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A Corporate Free-for-All Becomes a Fee for All

by WS Editors

Jul 15, 2004 | Foreign Policy, Uncategorized


A COVER-UP—In Iraq, the worst contracts could turn out to be “task-order” agreements. Christopher Yukins, an associate professor of government contract law at George Washington University, told Government Executive magazine in June that task-order contracts are also “non-competitive.”

The most infamous of these contracts allowed the Army to hide its procurement of private-sector interrogators at the Abu Ghraib prison under an innocent-looking, prenegotiated contract designed for information technology purchases.

In August 2003 the U.S. military command in Iraq specifically requested that interrogators working for CACI (originally Consolidated Analysis Centers, Inc.), a large government contractor based in Alexandria, Virginia, be deployed to Abu Ghraib prison in Iraq.

CACI’s technology contract doesn’t allow the company to engage in intelligence or interrogation services. But Interior Department spokesman Frank Quimby told Government Executivemagazine in May that the “technical” component of CACI’s work consisted largely of “data entry and processing”—data defined as the intelligence gathered during interrogation of prisoners at Abu Ghraib.

One damning order makes no mention of the tenuous ties between intelligence gathering and data entry technology. The “HUMINT [human intelligence] augmentee contractors” order of December 3, 2003, simply called for CACI employees to assist Combined Joint Task Force 7 and its subordinates with their interrogation duties “in secure and fixed locations” like Abu Ghraib.

In all, three intelligence and interrogation orders totaling almost $45 million were placed through the CACI technology schedule.

A tough report by Major General Antonio Taguba, the Army officer assigned to examine prisoner abuse at the Iraqi prison, identified at least one CACI employee, Steven Stefanowicz, as having helped to create conditions he knew would lead to physical abuse of inmates.

In a sworn statement, Stefanowicz said prison guards were given copies of written interrogation plans for each inmate, which were prepared by three-person teams often composed of private contractors.
CACI is now the subject of five different government investigations, most of which center on the process that allowed the company to provide interrogators to the Army.

But CACI is not the only company that may have sent private interrogators to Abu Ghraib under questionable circumstances. The Taguba report also charges civilian interpreters John B. Israel, an Iraqi native who is a naturalized U.S. citizen, and Adel Nakhla with being involved in abuses. Both worked as subcontractors to the Titan Corporation. CACI and Titan are now the subjects of a multimillion-dollar class-action lawsuit filed on behalf of several prisoners, including the estate of one who died under interrogation.

PROTECTING ABUSERS—So why hire a private interrogator to do a government employee’s job? The legality of interrogation has certainly been on the minds of the Bush administration.

In a January 25, 2002, memo, for instance, White House counsel Alberto Gonzales advised the president to declare that the war on terrorism “renders obsolete [the Geneva Conventions’] strict limitations on questioning of enemy prisoners.” A 2002 Justice Department memo from former Assistant Attorney General Jay Bybee told the White House that techniques such as sleep deprivation and isolation “may amount to cruel, inhuman or degrading treatment,” but don’t meet the legal definition of torture.

Administration officials, including Attorney General John Ashcroft, have asserted that they know of no presidential order that would allow Abu Ghraib prisoners to be tortured by U.S. personnel. But private contractors are technically not U.S. personnel.

Several members of the administration say that it is unclear who, if anyone, might prosecute contractors or their employees for Abu Ghraib abuse, since the Geneva Conventions and even American laws appear to cover only government interrogators. In May, Defense Secretary Donald Rumsfeld wrote a member of Congress that “disciplining contractor personnel is the contractor’s responsibility.”

A May story in the New York Times quotes Justice Department officials as saying that “they had not decided even whether they had jurisdiction to prosecute contractors who worked at Abu Ghraib.”

But the government had considered the issue before. A June report by the Associated Press entitled “Army Hired Private Interrogators for Iraq Despite Ban” states that a Clinton policy memo from December 2000 prohibits private contractors from engaging in military intelligence jobs such as interrogating prisoners, because it would “jeopardize national security.”

“An Army spokeswoman said senior commanders have the authority to override the contractor ban,” the AP report added. Other Iraq contracts, involving the rebuilding of the country’s infrastructure, were given out by the Army Corps of Engineers and the U.S. Agency for International Development (USAID). The General Accounting Office is currently reviewing them.

Editor’s note: We knew a year ago that President Bush was putting us between Iraq and a hard place. But then came the discoveries—and they are still coming as the United States turns over some ruling authority to the interim Iraqi government—that while hundreds of Americans and thousands of Iraqis have died in the combat for dubious objectives, American corporate interests are rollicking as they count their war profits.

Vice President Dick Cheney’s former employer, oil-services corporation Halliburton, has had the most—$18.2 billion in government contracts in Iraq and Afghanistan. That handout has brought rising criticism about both Halliburton and Cheney. (See FYI for Cheney’s foul-mouthed reaction.)

Booming reader interest in our May 1 issue on “Warriors Behind the Scenes” by Margie Burns required a special press run to fill orders for extra copies. In this issue we present another analysis of an under-reported aspect of the war in Iraq. It is by Cliff Montgomery, a Washington Spectator reader and a freelance journalist. He has written for us before. In the August 1, 2000, issue, he reported on the anti-gun-control militancy of the National Rifle Association.

Even before it began the war in Iraq, the Bush Administration decided that it would rebuild the country using private contractors, most of whom are longtime friends or contributors to the Bush team. It may now deeply regret that decision.

The corporate free-for-all has proven to be quite expensive for U.S. taxpayers. We pay American engineers 10 times the amount normally charged by their Iraqi counterparts.

According to Representative Henry Waxman (D-CA), “increasingly, the administration is turning over essential government functions to the private sector, and it has jettisoned basic safeguards like competition and supervision that are needed to protect the public interest.”

Released on March 18 with little fanfare, a Department of Defense (DoD) audit of the deals that its Defense Contracting Command awarded between February and August 2003 found “irregularities in both the award and administration of the contracts.”

The Pentagon awarded 24 contracts in all, valued at $122.5 million, primarily for “humanitarian assistance,” such as a media support staff and consultants to assist the Coalition Provisional Authority (CPA) in Iraq. The audit revealed that because the Defense Department “did not plan for the acquisition support . . . supplies and services were quickly acquired and contracting rules were either circumvented or liberally interpreted.”

The Pentagon’s inspector general found that although “the Federal Acquisition Regulation was established to ensure that DoD obtains quality products and services at fair and reasonable prices . . . the regulation was not followed for 22 of the 24 contracts.”

“As a result,” the report continued, “DoD cannot be assured that the best contracting solution was provided, that DoD received fair and reasonable prices for the goods and services, or that the contractors performed the work the contract required.”

STOP PRESS—The misadventures in Iraq of the San Diego-based Science Applications International Corporation (SAIC) is a good example of what the inspector general uncovered. SAIC was awarded seven very lucrative media contracts last year, including the management of a U.S.-subsidized media enterprise originally known as the Iraqi Media Network (IMN). It was supposed to serve as the de facto voice of the Coalition Pro-visional Authority. The contracts gave the company free rein to rebuild Iraq’s entire media structure, even though SAIC had no previous media experience.

Late last year SAIC was served with a stop-work order by Iraq’s Coalition Provisional Authority and excluded from the rebidding process for the media contract because of its atrocious quality of content, lost equipment and absurdly abusive payments to consultants, among other complaints. Numerous requests to discuss the cancellation with SAIC representatives were not answered.

SAIC is a particularly generous political contributor. Since 1996 the company, its employees and its political action committee have given over $4.7 million to national political campaigns, 64 percent of it to Republican Party fundsmaking it the fourth-highest political contributor among the businesses quickly contracted to reshape Iraq.

SAIC’s non-competitive contract for IMN totaled $82 million, and was the single largest contract for the reconstruction of Iraq.
Of these, the most infamous are the Halliburton deals. That company, once run by Vice President Dick Cheney, is the U.S. military’s biggest contractor in Iraq. It is embroiled in a firestorm over its contracts and charging policies.

Recently Time magazine uncovered an Army Corps of Engineers e-mail, dated March 5, 2003, stating that Under Secretary of Defense for Policy Douglas Feith had approved a huge, $7 billion Halliburton deal involving Iraqi oil. The deal was “contingent on informing WH [the White House] tomorrow.” The e-mail added that “we anticipate no issues since action has been coordinated w[ith] VP’s [vice president’s] office.”

Three days later a Halliburton subsidiary, Kellogg Brown and Root (KBR), won the contract. No other bids were considered.

The Pentagon e-mail was sent because “in anticipation of controversy over the award of a sole-source contract to Halliburton, we wanted to give the vice president’s staff a heads-up,” said a Pentagon spokesman.

This was hardly the only concern. In a report released in May, the Defense Contract Audit Agency (DCAA) reported that, “Our examination disclosed several deficiencies in KBR’s billing system, resulting in billings to the government that are not prepared in accordance with applicable laws and regulations and contract terms.”

TRUTH TELLERS—Now five former employees and one former executive have come forward to describe serious examples of Halliburton’s waste and fraud in Iraq.

David Wilson, a vehicle convoy commander for Halliburton, and James Warren, a company truck driver, described instances in which brand-new trucks worth $85,000 were abandoned if they got a flat tire or experienced minor mechanical problems.

Michael West, a former foreman for the company, said that although he and other employees spent weeks in Iraq with virtually nothing to do, they were instructed to bill 12-hour days 7 days a week on their time sheets.

Marie De Young, a Halliburton logistics specialist, also described rampant overcharging and mismanagement. Among other things, she revealed that the company refused to comply with the Army’s request to move its employees from a five-star hotel in Kuwait—which cost U.S. taxpayers about $10,000 a day—into air-conditioned tent facilities that cost less than $600 a day.

In June the Los Angeles Times reported that David M. Walker, head of the General Accounting Office, had spoken to members of the House Government Reform Committee about Halliburton’s troubling actions. Halliburton, which has government contracts in Iraq worth up to $18.2 billion, is “a particularly egregious example of poor oversight by the government and overcharging by the company,” he said.

Walker and other investigators said that Defense Department planners had failed to determine the true needs of U.S. soldiers in Iraq or to effectively oversee the billions of dollars’ worth of contracts they had issued. Investigators also found waste in the contracting process a year after the invasion began. Walker later estimated in remarks to reporters that the total losses due to waste and fraud among the various companies could amount to “billions.”

A spokeswoman for Cheney said the vice president has no remaining ties to Halliburton and played no role in the awarding of any Iraq contracts. But at least the first half of this claim is not quite true. Though Cheney quit Halliburton to join the GOP ticket in 2000, he has received deferred income from the company and continues to hold over 400,000 Halliburton stock options.

Bush administration officials insist that it is the Iraqi people who will benefit from any sales of Iraqi oil overseen by U.S. corporations.

But in May 2003, just weeks after the contract giveaways had gone into full swing, President Bush quietly signed into law Executive Order 13303. That little-discussed order deals with the legal oversight of Iraqi oil proceeds during reconstruction—the legal rights that Iraqis have over their oil reserves.

Bush’s order boldly proclaims that for the duration of the U.S. occupation—or, to be precise, as long as U.S. corporations such as Halliburton are running Iraqi oil fields or controlling proceeds from the sale of Iraq’s oil—any “judicial process against . . . Iraqi petroleum and petroleum products, proceeds, obligations, or any [related] financial instruments . . . obstructs the orderly reconstruction of Iraq,” and will be considered “an unusual and extraordinary threat to the national security and foreign policy of the United States.”

The presidential order then renders a simple verdict regarding Iraq’s oil: “Any attachment, judgment, decree, lien, execution, garnishment, or other judicial process is prohibited, and shall be deemed null and void.”

A July 2003 legal assessment of the order by the Institute for Policy Studies, a Washington think tank, bluntly called the order “a blank check for corporate anarchy,” and “a license for corporations to loot Iraq and its citizens.”

Perhaps sensing a coming storm, the Bush staff apparently tried to talk the new Iraq authorities into passing a law giving all U.S. private contractors in Iraq—presumably including those allegedly involved in the Abu Ghraib scandal—a similar blanket immunity. The Iraqi officials have flatly refused.

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