple pilfering of cash, mainly from the Commander’s Emergency Response Program, or CERP.

The guilty have been found to have smuggled cash home in their boots and mailed it home in boxes; they sold truckloads of stolen fuel in downtown Baghdad and took payola in the form of watches, cars and airplane tickets.

“Kickbacks and contractor collusion characterize most of these criminal investigations,” Bowen said. “It’s contracting officers and paymasters and individuals who had control over large sums of money or access to it.”

Many of the cases stem from activity in 2003 to 2006. In the early days of the war, reconstruction funding oversight was granted to only a few people with limited power with the Coalition Provisional Authority, which Bowen said was “not a deterrent.”

Meanwhile, billions of dollars in American cash meant to fuel the interim Iraqi government received little scrutiny, said Bowen.

“When you have uncontrolled money in an unstable environment, inevitably you’re going to see crimes committed,” he said.

The criminal convictions contain “an unfortunately high percentage of Army officers” because of the service’s greater role in the war and reconstruction, Bowen said.

He said the ongoing probe has uncovered 52 new cases in the last year.

What’s more, he said, the bulk of the agency’s criminal investigations are still to come.

‘A lot of work to do’

Alongside the ongoing financial forensic investigative review, SIGIR has detailed three prosecuting attorneys to the fraud section of the criminal division at the Justice Department to handle SIGIR-generated cases full time, Bowen said.

“We know that we can only catch a fraction of the wrongdoing that occurred because of the difficulty of operating in a conflict zone,” he said. “We’ve done as well as we could under the circumstances, and we’re by no means finished. An almost doubling of our caseload reveals we have a lot of work to do.”

The single largest case of corruption SIGIR has previously encountered may be the Bloom-Stein conspiracy, a bid-rigging scheme involving $8.6 million in contracts, which has resulted in at least seven convictions.

The scheme is named for contractor Philip H. Bloom and Robert Stein, a former contracting official with the Coalition Provisional Authority – South Central region who led other Army officials in the Hillah, Iraq, office as they illegally steered contracts toward Bloom.

Stein admitted that he and his co-conspirators smuggled $2 million out of Iraq on commercial airlines and took part in an illegal bid-rigging scheme.

Another significant case concerns CERP, a program that provides Army unit leaders with cash to fund reconstruction and security projects. Bowen said the program has improved, but suffered from “weak controls” in its early days.

Capt. Michael Nguyen, a West Point graduate and civil affairs officer for the headquarters company of the 2nd Battalion, 23rd Infantry Regiment, funneled $690,000 in CERP funds from his battalion safe and sent it home to himself. He pleaded guilty in the case after investigators spotted a pattern of large bank deposits and exorbitant purchases, such as a 2009 Hummer H3T and a 2008 BMW M3.

“It was all cash, and it wasn’t well-controlled, so therefore it was very easy for him to steal from that safe and put in the mail back to his house in the states,” Bowen said.

Although abuses persist, Bowen said that SIGIR’s presence has created a deterrent resulting in less wrongdoing and improved controls. He said the Defense Department has improved record-keeping practices, reduced cash concentrations in forward areas, improved coordination between civilian agencies on project selection, and now requires senior-level approval for projects greater than $1 million.

Bowen also credited the Army’s Money as a Weapon System manual and institutionalized training for Brigade Combat Team officers who oversee CERP projects.

Nevertheless, SIGIR’s audits still show “weakness” in CERP. For example, hand-off and coordination between commander’s tours “continues to be a challenge,” the system needs tighter controls on cash and CERP projects are not coordinated well-enough between the Defense and State departments to address needs in Iraq, audits state.

As SIGIR conducts its analyses, it is also soliciting tips from soldiers about wartime fraud, said Bowen, noting that the statute of limitations for such crimes does not expire for at least five years.

“Soldiers have an obligation to promote the integrity of the U.S. effort in Iraq, and that integrity is strengthened when violators are brought to justice,” Bowen said.

April 12, 2010 Posted by | Civilian Contractors, Contractor Corruption, Pentagon, State Department | , , , , , , , , , , , , | 1 Comment