Iraq Contractors

Army Looks to Learn Lesson from Contract to 22 Year-Old

Paul Kiel | April 28, 2008, 12:00PM

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.

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Paul Kiel | April 15, 2008, 10:10AM

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."

Iraq Contractors

Hearing on Twenty-Something Contractors Postponed

Paul Kiel | April 14, 2008, 1:38PM

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.

Iraq Contractors

Blackwater: Still in Business in Iraq

Paul Kiel | April 4, 2008, 6:28PM

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.

Iraq Contractors

No Testimony without Immunity, Man

Paul Kiel | April 4, 2008, 11:31AM

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.