WASHINGTON (CN) – Members of the bipartisan Commission on Wartime Contracting in Iraq and Afghanistan expressed frustration Monday that the government hasn’t devoted more resources to stopping the “universe of fraud” that developed as private contractors claimed $770 billion in taxpayer money over the past eight years.
“The bottom line is: fraud and abuse pays most of the time in contingency cases,” commission co-chair Christopher Shays told a panel of federal criminal investigators on Monday. “Some are investigated, few are prosecuted.”
Commission members said prosecuting white-collar crime stemming from war-related contracts has fallen to the wayside in favor of more high-profile cases involving counterterrorism.
FBI Criminal Investigative Division Assistant Director Kevin Perkins said that while the “vast majority” of international contracts are legitimate, he has seen an emergence of “wide-ranging” contractor fraud schemes, including illegal payment of bribes, kickbacks in exchange for government contracts and the black-market sale of stolen government property, such as diesel fuel.
“A universe of cases … are potentially out there,” said Deputy Inspector General Ginger Cruz, who works in the Office of the Special Inspector General for Iraq Reconstruction.
One of the biggest problems in pursuing fraud cases is the use of cash in overseas contracts, creating a “criminally susceptible environment,” Cruz said. Panelists cited the Commander’s Emergency Response Program, which provides quick influxes of cash to U.S. military leaders who use it as “walking around money” to fund rebuilding projects in Iraqi and Afghan communities.
Assistant Inspector General Raymond DiNunzio for the Special Inspector General for Afghanistan Reconstruction said the program was initially designed for small procurements, but has since been used for multibillion-dollar contracts.
“It’s grown much larger,” he said, adding that they could “size it down a bit.”
“From an investigative standpoint, cash is a problem,” said Deputy Inspector General James Burch of the Defense Criminal Investigative Service in the Department of Defense. “From a war perspective, I can see how it’s an effective tool.”
Even if federal investigators could see where the cash was going, the commission said, not enough resources were being devoted to investigative efforts.
When asked if the FBI’s use of “all available resources” to investigate international contract fraud cases was enough in light of increased attention to counterterrorism, Perkins replied, “I have to admit — not only in this arena but across the board — we focus our resources on only the top threats.”
Perkins said he finds the funding for the wartime contract fraud cases mostly through the financial crime sector of his division and admitted that it is not a line item in his budget.
Cruz said it was “understandable” that the Justice Department was focused on counterterrorism and not white-collar crime. “The dollar amounts on our cases are not necessarily the highest,” Cruz said. She said her team has been “creative” to make the cases more visible to the Justice Department and therefore more likely to be picked up.
“I feel like we are at the edge of substantive issues, but not talking about them,” Shays said. “I don’t get the feeling that we are getting the support we need from the DOJ.”
Shays said the Justice Department has ignored a litany of requests from the commission for consolidated data on international fraud cases since Dec. 8.
“We are trying to get basic information from Justice and we’re not getting it,” Shays said. “I can’t for the life of me understand why Justice would be reluctant to share stats unless they don’t like what the stats say. If we don’t get this information soon, I’m going to request that we subpoena Justice.”
Perkins promised to personally track it down. “I will provide that information,” he said.
Commission members then pointed to a letter sent May 20 by the U.S. House of Representatives Committee on Oversight and Government Reform to Attorney General Eric Holder, accusing the Justice Department of helping large contractors avoid getting blocked from conducting activities in Iraq and Afghanistan by awarding them settlements in civil and criminal cases. The committee fears settlements are being used as a “shield to foreclose other appropriate remedies such as suspension and disbarment.”
Cruz, who has three formal federal prosecutors working at the Justice Department, stuck up for the agency. While Burch said that out of 100 case referrals to the DOJ, the department picks up 73 on average, Cruz put that number at 100 percent.
“If the case has legs to it, it will be prosecuted,” Cruz said.