Iraq corruption probe to expand: American businessman pleads guilty; several Army Reserve officers implicated.

Christian Science Monitor
Apr. 21, 2006

Philip Bloom, the American businessman at the center of a widening inquiry into corruption in Iraq, pleaded guilty Tuesday to federal charges of conspiracy, bribery, and money laundering for illegally obtaining millions of dollars in 2003 and 2004 that were meant for the reconstruction of Iraq.

The New York Times reports that the court papers explaining the plea, and interviews with contractors and government officials in Iraq, show that the case is almost certain to expand to include several senior US Army Reserve officers.

The papers, which argue that Mr. Bloom is not a flight risk and should be released as those talks continue, assert that he has provided "tens of thousands of documents relevant to the government's wide-ranging investigations."

Some of those discussions have led investigators to potential new cases in Baghdad, where Mr. Bloom and the companies he controlled also did extensive contracting work. A United States official in Iraq said documents and other evidence in the case also cast strong suspicion on a range of other officials who ran the Coalition Provisional Authority's local headquarters from the Babil Hotel in Hilla.

"It just seems like everybody associated with that place, there was just a dark cloud hovering over that hotel," said the official, who spoke on condition of anonymity because he was not authorized to discuss the case publicly.

The Sydney Morning Herald reports that Bloom used "money, sex and designer watches" to help gain more than $8 million in reconstruction contracts.

The scheme began in January 2004, when Bloom began paying bribes to Robert Stein, a civilian contractor who controlled $US82 million in reconstruction funds as the comptroller for the coalition's headquarters in Hillah. Stein, who had a previous conviction for fraud when he was hired, pleaded guilty to accepting bribes in February. He funnelled money and favours from Bloom to other officials in Hillah, all of whom helped direct contracts to a group of companies controlled by Bloom, court documents say.

Two officers in the US Army Reserve, Lieutenant-Colonel Michael Wheeler and Lieutenant-Colonel Debra Harrison, have already been arrested in connection with the case and more arrests are expected, investigators said.

The Herald also reports that the contracts that Bloom received included plans for refurbishing a police academy in Hillah and a library in Karbala. Government audits later showed that the work was either never done or else done in a shoddy manner.

Meanwhile, the Los Angeles Times reports on a brilliant career that unraveled in Iraq. Highly decorated Air Force Col. Kimberly D. Olson, one of the first female pilots in the Air Force, has been "accused of profiting from the post-invasion chaos by using her position to benefit a private security firm that she helped operate," according to interviews and government documents obtained by the Times. After the 2003 invasion, Jay Garner, then head of the Coalition Provisional Authority, picked Col. Olsen as his "right arm."

Pentagon investigators allege that while on active duty as one of the most powerful figures in Iraq, Olson established a US branch of a South African security firm after helping it win more than $3 million in contracts to provide protection for senior US and British officials, as well as for KBR, a subsidiary of Halliburton Co.

Olson, 48, has spent more than a year fighting the charges. In military proceedings last year, she denied abusing her position to enrich herself or the security company, but agreed to plead guilty to lesser charges. She was reprimanded and allowed to resign from the Air Force with an honorable discharge and no reduction in rank. Olson was also banned from receiving further government contracts for three years. She is appealing the ban.

The Times also reports that Olsen's case has caused a conflict between former officials in Iraq and the Air Force investigators. Olsen's supporters, including Garner and Paul Bremer, also a former head of the CPA, says that Olsen is being punished for trying to do her best in a chaotic situation, and that her prosecution "is an overzealous prosecution that might impinge on reconstruction efforts."

Government officials "are going over there with the best of intentions, and they're coming back and being grilled," said Bob Polk, who was the director of plans for Garner. "It will have a chilling effect the next time."

But government investigators say Olson took advantage of her position for personal gain and made a mockery of US efforts to establish the rule of law in a country long ruled by corrupt autocrats. Olson is the highest-ranking US military officer to be accused of wrongdoing in connection with the reconstruction.

The Washington Post reports on "mothballed" reconstruction projects in Iraq, and how US officials are now wondering whether Iraqis have "the capacity to maintain, operate and protect the more than 8,000 reconstruction projects" already under way or planned for the next few years. The US has set aside more than $18 billion for these projects.

"The United States must ensure that the billions of dollars it has already invested in Iraq's infrastructure are not wasted," said an October report by the Government Accountability Office, the investigative arm of Congress, citing what it said were "limitations in the Iraqis' capacity to maintain and operate reconstructed facilities."

For example, the report said, "As of June 2005, approximately $52 million of the $200 million in completed large-scale water and sanitation projects either were not operating or were operating at lower capacity due to looting of key equipment and shortages of reliable power, trained Iraqi staff, and required chemicals and supplies."

Finally, The Washington Post also reports that expenditures in Iraq have doubled since the 2003 invasion. While corruption is part of the cost, the main reason for the growth in spending is that the military has had to deal with the "cost of repairing, rebuilding and replacing equipment chewed up by three years of combat."

The cost of the war in US fatalities has declined this year, but the cost in treasure continues to rise, from $48 billion in 2003 to $59 billion in 2004 to $81 billion in 2005 to an anticipated $94 billion in 2006, according to the Center for Strategic and Budgetary Assessments. The U.S. government is now spending nearly $10 billion a month in Iraq and Afghanistan, up from $8.2 billion a year ago, a new Congressional Research Service report found.

Annual war costs in Iraq are easily outpacing the $61 billion a year that the United States spent in Vietnam between 1964 and 1972, in today's dollars. The invasion's "shock and awe" of high-tech laser-guided bombs, cruise missiles and stealth aircraft has long faded, but the costs of even those early months are just coming into view as the military confronts equipment repair and rebuilding costs it has avoided and procurement costs it never expected.

Officials say that the Bush administration originally downplayed replacement and procurement costs in order to keep the "price tag" for Iraq low. But Army Chief of Staff Peter J. Schoomaker recently told the Senate Armed Services Committee that these costs were beginning to crest. General Schoomaker also told lawmakers that even after the conflict ends, costs will continue to rise as the Army reequips and upgrades. These costs will add up to $36 billion over six years, but some lawmakers speculated that if there is a protracted conflict in Iraq, that figure could triple.