Corruption In Iraq & World

White House Names Special Inspector General for Afghanistan's Reconstruction Programs

We posted earlier that there was an effort to establish a special inspector general program similar to SIGIR for reconstruction programs in Afghanistan.

Well, by golly, the White House just named the new Special Inspector General for Afghanistan Reconstruction, and it is someone I know from IRMO in Iraq. They appointed retired Marine Corps Major General Arnold (Arnie) Fields, who was Chief of Staff for IRMO when I was there. I have pictures of his good bye party when he left Iraq in 2005.

So, this will be interesting. I wonder whether auditors from downsized SIGIR (Special Inspector General for Iraq Reconstruction) will go to SIGAR (maybe they should change the Acronym to Cigar?). Or maybe it will be named SIGAR?
vj

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from
http://www.washingtonpost.com/wp-dyn/content/article/2008/05/29/AR2008052903679_pf.html

IG Is Named To Scrutinize Afghan Efforts

By Karen DeYoung
Washington Post Staff Writer
Friday, May 30, 2008; A11

The White House named a special inspector general to search for possible fraud and abuse in the funding of Afghanistan's reconstruction yesterday, three months after a congressional deadline for the appointment.

Retired Marine Corps Maj. Gen. Arnold Fields was appointed to head the office, which is modeled on a similar congressionally mandated effort in Iraq. Although the war in Afghanistan is overshadowed by the larger and much more expensive U.S. effort in Iraq, reconstruction and development assistance there has totaled nearly $23 billion.

Establishment of the office was included in the fiscal 2008 defense authorization bill, approved in January, which directed the White House to fill the job within 30 days.

Sen. Frank Lautenberg (D-N.J.), who sponsored the measure in the Senate, said yesterday that there is "too little oversight" of money spent in Afghanistan.

Earlier this month, Lautenberg and Senate Armed Services Committee Chairman Carl M. Levin (D-Mich.) wrote President Bush to ask why the job had not been filled.

The Pentagon and the U.S. Agency for International Development had opposed the measure last fall on the grounds that it would overlap with existing Defense and State department audit mechanisms.

Afghanistan has largely escaped the intense scrutiny Congress has given Iraq. Nevertheless, "a lot of the same problems exist, although not on the same scale," an administration official said. The official, who insisted on anonymity to speak candidly about the subject, said that corruption, bribery and extensive use of private security contractors are all areas of concern.

Fields has served since January 2007 as deputy director for the Africa Center for Strategic Studies at the National Defense University. Earlier, he was chief of staff of the Iraq Reconstruction Management Office, which coordinated the expenditure of U.S. reconstruction funds in that country. At the time he retired from active duty, he was serving as deputy commander of U.S. Marine forces in Europe.

The legislation that established the special inspector general for Afghanistan appropriated $20 million for the office's activities during 2008 and said it should continue operating until less than $250,000 in Afghan reconstruction funds remained.

Recap of Iraq Profiteering Issues

This is a new article with old information, but it serves as a good recap of some issues with some relevant recommendations. It is an excerpt from a new book.
vj

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from AsiaTimes online May 29,2008 at:
http://www.atimes.com/atimes/Middle_East/JE30Ak03.html

Invitation to steal: War profiteering in Iraq
By William D Hartung

The heavy reliance on private contractors to do everything from serving meals and doing laundry to protecting oil pipelines and interrogating prisoners has been a major factor in the immense costs of the Iraq war. By one measure, there may be more employees of private firms and their subcontractors on the ground in Iraq than there are US military personnel.

One of the main rationales for using private companies to carry out functions formerly done by uniformed military personnel - a practice that has been on the rise since then-defense secretary Dick Cheney commissioned a study that led to the contracting out of all army logistics work to Halliburton in the 1990s - was that it would save money. But in Iraq, the combination of greedy contractors and lax government oversight has resulted in exorbitant costs, many of them for projects that were never completed.

The first sign that something was terribly wrong with the contracting process for the war was the awarding of a no-bid, cost-plus contract to Halliburton, allegedly to pay the cost of putting out oil fires in Iraq. Congressman Henry Waxman started asking questions about the contract after he learned that it could be worth up to US$7 billion over a number of years. He rightly questioned how a no-bid deal justified on the basis of potential short-term emergencies could have such a long duration at such a high price. Only then was it revealed that the contract also covered the task of operating Iraq's oil infrastructure.

Given the long-term nature of this larger task, Waxman argued that this aspect of the work be taken away from Halliburton and subjected to competitive bidding. It was several years before his recommendation was implemented, and even then Halliburton received what at least one potential competitor - Bechtel - viewed as an unfair advantage.

While few contracts matched the size of Halliburton's oil deal, the use of cost-plus awards was widely emulated. A cost-plus award is virtually an invitation to pad costs, as profits are a percentage of funds spent - in other words, the more you spend, the more you make. This problem has been compounded by a lack of auditors to scrutinize these contacts. For example, in one zone of Iraq, only eight people were assigned to oversee contracts worth over $2.5 billion.

Halliburton's other major contract in Iraq is for the Logistics Civil Augmentation Program (LOGCAP). Under this arrangement, Halliburton supplies virtually all of the army's non-combat needs in the field, from building and operating bases to repairing and maintaining combat vehicles. LOGCAP operates on a variation of the cost-plus contracts, and it has exploited this arrangement to the fullest.

Among the overcharges engaged in by the company have been the following: overcharging by more than a dollar a gallon for fuel shipped into Iraq from Kuwait; billing the government for three times as many meals as it actually served the troops at several of the bases it runs; leasing SUVs for its personnel at a cost of $7,000 per month; and charging $100 each for doing a bag of laundry.

These are just a few examples among dozens in which Halliburton took advantage of the "fog of war" to line its pockets. The company's attitude was summed up by company whistleblower Henry Bunting, who indicated that when he raised questions with his supervisor about Halliburton's lavish expenditures of government money he was told "don't worry about it, it's cost-plus".

In all, Halliburton has been by far the greatest beneficiary of the Iraq war, with war-related contracts exceeding $8 billion, several billion of which has not been adequately accounted for. Although a number of changes were made in response to the company's record of fraud and abuse - from taking away its fuel supply contract to splitting the work for operating Iraq's oil infrastructure into three parts - these measures were a classic case of too little, too late. Reforms designed to prevent "another Halliburton" will be discussed below.

Large firms like Halliburton were not the only ones to exploit the war for excess - and in some cases illegal - profits. One of the most notorious examples involved Custer Battles, named after its founders, Scott Custer and Michael Battles. When the two men went to Iraq in search of contracts, they had no capital, no employees, and no experience in the security business. But they did have a knack for marketing, billing themselves "Green Berets with MBAs".

Shortly after arriving in Iraq, Custer Battles received a lucrative contract to provide security for the Baghdad airport. As an example of just how loose controls were, one early payment to the company was made in the form of $2 million in shrink-wrapped $20 bills, transferred to the firm in exchange for a handwritten receipt. A film of two Custer employees playing football with a brick of the shrink-wrapped bills provided one of the most enduring images of greed and corruption generated by the Iraq occupation contracting fiasco.

Even as rumors of poor performance on the airport security contract began to circulate, Custer Battles received another major contract, this time for delivering the new Iraqi currency to key points around the country. This effort was characterized by shoddy working conditions, unpaid subcontractors, and the use of broken-down trucks that could not carry out their mission.

Finally, after revelations by whistleblowers who had worked for the firm, the extent of Custer Battles corruption was exposed. In addition to failing to provide the security and transport services it was contracted to do, internal company documents showed that it had routinely charged for at least twice the value of services supplied by padding bills and funneling subcontracts to phony companies. While all of this was going on, Mike Battles was paying himself $3 million as head of the company.

These were far from isolated incidents, but the extent of the problem might never have been known without the creation of the Special Inspector General for Iraq Reconstruction (SIGIR). IG Stuart Bowen and his staff did scores of audits of every aspect of the reconstruction effort, from building schools to restoring electric service to providing security for a wide range of projects and activities. They discovered a pattern in which contract dollars were spent out in full while only a fraction of the promised work had been completed. While some of this gap can be accounted for by the violence and insecurity rampant in significant parts of Iraq from early on in the occupation, this cannot begin to account for the shoddy performance of major and minor contractors alike.

To cite just one example of a company that was roundly criticized in SIGIR audits, Parsons Corporation - the second-largest Iraq reconstruction contractor after Halliburton - is worthy of mention. The company completely botched or failed to deliver on hundreds of millions of dollars worth of contracts to build health clinics, fire stations, prisons and a police academy. This misconduct not only wasted dollars, it endangered the lives of US soldiers by fostering resentment among Iraqi citizens.

The lack of accountability of contractors in Iraq has extended well beyond financial malfeasance. Interrogators and translators from Titan Corp and CACI Inc were allegedly involved in incidents of torture at the infamous Abu Ghraib prison, but no employees of these firms were ever subjected to legal proceedings. This is due to the fact that private contractors in Iraq exist in a legal never-never land, subject neither to Iraqi law nor to the Uniform Code of Military Justice (UCMJ).

The US Extraterritorial Justice Act is supposed to cover cases like this one but it has almost never been utilized, due to the difficulty of having a prosecutor based in America build a case regarding an incident or incidents that may occur thousands of miles away.

The existence of security contractors who operate outside the military chain of command also poses serious problems. For example, when four employees of the private security firm Blackwater were killed and tortured by a mob in Falluijah in April 2004, the US military felt compelled to strike hard at the city in a punitive backlash that did much to accelerate the opposition to the US occupation among ordinary Iraqis. If the job had been done by personnel within the military chain of command, they might never have been deployed to that location at that time, thereby preventing the first Fallujah crisis from ever occurring.

Another circle of beneficiaries may be referred to as the "policy profiteers": individuals who advocated for the war with Iraq at the same time that they stood to gain from it. Chief among these were Bruce Jackson, R James Woolsey, and Richard Perle. Jackson, a former vice president at the world’s largest weapons contractor, Lockheed Martin, co-chaired the Committee for the Liberation of Iraq, an advocacy group that closely coordinated its pro-war messages with the Bush administration.

He had previously served as chair of the foreign policy subcommittee of the Republican platform committee at the party’s 2000 convention. Both Woolsey and Perle served as advisors to then secretary of defense Donald Rumsfeld as part of the Defense Policy Board. Both men used their posts as official advisors to the Pentagon to beat the drums for war, and both simultaneously ran investment funds that were receiving money from major contractors like Boeing that have profited mightily from the Iraq conflict. In addition, Woolsey is an executive at Booz, Allen and Hamilton, a consulting firm that has given seminars on how to get Iraq-related contracts.

Preventing war profiteering on the scale that has prevailed in Iraq will require the implementation of thoroughgoing reforms:
# Increasing the use of competitive bidding, even in cases in which only a few contractors are deemed to be capable of doing the task at hand.
# Better screening of bidders to rule out companies with no experience in the relevant area of work (see profile of Custer Battles, above).
# More auditors in the field from the outset of a conflict;
# A new "Truman Committee" modeled on the effort led by then Senator Harry Truman during World War II. The committee should have subpoena power, a robust investigative staff, and the ability to forward major abuses to the relevant criminal authorities,

These initial steps would go a long way towards preventing fraud and misconduct in future conflicts.

William Hartung is director of the Arms and Security Project at the New America Foundation. With Miriam Pemberton he edited the just-published Lessons from Iraq: Avoiding the Next War (Paradigm Publishers) from which this essay was taken.

(Copyright 2008, Institute for Policy Studies.)

(Posted with permission from Foreign Policy in Focus)

Iraqi Prime Minister Praised for Reducing Violence, but nothing said about Corruption

Baghdad Embassy Ambassador Ryan Crocker says there is progress in Iraq, violence is down and Prime Minister Nouri Al-Maliki is behind the progress.

But, what about recent Congressional hearings that Al-Maliki and the Embassy won't take action to support anti-corruption initiatives in Iraq?

Here's the quote from the AP article below:

The progress has brought the Shiite prime minister's political rehabilitation, quieting critics at home who have long seen him as ineffective, indifferent to corruption or biased toward Shiite interests.

So, it seems the diplomatic trade off is that we won't ask that corruption be reduced if Al-Maliki reduces violence. At some point, the State Dept. has to establish a higher order of ethics and demand both.
vj

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Click here to see the original AP article, which is also below

ANALYSIS: Iraq PM rides high on successes

By HAMZA HENDAWI – 1 day ago

BAGHDAD (AP) — After two years in office, Iraqi Prime Minister Nouri al-Maliki has managed only in the past two months to stamp a semblance of authority in this unwieldy nation with bold crackdowns on Shiite militias and Sunni insurgents in Baghdad, Basra and the north.

The progress has brought the Shiite prime minister's political rehabilitation, quieting critics at home who have long seen him as ineffective, indifferent to corruption or biased toward Shiite interests.

It also has won him praise from American officials and the military, only months after some in the United States were calling for him to be replaced for failing to achieve political benchmarks. His current political buoyancy also comes in no small part from an overall drop of violence — the U.S. military said that last week it recorded the lowest number of attacks since April 2004.

But al-Maliki is not out of the woods yet. Security gains made in the crackdowns he has personally overseen remain fragile and could quickly unravel, leaving him with little to show for his efforts and sparking new instability.

Followers of radical Shiite cleric Muqtada al-Sadr have stepped up their rhetoric against al-Maliki in recent days, accusing him of trying to eliminate them — straining a truce with the Sadrists' Mahdi Army militia that has been key to success in Sadr City and Basra.

The goodwill he has created has also yet to translate into concrete gains in reconciliation between Shiites, Sunnis and Kurds. A deal still has not been sealed on returning Sunni Arab rivals to his government or on passing a crucial law on sharing oil wealth, blocked in part by his Kurdish allies.

Reconciliation will be key as al-Maliki faces the potentially divisive political events that loom ahead — like provincial elections expected in November and negotiations over a long-term presence of U.S. forces.

Al-Maliki also has to face the daunting tasks of reducing popular discontent over services, employment and crime. Better-than-expected oil income — $60-plus billion this year — should enable him to cushion some of the hardship Iraqis face.

Still, al-Maliki acknowledged last week during a visit to the southern city of Najaf that power cuts — the scourge of Iraqis during the unforgiving heat of the summer months — may stay the same because of a decline in the volume of water available to hydraulic power stations.

"The Iraqis and the Americans seem to be going in vicious circles," said Thamer Abdul-Rasoul, a 42-year-old government employee and father of three from Baghdad. "They make progress in one area and do nothing about others. Security now is better than 2005 and 2006, but electricity still comes four or five hours a day in total."

Al-Maliki became Iraq's longest-serving prime minister since the 2003 fall of Saddam Hussein, marking his two-year anniversary on Tuesday. For much of that time, his opponents have accused him of doing little as Shiite factions and their militias gained power in many areas.

But his move against Shiite militias in Basra — though troubled when it began in late March — and the Iraqi security forces' deployment last week in Sadr City have some critics hopeful.

"Perhaps the message was finally received that what has gone on for the past two years cannot continue and the prime minister must take a decisive position," Sunni Vice President Tariq al-Hashemi told Associated Press Television News this week.

Still, nothing has yet come out of an agreement reached nearly a month ago with al-Hashemi for the return of Sunni ministers who quit the Cabinet in August.

"The ball now is in the government's court," al-Hashemi said. He said al-Maliki had rejected two lists of nominees to fill the vacant Cabinet posts presented by the Iraqi Accordance Front, parliament's largest Sunni Arab bloc.

The Basra assault sparked clashes with the Mahdi Army across southern Iraq and in Sadr City. But after a truce in mid-April, Basra is calmer and government forces have greater control. Violence in Sadr City continued for weeks until another truce was reached there in May. That paved a way for a large military deployment that has so far gone off without a shot in the district, where Mahdi Army fighters once operated unquestioned.

An unusual calm has descended on Baghdad since fighting ended in Sadr City.

But Mahdi Army militiamen have largely ignored al-Maliki's order to hand over medium and heavy weapons in Basra and Sadr City, suggesting they are keeping them to fight another day. The negotiated truces do not address the larger question of the future of the Mahdi Army, which earned notoriety for killing thousands of Sunni Arabs at the height of sectarian violence in 2006 and 2007.

"We're hopeful that it will hold," Lt. Gen. Lloyd J. Austin III, the No. 2 U.S. commander in Iraq, said Thursday about the Sadr City truce.

"But we recognize that, like anything, it is fragile and so there are a number of things that could happen, and we have to prepare ourselves for that eventuality."

Upcoming elections hold dangers: Al-Maliki has spoken of banning parties with militias from running, a move that would anger the Sadrists.

A new outbreak of violence with the Mahdi Army could throw everything back into turmoil and strain what the U.S. military says is an improved performance by Iraqi forces. The militia fought with tenacity in Sadr City and Basra, while the Iraqi army and police suffered the embarrassment of about 1,000 cases of desertions in Basra, casting serious doubt on their readiness.

Al-Qaida and Sunni insurgents are also not out of the picture. The offensive against them in Mosul was publicized by the government as early as January, months ahead of its launch, giving the terror network's fighters time to flee and regroup elsewhere.

Hamza Hendawi has covered Iraq for The Associated Press on numerous assignments since January 2003.

Follow up on Yesterday's DoD IG report on DoD's Iraq procurement screwups

Here is a CBS news transcript based upon an AP article about the US Congressional Oversight Committee hearing on Iraq procurement fraud. Yesterday I posted the initial reports on the DoD Inspector General testimony and report provided at the committee hearing.

Now I have read the entire DoD IG verbal transcripts and some of the actual report. Here is the link to the House Oversight Committee page for this hearing and transcripts:
http://oversight.house.gov/story.asp?ID=1965

The DoD IG audited procurement process systems that were separate from the one I dealt with for Iraq Reconstruction spending. They focused on military run procurement systems for Iraq police (Ministry of Interior) and other programs.

In my opinion, the DoD IG white washed a major cause for the lack of spending documentation they described.

Additionally, the "audit" followed a 1950's CPA derived format, not the modern audit approach used by Certified Internal Auditors, thus they 1) didn't walk through any of the actual work processes to find the actual reasons for the lack of documentation, and 2) they didn't describe the "cause" for the problems, which is a major part of audit reports provided by Certified Internal Auditors (CIA - I am one).

See my 5 detailed comments, and the CBS article at the link below.
vj

House Oversight Committee Amazed at DoD Lacking Iraq Payment Documentation

The article below describes how the DoD IG just presented audit findings regarding lack of documentation for Iraq spending for goods and services to the US House Oversight Committee run by Congressman Henry Waxman. The IG said they had a very hard time finding documentation to justify many payments. They didn't know why.

WELL, I can tell you why, RIGHT HERE, because I found the same thing happened to CPI in Iraq when I was there in 2004-2006. I am not sure if the IG was auditing the same group that processed Iraq Reconstruction funded procurements, but I bet the same problem applied to them.

Here is the link to the House Oversight Committee page for this hearing and transcripts:
http://oversight.house.gov/story.asp?ID=1965

Click here for a picture of the hearings taken from the DoD IG webpage.

The US Government has a regulation (Prompt Payment Act) that requires that vendors must be paid within 30 days of shipping (or invoice date - not sure which). In the case of Iraq, delivery and order delays made that impossible, SO SOMEONE AUTHORIZED THE WAIVING OF THE STANDARD REQUIREMENT TO WAIT FOR A SIGNED RECEIVING REPORT FROM THE END CUSTOMER, and instead vendors were paid in 30 days WITHOUT ANY SIGNED RECEIVING REPORT.

As the acting procurement manager for CPI in Iraq, I got a financial report that showed the list of our purchase requests approved by the budget / finance office, AND it also showed payment status. As an auditor, I always worked in corporations previously where you didn't pay the vendor until the end customer (or receiving warehouse) signed a receiving report to indicate proper receipt of the ordered items. This is a very basic accounting control. However, that control process was waived, and vendors were getting paid once they invoiced after shipping goods. That caused problems where shipments "disappeared" or were delayed for months in warehouses until we could physically track them down. THAT IS A MAJOR BLUNDER ON THE PART OF THE US ARMY RUNNING THE PROCUREMENT PROCESS, as well as the finance departments.

In the case of CPI, I found that several of our purchases had been paid for months earlier, when we were told by contracting to "be patient". Thus we knew the orders had been shipped, and had to contact the vendor, get copies of shipping documents, and try to get the logistics department to locate the missing items in warehouses. We never could locate an order for ammunition for Glock handguns for Investigators, even though the payment was made months earlier to the vendor.

That is also how I discovered that the military contracting office had NO quality control procedures to ensure the data they entered into the purchase orders from requisitions was accurate and not incomplete or out of date. They had 18 year old airmen typing forms without editing oversight, and I found numerous errors in purchase orders that would result in non delivery to us because the data was so inaccurate or bad. They even mistyped overly complex email addresses for finance, so even finance couldn't get required documentation.

So, DoD IG - that is how it happened.

NO ONE implemented a quality control review of purchase order accuracy, so deliveries could not be made, customers could not be contacted and finance emails went to wrong addresses. When we convened a meeting with contracting I had a Lt. Col yell at me trying to intimidate me to drop the issue. They were very defensive and did not want to be held accountable for data accuracy on purchase orders they created.

PS: A few months ago, two DoD IG investigators visited me for three hours, and that is one of the control breakdowns I described to them.
vj

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This summary article was distributed in Jimmie Durso's periodic emails on Iraq.

Report: Defense Department cannot fully account for $7.8B spent in Iraq
By Dan Friedman, CongressDaily

A House panel Thursday displayed vouchers showing single U.S. Army payments of up to $11 million made without any documentation showing how the money was spent. The House Oversight and Government Reform Committee used a hearing to publicize a Defense Department inspector general's report, released Thursday, which estimates that of $8.2 billion used to buy commercial goods and services in the war, the Defense Finance and Accounting Service processed $7.8 billion in payments without adequate documentation. For $1.4 billion of payments, the Army lacked the minimum justification required for payment, the report estimates. "We don't know what we paid for," testified Mary Ugone, the Defense Department's deputy inspector general for auditing. The IG made estimates by extrapolating from a sample of 702 commercial payments; a methodology the Army questioned in a written response to the report. Lawmakers highlighted some of the largest single payouts made without adequate paperwork, such as a voucher showing an $11.1 million payment in 2005 to contractor IAP Worldwide Services that "was missing both the receiving report and invoice," the report said, and a $5.6 million payment made in 2004 to an Iraqi company without any description of how the money was used.

The report also highlights $135 million in payments made without documentation through the Commander's Emergency Response Program, which was created to give local U.S. military commandeers in Iraq the ability to back small local projects. While the program is generally used to pay Iraqis for supporting U.S. forces, the report notes large lump sum payments of up $8 million made to foreign governments with troops in Iraq. The United Kingdom got $68 million, Poland $45 million and South Korea $21 million. But the IG report says of 22 related vouchers reviewed "none contained sufficient supporting documentation to provide reasonable assurance that these funds were used for their intended purpose." The report says auditors could not identify any reconstruction project resulting from the funds. Ugone denied that war conditions excuse sloppy recordkeeping. She said auditors used standards significantly less rigorous than those for domestic spending to decide if payments were adequately documented. "There are challenges, but there should be some semblance of accountability," she said. "No documentation, from our perspective, is not acceptable." Ugone noted that from 2003 to 2006, the audit found accounting did not improve.

House Oversight and Government Reform ranking member Tom Davis, R-Va., pointed out that problems accounting for payments have long plagued the Defense Department, putting it on GAO's high-risk list for the last 15 years. But Davis joined Democrats in faulting the Army for its response to the issue. Due to the audit, the Pentagon moved the DFAS office reconciling Iraqi payments from Kuwait to a Rome, N.Y. facility, but Ugone said she was unsure what larger fixes are underway. House Oversight and Government Reform Committee Chairman Henry Waxman, D-Calif., said the Pentagon had refused to send a witness to Thursday's hearing even though "the department has known about this audit for more than a year and has known about this hearing for several weeks." Members noted Pentagon officials had claimed they needed time to review the report, but had already sent extensive written comments on it to the IG.

Full story: http://www.govexec.com/story_page.cfm?articleid=40073&dcn=e_gvet

Democrats seek Iraq embezzlement probe

The AP article below describes new demands by two Democratic Senators to request that the Treasury Department investigate Iraq corruption charges made at a recent Democratic Policy Committee hearing we described in an earlier post. It is based upon the highly emotional testimony of Judge Brennan and James Mattil. We previously posted the written transcripts, but you have to watch the video to see how charged the meeting was. Read my further comments and the AP article below.

Note: until my blog software rolls out a new revision, I can't edit the rest of the post. However, below, the article talks about the investigation being run by a specific Treasury official, Stuart A. Levey. Click here to see his background page on the US Treasury website.
vj

Former AOL Time Warner Execs Charged in Cooking Books bigtime

Reuters and other news sources are full of articles about EIGHT AOL - Time Warner Execs who have been indicted by the SEC for hyping online advertising revenue numbers by over a BILLION dollars from mid-2000 to mid-2002.

Whenever I hear of hyped sales reporting, I always expect the guilty to be in sales, since I have seen it twice. Sales staffs in less disciplined firms always look for a way to manipulate reported sales revenues so they can earn more commissions. There are a whole list of ways to do it.

But, in this case, the Eight execs are mostly ex CFO's and Controllers - so apparently they cooked the numbers to achieve bonuses or stock increases.

Lessons Learned: 1) Why doesn't the article mention who the audit firm was that let this happen? Expect to see them named in shareholder lawsuits soon. 2) For once, I would like to see these financial guys lose their professional certifications - I am sure several are CPAs.
vj

Israeli Prime Minister Accused of Taking Bribes

Link: .

UK

I will follow up on this story as it unfolds. Sometimes bribe accusations are made by opposition officials, so I will wait until more facts come out.
vj

From Reuters in the UK

Israeli police to question Olmert
Tue May 20, 2008 10:25am BST

JERUSALEM (Reuters) - Israeli police will question Prime Minister Ehud Olmert for a second time on Friday, a police spokesman said, as part of a bribery investigation that could force him from office.

View this photo of PM Olmert

Police, who first questioned Olmert on May 2, have said he is suspected of taking "significant sums of money from a foreigner or a number of foreign individuals over an extended period of time".

Olmert has denied any wrongdoing but said he would resign if indicted.

He acknowledged earlier this month that U.S. businessman Morris Talansky raised funds for his two successful campaigns for mayor of Jerusalem in 1993 and 1998, a failed bid to lead the right-wing Likud party in 1999 and a further internal Likud election in 2002.

Israeli law broadly prohibits political donations of more than a hundred dollars.

"Olmert will be questioned for the second time by investigators from the National Fraud Unit this coming Friday," police spokesman Micky Rosenfeld said on Tuesday.

Israel's chief prosecutor said on Monday investigators suspected Olmert had taken envelopes full of cash from Talansky.

Olmert has said his former law partner handled the details, voicing confidence the attorney made sure proper procedures were followed. A judicial source said the sums involved totalled hundreds of thousands of dollars.

On Sunday, Attorney-General Menachem Mazuz said the investigation, one of several focusing on corruption suspicions against Olmert, would not be finished any time soon.

(Writing by Ari Rabinovitch)

© Thomson Reuters 2008.

Iraqi Writer of a Blog Assassinated While Investigating possible USAID Corruption

An Iraqi writer of a blog called BlogIraq, was recently killed in an apparent attempt to meet someone who had documents related to a corruption issue regarding USAID.

I don't have any more info, but read the entry below, and my comments about how corruption or bribes could have occured on USAID managed reconstruction contracts.

I would think it would be rare that anyone in USAID was involved in corruption, since many are ex PeaceCorps workers, but USAID staff don't go into the streets and towns of Iraq. Instead they issue vague RFP's and use third party Iraqi contractors (and maybe a US Prime contractor) to actually go into Iraqi communities for various projects.

It would not surprise me that a USAID sub-contractor was involved in corruption because USAID doesn't actually go into the field themselves to verify work. There have been GAO and SIGIR audit reports on this issue. In contrast, I knew IRMO Senior Advisors who went into the Iraqi communities and Ministries three times or more a week (in 2004-2006). One of them, the Sr. Advisor for the Water Ministry, was in a Hummer convoy when a roadside bomb went of and killed the gunner, and damaged the nerves of his face for several weeks.

Here is an example of how such corruption can happen: In 2004 and early 2005, everyone in the US Embassy, Baghdad ate in a dining room inside the Presidental Palace. There were big round tables and people just joined a table and the conversation, so you learned lots of stuff. I would ask anyone who worked in reconstruction, such as US contractor reps, if they encountered corruption, and learned a lot. In one case, a contractor rep who worked on renovating and rebuilding Fire Departments said that at each city they visited, the local Fire Chief would be sitting on the land, and refused access until he received a bribe of $5000. In the case of that contractor, they paid it. Apparently, there was no clause in the contract that said they were not to pay bribes or that they were to report any bribe requests to a hotline. In contrast, on another day, I met the contractor representative for a US firm in charge of rebuilding another type of building - it could have been schools or medical clinics, etc. His approach when asked for bribes was to immediately locate the local tribal chieftain and tell them that his firm would leave the area and the building would not be built unless the Chieftain made the bribe requests be retracted. In almost all cases, that was a successful method and the work continued without having to pay bribes. So, whichever agency (USACE or USAID) that managed the reconstruction of fire department buildings should be slapped around. Do I have proof, or names - no, and they probably hid the bribe payments under some other account, but it was clear to me I was getting the straight scoop.

Lessons Learned:
- Don't use USAID for reconstruction in conflict areas, because they are not willing to go into the field and personally verify the quality of work.
- Make sure all contractors have a clause in their agreement prohibiting the payment of bribes, AND also defined a reporting process of bribe requests to an independent group or IG (or CPI in Iraq before the bad guys took them over) that would follow up an arrest the requesters.
- Develop and publish a guide of alternative actions to handle bribe requests, such as the above usage of Tribal elders to remove bribe requesters. Also clearly layout strict guidelines to refuse construction work if bribes are requested - send the contractor to another location. In the example above about bribes to Fire Chiefs, the word spread of successful requests, so the next location always resulted in another Fire Chief demanding a bribe.
vj

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from
http://www.globalvoicesonline.org/2008/05/17/iraq-blogiraq-is-dead/

Iraq: BlogIraq is Dead
Saturday, May 17th, 2008 @ 23:17 UTC
by Salam Adil

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I am sad to report the death of Ahmed the writer of the blog BlogIraq who was murdered in the Al-Mansour district of Baghdad. May he rest in peace. Iraqi bloggers are a close-knit community and we mourn the death of fellow bloggers as if it is from our own family. There is not one family in Iraq that has been untouched by the violence that gripped our country and Iraqi bloggers are no different. His friend, Mohammed Alani, who helped set up the blog, wrote on BlogIraq:

Ahmed (BlogIraq) is dead. He was killed in Baghdad on April 11th, 2008… He had an appointment that day with a guy he knew. This guy was supposed to get him some documents that prove corruption in some USAID office back in Baghdad. I don't have complete details about it. Anyway, he and the guy bringing the documents were killed at their meeting place in Mansour district in Baghdad…

His brother in-law found him dead with his friend in Mansour district in one of the small streets there. Thank God his body was found, unlike many of our friends who were killed or just vanished without a trace.

When I first setup this blog for him, he gave me the admin password of his blog and I gave him the password of mine. We agreed that whoever dies first, the other should write about it in his blog. Its just my bad luck that he died first. I can only think of his 20 months old daughter. Shes about the same age as my daughter, Aya.

May God take revenge of those who killed him and orphaned his lovely daughter.

Abbas Hawazin adds: “I am feeling so much anger boiling, I tried to cry but I couldn't.”

US House Oversight Committee to Review Defense Base Act Insurance Scam in Iraq

Contractors in Iraq apparently were billing the US for employee insurance payments when two Tikrit, Iraq based contractors were NOT actually paying for the insurance. Thus the US House Committee on Oversight and Government Reform, chaired by Democrat Henry Waxman is holding hearings. I will add transcripts later if they are of interest, and my specific experience with US Contractors for the Oil Pipeline in Alaska using insurance reserves as hidden profits is in the next paragraph.
vj