"We’re also building a contractor-industrial-complex in Washington that has an economic interest in foreign expeditions. Doesn’t make it wrong; does make you want to be watchful."
Source: "The Best Allies Money Can Buy" By THOMAS L. FRIEDMAN - NY Times - November 3, 2009
[Stuart Bowen, who has been in charge of auditing Iraq's faltering reconstruction since 2004] inspectors are among the few US civilian officials who still venture beyond the fortified bounds of the Green Zone in Baghdad into the rest of Iraq, to see how $18bn of American taxpayers' money is being spent. Much of the money has been wasted. Sigir officials have referred 25 cases of fraud to the justice department for criminal investigation, four of which have led to convictions, and about 90 more are under investigation.
A culture of waste, incompetence and fraud may be one legacy the occupiers have passed on to Iraq's new rulers more or less intact. Mr Bowen's office found that nearly $9bn in Iraqi oil revenues could not be accounted for. The cash was flown into the country in shrink- wrapped bundles on military transport planes and handed over by the ton to Iraqi ministries by the Coalition Provisional Authority (CPA) run by Paul Bremer, a veteran diplomat. The money was meant to demonstrate the invaders' good intentions and boost the Iraqi economy, which Mr Bremer later insisted had been "dead in the water". But it also fuelled a cycle of corruption left over from Saddam Hussein's rule.
"We know it got to the Iraqis, but we don't know how it was used," Mr Bowen later told Congress.
In the Hillah region a defence department contract employee and two lieutenant colonels were found to have steered $8m in contracts to a US contractor in return for bribes. The Pentagon contract employee, Robert Stein, pleaded guilty earlier this year, admitting he and his co-conspirators received more than $1m in cash, help with laundering the funds, jewellery, cars and sex with prostitutes. Stein also admitted that they simply stole $2m from the construction fund, accounting for the money with receipts from fictitious construction companies.
Hillah just happened to be the district Mr Bowen's inspectors examined in depth. It is still far from clear how much reconstruction money has gone missing around the whole country.
A potentially far more serious problem has been the way the US government decided to give out reconstruction contracts. It split the economy into sectors and shared them out among nine big US corporations. In most cases the contracts were distributed without competition and on a cost-plus basis. In other words the contractors were guaranteed a profit margin calculated as a percentage of their costs, so the higher the costs, the higher the profits. In the rush to get work started the contracts were signed early in 2004. In many cases work did not get under way until the year was nearly over. In the months between, the contractors racked up huge bills on wages, hotel bills and restaurants.
According to a Sigir review published in October, Kellogg, Brown and Root (a subsidiary of Halliburton, Vice President Dick Cheney's former company) was awarded an oil industry repair contract in February 2004 but "direct project activity" did not begin until November 19. In that time KBR's overhead costs were nearly $53m. In fact more than half the company's $300m project costs from 2004-06 went on overheads, the audit found.
Iraq also represented a grey zone beyond the reach of the US civil courts. KBR was found to have overcharged the US military about $60m for fuel deliveries, but that did not stop it winning more government contracts.
A California company, Parsons, had its contract terminated this year after it was found to have finished only six of more than 140 primary healthcare centres it was supposed to build, after two years work and $500m spent. However, the contract was ended "for convenience", meaning Parsons was paid in full. In a police college Parsons built for $75m in Baghdad the plumbing was so bad that urine and excrement rained down from the toilets on to the police cadets. Parsons left a sub-contractor to do repairs but in general there is little punitive action that can be taken for shoddy work.
Part of the reason big US contractors have been able to get away with so much is that there has been limited proper supervision. CPA employees were picked not for their financial expertise but for their political loyalty.
Mr Bowen would have passed the test. He campaigned for George Bush in Texas and was one of the small army of Republican lawyers called in to Florida in 2000 to oversee the vote recounts on Mr Bush's behalf. When he started the job in March 2004 few expected he would do anything to embarrass the administration.
However, Mr Bowen has emerged as the scourge of the big corporations who are among the Republican party's biggest donors. Earlier this year a clause extending his mandate was stripped from a military spending bill just before a vote. Sigir, however, seems to have been saved by the Democratic victory in last month's elections.
Mr Bowen bristles at the suggestion that Mr Bush might have had a hand in the attempt to close his office. "I'm doing exactly what the president expects me to do," he said.
Source: "Corruption: The "Second Insurgency" Costing $4 Billion a Year" by Julian Borger and David Pallister - The Guardian (UK) - 02 December 2006
A former employee of a Halliburton subsidiary claims that she was fired for revealing to her managers that the company was charging the government fraudulently inflated costs for military facilities it ran in Iraq, according to court papers unsealed yesterday.
At bases in Anbar Province, the desert homeland of Iraq’s bitter Sunni-led insurgency, company employees faked head counts to inflate its charges for operating recreational and dining facilities, and led a relatively lavish lifestyle by appropriating food and equipment meant for the troops, the papers charge.
Source: Iraq Contractor Inflated Costs, Lawsuit Alleges - By JAMES GLANZ - NY Times - September 9, 2006
Halliburton has already raked in more than $10 billion from the Bush-Cheney Administration for work in Iraq, and they were awarded some of the first Katrina contracts," [Sen. Frank Lautenberg (D-NJ)] said in a statement. "It is unseemly for the Vice President to continue to benefit from this company at the same time his Administration funnels billions of dollars to it. The Vice President should sever his financial ties to Halliburton once and for all.
Cheney continues to hold 433,333 Halliburton stock options. The company has been criticized by auditors for its handling of a no-bid contact in Iraq. Auditors found the firm marked up meal prices for troops and inflated gas prices in a deal with a Kuwaiti supplier. The company built the American prison at Guantanamo Bay.
[Lautenberg] asserts that Cheney's [Halliburton stock] options -- worth $241,498 a year ago -- are now valued at more than $8 million.
Cheney told "Meet the Press" in 2003 that he didn't have any financial ties to the firm.
Since I left Halliburton to become George Bush's vice president, I've severed all my ties with the company, gotten rid of all my financial interest," the Vice President said. "I have no financial interest in Halliburton of any kind and haven't had, now, for over three years.
Cheney continues to received a deferred salary from the company. According to financial disclosure forms, he was paid:
| $205,298 | 2001 |
| $162,392 | 2002 |
| $178,437 | 2003 |
| $194,852 | 2004 |
Source: "Cheney's Halliburton stock options rose 3,281% last year, senator finds" - rawstory.com - October 11, 2005
President Bush is trying to score unearned points for fiscal rectitude by railing against the Senate's outsize $109 billion supplemental spending package, which includes money for the wars in Iraq and Afghanistan as well as hurricane relief. But the real scandal is Mr. Bush's own preference for financing much of the cost of the Iraq war outside the normal budget process. That is convenient for the administration, which does not have to count the money when it is pretending to balance the budget. But Iraq is not some kind of unexpected emergency, like Hurricane Katrina. It is a highly predictable cost, now amounting to about $100 billion a year, or just under 20 percent of total military spending.
Moving the war's financing off budget is no mere technical distinction. For one thing, it subjects the military's spending requests to less careful Congressional committee scrutiny than they would receive during the usual budget process. More important, this fiscal sleight of hand makes it that much easier for the Pentagon to duck the hard choices it desperately needs to be making between optional and costly futuristic weapons and pressing real-world needs.
The Pentagon's latest $460 billion budget request reflects exactly the kinds of distortions that gimmicky cost-shifting produces. There is no serious pressure to economize to pay for those uncounted war costs. So the budget barrels ahead with unrealistic long-term spending projects that the services and the nation will ultimately be unable to afford, piling on stealth destroyers and air combat fighters designed for the cold war while soldiers go short of armor and adequate reinforcements in Iraq.
Making matters worse, Defense Secretary Donald Rumsfeld shunted aside all pleas to expand the size of America's weary and badly overstrained ground forces to preserve even more dollars for wasteful weapons spending.
Congress would gladly vote the Pentagon every cent it needs to fight in Iraq and Afghanistan and rebuild its ground forces so that they are available for other military emergencies. But with so much of the war off budget, as it were, Congress is instead being asked to approve one of the biggest military budgets in American history for projects having little to do with current fighting.
Source: "Funny Money on Iraq" - NY Times - 5/8/06
[T]he Agency for International Development, the main pipeline for Iraq reconstruction, [has offered] a $1-billion-plus opportunity for interested parties to dream up "design and implementation" plans for stabilizing 10 "Strategic Cities" considered "critical to the defeat of the Insurgency in Iraq."
Talk about outsourcing: here comes the government's open invitation, for all "qualified sources" out there, to come up with $1.02 billion worth of fresh imaginings, even as the "Plan for Victory" is ballyhooed as a fully credible agenda in hand for fixing - perchance exiting - Iraq. Veterans of the think-tank consultancy complex in Washington are rating such an ultralucrative offer - an average of $100 million per city across two years - as eye-popping by the usual scale of Usaid grants. It's even more so when such a sweet deal comes, at least initially, with no specific strings attached.
Source: "Iraq Fixer, No Exp. Needed, $1B-up" - NY Times - December 3, 2005
When the Iraq war began in early 2003, analysts say, the American military hadn't stocked up on body armor because the White House did not intend to send a large occupational force.
In the world of military contractors, times like these - when a sudden, pressing need intersects with a limited number of suppliers - have all the makings of full-blown financial windfalls. For small vendors, the effect can be even more seismic than it is for their larger brethren, turning anonymous businesses into beehives of production and causing their sales to skyrocket. DHB Industries, based in Westbury, N.Y., whose Point Blank subsidiary in Pompano Beach, Fla., is a leading manufacturer of bulletproof vests, found itself occupying this lucrative turf when the military awarded it hundreds of millions of dollars in body armor contracts in 2003 and 2004.
[David H. Brooks, 51, its founder, namesake, largest shareholder and chief executive] cashed in DHB stock worth about $186 million in late 2004, has also courted attention and controversy. In November, Mr. Brooks held a bat mitzvah party for his daughter atop Rockefeller Center in New York, which an article in The Daily News said had cost $10 million. Mr. Rubin characterized the figure as exaggerated. He declined to comment on other elements of the article, which said that Mr. Brooks had used his company's jet to fetch a clutch of rock and hip-hop stars, ranging from Don Henley to 50 Cent, to perform at the celebration; that he changed out of an all-leather, metal-studded suit into a hot-pink suede suit as the party heated up; and that he supplied guests with goody bags stuffed with $1,000 worth of merchandise.
Over the years, DHB has bestowed unusual financial rewards on Mr. Brooks. From 1997 to 2004, he was entitled to lay claim to 10 percent of the company's annual profits as reimbursement for personal and business expenses. During that time, he rang up $2 million in personal charges on DHB's corporate credit cards, according to securities filings. For one year, between 1996 and 1997, he was also entitled to 10 percent of the company's annual profit as a bonus, a right that Mr. Rubin said Mr. Brooks had never exercised. Mr. Brooks' total annual compensation in 2004, the most recent year for which data are available, was about $73.3 million. Of that amount, $69.9 million represented options he exercised as part of his $186 million stock sale that year. DHB itself had profits in 2004 of $49.5 million.
THE rapid growth in military spending has fattened the wallets of C.E.O.'s running major defense contractors, according to the Institute for Policy Studies, a left-leaning research group in Washington. The group, which labeled Mr. Brooks a "body armor profiteer" in a report it prepared last summer, noted that the average compensation for C.E.O.'s at 34 leading military contractors tripled from 2001 to 2004, to $3.9 million. That meant that C.E.O.'s pay packages were 23 times larger than generals' salaries and 160 times the size of an average soldier's pay.
The Pentagon awarded more than $230 billion worth of military contracts in the 2004 fiscal year, and how companies of all sizes secured pieces of that pie depended on different combinations of expertise and political access. Government and military oversight of the fitness and capacity of suppliers has historically been plagued with challenges and lapses, and military analysts say that those problems are magnified during times of war. Some of the concerns that have cropped up recently about the adequacy of bulletproof vests, they say, are no surprise.
[A]nalysts say that the sheer volume of money gushing out of the military's contracting faucet, the difficulty of overseeing each and every supplier, and the need to rush armor and weaponry into the field inevitably creates problems.
"If you see some of these big companies scarfing down billions of dollars with nothing to show for it, then it's not surprising that problems have emerged at some of the smaller companies," said John E. Pike, founder of GlobalSecurity.org, a research firm that specializes in military and intelligence policy.
DHB has been an active client of three Washington lobbyists - Grayson Winterling, John C. Tuck, and Michael P. Flanagan - each of whom lobbied the Defense Department or undisclosed members of Congress on DHB's behalf, according to federal records.
THE DHB board, which has been expanded to seven members and still includes Mr. Brooks, has granted unusually generous perks to the company's founder. Under a 1996 employment agreement approved by the board's compensation committee, Mr. Brooks was entitled to annual bonuses equal to 10 percent of DHB's profits each year. That was replaced in 1997 by a new plan granting him annual reimbursement for business and personal expenses up to 10 percent of DHB's profits. DHB also reimburses Mr. Brooks for all expenses associated with a residence and office he uses in Florida. The company also reimburses Mr. Brooks' children for a jet they own whenever DHB uses it for business purposes (a bill that amounted to about $860,000 in 2004).
Source: "All's Not Quiet on the Military Supply Front" By TIMOTHY L. O'BRIEN - NY Times - January 22, 2006
Source: www.halliburtonwatch.org
"The above graph released by Sen. Frank Lautenberg (D-NJ) charts the value of the Vice President's holdings in Halliburton in the past year."
Source: rawstory.com - October 11, 2005