Since
December 2003, the Democratic Policy Committee (DPC) has held twelve oversight
hearings on contracting abuses related to the conflict in Iraq. Over the
course of these hearings, the DPC has heard from numerous witnesses, including
current and former employees of the Army Corps of Engineers, Halliburton, and
the Coalition Provisional Authority. They have testified that the Bush
Administration failed to follow long-established procedures for awarding
contracts, mismanaged the performance of contracts it did award, and allowed
contractors to engage in fraudulent and wasteful behavior. The DPC has also
received reports on contracting abuses prepared by the Army Audit Agency, the
Defense Contract Audit Agency, and the Special Inspector General for Iraq
Reconstruction.
As the examples below
demonstrate, these witnesses and reports reveal a disturbing pattern of abuse
and mismanagement by the Department of Defense, the Department of Justice,
Halliburton, Parsons, and the Coalition Provisional Authority. Although
Administration officials pride themselves on both management expertise and
national security credentials, their inability to maintain proper oversight of
military contractors has cost hundreds of millions of taxpayer dollars that
could otherwise purchase necessary armor and equipment for American troops.
That figure will continue to rise unless the Secretary of Defense and other
senior Administration officials take prompt and effective action to bring
contracting abuse and mismanagement under control.
Abuses by the Pentagon
Pentagon Fails to Properly Account for Costs of War and
Reconstruction
"The
information put out by the Department of Defense is at best confusing, and sometimes
misleading and incomplete. The result is that it is very difficult for anyone
to know what the wars in Iraq, Afghanistan, or the overall Global War on Terror
actually cost..."
"In
short, often the numbers just don't add up. For example, CRS reports that DOD does
not count about $7 billion from its FY2003 regular appropriations act that was intended
for GWOT but that it cannot track... DOD reports originally showed $38 billion
in obligations for Iraq in FY2003, later revised to $42.4 billion. Most
recently, DOD reports show $48 billion for Iraq in FY2003, which include not
only obligations in later years but also $2 billion from an unknown source. All
told this amounts to a $10 billion difference in the costs for Iraq in 2003 as
reported by the DOD..."
"This
puts the U.S. Congress in the position of not being able to maintain adequate oversight.
The Congress does not have enough information to really know how much is enough,
and whether the money is being properly spent and accounted for. The Congress also
does not have adequate information to evaluate whether some of these funds
might be better spent to achieve other specific purposes or goals." (Philip E.
Coyle III, Senior Advisor, Center for Defense Information, DPC Hearing,
12/7/2007)
Halliburton Was Worst Contract Abuse Top Army Corps Civilian Had
Ever Seen
"The
abuse I observed called into question the independence of the [Army Corps of
Engineers] contracting process. I can unequivocally state that the abuse
related to contracts awarded to KBR represents the most blatant and improper
contract abuse I have witnessed during the course of my professional career."
(Bunnatine Greenhouse, highest-ranking Army Corps civilian, 6/27/2005)
The Office of the Secretary of Defense Controlled Halliburton's Oil
Contract
"The
independence of the USACE contracting process was unquestionably compromised
with respect to the issuance of the Restore Iraqi Oil contract, known as RIO.
I observed, firsthand, that essentially every aspect of the RIO contract
remained under the control of the Office of the Secretary of Defense (OSD).
This troubled me and was wrong. However, once the OSD delegated responsibility
for the RIO contract to the Department of the Army, control over the
contracting process by the OSD should have ceased. However, the OSD remained
in control over the contracting process. In reality, the OSD ultimately
controlled the award of the RIO contract to KBR and controlled the terms of the
contract that was to be awarded even over my objection to specific terms that
were ultimately included in the contract." (Bunnatine Greenhouse,
highest-ranking Army Corps civilian, 6/27/2005)
Pentagon Gave Halliburton Unfair Advantage
"In
their conduct of the entire RIO [Restore Iraq Oil] program, I believe Pentagon
officials, up and down the chain of command, ignored our federal laws and
regulations and the procedures that normally ensure fair play. In 12 years, I
never saw anything approaching the arrogant and egregious ways in which the
[Army] Corps treated Halliburton's competitors and violated federal laws and
regulations to ensure [Halliburton's] KBR kept its RIO work." (Sheryl Tappan,
former Bechtel contract negotiator, 9/10/2004)
"That
summer, I led Bechtel's proposal team in the Iraq oil competition conducted by
the Corps of Engineers' Fort Worth District, the competition the Pentagon
promised to give other contractors a chance at the billions of dollars of RIO
work secretly awarded to Halliburton KBR that March. The irony is the 'Sons of
RIO' competition turned out to be far more suspect than the sole-source award."
(Sheryl Tappan, former Bechtel contract negotiator, 9/10/2004)
"I
further raised a concern over which contract authorized payment for
pre-positioning work KBR was doing in anticipation of being awarded the RIO
contract. I was generally familiar with the scope of the LOGCAP contract and
was under the impression that the LOGCAP contract was being used to fund the
initial preposition work being done by KBR before the Iraq War commenced. I
specifically questioned whether using LOGCAP funding was legal and insisted
that a new contract be prepared. My concern over this issue ended when I was
apparently provided misinformation that a new contract had been issued. This
is the first time I can recall being overtly misled about something as
fundamental as the existence of an underlying contract authorizing work to be
done." (Bunnatine Greenhouse, highest-ranking Army Corps civilian, 6/27/2005)
"I
learned that a specific basis to be used for the selection of the contractor
was a requirement that the contractor have knowledge of the contingency plan
KBR prepared for the restoration of Iraqi oil. The inclusion of this
requirement meant that the RIO contract would have to be awarded to KBR because
no other contractor participated in the drafting of the contingency plan and no
other contractor had knowledge of the contingency plan itself after it had been
prepared by KBR. What was particularly troubling about this arrangement was
that contractors who are normally selected to prepare cost estimates and
courses of action, such as the work KBR did when it prepared the contingency
plan, are routinely excluded from being able to participate in the follow-on
contract. (Bunnatine Greenhouse, highest-ranking Army Corps civilian,
6/27/2005)
"The
fact that [the RIO contract] was a no-bid, sole source contract meant that the
government was placing KBR in the position of being able to define what the
reasonable costs would be to execute the RIO contract and then charging the
government what it defined as being reasonable. Given the enormity of the
scope of work contemplated under the RIO contract, the exclusion of the
contractor responsible for pricing out the scope of work to be done under the
RIO contract should have been an imperative. Instead, it formed the basis of
awarding the RIO contract to KBR." (Bunnatine Greenhouse, highest-ranking Army
Corps civilian, 6/27/2005)
The Army Corps Waived the Requirement that Halliburton Provide Cost
Data
"[T]he
Commander of the USACE, Lt. General Flowers, took the unusual step of issuing a
waiver absolving KBR of its need, under the RIO contract, to provide "cost and
pricing data." The Corps simply asserted that the price charged for the fuel
was "fair and reasonable," thereby relieving KBR of the contract requirement
that cost and pricing data be provided." (Bunnatine Greenhouse, highest-ranking
Army Corps civilian, 6/27/2005)
Pentagon Failed to Justify Halliburton Contract
"The
Pentagon claimed Halliburton was best qualified because it extinguished 320 oil
well fires in Kuwait, but, as pointed out, it was Bechtel, not Halliburton, who
managed the entire 650 oil well firefighting efforts and the total oil field
reconstruction program. And they did it in half the time experts said they
would, which was widely reported. The Pentagon could have had Bechtel services
just as quickly as KBR's, because Bechtel had at least two federal contracts
that could have been used just as easily as LOGCAP." (Sheryl Tappan, former
Bechtel contract negotiator, 9/10/2004)
Pentagon Failed to Properly Supervise Halliburton's LOGCAP Work
"Contract
management for LOGCAP needed improvement. Specifically:
- Performance-based
contract procedures weren't followed during the task order planning and
statement of work preparation phases.
- Recurring
reports and support plans from the contractor sometimes weren't prepared.
- Contract
administrative authority wasn't properly delegated to the Defense Contract
Management Agency.
- Standing
operating procedures for the LOGCAP Support Unit, which defined roles and
responsibilities for contingency event contracting, weren't developed.
As
a result, the Army had no assurance that contractor performance was meeting
expectations. However, little was done to take meaningful corrective actions
because the perceived performance shortfall was primarily caused by government
actions or inactions." (U.S. Army Audit Agency Report, 11/24/2004)
"Although
the government estimates and contractor's rough orders of magnitude had
significant differences and lacked detail, the support unit wasn't advised of
the need to revise, modify or correct its cost estimates by either management
or the contracting office. These offices were willing to rely on the
contractor's cost estimates with little or no question. Support unit personnel
had limited contracting experience and didn't know how to prepare viable
government cost estimates. Consequently, in the absence of any feedback, they
didn't know their cost estimates couldn't be used to evaluate contractor's
estimates." (U.S. Army Audit Agency Report, 11/24/2004)
The Army Corps of Engineers Was the Wrong Entity to Handle Oil
Contracts
"When
I did gain access to some of the high level planning meetings related to the
implementation of the RIO contract I sensed that the entire contracting process
had gone haywire. I immediately questioned whether the Corps had the legal
authority to function as the Army's delegated contracting authority. The Corps
had absolutely no competencies related to oil production. Restoration of oil production
was simply outside of the scope of our congressionally mandated mission. How
then, I asked, could executive agency authority for the RIO contract be
delegated to the USACE? I openly raised this concern with high level officials
of the Department of Defense, the Department of the Army and the U.S. Army
Corps of Engineers. I specifically explained that the scope of the RIO
contract was outside our mission competencies such that congressional authority
had to be obtained before the Corps could properly be delegated contracting
authority over the RIO contract. Exactly why USACE was selected remains a
mystery to me. I note that no aspect of the contracting work related to
restoring the oil fields following the 1991 Persian Gulf War was undertaken by
the USACE, and there was no reason why USACE should take over that function for
the prosecution of the Iraq War." (Bunnatine Greenhouse, highest-ranking Army
Corps civilian, 6/27/2005)
Pentagon Ignored Concerns of Top Army Corps Civilian
"Ultimately,
I was most concerned over the continuing insistence that the RIO contract be
awarded to KBR without competitive bidding for an unreasonable period of time
-- two years plus the option to extend the contract an additional three years.
I raised this concern with officials representing the Department of Defense,
the Department of the Army and the Corps of Engineers. However, when the final
Justification and Approval (J&A) of the RIO contract was forwarded to me
for signature -- after the draft had been approved by representatives of the
office of the Secretary of Defense -- the five year, no-compete clause remained
in place. I could not sign the document in good faith knowing that this
extended period was unreasonable. However, we were about to prosecute a war
and the only option that remained opened to me was to raise an objection to
this requirement. Therefore, next to my signature I hand-wrote the following
comment:
'I
caution that extending this sole source effort beyond a one year period could
convey an invalid perception that there is not strong intent for a limited
competition.'"
"I
hand-wrote this comment directly onto the original document because experience
had taught me that a separate memo outlining my concerns could inexplicably be
lost. I wrote my comment on the original J&A to guarantee that my concern
was not overlooked. Instead, it was just ignored." (Bunnatine Greenhouse,
highest-ranking Army Corps civilian, 6/27/2005)
Pentagon Deliberately Circumvented Top Army Corps Civilian
"As
the ramp-up to the Iraqi War escalated I was increasingly excluded from
contracting activity related to the war effort. However, given my position, it
was simply impossible to completely exclude me from the process." (Bunnatine
Greenhouse, highest-ranking Army Corps civilian, 6/27/2005)
"Significantly,
it appears that a concerted effort was undertaken to ensure that I was kept in
the dark about the [the request for a waiver of the requirement that
Halliburton provide cost and pricing data under the RIO contract]. I have
every reason to believe that the USACE knew I would object to the granting of
the waiver if it had been presented to me for signature. So, I was
specifically kept in the dark and did not learn of the existence of the waiver
until I read about it in the press. Having reviewed the documentation used to
justify the waiver, I can unequivocally state that I would not have approved it
because the documentation relied upon to justify the fuel charges as 'fair and
reasonable' was grossly insufficient." (Bunnatine Greenhouse, highest-ranking
Army Corps civilian, 6/27/2005)
Pentagon Attempted to Fire Top Army Corps Civilian for Expressing
Concerns
"As
a result of stating my concern in writing... and as a result of expressing other
significant concerns over contracting matters related to KBR, I was eventually
summoned to a meeting on October 6, 2004 at which time I was issued a
memorandum notifying me that I was to be removed from the Senior Executive
Service and from my position." (Bunnatine Greenhouse, highest-ranking Army
Corps civilian, 6/27/2005)
Pentagon Discouraged Top Army Corps Civilian from Testifying
"On
June 24, 2005, I met with the acting General Counsel of the USACE. During the
course of this meeting it was conveyed to me that my voluntary appearance would
not be in my best interest. I was also specifically advised to clearly state
that I do not appear as a representative of the Department of the Army or the
United States Corps of Engineers." (Bunnatine Greenhouse, highest-ranking Army
Corps civilian, 6/27/2005)
Abuses by Halliburton
Halliburton Has Charged $1.4 Billion in Questioned and Undocumented
Costs
"[G]overnment
auditors at the Defense Contract Audit Agency have identified more than $1
billion in 'questioned' Halliburton costs. DCAA challenged most of these costs
as 'unreasonable in amount' after completing audit action because they 'exceed
that which would be incurred by a prudent person.' The auditors found (1) $813
million in questioned costs under Halliburton's Logistics Civil Augmentation
Program (LOGCAP) contract to provide support services to the troops and (2)
$219 million in questioned costs under the company's Restore Iraqi Oil (RIO)
contract to rebuild Iraq's oil infrastructure. The magnitude of these
questioned costs significantly exceeds previously known estimates. The DCAA
auditors have also found that an additional $442 million in Halliburton's
charges are 'unsupported.' As a result, Halliburton's total
'questioned'
and 'unsupported' costs exceed $1.4 billion." (Joint Report of Democratic
Policy Committee and House Government Reform Committee Minority Staff,
6/27/2005)
Halliburton Failed to Test and Treat Water that Troops in Iraq Used
to Shower and Bathe -- Which Instead Tested Positive for E. Coli and Coliform
Bacteria
"In January I noticed the water in our showering
facility was cloudy and had a foul odor. At the same time (over a two-week
period) I had a sudden increase in soldiers with bacterial infections
presenting to me for treatment. All of these soldiers live in the same living
area (PAD 103) and use the same water to shower... During a discussion (on 1 Feb
2006) between [Lieutenant] Strating and a newly hired KBR water quality
technician (Mr. Bill Gist) [Lieutenant] Strating mentioned the bacterial infections
that I had been seeing in my clinic. Mr. Gist told [Lieutenant] Strating he
had concerns that the [Reverse Osmosis Water Purification Unit (ROWPU)]
concentrate reject was being used to fill the water tanks at the PADs. After
hearing this [Lieutenant] Strating investigated. He went to the water
treatment site and followed the lines from the ROWPU concentrate drain to water
trucks filling up with this water. He then followed this truck and observed it
pumping the water into the water storage tank at PAD 206. The PM team tested
the water at the ROWPU concentrate distribution point. The results are as
follows: ...Coliform Positive, E. coli Positive... After discovering that KBR was
filling the water storage tanks with ROWPU concentrate, [Lieutenant] Strating
gathered the base mayor ([Colonel] Grayson), the Q-West KBR site manager
(Bernardo Torres), Rachel Vanhorn (KRB LNO), Mathew Wallace (KBR ROWPU Manager)
and Bill Gist (water quality technician) to the ROWPU site and told them all at
the same time that he had identified that KBR was filling the water storage
tanks with ROWPU concentrate. Mr. Wallace stated that it has always been done
this way and there is not a problem with it. [Lieutenant] Strating explained
that it is against Army regulations (TB MED 577) to use ROWPU reject for
personal hygiene." (E-mail from
Captain A. Michelle Callahan, Brigade Surgeon, 101st Sustainment
Brigade, 3/31/2006)
The Defense Contract Management Agency Has Confirmed that
Halliburton Failed to Follow Proper Procedure
"[T]here
was evidence suggesting that KBR was using outmoded and no-longer-valid
procedures with regard to the obtainment and treatment of the water used for
showering... DCMA Northern Iraq determined that it would be in the best interest
of the Government for KBR to follow more stringent water-purification
procedures. On February 7, 2006, DCMA Northern Iraq issued to KBR a Corrective
Action Request (CAR), citing questionable water-supply practices for
non-potable water and prohibiting the use of brine water for any activities
involving human contact." ("Point Paper" provided by Defense Contract
Management Agency, 4/7/2006)
Halliburton Failed to Chlorinate or Secure Water Used to Shower and
Bathe at a Second Military Base in Iraq
"I
had been told by the usual ROWPU lead that the water was chlorinated, and knew
that such [a larva] could not survive in chlorinated water. I decided at that
point to test the water in the employee's bathroom for chlorination. The test
results indicated zero presence of chlorine. I then tested at several other
locations in the KBR section of the base, and discovered no chlorine at those
sites either. I then tested the nonpotable water storage tank and, to my
shock, realized that the water in the tank tested negative for chlorine; that
the access lid of the tank was not in place, let alone secure; and that the air
vents to the tank were turned upward and left unscreened, leaving the water
supply vulnerable to contamination from dust, insects, rodents, or even enemy
attack. I was stunned. No trained water treatment specialist could claim that
the water was fit for human use." (Ben Carter, former KBR Acting ROWPU Lead, Camp
Ar Ramadi, 1/23/2006)
According to Its Own Theater Water Quality Manager, Halliburton Has
Failed to Test Water at Locations Across Iraq
"I am also
likely to believe that there is no documentation to support the 3x daily
requirement for testing of shower/hygiene water (I apologize if I am wrong). This
is in TB MED 577 8-10. This testing is required per our statement of work and
I have yet to find an installation that does the required testing let alone has
such documents to support their testing activities." (E-mail from Wil Granger,
7/15/2005)
In February 2006, Halliburton Admitted That It Lacked an Organizational
Structure and Proper Standard Operating Procedures to Manage Its Water Contract
"KBR
lacked an organizational structure to ensure that water was being treated in
accordance with Army standards and its contractual requirements. KBR's then
Standard Operating Procedure was unclear as to the proper treatment and
handling of potable and non-potable water." (KBR "Final Report: Water Quality
at Ar Ramadi" February 2006)
Halliburton Managers Instructed Employees Not to Notify the Military
of Problems with the Water
"I
then informed site management that we needed to notify the military that they
should immediately chlorinate their water storage tanks, which drew from the
same source. I was told by Suzanne Raku-Williams, the KBR site manager, that
the military was none of my concern. I was ordered to concern myself only with
the health and safety of KBR personnel." (Ben Carter, former KBR Acting ROWPU
Lead, Camp Ar Ramadi, 1/23/2006)
Halliburton Served Spoiled and Expired Food to the Troops
"Food
items were being brought into the base that were outdated or expired as much as
a year. We were told by the KBR food service managers to use these items
anyway. This food was fed to the troops. A lot of these were frozen foods:
chicken, beef, fish, and ice cream. For trucks that were hit by convoy fire
and bombings, we were told to go into the trucks and remove the food items and
use them after removing the bullets and any shrapnel from the bad food that was
hit. We were told to turn the removed bullets over to the managers for
souvenirs. When I had the military check some of the food shipments, they
would turn the food items away. But there wasn't any marking of the record, so
KBR just sent the food to another base for use. The problem with expired food
was actually worsened with the switch to PWC because it took longer for the
food items to get to the base as they were shipped from the U.S. to a warehouse
in Kuwait." (Rory Mayberry, former KBR Food Production Manager, 6/27/2005)
"KBR
also paid for spoiled food. When Tamimi dropped off food, there was often no
place to put it in to the freezers or refrigeration. Food would stay in the
refrigeration and freezer trucks until they ran out of fuel. KBR wouldn't
refuel the trucks so the food would spoil. This happened quite a bit." (Rory
Mayberry, former KBR Food Production Manager, 6/27/2005)
Halliburton Charged for Meals Never Served
"KBR
charged the government for meals it never served to the troops. Until late
2003, Anaconda was a transition site for army personnel. Because there could
be large numbers of extra personnel passing through everyday, KBR would charge
for a surge capacity of 5,000 troops per meal. However, KBR continued to
charge for the extra headcount even after Anaconda was no longer a transition
site. When I questioned these practices, the managers told me that this needed
to be done because KBR lost money in prior months, when the government
suspended some of the dining hall payments to the company. The managers said
that they were adjusting the numbers to make up for the suspended payments."
(Rory Mayberry, former KBR Food Production Manager, 6/27/2005)
"KBR
was supposed to feed 600 Turkish and Filipino workers meals according to their
custom. Although KBR charged the government for this service, it didn't
prepare the meals. Instead, these workers were given leftover food in boxes
and garbage bags after the troops ate. Sometimes there were no leftovers to
give them." (Rory Mayberry, former KBR Food Production Manager, 6/27/2005)
Testimony of Barry Godfrey, former KBR Subcontracts Administrator, 12/7/2007:
"QUESTION:
And the [sub] contractor was being paid as if they were serving 5,500 food -
5,500 troops?
GODFREY:
Yes.
QUESTION:
And you found out they were serving only a thousand?
GODFREY:
On the average."
Halliburton Punished Workers Who Raised Concerns
"Government
auditors would have caught and fixed many of the problems. But [Halliburton
subsidiary Kellogg, Brown & Root (KBR)] managers told us not to speak with
auditors. The managers themselves would leave the base or hide from the
auditors when they were on the base and not answer the radios when we called
for them. We were told to follow instructions or get off the base. The threat
of being sent to a camp under fire was their way of keeping us quiet. The
employees that talked to the auditors were moved to the other bases that were
under more fire than Anaconda. If they refused to move, they were fired and
sent home. I personally was sent to Fallujah for 3 weeks. The manager told me
I was being sent away until the auditors were gone because I had opened my
mouth to the auditors. When I returned from Fallujah, the convoy was
attacked. I was put in danger because the KBR managers didn't want me to talk
with U.S. government auditors." (Rory Mayberry, former KBR Food Production
Manager, 6/27/2005)
"I
had repeatedly raised my concerns to my management through the vice president
level within KBR. I was continually harassed and returned... I felt I was
forced to resign..." (Barry Godfrey, former KBR Subcontracts Administrator,
12/7/2007)
Halliburton Put a Whistleblower Under Armed Guard
Testimony of Julie McBride, former KBR Morale, Welfare &
Recreation Officer, 9/18/2006:
"MCBRIDE: When I went to Baghdad, I gave an
administrator a three-sheet report where I stated some of the observations that
I've told this committee today, in regard to the accounting that was being
done in the [Morale, Welfare & Recreation] department. In fact, I called
it 'cooking the books in true Enron style.' It was at that point that
I was put under guard.
QUESTION: And you were kept
under guard until they transported you out of the country?
MCBRIDE: Yes, sir."
Halliburton Manipulated Purchase Orders to Avoid Oversight
"For
purchase orders under $2,500, buyers only needed to solicit one quote from one
vendor. To avoid competitive bidding, requisitions were quoted individually
and later combined into purchase orders under $2,500. About 70 to 75 percent
of the requisitions processed ended up being under $2,500. Requisitions were
split to avoid having to get two quotes. For purchase orders above $2,500,
buyers were required to obtain two quotes. The buyer would select a
high-quoting supplier and a more moderate preferred-quoting supplier. Thus,
the buyer would be able to place the purchase order with a preferred supplier,
as he or she knew that the quote submitted by the preferred supplier would be
lower... We didn't worry about what it cost; we worried about whether it was
available." (Henry Bunting, former Halliburton employee, 2/13/2004)
Halliburton Discouraged Full Disclosure to Auditors
"When
I was there, I heard that we had the auditors in and that we were not supposed
to talk to the auditors; that was the quickest way home." (Henry Bunting,
former Halliburton employee, 2/13/2004)
Halliburton Overcharged for Oil and Oil Delivery
"During
my tenure at DESC [Defense Energy Support Center] we were occasionally forced
to pay sole-source prices in some locations, but not even in remote central
Asia did we pay close to $2 a gallon for jet fuel -- and that's delivered. I
believe that the most that we ever paid for delivered fuel was $1.40... When I
got the first call about $2.65 gasoline in Iraq, it was a real head-scratcher..."
(Jeffrey Jones, former Director, Defense Energy Support Center, 2/13/2004)
"[Overcharging
for oil was] simply out of control. And there was nobody watching the store,
and this is an area in which it didn't need to happen in. That's the other
piece of it." (Jeffrey Jones, former Director, Defense Energy Support Center,
2/13/2004)
Testimony of Gary Butters, Chairman of Lloyd-Owen International,
6/27/2005:
"QUESTION:
You testified, with your company's help, another company called Geotech was
transporting Kuwaiti fuel to Iraq at a cost of 18 cents per gallon. Is that
correct?
BUTTERS:
That's correct.
QUESTION:
Now, let's compare this to Halliburton's costs. Halliburton charged $1.30 per
gallon to deliver gasoline from Kuwait. In other words, they charged over
seven times more than you do. In your view, is there any way to justify such a
large price difference?
BUTTERS:
Frankly, there isn't. Our involvement has grown over the period of the year,
so our costs have been commensurate with that growth. An existing transporter
would have a larger infrastructure and would have greater overheads. And so,
in all fairness, you could probably uplift our costs by 100 percent to, say, 36
around about there cents. I can't see how it can go further than that...
QUESTION:
So you were doing the same thing that Halliburton was doing but you were doing
it, the transportation of the fuel, at a fraction of the cost and you can see
no other reason why they would have had such an inflated...
BUTTERS:
None whatsoever. They were sourcing their trucks in the same Kuwaiti market
that we were and all the difficulties we faced were the same that they faced.
They just had a larger infrastructure and ability to deal with it."
Halliburton Interfered with Delivery of Oil for Iraqi Civilian Use
"As
an example of the difficulties encountered, in 2004 KBR shut the border access
to Lloyd-Owen citing that because Lloyd-Owen (nor Geotech) did not have a valid
U.S. Military contract -- they denied us the privilege of using the Military
crossing."
"Following
hurried and emergency negotiations between various parties, a sense of reality
was placed back into the situation, in that the fuel is Iraqi Government fuel
on a Government-to-Government contract and the border should be immediately
re-opened to Lloyd-Owen and Geotech. LOI are simply the facilitators of this
project."
"Recently
officials of the U.S. Embassy have inexplicably stated that the allowing of
Lloyd-Owen to process the departure of Iraqi purchased fuel into Iraq via a
strategic and secure route (the military crossing) is not valid and is possibly
illegal and is only being allowed as a favor and in practical terms the fuel
should pass through the civilian crossing."
"It
will in fact be an absolute impossibility to get this many fuel tankers through
the civilian Kuwait/Iraq border on a daily and continuing basis in order to
maintain the fuel status quo inside Iraq. It would take approximately 30
minutes per truck to traverse the system or 60 hours per day -- it would not
work -- with predictable and dire consequences for the situation and stability
of Southern Iraq." (Alan Waller, CEO of Lloyd-Owen International, 6/27/2005)
Halliburton Failed to Complete Oil Infrastructure Work
"We
have recently been approached to supply equipment to the Khor Zubayer oil
terminal where we discovered, missing, broken, old or non-operational equipment
apparently supplied by KBR. It is the claim of the Iraqi staff that this
equipment, which was installed, was provided by KBR. Upon investigating the
operational effectiveness of said equipment, we found at least three pumping
and generating systems that were not operational due to old or incorrect
requirements." (Alan Waller, CEO of Lloyd-Owen International, 6/27/2005)
Testimony of Alan Waller, CEO of Lloyd-Owen International,
6/27/2005:
"QUESTION:
Let's turn to the fuel distribution infrastructure in Iraq. You work with this
every day. And last year, Iraq's state-owned oil company, SOMO, asked your
company to assess the fuel distribution infrastructure. Under Halliburton's
oil contract, it was responsible for making sure Iraq had a functioning system
for distributing fuel. What kind of job did Halliburton do? What was your
assessment of the work Halliburton had done by May, 2004?
WALLER:
I would have to say that with the fuel distribution program, that there was
none. We were asked to initially assess our distribution points prior to
delivery. We have not, to date, seen a functioning KBR piece of equipment to
where we deliver, that is Mufriq, Shibar (ph), Nasariyah, Samawah, Diwaniyah,
Amarah, Kut, Najaf, Karrada (ph) and Hillah. We have had to purchase equipment
in order for us to download fuel such as generators, pumps, hoses, couplings. Otherwise,
it would not happen.
QUESTION:
In the past year, how many Halliburton employees have you seen working on the
fuel distribution infrastructure?
WALLER:
Initially, when we first began investigating the delivery of fuel, we held
meetings with coalition forces and we met one KBR official at one of these
meetings. Since that point, we have only come across one KBR person in
Nasariyah and that was approximately one month ago. We visit these sites every
single day and we have never come across a KBR official...
QUESTION:
And you're also being then -- have witnessed, and you can't verify, but you've
been told that the oil fields -- this is outside of Basra, the fields there
that have been supplied equipment to rebuild them by KBR, that, that equipment
is defective?
WALLER:
Well, I can tell you firsthand experience that every installation that we
deliver to does not have any equipment of a modern caliber that would even
qualify as being recently placed there by KBR for the distribution of fuel
throughout Iraq.
QUESTION:
And that, again, directly impacts upon the ability, one, of the country to
reconstitute itself economically, to generate revenues for its own economic
recovery, but also on the supplies that are not available then, and the lines
and the frustration of the Iraqi population?
WALLER:
That's exactly correct."
Halliburton Failed to Follow Food Sanitation Guidelines
"The
food service personnel were given sanitation rules from the Military Preventive
Medicine information programs and rules to follow by the Armed Forces, but KBR
managers informed us that the information was not to be followed, that they
knew best, and to keep following their instructions. So our employees weren't
following sanitation rules as set forth." (Rory Mayberry, former KBR Food
Production Manager, 6/27/2005)
Halliburton Paid Too Much for Food
"KBR
paid too much for the food itself. Initially, a company called Tamimi Catering
was KBR's sub-contractor for the food. Tamimi paid local prices for the food
products in the towns and cities around the base in addition to orders sent to
their main office. Tamimi's pricing was fair for the condition of the
country. Then, KBR switched to a new supplier, PWC. PWC's prices were almost
triple what Tamimi's were. For example, tomatoes cost about $5 a box locally,
but the PWC price was $13 to $15 per box. The local price for a 15-pound box
of bacon was $12, compared to PWC's price of $80 per box. PWC charged a lot
for transportation because they brought the food from Philadelphia. KBR
switched from Tamimi to PWC because Tamimi complained about KBR's poor
treatment of its staff; they were living in tents with sand floors and no beds."
(Rory Mayberry, former KBR Food Production Manager, 6/27/2005)
Halliburton Overcharged and Double-Charged for Cases of Soda
"Soft
drink (consumable soda) costs of about $617,000 on one task order for about
2,500 personnel were listed as a morale and welfare-related cost. Not only was
the cost associated with individual drinks excessive, but it duplicated soft
drinks included as part of food service costs." (U.S. Army Audit Agency Report,
11/24/2004)
Halliburton Overcharged for Vanity Towels
"There
also was a requisition for 2,500 towels for a MWR facility in Baghdad. There
were old quotes for ordinary towels. The MWR manager changed the requisition
by requesting upgraded towels with an embroidered MWR Baghdad logo. He
insisted on this embroidery, which you can see from this towel... The original
purchase order for that, that I was discussing for these 2,500 towels, was for
towels at a price of .38KD which was roughly $1.60 a towel. That towel [with
the logo] would have cost around $4.50 and $5.50 per towel." (Henry Bunting,
former Halliburton employee, 2/13/2004)
Halliburton Overcharged on Transportation Contract
"A
major transportation subcontract, which grew in value from $9.5 million to $134
million in one year's time, is an example of a contract where we not only paid
4 to 9 times the price for each service on the contract, but where each service
had two or more layers of vendors below Halliburton. Halliburton hired staff
to run the operation, but then inflated the price of running this transfer
point and increased the security risk by turning the entire operation over to a
subcontractor, who in turn, hired different vendors off the street to provide
and operate trucks, the dining facility, the laundry operations, etc. Several
efforts by prudent subcontract administrators to reduce the cost of each type
of equipment or service such as tents and generators, and fuel tanker leases
were rebuffed." (Marie deYoung, former Halliburton employee, 9/10/2004)
Halliburton Overcharged for Ice Factory Contract
Testimony of Marie deYoung, former Halliburton employee, 9/10/2004:
"QUESTION:
So there was a competition for building these ice factories. Two bids were
received. One was for $3.4 million and one was for $450,000. According to a
memo from the subcontract administrator, these companies were equally
qualified, except for the price difference. Is that correct?
DEYOUNG:
That's correct.
QUESTION:
And who was awarded the subcontract?
DEYOUNG:
The subcontractor who charged the higher amount, $3.4 million. And if I may
add, about $900,000 was tacked on for shipment. [And] it actually cost the
taxpayers $4 million higher because of the shipment charge."
Halliburton Overcharged on Refrigerated Truck Contract
Testimony of Barry Godfrey, former KBR Subcontracts Administrator, 12/7/2007:
"QUESTION:
Mr. Godfrey, I'm sorry to interrupt you, but I want to understand this. The
first point you're talking about is an increase in the contract of $4 million
for refrigerated trucks?
GODFREY:
Yes.
QUESTION:
You went out and took a look at what that would normally cost, given bidding
and so on, and you decided that was way overpriced.
GODFREY:
Way overpriced."
Halliburton Wasted 50,000 Pounds of Nails
Testimony of Henry Bunting, former Halliburton employee, 2/13/2004:
"QUESTION:
And there's another element here that talks about an order for 50,000 lbs of
nails... Wrong nails, wrong product?
BUNTING:
They were nails that were too
short. And the --
QUESTION:
Fifty thousand pounds of nails that were too short?
BUNTING:
Fifty thousand pounds.
QUESTION:
Sitting in a warehouse --
BUNTING:
No, not even sitting in a
warehouse. Just sitting on the ground. They didn't even have warehousing
facilities."
Halliburton Wasted Transportation Equipment
"[W]e...allow[ed]
contractors to lease most of our trucks and equipment without appropriate
maintenance plans. In the Halliburton contracts alone, more than 400 trucks
were abandoned in Iraq, due to poor quality of equipment and nonexistent
maintenance. Every truck that broke down on a convoy because of poor
maintenance is a truck that put the lives of soldiers and other contractors in
danger." (Marie deYoung, former Halliburton employee, 9/10/2004)
Testimony of Richard Murphy, Iraq War veteran, 4/7/2006:
"QUESTION: My understanding is that your tour was extended
for three months in Iraq? And you were assigned to guard civilian truck
convoys? ...We had a hearing on contract
waste, fraud and abuse not just about Halliburton, although admittedly
Halliburton was a significant part of it, because the LOGCAP contracts that
were given to Halliburton were no bid, sole source contracts, and there is
massive waste and abuse. I think some fraud was involved,
there were substantial investigations. But, one of the witnesses talked to us
about brand new trucks 80-90 thousand dollar trucks having a flat tire and then
being left by the side of the road to be torched. Did you experience or see
any of that?
MURPHY: Yes sir.
QUESTION: Tell me about
it just to amplify what we have heard in other hearings.
MURPHY: We were
conducting convoys from the South, from a base called Taleel and moving up
North to Baghdad on a road in the middle of the desert, just about as safe as
you can get in Iraq. At one point, one of the trucks, one of the civilian
trucks got a flat tire and they did not have the proper wrench to change the
tire so the decision was made to torch the truck.
QUESTION: Was it a new
truck?
MURPHY: Yes Sir.
QUESTION: So they did
not have the proper wrench to change the tire so they made the decision to burn
the truck?
MURPHY: Yes, that was
the story.
QUESTION: I have heard
that before but you actually saw the truck?
MURPHY: Yes Sir, I saw
the truck."
Halliburton Charged for Services Never Provided
"At
Camp Fallujah, I became concerned about several Halliburton practices. The
first concerns procedures use to compile the head count for the [Morale, Welfare
& Recreation] department... This fraudulent head count can then equate to
millions of dollars in unnecessary funding. By inflating the number of users,
Halliburton can rationalize a greater need for facilities, equipment, staffing
and administrators than actually exists. The additional staffing does not
benefit the troops, but it does benefit Halliburton. Under its contract, the
more facilities, equipment, staff and administrators Halliburton can show a
need for, the more profit Halliburton makes. As the mantra at Halliburton
camps goes, 'It's cost plus, baby.'" (Julie
McBride, former KBR Morale, Welfare & Recreation Officer, 9/18/2006)
Halliburton Employees Hoarded Supplies Intended for the Troops
"Halliburton
employees also exploit requisitions to obtain luxuries that are not afforded to
the troops. One example of this was a Super Bowl party for Halliburton
employees only at taxpayer expense. Halliburton requisitioned a big-screen TV
and lots of food for the private use of Halliburton employees. Halliburton
made money on this too. Those same employees then arranged a live television
connection for that big screen TV, so that they could watch football games... In
my experience, many Halliburton employees, frankly, don't seem to care much
about the military. They often ignored troop requests or treated them like an
annoyance. Those same employees, however, indulged their own whims at taxpayer
expense." (Julie McBride, former KBR Morale, Welfare & Recreation Officer,
9/18/2006)
Halliburton Failed to Account for Cost Discrepancies
"We
reviewed four contractor rough orders of magnitude and identified about $40
million in questionable costs. Although we found indicators that customers and
the program management office did some review of contractor rough orders of
magnitude, the reviews were usually limited to technicalities and geared toward
execution plans instead of cost estimates... We identified more than $40 million
in proposed costs that exceeded requirements necessary for contractor
performance." (U.S. Army Audit Agency Report, 11/24/2004)
Halliburton Failed to Assist Sub-Contractors Recovering from
Insurgent Attack
"On
arriving in the Habbaniyah region, our convoy was ambushed approximately 2
kilometers from the U.S. Base and we suffered serious casualties in a near
four-hour fight. We lost 3 individuals to direct fire, 7 individuals were
injured and on arrival at the U.S. Base, one U.S. Military person was also
sadly injured in an attempt to assist... [I]t has now come to our attention
while investigating the incident that KBR Management had taken an extraordinary
decision to instruct their on site staff to offer no assistance to the
Lloyd-Owen personnel in order to unload KBR goods or prepare for the return
journey; as evidenced by this email exchange here. Certain KBR staff defied
their Management directions and immediately rendered assistance to Lloyd-Owen
in a very difficult situation." (Alan Waller, CEO of Lloyd-Owen International,
6/27/2005)
Halliburton Sent a Civilian Convoy into a Known Combat Zone
"Once
inside the gate of [Baghdad International Airport], a soldier came up to me and
said the words, to the effects, 'Who are you guys? What are you guys doing out
here? The roads are closed. We have been fighting those guys for over 48 hours.
They own that road out there.' Another Halliburton convoy commander, Mr. Rick
Udell (sp.), told several of that he could not believe that we had been sent
down the road since he had been attacked on the same road earlier that day
after leaving Camp Anaconda. He told Halliburton not to send anyone else down
that road due to hostilities." (Edward Sanchez, former KBR Truck Driver,
9/18/2006)
Halliburton Knew or Should Have Known Those Roads Were Closed
"As
reflected in the testimony of Mr. Kenneth Waller, which you will also see, he
worked at KBR's [Theater Transportation Mission] headquarters in Camp Anaconda
and was told that day, before he went to work, that all the roads were
designated as black or red, which meant they were supposed to be closed to
civilian traffic. In fact, on April 8, 2004, KBR civilian convoys had been
attacked already in the same location my clients and other convoys were again
attacked on April 9." (T. Scott Allen, Attorney for former KBR Truck Drivers,
9/28/2006)
Halliburton Offered to Nominate Wounded Truck Drivers for a Defense
Department Medal and Asked Them to Sign a Necessary Medical Records Release --
Which Also Contained a Full Liability Waiver
"In that letter, they
actually -- that letter says it is a medical release form. They mislead the
truck driver, tell him it's a medical release form and we're going to supply
your records to the Pentagon so you can receive a government medal which was
created on 9/11, the Defense of Freedom Medal. And then they have, to an uneducated
person, a release of liability included with it." (T. Scott Allen, Attorney for
former KBR Truck Drivers, 9/28/2006)
Halliburton Waste Demoralized U.S. Troops
"When
soldiers work with off-the-shelf products like CAT generators and John Deere forklifts
and commercial Internet satellites, they do their war-fighting mission with
confidence, especially when the equipment is delivered to them with spare parts
and maintenance manuals. When reservists and National Guard personnel from
states like Michigan and Wisconsin watch companies like Halliburton lease
poorly maintained forklifts and trucks from Middle East companies, they are
demoralized. Especially when equipment is leased at four times the price that
would have been paid if the equipment were purchased from their hometown
factories." (Marie deYoung, former Halliburton employee, 9/10/2004)
Abuses by Blackwater
Blackwater Failed to Provide Protective Equipment for Employees
"Scotty and the others that died with him were
promised so many things... not one of those promises were kept. For example,
it is undisputed that they did not have armored vehicles. They did not have
heavy machine guns. They did not have a team of six. They did not have three
people in each vehicle. They did not have a rear gunner that would have
allowed them to see people approaching from the rear. They were not able to
conduct a risk assessment of the mission. They did not have a chance to learn
the route before going on the mission. They were not even given a map. In
fact, when Scotty asked for a map of the route, he was told: 'It's a little too
late for a map now..."
"The
only document that we have ever seen that shows what actually went on prior to
Scotty's death ... is a March 30, 2004 e-mail from Blackwater's own Tom Powell in
Baghdad to Blackwater's corporate office, sent the day before our loved ones'
deaths. Mr. Powell complained that his men 'did not have the body armor, hard
cars, weapons, and ammo that they needed.' He stated that: 'the guys are in
the field with borrowed stuff and in harm's way,' that the decision to go with
Suburbans instead of hard cars was a bad idea and that Blackwater was engaged
in a 'smoke and mirrors show doing just enough to sustain the appearance of
operational capability,' while at the same time making representations that
were false and 'did not reflect the appalling truth on the ground.'" (Kathryn Helvenston-Wettengel, Mother of Former Blackwater USA Employee, DPC
Hearing, 9/21/2007)
Blackwater Deceived Third-County Nationals into Serving in Iraq
"There was a gentleman from
some country in central Africa that did his own interview with me and he said
that Blackwater would come into their village and hire many, many young men and
that they would maybe make thirty dollars a month and sent to join up with
Blackwater. Their families where guaranteed a million dollars if anything
would happen to their sons and not only did they never see that million dollars
but they never saw their sons gain. They never heard from them again. They
literally just disappeared." (Kathryn Helvenston-Wettengel, Mother of Former Blackwater USA Employee, DPC
Hearing, 9/21/2007)
"[M]any of the companies
realize that one of the ways they can drop the per day rates of those people is
to not hire American, or South Africans, Australians or Brits, but to go to... so
called TCNs, Third Country Nationals." (Nick Bicanic, Documentary Film Maker,
DPC Hearing, 9/21/2007)
Blackwater Refuses to Release Any Information About Actions and
Employees
"I tried many times to get
Blackwater to send me a copy of the incident report and a copy of the contract
Scotty signed. Eventually, I was told that I would have to sue them to get
that information. So, in an effort to learn the cause, circumstances and
reasons for the death of my son Scotty, as well as the brave men he served
with, Wesley Batalona, Jerry Zovko and Michael Teague, the families filed a
lawsuit against Blackwater in January of 2005. In the two and a half years
since that lawsuit was filed, Blackwater has consistently asserted that it
could not be held accountable for its actions in any state or federal court." (Kathryn
Helvenston-Wettengel, Mother of
Former Blackwater USA Employee, DPC Hearing, 9/21/2007)
"They replied that I would
have to sue them to get that information. And then when I did sue them, they
countersued me for 10 million dollars solely based on the fact that I had the
audacity to sue them." (Kathryn Helvenston-Wettengel, Mother of Former Blackwater USA Employee, DPC
Hearing, 9/21/2007)
Blackwater, in Violation
of its Rules of Engagement, Often Resorts to Deadly Force
"They have acted like
cowboys, running Iraqis off the road, firing indiscriminately at vehicles and,
in some cases, private forces have appeared on tape seemingly using
Iraqis for target practice.
They have shown little regard for Iraqi lives and have fueled the violence in
that country, not just against the people of Iraq but also against the official
soldiers of the United States military in the form of blowback and revenge attacks
stemming from contractor misconduct. These private forces have operated in a
climate where impunity and immunity have gone hand in hand..."
"This past May, Blackwater operatives engaged in a gun
battle in Baghdad, lasting an hour, that drew in both U.S. military and Iraqi
forces, in which at least four Iraqis are said to have died. The very next day
in almost the same neighborhood, the company's operatives reportedly shot and killed an Iraqi driver near the
Interior Ministry. In the ensuing chaos, the Blackwater guards reportedly
refused to give their names or details of the incident to Iraqi officials,
sparking a tense standoff between American and Iraqi forces, both of which were
armed with assault rifles." (Jeremy Scahill, Investigative Reporter, DPC Hearing,
9/21/2007)
Blackwater Negatively
Impacts the U.S. Mission in Iraq
"While
the company's operatives are indeed soldiers of fortune, their salaries are paid
through hundreds of millions of dollars in U.S. taxpayer funds allocated to Blackwater.
What they do in Iraq is done in the name of the American people..."
"The actions of this one company, perhaps more
than any other private actor in the occupation, have consistently resulted in
escalated tension and more death and destruction in Iraq -- from the siege of
Fallujah, sparked by the ambush of its men there in March of 2004, to
Blackwater forces shooting at Iraqis in Najaf with one Blackwater operative
filmed on tape saying it was like a 'turkey shoot' to the deadly events of the past
week..."
"The conduct of these private forces sends a clear
message to the Iraqi people: American lives are worth infinitely more than
theirs, even if their only crime is driving their vehicle in the wrong place at
the wrong time. One could say that Blackwater has been very successful at
fulfilling its mission -- to keep alive senior U.S. officials. But at what
price?" (Jeremy Scahill, Investigative
Reporter, DPC Hearing, 9/21/2007)
Abuses by Custer Battles
Custer Battles Submitted $10 Million Dollars in False Claims to the
Government
"Custer Battles obtained a
contract from the Coalition Provisional Authority at the Baghdad International
Airport that allowed it to submit its cost to the government and get paid for
all of those cost plus twenty-five percent profit and overhead. Then rather
than bill for its real cost, this company billed for substantial higher
fraudulent costs. They asked me three times to assist in preparing fake
invoices and leases that they then could submit to the government. The first
time I told them 'no.' The second time I told them 'hell no.' The
third time after telling them 'no,' I told them they were all going to prison... I
later learned that this company had handed ten million dollars in fake invoices
for approximately three million dollars of work." (Robert Isakson, former CPA
contractor, DPC Hearing, 9/21/2007)
Custer Battles Harassed Contractors that Refused to Participate in
Fraud
"As a result of my
continuing refusals to cooperate in their fraud, they pointed machine guns at
us, stole our weapons, and seized our identification. While our brave men and
women in uniform were fighting and dying for our safety and liberty in Iraq,
these former U.S. Army Rangers and CIA officers were accosting witnesses to
their proposed fraud, forcing them to be held at gun point, disarming them so
they could be killed in Iraq by the insurgents. Custer Battles left us to fend
for ourselves in the streets of Baghdad." (Robert Isakson, former CPA
contractor, DPC Hearing, 9/21/2007)
Abuses by Parsons
Parson Failed to Build
122 of 142 Health Clinics, Despite Being Paid $200 Million of a $243 Million
Contract
Testimony of Ali Fadhil,
Iraqi doctor and Fulbright Scholar, 7/28/2006:
"QUESTION: [Y]ou took a look
at the projects that Parsons had done and you say shoddy workmanship, bad
products, bad materials? Is that a fair assessment?
FADHIL: Yes, in fact, our first approach is to find out what Parsons exactly... what
was more interesting for us is the one hundred fifty clinics, the super
clinics...
QUESTION: Right.
FADHIL: Which then turned into one hundred forty-two. But, in fact, when I
went to the Ministry of Health, where I spent almost a month trying to find out
where all these health clinics, simply the officials said: there are no
clinics, they are imaginary clinics...
QUESTION: You're saying the
other clinics don't exist?
FADHIL: The other clinics, there were only like... it's just a building, it's
like a half-finished buildings: marble at the front, bricks at the side, you
see inside it's just a ghost building, you can't find anything. It's just, as
you said, it's just bricks and walls. That's, that's all that it is."
Parsons Failed to
Properly Renovate and Equip Hospital in Diwaniya
"As we walk around [the
pediatric and maternity hospital in Diwaniya], the problems are obvious.
Outside we can see an open manhole and sewage in the garden. And in the
kitchen more blocked sewage. Everywhere the standard of work is terrible.
Things have melted. Pipes have not been connected. And in the operating
changing room you can smell raw sewage. But there is one thing that to a
doctor seems incredible, the flooring has been done so badly, it is now a
potential killer...
"This is a maternity
hospital. Yet the new natal care unit is desperately short of proper
facilities. There are only 14 incubators, and they are old, made in the 70s.
Most are broken, doors held in place by wires and tubes and even plasters.
This is unhygienic. They should be sealed to keep out germs.
"Staff here feel angry, but they also feel betrayed. The coalition says it
spent hundreds of millions of dollars on health, yet still babies suffer
unnecessarily for lack of basic equipment." (Ali Fadhil, Iraqi doctor and
Fulbright Scholar, 7/28/2006)
Lax Oversight and Poor Judgment by the Coalition
Provisional Authority (CPA)
CPA Played Fast and Loose with U.S. and Iraqi Cash
"[I]nexperienced
officials, fear of decision-making, lack of communications, minimal security,
no banks, and lots of money to spread around. This chaos I have referred to as
a 'Wild West.'... [W]as waste of taxpayer's and Iraqi DFI dollars what it had to
be? Were inefficiencies at a high level inevitably mandated by the
circumstances? I would give a firm 'No' to both questions...." (Franklin
Willis, Former CPA Official, 2/14/2005)
Bush Administration Ignored CPA Contractor Fraud
"I
wish that I could tell you that the Bush Administration has done everything it
could to detect and punish fraud in Iraq. If I said that to you, though, I
would be lying. In our case, the Bush Administration has not lifted a finger
to recover tens of millions of dollars that our whistleblowers allege was
stolen from the government." (Alan Grayson, attorney for whistleblowers, DPC
Hearing, 02/14/2005)
"In
fact, in October 2004, in our False Claims Act case -- the very purpose of
which is to recover this money on behalf of the U.S. Government -- the Bush
Administration declined to participate in the case. When we asked why, the
Assistant U.S. Attorney indicated that the Bush Administration had decided, as
a matter of policy, that cheating the Coalition Provisional Authority was not
the same as cheating the United States." (Alan Grayson, attorney for
whistleblowers, 2/14/2005)
CPA-Funded Media Network Failed to Win Hearts and Minds of Iraqis
"[L]ike
so many of the goals and hopes for the new Iraq, a credible media has not been
realized. The failure to establish television 'accountable to the society' is
strongly felt. Instead, IMN has become an irrelevant mouthpiece for Coalition
Provisional Authority propaganda, managed news and mediocre programs." (Don
North, former CPA contractor, 2/14/2005)
CPA Contractor Hired Al-Jazeera to Train Journalists
"Incredibly,
the vital training of IMN reporters was turned over to Dubai satellite stations
Al Arabiya and Al-Jazeera, which often produce slanted, biased and
anti-American news." (Don North, former CPA contractor, 2/14/2005)
CPA Health Office Lacked
Relevant Experience and Ignored Advice of International Health Professionals
"[T]he people who were put in charge of rebuilding the
health sector didn't know what they were doing. What I mean by that is that
the individual that was put in charge of the CPA and his entire staff, among
them none of them had training in public health. None of them had lived
overseas. And not one of them had participated in the reconstruction of a
country following a disaster or a war. We have people with those sorts of
expertise in the United States, and some of them in the U.S. government. But none
of them were appointed to the CPA health office. So I think it was inevitable
that some of the priorities and some of the programs would be inappropriate.
And when interviewed for this video, that individual, Mr. Haveman, who was the
health advisor to the CPA, when it was asked how he was put in charge of
post-war reconstruction, his response... was, what is the difference between a
post-war situation? What is the difference in a pre-war situation? "
(Richard Garfield, former CPA Advisor, Columbia University, 7/28/2006)
CPA Failed to Develop
Systems to Monitor Health Conditions in Iraq
"The saddest part of the situation to me is not the
cost overruns, sad as that is, it's that since the time of the CPA and the PCO
offices, the U.S. involvement has not strengthened any of the monitoring
conditions to know what are the major diseases of the Iraqis. We actually knew
better under Saddam what health conditions were than we do today. Because you
need people who are experienced in international health to think forward about
how to strengthen information systems in the hospitals and clinics and how to
mount periodic monitoring efforts to see how we're doing in the field. In
fact, we don't know how we're doing in the field, because the last effort was
one run by UNDP in 2004. There has been none since then and none came out of
CPA or the PCO and there are no plans from those groups today." (Richard
Garfield, former CPA Advisor, Columbia University, 7/28/2006)
CPA Leadership Blocked
Efforts to Re-Establish the Iraqi Health System
"Much of my time in Iraq was not focused on work with
the Iraqis to improve the primary healthcare, but in discussions with Mr.
Haveman on why the work needed to be done at all. In particular, we were
unable to make a convincing case with him on why it was vitally important to re-engage
with the administrators and providers in Iraq in order to understand
professional values, ways of doing business, motivation, work environments and
most importantly resource needs.
I would like to quote a remark Mr. Haveman made to one of my team leaders. He
stated 'We are done with the corrupt government of Saddam
Hussein, why do we need to study what they had in the past?'"
"Given this attitude from the CPA, it was extraordinarily difficult for
us to suggest reasonable and inexpensive solutions that would have immediately
improved the situation. At one time we were asked for $16,000 to allow the
primary health care clinics in Al Karkh to purchase renewable sterile supplies
and other things that they had been unable to purchase because their bank
accounts were frozen by the CPA. We were unable to approach the CPA
effectively with that request." (Mary Paterson, former CPA Advisor, 7/28/2006)
Administration Officials Promoted
Construction of a "Boondoggle" Hospital
"And the article that you
mentioned this morning, on evaluating the Basra hospital is another aspect of
this. It is true that there are tremendous cost over-runs, it is true that
there has not been much building. But even if we had done a good job of
building it, it was the inappropriate action at the time it was decided to
build it. The supplemental appropriations which Senate and House voted on for
funding for health in Iraq, the postwar period, involved I think it was $860
million, and neither the House nor the Senate had -- neither of them voted on
the building of that hospital. That hospital was something of a boondoggle.
It was a showy project which didn't respond in an effective fashion for the
monies involved to the health needs of the situation." (Richard Garfield,
former CPA Advisor, Columbia University, 7/28/2006)
Abusive Iraqi Reconstruction Financing Schemes
Abusive Schemes Inflated Contract Prices
"[M]edium
and small Iraqi businesses are forced to turn to practically the only sources
that are ready, willing and able to provide financing of subcontracts awarded
by the American firms that hold the U.S. Government and Coalition Provisional
Authority (CPA) prime contracts: the well-off and capital-sufficient business
entities owned and operated by most of the 12 prominent and influential Iraqi
families... For a $1 million contract performed over a period of three-to-six
months, the borrowing business must increase the bid to provide the lending
family entity with a return equal to one-half of the maximum profit that can be
obtained on the project -- perhaps a net of 10% to the lending family. This
becomes the baseline bid price to Bechtel, KBR and others for most bids by mid-
and small-size Iraqi companies... This has the effect of substantially driving
up the contract price paid for out of U.S. Funds or the Iraqi funds
administered by the U.S. through the Development Fund for Iraq (for CPA
subcontracts)." (Timothy Mills, Iraq contract specialist, 11/03/2003)
Abusive Schemes Doubled the Price of Cement in Iraq
"In
July and August, the price of cement soared to almost $100 per ton in Iraq --
more than twice what it was on the world market. This was because Iraqi cement
companies had not been capitalized to re-start operations, and, therefore were
not producing for or operating in the domestic market. Of course, at that
price, cement from outside Iraq flooded the market. The price of cement in
Iraq dropped to about $60/ton -- still way above the world market price."
(Timothy Mills, Iraq contract specialist, DPC Hearing, 11/03/2003)
Indifference Towards Claims of Abuse by the
Department of Justice (DOJ) and the Bush Administration
DOJ Refuses to Pursue Contractors for Fraud
"Under
the False Claims Act, the Attorney General is supposed to join with
whistleblowers to prosecute and punish war profiteers. The sad truth is that
the Bush administration has not even tried to do this, on the contrary, it's
done all it could to prevent this." (Alan
Grayson, attorney for whistleblowers, DPC Hearing, 09/21/2007)
"No
one in the government rose up to help us or provided any protection for us in
this endeavor. Not only did we have to spend our own funds and time to
prosecute this case, we also had to endure the unrelenting attacks and slander
from our opponents. We were sued repeatedly. We have been the subject of
anonymous blogs and lies on the Internet and anonymous fraudulent e-mails and
documents." (Robert Isakson, former CPA contractor, DPC Hearing, 9/21/2007)
The Administration Refuses to Regulate Private Security Contractors
"There are 67 separate
government agencies doing contracting in Iraq. As it happens, the biggest are
the Department of Defense and Department of State, but the simple fact that
there are sixty-seven might indicate... was alluding to which was a libertine
nature. If you have sixty-seven contracting agencies and subcontracts on top of
that, you have a pretty big mess." (Nick Bicanic, Documentary Film Maker, DPC
Hearing, 9/21/2007)
"It is commonly stated that
PMCs [Private Military Contractors] in Iraq operate in an entirely lawless
environment. Coalition Provisional Authority Order 17 prohibits any
prosecution of security contractors in local Iraqi courts -- but there are laws
that do apply-- even within Iraq. Many of you have heard of the Military
Extraterritorial Jurisdiction Act (MEJA) and the Uniform Code of Military
Justice (UCMJ) -- sadly neither of these adequately completes the loop of
investigation, prosecution, and punishment for private contractors. Even if
new laws were passed that did apply to security contractors there are important
distinctions between the existence of a law and the political will to prosecute
under that law." (Nick Bicanic, Documentary Film Maker, DPC Hearing, 9/21/2007)
Whistleblowers Face Retaliation, Abuse, and Even Imprisonment for Reporting
Fraud
Testimony of Bunnatine
Greenhouse, former top-ranking civilian contracting officer, U.S. Army Corps of
Engineers, 9/21/2007:
"I was the United States
Army Corp of Engineers top procurement executive. A career spanning over 23 years
ended on August 27, 2005. I was removed after I raised concerns over the award
of a seven billion dollar sole-source no-compete cost-plus contract to
Halliburton subsidiary Kellogg, Brown, and Root, KBR, known as the Restore
Iraqi Oil RIO contract. The award of
this contract represents the worst contract abuse I witnessed during my
professional career. Before the contract was awarded, I voiced great concern
over the legality of the selection of KBR, the total lack of competition and
the excessive duration of the RIO contract. I explained to representatives
from the Department of Defense, the Department of the Army and the Army Corps
that granting a contract for two base years with the potential to extend the
contract for an additional three years was simply unconscionable." (Bunnatine Greenhouse, highest-ranking Army Corps
civilian, 9/21/2007)
Testimony of Donald
Vance, former private security contractor in Iraq, 9/21/2007:
"QUESTION: Mr. Vance, you presumably were imprisoned,
you believe, because you witnessed the sale of guns in Iraq...
VANCE: Yes, Sir.
QUESTION: ...illegal sale of
guns. You were a whistleblower. You came forward and reported that to your
government and your government, for that purpose, took you, and detained you,
and imprisoned you for 97 days. When you were released after 97 days of
interrogation with the things that you described: loud music, lights on 24
hours a day and so on, when you were released, what did they tell you upon your
release?
VANCE: Senator, I was given
a $20 dollar bill and dumped at Baghdad International Airport.
QUESTION: By whom?
VANCE: By the United States
military, Sir.
QUESTION: You don't know at
this point why you were imprisoned?
VANCE: Sir, the only answer
I was given was that we are detaining you because you are affiliated with
Shield Group Security and of course, my immediate answer was, "'Yes, I
know of their illegal activities, I have been telling you for about seven or
eight months...'"
VANCE:
Literally, I had people in front of me with fists pounding on desks. Their more
immediate concern was not about the weapons, but their logic was, 'Don, why didn't
you come to us with this. Why did you have to go home and speak to people outside
of the club?'"
