|Iraq as the world's biggest cash
By Emad Mekay
WASHINGTON - The United States has charged
a former employee of the US construction giant
Halliburton and a Kuwaiti sub-contractor with
defrauding the US government of millions of
dollars in a contract scam in Iraq, one day after
an international watchdog group warned that lax
oversight was threatening the reconstruction
Two men - Jeff Alex Mazon, a
former employee of Kellogg, Brown & Root
(KBR), a subsidiary of Houston-based Halliburton
Co; and Ali Hijazi, the managing partner of a
Kuwaiti business, LaNouvelle General Trading and
Contracting Company - were indicted on charges of
devising a scheme to defraud the US of more than
The charges are related to
the awarding of a sub-contract to LaNouvelle to
supply fuel tankers for US military operations in
Iraq before the US invasion of Iraq in March 2003.
The indictment alleges Mazon rigged a bid
he received from Hijazi of LaNouvelle for fuel
tankers to ensure that LaNouvelle would be
overpaid. It also said that Mazon, 36, allegedly
inflated the competitor's bid to ensure that
LaNouvelle's bid would be the lowest. Mazon
allegedly tripled both bids and, in February 2003,
on behalf of KBR, Mazon awarded the sub-contract
for fuel operations at the airport to LaNouvelle.
The sub-contract specified that KBR was to
pay LaNouvelle more than $5.5 million, nearly $5
million more than the KBR estimate of the job -
Hijazi allegedly presented
Mazon with a $1 million check in exchange for
Mazon's favorable treatment of LaNouvelle.
The investigation is one of several
involving Halliburton and its subsidiaries, which
are working to support the US occupation in the
The charges surfaced only a
day after the international watchdog group
Transparency International said in its Global
Corruption Report 2005 that profiteering threatens
to undermine the reconstruction of Iraq, where
most of the companies operating are US-based.
"When the size of a bribe takes precedence
over value for money, the results are shoddy
construction and poor infrastructure management,"
said Peter Eigen, chairman of Transparency
International (TI), in a statement. "Corruption
wastes money, bankrupts countries, and costs
The TI report called for the
adoption of more aggressive anti-corruption
measures as Iraq rebuilds. "Corruption thrives in
a context of confusion and change," the report
says, adding that the occupied Arab country was
especially vulnerable due to its recent history of
conflict, tyranny and mismanagement as well as
"the sizeable reconstruction funds that have been
pledged by the international community".
The organization said that the new Iraqi
government, US forces and international donors
need to place more emphasis on decentralizing
governance, loans and aid projects, and to support
Iraq's local media as an independent watchdog.
The report also identifies management of
Iraq's oil revenue as a priority. "Funds poured
into rebuilding countries such as Iraq must be
safeguarded against corruption," Eigen said.
Authors of the report on Iraq say that most of the
anticipated spending on building and procurement
has not yet occurred. "If urgent steps are not
taken Iraq will become the biggest corruption
scandal in history," the authors say.
Attempts by donors like the World Bank and
the International Monetary Fund (IMF) to hasten
the pace of reconstruction can heighten the
chances of waste and fraud, they argued.
Transparency International said that
current standards of supervision by donors and
implementing agencies are not yet sufficient.
Broad consultation and multilayered monitoring
that involve local communities are necessary to
reduce the risks of corruption, the report said.
"The example of Iraq is particularly dismal in
this respect," says the report.
referred to how the Coalition Provisional
Authority (CPA) and US Department of Defense
initially had only 80 people examining the largest
reconstruction program in history, half the number
needed according to the Association of Inspectors
General, and eventually outsourced oversight to
private companies, giving rise to potential
conflicts of interest.
The report also
said that many US contractors in Iraq have been
wasteful and taken what many would see as
excessive profits, both of which can be attributed
to "cost-plus" contracts. These are deals in which
companies are reimbursed for all costs with an
additional percentage added as guaranteed profit.
It said that US rules in Iraq still allow
the government to award an unspecified amount of
future work to approved contractors. "This system
restricts the ability of poorly connected and
smaller companies from bidding for contracts," it
The report also faulted the
phenomenon of "contract bundling", which joins
together two or more separate procurement
requirements into a super-sized contract,
effectively disqualifying smaller companies
because only the very largest contractors are able
Other case studies of
large-scale infrastructure projects around the
world that have been plagued by corruption include
dam projects in Lesotho, Argentina and Uganda; a
waste incinerator in Cologne, Germany; and the
Bataan nuclear power plant in the Philippines.
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