[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
WAR PROFITEERING AND OTHER CONTRACTOR CRIMES COMMITTED OVERSEAS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON CRIME, TERRORISM,
AND HOMELAND SECURITY
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
JUNE 19, 2007
__________
Serial No. 110-103
__________
Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://judiciary.house.gov
------
U.S. GOVERNMENT PRINTING OFFICE
36-173 PDF WASHINGTON DC: 2007
---------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing
Office Internet: bookstore.gpo.gov Phone: toll free (866)512-1800
DC area (202)512-1800 Fax: (202) 512-2250 Mail Stop SSOP,
Washington, DC 20402-0001
COMMITTEE ON THE JUDICIARY
JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California LAMAR SMITH, Texas
RICK BOUCHER, Virginia F. JAMES SENSENBRENNER, Jr.,
JERROLD NADLER, New York Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina ELTON GALLEGLY, California
ZOE LOFGREN, California BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas STEVE CHABOT, Ohio
MAXINE WATERS, California DANIEL E. LUNGREN, California
MARTIN T. MEEHAN, Massachusetts CHRIS CANNON, Utah
WILLIAM D. DELAHUNT, Massachusetts RIC KELLER, Florida
ROBERT WEXLER, Florida DARRELL ISSA, California
LINDA T. SANCHEZ, California MIKE PENCE, Indiana
STEVE COHEN, Tennessee J. RANDY FORBES, Virginia
HANK JOHNSON, Georgia STEVE KING, Iowa
LUIS V. GUTIERREZ, Illinois TOM FEENEY, Florida
BRAD SHERMAN, California TRENT FRANKS, Arizona
TAMMY BALDWIN, Wisconsin LOUIE GOHMERT, Texas
ANTHONY D. WEINER, New York JIM JORDAN, Ohio
ADAM B. SCHIFF, California
ARTUR DAVIS, Alabama
DEBBIE WASSERMAN SCHULTZ, Florida
KEITH ELLISON, Minnesota
Perry Apelbaum, Staff Director and Chief Counsel
Joseph Gibson, Minority Chief Counsel
------
Subcommittee on Crime, Terrorism, and Homeland Security
ROBERT C. ``BOBBY'' SCOTT, Virginia, Chairman
MAXINE WATERS, California J. RANDY FORBES, Virginia
WILLIAM D. DELAHUNT, Massachusetts LOUIE GOHMERT, Texas
JERROLD NADLER, New York F. JAMES SENSENBRENNER, Jr.,
HANK JOHNSON, Georgia Wisconsin
ANTHONY D. WEINER, New York HOWARD COBLE, North Carolina
SHEILA JACKSON LEE, Texas STEVE CHABOT, Ohio
MARTIN T. MEEHAN, Massachusetts DANIEL E. LUNGREN, California
ARTUR DAVIS, Alabama
TAMMY BALDWIN, Wisconsin
Bobby Vassar, Chief Counsel
Michael Volkov, Minority Counsel
C O N T E N T S
----------
JUNE 19, 2007
Page
OPENING STATEMENTS
The Honorable Robert C. ``Bobby'' Scott, a Representative in
Congress from the State of Virginia, and Chairman, Subcommittee
on Crime, Terrorism, and Homeland Security..................... 1
The Honorable J. Randy Forbes, a Representative in Congress from
the State of Virginia, and Ranking Member, Subcommittee on
Crime, Terrorism, and Homeland Security........................ 3
WITNESSES
The Honorable Stuart W. Bowen, Jr., Special Inspector General for
Iraq Reconstruction, Arlington, VA
Oral Testimony................................................. 7
Prepared Statement............................................. 8
Mr. Thomas F. Gimble, Principal Deputy Inspector General, U.S.
Department of Defense, Washington, DC
Oral Testimony................................................. 11
Prepared Statement............................................. 13
Mr. Barry M. Sabin, Deputy Assistant Attorney General, U.S.
Department of Justice, Washington, DC
Oral Testimony................................................. 27
Prepared Statement............................................. 29
Mr. Alan Grayson, Grayson & Kubli, P.C., McLean, VA
Oral Testimony................................................. 40
Prepared Statement............................................. 42
Ms. Erica Razook, Legal Advisor to the Business and HuMAN Rights
Program, Amnesty International, New York, NY
Oral Testimony................................................. 44
Prepared Statement............................................. 46
Mr. Scott Horton, Adjunct Professor of Law, Columbia University
School of Law, New York, NY
Oral Testimony................................................. 48
Prepared Statement............................................. 51
APPENDIX
Material Submitted for the Hearing Record........................ 79
WAR PROFITEERING AND OTHER CONTRACTOR CRIMES
COMMITTED OVERSEAS
----------
TUESDAY, JUNE 19, 2007
House of Representatives,
Subcommittee on Crime, Terrorism,
and Homeland Security
Committee on the Judiciary,
Washington, DC.
The Subcommittee met, pursuant to notice, at 2:05 p.m., in
Room 2141, Rayburn House Office Building, the Honorable Robert
C. ``Bobby'' Scott (Chairman of the Subcommittee) presiding.
Present: Representatives Scott, Delahunt, Johnson, Forbes,
Coble, and Chabot.
Staff Present: Bobby Vassar, Subcommittee Chief Counsel;
Ameer Gopalani, Majority Counsel; Veronica Eligan, Professional
Staff Member; Caroline Lynch, Minority Counsel; and Kelsey
Whitlock, Minority Staff Assistant.
Mr. Scott. The Subcommittee will come to order.
I am pleased to welcome you today to the hearing before the
Subcommittee on Crime, Terrorism, and Homeland Security on
``War Profiteering and Other Contractor Crimes Committed
Overseas.''
Over the last 4 years, reconstruction fraud has run rampant
during the engagement of U.S. forces in Iraq and Afghanistan.
The United States has devoted more than $50 billion to relief
and reconstruction activities in Iraq and Afghanistan, and the
inspectors general that are here before us today have reported
that millions of these dollars still are unaccounted for.
Millions may have been lost to fraud and other misconduct,
and these inspectors general have opened hundreds of
investigations into fraud, waste and abuse in Iraq, Kuwait and
Afghanistan involving illegal kickbacks, bid rigging,
embezzlements and fraudulent overbilling.
In addition to the fraud, there is well-documented evidence
of detainee abuse perpetrated by contractors as well as
evidence of unjustified shootings and killings by private
security contractors.
Private contractors have been used to a greater extent that
at any other time in our history. With the exponential use of
contractors comes the greater scrutiny of which laws, if any,
they are exposed to, and we currently have a situation in which
many contractors act with impunity and no accountability
because they operate outside of the physical jurisdiction of
the United States and, therefore, outside of the jurisdiction
of the U.S. Criminal Code.
I hope at this hearing we will be able to explore the
following questions: What is the extent of the problem, why are
there so few prosecutions, what are the reasons for the lack of
transparency in investigations and prosecutions, and are the
existing laws adequate to address these problems?
With respect to the first point, considering the vast
amount of evidence and investigations, there have been
relatively few prosecutions for fraud or detainee abuse.
Inspectors general before us have more than 70 open and active
investigations in contracting fraud and abuse in the war. In
addition, private whistleblowers have filed numerous civil
claims involving Iraq fraud under the False Claims Act.
Despite the breadth of all of these investigations and
cases, the Department of Justice has pursued only a relatively
small number of the cases, and it has not even participated at
all in the whistleblower cases.
With respect to detainee abuse in Iraq, there has only been
one successful prosecution of a civilian contractor, and that
was for the conviction of a CIA contractor for beating a
detainee who later died.
Another question that arises with respect to prosecutions
and investigations is a lack of transparency. For example, 17
pending cases of detainee abuse, including the abuse at Abu
Ghraib prison by contractors, have remained on the docket of
the U.S. attorney's office in the Eastern District of Virginia
for 3 years.
In some of these cases, the Army has investigated the
circumstances behind them and found probable cause that a crime
has been committed and referred these cases to the Department
of Justice for prosecution. But we are not told why these cases
are being held up and what the next steps are for prosecution.
On the fraud side, the Department of Justice has ignored
the False Claims Act cases by obtaining court orders sealing
the cases. Most of the cases filed regarding the war
profiteering in Iraq have remained under seal.
Finally, we need to examine whether the present laws on the
books are sufficient to address the problem. Although there are
antifraud laws to protect against waste of the United States
dollars at home, no law expressly forbid war profiteering or
expressly confers jurisdiction of the U.S. Federal court to
hear fraud cases outside the normal bounds of the United States
Criminal Code.
To this end, the gentleman from Hawaii, Mr. Abercrombie,
has introduced H.R. 400, the ``War Profiteering Prevention Act
of 2007,'' a companion bill to Senator Leahy's War Profiteering
Act.
The legislation would criminalize overcharging taxpayers to
defraud and to profit extensively from a war military action or
reconstruction effort. The crime would be a felony subject to
criminal penalties of up to 20 years in prison and fines up to
a million dollars or twice the illegal gross profits of the
crime, whichever is higher.
The bill also prohibits false statements connected with the
provision of goods and services in connection with war or
reconstruction effort. This crime would be a felony subject to
the criminal penalties of up to 10 years in prison and fines up
to $1 million or twice the illegal gross profits of the crime,
whichever is higher.
In sum, the bill sends a clear message that all contracting
fraud, whether it occurs in Iraq or elsewhere overseas, for
exorbitant gain is not only unacceptable and reprehensible; it
will be illegal.
With respect to the detainee abuse and other human rights
crimes committed overseas, we need to examine whether the
Federal courts have the appropriate authority to hear such
cases. While some abuses by military and some security
contractors may be prosecuted under current U.S. law, there
have been calls to clarify and amend the Military Exterritorial
Jurisdiction Act, the MEJA.
When that was signed into law in 2000, it provided the
United States Courts with jurisdiction over only those civilian
employees, contractors and subcontractors affiliated with the
Defense Department who create crimes overseas. That law was
later amended in 2005 to include employees of any Federal
agency supporting the mission of the Department of Defense
overseas.
We need to make sure that the growing number of contractors
overseas do not escape accountability simply because they are
not deemed to be supporting the mission of the Department of
Defense. To this end, on January 10, the gentleman from North
Carolina, Mr. Price, introduced H.R. 369, the Transparency and
Accountability and Security Contracting Act of 2007.
The bill includes two provisions which will close the
loophole to cover all private security contractors, not just
those associated with the Department of Defense, to ensure that
they are accountable under U.S. law. He also recently
introduced the provision as a standalone bill, H.R. 2740, the
MEJA Expansion and Enforcement Act of 2007.
So, today, I hope we can determine what kind of priority
the Department of Justice assigns to reconstruction fraud
cases, why many cases have not been prosecuted and what can be
done to correct the situation, whether it is through
legislation, more resources or other action.
It is now my privilege to recognize our esteemed colleague,
the Ranking Member of the Subcommittee, my colleague from
Virginia, Randy Forbes, for his opening statement.
Mr. Forbes. Thank you, Mr. Chairman.
And to all of our witnesses, we appreciate you being here
today and taking your time both in preparing for this testimony
and presenting it to us and responding to our questions.
I want to thank Chairman Scott for holding this hearing on
H.R. 400, the ``War Profiteering Prevention Act of 2007'' and
H.R. 369, the ``Transparency and Accountability and Security
Contracting Act of 2007.''
First of all, something we all agree on, it is not new, it
is not novel, and that is that fraud against the United States
and the defense industry or in relief or reconstruction
activities undermines our national security. Criminals who
enrich themselves at the expense of our military effort deserve
stiff sentences. Their actions threaten the safety and security
of our men and women in uniform and the success of our military
operations.
Unfortunately, we see it in Iraq, we see it in New Orleans
when we have relief efforts down there, and we act as if
sometimes this has just been birthed today or it has just been
birthed in this war.
As I look at the parties and the stakeholders and
discussing this legislation, there are a number of currents
that all start coming together. There are representatives from
Government whose job it is to oversee this and do a good job in
trying to find out and make sure the Government gets what it
has paid for. We have attorneys who make a lot of money off
this kind of litigation and, obviously, have a strong interest
in making sure that it takes place. And then we have
politicians who love to always point their fingers and act like
this is something new and different, and it just arrived.
I have looked at some of the history of war profiteering,
and, you know, we have had arms merchants that have been
profiteering for centuries. During the Civil War, Lincoln
denounced war profiteers as worse than traitors. He pushed for
the first Federal laws against abuse. These were called the
False Claims Act.
Congressional investigations were conducted, and Congress
passed antiwar profiteering statutes after World War I, World
War II and the Korean War. A provision from a statute in World
War II was used as a model for a provision which was attempted
to be added to legislation in 2003, but was stripped out of the
final bill.
August 31, 1990, Senator Jim Sasser of Tennessee challenged
oil companies to reduce their prices or face profiteering
charges as the crisis in the Middle East escalated.
September 12, 1990, then President Bush warned the U.S.
would not tolerate profiteering during the then Persian Gulf
crisis after legislation was introduced in both the House and
the Senate to prohibit excess fuel price increases during
national emergencies.
A U.S. renegotiation board, a separate entity created the
Korean War to guard against profiteering by defense
contractors--in 1978, it returned $34.4 million in profits it
had found to be unwarranted, while spending only $6.2 million.
Its demise came in 1976 after Congress refused to extend the
budget.
And during Lyndon Johnson's presidency, allegations were
made against some corporations who had contributed hugely to
his campaign, suggesting that they had close ties to the
President which dated back to the 1940's and that there was
huge profiteering involved then.
Today's witnesses will outline the significant effort that
has been made by the Justice Department, the Department of
Defense and the special investigator for the government of Iraq
reconstruction to identify and prosecute fraudulent schemes in
the global war against terrorism.
These cases are difficult to bring since they occur in or
close to the theater of war. Fraud cases require extensive
investigative resources and documentation. Gathering such
evidence in a dangerous setting like Iraq or Afghanistan makes
it extremely difficult sometimes to build a successful
prosecution.
Despite these difficulties, as the witnesses will explain,
many successful prosecutions have been brought by the Justice
Department, and it is likely that more will be brought. These
cases are not unique to any national effort in our Nation's
history.
When large amounts of money are expended, criminals see an
opportunity to steal from the Government. Those criminals must
be punished, and justice must be swift and sure.
Some may use this issue for political advantage by alleging
that such criminal activity reflects cronyism in the
Administration. Such claims are made without any factual base
and are actually contradicted by the prosecutions against its
contractors.
I am interested in focusing on the nature of the problem
and what, if any, additional resources are needed to fix the
problem. It is easy just to say or propose that additional FBI
resources should be added to investigate these cases without
considering the impact on other FBI responsibilities.
Similarly, some may argue that more cases should be brought. We
all agree on that.
My concern is how to deal and how to do that in the most
effective way possible, making the most from the resources that
are available and considering what resources may be needed to
help this effort.
With respect to the specific proposals before us, the
Justice Department has raised significant problems with H.R.
400, the ``War Profiteering Prevention Act of 2007.''
Specifically, the Justice Department raises several significant
concerns with the wording of the bill which would actually
hinder rather than help the prosecution of war profiteering
cases.
Moreover, the Justice Department is currently prosecuting
these cases under a variety of existing fraud and racketeering
statutes, and acting anew in separate criminal statute for war-
related fraud could make it, some would argue, more difficult
to prosecute some of these cases.
It is important to keep in mind that criminal prosecutions
do not occur in a vacuum. Criminal statutes are accompanied by
a body of case law that guides their use. Adding a separate
statute for war profiteering may score a political point, while
actually weakening U.S. efforts to prosecute these crimes.
Sometimes more is not better. It is just more.
I also have concerns about H.R. 369, the Transparency and
Accountability and Security Contracting Act of 2007. H.R. 369
extends extraterritorial jurisdiction to include a person
employed under a contract or subcontract at any tier awarded by
any department or agency of the United States government where
the work under such contract is carried out in a region outside
the United States in which the armed forces are conducting a
contingency operation.
Such authority is not needed to prosecute fraud committed
in the defense industry or in the relief or reconstruction
efforts. This is an attempt to extend jurisdiction of the
Federal criminal code to war crimes, alleged torture and other
criminal acts committed by persons under contract with non-DoD
agencies.
Congress is legislating in response to allegations of such
crimes. We must be cautious in extending the Military
Extraterritorial Jurisdiction Act because, as written, the
proposed language may be struck down as an unconstitutional
assertion of criminal jurisdiction.
I urge Chairman Scott to hold a separate hearing on the
issues raised by H.R. 369. Our Subcommittee works best when we
deal with issues in a fair and full debate. Such process brings
greater consensus and sharpens the issue.
I look forward to hearing from today's witnesses and
working together to address these important issues.
Mr. Chairman, thank you again for having this hearing, and
I yield back the balance of my time.
Mr. Scott. Thank you. Thank you. And I thank you for your
statement.
We have been joined by Mr. Delahunt from Massachusetts, Mr.
Johnson from Georgia, and Mr. Coble is with us from North
Carolina.
Our witnesses today--we will begin with Mr. Stuart Bowen,
who has served as special inspector general for Iraq
reconstruction since October 2004. He previously served as
inspector general for the Coalition Provisional Authority, a
position to which he was appointed in January of 2004. He holds
a BA from the University of the South, attended Vanderbilt Law
School and received a JD from St. Mary's Law School.
After he testifies, our next witness will be Mr. Thomas
Gimble, principal deputy inspector general for the Department
of Defense. He also served as acting inspector general until
April 30, 2007. As principal deputy inspector general, he
reports directly to the DoD inspector general. He attended
Lamar University where he received a BBA and the University of
Texas at San Antonio where he received an MBA. He is a
certified public accountant and certified government financial
manager.
Mr. Barry Sabin, Deputy Assistant Attorney General in the
criminal division of the United States Department of Justice.
Since 2006, he has been responsible for overseeing the fraud
section, criminal appellate section, gang squad and capital
case unit. He received his bachelor's and master's degrees from
the University of Pennsylvania and a law degree from New York
University School of Law.
Next will be Mr. Alan Grayson who is the principal at
Grayson & Kubli. Before he started the firm, he was a founder
and president of IDT Corporation. He received his juris
doctorate from Harvard Law School, holds a master's from the
Kennedy School of Government at Harvard, and completed his
undergraduate work at Harvard.
Next is Erika Razook who for 2 years has advised Amnesty
International's Business and Human Rights Program where she
conducted research and analysis of applicable laws, agency
regulations, proposed bills and other mechanisms for holding
private, military and security contractors accountable for
human rights violations and criminal acts committed on foreign
soil. She holds a law degree from Brooklyn Law School.
Our final witness will be Scott Horton who is an adjunct
professor at Columbia Law School where he teaches law of armed
conflict and commercial law courses. He is also chair of the
committee on international law at The Association of the Bar of
the City of New York. Since February of this year, he has
managed the project on accountability of private military
contractors on Human Rights First. He is an author of more than
100 publications dealing with issues of international public
and private law, and he is currently working on a book on legal
policy issues relating to private military contractors.
Each of our witnesses' written statements will be made part
of the record in its entirety.
We would ask that each witness summarize his or her
testimony in 5 minutes or less, and to help stay within that
time, there is a timing device at your table which will begin
on green. When you have 1 minute left, it will switch from
green to yellow, and then finally to red, when the 5 minutes
are up.
Our first witness will be Mr. Bowen.
TESTIMONY OF THE HONORABLE STUART W. BOWEN, JR., SPECIAL
INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION, ARLINGTON, VA
Mr. Bowen. Thank you, Mr. Chairman.
Chairman Scott, Ranking Member Forbes, and Members of the
Subcommittee, thank you for this opportunity to address you
today on the work of my office, the special inspector general
for Iraq reconstruction.
Permit me to outline several points essential to
understanding the challenges of investigating and prosecuting
fraud in Iraq.
First, corruption within the Iraqi government, indeed
within the fabric of Iraqi society, is a serious problem that
inhibits progress on many fronts. This is widely recognized by
the government of Iraq and the international community. SIGIR
has called Iraq's endemic corruption problem a second
insurgency.
I returned last month from my 16th trip to Iraq since my
appointment, and during my visit, I met with the commissioner
of Public Integrity, who heads the institution created by the
CPA, the Coalition Provisional Authority, charged with
increasing accountability in Iraq for corruption. I also had
met with the president of the Board of Supreme Audit, which is
the analogue to the Government Accountability Office.
The CPI commissioner told me that he currently has over
2,000 cases involving $5 billion in alleged corruption, and the
president of the Board of Supreme Audit has hundreds of audits
ongoing, and in virtually every case, as he has reported to us,
he has found a serious lack of accountability within the Iraqi
government.
Now let me emphasize that the CPI and the BSA both oversee
Iraqi money, of course, not U.S. money, Iraqi money that has
been stolen from Iraqi programs.
During my recent visit, I was also informed about political
interference with the work of these Iraqi anti-corruption
entities. For example, I learned that ministers and former
ministers are exempt from prosecution unless assent is received
from the prime minister of Iraq.
Each minister also, under Article 134 B of the Iraqi
criminal code, can exempt from prosecution any employee of
their respective ministries from insight. This effectively
creates an undemocratic bulwark against the enforcement efforts
to fight corruption in Iraq.
SIGIR's specific role in reviewing the anti-corruption
efforts is to report on, through audits, the ethicacy of U.S.
efforts to build up the rule of law system.
In July 2006, we released a survey on American efforts and
found that a very modest amount, specifically $65 million, had
been allocated to support anti-corruption efforts within the
Iraq government. My auditors found that our efforts have not
been sufficiently coordinated or focused and that more adequate
leadership and organization was needed
The embassy has responded to a number of our concerns, but
we are prepared to soon release an update on last year's report
that will address both progress made and problems that remain.
My second point is that the incidence of corruption within
the U.S. reconstruction program appears to constitute a
relatively small component of the overall American financial
contribution to Iraq reconstruction. Based on the work of the
18 criminal investigators on my staff, I believe that losses to
American taxpayers from fraud in reconstruction programs have
amounted and will likely amount to a relatively small component
of the overall investment in Iraq reconstruction.
However, the fact that the fraud we have detected is a
relatively small component does not diminish the aggressiveness
with which we pursue these allegations. We have found egregious
incidents of fraud, and we have pursued those investigations
and, in conjunction with the Department of Justice, have
pursued and succeeded in prosecutions.
Four subjects of our investigations have been prosecuted
and are in prison now. Faheem Salam was caught in a sting
operation run by my agency. He is in prison for 3 years. Philip
Bloom and Robert Stein, the comptroller for CPA's south region,
were caught in a conspiracy to steal millions of dollars in
Development Fund for Iraq money. Bloom is now in prison for
almost 4 years; Stein, for 9 years. Others caught in that web
include Steven Merkes who is in prison for just over a year.
Bruce Hopfengardner will be sentenced later this month. And we
have five more that will be prosecuted soon.
There are also, as you mentioned, Mr. Chairman, over 70
cases ongoing managed by my investigators and over 30 under
prosecution at the Department of Justice, and I expect in the
course of this year we are going to see significant progress,
the fruits of these investigations and the results of these
prosecutions.
Ultimately, it is about coordination, with both the DOJ and
with my colleagues here at the table, through a series of task
forces that helped get the job done in Iraq today. And most
importantly, I think, the latest significant development is the
formation of the Joint Operations Center co-located at the FBI
wherein a variety of all of the U.S. government entities with
oversight in Iraq are working together, communicating about
leads, pursuing cases and ultimately achieving prosecutions.
Mr. Chairman, Members of the Committee, thank you for your
time and attention to these important matters, and I look
forward to answering your questions.
[The prepared statement of Mr. Bowen follows:]
Prepared Statement of Stuart W. Bowen, Jr.
Chairman Scott, Ranking Member Forbes, and members of the
Subcommittee, thank you for this opportunity to address you today on
the role of the Office of the Special Inspector General for Iraq
Reconstruction on oversight and investigations into Iraq
reconstruction.
To ensure accurate context, permit me to outline several points
essential to understanding the challenges of investigating and
prosecuting fraud in Iraq.
First, corruption within the Iraqi government, indeed within the
fabric of Iraqi society, is a serious problem that inhibits progress on
many fronts in Iraq. This is widely recognized by the Government of
Iraq and the international community. In our quarterly reports, SIGIR
has called Iraq's endemic corruption problem a ``second insurgency.''
I returned last month from my 16th trip to Iraq and, during my
visit, I met with the Commissioner of Public Integrity, who heads the
institution created by the CPA to increase accountability for public
corruption in Iraq--and the President of the Board of Supreme Audit,
the analogue to the Government Accountability Office, which has existed
in Iraq for many decades. The Iraqi anti-corruption authorities again
emphasized to me the widespread nature of the problem of corruption,
which stretches across the government, afflicting virtually every
ministry. And they outlined for me the difficulties they face in
implementing their respective anti-corruption mandates.
The CPI Commissioner told me that he currently has 2,000 cases
involving $5 billion in alleged corruption. And the President of the
Board of Supreme Audit has hundreds of audits ongoing. In virtually
every case, he is uncovering a lack of accountability. Let me emphasize
that the CPI and the BSA oversee Iraqi money--not U.S. money--that is
missing or has been stolen from Iraqi programs.
During my visit, I was informed about political interference with
the work of Iraqi investigators and prosecutors. For example, I learned
that Ministers and former Ministers are exempt from prosecution unless
the assent of the Prime Minister is obtained; and each Minister is
entitled, under an Iraqi criminal code provision, to immunize
selectively ministry employees from being held accountable for
corruption.
Iraq must make progress on rule of law enforcement, in general, and
corruption, in particular; political interference with fighting
corruption remains a problem, undermining the effectiveness of the
developing rule of law system and consequently eroding the Iraqi
people's confidence in their government.
Iraq is a sovereign state. The role of the United States thus is to
encourage the development of an efficient Iraqi justice system. We do
this for its own sake and for the sake of maintaining and building upon
the efforts made, at great cost in blood and treasure, by Americans and
Iraqis since the liberation of Iraq.
SIGIR's specific role in this process has been to review the
effectiveness of United States efforts to improve the rule of law
system and to build up the corruption-fighting capacity of the Iraqi
government.
On July 28, 2006, SIGIR released a survey on this subject and found
that American efforts were funded at a very modest level, given the
scope of the problem, receiving about $65 million (about three-tenths
of one percent of our total reconstruction spending). My auditors found
that American efforts have not been sufficiently coordinated and
focused and that more adequate leadership and organization was needed.
The U.S. Embassy has responded to some of these concerns since the
review was released. SIGIR will soon release another review on the
issue, updating our previous report.
SIGIR has a continuing investigative responsibility to detect and
investigate malfeasance in American relief and reconstruction programs
in Iraq. As part of this effort, we have developed good working-level
and leadership-level relationships with the CPI and the BSA. We
coordinate with these Iraqi agencies whenever we come across evidence
of potential wrongdoing by Iraqis. SIGIR, of course, concentrates its
law enforcement efforts on American targets and works with the
Department of Justice in their effective prosecution.
My second point is that the incidence of corruption within the U.S.
reconstruction program--judging from those cases that we have uncovered
thus far--appears to constitute a relatively small component of the
overall American financial contribution to Iraq's reconstruction. Based
on the work of our 18 career investigators on SIGIR staff, I believe
that losses to American taxpayers from fraud within reconstruction
programs will likely amount to a relatively small percentage of the
overall investment in Iraq, totaling in the tens of millions (rather
than hundreds of millions or billions, as is sometimes imagined).
However, the fact that the fraud we have detected is relatively small
(to date) does not diminish the aggressiveness with which SIGIR pursues
allegations of fraud in Iraq. We have found egregious incidents of
fraud. And in partnership with the Department of Justice, SIGIR has
produced clear results in prosecutions and convictions.
For example, in January, two individuals were sentenced to prison
as a result of SIGIR investigations. In early February, indictments
were announced of five more individuals, resulting from SIGIR
investigations. To date, SIGIR has opened over 300 cases, and we have
over 70 ongoing investigations. Thirty-two of those cases are under
prosecution at the Department of Justice.
We believe that the publicity our enforcement actions have received
has helped to deter misconduct in the U.S reconstruction program. And
we also believe that enforcement will be an increasingly important part
of SIGIR's mission over the next 18 months. Moreover, in the course of
this year, we expect to produce concrete investigative results as
significant current cases come to fruition.
SIGIR remains committed to a robust, deterrent presence in Iraq as
long as our temporary organization exists. Today, I have five
investigators on the ground in Iraq investigating fraud. Although there
are other law enforcement agencies fighting fraud in Iraq, SIGIR has
maintained over the past three years the largest contingent of fraud
investigators in Iraq. My investigators travel the country under
dangerous conditions, pursuing leads, interviewing witnesses, and
piecing together evidence on a wide variety of cases. Their work also
takes them to other countries in the region. Of note, SIGIR is
currently reducing its overall personnel ``footprint'' in Baghdad to
conjunction with the reduction in spending of appropriated dollars on
Iraq reconstruction.
One of the most important aspects of our investigative efforts is
the development of task-force relationships with other agencies
involved in oversight in Iraq, including my colleagues from the Office
of Inspector General of the Department of Defense and the Defense
Criminal Investigative Service, as well as the Federal Bureau of
Investigation. SIGIR has 16 investigators in Arlington, and we are
participating in the new Joint Operations Center located at the FBI to
coordinate and enhance fraud investigations in Iraq.
SIGIR's first task force was the Special Investigative Task Force
for Iraq Reconstruction (SPITFIRE), and it combined the efforts of the
Internal Revenue Service, the Department of Homeland Security,
Immigrations and Customs enforcement office, the FBI and the Department
of State Office of Inspector General. That task force was able to
effectively pursue the Bloom-Stein conspiracy that my auditors
uncovered in Hillah, Iraq--a very egregious kickback and bribery scheme
involving over $10 million in reconstruction funds that Philip Bloom,
the contractor, and Robert Stein, the Coalition Provisional Authority
comptroller for that region, engineered for their own criminal ends.
SPITFIRE continues its work today; and we continue to pursue a number
of leads that arose from the Bloom-Stein case.
The other major task-force initiative that SIGIR has initiated with
the FBI is the International Contract Corruption Task Force (ICCTF).
ICCTF prompted the creation of the Joint Operations Center mentioned
above, which is producing the effective collection and coordination of
investigative leads and source development. Although I am not at
liberty to discuss details of these case, I am very pleased with the
very significant progress the JOC investigators have made, the news of
which I expect to be forthcoming later this year.
Along with SIGIR, the ICCTF includes the U.S. Army's Criminal
Investigative Division's Major Procurement Fraud Unit, the Defense
Criminal Investigative Service, the FBI, and the inspectors general of
the Department of State and the Agency for International Development.
SIGIR is also part of the DOJ National Procurement Fraud Task
Force. We continue to work closely with DOJ in the investigation and
prosecution of our cases.
Finally, to coordinate efforts in oversight in Iraq, I formed the
Iraq Inspector General's Council (IIGC) three years ago, which brings
together every agency with oversight authority in Iraq for a meeting
every quarter. The IIGC exists to deconflict and coordinate the member
agencies' oversight efforts in Iraq.
SIGIR is not limiting its efforts just to addressing contractor
misconduct through the criminal justice system. We also refer cases to
the U.S. government's administrative debarment and suspension
processes. To date, the competent oversight authorities have, through
established rules that preserve due process, suspended 17 companies and
individuals, debarred ten more, and have another 9 pending debarments.
To date, SIGIR has produced 13 quarterly reports, 86 audit reports,
and 90 inspection reports. Our auditors and inspectors regularly refer
investigative leads to our investigators some of which have developed
into very significant cases. The Bloom-Stein case is just one example.
SIGIR's three lessons-learned reports produced to date have
provided recommendations on policies designed to improve economy,
efficiency and effectiveness for the Iraq program and for future
reconstruction and stabilization operations. The reports have prompted
the introduction of reform measures in the Congress that will improve
contracting processes. SIGIR is at work on a lessons-learned capping
report, which will be produced at the end of this year. It is my hope
that our lessons learned reports will prompt reforms that will improve
the capacity of law enforcement to deter crime.
Mr. Chairman, with respect to H.R. 400, Representative
Abercrombie's bill entitled the ``War Profiteering Prevention Act of
2007, our position is essentially what it was when we were asked to
reflect on its counterpart at a Senate hearing this past March. SIGIR
remains a strong proponent of legislation that would strengthen efforts
to punish fraud or abuse in contracting programs in Iraq or elsewhere.
We look forward to working with the Department of Justice to enforce
H.R. 400, should it become law. That having been said, I must add that,
as we have developed criminal cases in Iraq, we have not become aware
of instances where the Justice Department was unable to prosecute,
under existing law, on the facts we developed in our investigations.
One of our responsibilities in Iraq is to encourage efficiency in
the reconstruction effort. In that role, we have prompted management to
seek the widest possible participation by business enterprises
(especially Iraqi firms) in reconstruction. The security risks in Iraq
are self-evident, and thus the risks to any business enterprise
operating in such an environment are mammoth. International companies
likely will not get into the business of reconstruction in Iraq without
incentives that render the risk-taking worthwhile. This reality should
figure in the development of legislation that affects contracting in
Iraq or similarly insecure environments.
Whether H.R. 400 becomes law, SIGIR will continue to aggressively
pursue investigations, provide robust oversight through audits and
inspections, and will press for more efforts to improve contract
administration, quality assurance, and quality control. It is my hope
that our continuing efforts will help promote an aim we all share--a
reconstruction program that is administered and executed honestly, and
is as well-managed and efficient as possible under very challenging
circumstances.
Mr. Chairman, members of the Committee, thank you for your time and
attention to these important matters, and I look forward to answering
your questions.
Mr. Scott. Thank you.
Mr. Gimble?
TESTIMONY OF THOMAS F. GIMBLE, PRINCIPAL DEPUTY INSPECTOR
GENERAL, U.S. DEPARTMENT OF DEFENSE, WASHINGTON, DC
Mr. Gimble. Mr. Chairman, Members of the Subcommittee,
thank you for the opportunity to appear today before you.
The global war on terror is a top priority for the
Inspector General and, currently, we have about 180 people
providing oversight.
To date, $558 billion in DoD funds have been appropriated
to support the fight against terrorism and to support the men
and women of our Armed Forces in Southwest Asia.
To accomplish our oversight mission, we have a combination
of initiatives, to include establishing an in-theater oversight
presence and improving interagency coordination to minimize
duplication within the oversight community. This includes
participation in the Iraq Inspectors General Council chaired by
the Special Inspector General for Iraq Reconstruction.
In March of 2006, we established our forward field site in
Qatar. In February of 2007, we established two sites, Camp
Victory and the International Zone, in Iraq. This month, we are
establishing our forward field site at Bagram Air Base in
Afghanistan. We are also assessing the need for the
establishment of a Defense Criminal Investigative Service
office in Afghanistan.
Of the 22 ongoing global war on terror-related audits, 19
are Iraq-related audit projects involving critical readiness
issues that directly impact the warfighter, such as personnel
operational equipment readiness; sustainability of small arms
programs; and the resetting of ground vehicles and equipment
with the combatant commands. Our audits also include the
oversight of contracting, cash management, and other monetary
assets within Iraq, as well as the execution of the
supplemental funds used to train and equip Iraq and Afghanistan
security forces.
The Defense Criminal Investigative Service, or DCIS, the
criminal investigative arm of the DoD inspector general, has
been engaged in investigating DoD-related matters pertaining to
the Iraqi theater since the start of the war. The presence of
the DCIS in the region has led to 93 investigations in areas
such as corrupt business practices; loss of U.S. funds through
contract fraud; and the theft of military equipment.
DCIS is currently conducting 78 investigations related to
the war effort, which include war profiteering, contract fraud,
and contract corruption. Fourteen of these investigations are
being conducted by DCIS special agents in the Iraqi theater.
The remaining 64 investigations are being conducted by special
agents in our CONUS and Germany-based DCIS offices.
Both closed and ongoing investigations have resulted in
four Federal criminal indictments, nine Federal criminal
informations, and two Article 32 hearings under the Uniform
Code of Military Justice.
As a result of the investigations, nine U.S. persons and
one foreign person were convicted of felony crimes. It resulted
in a total of approximately 15 years confinement and 11 years
of probation. Additionally, two contractors signed settlement
agreements with the U.S. Government.
In all, about $9.8 million was paid to the U.S. in
restitution; $323,000 levied in fines and penalties, $3,500 was
forfeited; and $61,000 was seized.
In addition to the above judicial actions, four individuals
and one company were debarred from contracting with the U.S.
Government, and 19 companies and personnel were suspended.
Our policy and oversight component continues to play a key
role in developing and promoting the establishment of effective
oversight and security organizations in both Afghanistan and
Iraq, to include the development of a viable self-sustaining
Inspector General system.
Our intelligence component currently has two ongoing
projects related to improving the intelligence support to the
combatant commanders and warfighters.
We are committed to ensuring that the appropriated
resources are used effectively.
I would like to submit my written statement for the record,
and I am prepared to answer your questions.
[The prepared statement of Mr. Gimble follows:]
Prepared Statement of Thomas F. Gimble
Mr. Scott. Thank you very much.
Mr. Sabin?
TESTIMONY OF BARRY M. SABIN, DEPUTY ASSISTANT ATTORNEY GENERAL,
U.S. DEPARTMENT OF JUSTICE, WASHINGTON, DC
Mr. Sabin. Chairman Scott, Ranking Member Forbes, Members
of the Subcommittee, thank you for the opportunity to be here
today to discuss the efforts of the Department of Justice to
combat procurement fraud relating to spending on the wars and
rebuilding efforts in Iraq and Afghanistan.
I would like to reiterate the Department of Justice's
commitment to a strong and vigorous enforcement effort in this
area and address three primary points.
First, the Department of Justice has made the investigation
and prosecution of procurement fraud, including procurement
fraud related to the wars in Iraq and Afghanistan, a priority
and has devoted significant prosecutorial and investigative
resources to that effort.
Second, the Department is working through the International
Contract Corruption Task Force, including the Special Inspector
General for Iraq Reconstruction and others Inspectors General,
and traditional law enforcement partners to investigate and
prosecute procurement fraud and has already developed a track-
record of success in this area.
Third, in order to leverage law enforcement resources and
more effectively address procurement fraud, the Department
formed the National Procurement Fraud Task Force last year. The
task force is off to a successful start, has formed key working
committees, and is already working to identify and remove
barriers to preventing, detecting and prosecuting procurement
fraud.
The Department of Justice has taken an aggressive,
proactive leadership position to help ensure that dollars from
the public fist are used for the purpose to which they have
been appropriated and not to line the pockets of corrupt
individuals or companies. We take that responsibility
seriously. Working with the interagency community, the
Department has demonstrated this commitment at the
investigative and prosecution stages for both civil and
criminal matters.
These DOJ prosecutive components include the criminal,
anti-trust and civil divisions at main Justice, the United
States attorney's offices and the investigative resources at
the FBI.
Just last week, training for prosecutors from across the
country was conducted at the National Advocacy Center in
Columbia, South Carolina. It was productive, and one of the key
themes that emerged and we address was how to streamline these
complex cases in order to bring them more expeditiously.
The Department has been and is working closely with and
through the International Contract Corruption Task Force. It
was established in October 2006 as an operational task force.
The charter agencies and mission are set forth in my written
statement.
These types of procurement fraud cases are usually very
complex and resource intensive. The cases often involve
extraterritorial conduct as well as domestic conduct requiring
coordination between appropriate law enforcement agencies.
Investigating the international component often proves
difficult due to the need to cooperate with foreign law
enforcement officials and due to the burden of providing
adequate security to prosecutors and investigators working
abroad. Indeed, the difficulty of locating and collecting
evidence and interviewing witnesses in an active combat zone
cannot be overstated.
Despite these challenges, the Department of Justice will
continue to pursue these cases wherever the evidence leads.
The Department has charged 25 individuals criminally for
public corruption and government fraud relating to the war on
terror, which includes matters involving Iraq, Kuwait and
Afghanistan.
For example, on February 1 of this year, three Army
officials and two civilians were indicted for various crimes
related to a scheme to defraud the Coalition Provisional
Authority South Central Region in Iraq. Defendant Whiteford was
once the second most senior official in this area. Defendant
Wheeler was an advisor for CPA projects for the reconstruction
of Iraq. In August of last year, a lieutenant colonel in the
United States Army Reserves pleaded guilty to conspiracy to
commit wire fraud and money laundering in connection with this
scheme.
The charges against these individuals emanated from an
investigation into illegal conduct by Robert Stein, CPA South
Central's comptroller and funding officer, and Philip Bloom, a
U.S. citizen who resided in Romania and Iraq. Both have pleaded
guilty to conspiracy, bribery and money laundering.
The LOGCAP Working Group, which operates out of the U.S.
attorney's office in the Central District of Illinois, has also
filed criminal charges against eight individuals for bribery
and kickbacks associated with Iraq reconstruction efforts and
military operations in Kuwait, and they include a defendant
formerly serving as the Army's theater food service advisor for
Kuwait, Iraq and Afghanistan who pled guilty to bribery, and a
former subcontracts manager for Kellog, Brown & Root who
pleaded guilty to major fraud against the United States and
conspiracy to commit money laundering.
The Department formed the National Procurement Fraud Task
Force in October of last year. The task force has been and will
continue to focus on the objectives and missions articulated in
my written statement. To accomplish these objectives, the task
force has created working committees to address particular
issues, such as legislation, training and private-sector
outreach relating to procurement fraud. Each committee is
chaired by a high-level member of the Inspector General
community or the FBI.
In conclusion, the Justice Department has already taken
significant steps to improve the effectiveness of Federal law
enforcement in this area and will continue to maintain the
investigation and prosecution of procurement fraud as a
priority. We look forward to working with the Subcommittee in
this area.
I will do my best to answer any questions you may have.
[The prepared statement of Mr. Sabin follows:]
Prepared Statement of Barry M. Sabin
Mr. Scott. Thank you very much.
Mr. Grayson?
TESTIMONY OF ALAN GRAYSON, GRAYSON & KUBLI, P.C., McLEAN, VA
Mr. Grayson. Good afternoon, and thank you very much for
the opportunity to be here today and to speak before this
honorable Subcommittee.
My name is Alan Grayson. I am an attorney, and I represent
whistleblowers in numerous cases involving fraud by government
contractors in Iraq. At the moment, there are only four such
cases in litigation that have been unsealed, and I am attorney
of record in all four of them. There are three of them against
KBR.
Needless to say, there have been far more than four
instances of war profiteering in Iraq. Billions of dollars are
missing, and many billions more wasted. How it came be that
only four such cases are unsealed and in litigation and how it
is that even in those four cases, the Bush Administration is
not participating are the subject of my testimony today.
As I will explain, in our 5th year in the war in Iraq, the
Bush administration has not litigated a single case against any
war profiteer under the False Claims Act.
For over a century, war profiteering cases have been
brought under the Civil False Claims Act. This statute was
enacted in 1863 to combat war profiteering during the Civil
War. Lawyers often refer to that statute as the Lincoln law.
In 1986, when Congress enacted Congressman Howard Berman's
amendments to the Civil False Claims Act, it lauded the act as
the ``government's primary litigative tool for combating
fraud,'' and the Supreme Court has recognized the Civil False
Claims Act is intended to reach all types of fraud, without
qualification, that result in financial loss to the government.
The Civil False Claims Act imposes treble damages and
penalties on war profiteers, and the threat of having to pay
three times what you steal can be a real deterrent, if that
threat is perceived as real.
Moreover, the Civil False Claims Act deputizes
whistleblowers to bring lawsuits in the name of the U.S.
Government against war profiteers. The whistleblowers can keep
between 15 percent and 30 percent of the recovery, but with
treble damages, the government ends up well ahead.
The Civil False Claims Act yielded total recoveries of over
$3 billion last year alone. But in Iraq, where there has been
war and war profiteering for over 4 years, the total recovery
to date is less than $6 million--in the midst of what Senator
Dorgan rightly has called an orgy of greed by military
contractors.
Why has the Civil False Claims Act so far been unsuccessful
in punishing and preventing war profiteering committed in Iraq,
and what can be done to change that?
One reason is that the Bush administration has swept cases
under the rug by obtaining and perpetuating court orders
sealing the cases. These orders allow the Administration to
threaten whistleblowers with dismissal of their cases or
contempt of court simply for telling people what they know.
To prevent the abuse of this sealing provision, which is
only supposed to be in effect for 60 days--but, in this case,
60 days becomes 60 weeks and almost 60 months--there needs to
be a firm limit on extensions of the seal. Clearly, 1 year is
enough. The seal is meant to help to uncover fraud, not to bury
it.
A second reason why the Civil False Claims Act has been
unsuccessful in punishing and preventing war profiteering in
Iraq is that after cases are unsealed, the courts create and
apply rules to the cases that have no basis in the statute. For
instance, the act punishes anyone who knowingly makes, uses or
causes to be made or used a false record or statement to cause
a false claim to be paid or approved by the government.
Last year, in our Custer Battles case, the first Iraq war
profiteering case to go trial, a jury found the defendants
guilty of over 40 acts of fraud, but the judge suspended the
verdict because he added a presentment requirement, a
requirement that simply does not exist in the statute.
Long ago, the U.S. Supreme Court said the courts should
refuse to accept any rigid restrictive reading of the Civil
False Claims Act, but that is exactly what is happening. Based
on my experience, Congress needs to make the Supreme Court's
wise words law by providing that the act shall be broadly and
liberally construed, in accordance with its remedial purpose.
Other acts have that language; and this act needs it.
Thanks to Congress, the Civil False Claims Act already
makes it clear that a defendant's knowledge of the fraud is all
that is required, not the specific intent to defraud, and only
a preponderance of the evidence of that is required.
What is needed now is for Congress to provide that, for a
complaint under the Civil False Claims act, only a short and
plain statement of the claim showing that the pleader is
entitled to relief is required. That is the normal standard
under Federal Civil Rule 8(a). It is the standard when a
contractor sues the government, and it would be the standard
when the government sues a contractor, if the lower courts had
not imposed a higher standard.
Now a third reason why the Civil False Claims Act has been
unsuccessful in punishing and preventing war profiteering is
that the Bush administration has done virtually nothing to
pursue such cases. It has settled two cases without litigation
for pennies on the dollar, and it declined to prosecute 10
more. All the rest remain under seal.
As I said before, in our 5th year of the war in Iraq, the
Bush administration has not litigated a single case against any
war profiteer under the False Claims Act. For all the Bush
administration claims to do in the war on terrorism, it is a
no-show in the war against war profiteers.
Congress needs to fix that flaw by providing that the
executive branch's see-no-evil-hear-no-evil-speak-no-evil
policy regarding fraud perpetrated against the soldiers and the
taxpayers in a war zone is no longer an option. I recommend
that the False Claims Act be amended to provide that the
Administration shall participate in all war profiteering cases,
whenever the whistleblower complaint establishes a prima facie
case of fraud. Both the troops and the taxpayers deserve no
less.
Fraud against the taxpayers is bad enough, but when that
fraud is committed against the U.S. Army, engaged in battle, it
is intolerable. As Lincoln said 144 years ago, ``Worse than
traitors in arms are the men who pretend loyalty to the flag,
feast and fatten on the misfortunes of the nation, while
patriotic blood is crimsoning the plains, and their countrymen
moldering in the dust.''
For 4 years, I have fought the war profiteers who have been
feasting and fattening on our misfortune. Let us acknowledge
how far we have fallen from President Lincoln's standards and
ideals and amend the Lincoln law to remind this President and
future Presidents of their constitutional duty to see that the
laws are faithfully executed.
Thank you very much.
[The prepared statement of Mr. Grayson follows:]
Prepared Statement of Alan Grayson
Good afternoon. Thank you very much for the opportunity to be here
today, and to speak before this honorable Subcommittee.
My name is Alan Grayson. I'm an attorney. I represent
whistleblowers in numerous cases involving fraud by government
contractors in Iraq. At the moment, there are only four such cases in
litigation that have been unsealed, and I am attorney of record in all
four of them. Three of them are against KBR.
Needless to say, there have been far more than four instances of
war profiteering in Iraq. Billions of dollars are missing, and many
more billions wasted. How it came be that only four such cases are
unsealed and in litigation--and how it is that even in those four
cases, the Bush Administration is not participating--are the subjects
of my testimony today.
War profiteering cases often are brought under the Civil False
Claims Act. This statute was enacted in 1863, to combat war
profiteering during the Civil War. Lawyers often refer to the statute
as the ``Lincoln Law.''
In 1986, when Congress enacted Congressman Howard Berman's
amendments to the Civil False Claims Act, it lauded the Act as the
``Government(s primary litigative tool for combating fraud.'' \1\ The
U.S. Supreme Court has recognized that the Civil False Claims Act is
``intended to reach all types of fraud, without qualification, that
might result in financial loss to the Government.'' \2\
---------------------------------------------------------------------------
\1\ S. Rep. No. 99-345, at 2 (1986).
\2\ United States v. Neifert-White Co., 390 U.S. 228, 232 (1968).
---------------------------------------------------------------------------
There are criminal laws, such as mail fraud, wire fraud, false
statements, and criminal false claims statutes, that could be used to
address war profiteering.\3\ These laws do little to punish war
profiteering corporations, however. There are several reasons for this.
First, the burden of proof--beyond a reasonable doubt--may be difficult
to establish. Second, corporations cannot be incarcerated. Third, the
fines often are so small that crime does pay.
---------------------------------------------------------------------------
\3\ 18 U.S.C. 287, 1001, 1341 & 1343 (2000).
---------------------------------------------------------------------------
The Civil False Claims Act, in contrast, imposes treble damages and
penalties on war profiteers. The threat of having to pay three times
what you steal can be a real deterrent.
Moreover, the Civil False Claims Act ``deputizes'' whistleblowers
to bring lawsuits in the name of the U.S. Government, against war
profiteers. The whistleblowers can keep between 15% and 30% of the
recovery, but with treble damages, the U.S. Government ends up well
ahead.
The Civil False Claims Act yielded total recoveries of over $3
billion last year alone.\4\ Yet in Iraq, where there has been war and
war profiteering for over four years, the total recovery to date is
less than $6 million--in the midst of what Senator Dorgan rightly has
called ``an orgy of greed'' by military contractors. Why has the Civil
False Claims Act so far been unsuccessful in punishing or preventing
war profiteering committed in Iraq? And what can be done to change
that?
---------------------------------------------------------------------------
\4\ ``Justice Department Recovers Record $3.1 Billion in Fraud and
False Claims in Fiscal Year 2006,'' DOJ News Release (Nov. 21, 2006),
www.usdoj.gov/opa/pr/2006/November/06_civ_783.html
---------------------------------------------------------------------------
One reason is that the Bush Administration has swept such cases
under the rug, by obtaining and perpetuating court orders sealing the
cases. These orders allow the Administration to threaten whistleblowers
with dismissal of their cases, or even contempt of court, for simply
telling people what they know.
According to SIGIR information, most of the Civil False Claims Act
cases filed regarding war profiteering in Iraq remain under seal. The
False Claims Act requires whistleblower cases to be kept under seal for
60 days.\5\ Thanks to extensions that the Bush Administration has
obtained, those 60 days have become 60 weeks, and are heading toward 60
months. Although the judges almost always rubber-stamp these
extensions, in one recent case against KBR, the judge refused to do so,
and the case was unsealed.
---------------------------------------------------------------------------
\5\ 31 U.S.C. 3730(b)(2) (2000).
---------------------------------------------------------------------------
To prevent the abuse of the sealing provision, there should be a
firm limit on extensions. Certainly, one year is enough. If the
Executive Branch simply wants more time to investigate a case, and can
show good cause, it might have that extra time, but not at the expense
of keeping the public and Congress in the dark. The seal is meant to
help uncover fraud, not to bury it.
A second reason why the Civil False Claims Act has been
unsuccessful in punishing and preventing war profiteering in Iraq is
that after cases are unsealed, the courts create and apply rules to the
cases that have no basis in the statute. For instance, the Act punishes
anyone who ``knowingly makes, uses, or causes to be made or used, a
false record or statement to get a false or fraudulent claim paid or
approved by the Government.'' \6\ Last year, in our Custer Battles case
``the first Iraq war profiteering case to go trial,'' a jury found the
Defendants guilty of over 40 acts of fraud. The judge suspended the
verdict, however, because he added a ``presentment'' requirement--a
requirement that simply doesn't appear in the statute.
---------------------------------------------------------------------------
\6\ 31 U.S.C. 3729(a)(2) (2000).
---------------------------------------------------------------------------
Another recent case alleged that KBR, under its infamous cost-plus
LOGCAP Contract, ran empty trucks back and forth across the desert in
Iraq, in order to run up the bill on the taxpayers. The judge dismissed
the 24-page complaint because, he said, it wasn't ``specific'' enough.
Yet this ``specificity'' requirement also doesn't appear in the
statute.
Long ago, the U.S. Supreme Court said that the courts should
``refuse[] to accept a rigid restrictive reading'' of the Civil False
Claims Act, and should ``broadly construe[]'' it.\7\ That is simply not
happening. Based on my experience, Congress needs to make the Supreme
Court's wise words the law, by providing that the Act shall be
liberally construed, in accordance with its remedial purpose. Other
Acts have such language; this Act needs it.
---------------------------------------------------------------------------
\7\ Niefert-White, 390 U.S. at 786 & 788.
---------------------------------------------------------------------------
Thanks to Congress, the Civil False Claims Act already makes it
clear that only a preponderance of the evidence, not ``clear and
convincing evidence,'' is required. It also makes it clear that only a
defendant's knowledge of the fraud, not a specific intent to defraud,
is required.\8\ What is needed now is for Congress to provide that as
for the Complaint, only ``a short and plain statement of the claim
showing that the pleader is entitled to relief'' is required. This is
the normal standard under Federal Rule 8(a), it is the standard when a
contractor sues the Government, and it would be the standard when the
Government sues a contractor, if the lower courts had not imposed a
higher standard on their own.
---------------------------------------------------------------------------
\8\ 31 U.S.C. 3729(b) (2000).
---------------------------------------------------------------------------
A third reason why the Civil False Claims Act has been unsuccessful
in punishing and preventing war profiteering in Iraq is that the Bush
Administration has done virtually nothing to pursue such cases. It has
settled two cases, without litigation, for pennies on the dollar. It
has declined to prosecute nine more cases. All the others remain under
seal. In our fifth year of the War in Iraq, the Bush Administration has
not litigated a single case against any war profiteer under the False
Claims Act. It evidently has not even sued any U.S. contractor in Iraq,
for breach of contract. Two years ago, Senator Grassley wrote to the
Attorney General, asking why the Administration was taking no action in
such cases. There was no reply. For all the Bush Administration claims
to do in the war against terrorism, it is a no-show in the war against
war profiteers.
It appears the Civil False Claims Act has a flaw that remained
hidden for 138 years, but is now apparent--it gives a do-nothing
Administration the opportunity to do nothing. Congress can try to fix
that flaw by providing that the Executive Branch's ``see no evil, hear
no evil, speak no evil'' policy regarding fraud perpetrated against the
soldiers and the taxpayers--in a war zone--is no longer an option. I
recommend that the False Claims Act be amended to provide that the
Administration shall participate in all war profiteering cases,
whenever the whistleblower complaint establishes a prima facie case of
fraud. Both the troops and the taxpayers deserve no less.
Fraud against the taxpayers is bad enough. But when that fraud is
committed against the U.S. Army, engaged in battle, it is intolerable.
As Lincoln said, 144 years ago, ``worse than traitors in arms are the
men who pretend loyalty to the flag, feast and fatten on the
misfortunes of the Nation, while patriotic blood is crimsoning the
plains . . . and their countrymen moldering the dust.''
For four years, I have fought the war profiteers, who have been
feasting and fattening on our misfortune. The Bush Administration has
not fought them, not in the least. Let us acknowledge how far we have
fallen from President Lincoln's standards and ideals, and amend the
Lincoln Law, to remind this President and future Presidents of their
constitutional duty to see that the laws are faithfully executed.
Mr. Scott. I want to recognize Mr. Chabot from Ohio who has
joined us.
Ms. Razook?
TESTIMONY OF ERICA RAZOOK, LEGAL ADVISOR TO THE BUSINESS AND
HUMAN RIGHTS PROGRAM, AMNESTY INTERNATIONAL, NEW YORK, NY
Ms. Razook. Thank you, Mr. Chairman, Ranking Member Forbes,
Members of the Subcommittee. My name is Erika Razook, and I am
here on behalf of Amnesty International.
Amnesty International has been investigating and reporting
on human rights abuses for over 40 years, and one of the most
constant themes in our work has been that we see the most
horrible and worst abuses when there is a culture of impunity
for them, and that is what we have seen in this area of private
military and security contractors working on behalf of the
United States government in countries around the world and in
particular in Iraq and Afghanistan.
Literally, there are over 100,000 contractors in Iraq and
Afghanistan alone. Numerous reports of human rights abuses,
including torture, cruel and inhumane, degrading treatment, and
shootings and killings of innocent civilians have surfaced and
have even come to light in the Army's own investigations. Yet,
despite these large numbers of contractors and reports of
abuse, we have seen only two indictments of abuse by
contractors.
What I would like to talk to you briefly about today is the
scope of the problem, the lack of prosecution and the
environment of impunity for contractor crime abroad, and the
solution that Amnesty sees that Congress can take a step toward
in the immediate future with the present proposed legislation
that is before Congress now.
We have been in dialogue with both government agencies that
are contracting private military and security firms and with
the companies themselves, and we understand that the companies
are working in a difficult and complex environment, inherently
risky to work in.
However, the problem here and the problem that we see is
that there is virtually no control or oversight over these
contracted personnel, which has led to this environment of
impunity, where a contractor can shoot an Iraqi civilian in the
street who later dies and never sees any punishment, redress or
prosecution.
It is essential that the Department of Justice prosecutes
cases of criminal misconduct of contractors. To continue to
allow cases of human rights abuses to languish on the court's
dockets, as they have been in the Eastern District of Virginia
where there are 17 cases of detainee abuse which have been on
the court's docket since 2004, is to sanction impunity and to
deny meaningful access to justice to the victims of these
abuses.
But, right now, Congress has an opportunity before it to
take a step forward to address this problem of impunity, and
that is why Amnesty is supporting Representative Price's H.R.
369 and H.R. 2740.
There are three crucial areas that these bills address and
that I will discuss briefly here.
First is the expansion of the Military Extraterritorial
Jurisdiction Act, otherwise known as MEJA. The expansion would
cover contractors who are not only supporting a DoD mission,
but contractors whose work is carried out in a region where
there is a contingency operation.
This is a very important provision because where we have
seen the growth of contractors carrying out work for the U.S.
Government is not in the more intimately DoD-aligned roles, but
in ancillary roles, such as security for reconstruction
projects, even border control, and now there is discussion of
contractors working in peacekeeping roles as well.
So, for these extended functions, it is necessary that
Congress extend the application of MEJA so that these
contractors do not escape accountability.
The second is the enforcement mechanisms that are included
in H.R. 369 and 2740. These bills establish an FBI
investigative unit which would be on the field in the area of
the contingency operation. This will help the Department of
Justice to overcome the practical hurdles of investigating
cases, securing witness testimony and locating evidence.
The third area is the transparency provisions which require
reporting of the DOJ to Congress on the number of complaints
received, the investigations into these complaints of
contractor misconduct, the cases that have been opened, the
results of the cases that have been closed, and the capacity
and effectiveness of the Department of Justice in prosecuting
such misconduct.
These transparency positions are crucial and vital to
ensuring accountability for human rights violations because
what we have seen thus far is that Congress does not know, the
public does not know, and we at Amnesty do not know why these
cases have not been prosecuted.
Why have about 3 years passed since the horrendous torture
and inhumane treatment at Abu Ghraib, since these pictures came
to light, and since the Army investigations indicated that
contractor personnel were involved in these abuses? Why have
there still not been prosecutions? These transparency
provisions will give Congress the power o further legislative
and to ensure that these human rights violations do not go
unaddressed.
Finally, Amnesty International has previously stated in its
2004 report, Human Dignity Denied, that human rights
violations, whether they are committed by military or civilian
personnel, should be tried in civilian court, and these
civilian trials should conform, of course, to international
standards of fair trials, and the death penalty should not be
imposed., and I bring that point up because the death penalty
is an option under the UCMJ and under the torture statute.
For these reasons, Amnesty International asks Members of
Congress and you particularly in the Subcommittee who are
paying careful attention to this issue to pass this very
important legislation to close loopholes and to ensure that
there is accountability for human rights violations committed
by contracted personnel hired by our government.
Thank you.
[The prepared statement of Ms. Razook follows:]
Prepared Statement of Erica Razook
Thank you Mr. Chairman and members of Congress; Amnesty
International (AI) is pleased to testify at this important and timely
hearing.
summary
In May of 2006, AI publicly called on the Department of Justice to
immediately investigate and, where clear evidence of human rights
violations exists, prosecute employees or contractors of private
military and security firms operating overseas for their involvement in
human rights violations. However, despite the passing of more than a
year since Amnesty International made these demands, to date, the same
17 pending cases of detainee abuse, including abuse at Abu Ghraib, by
civilians remain languishing on the docket of the U.S. Attorney's
Office in the Eastern District of Virginia.
In addition to the cases of detainee abuse, Amnesty International
is aware of hundreds of serious incident reports (SIRs) voluntarily
filed by contractors, and reported shootings and killings by security
contractors that have also apparently been unaddressed by the Justice
Department. AI filed a brief in support of the Los Angeles Times' suit
requesting that more information in the SIRs be released, which was
denied on national security grounds and contract personnel privacy
concerns. In this environment of apparent impunity for serious criminal
conduct and human rights violations and complete lack of transparency,
the U.S. government's reliance on private contractors has grown
tremendously, creating a dire need for Congress to establish adequate
regulation of the industry. For these reasons, Amnesty International
commends the attention the Judiciary Committee is committing to this
issue and calls for (i) immediate investigation and prosecution of
cases of human rights violations committed by U.S. contractors under
currently available law, (ii) expansion of the Military
Extraterritorial Jurisdiction Act (MEJA) and other current U.S. law to
ensure that security contractors, hired by various agencies of the U.S.
government, do not escape accountability and (iii) greater transparency
to Congress on the status of cases referred to the Department of
Justice, in particular, any circumstances prohibiting it from
prosecuting referred cases of contractor criminal conduct.
Amnesty International emphatically supports the Transparency and
Accountability in Security Contracting Act of 2007 (H.R. 369) and the
MEJA Expansion and Enforcement Act of 2007 (H.R. 2740), introduced by
Representative David Price, which contain several important provisions
not addressed by the Defense Authorization Act (H.R. 1585), and which
largely answer AI's calls for transparency and accountability for human
rights violations in private military and security contracting.
current u.s. law providing for jurisdiction over contractor crime
overseas
The U.S. Justice Department currently has the authority to
prosecute civilian contractors for certain crimes committed outside the
United States under several U.S. laws, including:
The War Crimes Act. This law, 18 U.S.C. Sec. 2441, criminalizes
certain war crimes committed inside or outside the United States by
anyone who is a member of the armed forces or is a U.S. national. Under
the Act, a war crime includes conduct defined as a grave breach of the
Geneva Conventions, or constituting a violation of common Article 3 of
the Conventions. The latter prohibits, inter alia, cruel treatment,
torture, and outrages upon personal dignity, in particular humiliating
and degrading treatment.
The Torture Statute. This law, 18 U.S.C. Sec. 2340, makes it a
criminal offense for any U.S. national acting in an official capacity
``outside the United States'' to commit or attempt to commit torture.
The law was enacted in 1994. Anyone who conspires to commit the acts
prohibited under the statute can be subject to the same penalties as
the actual perpetrator. This law, however, defines torture in an
arguably narrower way than the U.N. Convention against Torture.
The Military Extraterritorial Jurisdiction Act (MEJA) of 2000. This
law, 18 U.S.C. Sec. 3261, criminalizes conduct committed by ``members
of the Armed Forces and by persons employed by or accompanying the
Armed Forces outside the United States'' that would be punishable by
more than one year's imprisonment if engaged in within the United
States. The text of MEJA (18 U.S.C. Sec. 3267(1)(A)) was amended in
2005 to define the term ``employed by the Armed Forces outside the
United States'' to include civilian employees, contractors, or
employees of contractors, not only of the Department of Defense, but
also of ``any other Federal agency, or any provisional authority, to
the extent such employment relates to supporting the mission of the
Department of Defense overseas.'' The U.S. Attorney's Office in the
District of Arizona used MEJA to bring charges against a security
contractor for Assault with a Deadly Weapon and Assault Resulting in
Serious Bodily Injury in February 2007.
The USA PATRIOT Act. Section 804 of this law, 18 U.S.C. Sec. 7 (9),
extends the jurisdiction of U.S. federal courts over military
personnel, including civilian contractors, for violations of federal
criminal law committed at U.S. facilities abroad. The U.S. Department
of Justice has used this provision to bring criminal charges against a
CIA contractor who allegedly beat a detainee who later died in custody
in Afghanistan. The contractor was indicted by a North Carolina grand
jury of Assault with a Dangerous Weapon and Assault Resulting in
Serious Bodily Injury, was found guilty of multiple counts of assault
and was sentenced to over eight years in prison.
expansion of law supported by amnesty international
While past abuses by military and some security contractors may be
prosecuted under current U.S. law, Amnesty International also supports
an expansion of the MEJA and any other U.S. law that would ensure that
contractors, who are taking on a growing number of functions, for
example in security, border patrol and reconstruction projects, do not
escape accountability simply because they may be deemed to not be
``supporting the mission of the Department of Defense''.
The MEJA Expansion and Enforcement Act of 2007 (H.R. 2740) and its
predecessor (H.R. 369) accomplish such an expansion by establishing
jurisdiction over all U.S. government contractors, as long as their
work is carried out outside of the United States in an Armed Forces
contingency operation, compared to the current jurisdiction MEJA
grants, over contractors whose work supports a Department of Defense
mission. The Judiciary Committee should consider amending language to
even further the expansion to all U.S. contractors operating overseas,
as long as they are working to support a mission or effort of the U.S.
government.
Further, Amnesty International supports a clear establishment of
enforcement mechanisms, including organization of any existing
enforcement resources, to ensure that prosecutions are not thwarted due
to practical problems such as collecting evidence and making available
witness testimony. While enforcement mechanisms must be established in
accordance with certain Constitutional protections, and with
consideration to the sovereignty of the host country, international law
recognizes the nationality principle, under which a state may apply and
enforce its criminal law outside of its territorial jurisdiction in
order to hold accountable its own citizens and people who otherwise
avail themselves of its nationality, for their criminal misconduct. The
environment of impunity in which tens of thousands of U.S. contractors
have been and are currently operating overseas is the exact type of
situation necessitating application of this principle.
Thus far, it appears that some investigations overseas have been
conducted, leading to the referral of at least twenty cases of detainee
abuse to the Department of Justice. However, the status of those cases,
and the reason(s) why they have not been acted on in the more than
three years they have been on the docket of the U.S. Attorney's Office
in Eastern Virginia, are unknown. In order to ensure that victims of
human rights abuses have meaningful access to justice, Congress should
mandate, in accordance with H.R. 2740, that the Department of Justice
report to it the status of cases of contractor misconduct overseas to
the extent that, at a minimum, Congress is aware of (i) the number and
type of complaints received, (ii) the number of investigations into
complaints received, (iii) the number of cases opened, (iv) the number
and result of cases closed, and (v) the reasons why prosecutions could
not be brought in cases that were not opened.
preference of civilian prosecutions over application of
uniform code of military justice
The Uniform Code of Military Justice (UCMJ) is applicable to U.S.
troops worldwide and, since the 2007 Defense Authorization Act (P.L.
109-364), can also be used to prosecute certain civilians ``in time of
declared war or contingency operation . . . serving with or
accompanying an armed force in the field.'' The fact that a person is
eligible for trial by court-martial under the UCMJ does not make him or
her ineligible for trial in the ordinary U.S. courts.
In order to prevent arbitrariness--with, for example, civilian
contractors charged with similar or the same crimes as military
personnel, but tried in different jurisdictions--and to avoid any
perception of inappropriate military justice leniency or lack of
impartiality, Amnesty International believes that all personnel,
civilian or military, of low rank or high, should be tried for human
rights abuses in civilian courts. Any trials must conform fully to
international standards for fair trial, and the death penalty--which
could be available under the UCMJ, the War Crimes Act and the Torture
Statute in cases of torture or ill-treatment resulting in death--must
not be imposed.
Mr. Scott. Thank you.
Professor Horton?
TESTIMONY OF SCOTT HORTON, ADJUNCT PROFESSOR OF LAW, COLUMBIA
UNIVERSITY SCHOOL OF LAW, NEW YORK, NY
Mr. Horton. Thank you, Chairman Scott, Ranking Member
Forbes and Members of the Subcommittee. I want to thank you for
the opportunity to speak with you today about this very
important subject.
I would like to highlight three points from the written
remarks I have submitted, and I would also like to come back at
the end and address the question of constitutionality which was
raised by Ranking Member Forbes in his comments.
First, we are facing a major accountability problem. The
force profile has changed dramatically. The current mix draws
far more heavily on civilians than at any time in our history,
and prior to the time the current surge began, there were about
100,000 contractors in Iraq, for instance, against 125,000
Americans in uniform. So this is approaching parity.
If we compare this with the situation in World War II, in
the Korean War, for instance, in both of those conflicts, the
percentage of contract personnel involved would have run
between 3 percent and 5 percent.
But even though this configuration has changed radically,
the way we handle accountability issues has not. That is we
continue to have a focus on those in uniform. So, as a result
today, we are performing at historical levels with respect to
military accountability, but with respect to the civilians, the
system clearly has broken down.
Now the current legislation has some holes in it. In
particular, we have legislation that is tied to the Department
of Defense and legislation which is tied to U.S. installations.
In my own review of individual cases reported in the media and
from other sources, there are a significant number of cases
that are going to fall in the gap between these two categories.
In fact, I would say generally the group of cases I am most
troubled by right now involves homicide and assault and
involves a particular group of security contractors contracted
by the Department of the State where their contract states that
their mission is diplomatic protection.
So I can see if a prosecution were brought under MEJA
today, we would have an immediate squabble--and lawyers would
get to earn a lot of fees--over whether they are covered by
this statute, and I think that would be unfortunate, a waste of
prosecutorial and judicial resources.
H.R. 369 is going to bridge this problem by expanding the
scope of covered persons under the MEJA to cover any U.S.
Government contractor or subcontractor with the focus of their
deployment in the region where the contingency operation is
going on. That strikes me as exactly the correct approach.
Second, we need to consider that the exercise of criminal
jurisdiction may, in fact, be essentially protective in nature.
A significant number of the cases that I have looked at involve
American contractors as victims, not simply as actors.
There may not be a basis to prosecute and investigate those
cases, as things stand right now, and that particularly arises
as a result of the order, Order 17 that was issued by Jerry
Bremer on his last day in Iraq granting complete immunity to
American contractors and contract employees under the Iraqi
criminal justice system.
So they are out under that system, and that means that
there has to be a pro tanto substitute. There has to be a
provision of criminal investigatory authority and criminal
oversight by the United States.
We need to consider here as well if granting this immunity
from the Iraqi system is an objective that the United States
has going forward.
General Petraeus has stated in the last few days that he
sees a Korea-style solution here, a situation where there will
be a substantial force presence in Iraq for the next 50 years.
If that is true, there will be a substantial civilian presence
there as well, and if we want to negotiate the status of forces
agreement with the Koreans that continues this immunity
arrangement, we have to provide the ability to handle criminal
investigations and prosecutions.
Third, I see a false conflict emerging here between the
Uniform Code of Military Justice--its use has been advocated by
Senator Graham--and the MEJA, and I do support Senator Graham's
initiative. It strikes me as an appropriate underscoring of the
authority of military command. I see these things as
complementary and mutually reinforcing and supporting, not as
in conflict.
Finally, Ranking Member Forbes raised questions concerning
the constitutionality of MEJA, and I think it is important to
note that law of war concepts and law of war enforcement have
never been subject to the sort of territoriality rules that
apply generally to criminal law. In fact, if we look at the law
of war norms from the time of the drafting of the American
Constitution, Vattel and Grotius, the two major writers who
were relied upon and known to the framers, both of them argued
that the sovereign has the right and the responsibility to
enforce the laws of war with respect to all those who are
deployed by the sovereign in connection with the war effort.
That includes soldiers, mercenaries, camp followers and
contractors.
Now the Constitution gave Congress the authority to define
the law of nations in this regard, and the proposal that is
made here with respect to MEJA is defining the law of nations
in the way that is completely consistent with the historical
understanding of the criminal law jurisdiction to enforce the
laws of war.
We also have to understand this against the backdrop of the
immunity that is granted here from Iraqi criminal prosecution
because if the result is that there is no available criminal
jurisdiction, neither American nor Iraqi, then we have done
something that is a serious violation of the law. Then there is
a responsibility with Congress, not just a right, to legislate
this.
Thank you.
[The prepared statement of Mr. Horton follows:]
Prepared Statement of Scott Horton
Mr. Scott. Thank you very much.
I thank all the witnesses for testifying.
And we will now have questions for the panel limited to 5
minutes, and I will recognize myself first for 5 minutes.
I wanted to follow up, Professor Horton. Well, I guess I
will start with Mr. Sabin.
He has indicated a lot of kind of areas where there may be
gaps in coverage. When we passed MEJA in 2000, we thought we
had covered the problem of people overseas committing crimes
and find themselves, because they are outside of the
continental United States, not under the criminal code. They
could do it with impunity, and we thought we had covered
everybody. There have been a number of kind of categories of
people--Iraqis committing crimes, either fraud or assault,
contractors of other agencies, other than the Department of
Defense, subcontractors, spouses, I guess, crimes committed off
base.
Has the Department of Justice looked into possible gaps
that need to be closed?
Mr. Sabin. Yes.
Mr. Scott. And do you have a list of recommendations for
us?
Mr. Sabin. We have two different concepts being discussed
here. One is the war profiteering under H.R. 400 and the
problems that that would address, and we can talk about our
discussion in that regard.
The MEJA issue, the statute has been amended. The Patriot
Act provision that deals with the subject matter of the special
maritime and territorial jurisdiction, that was addressed in
the amendment under 2004 and 2005.
As a result of that, it added certain language which would
include the language that the professor referred to, a
contractor in support of DoD mission abroad. So the concern
that he articulated is a fair one, where you have folks that
would be in support of that mission which would raise a factual
issue that prosecutors would need to address in order to have
appropriate ability to bring a case under MEJA.
And remember, MEJA relates to, as articulated, common-law
crime--murder, assault and the like--and we have been able to
exercise MEJA jurisdiction in relationship to the Iraq theater
as well as in other----
Mr. Scott. Well, some people could be over there doing
things that might not be technically Department of Defense. It
might be Department of State in the theater.
Mr. Sabin. Correct. And if it is outside the Patriot Act
extension relating to the special and maritime territorial
jurisdiction of the United States, MEJA looks to the status of
the individual as opposed to Title 18 Section 7 Subsection 9
which is a blend between who the person is, the offender or the
person who is the victim of the crime, blended with the
location of the particular incident occurring.
So, under MEJA, you look to who is involved here, what is
the status of that individual, is it a dependent, is it someone
who is accompanying someone abroad, is it an actual present
service member of the military or a former service member of
the military? So we look through where we are, who it is, and
then figure out is there appropriate jurisdiction under either
the Patriot Act or traditional extraterritorial offenses or
MEJA.
Mr. Scott. Well, let's get to the bottom line. Does the
Department of Justice see any gaps in coverage?
Mr. Sabin. Originally, we are here to talk about the War
Profiteering Act, so I do not have cleared comments to
recommend to you with respect to either H.R. 369 or 2740.
However, I do have comments that I could provide to you
regarding certain constitutional issues that arise from as
presently drafted.
Mr. Scott. Okay. Does anybody else have a list of
categories of people that we need to be covering just in terms
of MEJA jurisdiction? There are----
Professor Horton, you have indicated a number of different
categories that did not seem to be covered. Do you have a list?
Mr. Horton. Yes, sir. I think the specific example I cited
was diplomatic protection under Department of State, and I come
to that just on the reverse analysis, looking at specific
incidents and asking whether a prosecutor looking at all the
tools that are available to him now is going to be able to deal
with it.
Now I agree with Mr. Sabin. I think, obviously, a
prosecutor is going to be able to assert jurisdiction of some
sort, but, because of the way this language has been drafted,
because of it being tied to a mission of the DoD, we are going
to look at a preliminary skirmish in a lot of these cases about
whether the contract really is tied to the DoD, and when it is
written by the Department of the Interior, the Department of
State, USAID, and when it is a subcontractor, we are going to
see that over and over again. That is a waste.
Mr. Scott. Ms. Razook, do you have any comments on just
jurisdiction, who ought to be covered by the criminal code?
Ms. Razook. Yes. And I just want to clarify what Mr. Sabin
said, that the USA Patriot Act covers people who committed a
crime on a U.S. facility abroad, so the category that I
mentioned with contractors doing security for reconstruction
efforts, that is not going to be necessarily on a U.S.
facility. So those types of contractors potentially would fall
in the loopholes left under MEJA and the USA Patriot Act.
Mr. Scott. Thank you.
Mr. Forbes?
Mr. Forbes. Thank you, Mr. Chairman.
Once again, I thank all of you for taking your time to be
here today. I wish we had time to sit down with each of you for
a long period of time, but we are limited to 5 minutes, just
like you are. So I am going to try to be quick on my questions.
And one of the things that I get from listening to all of
you is that we are going to have private contractors in every
contingency operation, every conflict we have from now on, and
I think even Professor Horton acknowledged those percentages
are increasing, and that is just the nature of the beast. We
cannot deliver troops. We cannot do a lot of things without the
contractors there.
Mr. Bowen, I want to first thank you--Mr. Gimble--both of
you for the jobs you do. We have had you in a number of
hearings, and both Republicans and Democrats always laud your
work, and we appreciate that.
I may have misunderstood you, Mr. Bowen, but it is my
thought that your testimony is, despite this growing number of
contractors that we have involved, when really you look at the
amount of war profiteering and fraud that is there, it is a
small percentage of the overall operations. Is that accurate
or----
Mr. Bowen. That is right. You did not misunderstand it. It
is a small component of the overall investment in Iraq
reconstruction, which amounts to about $38 billion, and to
date, the convictions and imprisonments we have obtained,
results of egregious fraud we have uncovered, primarily focused
on misuse and fraudulent misuse of Development Fund for Iraq
money. That is Iraqi money. However, we have, as I said, over
70 cases ongoing, 30 at the Department of Justice, most of
those involving U.S. money.
Mr. Forbes. And it does not matter whether it is a small
percentage or not. We are still aggressively prosecuting the
ones that we discover and find. Is that fair and accurate?
Mr. Bowen. That is right.
Mr. Forbes. Mr. Sabin, I would just ask you a question.
What is the process for sealing a case under the False Claims
Act?
Mr. Sabin. You would look to Title 31 United States Code
Section 3730. An extension for sealing under the False Claims
Act is issued by a judge. It is presented upon a factual
showing by the government for keeping the case to be sealed.
The government must demonstrate to that court that good
cause is shown for its request to extend the time to have the
matter sealed, and that for a variety of reasons, in order to
continue to conduct these complex investigations, to protect
witnesses, informants, and it is consistent with congressional
intent for the government to determine whether it should
intervene in a matter which otherwise may have been brought or
not brought by the United States that the relater, the term of
art, the whistleblower has filed in a court of law.
Mr. Forbes. So the judge is the one that would ultimately
make that----
Mr. Sabin. Absolutely. Present it to a judge who makes the
determination upon a specific factual showing by the government
for good cause.
Mr. Forbes. Let me ask you this. And I do not mean to cut
you off. It is just I am short on my time here.
Mr. Sabin. Yes, sir.
Mr. Forbes. The Department has been criticized today for
disingenuously seeking to seal these cases in order to threaten
whistleblowers with dismissal of their cases. Any response to
that?
Mr. Sabin. Patently false. I absolutely disagree with that
assertion. I do not believe it is a well-founded assertion. The
government professionally and thoroughly reviews the
allegations made and, if appropriate, will intervene; if not,
will decline and the matter can go forward if the relater wants
to and counsel wants to.
Mr. Forbes. Mr. Grayson, thank you for being here, and I
know that this hearing, as you know, is at least a discussion
of H.R. 400 and H.R. 369. Do you support both of these pieces
of legislation?
Mr. Grayson. Well, I am here primarily to address the lack
of enforcement that has occurred under existing law under the
False Claims Act, and I point out----
Mr. Forbes. So you are not here to speak on those two
pieces of legislation?
Mr. Grayson. Indirectly, I am, but directly not. I would
point out that Mr. Sabin has no responsibilities with regard to
seal False Claims Act at all, and I do.
Mr. Forbes. I will leave those to somebody else, but if you
are not here on those two pieces of legislation, let me move to
Ms. Razook.
And I hope I am pronouncing that correctly. Thank you for
being here. And one of the things I noticed in your testimony
is that you believe that all personnel--civilian and military--
should be tracking human rights violations in civilian courts,
and then you mentioned the fact that these 17 cases in the
Eastern District of Virginia are languishing, I think was your
term that you had. Is that a civilian court?
Ms. Razook. Yes.
Mr. Forbes. Have you practiced in that court before?
Ms. Razook. In the Eastern District of Virginia? No.
Mr. Forbes. I have, and one of the things in that court
that they are known for is the judges controlling the dockets
and not the attorneys, be they prosecutors or defense
attorneys. So here we have a civilian court that is handling
these matters, and the judges apparently are moving the dockets
in the way that they think are preferential, but you are really
upset with those judges and how they are handling their dockets
as well. Is that not correct?
Ms. Razook. Well, there are two parts of it. First is
that----
Mr. Forbes. Just be quick because my time is out.
Ms. Razook. I am sorry.
Mr. Forbes. That is okay. You go ahead. You go ahead.
Ms. Razook. The first is that there has not been
prosecution of what even the Army's own investigation has said
has been evidence of serious human rights violations, and in 3
years, we have not seen anything, but not just that we have not
seen a prosecution or any evidence of an investigation. But the
second part of the problem is the transparency issue which we
cannot even figure out why that is not happening.
Mr. Forbes. But my question to you was you have 17 cases in
that court that you say are languishing. Is that accurate? That
is a civilian court. Is there anything that takes the movement
of that docket and changes it from the way that those judges
would normally handle their dockets in their court?
Ms. Razook. The reason why Amnesty International supports
civilian trials for prosecution of human rights violations is
because, first of all, we would want prevent potential
arbitrariness between military personnel being tried under one
system, the UCMJ, and civil contractors being tried under
another system. And the other--there are actually a couple of
other reasons--is the perception of inappropriate military
justice leniency for----
Mr. Forbes. Mr. Razook, I am happy with that. I mean, you
have submitted all that, but my question was your discussion
about civilian courts and your frustration with the Eastern
District Court of Virginia and how those judges are handling
their dockets, and I was wondering if you could explain what
those judges are doing wrong because they control their
dockets.
Ms. Razook. Well, that is the problem, is that we do not
know what they are doing.
Mr. Forbes. But your complaint there is not with the
Department of Justice. It is with the judges in handling their
dockets.
Ms. Razook. Well, on the one hand, we have seen other
districts, the District of Arizona and the District of North
Carolina, prosecute. However, the Department of Justice is the
body charged with this responsibility in general, and so we
have----
Mr. Forbes. But they do not control that docket in the
Eastern District of Virginia, do they?
Ms. Razook. Well, they are charged with responsibility,
and----
Mr. Forbes. Thank you, Mr. Chairman. I yield back.
Mr. Scott. The gentleman from Georgia?
Mr. Johnson. Thank you, Mr. Chairman.
Mr. Bowen, I heard you say that there is about $38 billion
worth of fraud in Iraq that----
Mr. Bowen No, sir. About $38 billion has been invested in
Iraq in taxpayer money.
Mr. Johnson. Oh, okay. In terms of reconstruction?
Mr. Bowen. That is right. Relief and reconstruction
efforts, including security money.
Mr. Johnson. All right. And so you are saying that it is
about $5 billion in alleged corruption that has been uncovered?
Mr. Bowen. On the Iraqi side, that is what the commissioner
on Public Integrity told me.
Mr. Johnson. And on the Iraqi side, you have Iraqi
ministers who are immune from prosecution, if you will, for
corruption?
Mr. Bowen. That is right.
Mr. Johnson. And they have the ability to immunize their
subordinates for corruption?
Mr. Bowen. That is right.
Mr. Johnson. And that corruption involves U.S. taxpayer
dollars?
Mr. Bowen. Iraqi dollars.
Mr. Johnson. Iraqi dollars?
Mr. Bowen. Yes, sir.
Mr. Johnson. It does not include United States taxpayer
money?
Mr. Bowen. No, sir.
Mr. Johnson. I see. So does current law allow for the
United States to prosecute Iraqis for fraudulent obtaining of
Iraqi money which came from American taxpayers' money?
Mr. Bowen. To prosecute Iraqis for the fraudulent----
Mr. Johnson. Iraqis for stolen money from Iraq which
basically came to Iraq from the American taxpayer.
Mr. Bowen. That is a jurisdictional question that we work
with the Department of Justice on. I am going to defer to Mr.
Sabin to give you that answer, but SIGIR focuses on prosecuting
U.S. citizens involved in corruption.
Mr. Johnson. All right.
Mr. Sabin?
Mr. Sabin. The United States has traditional fraud
statutes, mail fraud, wire fraud, which have had
extraterritorial application in order to assert jurisdiction
over individuals that have a scheme to defraud, make false
representations in order to obtain taxpayers' money.
So, as a general proposition, the extraterritorial
application of fraud-based statutes that the U.S. attorney's
office could assert in a U.S. district court. So the direct
answer is yes to that general proposition.
Depending upon the status of the individual, whether there
is extradition treaties for particular locations, then you get
into the details.
Mr. Johnson. Thank you.
Mr. Grayson, according to your testimony, one of the
reasons why the Civil False Claims Act has been unsuccessful in
punishing and preventing war profiteering is because the Bush
administration has done nothing to pursue those cases, and you
just heard from Mr. Sabin taking strong offense at your
characterization of what you call perpetual court orders
sealing cases as evidence. He takes issue with your assertion
that the sealing of these cases actually stops the process. How
would you respond to that?
Mr. Grayson. Well, there has never been a case under the
False Claims Act in 144 years of history where an entire class
of cases has remained under seal for years and years until now.
The Iraq False Claims Act cases have remained under seal for
years and years even though the statute says 60 days is the
prescribed period.
Mr. Sabin is in the criminal division. He has no
responsibilities regarding the Civil False Claims Act. So he is
literally not competent to testify about this.
It is also true that----
Mr. Johnson. Well, now hold on. Let me give Mr. Sabin an
opportunity to respond to that.
Mr. Sabin. I had, with all due respect, Counsel, the
opportunity to discuss the matters with our civil division
folks. He is correct that I am in the criminal division--and
proud of that--at the Department of Justice, but had the
opportunity to chat with our colleagues in the civil division
regarding Mr. Grayson's comments in his statement.
I believe some are inaccurate. Some are accurate with
respect to the Custer Battles case. For example, he refers to
that particular case. The Department of Justice civil division
2 weeks ago filed a brief in the Fourth Circuit Court of
Appeals supporting Mr. Grayson's position. We filed pleadings
in the district court in the Eastern District of Virginia in
support of Mr. Grayson's position there.
So we take issue that cases have not been brought. We have
had two matters that have been specifically addressed by the
civil division.
Mr. Johnson. Why are there so many cases that are still
under seal?
Mr. Sabin. A number of reasons. I can talk you through
them.
One is lack of verifiable evidence that is in the complaint
filed by the relater.
Second, we need timely cooperation by counsel as well as
the relater to be interviewed to provide the information to
further the investigations to determine whether or not to
intervene in the particular matter.
Third, as discussed previously, the gathering of evidence
is a challenge, especially in the international forum and
especially in war theaters and combat zones.
Additionally, you need the cooperation of defendants and
third parties, and that cooperation varies widely. It is not
necessary in each matter, but in some matters, that cooperation
can help facilitate the expeditious development of the case,
and non-compliance, for example, with inspectors generals'
subpoenas that are issued in that regard.
You have the coordination in parallel investigations
between the criminal prosecutors and the civil prosecutions.
You have the administrative aspect relating to suspension
and debarment, so you have the coordination in terms of a
potential global resolution of administrative, civil and
criminal all coming together in order to appropriately address
the matter.
Mr. Johnson. How many people in the civil division dealing
with these kinds of----
Mr. Sabin. At the headquarters civil division, there are 13
line attorneys and three supervisors. That does not include the
number of civil attorneys around the country in the United
States attorney's office and in particular the Central District
of Illinois that are addressing the matters.
Mr. Johnson. All right. And last question, do you agree
with Mr. Bowen's assertion that $5 billion is the extent of the
alleged corruption, alleged fraudulent misconduct in Iraq?
Mr. Sabin. I believe he and his staff are in a better
position to know. So I would defer to that. I have no reason to
doubt that number, but those individuals are the experts that
are working through these matters in a professional and
thorough fashion, and I have no reason to doubt that number.
Mr. Bowen. The $5 billion has to do with the 2,000 cases
that the Iraqis have on----
Mr. Scott. Did you say billion or million?
Mr. Bowen. Five billion dollars that are involving cases
that are being conducted by the Iraqi Commission on Public
Integrity.
Mr. Johnson. I am sorry. All right. Thank you.
Thank you.
Mr. Scott. Thank you.
The gentleman from North Carolina?
Mr. Coble. Thank you, Mr. Chairman.
Mr. Chairman, today has been one of those days when I had
to be at five places simultaneously, so I apologize to you and
the witnesses for my belated arrival.
Mr. Sabin, how do the Departments of Defense and Justice
and the Office of SIGIR coordinate to investigate and prosecute
alleged criminal acts associated with the war in Iraq?
Mr. Sabin. In a variety of fashions. We try to be working
together in a coordinated fashion through the task forces that
we have set up, the ones I referred to, the International
Contract Corruption Task Force. That is the operational
component.
And we are sharing information, exploiting intelligence,
trying to figure out where the evidence will yield most
productive investigation and prosecution. So that sharing of
information, prosecutors and agents sitting down at an early
stage in order to proactively address it, through training,
through coordination in what I refer to as the National
Procurement Fraud Task Force, which has----
It is really pretty damn impressive because you have
inspectors general themselves chairing each of the different
subcommittees on legislation and training and private-sector
outreach, governmentwide, to really make it a significant long-
term institutional change.
So not to look at just the individual criminal prosecution,
but what as an industry in this unique time in our country's
history should we be doing in order to fill regulatory gaps,
really provide effective and robust coordination and
prosecution, and it is something, I think, we are proud of and
we are looking forward to successes in the coming months and
years.
Mr. Coble. Thank you, sir.
Mr. Bowen, is the FBI a part of the task force, the ICCTF,
A; are they in theater, B; and are they the lead investigators
on these cases? A three-prong question I have hurled at you.
Mr. Bowen. Yes, Mr. Coble. The FBI is part of the
International Contract Corruption Task Force, and the Joint
Operations Center, which is the central facilitating
operational arm of that task force, is co-located at FBI
headquarters. I visited there a month ago, and, as I said in my
statement, the Joint Operations Center is producing important
work in support of our cases.
The FBI does have agents in Iraq. Many of them are involved
in counterterrorism investigations, but we are working with
them on our fraud cases as well, and I expect that it is a
joint relationship, and, as you know, our organization is a
temporary organization. Many of our cases will continue after
SIGIR's expires at the end of next year, and I expect that the
FBI will be inheriting a number of those cases.
Mr. Coble. Thank you, Mr. Bowen.
Mr. Gimble, before my red light illuminates, if you will,
briefly describe the investigations involving KBR and LOGCAP.
Mr. Gimble. The KBR and LOGCAP are joint investigations
that have been conducted by the members of the International
Contract Fraud Task Force of which our DCIS investigators are a
part, and there is still an ongoing number of efforts in that
respect largely run out of the Rock Island District.
Mr. Coble. I did not hear the last part you said.
Mr. Gimble. Largely, the LOGCAP investigations are being
done in theater, but also back in Rock Island, IL.
Mr. Coble. But how long has the investigation extended or
lasted?
Mr. Gimble. They started fairly early. They continue on. It
started in 2004, I believe.
Mr. Coble. Okay. So it has been going on about 2 or 3 years
then.
Mr. Gimble. Yes, that is right.
Mr. Coble. About 3 years.
Mr. Gimble. About 3 years.
Mr. Coble. Thank you, Mr. Gimble.
Do you want to weigh in on that, Mr. Sabin?
Mr. Sabin. Yes, it is being conducted with the
investigators out of the Central District of Illinois with
assistance from main Justice. There have been eight different
criminal matters brought as a result of those investigations.
Some of those involve individuals associated with Kellog, Brown
and Root.
Mr. Coble. Thank you, Mr. Sabin.
I yield back, Mr. Chairman.
Mr. Scott. Thank you.
The gentleman from Massachusetts?
Mr. Delahunt. Mr. Sabin, I think I heard something about
the docket in the Eastern District and that it is the court
that controls the docket.
Mr. Sabin. I could clarify. I think what the witness was
referring to was not the court's docket because these matters
have not been criminally charged and are on the court's docket.
To the extent that there has been public confirmation--and I am
not going to get into specifics regarding any investigation--
those matters may be ongoing within the Department of Justice
as a grand jury investigation.
Mr. Delahunt. So there is not an indictment or any formal
charge now?
Mr. Sabin. Correct. It is a misunderstanding.
Mr. Delahunt. So it is a misunderstanding.
Mr. Sabin. Yes.
Mr. Delahunt. So, for 3 years now, the Department of
Justice has been doing presumably something?
Mr. Sabin. I am not going to comment upon any ongoing
investigation, but the Department of Justice has set up a
detainee abuse task force being operated out of the Eastern
District.
Mr. Delahunt. If I can address this to Ms. Razook, how do
you come up with the number 17?
Ms. Razook. That number was reported several times, one in
the By the Numbers report published by Human Rights First, New
York University, and Human Rights----
Mr. Delahunt. So we do not know what the government is
doing?
Ms. Razook. Correct. That is the problem.
Mr. Delahunt. That is the problem. And neither, I can
assure you, does this Committee know what the government is
doing in this particular matter either, which is the problem as
well, but----
Mr. Sabin. Mr. Delahunt, as a former prosecutor, you know
that ongoing grand jury investigations and because of
separation of powers and prosecutorial discretion, Congress
should not----
Mr. Delahunt. I certainly understand that, but if there are
17, hypothetically, if that number is accurate, I would expect
that, given the talent our Department of Justice has available
to it, it could have, you know, proceeded in a more expeditious
fashion. Three years even for the Federal Government is a
Federal case, I would say.
Mr. Sabin. I am not going to confirm the timeframe with
respect to each of those matters, but I have the highest
confidence in the prosecutors in the Eastern District of
Virginia and the U.S. Attorney Chuck Rosenberg to pursue those
cases as appropriate.
Mr. Delahunt. Well, I would hope that that is the case. Of
course, we do not know.
Mr. Bowen, once more, thank you for what you have done for
this country. You have been a bright light in a rather dark
chapter.
Mr. Bowen. Thank you.
Mr. Delahunt. You know, I just read Mr. Gimble's testimony,
and almost $10 million was paid to the U.S. in restitution,
$323,000 was levied in fines and in penalties, $3,500 was
forfeited, and $61,000 was seized in some litigation. Were we
ever able to account for that $9 billion that your report
indicated was unaccounted for?
Mr. Bowen. Yes. You are referring to our January 30, 2005,
audit of the----
Mr. Delahunt. Yes, I am.
Mr. Bowen [continuing]. CPA's management of the Development
Fund for Iraq money. That is Iraqi money.
Mr. Delahunt. Correct.
Mr. Bowen. It was transferred by the CPA to the interim
Iraqi government, and the answer is, no, the Iraqi government
has not accounted well for what happened to----
Mr. Delahunt. And I understand the distinction, but I do
understand--and you can correct me, please--that money was
disbursed to the Iraqi government by the CPA
Mr. Bowen. That is correct.
Mr. Delahunt. Nine billion dollars. And we are talking
about $3,500 was forfeited. In Mr. Gayson testimony, when he
uses billions in terms of fraud--and I guess you quoted someone
in the other body about an orgy of greed--I have this uneasy
feeling that we are missing something here. We are missing a
potential substantial recovery.
Mr. Sabin, why hasn't the government participated under the
whistleblower statute?
Mr. Sabin. We have brought two civil cases that have been
resolved totaling $5.8 million in recovery, we have declined to
intervene for a variety of reasons in, I believe, four others,
and I believe three others that are public have been
voluntarily dismissed by the relaters. The other matters, we
will continue to review as appropriate, and when it is
appropriate to unseal and/or decline to intervene, the
Department of Justice will so advise.
Mr. Delahunt. Mr. Grayson?
Mr. Grayson. The Bush administration has not actually
litigated a single case under the False Claims Act. The two
settlements that Mr. Sabin is referring to were settlements.
There was not litigation involved. They recovered a grand total
of $5 million when $9 billion, as you just pointed out, Mr.
Delahunt, is missing from the Development Fund of Iraq alone.
Not only that, but Senator Grassley wrote to the Attorney
General 2 years ago asking why nothing is being done on these
cases under the False Claims Act, and he never received a
reply. Not only that, but KBR has never been sued for anything
it has done wrong in Iraq by the U.S. Government. It has never
been sued in any whistleblower case that the U.S. Government
has participated in. The only people who have had to suffer for
this are the taxpayers.
Mr. Sabin. Just a comment on that point. The letter that
Senator Grassley sent on February 17 of 2005 was responded to
by the Department of Justice on April 20 of 2005, 60 days
later.
Mr. Delahunt. That is very good speed. That is a quick
response. I wish all my letters were responded to as quickly,
Mr. Sabin. So I will take note, and I will credit the alacrity
with which that response came. But I would hope and encourage
you to have further conversations with Mr. Grayson regarding
the cases which he is alluding to.
Mr. Sabin. And Mr. Grayson can correct me if I am wrong,
but my understanding is the civil division does have ongoing,
in certain matters, conversations with Mr. Grayson with respect
to some of the matters that he is aware of. Some of them are
sealed, so we cannot talk about specifics here today. But it is
my understanding that in some matters that have been extended--
and, again, Mr. Grayson can correct me if I am wrong--there has
been a consent by him to that extension.
Mr. Grayson. There has never been a single case picked up
by the Justice Department that I have brought or that any other
attorney has brought under the whistleblower statute since the
war began. That is a fact.
Mr. Delahunt. Well, I think my time has expired, but I am
not defending the Justice Department, Mr. Grayson. That has not
been my customary practice, but I do think it is an issue
sometimes of resources, and Mr. Sabin is not in a position to
say that. But I think we underresource the Department in
situations where it works to wreak an injustice, if you will,
but that will, I guess, be the subject of another hearing in
another day.
Mr. Scott. The gentleman's time has expired.
Mr. Sabin can get an opportunity to respond to whether or
not you have sufficient resources to effectively prosecute the
issues before you----
Mr. Sabin. In the last few weeks----
Mr. Scott [continuing]. Or not.
Mr. Sabin. I have been up to Congress to talk about just
just the fraud context: the Foreign Corrupt Practices Act and
resources, the securities and corporate fraud endeavors of the
Department of Justice, the mortgage fraud activity, the health
care fraud activities and identity theft, and we want to speak
with one voice with respect to the matter of resources. So----
Mr. Scott. When you come to speak, are you asking for more
resources?
Mr. Sabin. And what I say is that, as Mr. Delahunt pointed
out, there are appropriate channels for those discussions to
occur in terms of appropriations and budget authority.
Of course, an individual prosecutor would want to come up
here and say, ``Give us more resources in order to undertake
legitimate efforts in a priority area,'' but given all the
different matters that are before the Congress and before the
Justice Department, we say there are appropriate channels, we
welcome an opportunity to engage us in dialogue in order to
address the resource allocations.
Mr. Scott. Well, those are some choices, I guess, we have.
If you would just tell us what you can do with what you have
and what you could do if you had a little bit more. I mean,
last time we had one of these hearings, it was on identity
theft, and I had a bill to give you more money, as you may
remember. I think you were the one testifying, as a matter of
fact.
Mr. Sabin. I do not think it was identity theft. I have
been up here a few times, but I do not think it was identity
theft.
Mr. Scott. On identity theft. And we asked if you had
enough resources, and you said, ``Sure.'' You do not need my
bill.
Mr. Sabin. No, I would not have said that, sir. That was
not me.
Mr. Scott. Well, somebody did. Somebody did. And then I
gave an example of the U.S. senator who had had his identity
stolen and fraud run up, why that case had not been prosecuted,
and the answer was it is a matter of resources.
Mr. Sabin. Again, I do not know----
Mr. Scott. So if you----
Mr. Sabin [continuing]. The specifics of that interaction.
Mr. Scott. If you just tell us what you can do with what
you have and what more you can do, then we can decide whether
or not we want that extra done, but if we all get is, ``This is
what we have, and we are not going to ask for more,'' we do not
know the answers to his question.
Mr. Sabin. So what I am saying is we have a track record of
success. With additional resources, we would work to use them
effectively and efficiently consistent with budgetary
restrictions in order to bring more civil cases and criminal
cases, or at least sort through the matters, as you could, with
more resources.
Mr. Scott. Well, we have a kind of vague idea of what the
problem is.
Mr. Grayson, did I understand you to say that you believe
that $9 billion--with a B--is missing over in Iraq?
Mr. Grayson. Yes, from the Development Fund of Iraq alone.
Mr. Scott. Okay.
Mr. Bowen, you, as I understand your testimony, were in the
low double-digit millions.
Mr. Bowen. Yes. The Development Fund for Iraq money is not
U.S. money. It is Iraqi money. I was talking about U.S. money.
Mr. Scott. Okay. So the $9 billion Iraqi money--you are not
disagreeing with that figure?
Mr. Bowen. No, that was the result from our audit January
30, 2005, looking at the CPA's transfer of Development Fund for
Iraq money to the interim Iraqi government.
Mr. Scott. Mr. Grayson, who is in charge of the $9 billion?
Mr. Grayson. Well, a substantial amount of the Development
Fund of Iraq money actually came from the United States. It
included seized funds that were seized in the battlefield,
vested funds that the Administration seized in bank accounts in
this country and appropriated funds as well. So the----
Mr. Scott. And, Mr. Bowen, we are not interested in that
money being spent appropriately?
Mr. Bowen. To clarify, it is Iraqi money. It was Iraqi
money that, as a result of the Oil for Food process, was kept
in the Federal Reserve Bank of the Southern District of New
York. However, it was Iraqi money. None of the Development Fund
for Iraq money was U.S. money.
Mr. Scott. Okay. In terms of U.S. money, have any of the
no-bid, cost-plus contracts and multiple layers of
subcontracting resulted in the actual cost of the work being
escalated because you had to go up through many channels? Has
that caused any waste of the United States taxpayers' money?
Mr. Bowen. Yes, it has. And our audits point that out. For
example, in our inspections, the Baghdad Police College
inspection, which we have reported on several times, the
primary health care clinic program, and we have analyzed
lessons learned from that process in our Contracting Lessons
Learned report to Congress which was provided last August.
Mr. Scott. And has anything been done to cure these
problems?
Mr. Bowen. Yes, Senator Collins has a bill she introduced
to implement a number of the recommendations in our Contracting
Lessons Learned report that will improve--significantly, in my
view--the cost-plus contract process.
Mr. Scott. Has the Administration done anything
administratively to address that yet?
Mr. Bowen. Yes. As our Lessons Learned report lays out, the
story of contracting in Iraq is the story of lessons learned
itself, gradual progress in the formation of entities, like the
Joint Contracting Command in Iraq that provided adequate
numbers of contracting options, that provided adequate systems
to keep track of how quality control, quality assurance were
carried out, more specifically to keep track of how those
contracts were monitored from a financial perspective.
Mr. Scott. And Ms. Collins' bill is pending now over in the
Senate?
Mr. Bowen. Yes, sir. That is right.
Mr. Scott. And your recommendation is that we pass that
legislation?
Mr. Bowen. Very strongly. Yes, sir.
Mr. Scott. Mr. Sabin, just two other questions. You
indicated that you had some comments to make on the new bill on
war profiteering, I think your definitions and some of the
complications that may take place if you try to change the law
midstream.
Mr. Sabin. Yes, sir. Yes. And you could find that laid out
in detail in my May 18 response to Senate testimony and
questions for the record on the Senate side dealing with the
War Profiteering Act, and we can get you those in particular.
But they fall into three general concerns: definitional, intent
and jurisdictional. I could go through them if you are
interested.
Mr. Scott. Well, it is your position that you can work with
the present law to chase after war profiteers better than a new
law?
Mr. Sabin. No, I am saying that in the new law, there are
some good recommendations relating to venue and penalties and
other aspects. If you decide not to pursue the War Profiteering
Act, that you could augment existing fraud-based statutes to
provide additional tools and additional penalties for criminal
prosecutions. If you choose to pursue the War Profiteering Act
as a mechanism, in terms of those definitional terms and
jurisdictional concerns, we would be happy to work with you in
order to address that.
Mr. Scott. Okay. And finally, the gentleman from Georgia
asked you why things were under seal for so long. I think your
answer tended to speak to why the cases are taking so long, but
not specifically why they are still under seal.
Mr. Sabin. They are under seal because a judge had ruled
that they should remain under seal based upon the submission
for good cause by the government in terms of its actual
assertions in the civil realm relating to False Claims Act
matters.
Mr. Scott. And those pleadings would be under seal, too?
Mr. Sabin. Correct.
Mr. Scott. So does the other side get to see those
pleadings?
Mr. Sabin. In certain instances, I believe there are
discussions with counsel and relaters, but not all aspects of
that are in every case undertaken.
Mr. Scott. Well, in civil litigation, if it is a Civil
False Claims Act, you may not be involved in the case. Is that
right?
Mr. Sabin. Well, it depends. If we decide not to
intervene----
Mr. Scott. You can intervene. No, you do not have to
intervene.
Mr. Sabin. Correct. And that is----
Mr. Scott. But you intervene and it is an ex parte
proceeding as to whether it stays under seal?
Mr. Sabin. Correct.
Mr. Scott. I want to thank all of the witnesses for their
testimony.
Mr. Delahunt. Mr. Chairman, are we having a second round?
Mr. Scott. Yes. The gentleman from Massachusetts?
Mr. Delahunt. Yeah, I posed the question to the Chair
because I thought the Chair had a second.
Mr. Scott. Yes, you are right.
Mr. Delahunt. Professor Horton, you earlier talked about
almost reaching parity in terms of private contractors and
military personnel. I think your figures were 120,000 to
100,000. It might have been before the surge.
Mr. Bowen, if you know the breakdown in terms of
compensation for the 100,000 contractors--you might not have
this available--I suspect that it is considerably higher than
the remuneration for military personnel. If you can give us a
comparison, it would be most welcome.
Mr. Bowen. Mr. Delahunt, I do not have that yet. We have
ongoing audits of Blackwater, and we expect to have that
completed for our fall quarterly report, and we will have
follow-on reviews of security contractors, so I do not want to
venture a number until we have supportable data.
Mr. Delahunt. Thank you.
Professor Horton, would you be willing to take a stab, and
I understand this is an estimate.
Mr. Horton. Well, on an individual basis, I, in fact,
interviewed in Baghdad a number of security contractors about
their pay background and, of course, a large part of them,
particularly among the elite units, came from our Special
Services. They were being compensated at a level of around
$30,000 a year, some a little bit more than that. And going
into high-level security contractor operation, the compensation
level was running between $110,000 and $135,000. So it is quite
substantially larger.
Of course, this is a very, very simple way of approaching
it.
Mr. Delahunt. I understand.
Mr. Horton. One needs to fold in a number of other
criteria, health benefits, pension and so forth.
Mr. Delahunt. But it is still the American taxpayer that is
paying those private contracts, as well as the military
personnel. And is it a fair statement to say that our military
loses something in terms of its talent available by pursuing a
private army, if you will?
Mr. Horton. Well, I will just say I have repeatedly heard
representatives of the industry say that they are a cheaper
alternative, and I have never been able to put together numbers
that would show that. It seems to me that that would be very,
very difficult to display.
And, of course, we are looking at hemorrhaging from our
most talented people in the Special Forces Operations. A lot of
them describe to me the fact that they were looking for the
earliest opportunity to exit and get higher pay. So we are
working against ourselves in that respect.
Mr. Delahunt. Thank you, Professor.
Mr. Grayson, why is it preferable from the perspective of a
whistleblower to have the participation of the government?
Mr. Grayson. Well, the government has the imprimatur of
speaking on behalf of the taxpayer. In fact, interestingly
enough, the statute provides that the whistleblower gets more
money when the whistleblower proceeds with the case himself
without the government's assistance, but whistleblowers want
the government's assistance because it is the government's
money that is out there.
When you look at it from a judge's point of view, the judge
asks himself, ``If the Justice Department does not care about
this case, why should I?'' and that is an uphill battle for
every whistleblower in every case that the Department of
Justice declines to prosecute, including the many cases that it
has declined to prosecute against KBR already.
Mr. Delahunt. In terms of resources and access to
information, I presume--you can correct me--and, Mr. Sabin, you
can join in--correct if I am wrong--but I would presume that
access to information would be much more readily available with
the participation of the government.
Mr. Grayson. That is true, and I believe the government's
allocated substantial resources within DoD for this purpose. It
has allocated substantial resources within the FBI for this
purpose. The Defense Criminal Investigative Service has done
very thorough investigations of the cases that I have been
involved in. The roadblock, the barrier is the Department of
Justice. The Department of Justice will not go forward with
whistleblower cases brought concerning contractor fraud in
Iraq.
Mr. Delahunt. Thank you.
Mr. Sabin, if you are aware in terms of ex parte, as we
were referring to earlier when you were being questioned, has
the government ever been denied its motion?
Mr. Sabin. I can get back to you on specifics, but the
general answer is yes as to the extent of the length of the
time that we had----
Mr. Delahunt. So it is a time issue? It is not----
Mr. Sabin. I believe that is accurate.
Mr. Delahunt. But you can renew that request, I presume.
Mr. Sabin. No, I think that, for example, a judge may say
you cannot go past X date in certain jurisdictions. It varies
jurisdiction to jurisdiction, is my understanding, and some
judges will not go in certain jurisdictions past a particular
time period, and we work with that, obviously, under the
court's order.
Mr. Delahunt. Thank you.
Mr. Scott. The gentleman's time has expired.
We want to thank the witnesses.
Do any of the witnesses have any last-minute very brief
comment to make? I am not inviting it, but I noticed at one
point Professor Horton was about to jump out of his seat, but I
think that issue had been explained.
I want to thank you very much for your testimony. There may
be additional questions that we would ask you to respond to in
writing for the Committee, but if there is no further business,
the Committee stands adjourned.
[Whereupon, at 3:47 p.m., the Subcommittee was adjourned.]
A P P E N D I X
----------
Material Submitted for the Hearing Record
Prepared Statement of the Honorable Sheila Jackson Lee, a
Representative in Congress from the State of Texas, and Member,
Subcommittee on Crime, Terrorism, and Homeland Security
Prepared Statement of the Honorable Neil Abercrombie, a Representative
in Congress from the State of Hawaii
Chairman Conyers and Members of the Judiciary Committee:
I am grateful to the Committee and its distinguished Chairman for
today's hearing on HR 400, the ``War Profiteering Prevention Act of
2007,'' and for affording me the privilege of submitting testimony for
the record.
Mr. Chairman, among the many significant consequences of the Bush
Administration's decision to invade and occupy Iraq, marked by a
complete dismissal of the need for intelligent planning and stunning
incompetence in the conduct of the war, one area has received too
little attention from the news media, the public and the Congress.
The United States Government, directly and through the late
Coalition Provisional Authority, has outsourced the war in Iraq like no
other in our history, spending more than $50 billion to hire private
contractors to provide food, water, gasoline and other supplies, guard
bases, drive trucks and many other activities in support of our troops.
But consistent with the Administration's overall attitude toward
spending public money with private companies, little or no thought was
given to contract oversight or accountability.
As a result, The U.S. occupation of Iraq has been viewed by some of
these contractors as ``open season'' on the American taxpayer. At least
ten companies, with billions of dollars in contracts, have already been
forced to pay more than $300 million in penalties to resolve
allegations of bid rigging, fraud, gross overcharging, delivery of
faulty military parts and environmental damage. Some of these same
companies have faced such allegations during past military operations
in other countries, but have had no problem receiving new contracts in
Iraq.
Cleaning up this mess has been hampered by the fact that while
there are anti-fraud laws to protect against the waste or theft of U.S.
tax dollars in the United States, there have been no statutes
prohibiting such sleazy business practices by American companies
overseas. Legal jurisdiction continues to be a question.
As examples:
One contractor was found guilty of 37 counts of
fraud, including false billing, and was ordered to pay more
than $10 million in damages. However, the decision was
subsequently overturned because contracts were let through the
Coalition Provisional Authority, and since CPA was not strictly
considered to be part of the U.S. Government, U.S. laws against
fraud did not apply.
Despite millions of dollars in payments to U.S.
companies, key pieces of Iraq's infrastructure, such as power
plants, telephone exchanges, and sewage and sanitation systems,
have either not been repaired, or have been fixed so poorly
that they still don't function.
A large U.S. construction company was paid tens of
millions to repair raq's schools. Many of the schools were
never touched, and several that were ``repaired'' were left in
shambles; one filled with unflushed sewage.
Mr. Chairman, there is example after example of the flagrant abuse
of the public's trust and the public's money during a time of war:
According to testimony before the House Appropriations Defense
Subcommittee, when the wrong computer equipment arrived in Iraq, the
contractor dumped it into a mammoth ``burn pit'' and placed an order
for a replacement rather than sending it back. The government paid for
both the wrong computer and the replacement, and the contractor
collected a fee for each, thanks to a cost-plus contract.
Halliburton had drivers driving empty trucks between bases in
Iraq--unnecessarily exposing drivers to danger--because the company was
paid by the trip, not by the amount of materiel hauled or a flat fee.
$186 million was spent over two years to build 142 health care
centers. Yet, only 15 were completed and only eight are open. According
to testimony, the contractor lacked qualified engineers, hired
incompetent subcontractors, failed to supervise construction work and
failed to enforce quality control.
Obviously, these practices cannot be allowed to continue. My bill,
House Resolution 400, the War Profiteering Prevention Act of 2007,
would:
1. Criminalize ``war profiteering,'' defined as bid rigging,
contract fraud or overcharging for goods and services during a
time of war, military action or a reconstruction effort.
2. Violations of the law would be a felony, and punishable by
up to 20 years in prison and fines of up top $1 million or
twice the illegal profits of the crime.
3. Jurisdiction for such cases, no matter where the alleged
crimes are committed, would be in United States Federal Court.
There is a companion bill in the other body, S. 119 by Senate
Judiciary Committee Chairman Patrick Leahy. S. 119 has been approved by
the Judiciary Committee and awaits floor action. Senator Leahy referred
to the rampant contactor fraud and abuse in Iraq as a ``second
insurgency.''
Mr. Chairman, most of the cases of fraud, questionable business
practices and outright corruption have been uncovered and investigated
through the efforts of the Special Inspector General for Iraq
Reconstruction (SIGIR), Mr. Stuart W. Bowen, Jr., who is scheduled to
give testimony before your committee today. Mr. Bowen and his superb
staff, both here in the U.S. and on the ground in Iraq, have provided
the sole oversight, under the most difficult conditions imaginable, for
billions of American tax dollars intended to support our troops in
combat. They deserve the gratitude of the Congress and the nation for a
tough job done well.
A testament to the effectiveness of Mr. Bowen's operation is that
in the closing hours of the 109th Congress, there was an attempt to
insert a provision in the conference report of the 2007 National
Defense Authorization Act that would have prematurely shut down the
Special IG's office. Only the wary eye House Armed Services Committee
Chairman Ike Skelton caught the attempt and immediately introduced and
passed a bill to, not only continue, but extend the life or SIGIR.
Mr. Chairman, I appreciate today's House Judiciary Committee
hearing on HR 400 and on the continuing problem of wartime profiteering
in Iraq, and I am grateful for the opportunity to submit testimony for
the record. I will do anything I can to assist the Committee in its
deliberations.