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Federal prosecutors attempt to determine just how much corruption, fraud, and theft has occurred among government contracts handed out to corporations for their work in Iraq. The preliminary answer: a great deal. The US Justice Department chooses to center its probe into war profiteering in the small town of Rock Island, Illinois, because high-ranking Army officials at the arsenal there administer KBR’s LOGCAP III contract to feed, shelter, and support US soldiers, and to rebuild Iraq’s oil infrastructure. KBR, formerly Kellogg, Brown, & Root, is a subsidiary of oil-construction giant Halliburton. The reported violations are rampant (see February 20, 2008, October 2005, October 2002, April 2003, June 2003, and September 21, 2007). (Jackson and Grotto 2/20/2008) The investigation is under the aegis of the National Procurement Fraud Task Force, formed by the Justice Department to detect, identify, prevent, and prosecute procurement fraud by firms such as KBR. The Task Force includes the FBI, the US Inspectors General community, the Executive Office for United States Attorneys, and others. (PR Newswire 7/13/2007)
Multiple Prosecutions Underway - The Justice Department prosecutes four former supervisors for KBR, the large defense firm responsible for most of the military logistics and troop supply operations in Iraq. The government also prosecutes five executives from KBR subcontractors; an Army officer, Pete Peleti, has been found guilty of taking bribes (see February 20, 2008). Two KBR employees have already pleaded guilty in another trial, and about twenty more people face charges in the ever-widening corruption scandal. According to recently unsealed court documents, kickbacks, corruption, and fraud were rampant in contractual dealings months before the first US combat soldier arrived in Iraq. Not only did KBR contractors receive handsome, and illicit, payoffs, but the corruption and fraud endangered the health and safety of US troops stationed in Iraq and Kuwait. One freight-shipping subcontractor has already confessed to bribing five KBR employees to receive preferential treatment; five more were named by Peleti as accepting bribes. Prosecutors have identified three senior KBR executives as having approved deliberately inflated bids. None of these people have yet been charged. Other related charges have been made, from KBR’s refusal to protect employees sexually assaulted by co-workers to findings that the corporation charged $45 for a can of soda.
Pentagon Slashed Oversight - The overarching reason why such rampant fraud was, and is, taking place, prosecutors and observers believe, is that the Department of Defense outsourced critical troop support jobs while simultaneously slashing the amount of government oversight (see 2003 and Beyond).
Lack of Cooperation - Kuwait refuses to extradite two Middle Eastern businessmen accused of LOGCAP fraud. And KBR refuses to provide some internal documents detailing some of its managers’ business dealings. KBR says it “has not undertaken an exhaustive search of its millions of pages of procurement documents” to determine whether other problems exist. (Jackson and Grotto 2/20/2008; Chicago Tribune 2/21/2008)
Chief Warrant Officer Pete Peleti, formerly the military’s top food adviser in the Middle East, is sentenced to 28 months in prison for taking bribes from US contractors operating fraudulent war-profiteering schemes in Iraq and Kuwait. Peleti took bribes from Saudi conglomerate Tamimi Global Co, US firm Public Warehousing Co, and others between 2003 and 2006. Among the bribes Peleti accepted was a trip to the 2006 Super Bowl. Peleti also accepted bribes from Tamimi executive Shabbir Khan to influence military contracts. In 2006, Peleti was arrested as he re-entered the US at Dover Air Force Base; he was carrying a duffel bag stuffed with watches and jewelry, and had $40,000 hidden inside his clothes. Peleti is now cooperating with prosecutors. This and other information about KBR war profiteering in Iraq comes from a federal investigation that will begin in late 2007 (see October 2006 and Beyond). (Jackson and Grotto 2/20/2008; Chicago Tribune 2/21/2008)
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