Tuesday, June 07, 2005

Reports of Corruption in Iraq

Rare or widespread?

Colin Freeman reported in his February article, Suspicion surrounds missing Bay Area man, that both von Ackermann and Manelick had raised concerns about corruption.

In recent months, news stories on contract fraud in Iraq have been appearing in the press much more frequently. While the following sample of articles discuss companies and people unrelated to Kirk von Ackermann or Ryan Manelick, it provides a glimpse into the bigger picture of the overall business environment that some contractors are working in.

Most of the articles on fraud and corruption seem to cover mismanagement, over billing, kick backs, and missing funds.

The first article is rare in that it also reports the death of another civillian contractor who had complained about corruption. The circumstances, however, are much different than those surrounding von Ackermann and Manelick. The contractor, Dale Stoffel, was working with the Iraqi Defense Ministry, the amount was 20 times that of the Ultra Services' contract for containerized offices, Stoffel's death was one year after Manelick was gunned down, and finally, Stoffel was an arms dealer.

A long article on contractor Dale Stoffel can be read in this month's Washington Monthly, The Unquiet American, by Aram Roston, June 2005.

For the purposes of brevity, and this post is getting long, I am linking to an earlier article from the Los Angeles Times.

Army Ignored Broker on Arms Deal
by Ken Silverstein and T. Christian Miller, Los Angeles Times, March 15, 2005

Soon after interim Prime Minister Iyad Allawi took office last summer, he announced plans to create a tank division for the new Iraqi army.

The $283-million project was supposed to display the power of Iraq's new government. But under the guidance of a task force overseen by one of America's top generals, it has become another chapter in a rebuilding process marked by accusations of corruption.

The U.S. contractor working on the project repeatedly warned the task force headed by Army Lt. Gen. David H. Petraeus that a Lebanese middleman involved in the deal might be routing kickbacks to Iraqi Defense Ministry officials. But senior U.S. military officials did not act on the contractor's pleas for tighter financial controls, according to documents and interviews.

"If we proceed down the road we are currently on, there will be serious legal issues that will land us all in jail," the contractor, Dale Stoffel, wrote in a Nov. 30 e-mail to a senior assistant to Petraeus.

Eight days later, Stoffel was shot dead in an ambush near Baghdad. The killing is being investigated by the FBI, according to people who have been interviewed by the bureau.

Whistle-Blower Suit May Set Course on Iraq Fraud Cases
by Eric Eckholm, New York Times, May 22, 2005
In September 2004 the Pentagon, citing evidence of fraud and a continuing criminal investigation of Custer Battles, barred the company from receiving more federal contracts, halting what had been the company's explosive growth. The company was founded in 2001 by two veterans with more ambition than assets, and by mid-2004 it had $100 million in Iraq contracts.

The company's critics say its owners, Scott Custer and Mike Battles, benefited from the frantic awarding of contracts in 2003 and the constant turnover of monitors.

The whistle-blower suit accuses the company of defrauding the government through actions as large as the creation of shell companies to pose as suppliers and increase billable costs and as small as the repainting of Iraqi Airways forklifts, then claiming to have leased the machines for thousands of dollars per month.

Audit of Iraq Spending Spurs Criminal Probe
by Griff Witte, Washington Post, May 5, 2005
Investigators have opened a criminal inquiry into millions of dollars missing in Iraq after auditors uncovered indications of fraud in nearly $100 million in reconstruction spending that could not be properly accounted for.

The money had been intended for rebuilding projects in south-central Iraq. But auditors with the Office of the Special Inspector General for Iraq Reconstruction found that of $119.9 million allocated, $7.2 million could not be accounted for at all, and $89.4 million in reported spending could not be backed up with sufficient documentation, according to a report released yesterday.


Criminal investigators with the office of Special Inspector General Stuart W. Bowen Jr. will be looking into whether anyone involved committed fraud, the audit says, although it does not disclose who is being investigated.

Iraq is becoming 'free fraud' zone
by Tom Regan, Christian Science Monitor, April 7, 2005
A former senior advisor to the US-led Coalition Provisional Authority (CPA), which ran Iraq until the election of an interim Iraq government last January, says that the US government's refusal to prosecute US firms accused of corruption in Iraq is turning the country into a "free fraud zone."

Newsweek reported earlier this week that Frank Willis compared Iraq to the "wild west," and that with only $4.1 billion of the $18.7 billion that the US government set aside for the reconstruction of Iraq having been spent, the lack of action on the part of the government means "the corruption will only get worse."


The Christian Science Monitor reported on other allegations of corrpution in Iraq leveled against companies, including a "report by special inspector Stuart Bowen [which] found that $8.8 billion dollars had been disbursed from Iraqi oil revenue by US administrators to Iraqi ministries without proper accounting."

Fraud and corruption
by George Monbiot, The Guardian, February 8, 2005
Last week a British adviser to the Iraqi Governing Council told the BBC's File on Four programme [sic] that officials in the CPA were demanding bribes of up to $300,000 in return for awarding contracts. Iraqi money seized by US forces simply disappeared. Some $800m was handed out to US commanders without being counted or even weighed. A further $1.4bn was flown from Baghdad to the Kurdish regional government in the town of Irbil, and has not been seen since.

See the following section for information on Fighting Fraud and Corruption.


Susie Dow said...

While this is related to corruption within the Iraq government, it is an indication that the rising number of complaints warranted action at the highest level.


The Commission was originally created under Paul Bremer on January 31, 2004. Press release:

Commission on Public Integrity to Combat Government Corruption

Susie Dow said...

Related article on cooperation from the FBI with Iraqi counterparts to solve crimes in Iraq.

Gonzales: FBI to Aid Iraqi Investigations

The United States will help Iraq investigate the killing and kidnapping of government officials, Attorney General Alberto Gonzales says. The informal agreement was disclosed as Gonzales made an unannounced and tightly guarded, six-hour visit Sunday to Baghdad. He met with Iraq's prime minister, Ibrahim al-Jaafari, as well as police and judicial officials.

Word of the arrangement followed the abduction on Saturday night of Egypt's top envoy to Iraq. [...]

While details are still to be worked out, investigators from the FBI and other U.S. law enforcement agencies would join their Iraqi counterparts at crime scenes and in other aspects of the probes, aides to Gonzales said.


Blogger said...

eToro is the ultimate forex broker for beginning and pro traders.