Pentagon Deputy's Probes in Iraq Weren't Authorized, Officials Say
By T. Christian Miller
LATimes - July 7, 2004 -
WASHINGTON A senior Defense Department official conducted
unauthorized investigations of Iraq reconstruction efforts and used
their results to push for lucrative contracts for friends and their
business clients, according to current and former Pentagon officials
and documents.
John A. "Jack" Shaw, deputy undersecretary for international technology
security, represented himself as an agent of the Pentagon's inspector
general in conducting the investigations, sources said.
In one
case, Shaw disguised himself as an employee of Halliburton Co. and
gained access to a port in southern Iraq after he was denied entry by
the U.S. military, the sources said.
In that investigation,
Shaw found problems with operations at the port of Umm al Qasr,
Pentagon sources said. In another, he criticized a competition
sponsored by the U.S.-led Coalition Provisional Authority to award
cellphone licenses in Iraq.
In both cases, Shaw urged
government officials to fix the alleged problems by directing
multimillion-dollar contracts to companies linked to his friends,
without competitive bidding, according to the Pentagon sources and
documents. In the case of the port, the clients of a lobbyist friend
won a no-bid contract for dredging.
Shaw's actions are the
latest to raise concerns that senior Republican officials working in
Washington and Iraq have used the rebuilding effort in Iraq to reward
associates and political allies. One of Shaw's close friends, the
former top U.S. transportation official in Iraq, is under investigation
for his role in promoting an Iraqi national airline with a company
linked to the Saddam Hussein regime.
The inspector general's
office which investigates waste, fraud and abuse at the Pentagon
has turned over its inquiry into Shaw's actions to the FBI to avoid the
appearance of a conflict of interest, the sources said.
The
FBI also is looking into allegations, first reported by the Los Angeles
Times, that Shaw tried to steer a contract to create an emergency phone
network for Iraq's security forces to a company whose board of
directors included a friend and one of Shaw's employees.
Shaw,
who held top positions in the Reagan and George H.W. Bush
administrations, declined to comment for this article. In previous
interviews, he has denied any financial links to the companies involved
or receiving any promises of future employment or other benefit.
Shaw justified his investigations under a special agreement with the
Pentagon inspector general, Joseph E. Schmitz. The August agreement
created a temporary office headed by Shaw called the International
Armament and Technology Trade Directorate. Its mission was to cooperate
with the inspector general on issues related to the transfer of
sensitive U.S. technologies or arms to foreign countries.
Shaw
frequently cited the agreement in his dealings with reporters and the
military, telling them it allowed him to "wear an IG hat" to conduct
investigations. In a recent letter to the inspector general, he said
the agreement gave him "broad investigatory authority."
That
contention is the subject of dispute, however. The agreement states
that Shaw "may recommend" that the inspector general initiate audits,
evaluations, investigations and inquiries, but it does not appear to
give him investigative powers.
"Jack Shaw was never authorized
to do any kind of investigation or auditing on his own," said one
source close to Schmitz. "The agreement was not for that. He's trying
to cram more authority into that agreement than it gives him."
Schmitz canceled the agreement two weeks after Shaw was first accused
of tampering with the emergency phone network contract. Schmitz
declined to comment, but in his letter canceling the arrangement, he
praised Shaw for "outstanding leadership."
Shaw used the
agreement to win permission to visit Iraq last fall. In an Oct. 28
letter to Army Gen. John P. Abizaid, head of the U.S. Central Command,
Shaw said he wanted to "investigate those who threatened the national
security of the United States through the transfer of advanced
technologies to Iraq."
Specifically, Shaw said he planned to
identify countries that had smuggled contraband weapons into Iraq and
catalog existing conventional weapons stockpiles.
Although he did not mention it in the letter, Shaw also was interested in investigating operations at the port of Umm al Qasr.
Last summer, Shaw was visited by Richard E. Powers, a longtime friend
and lobbyist. Powers was representing SSA Marine, a Seattle-based port
operations company that had won a controversial limited-bid contract in
the early days of the war to manage the troubled port.
He also
was representing a small business owned by Alaskan natives called Nana
Pacific. Under federal regulations, small companies owned by Alaskan
Native Americans can bypass the normal process and receive unlimited,
no-bid contracts.
Powers suggested there were serious problems
with dredging at the port that could be quickly remedied by having a
no-bid contract awarded to Nana, which then could subcontract to SSA
Marine, sources said.
Powers did not respond to requests for
comment. Public lobbying records show that Nana and SSA Marine paid
Powers $80,000 last year for his work.
In December, Shaw flew
to Kuwait to inspect the port. The military refused to allow him into
the facility, however, because of the danger involved, Pentagon sources
said.
Shaw and several staffers then went to the port dressed
like employees of KBR, the Halliburton subsidiary that has a contract
to supply the military with food and other items.
In a KBR hat,
Shaw and his staff spent less than an hour at the port, taking pictures
and talking with soldiers, current and former Pentagon sources said.
The group documented well-known problems there, including the presence
of unexploded mines.
A Defense official in Shaw's office
acknowledged that they had entered the port despite the military's
concerns. He described the disguise as an attempt to conceal Shaw's
status, for safety reasons.
He said the military's negative reaction to the proposed visit convinced him that there was serious trouble at the port.
"This Army two-star said, 'We won't let you in the country.' I said,
there's something there," said the Defense official, who did not want
to be identified. "Everybody had declared victory at the port
. We
looked at the port and there were still tremendous problems."
When coalition officials learned that Shaw was at the port, they made a
frantic effort to locate him, but didn't reach him until after his
return to Kuwait.
"I get this call from [the U.S. military
command in Iraq] that said: 'We have an undersecretary of Defense
roaming the countryside. We need to locate and secure him,' " recalled
a former CPA official. "He's in the country illegally, but we can't
arrest him, so we let him finish the tour."
Shaw spent about a
week in Iraq, meeting with top U.S. and Iraqi officials. He told
several officials that the trip to Umm al Qasr had convinced him that
work at the port had to be accelerated. He then suggested that the work
could be expedited by awarding the contract to Nana, several former CPA
officials said.
"The only time I heard Nana's name was when
[Shaw and his team] were in Baghdad," said a former CPA official
involved in the ports. "The notion was that this might well be a
vehicle where you could in fact get things moving quickly that needed
to be done, such as dredging and so forth."
Soon after Shaw's
visit, the CPA granted Nana a construction and communications contract
worth up to $70 million. Nana then subcontracted $3.5 million in work
to SSA Marine, which recently completed the dredging.
Nana also is linked to Shaw's other investigation.
Late last year, Shaw began looking into the award of cellphone licenses
in Iraq after receiving complaints from a longtime friend, Don
DeMarino, who had worked under Shaw at the Commerce Department.
DeMarino was a director of a consortium called Liberty Mobile, one of
the losing bidders in the contest that awarded the cellphone licenses,
potentially worth hundreds of millions of dollars, to three other firms.
Relying on information from DeMarino and Liberty Mobile's president,
Declan Ganley, Shaw cast doubt on the validity of the awards by leaking
to several media outlets information that he said showed corruption in
the process, said current and former Pentagon sources. He also provided
the evidence he had gathered to the inspector general.
In
December, the inspector general's office released a report saying that
no basis had been found for Shaw's accusations. The office referred
part of the complaint to the British government for further
investigation of two British CPA officials involved in the licensing
process, according to a copy of the report obtained by The Times.
British authorities exonerated the men. Later, Deputy Defense Secretary
Paul D. Wolfowitz wrote to the British ambassador clearing them.
"The British ambassador in the U.S. has received notification that no
British citizens are under investigation by the U.S." in the contract
matter, a British Embassy spokesman said.
Soon after Liberty
Mobile lost the bidding war last fall, Shaw began pushing Nana to win a
no-bid contract to build a communications system for the Iraqi police,
fire and security forces, according to officials with the now-dissolved
CPA and documents obtained by The Times. He then tried to change the
language of the contract to allow the creation of a cellphone network,
according to interviews and documents.
Nana planned to
subcontract the construction of the communications system to a company
called Guardian Net. Guardian Net's board of directors was nearly
identical to that of Liberty Mobile. It included DeMarino, Ganley and
Julian Walker, who works for Shaw as a researcher, according to the
documents.
Ganley and DeMarino have acknowledged participating
in the attempt to win a cellphone license. Walker could not be reached
for comment.
When CPA officials reported their concerns about
the Guardian Net plan to Pentagon investigators, Shaw stepped up his
investigation of the role of the CPA officials in the licensing
process, Pentagon sources said.
Even after the Pentagon
canceled the agreement that Shaw had used to justify his probe, he
unilaterally continued the investigation, Pentagon sources said.
On May 11, Shaw delivered his report, which concluded that there was
"serious, credible evidence of criminal wrongdoing by U.S. government
employees pertaining to taking official acts in exchange for bribes."
He acknowledged that the report "directly conflicts" with the December
report by the inspector general, which he dismissed as "worthless."
Shaw's report, which The Times has reviewed, claims evidence of a
conspiracy to take over Iraq's cellphone service led by Nadhmi Auchi, a
British businessman who has been accused of links to Hussein and who
was convicted last year in a French court in an unrelated kickback
scheme. Auchi maintains his innocence and is appealing.
Auchi,
according to the report, paid bribes through a series of surrogates to
win the three cellphone licenses and gain control of Iraq's cellular
system.
A spokesman for Auchi denied Shaw's claims. He
acknowledged that Auchi has an indirect, minor stake in Orascom, one of
the cellphone operators. He denied any ownership interest in the other
phone companies.
Shaw's report relies mainly on newspaper
articles, rumors and secondhand conversations reported by the losing
bidders or anonymous sources and "the Arab street," which Shaw calls "a
reasonable sounding board for accepted truth."
In the
conclusion to his report, Shaw recommends that all the cellphone
licenses be canceled and that the contract be awarded to one of the
original bidders as long as the bidder uses a technology known as
CDMA, which Shaw describes as superior to other cellular technologies.
Shaw sent his report to the inspector general's office, which turned it
over for further investigation to the FBI. An FBI official confirmed
that the agency had received the report and had just begun looking into
the allegations of bribery.
"While some of the evidence in this
report is fragmentary, the dots are connected in convincing and
important ways," Shaw said in the report. "Below the deadly serious
efforts to restore security and legitimacy to Iraq lies a muted gold
rush mentality."
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