Hearing of the Democratic Policy Committee - Contracting Abuses in Iraq

Statement

Hearing of the Democratic Policy Committee - Contracting Abuses in Iraq

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SEN. AMY KLOBUCHAR (D-MN): Well, thank you very much, Senator Dorgan. And thank you for holding this important hearing. And thank you for our witnesses for coming to testify.

I think everyone knows how important accountability is, that for the first few years of this war, that there really wasn't that kind of congressional oversight that the chairman has shown here. And at the same time, American taxpayers were spending billions of dollars to help rebuild Iraq, and many corporations were bringing in record profits, yet the work wasn't getting done.

Today yet another report was released by the special inspector general for Iraq reconstruction detailing how millions of dollars of lucrative Iraq reconstruction contracts were never finished because of excessive delays, poor performance or other factors, including failed projects that are being falsely described by the U.S. government as complete on their data base.

The inspector general's office found that at least 885 contracts were terminated by U.S. officials before their completion, and 112 of those agreements were ended specifically because of the contractor's actual or anticipated poor performance.

The report also found that many reconstruction projects were being described as complete or successful when they were not. In one case, USAID contracted with Bechtel Corporation in 2004 to construct a $50 million children's hospital in Basra, only to, quote, "essentially terminate" the project in 2006 because of month-long delays. But the U.S. data base of Iraqi construction contracts shows the project is complete when, in fact, the hospital was only 35 percent complete when work was stopped.

When people are given unlimited contracts, no-bid contracts, you could see why you would get (excess ?). In my former job as county attorney, we always said, "Follow the money and you'll find the bad guys." Well, in 2007 the GAO and the Defense Contract Audit Agency followed the money, and here is what they found. Of the $57 billion given in contracts for reconstruction in Iraq that was investigated, approximately $10 billion has been wasted; $4.9 billion was lost through contract overpricing and waste; $5.1 billion was lost through unsupported contract charges. Of this $10 billion, more than $2.7 billion was charged by Halliburton.

This means almost one in six federal tax dollars was wasted and should not have been spent -- one in six federal tax dollars, as we're dealing with this enormous debt, as we're dealing with kids not being able to afford health care, and people losing their homes -- one in six federal tax dollars wasted.

Last fall, I joined with my freshman colleagues in introducing legislation to create a wartime contracting commission modeled after the Truman Commission during World War II to investigate the contracting waste and abuse in Iraq and Afghanistan. Though the authority for the Wartime Contracting Commission was signed into a law as part of the '08 defense authorization bill, we are still meeting opposition from the administration to implement it.

But this is not going to stop until all of us demand accountability from government officials and contractors charged with supporting U.S. troops and reconstruction projects. That's what Senator Dorgan is doing by holding this hearing today and that's why the three of you are so important as part of this process to come forward and give us the information that we need.

I look forward how we might be able to apply the lessons that we have learned from the past to minimize waste and abuse going forward and to prevent incompetence in the future, and protect our taxpayers' dollars.

Thank you very much.

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SEN. KLOBUCHAR: Well, thank you very much, and thank you for the testimony. Where are your sons now, Ms. Warren?

MS. WARREN: I have one on the Carl Vinson; one is in the U.S.M.C. Reserves; and then my son, Andy, is a weatherman in Enid.

SEN. KLOBUCHAR: I was actually -- about a year ago, I went to Fallujah and visited the camp there. So, as I heard this, we had a lot of Minnesota troops there.

And my questions would first be just about this report that came out today. And I wouldn't expect you to see it, but it was a lot about how these contracts -- the U.S. government is saying they're completed, but they're not really completed. And it sounds like a number of them weren't completed.

And, could you talk, just generally -- any of you can chime in, about why you think there is trouble in completing these contracts? Is it, some of it, the corruption -- and, of course, we can't -- each case will have its own, but what you've seen, in terms of contract delay, and what the problem is in completing contracts?

MS. WARREN: Well, the problem that I saw in completing the contracts was just an unwillingness on the part of KBR upper management. For instance, at our MWR, to put on a music night we had to borrow laptops from the troops to put on a music night. And we were billing the government for that entertainment that we were providing. Which was a farce -- we had a box of components to put together a music night. We didn't even have music.

SEN. KLOBUCHAR: Mm-hmm. (In acknowledgement.) (Laughs.) Anyone else want to add to this about the delay in completing contracts, and anything you saw, in terms of the waste, and how that contributed to it?

Mr. Cassaday?

MR. CASSADAY: Yes, Senator, there's a lot of things that happened over there that I really can't comment on at this time. But I did see a lot of things that had to do with the MWR, when I myself had to go in there to do some work on some satellite dishes -- which KBR had me do, and I really knew nothing about them.

I had to sign in and out several times. If I went out to the latrine, I had to sign back in. If I went to another room, I had to sign in. So they did, constantly, have people sign in and out, and charge other people with that.

SEN. KLOBUCHAR: The ice example that you were giving, about the -- how hot was it when they were denying the ice to the Marines?

MR. CASSADAY: It was between 120 and 140 degrees. A normal day, it was 120 degrees. And there was a time when the temperature actually did hit 140 over there.

SEN. KLOBUCHAR: And they used the ice for drinking water, or to put on their heads, or what did they use the for?

MR. CASSADAY: Well, mostly the ice is used to cool down the drinks. And when the Marines go out on convoy, they take the ice to try to cool down any of the soda that they have, or any fruit juice. And they -- if they have any other type of foods, food items.

SEN. KLOBUCHAR: So, this guy, when he -- the guy that was tallying it wrong, and making things up, and then selling the ice -- would he sell it just for himself, or would he -- how would he do this? Can you expand on that a little bit more?

MR. CASSADAY: Yes, he would go across the street to the Iraqi shops, and he would take ice to one of the restaurants, and he would trade it for food. And he would also take it to where he could buy DVDs, and CDs, and other items that he wanted to get. And he would just make deals with them on the ice. And he -- I'm sure he also sold it for money to them too.

SEN. KLOBUCHAR: And, how long did this go on?

MR. CASSADAY: This went on for, when I was over there, from July -- approximately July 6th of 2004, until he actually got fired some time around September of that year.

SEN. KLOBUCHAR: So, when you were working on this project -- and maybe you want to add to this, Mr. Halley, did you feel a sense of oversight from U.S. officials? Were they watching what was going on with these contractors -- when we're looking in one out of six federal dollars that have been lost because of corruption and abuse?

MR. HALLEY: The only thing I saw over there, really, was just the different supervisors and the formens and the camp managers that weren't doing their jobs properly. I really have no information about anyone else.

SEN. KLOBUCHAR: But, so you were -- here you were, you were frustrated with what's going on -- you're seeing this guy stealing the Marine's ice, but you didn't really feel that there were U.S. officials that were watching these guys, or you didn't see that happening?

MR. HALLEY: No, there wasn't any U.S. officials watching at all, just us other employees there that saw that it was wrong. And we would try to make up for it. We would try to give the Marines the ice, and then put down on the tally sheets what we gave them.

I, myself, would go out of the way. If I saw Marines wanted the ice, I would take them the ice. Then I'd come back and I would put on the tally sheets what I gave them.

SEN. KLOBUCHAR: Ms. Warren, when saw the looting going on, that you were describing -- I was in some of those palaces, and I could just imagine how many things were in them, do you sense that there were U.S. officials overseeing any of this that was going on when the --

MS. WARREN: There were no --

SEN. KLOBUCHAR: -- contracts --

MS. WARREN: -- there were no U.S. officials.

SEN. KLOBUCHAR: And so, did you have a sense that you could go to the U.S. officials to report this? Or, were you --

MS. WARREN: I tried to go to the U.S. officials. I contacted members of Congress, and I got a form letter.

SEN. KLOBUCHAR: Okay.

Mr. Halley, how about the abuse you saw? Did you feel that there was any oversight from U.S. officials, or people you could go to?

MR. HALLEY: At one point there were -- was an inspection from Justice Department officials. And they were -- they came to do an inspection, to ask questions about the lack of weapons and armored vehicles, and other items that the Defense contractor we were working to support, had built for, but were non-existence and been -- had been complaints raised by the actual company's employees.

During that time, I had a -- was asked briefly about it and -- by one of the Justice Department officials, and I told them that I had no complaints since this did not affect, you know, my -- the contract I was working on.

Later, when I worked for Cape Management, and issues had been raised about billing, I had went directly to the contracting officer and told him of my concerns. And after that I had received no further questions from the contracting officer after my initial contact with him about the billing issues.

SEN. KLOBUCHAR: Thank you. I'm out of time, but I will say one of the things that I've taken away from your testimony is this isn't just about taxpayer's money -- which is critical, which I talked about in my opening statement, it's also about the troops and how they're being treated, and whether they're getting ice, or whether they're getting the safe weapons or safe equipment that they need, and that this has actually hurt them as well. So, thank you for your testimony.

MS. WARREN: May I say something about the ice?

SEN. KLOBUCHAR: Sure.

MS. WARREN: My son was a Marine in Falluja, and he told me not to use the ice. And the reason he didn't want me to use the ice is because KBR was using trailers to store dead bodies in; that they were then using to support -- to transport the ice.

SEN. KLOBUCHAR: So that, with your understanding, the same trailers that they were using to put fallen soldiers, or Iraqis, or --

MS. WARREN: They were dead Iraqi bodies. My son was helping out with Mortuary Affairs, and he saw the same trailer loaded with ice.

SEN. KLOBUCHAR: Thank you very much.

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