Fix. Contract to build democracy center in Al Hillah was rigged in scheme. (Photo courtesy of Cumberland County Sheriff

The U.S. investigation into contracting corruption in Iraq so far has yielded one guilty plea and three additional arrests as Stuart Bowen Jr., the special inspector general for Iraq reconstruction, warns that U.S. agencies working there will face additional scrutiny and a tangle of issues this year as many more projects are handed over to the new Iraqi government.

Without a stronger push for transition planning and spending, Bowen says the Iraqi operators of newly reconstructed facilities may lack the training and administrative resources to sustain them.

Bowen, in his eighth quarterly report to Congress on Jan. 30, called the indictments of four people his agents charged in a kickback scheme uncovered on the basis of a tip, as his operation’s most notable achievement in the last quarter of 2005. “We want the relatively few who believe they will never be called to account for their misdeeds to know that SIGIR is on the case, and we will be seeing them soon,” Bowen said.

STEIN

One of those indicted, Robert J. Stein Jr., 50, a Dept. of Defense contract employee, pleaded guilty to conspiracy, bribery, money laundering and two firearms charges on Jan 20 (ENR 11/28/05 p. 11). In documents filed with his plea agreement, announced Feb. 2, Stein admitted to conspiring in 2004 with five U.S. Army Reserve officers working in the Coalition Provisional Authority’s South Central office in Al Hillah to rig bids and steer $8 million in contracts to a U.S. contractor in exchange for taking more than $1 million in kickbacks.

None of the alleged co-conspirators, who included Stein’s supervisor and deputy, were identified by name in his plea documents. But other people have been charged as a result of the same investigation.

One is Philip Bloom, 65, a U.S. citizen living in Romania and Iraq. He owns and operates many construction and service companies doing business in Iraq. Bloom was arrested Nov. 13, 2005, and charged with conspiring to commit money laundering and wire fraud.

The dragnet also snared two lieutenant colonels in the U.S. Army Reserve. Michael Wheeler, 47, of Amherst Junction, Wis., was arrested Nov. 30, 2005, and charged with conspiring to commit bribery, money laundering, possession of automatic weapons, theft and wire fraud. Debra Harrison, 47, of Trenton, N.J., was arrested Dec. 15, 2005, on charges of conspiracy, bribery, interstate transportation of stolen property and money laundering.

Related Links: Security Woes Slow Rebuilding Iraqi Infrastructure, IG Says , Feb. 8, 2006 Reconstruction Corruption Scheme Is A Crying Shame, Feb. 13, 2005

The plea documents also cite 10 other unnamed individuals for allegedly aiding, or at least knowing, of the scheme.

Stein controlled $82 million in reconstruction spending in his tenure as the regional office comptroller. In the plea documents, Stein admitted that he and five others received bribes worth at least $1,082,279 in money; money-laundering services to move proceeds back to the U.S.; jewelry, cars and other luxury goods; first-class airline tickets and sexual favors from women the contractor provided at a villa in Baghdad. Stein also admitted that he and the others stole at least $2 million in cash designated for reconstruction. In return, Stein and the officers used their official positions to steer $8,641,375 in awards to the contractor’s companies.

According the plea documents, Stein and his co-conspirators accepted high bids known to be from fictitious companies submitted by the contractor to ensure that he won the work. They structured deals into awards of less than $500,000 to avoid exceeding Stein’s contracting authority. And they hid payments as large as $498,000 by using small payment forms with a limit of $15,000 not normally audited by central authorities in Baghdad.

The projects involved the public library in Karbala and the police academy, regional democracy center and demolition of the Baath Party headquarters in Al Hillah. Stein faces up to 30 years in jail and a $250,000 fine.