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US: Senator calls for more aggressive investigation of war profiteering

by Elise CastelliFederal Times
March 20th, 2007

The Justice Department isn’t moving aggressively enough against contractors who have bilked the government out of billions in Iraqi reconstruction dollars, a top Senate Democrat said Tuesday.

Despite more than 70 open investigations into contracting waste, fraud and abuse in Iraq by the special inspector general for Iraqi reconstruction, Justice has brought only eight criminal cases to court, said Sen. Patrick Leahy, D-Vt., chairman of the Senate Judiciary Committee.

The committee held a hearing Tuesday to discuss prosecution of what Leahy calls war profiteers, companies that overcharge and defraud the government while carrying out contracts for Iraqi reconstruction.

The White House has allowed contractors to unfairly profit from the wars by offering no-bid contracts and cost-plus contracts that pay expenses over negotiated fees to companies closely tied to the administration, Leahy said. At the same time, insufficient resources have been committed to support oversight of those contracts, he said.

“A law combating war profiteering is sorely needed,” Leahy said. In January, he introduced legislation that would make war profiteering — overvaluing items sold to the government to support war, relief or reconstruction — a crime and allow the government to recover excessive profits and put convicted contractors in prison for up to 10 years.

“If people think they’ll actually go to jail, that the bars will close on them, that has a lot more impact than any fine,” Leahy said.

Combating waste, fraud and abuse “is a priority area” for the Justice Department, said Barry Sabin, a deputy assistant attorney general. The department has 70 prosecutors assigned to war-related corruption cases, and it has secured convictions of 16 individuals on myriad public corruption offenses, such as bribery, theft and smuggling — though not all are related to contracting, he said.
While corruption is prevalent in the Iraqi government, “on the U.S. side, incidents of corruption are a small component of the overall investment,” said Stuart Bowen, special IG for Iraqi reconstruction. Waste, however, has been a significant problem, he said. Auditors are working to determine the exact amount of government dollars lost to waste, he said after the hearing.

The Defense Department is also conducting investigations into war profiteering, contract fraud and contract corruption, said Thomas Gimble, acting inspector general. Defense investigators are pursuing 56 criminal investigations in this area and conducting 22 audits, according to his prepared testimony. Investigations include allegations of Halliburton subsidiary KBR receiving kickbacks and overcharging the government for food, meals and fuel under its logistical support contract, he told the committee.

Bowen said the Justice Department has moved aggressively over the last year to respond to 28 cases his office has referred to it.

Iraq presents unique challenges to pursuing criminal cases because Iraq does not have an electronic banking system to show a clear money trail, Bowen said. Many transactions are made in cash and investigators are dependent on “people coming forward when their lives are threatened,” Bowen said.

In addition to criminal charges, the inspectors general and Justice have pursued alternate punishments for contractors, such as civil penalties, suspensions and debarments, he said.

Justice is trying to use all the tools it has available when pursing contracting cases, Sabin said. The department has not taken an official position on Leahy’s legislation, but there are concerns the wording could make cases more difficult to prosecute, he said. Many contracting waste, fraud and abuse cases connected to the war have a domestic component that allows Justice to pursue a case under existing laws, Sabin said.



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