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Review of Contracting Process in Iraq Yields Problems

The U.S. District Court in Washington last week issued arrest warrants for two Americans in the first criminal corruption case related to reconstruction in Iraq. VOA's Peter Fedynsky examines whether the arrests are isolated instances of fraud, or the tip of an iceberg.

A government affidavit accuses Robert J. Stein Jr., a private contractor with the Coalition Provisional Authority in Iraq, of accepting kickbacks to rig the bidding process for reconstruction contracts in the cities of Hillah and Karbala. Low bids were allegedly tendered by the Global Business Group; a company controlled by American businessman Philip Bloom operating in Romania. Mr. Bloom allegedly submitted high bids from fake companies he also set up to create an appearance of competition.

"We allege that, in fact, many of those rigged contracts did not result in work, or if there was work done it was extremely shoddy." So said Ginger Cruz, the U.S. Deputy Inspector General for Iraq Reconstruction. She says an example of irresponsible work is the Karbala library, where plastic chairs were substituted for upholstered metal ones called for in Mr. Bloom's contract.

In separate cases, U.S. investigators seized assault rifles purchased with misappropriated reconstruction funds, as well as $4 million in stolen cash designated for a police training facility. But Deputy Inspector General Cruz says that, despite all this, the program is doing some good.

"Overall, in our quarterly reports and our audits and all of our investigations, we have found that the bulk of the reconstruction program has proceeded well and that there are a lot of benefits going to the Iraqi people," she said.

The Special Inspector General's office investigates corruption after the fact. However, Bill Allison, an editor at the Center for Public Integrity, a non-profit public interest group in Washington, says the government is not doing enough to prevent corruption.

"What you find is that private contractors are being hired to do procurement for the government. In other words, the government can't even give the money away fast enough. They have to hire somebody to do that for them. So I think there's a real hollowing out of the government's ability to oversee and monitor these contracts."

There is also U.S. Congressional concern about no-bid contracts awarded for Iraqi reconstruction to several companies, including Kellogg Brown and Root, a unit of the Houston-based Halliburton Corporation.

"We have done several audits of work that was done by Halliburton and KBR,” said Ms. Cruz. “There were some issues that were brought up and we have presented those. Those are public and available on our website."

Some of those issues involve allegations that Halliburton overcharged the government for fuel, a charge the company denies. However, Bill Allison believes there is a larger issue involving the relationship between the government and private defense contractors.

"It's still something that the U.S. -- the government and the people -- the country hasn't quite figured out yet: what is the proper relationship and balance of power between the government and companies that by and large are dependent upon government spending to stay in business?" asks Mr. Allison.

According to the Special Investigator's report, Iraq is also being deprived by its own citizens of more than $2 billion annually in stolen gasoline and diesel fuel supplies.

Uncovering corruption in that country is a dangerous task. Several Iraqi investigators have been murdered and their U.S. counterparts have been shot at. However, Deputy Inspector General Ginger Cruz says it is important for Iraqis to understand that the United States is committed to fighting fraud and corruption in the reconstruction effort.