Nearly a year and a half after the incident, the Justice Department has sent a team to investigate a former Blackwater contractor for drunkenly gunning down a bodyguard to Iraqi Vice President Adil Abd-al-Mahdi on Christmas Eve, 2006.

To refresh your memory on this singularly ugly case: after the shooting, Blackwater and the State Department got together to hustle the contractor, Andrew Moonen, out of Iraq (when Blackwater CEO Erik Prince was asked about this, he replied, "It could easily be.").

Part of the effort to keep the thing under wraps was a payment to the victim's family. Emails showed that when U.S. Embassy officials suggested either $100,000 or $250,000, a State diplomatic-security official countered with $15,000. The figure needed to be lower, the diplomatic-security official contended, so Iraqis wouldn't "try to get killed to set up their family financially."

And they managed to keep the thing so quiet that Moonen soon went back to Iraq working for another contractor.

But now prosecutors have evidently determined that the law will allow them to charge Moonen. They say they'll reach a decision at the end of the summer. Don't confuse this case with the Nisour Square shooting -- the Justice Department is also investigating that incident, and a handful of contractors are reportedly still on the hook.

From the AP:

Blackwater Worldwide, the security contractor blamed by an angry Iraqi government for the shooting deaths of 17 civilians, is not expected to face criminal charges -- all but ensuring the company will keep its multimillion-dollar contract to protect U.S. diplomats.

Instead, the seven-month-old Justice Department investigation is focused on as few as three or four Blackwater guards who could be indicted in the Sept. 16 shootings, according to interviews with a half-dozen people close to the investigation.

So what does this mean? Well, for one thing, it would certainly seriously damage the company's prospects for government business -- especially its contracts in Iraq and Afghanistan -- if Blackwater were indicted. It also certainly wouldn't help the search for investors. But if a few bad apples get put to justice, well, prospects improve. Blackwater spokeswoman Anne Tyrrell tells the AP, "If it is determined that there are any individuals who need to be held accountable, we support that."

Earlier this week, ABC reported that the investment firm Cerberus Capital was in talks to buy Blackwater for around $200 million, but Cerberus, which had apparently been exploring the deal since the beginning of this year, got cold feet as soon as the news went public.

It turns out that it's part of a concerted push, The Times reports, to expand Blackwater's business because "whatever the outcome of the US presidential election Blackwater, run by Erik Prince, the Republican former Navy Seal, may find itself without friends in Washington." So there's an effort to prepare for the future, when all those federal investigations and scandals might actually affect the bottom line:

Blackwater has advertised in security industry journals repositioning itself as a peacekeeping force. The adverts show mothers feeding babies and Blackwater guards smiling as children play in a street. It has also set up a division called Greystone, which is seeking to win protection work from the UN, aid organisations and foreign companies.

A defence industry source said: "Theirs is nearly all US government work and if that goes they are in trouble."

(Here's more on Greystone from Mother Jones.)

It looks like the Pentagon is just in a lesson-learning mood lately. While they're busily reviewing whether the carefully-orchestrated use of military analysts was improper, the Army is reviewing whether it should have known better than to award a $300 million contract to supply arms to the Afghan security forces to a company run by a 22 year-old.

As The New York Times reports, the key lesson seems to be that if a contractor's price seems too good to be true, then it probably is.

Prepare to have your credulity tested.

Back in February, the AP broke the story that the White House had secretly modified a proposed rule to crack down on contract fraud. The rule, originally drafted by the Justice Department, was intended to force contractors to police themselves and report evidence of fraud or abuse. But the White House's version of the rule specifically exempted contractors working overseas on contracts that exceeded $5 million.

The Justice Department, which needs all the help it can get in busting corrupt contractors, was dismayed. But it made the major overseas contractors (like, say, Blackwater, KBR, CACI International, etc.), who had been opposing the rule, very happy.

When the AP asked why the White House had inserted the loophole, no answers were forthcoming. A spokeswoman from the Office of Management and Budget would only say that it was a "proposed rule," and that they were reviewing public comments.

And that was it. Over the ensuing months, members of Congress from both parties denounced the rule and vowed investigations. Even the Special Inspector General for Iraq Reconstruction publicly criticized the rule. But the White House otherwise stayed mum.

The first Congressional hearing was set for today. And the White House has let it be known that the loophole is gone -- and that it was all a big misunderstanding:

Reversing itself after months of criticism, the administration closed the loophole that was quietly slipped last year into a proposed Justice Department crackdown on government contract fraud....

Government policywriters said the original rule was drawn up quickly, and chided the Justice Department for not explicitly making sure that overseas contracts should be included in the crackdown. "It was only after publication of the proposed rule ... that DoJ and other respondents expressed concern about the overseas exemption," the draft states....

A Bush administration official on Monday called the loophole "a drafting error" that happened when policywriters merely cut and pasted a 20-year-old Defense Department regulation into the contracting crackdown.

Oh well. Mistakes do happen.

Rep. Peter Welch (D-VT), who had called for the hearing, seems not to take the White House's story at face value: "This investigation proves why oversight works.... The question is why it required a congressional investigation to prevent the Bush administration from giving overseas contractors a free pass to defraud taxpayers."

For those of you waiting to hear from the senior executives behind AEY, Inc., you'll have to wait a little longer. The House oversight committee, which had set a hearing for 22 year-old AEY President Efraim Diveroli, his 25 year-old VP (and masseur) David Packouz, and the company's general manager, also 25, to testify, has indefinitely postponed the hearing.

Packouz's lawyer had informed the committee that his client would be pleading the Fifth unless he received immunity to testify -- something which seems unlikely. So that likely has something to do with the postponement. Diveroli and his boyz are under federal investigation for allegedly lying about the source of the ammunition he provided to the Afghan army.

Why is this man smiling? From the AP:

The State Department says it will renew Blackwater USA's license to protect diplomats in Baghdad for one year, but a final decision about whether the private security company will keep the job is pending.

A top State Department official said that because the FBI is still investigating last year's fatal shooting of Baghdad civilians, there is no reason not to renew the contract when it comes due in May. Blackwater has a five-year deal to provide personal protection for diplomats, which is reauthorized each year.

Iraqis were outraged over a Sept. 16 shooting in which 17 civilians were killed in a Baghdad square. Blackwater said its guards were protecting diplomats under attack before they opened fire, but Iraqi investigators concluded the shooting was unprovoked.

Since the "top State Department official" seems so blithe about the FBI investigation, it's worth recalling that Justice Department faces probably insurmountable obstacles in bringing a prosecution based on the Nisour Square shootings. That's despite the fact that the FBI determined that the guards had indeed opened fire without provocation.

Update: More from Reuters:

"I have requested and received approval to have task order six -- which Blackwater has to provide personal protective services in Baghdad -- renewed ... for one year," the head of diplomatic security, Gregory Starr, told reporters....

Asked whether the Blackwater Baghdad deal could be scrapped if the FBI investigation found wrongdoing, Starr said: "We can terminate contracts at the convenience of the government if we have to."

"I am not going to prejudge what the FBI is going to find in their investigation. I think really, it is complex. I think that the U.S. government needs protective services," he said.

"Essentially I think they do a very good job. The September 16th incident was a tragedy. It has to be investigated carefully," he added.

House oversight committee Chair Henry Waxman (D-CA) wants the twenty-something senior executives of AEY, Inc. to appear for a Congressional hearing. You know, just to hang out and chat about how they managed to bag a $300 million contract to provide munitions to Afghan forces, and then allegedly lied about where they were coming from.

But they're not going to come easy, The New York Times reports:

Marc D. Seitles, the lawyer who represents David M. Packouz, the licensed massage therapist who is AEY’s former vice president, said he had sent a letter to Congress saying Mr. Packouz would speak publicly only if he was granted immunity from prosecution.

Mr. Packouz, 25, left AEY last spring and had no contact with the company since, Mr. Seitles said. Without immunity, he said, “I cannot allow my client to testify in this matter, and if he is subpoenaed he will invoke the Fifth Amendment.”

AEY and particularly its president Efraim Diveroli do have a lot to worry about. Federal investigators are digging to see if Diveroli committed a crime by promising in a contract to deliver Hungarian ammo, when he was in fact delivering forty year-old Chinese ammo (itself prohibited). And Government Executive reports today that AEY might have also misrepresented itself as a disadvantaged business, allowing it to pick up much more business.

It seems highly unlikely that Congress would even consider immunity for either Diveroli or Packouz, so either Waxman's planned hearing later this month will be deferred, or the two will spend a lot of time respectfully pleading the Fifth.

Oh, man. Not cool. Not only has the Army suspended any further contracts for AEY (the shady contractor run by 22 year-old Efraim Diveroli), but the U.S. attorney in Miami along with Department of Justice prosecutors in Washington have picked up the case, The Miami Herald reports.

The probe launched as a result of an audit by the Army's Procurement Fraud Branch (it's unclear whether the probe launched as a result of The New York Times' inquiries), where officials determined that Diveroli appeared to have lied when he claimed that the ammunition he was providing came from Hungary when it in fact was made in China -- which he would have done because the Army prohibits using Chinese ammo.

If Diveroli did lie to the government, that would be a crime. You can read the Army's audit letter, in addition to the letter to Diveroli suspending his ability to win any further contracts, here.

The Herald also uncovered a second arrest for Diveroli: one for drunk driving earlier this month. That's the mugshot above. The earlier one, as the Times reported in the initial story, was for beating up a parking valet and getting busted with a fake ID (ironically just after his 21st birthday). The mugshot for that one is to the right. I guess sometimes the pressures of being a big time defense contractor are just too much.

Update: A number of stories have featured Diveroli's sadly out of date MySpace page. How a multi-million dollar contractor only has one friend I cannot understand.

For the curious, Radar was also able to get in touch with AEY's 25 year-old masseur VP (or someone claiming to be him, at least) through his MySpace page.

Dude! It's time to testify before Congress!

House sleuth Henry Waxman (D-CA) read the news today, oh boy. And he wants 22 year-old AEY President Efraim Diveroli, his 25 year-old VP (and masseur) David Packouz, and the company's general manager, also 25, to testify before Congress about how they managed to get a $300 million U.S. contract to supply (sometimes forty year-old) ammunition to the Afghan Army, among other contracts. Waxman also wants officials from the Department of Defense and Department of State to appear as well. He's set the date of April 17th.

Update: Here's a copy of the letter that the Army sent AEY on Tuesday, suspending any further contracts. The attached letter also runs through all of the contracts AEY won since 2004.

Courtesy of The New York Times, I'm proud to present to you a brand new member of the Bush Administration War Profiteer Hall of Shame: 22 year-old Efraim Diveroli, whose company AEY has been awarded approximately $300 million in contracts by the Pentagon.

How does a 22 year-old get a multi-million dollar defense contract? you ask. “AEY’s proposal represented the best value to the government," the Army tells the Times. (Never mind that AEY was headed by a guy who'd been busted by the police for carrying a fake ID.)

AEY's fattest contract came in January of last year, when a Pentagon contract made AEY, "which operates out of an unmarked office in Miami Beach,... the main supplier of munitions to Afghanistan’s army and police forces." AEY's VP is 25 and a licensed masseur. AEY also had a $5.7 million contract for rifles for Iraqi forces, among others.

As the Times found out, AEY fulfilled that contract by dealing with a variety of shady arms dealers (one Czech, one Swiss) to get their hands on ammo stockpiles in the old Eastern bloc. And as far as ensuring the quality of the munitions? Here's how it went in Albania:

Albania offered to sell tens of millions of cartridges manufactured as long ago as 1950. For tests, a 25-year-old AEY representative was given 1,000 cartridges to fire, according to Ylli Pinari, the director of the arms export agency at the time of the sale.

No ballistic performance was recorded, he said. The rounds were fired by hand.

Not surprisingly, the Afghan army has been unhappy with the product. AEY shipped the decades-old ammo in cardboard boxes -- apparently to save money on shipping charges. And the Times reports that the boxes arrived in Afghanistan spilling out of the boxes, "revealing ammunition manufactured in China in 1966." It's illegal to deal in Chinese arms.

In response to the Times' questions, the Army has suspended AEY "from any future federal contracting, citing shipments of Chinese ammunition and claiming that Mr. Diveroli misled the Army by saying the munitions were Hungarian."

But surely the most memorable details of the story (which is well worth reading in full) have to do with a kid trying to wiggle out of legal trouble on the basis of his work fighting terror:

By [2005, when Diveroli became president of the company at the age of 19, taking over from his father], pressures were emerging in Efraim Diveroli’s life. In November 2005, a young woman sought an order of protection from him in the domestic violence division of Dade County Circuit Court….

Mr. Diveroli sought court delays on national security grounds. “I am the President and only official employee of my business,” he wrote to the judge on Dec. 8, 2005. “My business is currently of great importance to the country as I am licensed Defense Contractor to the United States Government in the fight against terrorism in Iraq and I am doing my very best to provide our troops with all their equipment needs on pending critical contracts.”…

On Dec. 21, 2006, the police were called back to the condominium. Mr. Diveroli and AEY’s vice president, David M. Packouz, had just been in a fight with the valet parking attendant.

The fight began, the police said, after the attendant refused to give Mr. Diveroli his keys and Mr. Diveroli entered the garage to get them himself. A witness said Mr. Diveroli and Mr. Packouz both beat the man; police photographs showed bruises and scrapes on his face and back.

When the police searched Mr. Diveroli, they found he had a forged driver’s license that added four years to his age and made him appear old enough to buy alcohol as a minor. His birthday had been the day before.

“I don’t even need that any more,” he told the police, the report said. “I’m 21 years old.”

Diveroli would have been prohibited from dealing in contracts if he'd been convicted of possession of a forged document, which is a felony, the Times reports, but "to avoid a conviction on his record, Mr. Diveroli entered a six-month diversion program for first offenders in May 2007 that spared him from standing trial."

Unfortunately, it seems that AEY is unwinding with all this public attention:

[I]n Miami Beach, even before the suspension, AEY had lost staff members. Michael Diveroli, the company’s founder, told a reporter that he no longer had any relationship with the company. Mr. Packouz, who was AEY’s vice president, and Levi Meyer, 25, who was briefly listed as general manager, had left the company, too.

Mr. Meyer offered a statement: “I’m not involved in that mess anymore.”

So it seems pretty clear that Diveroli is a shoo-in for the Hall of Shame. But the question becomes whether he's in competition to be the champ. Is he competition for Erik Prince, Brent Wilkes?

From The Boston Globe:

When the American team arrived in Iraq in the summer of 2003 to repair the Qarmat Ali water injection plant, supervisors told them the orange, sand-like substance strewn around the looted facility was just a "mild irritant," workers recall....

But the chemical turned out to be sodium dichromate, a substance so dangerous that even limited exposure greatly increases the risk of cancer. Soon, many of the 22 Americans and 100-plus Iraqis began to complain of nosebleeds, ulcers, and shortness of breath....

Now, nine Americans are accusing KBR, then a subsidiary of the oil conglomerate Halliburton, of knowingly exposing them to the deadly substance and failing to provide them with the protective equipment needed to keep them safe.

But the workers, like all employees injured in Iraq, face an uphill struggle in their quest for damages. Under a World War II-era federal workers compensation law, employers are generally protected from employee lawsuits, except in rare cases in which it can be proven that the company intentionally harmed its employees or committed outright fraud.

KBR is citing the law, called the Defense Base Act, as grounds to reject the workers' request for damages.

But the company's own actions have undermined its case: To avoid payroll taxes for its American employees, KBR hired the workers through two subsidiaries registered in the Cayman Islands, part of a strategy that has allowed KBR to dodge hundreds of millions of dollars in Social Security and Medicare taxes.

That gives the workers' lawyer, Mike Doyle of Houston, a chance to argue to an arbitration board that KBR is not an employer protected by federal law, but a third-party that can be sued.

The whole horrid story is worth a read.

It was a pretty neat trick. Because Blackwater classified its guards in Iraq as independent contractors, the company saved possibly "tens of millions" of dollars in taxes.

A number of senators called for investigations last October. But House oversight committee Chairman Henry Waxman (D-CA) says that his staff have been digging and now it's clear: Blackwater is wrong when it says that its guards fit the description of contractors and not employees, and that dodge had much bigger benefits than a simple tax dodge.

Because Blackwater had many fewer "employees," for example, it made out with a number of contracts reserved for so-called small businesses: "at least 100 small business set-aside contracts. worth over $144 million, that have been awarded to Blackwater since 2000."

Waxman wants the IRS, the Small Business Administration, and the Department of Labor to investigate. Blackwater is already the focus of its share of criminal investigations, but it may be that these, if they were to get off the ground, would do the most damage to the company's bottom line.

Viktor Bout, the famed Russian arms smuggler, supplier to anybody anywhere in the world who could pay the right price (such as, say, Liberia's Charles Taylor, FARC in Colombia, and the U.S. military), has been nabbed in Thailand. From the AP:

One of the world's most notorious arms dealers was arrested Thursday in Bangkok on allegations that he supplied Colombian rebels with arms and explosives, Thai police said.

Russian Viktor Bout was arrested in his hotel room in the capital, Bangkok, on a warrant issued by a Thai court, said Police Lt. Gen. Pongpat Chayapan, head of the Crime Suppression Bureau. The warrant stemmed from an earlier one issued by the U.S. Drug Enforcement Administration, he said.

A U.S. Embassy spokesman "congratulated" Thai police for the arrest but could not provide details about the role U.S. officials played in it.

Funny, that last bit, since journalists Douglas Farah and Stephen Braun reported in their book on Bout, "Merchant of Death: Money, Guns, Plans, and the Man Who Makes War Possible," that both the U.S. military and defense contractors KBR and Dyncorp had used Bout's services in the aftermath of the Iraq war.

Even after President Bush signed an order freezing Bout's assets, the Pentagon continued using his planes, they reported, to get reconstruction supplies into Baghdad. All in all, they say, his planes flew hundreds of flights from 2003 to 2006, even after his work for the Defense Department was exposed in 2004. Bout may have been an international criminal, but he got the job done.

But now Thai police have nabbed him. So congrats!

Update: Turns out that U.S. authorities were in on the bust, which was a "four-month sting by the Drug Enforcement Administration with secret help from security officials in four other nations." Go figure.

Finally, we get it right from the horse's mouth. From Human Events, via MoJo:

Prince’s book, tentatively titled We Are Blackwater, will be released this summer. It is the only insider’s account of the controversial company that has supplied bodyguards and support-and-rescue personnel to hot spots around the world, including the battlefields of Afghanistan and Iraq.

Prince, a former Navy SEAL, will reveal how he created Blackwater, refute criticisms of the company, and take the reader on thrilling Blackwater missions into hostile territory, from rescuing teenage missionaries in Africa, to helicoptering wounded Marines to safety, to inventing, testing, and manufacturing armored vehicles to better protect our troops in the field.

No word yet on whether Prince will be outsourcing the work to a ghostwriter.

For years, the families of the four Blackwater guards killed in the infamous Fallujah incident have carried on a wrongful death lawsuit against the company. A House oversight committee investigation faulted the company's cost-cutting for leaving the guards vulnerable to the ambush.

But Blackwater, always in need of very good lawyering, says that if it weren't for some lousy (though very expensive) lawyers, they would have easily disposed of the lawsuit already. From Legal Times:

Blackwater Security filed a $30 million malpractice suit against Wiley Rein on Wednesday, alleging that the firm made costly missteps in a wrongful death case brought on behalf of four former Blackwater employees who were killed in Iraq in 2004.

Somewhat awkwardly, one of the lawyers who was on that Wiley, Rein team being sued for incompetence is current White House counsel Fred Fielding. It's nothing personal, I guess.

Blackwater dropped Wiley, Rein back in 2005, opting for another heavy-hitting firm, Greenberg, Traurig. The suit is ongoing.

No surprise here:

Justice Department officials have told Congress that they face serious legal difficulties in pursuing criminal prosecutions of Blackwater security guards involved in a September shooting that left at least 17 Iraqis dead.

In a private briefing in mid-December, officials from the Justice and State Departments met with aides to the House Judiciary Committee and other Congressional staff members and warned them that there were major legal obstacles that might prevent any prosecution....

The officials from the Justice and State Departments “didn’t say they weren’t going to prosecute,” said one Congressional aide who attended the briefing. “They said there would be a lot of difficulties.”

To review: it's debatable whether Blackwater can even be prosecuted because they don't seem to be covered by any law. Beyond that, the State Department provided the Blackwater guards involved in the incident with limited immunity in order to get their version of events, thus further compromising the investigation. And don't forget that Blackwater quickly mended the trucks involved in the incident, destroying key evidence as to whether the guards were actually under attack when they opened fire (Blackwater says that State gave them the green light to do that).

So those are the difficulties. The DoJ did launch a grand jury investigation after the FBI determined that the guards had indeed opened fire without provocation. But don't hold your breath.

Boy, this thing was rigged from the get-go. From the AP:

Blackwater Worldwide repaired and repainted its trucks immediately after a deadly September shooting in Baghdad, making it difficult to determine whether enemy gunfire provoked the attack, according to people familiar with the government's investigation of the incident.

Damage to the vehicles in the convoy has been held up by Blackwater as proof that its security guards were defending themselves against an insurgent ambush when they fired into a busy intersection, leaving 17 Iraqi civilians dead.

U.S. military investigators initially found "no enemy activity involved" and the Iraqi government concluded the shootings were unprovoked.

The repairs essentially destroyed evidence that Justice Department investigators hoped to examine in a criminal case that has drawn worldwide attention.

Blackwater's explanation for the repairs is that they were done at the "government's direction" -- meaning the State Department. That's a sadly credible claim, given that the State Department offered limited immunity to the Blackwater guards involved in the September 16th shootings that left 17 Iraqi civilians dead. If State really did direct Blackwater to repair those trucks, it would mean that they made two different crucial moves immediately following the shootings that dramatically undercut the possibility of a criminal prosecution.

As far as Blackwater's many sins go, this one's pretty minor. But it's got that special Blackwater touch.

Back in 2005, The New York Times reports, a Blackwater helicopter dropped tear gas (CS gas) on a checkpoint in Baghdad's Green Zone. "An armored vehicle on the ground also released the gas, temporarily blinding drivers, passers-by and at least 10 American soldiers operating the checkpoint.... A number of Iraqi civilians, both on foot and in cars waiting to go through the checkpoint, were also exposed. " The gas, which the American military itself "can use only under the strictest conditions and with the approval of top military commanders," causes burning eyes, skin irritation, coughing, difficulty breathing and sometimes even vomiting.

Blackwater's explanation, by way of spokeswoman Anne Tyrell, was that "a CS gas canister was mistaken for a smoke canister and released near an intersection and checkpoint." If there was some mistake, both the helicopter and the vehicle on the ground seem to have been mistaken. Oops.

Oddly enough, Army officers told the Times that "the Blackwater convoy appeared to be stuck in traffic and may have been trying to use the riot-control agent as a way to clear a path." Now, how blinding everyone in the area would help traffic to clear isn't immediately clear to me. Nor is it clear to Capt. Kincy Clark who was hit by the gas and wrote, "Why someone would think a substance that makes your eyes water, nose burn and face hurt would make a driver do anything other than stop is beyond me.”

Note: Blackwater hired its third lobbyist recently.

Back to our Afghanistan-contractors document for a minute. How could it be that the State Department could effectively lose $28 million worth of cars, guns, radios, computers, generators, and other not-easy-to-lose items? Probably because State doesn't devote people to making sure the stuff is where the contractors say it is, in violation of federal regulations. From the State Department Inspector General:

[Federal Acquisition Regulation] assigns certain responsibilities, such as reviewing contractors' property control systems and approving the type and frequency of physical inventories, to the [contracting officer] or "the representative assigned the responsibility as a property administrator." However, the Department had not appointed a property administrator for these contracts, and Department officials indicated that it was not the Department's practice to do so. ...

As of September 30, 2006, according to the Department, contractors held capitalized government property with a total cost of about $144 million and a net book value of almost $49 million. Although the Department has not appointed property administrators in the past, [the Office of the Inspector General] concluded that contractor-held property has reached such a level that the amount of oversight necessary cannot be met effectively by the Department's existing property administration structure and recommends the following.

The federal government uses many acronyms. Unfortunately, WTF isn't one of them.

More outrageous tales from the State Department car dealership: it turns out that contractor DynCorp didn't have to even prove that it in fact purchased dozens of SUVs for which it charged the government. Try to follow the money on this one.

[O]ne Civilian Police task order [on which DynCorp is the contractor] included a requirement for 68 armored Ford Excursions at a fixed price of $113,064. The [State] Department was billed for 68 "armored vehicles" at a unit cost of $123,327. The property list contained 61 Ford Excursions, of which some were described as armored, others uparmored, and others had no notation of armoring. The costs shown on the property list for these 61 Ford Excursions ranged from $43,990 to $150,000 with nine at $122,190, seven with higher costs, and the remaining 45 with costs of $77,000 and below. Thus, OIG could not conclude that the 68 "armored vehicles" in the vouchers were the 68 armored Ford Excursions specified in the task order.

Let's just assume for a minute that they are. To do the math: 68 Excursions at the State Department contract's fixed unit price works out to $7,688,352. But 68 Excursions at the price DynCorp billed the department is $8,386,236. So that's an overcharge of almost $698,000. Nice.

But what the report's saying is that it has no way of knowing if DynCorp really spent the $8,386,236. It's not easy to work out the numbers given the vague way the report describes the expenses cited on the 61 Excursions DynCorp documented. But nine Excursions at $122,190 is $1,099,710. Add another 45 at $77,000 (the maximum cited here), and that's $3,465,000. Take a conservative estimate of the remaining seven with "higher costs" than the $122,190 -- let's say $122,200, a mere $10 more. That's $855,400. Add it all up and you get in the ballpark of $5,420,110.

And that means the State Department's lax bookkeeping requirements allowed DynCorp to, potentially, pocket around (by my calculation) $2,996,126. Whether that in fact happened is unclear by definition. But what's crystal clear is that State's shoddy accounting is practically an invitation to abuse. Why not just have the State Department open its petty cash drawers and save the inspector-general's office the trouble?

For a moment, leave aside the question of missing property. The September 2007 State Department inspector general report provides a blueprint for how lax department rules let contractors in Afghanistan shoehorn all manner of purchases into their conctract costs -- regardless of whether the contract required those specific purchases. As they say on the streets, DynCorp, essentially, got to charge it to the game.

Take one example. On one of DynCorp's task orders for the Civilian Police training contract, the company bought $1.1 million worth of trucks, unspecified in its contract, and charged it to the government. And that was just the start.

Under one of the Civilian Police task orders, the vouchers included charges for 20 Ford F-250s, with a cost of $1.1 million, that were acquired before the modification authorizing their purchase was issued; 18 vehicles consisting of Ford Excursions, John Deere Gators, and Yamaha motorcycles, with a cost of $384,590, that were not specified in the task order; and an additional unknown quantity of John Deere Gators and Ford Excursions, with a cost of $1.4 million, that were not specified in the ask order.

That worked for DynCorp so well on the police contract, the company ran the same game on its ordnance-removal contract:

Although weapons and weapon accessories were not among the property specified for purchase under the WRAP contract, the vouchers included charges of $30,000.

The inspector general concedes that contractors might legitimately need to buy new property during the course of the contract. But the department's requirements -- apparently still in place -- don't allow outside observers enough visibility to determine what's a legitimate expense and what isn't. (Or, in the IG's words, "the Department should assess whether additional property items are needed to meet program requirements, approve new acquisitions before they are made, and modify the contract accordingly.") The absence of such protections is practically an invitation for a contractor to walk into a Ford dealership and hand over Condoleezza Rice's credit card -- which, incidentally, you pay for.

A September 2007 State Department report, obtained by TPMmuckraker, found that contractors DynCorp and Blackwater can't account for $28.4 million in U.S. government-issued property in Afghanistan, including armored cars, guns and radios.

The report, prepared by the State Department inspector-general's office, hits the department for its lack of "adequate internal control over the government property held by contractors." It calls the property lists provided by State officials managing the contract in Afghanistan "incomplete and, therefore, unreliable." The $28.4 million worth of missing or poorly-documented property represents 21 percent of the government property held by DynCorp and Blackwater.

In some cases, the property has disappeared into a bureaucratic morass, thanks to State's improper bookkeeping. But in other cases, the property appears to be simply gone. For instance, the report finds:

OIG [the Office of the Inspector General] found all of the selected WPPS [Worldwide Personnel Protective Service] items on the property list but was unable to locate some of the items (see Table 3), including vehicles, a weapon, generators, computers, radios, and phones, on the Civilian Police and WRAP [Weapons Removal and Abatement Program] lists.

DynCorp holds the Civilian Police and WRAP contracts. The WPPS contract is held by Blackwater, and the report doesn't accuse Blackwater of mishandling government property. But it does say that Blackwater didn't include the cost of 91 percent of items on its property list reviewed by the inspector general. As a result, inspectors were unable to verify that the money cited by Blackwater for the purchase of "any of its vehicles and much of its communications equipment" was properly spent.

It wouldn't be the first time inspectors hit the department for inadequate bookkeeping. In October, Stuart Bowen, the Special Inspector General for Iraq Reconstruction, chided State for its inability to account for $1.2 billion it had awarded to DynCorp in Iraq.

TPMmuckraker obtained the September 2007 report thanks to a Freedom of Information Act request. We'll have it for you in our Documents Collection shortly. And we'll be presenting you with more from the report throughout the week.