Windfalls of War

From the Executive Director

Charles Lewis’ remarks to the press on the release of Windfalls of War.

Good morning. The Center for Public Integrity is a nonprofit, nonpartisan watchdog organization that investigates public service and ethics-related issues. We opened our doors here in Washington in May 1990, and since then, we have issued more than 250 investigative reports and 12 books that serve as vital reference material for journalists, academics, policymakers and citizens alike. The Center for Public Integrity is funded by foundations and individuals and the sale of our publications. We do not accept advertising or contributions from companies, labor unions or governments. We do not take positions or lobby on specific public policy or legislative matters. The names of our major donors and other information about the Center are available on our award-winning Web site, www.publicintegrity.org.

In recent years, we have become increasingly curious about defense contractors and their activities. In August 2000 within days of Dick Cheney being named as George W. Bush’s running mate, we published a report about Halliburton, its government contracts, and how they had doubled while Mr. Cheney was CEO of the company. A year ago, the Center issued an 80,000-word report by its International Consortium of Investigative Journalists entitled Making a Killing: The Business of War, which featured a comprehensive Web database of 90 private military companies operating in the world today, including Halliburton subsidiary, Kellogg Brown & Root. In December, 2002, we published a report, Outsourcing Big Brother, about the Pentagon’s controversial Total Information Awareness program and its private, data-mining contractors. And this past spring, during the Iraq war, the Center issued a report detailing how nine of the 30 members of the Defense Policy Board had ties to defense companies with $76 billion in Pentagon contracts in just the preceding two years.

Today, we are releasing The Windfalls of War, which consists of a summary report, six “sidebar” reports, profiles of 71 companies and individuals awarded contracts in Afghanistan and Iraq in 2002 and 2003, plus numerous charts. The Center’s six-month investigation has produced the most comprehensive information to date – inside or outside of the government – about the American companies that landed U.S. taxpayer money contracts in the two nations targeted in Washington’s war on terror. At the same time, it should be noted that we specifically focused on contracts awarded by the Pentagon, the State Department and the U.S. Agency for International Development. Our 62,000-word investigative report has been produced by 20 researchers, writers and editors, who filed 73 Freedom of Information Act requests and appeals to the various relevant agencies. Besides studying thousands of pages of secondary source accounts, we analyzed millions of federal campaign contribution records, lobbying registration records, government contracts, and agency Web site and private company Web site pages.

What we are presenting today is quite cautious and conservative. We have been careful to only mention and include companies and contracts that we could confirm, but these numbers will continue to grow as the government provides us with more information over the coming weeks and months. As a result of this somewhat fluid situation, we will update our site and post new contracts as they become available to us.

What did we find? More than 70 American companies and individuals have won up to $8 billion in contracts for work in postwar Iraq and Afghanistan over the last two years. Those companies contributed more money to the presidential campaigns of George W. Bush – more than $500,000 – than to any other politician over the last dozen years.

Kellogg, Brown & Root, the subsidiary of Halliburton – which Vice President Dick Cheney led prior to being chosen as Bush’s running mate in August 2000 – was the top recipient of federal contracts for the two countries, with more than $2.3 billion awarded to the company. Bechtel Group, a major government contractor with similarly high-ranking ties, was second at around $1.03 billion.

However, dozens of lower-profile, but well-connected companies shared in the reconstruction bounty. Their tasks ranged from rebuilding Iraq’s government, police, military and media to providing translators for use in interrogations and psychological operations. There are even contractors hired to evaluate the other contractors.

Nearly 60 percent of the companies had employees or board members who either served in or had close ties to the executive branch for Republican and Democratic administrations, for members of Congress of both parties, or at the highest levels of the military.

Most of the companies that won contracts in Iraq and Afghanistan are political players. According to the Center’s analysis, the companies, their political action committees and their employees contributed a total of nearly $49 million to national political campaigns and parties since 1990. Donations to Republican Party committees – the Republican National Committee, the Republican Senatorial Campaign Committee and the National Republican Congressional Committee – outpaced those to Democratic committees, 12.7 million to $7.1 million.

These two wars in two years and their aftermaths have brought out the Beltway Bandit companies in full force, and there is a stench of political favoritism and cronyism surrounding the contracting process in both Iraq and Afghanistan. I am not just talking about the large political payments and excessive lobbying fees to land these fat contracts, or the already reported, cushy, no-bid circumstances surrounding the Vice President’s former company, Halliburton. We found numerous instances in which companies with thin or no credentials landed major multimillion dollar contracts. We also found a current Pentagon official whose spouse has been getting Iraq contracts. Carol Haave has been deputy assistant secretary of defense for security and information operations since November 2001, and her husband, Terry Sullivan, still works for their contractor company, Sullivan Haave. He told us, with a straight face, that “People need to know how we operate as a husband and wife. We keep things completely separate and always have.”

In another case, a company called Creative Associates International, a private for-profit company based in Washington D.C., landed an educational reform contract in Iraq of up to $157 million just months after a Creative Associates employee attended internal meetings at the U.S. Agency for International Development meetings on – you guessed it – educational reform.

Regarding another situation, an Afghanistan contractor in Nebraska bluntly told us that efficiency and quality are secondary to politics in the process of selecting companies and organizations to work in that country, “It depends on who knows who in the Administration, USAID and the State Department.”

Incidentally, contract spending in Iraq was more than double that in Afghanistan. According to our investigation, at least $5.7 billion in government funding was slated for U.S. contractors in Iraq, compared to nearly $2.7 billion for Afghanistan.

Frankly, what surprised us the most was the Keystone Kops, rank amateur nature of the government contracting process. Federal officials sent us documents affixing a contract amount at $600 million and then months later told us, oops, it was actually $600,000. The Center for Public Integrity found no uniformity across the government in how contract values are reported. The amount listed for an individual contract either represented only what had been paid to date on a multiyear contract, or a minimum and maximum dollar range of the contract; or in some instances, a single figure, without any specification as to whether it represented a first payment, a first-year total, or a multiyear total. In some instances, the Center could not determine anything about a particular contract cost or other details because neither the company nor the government agency responsible for it would divulge that information.

We are only talking about primary contractors here. Because of the paucity of disclosure requirements for subcontractors, we were unable to examine them in any systematic way, and it was not clear how much of the postwar Iraq and Afghanistan business they actually hold. USAID Administrator Andrew Natsios has said that more than 50 percent of the money that goes to contractors actually ends up with subcontractors.

A few times, when the government stiffed us, we found that the companies actually had bragged about landing the contracts on their Web sites or to investors in the industry trade press. We would then forward this useful information to federal officials, and lo and behold, they suddenly found the contracts.

This is all outrageous. We are talking about the expenditure of billions of dollars in taxpayer money. As Americans, we have a right to know how our hard-earned money is spent. When American soldiers are at risk or worse, are being killed, the stunning incompetence and deliberate stonewalling become even more offensive and unacceptable.

Too often, we found that federal officials were reluctant to release contract information, wanting to check first with the companies, to see if they minded releasing the contracts and related information. The last time I checked, in this democracy we are supposed to have a government of the people, by the people and for the people, not public officials protecting private companies behind closed doors.

The General Accounting Office is investigating the entire contracting mess in Iraq and Afghanistan, and acknowledging the almost incomprehensible confusion, the Pentagon has announced that it is creating a centralized, consolidated contracts office in Baghdad next month. These all sound like improvements, but does anyone really believe the substantial political influence problems and perceptions will go away? That hardly seems possible.

I’m certainly not holding my breath.

But just as bothersome are the secrecy and obfuscation. Indeed, the government’s responses to our Freedom of Information Act requests were sporadic, at best, and yesterday, the Center filed suit in U.S. District Court in Washington, D.C., against the State Department and the Army after both agencies failed to respond fully to our request for information as outlined under federal FOIA law. This is only the second time in our 14-year history as an organization, in which we have filed a lawsuit to pry public information out of the federal government. By the way, the last case, involving Vice President Al Gore and the sale of federal lands to Occidental Petroleum, we won.

Before taking your questions, I want to thank publicly the extraordinary folks who have made this important report possible. First and foremost, we would not be here today without the dogged perseverance and determined leadership of six-year Center veteran Maud Beelman, project manager, editor, writer and director of the Center’s International Consortium of Investigative Journalists. She led a spectacular team of writers (alphabetically) Kevin Baron, Neil Gordon, Laura Peterson, Daniel Politi, André Verloy, Bob Williams, Brooke Williams; researchers Aubrey Bruggeman, Alex Cohen, Sarah Dalglish, Alex Knott, Estelle Levresse, Adam Mayle and Susan Schaab. I want to thank our wonderful editors, managing editor Bill Allison, Teo Furtado, Aron Pilhofer, and Peter Smith; production staff Mohammad Ismail, Javed Khan and Jonathan Werve, and Webmaster Han Nguyen.

Thank you.