Friday, October 26, 2007

Army Looks for Contract Fraud in Abu Ghraib Fashion

The Army plans to focus on a Kuwaiti purchasing office rife with corruption. According to the AP:

A team of specially trained investigators will hunker down in an Army office north of Detroit on Monday to begin poring over hundreds of Iraq war contracts in search for rigged awards. This team of 10 auditors, criminal investigators and acquisition experts are starting with a sampling of the roughly 6,000 contracts worth $2.8 billion issued by an Army office in Kuwait that service officials have identified as a hub of corruption.

Based on what the team finds, the probe may expand and the number of Army military and civilian employees accused of accepting bribes and kickbacks could grow, U.S. officials told The Associated Press. Nearly two dozen have been charged so far.

Of course the little people should pay for their role, but someone greater created the system. Do you recall Abu Ghraib and the torture of prisoners there? Only the junior people paid the price. Might this be the ceremonial offering of little folks for all that Iraqi corruption? Paul Bremer's team scattered $8 billion in unaccounted for cash before waltzing out of the country. How does prosecuting 23 people for taking over $15 million in bribes compare to the greater corruption? The Army wants us to believe it took a few crafty insiders to swindle the government.

Deceiving the checks and balances in the federal procurement system takes careful planning, Frank Anderson, president of the Defense Acquisition University at Fort Belvoir, said in a separate interview.

"You had some smart bad apples," said Anderson, who leads the organization that trains the military's acquisition officials. "It had to be someone who understood the business well enough to figure out how to get around the system."

A quick look at one contractor's SEC filings reveals some interesting elements of the Pentagon purchasing system. DynCorp reported on its contracts with the federal government over the last 3 years. Over 56% were indefinite delivery, indefinite quantity contracts. Those get turned into one of three types of arrangements, fixed price, time and materials, and cost reimbursement. DynCorp has $3.3 billion worth of contracts as of March 2007 with the State Department alone. Most of that is for the Civilian Police Program while the remainder covers International Narcotics and Law Enforcement. A government auditor recently revealed there is little documentation of what the State Department got for its $1.2 billion from DynCorp, the company charged with training Iraqi police.

What of the companies paying the enterprising Army soldiers bribes and kickbacks? Will they be identified, charged with crimes and executives held accountable? The government's track record with domestic businesses in this regard is poor. Numerous stock option cheats walk free despite ripping off shareholders for millions. Chiquita Banana execs funded South American terrorists and walked away with a fine. And British Petroleum committed numerous criminal offenses while led by Lord John Browne. His penalty was a cush job with a Carlyle Group energy joint venture.

Something bigger has been going on than a dozen or two rip off artists in a Kuwaiti army purchasing office. I have a sense blame will be delegated to the little guys while the system allowing corruption goes on unabated. One only need look at political donations and voting patterns. We have the best democracy money can buy...