Halliburton has become synonymous with war profiteering, but there
are lots of other greedy fingers in the pie. We name names on 10 of the worst.
The history of American war profiteering is rife with egregious examples of
incompetence, fraud, tax evasion, embezzlement, bribery and misconduct. As war
historian Stuart Brandes has suggested, each new war is infected with new forms
of war profiteering. Iraq is no exception. From criminal mismanagement of Iraq's
oil revenues to armed private security contractors operating with virtual impunity,
this war has created opportunities for an appalling amount of corruption. What
follows is a list of some of the worst Iraq war profiteers who have bilked American
taxpayers and undermined the military's mission.
No. 1 and No. 2: CACI and Titan
In early 2005 CIA officials told the Washington Post that at least 50 percent
of its estimated $40 billion budget for that year would go to private contractors,
an astonishing figure that suggests that concerns raised about outsourcing intelligence
have barely registered at the policymaking levels.
In 2004 the Orlando Sentinel reported on a case that illustrates what can go
wrong: Titan employee Ahmed Fathy Mehalba, an Egyptian translator, was arrested
for possessing classified information from the Guantanamo Bay prison camp.
Critics say that the abuses at Abu Ghraib are another example of how the lines
can get blurred when contractors are involved in intelligence work. CACI provided
a total of 36 interrogators in Iraq, including up to 10 at Abu Ghraib at any
one time, according to the company. Although neither CACI, Titan or their employees
have yet been charged with a crime, a leaked Army investigation implicated CACI
employee Stephen Stefanowicz in the abuse of prisoners.
CACI and Titan's role at Abu Ghraib led the Center for Constitutional Rights
to pursue companies and their employees in U.S. courts.
"We believe that CACI and Titan engaged in a conspiracy to torture and
abuse detainees, and did so to make more money," says Susan Burke, an attorney
hired by the Center for Constitutional Rights (CCR), whose lawsuit against the
companies is proceeding into discovery before the Federal Court for the District
The private suits seem to have already had some effect: In September 2005 CACI
announced that it would no longer do interrogation work in Iraq.
Titan, on the other hand, has so far escaped any serious consequences for its
problems (in early 2005, it pleaded guilty to three felony international bribery
charges and agreed to pay a record $28.5 million Foreign Corrupt Practices Act
penalty). The company's contract with the Army has been extended numerous times
and is currently worth over $1 billion. Last year L-3 Communications bought
Titan as part of its emergence as the largest corporate intelligence conglomerate
in the world.
No. 3: Bechtel: precast profits
The San Francisco-based construction and engineering giant received one of
the largest no-bid contracts -- worth $2.4 billion -- to help coordinate and
rebuild a large part of Iraq's infrastructure. But the company's reconstruction
failures range from shoddy school repairs to failing to finish a large hospital
in Basra on time and within budget.
Recall that USAID chief Andrew Natsios originally touted the reconstruction
as a Middle Eastern "Marshall Plan." Natsios should have known that
all would not go smoothly with Bechtel in the lead: Prior to joining the Bush
administration, he was chief executive of the Massachusetts Turnpike Authority,
where he oversaw the Big Dig -- whose costs exploded from $2.6 billion to $14.6
billion under Bechtel's lead.
In July, the company's reputation for getting things done unexpectedly plummeted
like a 12-ton slab of concrete when Stuart Bowen, the special inspector general
for Iraq Reconstruction (SIGIR), released an audit of the Basra Children's Hospital
Project, which was $70 million to $90 million over budget, and a year and half
behind schedule. Bechtel's contract to coordinate the project was immediately
Now that the money is running out, American officials are beginning to blame
Iraqis for mismanaging their own infrastructure. But as Bowen warns, contractors
like Bechtel, the CPA and other contracting agencies will only have themselves
to blame for failing to train Iraqi engineers to operate these facilities (esp.
water, sewage and electricity) when they leave.
No. 4: Aegis Defense Services
The General Accounting Office (GAO) estimates 48,000 private security and military
contractors (PMCs) are stationed in Iraq. The Pentagon's insistence on keeping
a lid on military force requirements (thereby avoiding the need for a draft)
is one reason for that astronomical growth, which has boosted the fortunes of
the "corporate warriors" so much that observers project the industry
will be a $200 billion per year business by 2010.
Yet the introduction of PMCs has put "both the military and security providers
at a greater risk for injury," the General Accounting Office says, because
PMCs fall outside the chain of command and do not operate under the Code of
George Washington University professor Deborah Avant, author of Market for
Force and an expert on the industry, says that while established PMCs may act
professionally, the government's willingness to contract with a few cowboy companies
like Aegis -- a U.K.-based firm whose infamous founder and CEO Tim Spicer was
implicated for breaking an arms embargo in Sierra Leone -- only reinforces the
fear that U.S. foreign policy is being outsourced to corporate "mercenaries."
An industry insider told Avant that the $293 million contract was given despite
the fact that American competitors had submitted lower bids, suggesting the
government wanted to hire the foreign company to shield both sides of the transaction
from accountability for any "dirty tricks."
Industry critics, including Rep. Jan Schakowsky, D-Ill., say that, at a minimum,
Spicer's contract suggests that government agencies have failed to conduct adequate
background checks. While it's hard to say how often PMCs have committed human
rights violations in Iraq, the Charlotte News-Observer reported in March that
security contractors regularly shoot into civilian cars. The problem was largely
ignored until a "trophy video" of security guards firing with automatic
rifles at civilian cars was posted on a web site traced back to Aegis.
Although the Army's Criminal Investigation Division says no charges will be
filed against Aegis or its employees, critics say that only proves how unaccountable
contractors are under current laws. Since the war on terror began, just one
civilian, CIA contract interrogator David A. Passaro, has been convicted for
felony assault associated with interrogation tactics.
Even The International Peace Operations Association, a fledgling industry trade
association that insists the industry abides by stringent codes of conduct has
rejected Aegis' bid to join its ranks.
No. 5: Custer Battles
In March, Custer Battles became the first Iraq occupation contractor to be
found guilty of fraud. A jury ordered the company to pay more than $10 million
in damages for 37 counts of fraud, including false billing. In August, however,
the judge in the case dismissed most of the charges on a technicality, ruling
that since the Coalition Provisional Authority was not strictly part of the
U.S. government, there is no basis for the claim under U.S. law. Custer Battles'
attorney Robert Rhoad says the company's owners were "ecstatic" about
the decision, adding that "there simply was no evidence of fraud or an
intent to defraud."
In fact the judge's ruling stated that the company had submitted "false
and fraudulently inflated invoices." He also allowed the jury's verdict
to stand against the company for retaliating against the whistleblowers that
originally brought the case under the False Claims Act, the law that allows
citizens to initiate a private right of action to recover money on taxpayers'
behalf. During the trial, retired Brig. Gen. Hugh Tant III testified that the
fraud "was probably the worst I've ever seen in my 30 years in the Army."
When Tant confronted Mike Battles, one of the company's owners, with the fact
that 34 of 36 trucks supplied by the firm didn't work, he responded: "You
asked for trucks and we complied with our contract and it is immaterial whether
the trucks were operational."
The Custer Battles case is being watched closely by the contracting community,
since many other fraud cases could hinge on the outcome. A backlog of 70 fraud
cases is pending against various contractors. Who they are is anyone's guess
(one case was recently settled against Halliburton subcontractor EGL for $4
million), since cases filed under the False Claims Act are sealed and prevented
from moving forward until the government decides whether or not it will join
the case. The means some companies accused of fraud have yet to be publicly
identified, which makes it difficult for federal contracting officers to suspend
or debar them from any new contracts. The U.S. Air Force moved to suspend Custer
Battles from new contracts in September 2004, after the alleged fraud was revealed.
In May, however, the Wall Street Journal reported that attempts were made to
bypass the suspension order by two former top Navy officials who had formed
a company that purchased the remnants of Custer Battles. Meanwhile, Alan Grayson,
the attorney who filed the Custer Battles case, says that because of orders
passed by the CPA, Iraqis have no chance of recovering any of the $20 billion
in Iraqi money used to pay U.S. contractors. The CPA effectively created a "free
fraud zone," Grayson says.
No. 6: General Dynamics
Most of the big defense contractors have done well as a result of the war on
terror. The five-year chart for Lockheed Martin, for instance, reveals that
the company's stock has doubled in value since 2001.
Yet The Washington Post reported in July that industry analysts agree that
of the large defense contractors, the one that has received the most direct
benefit from the war in Iraq is General Dynamics. Much of that has to do with
the fact that the company has focused its large combat systems business on supplying
the Army with everything from bullets to tank shells to Stryker vehicles, which
made their debut during the 2003 invasion.
In July, the Post reported that the company's profits have tripled since 9/11.
That should make some people happy, including David K Heebner, a former top
aide to Army Chief of Staff Eric Shinseki, who was hired by General Dynamics
in 1999, a year before the Stryker contract was sealed. According to Defense
watchdogs at the Project on Government Oversight (POGO), General Dynamics formally
announced it was hiring Heebner on November 20, 1999, just one month after Shinseki
announced a new "vision" to transform the Army by moving away from
tracked armored vehicles toward wheeled light-armored vehicles, and more than
a month prior to Heebner's official retirement date of Dec. 31, 1999.
Less than a year and a half later, Heebner was present for the rollout of the
first Stryker in Alabama, where he was recognized by Shinseki for his work in
the Army on the Stryker project.
Although the Pentagon's inspector general concluded from a preliminary investigation
that Heebner had properly recused himself from any involvement in projects involving
his prospective employer once he had been offered the job, critics say the current
ethics rules are too weak.
"It's clear that the Army was leaning toward handing a multibillion-dollar
contract to General Dynamics at the very time Heebner may have been in negotiations
with the company for a high-paying executive position," says Jeffrey St.
Clair, author of Grand Theft Pentagon, a sweeping review of war-profiteering
during the "war on terror."
Heebner's case is similar to Boeing's infamous courtship of Darlene Druyan,
the Air Force acquisition officer who was eventually sentenced to nine months
in prison and seven months in a halfway house for arranging a $250,000 a year
job for herself on the other side of the revolving door while negotiating contracts
for the Air Force that were favorable to Boeing.
This March, Heebner reported owning 33,500 shares in the company, worth over
$ 4 million, along with 21,050 options.
Not everyone has been happy with the outcome of the Stryker contract. Tom Christie,
the Pentagon's director of operational testing and evaluation, sent a classified
letter to Donald Rumsfeld before it was deployed in Iraq, warning that the $3
million vehicle was not ready for heavy fire. Meanwhile, the GAO warned of serious
deficiencies in vehicle training provided, a concern that turned serious when
soldiers accidentally drove the Stryker into the Tigris rivers. Despite public
praise from top Army officials, an internal Army report leaked to the Post in
March 2005 revealed that the vehicles deployed in Iraq have been plagued with
inoperable gear and maintenance problems that are "getting worse not better."
Perhaps as insurance against any flap, General Dynamics has added former Attorney
General John Ashcroft to its stable of high-powered lobbyists. Working the account
are Juleanna Glover Weiss, Vice President Dick Cheney's former press secretary,
Lori Day Sharp, Ashcroft's former assistant, and Willie Gaynor, a former Commerce
Department official who also worked for the 2004 Bush-Cheney reelection campaign.
No. 7: Nour USA Ltd.
Incorporated shortly after the war began, Nour has received $400 million in
Iraq contracts, including an $80 million contract to provide oil pipeline security
that critics say came through the assistance of Ahmed Chalabi, Iraq's No. 1
opportunist, who was influential in dragging the United States into the current
quagmire with misleading assertions about WMDs. Chalabi has denied reports that
he received a $2 million finder's fee, but other bidders on the contract point
out that Nour had no prior related experience and that its bid on the oil security
contract was too low to be credible. Another company consultant who hasn't denied
getting paid to help out is William Cohen, the former defense secretary under
President Clinton. Many Iraqis now believe that Chalabi is America's hand-picked
choice to rule Iraq, despite being a wanted fugitive from justice in Jordan
and despite being accused of passing classified information along to Iran. Iyad
Allawi, a potential rival for power in Iraq, has publicly criticized Chalabi
for creating contracts for work that he says should be the responsibility of
No. 8, No. 9 and No. 10: Chevron, ExxonMobil and the Petro-imperialists
Three years into the occupation, after an evolving series of deft legal maneuvers
and manipulative political appointments, the oil giants' takeover of Iraq's
oil is nearly complete.
A key milestone in the process occurred in September 2004, when U.S.-appointed
Interim Prime Minister Iyad Allawi preempted Iraq's January 2005 elections (and
the subsequent drafting of the Constitution) by writing guidelines intended
to form the basis of a new petroleum law. Allawi's policy would effectively
exclude the government from any future involvement in oil production, while
promising to privatize the Iraqi National Oil Co. Although Allawi is no longer
in power, his plans heavily influenced future thinking on oil policy.
Helping the process move along are the economic hit men at BearingPoint, the
consultants whose latest contract calls for "private-sector involvement
in strategic sectors, including privatization, asset sales, concessions, leases
and management contracts, especially those in the oil and supporting industries."
For their part, the oil industry giants have kept a relatively low profile
throughout the process, lending just a few senior statesmen to the CPA, including
Philip Carroll (Shell U.S., Fluor), Rob McKee (ConocoPhillips and Halliburton)
and Norm Szydlowski (ChevronTexaco), the CPA's liaison to the fledgling Iraqi
Oil Ministry. Greg Muttitt of U.K. nonprofit Platform says Chevron, Shell and
ConocoPhillips are among the most ambitious of all the major oil companies in
Iraq. Shell and Chevron have already signed agreements with the Iraqi government
and begun to train Iraqi staff and conduct studies -- arrangements that give
the companies vital access to Oil Ministry officials and geological data.
Although Iraqi Oil Minister Hussain al-Shahristani said in August that the
final competition for developing Iraq's oil fields will be wide open, the preliminary
arrangements will give the oil giants a distinct advantage when it comes time
to bid. The relative level of interest by the big oil companies depends on their
appetite for risk, and their need for reserves. Shell, for example, has performed
worse than most of its peers in finding new reserves in recent years -- a fact
underscored by a 2004 scandal in which the company was caught lying to its investors.
At this point the key challenge to multinationals is whether they can convince
the Iraqi parliament to pass a new petroleum law by the end of this year.
A key provision in the new law is a commitment to using production sharing
agreements (PSAs), which will lock the government into a long-term commitment
(up to 50 years) to sharing oil revenues, and restrict its right to introduce
any new laws that might affect the companies' profitability. Greg Muttitt of
Platform says the PSAs are designed to favor private companies at the expense
of exporting governments, which is why none of the top oil producing countries
in the Middle East use them. Under the new petroleum law, all new fields and
some existing fields would be opened up to private companies through the use
of PSAs. Since less than 20 of Iraq's 80 known oil fields have already been
developed, if Iraq's government commits to signing the PSAs, it could cost the
country up to nearly $200 billion in lost revenues according to Muttitt, lead
researcher for "Crude Designs: the Rip-Off of Iraq's Oil Wealth."
Meanwhile, in a kind of pincer movement, the parliament has begun to feel pressured
from the IMF to adopt the new oil law by the end of the year as part of "conditionalities"
imposed under a new debt relief agreement. Of course pressuring a country as
volatile as Iraq to agree to any kind of arrangement without first allowing
for legitimate parliamentary debate is fraught with peril. It is a risky way
to nurture democracy in a country that already appears to be entering into a
"If misjudged -- either by denying a fair share to the regions in which
oil is located, or by giving regions too much autonomy at the expense of national
cohesion -- these oil decisions could fracture, and ultimately break apart,
the country," Muttitt suggests.
Charlie Cray is director of the Center for Corporate Policy
in Washington, D.C.
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