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Head of Firm Paid to Track Iraq Spending Investigated    [

    Embassy Builder Linked to Kickbacks
    By Pete Yost
    The Associated Press

    Thursday 20 September 2007

    Washington - The Kuwaiti company building the U.S. embassy in Baghdad has been accused of agreeing to pay $200,000 in kickbacks in return for two unrelated Army contracts in Iraq.

    The scheme, outlined in a now-sealed court document obtained by The Associated Press, allegedly involved First Kuwaiti General Trading & Contracting and a manager for Kellogg Brown & Root Inc. or KBR, a firm hired to handle logistics for the military in Iraq and Afghanistan.

    The document summarizes grand jury testimony from the former KBR manager, Anthony J. Martin, who pleaded guilty in July to taking kickbacks in 2003.

    Although the government has tried to keep First Kuwaiti's name out of public records related to Martin's case, details from his grand jury testimony were found by a defense lawyer, J. Scott Arthur of Orland Park, Ill., who included a summary in a six-page document filed last Friday in an unrelated federal court case in Rock Island, Ill. The AP downloaded a copy of the document from the court's Web site shortly before a judge ordered the document sealed and removed from the public record.

    According to the court document, Martin testified to a federal grand jury that he engaged in the kickback scheme with Lebanese businessman Wadih Al Absi, who controls First Kuwaiti General Trading & Contracting. The company is building the $592 million Baghdad embassy, the largest in the world with working space for about 1,000 people.

    In a statement, First Kuwaiti said Martin's allegations are "without merit."

    Questions about the company come amid growing concerns about contractors in Iraq and Afghanistan, and claims that the State Department's inspector general has been reluctant to help investigations into alleged fraud.

    First Kuwaiti has done other work for the government, including jobs for the Army Corps of Engineers and the U.S. Marine Corps, according to the company's Web site. The company already is under scrutiny by Congress for its labor practices, and a State Department e-mail disclosed this week says the Justice Department is investigating First Kuwaiti for alleged contract fraud on the embassy project.

    The document filed by defense attorney Arthur of Orland Park, Ill., seeks more information from the government about the alleged conspiracy between Martin and First Kuwaiti. Arthur contends the government is improperly withholding evidence about Martin and his allegedly criminal relationship with the company through Al Absi.

    In the court filing, Arthur says that while preparing for his client's upcoming trial, he discovered the allegations about First Kuwaiti and Al Absi agreeing to pay kickbacks to Martin. Arthur said federal prosecutors accidentally disclosed Al Absi's name in heavily edited grand jury transcripts. Arthur now is demanding that prosecutors turn over all information about the company and Al Absi.

    "Tony Martin's plea agreement, together with the inadvertent identification of Wadih and First Kuwaiti as coconspirators in an ongoing scheme to defraud the United States government entitles the defendant to know the exact scope of said conspiracy," Arthur's court filing stated.

    Martin said in court documents that he agreed to receive kickbacks before awarding a $4.6 million contract to First Kuwaiti to supply 50 semi-tractors and 50 refrigeration trailers for six months. A month later, Martin awarded First Kuwaiti an additional $8.8 million subcontract to supply 150 semi-tractors for six months.

    For his effort, Martin said, the company agreed to pay him $200,000. After he received an initial $10,000, he took a trip back to the United States. When he returned, he says he told the company he would not take any additional money.

    The court filing says Martin's "criminal benefactor appears to have completely escaped responsibility for his misconduct and instead continues to profit from a cozy relationship with the government."

    Martin was allowed to plead guilty to a single felony charge in exchange for his cooperation with prosecutors. The government plans to have him testify as a prosecution witness in a military contracting case against Arthur's client, a former KBR procurement manager, Jeff Alex Mazon.

    First Kuwaiti strongly defended its work on the Baghdad embassy, saying it is particularly proud of completing the job within budget and on time "while constructing high-quality buildings - an achievement competitors didn't think possible."

    First Kuwaiti said all its contracts with the U.S. government have been awarded appropriately, that it has consistently provided more value than requested in support of the U.S. war effort in Iraq and elsewhere under extraordinarily difficult conditions.

    Last January, the Justice Department asked the State Department inspector general to help look into allegations of misconduct by First Kuwaiti on the Baghdad embassy, according to a letter this week by Rep. Henry Waxman, D-Calif., chairman of the House Oversight and Government Reform Committee.

    In July, contractors told Waxman's committee that First Kuwaiti used forced labor to build the embassy, which is to be completed this month. First Kuwaiti this week pointed to an investigation by Philippines officials, who have concluded that none of their citizens on the embassy project was forced to work.

    Waxman's committee is investigating State Department Inspector General Howard Krongard for allegedly preventing his investigators from cooperating with the Justice Department probe. Krongard says he has tried to help other government agencies, noting that he made one of his best investigators available to federal prosecutors in North Carolina in a probe of alleged weapons smuggling into Iraq by a contractor.

    An internal State Department e-mail disclosed by Waxman says the allegations regarding First Kuwaiti "are basically contract fraud and public corruption."

    Halliburton, where Vice President Dick Cheney was CEO until 2000, has been selling off its interest in KBR for more than a year and completed the process five months ago. Four former KBR procurement employees have been charged or pleaded guilty in contracting fraud cases involving Army contracts. The Army awarded the multibillion-dollar logistical support to KBR after the Sept. 11 attacks.

    KBR spokeswoman Heather Browne said the company brought two of the matters to the attention of federal investigators and the company "in no way condones or tolerates unethical behavior. We have fully cooperated with the Department of Justice."

    The Justice Department says 29 people have been charged or convicted in procurement fraud cases involving Iraq, Afghanistan or Kuwait.

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    On the Net:

    First Kuwaiti General Trading & Contracting:

    KBR:

    www.firstkuwaiti.com/

    www.kbr.com/

 

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    Head of Firm Paid to Track Iraq Spending Investigated
    By Matt Kelley
    USA TODAY

    Thursday 20 September 2007

    Washington - Robert Raggio quit his $97,000-per-year government job as a financial manager for the Iraq reconstruction effort in September 2005. He said in his resignation form that he wanted to "pursue other opportunities."

    That same day, Raggio's newly formed company, Reviewer Management International (RMI), received a U.S. contract to audit $7.3 billion in Iraqi reconstruction spending, according to Army documents obtained by USA TODAY under the Freedom of Information Act.

    The $1.5 million contract was designed to help investigators fight fraud in Iraq. Now, Raggio is under investigation.

    Before he quit his government position, Raggio wrote the requirements for the federal contract at the same time he negotiated to obtain it for RMI, according to the documents. The Army's Suspension and Debarment Office suspended Raggio and his consulting firm from getting new government contracts in August amid an ongoing investigation into whether he violated conflict of interest laws.

    The laws, which bar government officials from benefiting from their official actions, carry penalties of up to five years in prison. Civil penalties can include fines equal to the amount of the contract, Army documents say.

    The suspension and the investigation have not been made public before.

    Army contracting officials began looking into the case after the government's Iraq reconstruction watchdog, Stuart Bowen, passed along an anonymous complaint his office received about Raggio, documents show.

    Raggio did not respond to repeated telephone messages left at the phone number he listed as RMI's office, which public records show is his brother's home in suburban New York.

    RMI was hired to create a database to track the $7.3 billion in Iraqi government money U.S. officials doled out - much of it in $100 bills shipped to the country on pallets - after the 2003 invasion. Federal auditors had uncovered a bribery scheme involving more than $8.6 million from the Development Fund for Iraq and wanted to determine if there was more corruption.

    But the Army failed to properly oversee Raggio's contract and after nearly a year of work he delivered a database that was incomplete, unreliable and nearly unusable, according to a January report from Bowen, the Special Inspector General for Iraq Reconstruction. The database couldn't meet one of its primary goals: allowing investigators to connect payments to the U.S. officials who made them, Bowen's report said.

    RMI told investigators its database included more than 300,000 entries, but Bowen's report described it as "only a collection of records that were not audited or effectively connected to one another."

    Army contracting officials didn't monitor the contract or ensure RMI filed required status reports every two months, Bowen's report said. The report faulted the contract's initial requirements, which the Army documents reveal Raggio wrote.

    Raggio had incorporated RMI on Aug. 5, 2005 - the day after the Joint Contracting Command-Iraq in Baghdad solicited proposals for auditing the Development Fund for Iraq. At the time, Raggio was the financial manager of the Accelerated Iraq Reconstruction Program, one of the fund's main components, the Army documents say.

    RMI was given the contract after the government's aborted attempt to seek competitive bids, Air Force Lt. Col. Joe Mazur of the Joint Contracting Command-Iraq said in an interview in April.

    Mazur said an unsigned memo in the contract file showed the competitive bidding process for the contract was cancelled because the process had been "compromised," meaning one or more of the bidders had inside information about the contract. Mazur said another unsigned document indicated RMI got the contract because it was the only firm able to do the work in time to meet a deadline at the end of 2005, which was later extended to the end of 2006.