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Iraq: Business Ties Raise Questions

by Craig Gordon and Knut RoyceNewsday
October 5th, 2003

Washington - The former law partner of the Defense Department's architect of Iraq's post-war planning has teamed up with the nephew of Ahmed Chalabi, a Pentagon-anointed leader in the country, to profit from the multibillion-dollar rebuilding of the war-ravaged nation.

L. Marc Zell, a Jerusalem-based attorney, is the former partner of Douglas Feith, the Pentagon undersecretary who was a major force behind the push for war.

Chalabi's nephew, Salem Chalabi, has set up a law firm in Baghdad and has boasted of daily contact with his uncle, who has emerged as a powerful figure in the new Iraqi interim government. Chalabi is a favorite of Pentagon hawks, including Feith, who pushed for Hussein's overthrow.

In an interview, Zell said Salem Chalabi owns the Baghdad law firm, while Zell helped create the idea and is marketing the firm to U.S. and other clients. Zell said his previous 15-year partnership with Feith, and Salem Chalabi's family ties, are separate from the work the pair is doing in Iraq.

"It has nothing to do with [Ahmed] Chalabi or Doug Feith," Zell said.

Both Feith and Ahmed Chalabi say they are not connected to either man's efforts to seek business in Baghdad.

Yet Salem Chalabi's Iraqi International Law Group hints at its ability to offer clients the advantages of its close contacts with the U.S.-led Coalition Provisional Authority and the 24-member Iraqi Governing Council, upon which his uncle sits.

"You cannot adequately advise about Iraq unless you are here day in and day out ... At IILG, we don't talk about coming to Iraq - we are in Iraq," its Web site reads. Salem Chalabi couldn't be reached.

Ahmed Chalabi said in an interview that he would take steps - unspecified so far - to eliminate any appearance of influence-peddling in the Iraqi Governing Council or in his nephew's relations with him.

A member of Chalabi's inner circle is more blunt about the appearance of impropriety related to Salem Chalabi's law firm: "This looks greedy, careless and stupid."

The Zell-Salem Chalabi venture is just one of several firms with ties to the Bush administration and influential Iraqis hoping to profit from Iraq's reconstruction, a years-long project that World Bank and other estimates say will cost at least $56 billion.

Critics say the Zell-Chalabi effort in particular crosses an ethical line by appearing to play on family connections in Iraq to give clients a leg up in getting business. Coupled with no-bid contracts awarded to politically connected firms like Bechtel and Halliburton, critics say, these firms give credence to doubts expressed by skeptical allies and Iraqis over the Bush administration's true motives.

"The appearance of all this is terrible," said Chellie Pingree, president of Common Cause, a Washington-based government watchdog group. "It continues to harm our reputation at a time when we're trying to justify the appropriateness of going to war, when a lot of people are asking, 'Was this about making money for the United States?' "

The multibillion-dollar reconstruction effort has unleashed what one Iraqi adviser called a "gold-rush mentality" among U.S. firms to get in first and fast. Those involved talk of seemingly limitless possibilities in rebuilding an economy left in shambles by Hussein's quarter-century rule and wars with the United States and Iran.

Baghdad has "not one single recognizable brand name, not one single oasis of quality, no brass, glass and steel office building, or a retail store you're familiar with - nothing," said a partner in a Washington firm called New Bridge Strategies. "One well-stocked 7-Eleven would put 30 Iraqi shops out of business."

New Bridge Strategies was created by a group of influential Republicans with close ties to the Bush family - including President George W. Bush's campaign manager, Joe Allbaugh - to tap into business in Iraq.

The firm's Web site notes that its partners have served in the Reagan administration and both Bush administrations, making them "particularly well-suited" to deal with the White House, Pentagon and Congress.

Other firms are getting involved. The lobbying firm of former House Appropriations chairman Robert Livingston (R-La.) hired the Iraqi lawyer who assisted in the rescue of Pfc. Jessica Lynch to help them drum up Middle East business.

BKSH & Associates, headed by longtime Republican insider Charles Black, represents Chalabi's Iraqi National Congress, his former exile group, in Washington. A BKSH lobbyist, Riva Levinson, works side-by-side with Chalabi on his frequent trips to Capitol Hill.

"What I think gives us a leg up, and I think we have a leg up, is the fact we have been working this issue for four-and-a-half years, and we know a lot of Iraqis that have been involved in the political process," Levinson said. He said the firm's real interest is not in U.S. government reconstruction contracts but in private commercial opportunities for its clients.

Yet of all the firms seeking entre into Iraq now, few come with the kind of personal connections available to Zell and Salem Chalabi.

Their exact business relationship remains unclear, though an e-mail address for Zell appears on the Chalabi law firm Web site, listing Zell as "partner for international marketing." Zell refused to name any clients but said most of the dozens of firms he has helped into Iraq are from non-Israeli Middle Eastern countries, with just one or two U.S. firms.

Zell said that his official partnership with Feith ended in 2001, when Feith left to take the Pentagon job. However, Zell still markets his new law firm under www.fandz.com - the Web site of the former firm Feith and Zell. Zell said he retains the Web name because it had become so ingrained with him and his associates.

Zell said of Feith: "He has no knowledge of what we are doing. There is an absolute wall. It couldn't be any taller and it couldn't be any thicker."

In a statement through a Pentagon spokesman, Feith said, "When I was appointed as undersecretary of defense for policy, I resigned from my former law firm and terminated all financial interests in it. My former colleagues are still entitled to work." Feith also said he has no role in the Coalition Provisional Authority's process for awarding contracts.

Ahmed Chalabi said his nephew has no official position on the Iraqi Governing Council but does provide pro-bono legal advice at times and fills in on the council's constitution commission when member Kanan Makiya is unavailable.

Ahmed Chalabi said in an interview last week that he does not see anything improper in his nephew's actions. He said he would seek to remove any appearance of impropriety but did not say how. "We will be very strict in isolating business decisions from politics," Chalabi said of the governing council.

Those appearances are what gives Pingree, of Common Cause, such concern. "This is not a simple matter of cosmetic appearance. This is about our international relations at a time when we're doing our best to slow the spread of terror and eliminate justifications for discontent around the world," she said. "America has to be above reproach here."

Staff correspondent Andrew Metz contributed to this article from Jerusalem.





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