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US:Saudi Company Official and Former Halliburton Employee Charged in Kickback Inquiry

The United States attorney's office also unsealed charges against a former employee of Kellogg Brown & Root, the Halliburton subsidiary, who is accused of receiving the kickbacks, which the office said totaled $124,000.

by James GlanzThe New York Times
March 24th, 2006

The director of operations for a Saudi company that operates numerous dining facilities for United States Army troops in Iraq and Kuwait was arrested Wednesday and accused of making false statements in connection with what is believed to be a kickback scheme involving a major base near the border of the two countries, a federal prosecutor's office in Illinois said yesterday.

The United States attorney's office also unsealed charges against a former employee of Kellogg Brown & Root, the Halliburton subsidiary, who is accused of receiving the kickbacks, which the office said totaled $124,000. The jurisdiction of the Illinois attorney's office includes the Army Field Support Command in Rock Island, Ill., which administers an enormous contract held by Kellogg Brown & Root to give logistics support to the Army.

The operations director, Mohammad Shabbir Khan, a naturalized American citizen born in Pakistan, was arrested in Rock Island during an interview in which he denied paying the kickbacks to the former Kellogg Brown & Root employee. He is accused of making the payments in return for receiving a $14.4 million subcontract to outfit and run the main dining facility at Camp Arifjan, a major American base in Kuwait, in 2002 and 2003.

Mr. Khan is with Tamimi Global Company, whose billing for meals at Camp Arifjan was questioned by Pentagon auditors and members of Congress. What critics called overcharges for meals by Tamimi at Camp Arifjan under its subcontract with Kellogg Brown & Root led to an investigation of facilities across Iraq and Kuwait, and a settlement in which the Army withheld some $55 million in claims from Kellogg Brown & Root. It is not clear if the criminal charges could force those negotiations to be revisited.

The former employee, a procurement manager named Stephen Lowell Seamans, of Maryland, had been cooperating with prosecutors and had told them of a false cover story that he and Mr. Khan had created to explain wire transfers of the kickback money, the federal attorney's office said. When Mr. Khan repeated the story to federal agents in Rock Island, he was arrested, the prosecutors said.

Mr. Seamans, charged with wire fraud and conspiracy to launder money, faces a possible 20 years in prison for each count. Mr. Khan faces a maximum of 5 years in prison for the charge of making false statements to federal agents. Rodger A. Heaton, the United States attorney for the Central District of Illinois, declined to say whether either man would be prosecuted for the claimed kickback scheme itself.

But because of the wide involvement that Mr. Khan has had with the American war effort in Iraq and Kuwait, the arrest raises the question of how much further the case could take the web of corruption charges that have riddled the expensive but seemingly indispensable roster of contractors that support the military effort in Iraq. "Obviously the investigation is still quite active and under way and obviously we're going to be as aggressive as we can be," Mr. Heaton said in an interview, "but I can't make any statements about further arrests."

Melissa Norcross, a spokeswoman for Kellogg Brown & Root, said the company had done its part to alert investigators to possible wrongdoing by its former employee. "In connection with an earlier internal investigation by K.B.R., the company had advised the government of its concerns," Ms. Norcross said in a written statement.

Representative Henry A. Waxman of California, who is the ranking Democrat on the Committee on Government Reform, said in response to the latest arrest: "This is more evidence of the waste and fraud that infected contracting in Iraq. The question we need to answer is how far this taint of corruption extends."

A Kellogg Brown & Root official said Tamimi had set up many or most of the Army's dining facilities, universally known as DEE-facs for their military abbreviation, DFAC, in Iraq and Kuwait. The job called for bringing in the necessary equipment, hiring laborers and running the daily operations, the official said.

Although many of those facilities were set up under the Kellogg Brown & Root subcontracts, Tamimi has since been operating some under direct agreements with the Army. Tamimi now runs the dining facility at Camp Arifjan under a direct contract with the Army, the official said.

According to the United States attorney's office, this case began in October 2002 when Mr. Khan was negotiating the terms for the main dining facility at Camp Arifjan, a dusty camp near the border that is used as a vast staging area for convoys of fuel, food, troops and military equipment into Iraq. After a birthday party held by Tamimi for Mr. Seamans, Mr. Khan offered a kickback "for the award of the Camp Arifjan dining facility subcontract," the prosecutors' office said.

Mr. Seamans received both cash and wire transfers, the prosecutors contend, including $20,965 to an account covering a car loan. Mr. Seamans left Kellogg Brown & Root in May 2003, but heard from an associate of Mr. Khan's in April 2005. The associate told Mr. Seamans that an American Embassy official in Bahrain had been asking about the suspicious wire transfers.

The prosecutors contend that as a result the two men developed a story that the wire transfers had been made as part of the purchase of an armored vehicle in the United States for resale in the Middle East.

Prosecutors ultimately invited Mr. Khan to Rock Island after making a deal in which he would not be prosecuted for his conduct abroad, but would be in peril of arrest for making false statements. Mr. Khan spun out the tale of the armored vehicle, the office said, and was arrested.





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