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IRAQ: Corruption, Missing Millions and Two Dead Contractors

After securing contracts with the Iraqi government potentially worth hundreds of millions, someone killed Dale Stoffel.

by Deborah HastingsAssociated Press
January 28th, 2006

There are fortunes to be made in Iraq, where seemingly everything is broken or looted or blown up. The fortunes come from fixing those things; there is no shortage of cash to hire the fixers.

Often they are characters writ large with bravado and cunning and greed, sprouting like weeds amid the rubble.

Dale Stoffel was all of that. He devised elaborate schemes to get Iraqi government contracts to repair an unending list of things that no longer worked. He posed for photographs in the desert wearing a flak vest and toting an M5 submachine gun. He clenched a cigar between his teeth.

He pushed those schemes until they became reality. He signed huge contracts with the interim Iraqi Defense Ministry the biggest of which was to repair the country's broken-down arsenal of tanks, helicopters and jets.

Yet Stoffel had expectations that seemed naively arrogant for a man of the world.

He was an arms dealer with a mysterious past, a swashbuckling, larger-than-life character who'd been around the block of international intrigue more than once. But in all the chaos, in a place overrun with mercenaries, privateers and shady government officials, he nonetheless expected everyone in Iraq to play by his rules.

It was a dangerous expectation.

At first, he complained to U.S. military and Baghdad officials: He wasn't being paid for his contracting work; corruption plagued his dealings with the Iraqi interim government. When that didn't produce a satisfactory response, he wrote to the Pentagon and to members of Congress saying the Iraqi Defense Ministry was ripping him off.

Then, after one year in country, after he hired powerful Washington lobbyists and pressed the flesh with connected Iraqis such as Ahmed Chalabi, after he secured contracts with the Iraqi government potentially worth hundreds of millions, someone killed Dale Stoffel.

On Dec. 8, 2004, a blue BMW station wagon riddled with blood and bullet holes was found on the side of a one-lane road used as a shortcut from the Taji military base, just past the point where it makes a hard right along the Tigris River.

The occupants were missing.

Stoffel had been in the passenger seat. Driving was American engineer Joseph Wemple, an expert carpenter who worked for Disney World and knew little about living in the kind of shadow world Stoffel embraced.

They had left Taji earlier that day, accompanied by an Iraqi worker, and were headed to their fortified compound outside Baghdad, a 15-minute drive. They never arrived.

After a series of calls, desperate colleagues located the Americans' bodies in a Baghdad morgue. They had been shot to death. The Iraqi employee survived. He has since disappeared.

The killings remain unsolved. The FBI is still investigating, though family members say little has happened in the past several months. A previously unheard of insurgency group continues to post Internet videos for no apparent reason, showing documents from Stoffel's laptop computer, which was stolen in the attack.

And in the passage of time, the deaths of these men have become one more turn in a twisting road of corruption leading ultimately to the interim Defense Ministry, to the issuance of 27 arrest warrants for its members and to the disappearance of nearly the entire procurement budget for rearming the Iraqi military.

That money was to be used so that Iraq could stand on its own, and so that its occupying soldiers, most of them Americans, could go home.

___

Stoffel's company, Wye Oak Technology, had a hard-to-get federal license allowing him to import weapons. His former schoolmate Robert Irey, head of a Canonsburg, Pa.-based firm called CLI Corp., had years of construction experience.

Together, according to the plan, the international arms dealer and the small-town engineering company would get Iraqi military contracts and make lots of money.

Robert's brother, Bill, who did construction work for Disney World in Florida, also signed on, which was how Joe Wemple entered the picture. "I knew Joe from Disney," said Bill Irey. "He was the project manager for Shades of Green, the Army resort" near the amusement park.

All parties agreed that much of the money earned in Iraq would go to Stoffel, according to Irey. Stoffel had the weapons knowledge and he had made the contacts, including hiring a lobbying firm that also represented Chalabi's exiled Iraq National Congress.

He used those connections to meet other Chalabi family members an extremely large clan whose offspring are scattered through the Iraqi government and business community as well as interim Defense Minister Hazem Shaalan and other officials.

"It was his idea," said Bill Irey. "He had put together a brilliant proposal."

Wye Oak and CLI would refurbish every piece of moving equipment in Iraq's well-worn arsenal, including jets, helicopters, and Soviet-era tanks. The work would be financed by selling off an estimated 30 million to 40 million pounds of military scrap from across Iraq, which Stoffel said was worth at least $1 billion, and possibly a great deal more.

CLI would retrofit a number of buildings at the Taji military base, installing a kind of assembly line to do the repairs. CLI would also provide the manpower. Stoffel's international arms license would allow him to buy whatever parts were needed.

The interim Defense Ministry, in the first project of its kind since the U.S.-led invasion, signed the contract. Work began in August 2004, focusing on refurbishing tanks so they could be used to protect polling places during the parliamentary election in January 2005.

The project was overseen by the rebuilding task force led by U.S. Army Lt. Gen. David Petraeus.

To the Americans, it was a public relations bonanza. The Iraqi military had been disbanded after the invasion. If the occupiers could show the army was getting back on its feet with newly overhauled equipment, everyone looked good.

To Stoffel and CLI, the deal was worth nearly $300 million. It also represented a windfall for the Iraqi government, which would get whatever funds were leftover from selling the military scrap, after the refurbishing was done.

But Wye Oak and CLI were never paid, both companies claimed.

After the contract was signed, Defense Minister Shaalan "came in and said, 'Oh, by the way, we're putting this guy in charge as an intermediary,'" Irey said. The intermediary was Raymond Zayna, an enigmatic Lebanese businessman who was given control of financial transactions between the contractors and the ministry. "We sent an invoice. The Ministry of Defense paid him. But we never saw any of the money," Irey said.

Stoffel believed that Zayna was skimming funds and kicking some back to the Defense Ministry, Irey said.

Fed up, Stoffel flew home for Thanksgiving.

He met with staffers from Pennsylvania Republican Sen. Rick Santorum's office, who promised to look into the matter. The senator wrote to U.S. Defense Secretary Donald Rumsfeld, asking for an investigation of Stoffel's complaints, according to documents supplied to The Associated Press by Santorum's staff.

Heartened, Stoffel went back to Iraq, where he was summoned to a series of meetings in the Green Zone to discuss his complaints. Eventually, after arguing back and forth, it was agreed that Zayna would make an initial payment to the contractors.

Five days later, Stoffel and Wemple were shot to death.

___

The killings have become Internet folklore, generating scores of blog entries and spy scenarios as intricate as any Eric Ambler novel: Stoffel, and by association, Wemple, were CIA agents; Stoffel was killed by an assassin connected to the Iraqi government; Stoffel was bumped off by another arms dealer who wanted his contract.

A week after the killings, an insurgent group calling itself the Brigades of the Islamic Jihad claimed responsibility in a video that showed identity cards belonging to Stoffel and Wemple, and photographs of the two taken from Stoffel's computer.

Both men, the video claimed, were CIA spies who were pillaging Iraq.

But unlike most terrorist postings, there were no images of the killings or of the bodies, prompting questions about whether the video was truly the work of terrorists or simply a smoke screen to hide the murder of a troublesome American.

"It's very strange," said Evan Kohlman, a terrorism consultant who has monitored the postings with increasing interest. "I really doubt they're insurgent groups. I've never seen anything like this, and I monitor every single posting coming out from every major insurgent group in Iraq."

And never, Kohlman said, has he seen such postings continue for months.

At least 13 have appeared since the killings by another unknown group, this one calling itself Rafidan: The Political Committee of the Mujahideen Central Command. These show Defense Ministry correspondence and e-mail between Stoffel and various Iraqi and military officials, as well as photographs of Stoffel standing next to President George W. Bush, and another of him standing next to Chalabi, all taken from Stoffel's laptop.

"I think they're trying to divert attention from the fact that there are other motives for the killing of Dale Stoffel," Kohlman said. "There's nothing to be gained except to try to convince people that it's really insurgents who killed this guy."

___

And as for the corruption in the Iraq Defense Ministry that so infuriated Stoffel?

It went much deeper than even he suspected.

Stoffel and his CLI colleagues were dealing with Shaalan, the defense minister who was a small business owner in London before the invasion, and with chief procurement officer Zaid Cattan, a salesman with joint Polish-Iraqi citizenship who'd been living in Europe.

He griped about both, but his complaints found no legitimacy until five months after he and Wemple were killed.

In that time, a new parliament was sworn in, with Shaalan as a member. Letters from the U.S. Defense Department about Stoffel's accusations had bounced from Rumsfeld's office down to a military attorney who concluded the entire matter had nothing to do with the U.S. military.

But then the Iraqi Supreme Board of Audit presented a confidential report on the Defense Ministry to new Prime Minister Ibrahim Jaafari.

The May 2005 findings were breathtaking. Widespread fraud under Shaalan had resulted in the disappearance of virtually the entire $1.3 billion procurement budget. The report, a copy of which was obtained by the AP, examined 89 contracts and found that all had been paid in full, via cash bank transfers, in advance of any work being done.

All were awarded to Iraqis acting as intermediaries like Stoffel's contact, Zayna, and not to the suppliers themselves.

The finance minister called it "possibly one of the greatest thefts" in Iraqi history.

The Wye Oak-CLI contract was one of the most glaring examples. Nearly $25 million had been deposited by Zayna in a Lebanese bank "contrary to general contracting provisions," the audit said.

In October, 27 arrest warrants were issued for Defense Ministry officials, including Shaalan and Cattan. But by then, Shaalan had immunity from prosecution as a member of parliament.

He'd also left the country. He now lives in Britain and denies wrongdoing, though he acknowledges transferring $500 million in ministry funds to a Lebanese bank to buy armored vehicles, he said.

He ran for re-election in December, but lost.

It is unclear what the newest Iraqi government will do about the arrest warrants.

As for Zayna, the last thing Bob Irey heard was the middleman remains in Iraq. He continues to bill the Defense Ministry for work done under the Taji contract.





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