Special Inspector General for 

Iraq Reconstruction

Iraq Reconstruction Lessons Learned from Investigations, 2004−2012

April 2012

Contents

Introduction .....................................................................................1

Top Ten Lessons Learned .................................................................. 2

Oversight during the Initial Stages 

of the Iraq Reconstruction Program .................................................. 5

Investigations Grow......................................................................... 17

Investigating the Military ............................................................... 26

Increasing Capacity .........................................................................31

Blossoming of Indictments and Convictions ................................... 36

Best Practices ................................................................................. 40

Conclusion ..................................................................................... 42

The Bloom-Stein Crime .................................................................... 9

The Cockerham Conspiracy ............................................................ 22

The Schmidt Case .......................................................................... 28

*Th e offi cial version of this report, including any corrections, is available on the 

SIGIR website: www.sigir.mil.
APRIL 2012 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION I 1

Introduction 

Th e Iraq reconstruction experience produced a plethora of lessons 

about what happens when a stabilization and reconstruction operation (SRO) commences without suffi cient systemic support in place. 

Among the most salient is the need to provide a robust on-the-ground 

team of investigators and auditors from the outset of such an operation. Th e presence of strong oversight early on in an SRO would deter 

the kind of fraud, waste, and abuse that occurred all too oft en during 

the U.S. reconstruction program in Iraq. 

Waste is the product of poor planning and weak controls. Abuse is 

bad management caused by insuffi cient systemic order. But fraud is 

the intentional wrongdoing by persons seeking to enrich themselves 

amid a chaotic and oft en kinetic environment. 

Th is report focuses on fraud and the other white-collar crimes that 

occurred in the course of the Iraq rebuilding endeavor, eliciting a series 

of lessons drawn from criminal investigations conducted by the Special 

Inspector General for Iraq Reconstruction (SIGIR), outlining illustrative 

examples of major cases, and suggesting best practices for future SROs 

that could obviate or reduce criminality. Th ere will always be crooks in 

confl ict zones who will try to take advantage of the chaos that wartime 

brings. But ensuring strong oversight in theater from the start of an SRO 

could stop many who might otherwise abuse the system; at the very 

least, it would increase the likelihood of catching those who do. 

SIGIR investigators have served in Iraq since 2004, frequently under 

fi re. Th e inherent disorder of life in a war zone—coupled with the 

challenges of starting up a new organization—meant that substantial investigative results came gradually. Th e incremental nature of 

this progress stemmed, in part, from the unpredictable character of 

the criminal investigative process, which is less structured and more 

desultory than the audit process. But signifi cant results did come, and 

their numbers stand as silent testimony supporting the need for robust 

oversight during SROs. As of March 31, 2012, SIGIR investigations 

had yielded 86 indictments, 66 convictions, and more than $175 million in court-ordered fi nes, forfeitures, restitution payments, and other 

monetary penalties. 
2 I IRAQ RECONSTRUCTION: LESSONS LEARNED FROM INVESTIGATIONS, 2004–2012

Top Ten Lessons Learned

Th ese are the ten most important lessons that SIGIR derived from its 

eight years of experience investigating crimes arising from the Iraq 

reconstruction program:

1. Ensure that law-enforcement agencies have appropriate investigative plans and procedures in place before an SRO begins, with 

trained personnel who are well prepared to carry them out. Upon 

inception, SIGIR adopted the rules and procedures of the Department of Defense Offi ce of Inspector General (DoD OIG), but these 

proved ill-suited to operating within a contingency environment. 

Over time, SIGIR developed its own set of rules and procedures 

adapted to settings confronted in Iraq. On the personnel front, 

SIGIR recognized that SRO investigators should have white-collar 

fraud experience.

2. Use non-law-enforcement forensic assets, such as auditors and 

inspectors, to generate leads for investigations. A number of 

early cases uncovered by SIGIR had their foundations in audit or 

inspection fi ndings. Th is led the Inspector General to form forensic teams that combined auditors and investigators. Th e melding 

of their skills opened doors to cases that otherwise might have 

remained closed.

3. Pursue a holistic approach to case management that integrates 

the eff orts of in-theater investigators with U.S.-based investigators and prosecutors. SIGIR developed the regular use of video teleconferences to improve the fl ow of information between personnel 

based in the United States and those based in Iraq. In concert with 

the Department of Justice (DoJ), SIGIR created an unprecedented 

program called SIGPRO (SIGIR Prosecutorial Initiative), wherein 

the Inspector General hired his own prosecutors and paralegals, 

detailing them to DoJ to work on Iraq cases. Th e application of 

advanced communication tools and novel prosecutorial initiatives 

greatly strengthened production and improved outcomes.
APRIL 2012 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION I 3

4. Maintain strong relations with host-country law-enforcement 

offi cials to bolster case development, evidence gathering, and the 

pursuit of potential suspects in country. Th e Inspector General 

met regularly with the leaders of Iraq’s law-enforcement agencies 

as well as its senior judicial offi cers. SIGIR investigators maintained 

regular contact with agents within the Iraqi law-enforcement community. Th ese multilevel connections fostered case development, 

with the salutary eff ect of furthering U.S.-Iraq relations. Further, 

they permitted the opportunity for capacity-building training, which 

SIGIR provided to Iraqi inspector general personnel. 

5. Deploy a robust in-country presence of investigative personnel, widely publicize the Hotline, and regularly engage with U.S. 

government organizations in fraud-awareness activities. SIGIR’s 

success in Iraq was tied to a key principle: to make cases, you have to 

be there. Trying to develop leads on an “expeditionary” basis will not 

produce necessary results, nor will it deter crime. A forward-leaning 

presence is crucial to deter crime, develop leads, and catch criminals. 

Maintaining a widely disseminated Hotline number for the anonymous reporting of wrongdoing is key to case development.

6. Avoid bureaucratic turf battles among law-enforcement agencies by building a task-force approach that brings all agencies 

together around the law-enforcement mission. Investigative task 

forces strengthen case management. Th e inevitable chaos caused by 

SROs requires the improved integration of all U.S. agencies operating in theater, including law enforcement. SIGIR’s successes generally resulted from eff ective teamwork realized through task-force 

investigations—the headquarters level working to coordinate and 

deconfl ict cases and the fi eld level working to maximize the available 

investigative resources. 

7. Ensure fl exibility in personnel requirements, staffi ng numbers, 

and deployment procedures. SIGIR’s enabling statute, which created the fi rst Special Inspector General’s offi ce in U.S. history, provided 

employment fl exibilities, permitting the dynamic management 
4 I IRAQ RECONSTRUCTION: LESSONS LEARNED FROM INVESTIGATIONS, 2004–2012

of investigative personnel. Standard U.S. government regulations 

are too unwieldy for use in highly demanding SRO environments. 

Legal fl exibility ought to be the rule for administrative and personnel practices governing law-enforcement eff orts executed during 

contingency operations, whether achieved through the creation of 

a permanent Special Inspector General for Overseas Contingency 

Operations—a concept now pending before the Congress—or some 

future interim Special Inspector General.

8. Prioritize using advanced criminal-intelligence techniques and 

developing informants in theater. SIGIR enjoyed notable success 

making cases in Iraq via undercover stings, wiring informants, and 

employing a variety of technical capabilities. Th e use of task forces 

improved the success rate of these and other law-enforcement 

techniques. Th e watchword is, whenever possible, bring stateside 

investigative tools to bear during an SRO, notwithstanding the rigors 

presented by the environment. 

9. Engage with partner-nation law-enforcement agencies to prosecute non-U.S. criminals. SROs commonly involve a coalition of 

countries, meaning that multinational personnel may be involved 

in rebuilding eff orts. Th is was the case in Iraq. SIGIR developed 

relationships with law-enforcement agencies in Coalition-member 

countries, producing the prosecution and conviction of non-U.S. 

personnel in their home jurisdictions. 

10. Develop innovative investigative programs targeted to the 

specifi c needs of the SRO. SIGIR’s investigative leadership created 

a series of novel programs shaped to solve the problems that arose 

from the Iraq reconstruction enterprise. Some combined personnel 

within the agency, while others used an interagency approach. In 

addition, SIGIR emphasized the importance of using the suspension 

and debarment process in reining in abusive contractors. Th ese 

innovative eff orts were driven by an overarching purpose: the 

protection of taxpayer interests through the effi cient and eff ective 

making of cases. 
APRIL 2012 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION I 5

Oversight during the Initial Stages 

of the Iraq Reconstruction Program

Tracking the Coalition Provisional Authority

In the year following the May 1, 2003, declaration of the end of hostilities in Iraq, more than $42 billion was made available in varying ways 

for use by the Coalition Provisional Authority (CPA), the agency authorized by United Nations’ mandate to govern Iraq as interim authority. Th ese funds chiefl y came from four sources:

• about $20 billion in Development Fund for Iraq (DFI) monies, 

comprising Iraqi oil revenues deposited into the Federal Reserve 

Bank of New York 

• about $2 billion in seized and vested assets, comprising funds recovered in Iraq by the U.S. military or frozen in foreign accounts

• $2.475 billion in the Iraq Relief and Reconstruction Fund (IRRF 1), 

approved by the Congress in April 2003 and chiefl y used by the 

U.S. Agency for International Development (USAID)

• $18.04 billion in the Iraq Relief and Reconstruction Fund (IRRF 2), 

approved by the Congress in November 2003, but not obligated 

until the spring of 2004 toward the end of the CPA’s tenure.

Th e CPA used the DFI to fund Iraq’s national budget, which supported ministry operations. Some of the DFI, approximately $7 billion, 

went to CPA-approved relief and reconstruction projects. Aft er the 2003 

invasion, Iraq had no functioning banking system; 

virtually all transactions were conducted in cash. 

Th is major vulnerability spawned signifi cant 

criminal activity. 

DFI funds were bundled onto pallets and airlift ed to Iraq. A typical pallet held 640 bundles of 

$100 bills, with a thousand bills per bundle. Each 

loaded pallet weighed about 1,500 pounds and 

carried about $64 million. Under the CPA’s aegis, 

these money-laden pallets were transported to Baghdad through a 

series of fl ights originating from Andrews Air Force Base in suburban 

Maryland throughout 2003 and 2004. Th e money was deposited in the 

BEST PRACTICE

Begin oversight early. 

As was demonstrated 

repeatedly in the early 

days of Operation 

Iraqi Freedom, many of 

the temptations and 

opportunities for criminals 

were due to the lack of 

oversight.
6 I IRAQ RECONSTRUCTION: LESSONS LEARNED FROM INVESTIGATIONS, 2004–2012

Central Bank of Iraq (CBI) and withdrawn, pursuant to CPA directives, for use by the ministries or for projects across the country. 

In April 2004, the handover of sovereignty from the CPA to Iraqi control drew near. Th e CPA’s Administrator, Ambassador L. Paul Bremer, 

III, ordered his staff to expedite the execution of DFI funds, because 

he wanted all available monies obligated to support the burgeoning 

reconstruction program. James “Spike” Stephenson, the USAID Mission 

Director in Iraq, characterized this period as “frenzied.”1

During the fi nal six weeks before the CPA’s dissolution, more than 

$5 billion was either transferred to Iraq’s ministries or committed 

to CPA-administered reconstruction projects. Th is amounted to 

more than a quarter of all the DFI funds disbursed during the CPA’s 

14-month existence. It was into this chaotic maelstrom of systemic 

vulnerabilities, physical threats, and weak controls that SIGIR’s fi rst 

law-enforcement offi cers arrived in the spring of 2004. 

Beginning Oversight

On January 20, 2004, Stuart W. Bowen, Jr., was appointed the Coalition Provisional Authority Inspector General (CPA-IG). Th e Congress created the CPA-IG in early November 2003, and, two weeks 

later, the Administration announced that the CPA would close by 

June 30, 2004. Th e CPA-IG’s mandate provided that it should terminate six months aft er the closing of the CPA. It thus appeared that this 

fl edgling oversight offi ce would experience an abbreviated existence, 

with its ostensible shuttering to occur on December 31, 2004. But the 

Congress superseded that expected eventuality 

by creating the Special Inspector General for Iraq 

Reconstruction in late October 2004, thereaft er 

giving it oversight of all funds for the reconstruction of Iraq.

Th e Inspector General’s fi rst trip to Iraq revealed 

an urgent need for aggressive oversight. During 

that February 2004 visit, he was accosted by various staff within the CPA as well as contractors, 

who identifi ed, frequently with great alarm, the weak accountability 

over DFI funds. In an environment awash with cash, the basic safeLESSON

Deploy a robust in-country 

presence of investigative 

personnel, widely 

publicize the Hotline, and 

regularly engage with U.S. 

government organizations 

in fraud-awareness 

activities.

1. SIGIR, Hard Lessons: The Iraq Reconstruction Experience, 2/2009, p. 155.
APRIL 2012 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION I 7

guards common to 

typical government operations were missing. 

One example of a 

key control weakness 

was the absence of a 

record-management 

policy. Th e Inspector 

General discovered this 

vulnerability during 

his second visit in early 

March 2004, when 

he was told that CPA 

records were not being 

maintained pursuant to any guideline or rule but instead were being 

haphazardly deleted or destroyed. At the IG’s request, the CPA’s Administrator promptly issued a records-management policy. But this basic 

safeguard came into being more than nine months aft er the U.S.-led 

interim authority had begun operations. 

Iraq’s disordered situation in the spring of 2004 presented a range of 

daunting challenges for CPA-IG investigators. First, the fl ood of funds 

into the country made the threat of high crime ubiquitous. Second, the 

volatile and hazardous nature of daily life impeded investigative activity 

on every front. Th ird, CPA-IG investigators found themselves thrust 

into a disjointed community of law-enforcement entities, including the 

following: the Federal Bureau of Investigation (FBI), which was focused 

on counterterrorism; the U.S. Army Criminal Investigation Command 

(CID), which was chiefl y focused on non-fraud crime; the Defense 

Criminal Investigative Service (DCIS), which had three investigators 

rotating in and out of country but no personnel permanently assigned 

to Iraq; and the USAID OIG, which had one investigator in country.2

Notwithstanding these diffi culties, as of June 28, 2004, the CPA’s 

fi nal day, the CPA-IG had opened 69 cases. Th is investigative explosion was an early red fl ag regarding the scope of the fraud problem 

affl icting the rebuilding program. Some would later describe the Iraq 

of this period as a “free-fraud zone.”

Investigators in Iraq worked in a dangerous environment where 

roadside bombs and other attacks threatened daily.

2. SIGIR, Quarterly Report and Semiannual Report to the United Stated Congress, 7/2005. 
8 I IRAQ RECONSTRUCTION: LESSONS LEARNED FROM INVESTIGATIONS, 2004–2012

Managing Cases in a War Zone

CPA-IG’s initial investigative eff orts quickly aff ected the CPA’s operations. In an early case, a CPA senior advisor to 

an Iraqi ministry was found to have manipulated 

the award of a $7.2 million security contract. To 

aggravate matters, he had authorized an advance 

payment of $2.3 million to the contractor. CPAIG’s intervention resulted in a review by the CPA 

General Counsel, who recommended voiding the 

contract. Th e CPA Administrator revoked the $7.2 million award, the 

contractor repaid the $2.3 million, and the senior advisor was removed.

Early CPA-IG audit fi ndings of waste and abuse spurred further 

investigative activity. In one instance, a contractor 

was fi ned $3,379,505 for an overcharge uncovered by an audit. Another audit found that a 

contractor overbilled the government by $20,000 

for security services. Th e contractor was forced to 

repay that amount aft er a CPA-IG investigation. 

Other early investigations uncovered:

• time-card fraud 

• possession of unauthorized automatic weapons

• gambling away of funds designated for reconstruction activities

LESSON

Ensure fl exibility in 

personnel requirements, 

staffi ng numbers, and 

deployment procedures. 

LESSON

Use non-law-enforcement 

forensic assets, such as 

auditors and inspectors, 

to generate leads for 

investigations.
APRIL 2012 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION I 9

THE BLOOM-STEIN CRIME

Th e most signifi cant early case made by SIGIR concerned a wideranging contract-fraud conspiracy that ensnared several senior 

CPA offi cials. It began with a whistleblower’s tip, led to a series of 

audits, and ended with the conviction of eight U.S. citizens. 

Th e Tip

In April 2004, an Air Force sergeant working at CPA’s headquarters 

in Baghdad met with SIGIR auditors to relay concerns about the 

new comptroller at the CPA’s regional offi ce in Hilla. According to 

the sergeant, the comptroller, Robert Stein, refused to comply with 

CPA requirements, despite repeated requests. 

Rules required regional comptrollers to travel to Baghdad to 

withdraw funds designated for DFI contracts. Aft er completing 

payment on the contracts, comptrollers had to provide proof that 

the contract work was accomplished. Stein was not providing the 

required proof to Baghdad. He claimed that the roads were too 

dangerous to make the 40-mile trip east from Hilla. Stein’s recalcitrance raised suspicions in the Baghdad Comptroller’s Offi ce, but 

the sergeant was concerned that nothing would be done.

In response to the tip, SIGIR’s chief auditor took a team to Hilla 

for a preliminary inquiry. Stein was on emergency leave, so SIGIR 

auditors interviewed his deputy, Lieutenant Colonel Debra Harrison; but the records she produced were grossly incomplete. 

Harrison blamed the poor documentation on her inability to get 

the copier to work. Th e implausibility of her explanation, coupled 

with the odd demeanor she displayed, leant further credence to the 

allegations of grave impropriety in the Hilla comptroller’s offi ce.

Th e Audit

SIGIR auditors brought the Hilla documentation problem to the 

attention of CPA’s Chief Comptroller, an Air Force Colonel, but 

he assured them that the paperwork was in order. Aft er making 

further inquiries, however, SIGIR found that Stein’s records were 
10 I IRAQ RECONSTRUCTION: LESSONS LEARNED FROM INVESTIGATIONS, 2004–2012

so severely inadequate as to appear fraudulent. 

Among other things, he had failed to sign for 

a $30 million cash withdrawal. SIGIR announced a full audit of all contracts in Hilla.

Stein, a contract employee brought to Iraq 

in the fall of 2003, fi rst worked as the security, 

logistics, and supplies director for the Hilla compound. When the 

comptroller position became vacant, Lieutenant Colonel Harrison, 

the Deputy Regional Comptroller, urged Stein’s appointment. Harrison’s advice was followed, and Stein became the South Central 

Regional Comptroller, despite possessing neither the training nor 

the appropriate background for the position. SIGIR investigators 

later discovered that Stein had a previous federal felony conviction 

for credit card fraud. 

In December 2003, Stein acceded to his new offi ce and, 

shortly thereaft er, drove to Baghdad with three others in two 

unarmored SUVs to pick up $63 million in cash. As he later told 

SIGIR: “Th e Comptroller’s procedures in Baghdad were so lax it 

was unbelievable.”

As the audit of Stein’s contracts proceeded, SIGIR auditors 

compared receipts and paperwork at the Baghdad Comptroller’s 

offi ce with those in Stein’s offi ce. Numerous problems surfaced. 

For example, Baghdad 

showed Stein withdrawing 

approximately $70 million 

in cash, whereas Stein’s 

documents indicated $119 

million. Th e CPA Comptroller had lost accountability of the funds it was 

distributing. Reasons for 

this failure may have included the heavy turnover 

in the Comptroller’s offi ce 

LESSON

Use non-law-enforcement 

forensic assets, such as 

auditors and inspectors, 

to generate leads for 

investigations.

A typical sandstorm in Baghdad, where working 

conditions for investigators and auditors could be 

diffi cult.
APRIL 2012 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION I 11

or the pressure to spend money rapidly in 

2004. Whatever the case, this key control weakness allowed a massive fraud to occur. 

At Hilla, it was common knowledge that 

Stein had an unusually close relationship with 

a contractor named Philip Bloom. Stein later 

disingenuously explained to SIGIR that he did 

not trust Iraqi contractors and thus funneled 

work to Bloom because he was the only U.S. 

contractor in the area. But Stein’s preference 

was more than expedience; he gave Bloom a 

virtual monopoly on all contracts for criminal 

reasons: the promise of huge kickbacks. 

Stein’s scheme was too clever by half. Any 

contract over $500,000 had to be approved by 

CPA headquarters in Baghdad. To circumvent 

this requirement, Stein awarded Bloom multiple 

contracts for the same project, each amounting to just under $500,000. For example, for 

the Hilla Police Academy project, Bloom received 10 contracts for 

amounts slightly more than $480,000. Needless to say, this practice 

“blinked red” once it showed up on SIGIR’s audit radar.

As documented by 

SIGIR audits, Bloom’s 

actual work, to the extent 

that it was accomplished, 

was poor. Buildings at 

the police college were so 

poorly constructed as to 

make them uninhabitable, 

with construction literally 

falling apart and electrical 

fi xtures disintegrating. Th e 

police cadets were called 

BEST PRACTICE

Deploy agents forward. 

The press of accomplishing 

the mission offers 

opportunities for criminals. 

Enforcement on the ground 

early, developing the cases 

and providing deterrence, 

can counter this trend.

BEST PRACTICE

Hire investigators with 

fraud experience. A 

multitude of investigative 

skills are required to police 

a contingency operation. 

However, operations in 

Iraq showed that fraud 

investigations were in 

the greatest demand and 

could not be compensated 

for with other types of 

investigators. 

A collapsing septic system at Hilla Police Academy: 

an example of poor construction under contracts 

awarded to Philip Bloom.
12 I IRAQ RECONSTRUCTION: LESSONS LEARNED FROM INVESTIGATIONS, 2004–2012

on to learn their craft in 

classrooms that reeked 

of sewage, suff ered from 

broken fi xtures, and had no 

working air-conditioning 

in a place where temperatures rose to above 120 

degrees in the summer. 

Local Iraqis complained 

bitterly to SIGIR’s auditors 

about the poor construction. Generators oft en went 

missing, and substandard 

equipment was oft en installed instead of the 

materiel required by the contract. But no matter 

the weaknesses, U.S. military offi cers always 

signed off on Bloom’s projects as having been 

completed satisfactorily. 

Under ever-increasing pressure to spend 

money quickly before the close of the CPA, 

Stein handed out multiple grants to local Iraqis. Examples included two grants—$800,000 for democracy building and $1 million for a local college—all of which were in cash. However, the 

Iraqis who were supposed to receive these grants claimed, during 

an interview with SIGIR’s auditors, that they never received any of 

the money. 

Th e Investigation 

Once the potential perfi dy in Hilla was identifi ed, SIGIR’s auditors 

called Baghdad to give a preliminary report to the Inspector General. He immediately ordered the opening of a formal criminal investigation. SIGIR investigators soon deployed to Hilla to interview 

suspects and review evidence. Th ey also gained the cooperation of 

the CBI to trace suspicious fi nancial transactions. 

BEST PRACTICE

Intervene with education. 

At the beginning of the 

Operation Iraqi Freedom, 

many were rushed into 

service without a grasp of 

the requirements to handle 

money and contracting. 

Reinforcement for collapsing building roofs at the 

Hilla Police Academy: another example of poor 

construction under a contract awarded to Bloom.
APRIL 2012 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION I 13

DoJ soon assigned a prosecutor to support the investigation, 

and, at his direction, SIGIR sent the fi nancial records it obtained 

from the CBI to the Criminal Investigation Division of the 

Internal Revenue Service (IRS-CI). Upon forensic review, those 

records demonstrated: 

• Stein steered more than $8 million to Bloom’s companies. 

• Stein smuggled money for Bloom on his trips back to the 

United States. 

• Stein deposited stolen money for Bloom in banks in Romania 

and Switzerland, a portion of which was then transferred to 

accounts under the control of Stein. 

• Bloom sent wire transfers to Stein and Stein’s wife, along with 

others who worked at the CPA offi ce in Hilla. 

Th e SIGIR-led investigative team then went aft er the computers 

and Internet servers from Hilla. Th e relevant computer drives fortunately were found among IT equipment scheduled for reimaging. Th e documents recovered from these drives provided ample 

evidence of illegal activity on the part of Stein, Bloom, and several 

others. For example, one email message from Bloom ordered 

Stein to pay $60,000 to a member of the 

Hilla staff to “shut him up.” 

With substantial incriminating computer documents and bank records in 

hand, DoJ prosecutors had enough to issue arrest warrants for Bloom and Stein. 

SIGIR investigators participated in their 

arrests, snagging Bloom on November 13, 

2005, and Stein on the following day. 

Investigators and prosecutors then questioned both; and their interrogations led the investigative team to 

other criminal participants who would soon be indicted.

Th e interrogations further revealed the simple criminal scheme 

that underlay the Hilla conspiracy: Stein would off er contracts, 

Bloom.
14 I IRAQ RECONSTRUCTION: LESSONS LEARNED FROM INVESTIGATIONS, 2004–2012

and Bloom would send in dummy bids 

from fi ctional companies, with his outfi t 

always being the lowest. Bloom would 

then do minimal work, keeping the 

contract payments for himself while kicking back bribes to Stein and others. Th ey 

oft en coordinated their illegal activities at 

Bloom’s three-story villa about 10 miles 

south of Baghdad, where Bloom supplied 

contracting offi cers with, in the words 

of one defendant, “women of the night, 

Cuban cigars, and booze.” 

Stein and Bloom’s information allowed 

DoJ to construct cases against several 

more conspirators: 

• Lieutenant Colonel Harrison, the 

Deputy Comptroller at Hilla, took 

approximately $420,000 of stolen 

money at Stein’s direction, hiding it in 

her residence at Hilla. Aft er Harrison 

returned to the United States, Bloom 

contacted her to say that he wanted to 

give her a new car. In October 2004, 

Harrison sent an email to Stein stating that she would help Bloom with 

a SIGIR audit in exchange for the car. 

Federal authorities arrested Harrison 

on December 15, 2005. She pleaded 

guilty and was sentenced to 2.5 years 

in prison.

• Colonel Curtis Whiteford was the Chief of Staff at Hilla. He 

was also the senior military offi cer in the Hilla offi ce. Stein 

gave Whiteford, among other things, a $3,200 Breitling 

watch, $10,000 in cash, and a $3,000 laptop. In June 2004, 

Stein.

Harrison.

Whiteford.
APRIL 2012 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION I 15

Whiteford signed an authorization 

for Stein to take $250,000 to the 

United States. Federal authorities 

arrested Whiteford on February 13, 

2007. He took his case to trial and a 

jury found him guilty of conspiracy 

to transport fi rearms and stolen 

property, wire fraud, and bribery. He 

was sentenced to 5 years in prison. 

• Lieutenant Colonel Bruce Hopfengardner was a project offi cer at Hilla 

who recommended expenditures 

on CPA contracts. He oversaw the 

procurement of equipment and 

weapons for the local police. In late 

December 2003, Bloom off ered him 

$100,000 up front and $10,000 per 

month thereaft er to support his 

fraudulent scheme. Records showed 

bank transfers to his account totaling $289,000. He used 

these ill-gotten gains 

to purchase, among 

other things, a Harley 

Davidson motorcycle, 

GMC Yukon Denali, 

expensive photography 

equipment, and two 

computers. Federal 

authorities arrested 

Hopfengardner on 

August 25, 2006. He 

was sentenced to 21 

months imprisonment.

Hopfengardner.

Harley Davison motorcycle seized from Lieutenant 

Colonel Bruce Hopfengardner.

Wheeler.
16 I IRAQ RECONSTRUCTION: LESSONS LEARNED FROM INVESTIGATIONS, 2004–2012

• Lieutenant Colonel Michael Wheeler was a U.S. Army reservist who served at Hilla as the Deputy Civil Administrator 

and Deputy Chief of Staff . Wheeler worked with Bloom to 

steer contracts to him, subsequently falsely certifying that he 

satisfactorily completed these contracts. Federal authorities 

arrested Wheeler on November 30, 2005. He took his case to 

trial, and a jury found him guilty of conspiracy to transport 

fi rearms and stolen property, wire fraud, and bribery. He was 

sentenced to 42 months imprisonment. 

• William Driver was the husband of Lieutenant Colonel Debra 

Harrison. He signed the tax returns that failed to take account of the money and goods she received worth $347,163. 

He also helped launder some of the money. Federal authorities arrested Driver on February 13, 2007. He was sentenced 

to 3 years of probation and 6 months of home confi nement.

Stein was sentenced to 9 years in prison and 36 months of 

supervised release, and he was ordered to pay $3.6 million in 

restitution. Philip Bloom was sentenced to 46 months in prison 

and 2 years of supervised release, and he was ordered to pay 

$3.6 million in restitution. 
APRIL 2012 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION I 17

Investigations Grow

Aft er the CPA dissolved on June 28, 2004, it appeared that the CPA-IG 

would similarly conclude operations six months later. Staffi ng numbers began to plummet, and plans for a December shutdown developed. But the Congress had 

other ideas: it created the Offi ce of the Special 

Inspector General for Iraq Reconstruction in 

October 2004. With the advent of SIGIR, the 

Inspector General quickly reversed course and 

began staffi ng up again on all fronts. 

To achieve its new personnel goals, SIGIR began to hire, train, and deploy additional criminal 

investigators. Working in conjunction with the U.S. Army Civilian 

Personnel Online, SIGIR developed job announcements for Criminal 

Investigator (GS-1811) positions. Th e hiring process yielded more 

than 50 applicants. To strengthen investigative procedures, report 

formats, and other administrative requirements, SIGIR developed a 

new manual for its special agents and established a memorandum of 

agreement with the Financial Crimes Enforcement Network.

Th e variety of skills necessary to succeed as an investigator in Iraq 

included experience in fi nancial analysis, forensics, lead development, 

undercover work, and white-collar case management. But, to be eff ective, these skills had to be brought to bear cumulatively through interagency teamwork. At times, investigations were stifl ed by agencies 

that deployed investigators lacking the required skills. Departmental 

bureaucracies also occasionally impeded the development of criminal 

cases, causing distrust to seep into agent-to-agent relationships. 

When interagency eff orts worked, however, it was due chiefl y to the 

strong individual relationships developed among investigators who 

were willing to share burden and credit equally. Good production 

occurred whenever transparent case-management strategies allowed 

the participating agencies to see what others were doing. When this 

synchronous convergence happened, agents integrated operationally 

to make cases, each applying his or her agency’s respective strengths. 

LESSON

Ensure that lawenforcement agencies have 

appropriate investigative 

plans and procedures 

in place before an SRO 

begins, with trained 

personnel who are well 

prepared to carry them out. 
18 I IRAQ RECONSTRUCTION: LESSONS LEARNED FROM INVESTIGATIONS, 2004–2012

Nearly all of the successes outlined in this report sprang from integrative investigator-to-investigator relationships.

Overcoming Challenges

Despite the handicap of starting up an IG shop in a war zone, then 

preparing to close it, then starting up again, all within six months, 

SIGIR’s investigative team began to produce a number of successful cases in 2005, the Bloom-Stein cases foremost among them. For 

example, in mid-2005, SIGIR received allegations from offi cials at the 

Project and Contracting Offi ce (PCO) in Iraq that a contractor was 

over-billing by $15 million for oil-pipeline repairs and security. SIGIR 

investigators found that the contractor failed to provide the necessary 

personnel and the equipment promised in the contract. With SIGIR 

support, the PCO denied $15 million in payments to the contractor.

SIGIR teamed with several investigative agencies that had uncovered a 2005 cash-smuggling operation involving Army Major Charles 

Sublett, who served as a contracting offi cer at the Balad Regional 

Contracting Center in North-Central Iraq. Sublett was responsible for 

evaluating and supervising contracts with companies that provided 

goods and services to the U.S. Army. While in Iraq, he sent a package to 

Texas, which was seized by U.S. Customs and Border Protection offi cers 

in Memphis. A task force comprising investigators from SIGIR, the 

Army’s Criminal Investigative Division-Major Procurement Fraud Unit 

(CID-MPFU), DCIS, FBI, IRS-CI, and U.S. Immigration and Customs 

Enforcement (ICE) investigated Sublett. Upon interrogation, he made 

false claims by describing the contents of the intercepted package as 

books, papers, a jewelry box, and clothes, with a total declared customs 

value of $140. In fact, the package contained $107,900 in U.S. currency 

and 17,120,000 Iraqi dinar (valued at approximately $14,000). Sublett 

eventually pleaded guilty. Th e Sublett task-force investigative approach 

became a paradigm for SIGIR. 

SPITFIRE

In summer 2005, SIGIR created the Special Investigative Task Force 

for Iraq Reconstruction (SPITFIRE) to enhance its capacity to detect 

fraud, trace international money transactions, and monitor the travel 
APRIL 2012 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION I 19

of suspects. SPITFIRE’s fellow investigative partners included:

• ICE/Department of Homeland Security 

• IRS-CI

• Department of State Offi ce of Inspector 

General (DoS OIG) 

SPITFIRE investigative teams employed electronic databases and 

specialized forensic analysis to expeditiously support complex fi nancial investigations. Working closely with DoJ’s Asset Forfeiture and 

Money Laundering Section (AFMLS), SPITFIRE applied a synergistic 

process to investigate and prosecute individuals involved in fraud and 

to recover reconstruction funds. In late 2005, SIGIR secured $2 million in funding from the Congress for AFMLS to fund four full-time 

prosecutors to work on SIGIR cases generated by SPITFIRE. 

SPITFIRE succeeded in recovering illicitly obtained funds and other 

contraband, including the following: 

• $4 million that was part of the theft of $8 million fraudulently 

secured under unauthorized contracts issued for the maintenance 

of a police training facility 

• $670,000 in DFI monies, then returned for use in reconstruction 

• $527,456 in DFI funds, fi rst identifi ed in a SIGIR audit, which was 

returned to the Comptroller for reconstruction use

• 21 automatic assault rifl es valued at $37,800 and a sniper rifl e 

valued at $3,400 

• fi ve government computers and several unauthorized weapons 

from a contractor in an investigation involving the overbilling of 

personnel and equipment costs

Policing Procurement Fraud 

Contractors in Iraq occasionally attempted to manipulate the award system to cut out competition. One such case involved Diana Demilta, the 

president of a Green Zone-based company. Demilta devised a scheme 

involving the submission of sham bids from dormant companies 

ostensibly competing for a bullet-proof vest contract. Aft er an investigaLESSON

Develop innovative 

investigative programs 

targeted to the specifi c 

needs of the SRO. 
20 I IRAQ RECONSTRUCTION: LESSONS LEARNED FROM INVESTIGATIONS, 2004–2012

tion by SIGIR and CID-MPFU, Demilta admitted that she paid $60,000 

to infl uence award of the contract. She was sentenced to 6 months 

in prison, 12 months home confi nement, and 24 months supervised 

probation. Demilta was also ordered to pay $70,000 in restitution and a 

$25,000 fi ne.

In early 2006, SIGIR began using “sting” operations to combat 

procurement fraud. One such sting led to the arrest of a U.S. civilian 

translator employed by a DoD subcontractor on charges of off ering a 

bribe to a foreign offi cial. Specifi cally, the defendant off ered an Iraqi 

police offi cial approximately $60,000 in exchange for assistance with the 

purchase of about 1,000 armored vests and a sophisticated map printer. 

In furtherance of this scheme, the defendant then off ered a $28,000 

bribe to an undercover SIGIR investigator posing as a procurement offi cer. Th e individual pleaded guilty to a violation of the Foreign Corrupt 

Practices Act and was sentenced to 36 months in prison.

$4 million in cash seized by SIGIR agents in 

Baghdad.

$670,000 in DFI funds returned to U.S. 

comptroller in Iraq.
APRIL 2012 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION I 21

In a bribery investigation, an undercover special agent was offered money in exchange for the 

contract to produce 1,000 armored vests.

A contracting offi cer due to leave Iraq within two days was found in possession of $670,664, for 

which he had no record of origin.
22 I IRAQ RECONSTRUCTION: LESSONS LEARNED FROM INVESTIGATIONS, 2004–2012

THE COCKERHAM CONSPIRACY

Th e case of former U.S. Army Major John Cockerham was perhaps the most signifi cant criminal conspiracy uncovered during 

the Iraq reconstruction eff ort. It involved an 

insidious web of contractors, U.S. contracting offi cials, and third-country nationals, who 

participated in various acts of fraud, including 

the exchange of millions of dollars in bribes for 

tens of millions of dollars in contracts in Iraq 

and Kuwait. Th e case was fraught with intrigue: 

one military offi cer who received bribes committed suicide upon 

being caught; another key player was murdered. To date, a total of 

19 individuals have been convicted, with additional suspects still 

facing charges. Prison sentences have ranged up to 17.5 years. 

Th e scope of criminal activity discovered by the Cockerham 

Task Force was signifi cant, revealing a pattern of widespread 

contract fraud at Camp Arifj an, Kuwait, the principal supply hub 

for the Iraq reconstruction program. Th e gargantuan investigation involved the analysis of more than 2 million documents, the 

issuance of about 50 search warrants, and the conduct of more 

than 400 interviews. 

Catching John Cockerham 

Th e Cockerham task force initially comprised Army CID-MPFU, 

SIGIR, and DCIS. CID-MPFU managed the overall eff ort, with 

SIGIR and DCIS providing investigative support. FBI, ICE, and 

IRS-CI eventually became partners. Four different offi ces within DoJ played roles in the 

prosecution of Cockerham defendants: the 

Criminal Division-Fraud and Public Integrity 

Sections, Anti-Trust Division, and Offi ce of 

International Aff airs.

Th e instigator of this criminal scheme, Major 

John Cockerham, was assigned to Camp Arifj an 

LESSON

Pursue a holistic approach 

to case management that 

integrates the efforts of intheater investigators with 

U.S.-based investigators 

and prosecutors.

LESSON

Avoid bureaucratic turf 

battles among lawenforcement agencies 

by building a task-force 

approach that brings all 

agencies together around 

the law-enforcement 

mission. 
APRIL 2012 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION I 23

from June 2004 to December 2005. He served as the 

contracting offi cer responsible for soliciting and 

reviewing procurement 

proposals for bottled-water 

contracts and other ongoing support needs. Cockerham’s criminality was 

relatively straightforward: 

he guaranteed contract 

awards in return for 

kickbacks. He also would 

modify contracts in exchange for cash payments. 

He even developed a price 

list tying award amounts to 

kickbacks required. 

Major Cockerham 

brought several members 

of his family into the conspiracy, including his wife, 

his sister, and his niece. Th e cash accumulated from his criminal activity was deposited into safe deposit boxes and accounts in Kuwait, 

Dubai, and other locations under Cockerham’s name as well as the 

names of his wife, Melissa, and his sister, Carolyn Blake. 

Major Cockerham received more than $9 million in bribes. Task 

Force representatives, including a SIGIR agent, arrested Cockerham 

on July 22, 2007, and he subsequently pleaded guilty to fraud charges and was sentenced to 17.5 years in prison and ordered to pay 

$9.6 million in restitution. Melissa Cockerham and Carolyn Blake 

were also arrested on July 22, 2007, and they both subsequently 

pleaded guilty. Melissa Cockerham was sentenced to 3 years and 5 

months in prison, while Blake received 5 years and 10 months. 

More than $1.7 million in currency seized in 

Cockerham case.

Former Army Major John Cockerham is escorted into 

federal court for sentencing. (Photo by Shaminder 

Dulai, Copyright 2009 San Antonio Express-News, 

reprinted with permission)
24 I IRAQ RECONSTRUCTION: LESSONS LEARNED FROM INVESTIGATIONS, 2004–2012

Cockerham Spin-Off s

Th e Cockerham Task Force investigation resulted in the suspension or debarment of more than 60 companies and individuals, 

as well as the conviction of numerous other personnel who were 

involved, including the following: 

• Major Charles Bowie deployed to Camp Arifj an from April 

2004 to April 2005 where he worked with Cockerham on 

bottled-water contracts. While serving in Kuwait, Bowie 

became friends with Cockerham, who directed a government 

contractor to pay Bowie money in exchange for the award of 

bottled-water contracts. Aft er pleading guilty, a federal court 

sentenced Bowie to 2 years of imprisonment and ordered 

him to pay $400,000 in restitution.

• Major Derrick Shoemake was assigned to Camp Arifj an from 

2004 to 2006, working with Cockerham on contracts for the 

purchase of bottled water for troops in Iraq and Afghanistan. 

He accepted $250,000 in bribes for awarding contracts. Shoemake pleaded guilty and is awaiting sentencing. 

• Major James Momon took over duties from Cockerham at 

Camp Arifj an in 2005. He was involved in a criminal conspiracy to accept cash bribes from fi ve DoD contractors that 

supplied bottled water and other goods and services to DoD. 

Momon accepted about $5.8 million from his co-conspirators 

as payment for his actions. On August 13, 2008, Momon pled 

guilty, and he is awaiting sentencing. 

• Major Christopher Murray served as a contracting specialist 

in the small purchases branch of Camp Arifj an’s contracting command. Murray solicited and received approximately 

$225,000 in bribes from DoD contractors in exchange for 

recommending the award of contracts for various goods and 

services. He was sentenced to 4 years and 9 months in prison 

and ordered to pay $245,000 in restitution. 

Other cases spinning out of the widespread wrongdoing at 

Camp Arifj an included: 
APRIL 2012 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION I 25

• Lieutenant Colonel Levonda Selph, while serving in 2005 as 

chair of a selection board for an annual $12 million contract 

to build and operate DoD warehouses in Iraq, 

accepted fraudulent bids from a contracting 

fi rm and helped that fi rm win the contract 

award. In return for these actions, Selph admitted to accepting a vacation to Th ailand and 

other things of value totaling approximately 

$9,000. She pleaded guilty, was sentenced to 12 months imprisonment, and was ordered to pay a $5,000 fi ne and $9,000 

in restitution.

• Justin Lee provided items valued at more than $1.2 million to 

public offi cials in return for offi cial acts that helped him obtain 

lucrative DoD contracts. Lee and his father, George H. Lee, 

Jr., were charged in an indictment unsealed on May 27, 2011, 

in the Federal Court of the Eastern District of Pennsylvania. 

Justin Lee pleaded guilty on July 15, 2011, but his father is still 

at large.

BEST PRACTICE

Use task forces. The cases 

that came out of Camp 

Arifjan demonstrate the 

advantages of a task-force 

approach. 
26 I IRAQ RECONSTRUCTION: LESSONS LEARNED FROM INVESTIGATIONS, 2004–2012

Investigating the Military

U.S. servicemembers who had control over large sums of weakly 

controlled cash sometimes succumbed to the temptation to unjustly 

enrich themselves. Th is most oft en occurred within the Commander’s 

Emergency Response Program (CERP), a novel rebuilding initiative begun in 2003 to provide military offi cers in the fi eld rebuilding 

funds they could use to support emergency response projects aimed 

at winning Iraqi hearts and minds. From 2004 to 2010, the Congress 

appropriated nearly $4 billion for the CERP in Iraq. Th is entirely cashdriven program commonly involved the distribution of hundreds of 

thousands of dollars for projects in the fi eld. 

SIGIR has made a number of cases against military personnel who 

stole CERP cash. Th e following are selected examples: 

• Captain Michael Nguyen, a West Point graduate, served in Iraq as 

the CERP project purchasing offi cer for the 1st Battalion, 23rd Infantry Regiment. Th e currency he controlled was intended to pay 

for security contracts with the Sons of Iraq as well as for humanitarian relief and reconstruction programs. Nguyen stole signifi -

cant amounts of CERP funds, mailing them back to the United 

States. He deposited $387,550 of the purloined cash into private 

accounts in Oregon and elsewhere. SIGIR, IRS-CI, FBI, Army 

CID-MPFU, and DCIS jointly conducted the Nguyen investigation, determining that he stole and converted to his own use 

approximately $690,000. During the execution of a search warrant, investigators discovered more than $300,000 in stolen CERP 

funds hidden in the attic of Nguyen’s Portland family home. Th e 

court ordered Nguyen to serve 30 months in prison, pay restitution in the amount of $200,000, and forfeit all personal property 

he bought with the stolen money as well as the remaining funds 

seized by the government at the time of his arrest.

• Major Mark Fuller, a former U.S. Marine Corps fi ghter pilot, 

deployed to Iraq in 2005 and served as a CERP project purchasing 

offi cer at Camp Fallujah. Fuller identifi ed and selected reconstruction projects, awarded reconstruction contracts to Iraqi contractors, and verifi ed the completion of projects. Between October 
APRIL 2012 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION I 27

2005 and April 2006, Fuller made 91 cash deposits, totaling more 

than $440,000, into private stateside bank accounts, all under 

$10,000 for the purpose of evading the reporting requirements 

under federal law. SIGIR, IRS-CI, DCIS, and the Naval Criminal 

Investigative Service (NCIS) investigated Fuller’s crimes, and he 

was eventually sentenced to serve 1 year and 1 day in prison and 

ordered to pay a fi ne of $198,510.

• Major Kevin Schrock was deployed to Mosul from September 2004 

to September 2005 as the pay agent for CERP contracts. When 

Schrock was at home on leave in April 2005, he deposited $18,900 

into his bank accounts. From September to December 2005, he 

deposited $28,000 more. An investigation was initiated by SIGIR, 

Army CID-MPFU, and DCIS. When questioned in January 2010, 

Schrock claimed the deposits in April were from the sale of a 

car. In June 2010, Schrock was interviewed and admitted that he 

stole $45,000 from funds he was to administer in Iraq and that he 

smuggled the cash home on his person. Schrock pleaded guilty on 

February 8, 2011, and was sentenced on March 2, 2012, to 3 years 

probation and ordered to pay restitution of $47,241.62.

• Captain Faustino Gonzales received cash bribes for awarding contracts under the CERP. SIGIR, Army CID-MPFU, DCIS, and the 

U.S. Postal Inspection Service initiated a cooperative investigation 

that found the contracts Gonzales awarded were based on infl ated 

prices. Gonzales admitted that portions of the bribe money were 

deposited into bank accounts located in Texas and that he used 

some of the bribe money to purchase a vehicle. On June 24, 2010, 

Gonzales pleaded guilty to receiving a gratuity by a public offi cial. 

He was sentenced to 15 months in prison and ordered to pay a 

$10,000 fi ne and $25,500 in restitution.
28 I IRAQ RECONSTRUCTION: LESSONS LEARNED FROM INVESTIGATIONS, 2004–2012

THE SCHMIDT CASE

On June 21, 2009, state police in California were called to the 

home of Captain Eric Schmidt, USMC, on a domestic violence 

complaint. Schmidt had served in Iraq from January 2008 to 

January 2009 as a contracting offi cer’s representative at Camp 

Fallujah. Th e police arrested Captain Schmidt for assaulting his 

wife. During their investigation, the police determined that the 

husband and wife were arguing about fi nancial matters. Th ey 

searched Schmidt, fi nding $10,000 in $100 bills on his person. 

One of the offi cers noticed that money was stamped with the 

imprint of an Iraqi bank. 

Th e California police passed the information to Schmidt’s superiors in the U.S. Marine Corps, who notifi ed NCIS who, in turn, 

shared it with DCIS, IRS-CI, and SIGIR. SIGIR’s Arabic language 

and cultural specialists were shown police photographs of the 

$100 bills and confi rmed that the stamps on the cash indicated 

that the money had come from Iraq. Ultimately, a search warrant 

was executed on the Schmidt residence, resulting in the seizure of 

$50,000 in cash from a safe inside the residence. 

Subsequent investigations revealed that, while serving in Iraq, 

Schmidt illegally steered contracts to a specifi c Iraqi vendors. Th e 

contractors, in turn, used Schmidt’s wife’s company, Jenna International, Inc., to request 

bids and supply parts. 

Jenna International bought 

the parts, but fewer than 

required by the contracts 

and of inferior quality. Th e 

contractor would then sign 

a false invoice, claiming it 

had delivered all the goods 

called for in the contracts, 

with Schmidt certifying the 

goods as received and the Part of $40,000 in cash with Iraqi marking seized at 

Schmidt’s residence.
APRIL 2012 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION I 29

contract completed. Financial analysis by the task force 

showed substantial sums of 

money moving through Janet 

Schmidt’s fi nancial accounts. 

Investigators encountered 

several diffi culties in developing their case against Schmidt and his wife. Th e Iraqi contractors were referred to by a variety of diff erent names, making 

identifi cation diffi cult. Th e agents also did not have access to the 

business and fi nancial records of the Iraqi contractors. Further, 

the Iraqis interviewed denied any inappropriate activity.

On May 17, 2010, Schmidt pleaded guilty to conspiracy to commit wire fraud and fi ling a false tax return. Th e court sentenced 

him to 6 years in prison and ordered restitution of $2.1 million. On 

March 18, 2010, Janet Schmidt pleaded guilty to tax fraud and was 

sentenced to 1 year of home confi nement and 3 years of probation. 

Th e investigative team uncovered another scheme utilizing 

special investigative techniques. Schmidt’s subordinate at Camp 

Fallujah from May to September 2008, a staff sergeant named 

Eric Hamilton, managed the military’s storage yard, which held 

electrical generators, air-conditioners, water containers, fuel 

tanks, and portable shower and toilet trailers. Hamilton admitted 

that he entered into a scheme with Schmidt to facilitate the theft 

Seized property that had been 

purchased by Schmidt with stolen funds.
30 I IRAQ RECONSTRUCTION: LESSONS LEARNED FROM INVESTIGATIONS, 2004–2012

of electrical generators from the base by Iraqi contractors. He 

would mark the generators to be stolen by painting a red circle 

on them and would then unlock the gate to allow the contractors 

and their trucks access to the yard, whereupon they would steal 

the designated generators. For his participation in this criminal 

scheme, Hamilton received more than $124,000 from Schmidt 

and the Iraqi contractors. Hamilton pleaded guilty on August 

10, 2011, to two counts of conspiracy to steal public property. He 

was sentenced on February 6, 2012, to 18 months in prison and 

ordered to pay $124,944 in restitution. 
APRIL 2012 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION I 31

Increasing Capacity

By the fall of 2007, SIGIR had 19 investigators on staff , with 8 assigned 

to Baghdad and the remainder chiefl y in Arlington, Virginia. Th en 

fi elding the largest number of investigators in Iraq, SIGIR was able 

to provide personnel for various joint investigative teams working in 

Baghdad and beyond. As of October 30, 2007, SIGIR had opened 332 

cases and closed or referred 275. Further, SIGIR investigations by that 

time had resulted in $17.24 million in court-ordered restitutions, forfeitures, and recoveries. Th e increased investigative capacity at SIGIR 

improved its ability to catch Americans violating the law in Iraq. 

David Ricardo Ramirez worked for a DoD contractor at Balad Air 

Base from November 2006 to November 2007, where he helped plan 

the construction of base facilities. He sent more 

than $155,000 in cash back to Texas, where it was 

deposited into his personal account. A task force 

involving SIGIR, CID-MPFU, the Air Force Offi ce of Special Investigations, ICE, and FBI investigated Ramirez. He was charged with smuggling 

bulk cash and sentenced to 4 years and 2 months in 

prison. He also forfeited a $95,000 condominium, a $25,000 real-estate 

lot, a 2007 Ducati motorcycle valued at $33,000, and a 1989 Lamborghini valued at $80,000.

SIGIR’s Proactive 

Programs

In 2008, SIGIR established the Forensic 

Evaluation Research 

and Recovery Enforcement Team (FERRET), 

designed to identify 

suspicious fi nancial 

transactions by U.S. 

personnel and contractors who worked 

BEST PRACTICE

Integrate law-enforcement 

efforts. Without question, 

most of SIGIR’s success 

was due to a team approach 

in investigations.

Motorcycle and car seized from David Ramirez.
32 I IRAQ RECONSTRUCTION: LESSONS LEARNED FROM INVESTIGATIONS, 2004–2012

in Iraq. Th e Investigations Directorate also 

shift ed to an approach that emphasized hiring 

persons with expertise in fi nancial crimes. 

Th e deployment of SIGIR investigators also 

evolved, with personnel operating from varying 

regions across the United States. By July 2008, SIGIR had fi ve agents in 

Baghdad, eight at SIGIR headquarters in Virginia, and nine distributed among offi ces in Pennsylvania, Florida, Ohio, Michigan, Maryland, 

and Texas. 

Eff orts invested in building cooperation between SIGIR and foreign 

authorities began to pay off . Four Coalition partner military offi cers 

were arrested in 2008, with three eventually convicted in a foreign 

military court. Th e case involved extortion and bribery in connection 

with a contract for projects funded by the CERP and administered by 

a Coalition partner. Th e loss to the U.S. government was estimated to 

be $2.9 million. Army CID played a major role in the investigation and 

coordination with the foreign military on this case.

In 2009, SIGIR and the DoJ collaborated to initiate the new SIGPRO 

prosecutorial eff ort, which allowed SIGIR to hire and fund prosecutors 

who were detailed to the Fraud Section of the DoJ Criminal Division 

to prosecute cases. SIGPRO quickly returned results, with a SIGIR attorney obtaining the guilty plea of Richard Razo who had entered into 

a scheme to enrich himself by fraudulently providing Iraqi contractors 

with confi dential bidding information. Razo did so fi rst as an employee 

of an international company doing business in 

Iraq under contracts with the U.S. government 

and then as a DoS employee. Th e investigators 

found that Razo had collected more than $106,000 

in kickbacks. He was sentenced in U.S. District 

Court in San Antonio to 33 months in prison and 

ordered to pay $106,820 in restitution.

In 2010, SIGPRO prosecuted Lieutenant Colonel David Pfl uger, who was deployed to Iraq from 

October 2003 through April 2004, serving as the 

“mayor” of a forward operating base. In this capacity, he had authority over the day-to-day operations of the physical assets and security 

BEST PRACTICE

Dedicate specifi c 

prosecutors. Early on, it 

became clear that many 

prosecutors new to the 

types of cases coming out 

of Iraq and unfamiliar with 

the diffi culties in acquiring 

evidence were slowing 

down the prosecutions and 

development of cases. 

LESSON

Engage with partner-nation 

law-enforcement agencies 

to prosecute non-U.S. 

criminals. 
APRIL 2012 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION I 33

on base. Pfl uger accepted more than $10,000 in cash, as well as gift s of 

jewelry and clothing, from contractors. In return, Pfl uger encouraged 

awarding projects to specifi c contractors, bypassed or relaxed security 

procedures at the base for specifi c contractors, issued weapon permits 

without legal authority, and converted government property in his 

control for use by these contractors. SIGIR, DCIS, and Army CIDMPFU conducted a joint investigation, and a SIGPRO prosecutor successfully obtained the conviction. On July 29, 2011, a court sentenced 

Pfl uger to 18 months in prison for accepting illegal gratuities.

Another SIGPRO success came in 2011 in a case involving DoS 

employee Osama Esam Saleem Ayesh. Ayesh, a resident of Jordan, 

was hired by DoS as a shipping and customs supervisor at 

U.S. Embassy-Baghdad, where 

he oversaw the shipments of 

personal property of Embassy 

offi cials and personnel in Iraq. 

He was involved in establishing 

and operating blanket purchase 

agreements for the provision of 

customs clearance and delivery 

services to the Embassy from 

which he illegally benefi ted. 

DoS OIG and FBI opened the 

investigation, which was successfully prosecuted by a SIGPRO 

attorney. Ayesh was sentenced to 

3.5 years in prison and ordered 

to pay $243,416 in restitution 

and a $5,000 fi ne. As a result of 

the SIGPRO program, prosecutions of investigations originating or as a result of the Iraq War 

drastically increased and moved 

through the judicial system at a 

much faster pace. 

0

5

10

15

20

25

Military SIGPRO/AUSA 

(sealed)

AUSA

DoJ/AUSA 

(sealed)

DoJ SIGPRO/AUSA

(sealed)

DoJ DoJ/AUSA Foreign

FY ‘12

Q1−Q2

4

9

5

1

4

2

4

1

9

5

2

1

7

8

1

5

1

1

9

1

8

2

FY 

‘06

FY 

‘07

FY 

‘08

FY 

‘09

FY 

‘10

FY 

‘11

SIGIR CASE PROSECUTORS

Figure 1
34 I IRAQ RECONSTRUCTION: LESSONS LEARNED FROM INVESTIGATIONS, 2004–2012

Figure 1 shows the involvement of prosecutors who worked Iraq 

reconstruction cases from FY 2006 through FY 2012.

Suspension and Debarment

In June 2003, the Department of Defense designated the Department 

of the Army as the executive agent for contracting support for Iraq’s 

reconstruction. Th e Army’s Suspension and Debarment Program has 

led the eff ort to ensure the integrity of contractors performing these 

contracts. Th e goal of this program is to ensure that these contracts are 

awarded to, and performed by, contractors who are honest and ethical 

and who have the ability to successfully perform their work.

SIGIR used the suspension and debarment process to strengthen 

investigations and prevent fi nancial losses to the government. Contractors fear the use of this tool, perhaps even more than the criminal 

process, because it prevents them from receiving future government 

contracts. Th e Army’s Procurement Fraud Branch has worked closely 

with DoJ, SIGIR, and its investigative partners to suspend and debar 

contractors for fraud or corruption involving reconstruction contracts 

in Iraq and Afghanistan. Th ese cases commonly arise from criminal 

indictments fi led in federal district courts or allegations of contractor 

irresponsibility. Th ey require fact-based examinations by the Army’s 

Suspension and Debarment Offi cial.

In the Cockerham case, many individuals and companies were suspended prior to indictment based on fi ndings by the Army’s Procurement Fraud Branch. Th ese actions disqualifi ed the aff ected contracting fi rms or persons from government contracting, subcontracting, or 

participation in covered transactions. Th ey also assisted investigators 

in furthering various ongoing criminal investigations.

As of March 31, 2012, the Army’s Procurement Fraud Branch had 

suspended 135 individuals and companies involved in sustainment and 

reconstruction contracts in Iraq and Kuwait; and 191 individuals and 

companies had been proposed for debarment, resulting in 138 fi nalized 

debarments that ranged in duration from 9 months to 10 years.

On March 26, 2007, Robert Grove, a retired U.S. Army colonel 

working as an employee for a private contractor, returned to the 

United States from Iraq and was arrested for concealing approximately 
APRIL 2012 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION I 35

$50,000 in U.S. currency that he failed to report on his U.S. Customs 

declaration. On September 21, 2007, Grove pleaded guilty to a threecount indictment charging him with smuggling bulk cash, failing 

to fi le a report regarding monetary instruments, and making false 

statements. Grove was sentenced to 5 months in prison followed by 

2 years probation, and ordered to pay a fi ne of $30,000. He also was 

debarred from further U.S. government contracting; but he later 

returned to Iraq as a consultant, representing an Iraqi contractor in 

meetings with the U.S. Army Corps of Engineers (USACE) on DoD 

contracts worth $67 million. During a meeting with USACE, Grove 

was questioned and denied that he was a convicted felon or that he 

had been debarred. SIGIR and DCIS agents investigated the case, 

quickly developing information that resulted in Grove being terminated and deported from Iraq. On March 26, 2009, Grove was found 

guilty of violation of supervised release concerning the prior conviction and ordered to serve 2 months in prison followed by 22 months 

of supervised release.
36 I IRAQ RECONSTRUCTION: LESSONS LEARNED FROM INVESTIGATIONS, 2004–2012

Blossoming of Indictments and Convictions

Focus Shift s to the United States 

In 2010, SIGIR continued to expand its investigative eff orts and add 

personnel, but the emphasis gravitated toward stateside work, involving the pursuit of persons who had committed crimes in Iraq but had 

since returned home. By September 2011, SIGIR had 2 investigative 

personnel assigned to Baghdad, 6 at SIGIR headquarters in Arlington, 

and 11 in other offi ces throughout the United States. And, as of March 31, 

2012, the work of SIGIR investigators had resulted in 86 indictments, 66 

convictions, and more than $175 million in fi nes, forfeitures, recoveries, 

restitution, and other monetary results. 

Figure 2 shows criminal and monetary results since FY 2008. See 

Figure 3 for a breakdown of indictments by type of criminal activity. Figure 4 shows monetary results by affi liation of wrongdoer, and 

Figure 5 shows convictions by affi liation of wrongdoer.

0

10

20

30

40

50

60

Convictions

Sentencings

Indictments

FY ‘08 FY ‘09 FY ‘10 FY ‘11 FY ‘12

Q1−Q2

6

6

21

8

18

21 12

12

11

13

8

17

13

13

Monetary Results ($ Millions)

Criminal Results

Monetary Results

$0

$15

$30

$45

$60

$75

$90

SIGIR Investigations: 

Criminal and Monetary Results

Figure 2 Figure 3

13%

9%

7%

71%

Total: 86

Types of Criminal Activity

At Indictment

Theft/

Embezzlement/

Conversion

8

Contract Fraud

11

Money Laundering/

Smuggling/Tax Fraud

6

Kickback

61
APRIL 2012 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION I 37

Figure 4

Note: Numbers affected by rounding.

SIGIR Investigations Monetary Results, by Affiliation 

of Wrongdoer, as of 3/31/2012

$ Millions

48%

21%

21%

5%

U.S. Military

$37.0

Contractor (DoD)

$37.3

USG Civilian (DoD)

$2.5 (1%)

U.S. Military Dependent

$1.4 (1%)

Foreign Military

$1.1 (1%)

Other

$0.06 

Contractor (non-DoD)

$83.4

USG Civilian (non-DoD)

$3.8 (2%)

Civilian

$8.4

Total: $175.3

Figure 5

18%

8%

5%

6%

5%

5%

50% U.S. Military

33

Contractor (DoD)

12

USG Civilian 

(DoD)

3

U.S. Military 

Dependent

4

Foreign Military

3

Contractor (non-DoD)

5

USG Civilian/

Contractor

1 (2%)

USG Civilian

(non-DoD)

2 (3%)

Civilian

3

SIGIR Convictions, by Affiliation of Wrongdoer, as of 3/31/2012

Total: 66
38 I IRAQ RECONSTRUCTION: LESSONS LEARNED FROM INVESTIGATIONS, 2004–2012

More Cockerham 

Th e Camp Arifj an investigation produced another major outcome in 2011 

when Major Eddie Pressley came to trial. Th is case, like the other Cockerham cases, was jointly conducted by a task force that included SIGIR, Army 

CID-MPFU, DCIS, ICE, IRS-CI, and FBI. Pressley had served as an Army 

contracting offi cer at Camp Arifj an during 2004–2005. 

In February 2005, Pressley arranged for a contractor to obtain a blanket purchase agreement to deliver goods and services to DoD and its 

components in Kuwait and elsewhere. DoD would order supplies on an 

as-needed basis, and the contractor would then be obligated to deliver 

the supplies ordered at the price agreed to in the blanket purchase agreement. Th e term for such an order by DoD is a “call.” Pressley demanded 

a $50,000 bribe before he would issue calls for bottled water. 

Pressley enlisted the help of his wife, Eurica Pressley. She traveled to 

Dubai in May 2005 and to the Cayman Islands in June 2005 to open 

bank accounts for the bribe money. Bank statements and wire-transfer 

reports demonstrated that, in total, the Pressleys received approximately $2.9 million in bribes. Th ey used the money to purchase real 

estate and expensive automobiles, among other things. 

Eddie Pressley was sentenced to 12 years in prison and ordered to 

forfeit the millions he had illegally received. Eurica Pressley was sentenced to 72 months in prison.

Th e Value of Whistleblowing

Aft er the invasion of Iraq, uncontrolled munitions in old Iraqi depots 

represented a signifi cant threat to U.S. servicemembers. USACE contracted for an ammunition clearance program that ended up costing 

about $413 million. Th ere was no reason for U.S. oversight offi cials to 

think anything was wrong with the contract until several government 

workers came forward to SIGIR with concerns that their colleagues 

were taking bribes. SIGIR initiated an investigation, looked into the 

contracts, and confi rmed that the criminal activity was going on.

Th e contractor had hired a program manager and deputy program 

manager to supervise the disposal work. Th ese two then entered into 

an agreement with subcontractors to receive kickbacks on awards 

totaling $23 million. Investigators eventually tracked $974,000 paid in 
APRIL 2012 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION I 39

Iraqi ammunition stockpiles like this were vulnerable to 

exploitation by insurgents, posing a threat to Coalition forces.

kickbacks to the managers from March 2006 

through April 2007. An 

indictment unsealed 

on March 9, 2012, 

charged the managers 

with fraud, and the 

case is pending court 

disposition. While the 

skills of the investigators to make the case 

were crucial to its success, the lead investigator importantly noted: “We would have never caught these guys had 

someone not had the courage and integrity to make that fi rst report.”

Th e Success of the Task-force Approach

Th e task-force concept proved to be an integral part of SIGIR’s investigative successes. Th e impacts began at the headquarters level of the 

aff ected investigative organizations. It ensured cooperation on cases, 

subjects, and allegations, as well as prosecutorial coordination and 

deconfl iction. In 2006, the International Contract Corruption Task 

Force (ICCTF) was established for Iraq cases, and it subsequently 

was expanded to include Afghanistan. When SIGPRO came into 

being, the ICCTF successfully utilized it in prosecuting cases arising 

from Iraq. 

At the fi eld level, the task force concept was used to ensure that all 

available investigative and support resources were identifi ed and deployed to produce the timely execution of investigations. Th e task-force 

concept was the driving force in the multiple convictions arising from 

the Major John Cockerham investigation—one of many examples of its 

successful use in Iraq. 
40 I IRAQ RECONSTRUCTION: LESSONS LEARNED FROM INVESTIGATIONS, 2004–2012

Best Practices

From extensive experience developed while pursuing more than 600 

investigations arising from the Iraq reconstruction enterprise, SIGIR suggests seven best practices, the implementation of which could help mitigate the waste, fraud, and abuse of U.S. taxpayer funds in future SROs. 

• Begin oversight early. As soon as the planning for a contingency 

begins, the relevant investigative entities must develop programs 

to integrate oversight operations in theater. Federal law-enforcement agencies should collaborate on an integrated contracting 

database that incorporates information about past contracting 

activities so as to better identify potential trouble spots well in 

advance. 

• Deploy agents forward. A strong in-theater presence is crucial to 

deterring crime during an SRO. Trying to thwart bad conduct in 

a chaotic situation with a smattering of investigators who rotate in 

and out simply will not work. Th ere must be a continuous, widely 

noticed law-enforcement presence to stop crime and catch those 

who commit it.

• Intervene with education. SROs occur in environments that off er 

manifest temptations to criminal minds. Fraud-awareness training is needed for all government and contractor personnel operating in the SRO. DoJ also should publicize convictions to leverage 

their deterrence value. 

• Integrate law-enforcement eff orts. Agencies with jurisdiction 

over SRO investigations may include inspector general offi ces, 

as well as DoD, DoS, DoJ, IRS, FBI, and ICE. Prior integrative 

planning must occur for this broad and diverse spectrum of lawenforcement agencies to function well together. Th e creation of a 

Special Inspector General for Overseas Contingency Operations 

would facilitate such integrative planning. 
APRIL 2012 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION I 41

• Use task forces. Investigative task forces improve the likelihood of 

success in criminal cases because pooled resources strengthen the 

eff ort. Not every law-enforcement offi ce has the means to maintain 

a broad array of technical capacities. Integrative operations—from 

headquarters to the fi eld levels—improve outcomes in the investigative world, just as they improve results in the military world.

• Hire investigators with fraud experience. Although the particular requirements may vary depending on the nature of the SRO, 

most investigators should have substantial knowledge of complex 

contracting procedures, fi nancial transactions, asset tracing, and 

the like. Th is means that having white-collar crime experts in 

country produces more convictions. Investigative agencies operating in Iraq oft en deployed inexperienced agents or sent senior 

investigators whose career experience was inapposite. 

• Dedicate specifi c prosecutors. Th e SIGPRO experience, which 

entailed SIGIR hiring its own prosecutors and deploying them to 

DoJ, demonstrably proved the wisdom of well-targeted prosecutorial capacities. Aft er the formation of SIGPRO, SIGIR conviction rates rose. Events unfold rapidly in contingency operations; 

having a special team of prosecutors focused on the operation 

ensures better results.
42 I IRAQ RECONSTRUCTION: LESSONS LEARNED FROM INVESTIGATIONS, 2004–2012

Conclusion 

SIGIR’s experience in Iraq points to a singularly important overarching lesson: the United States must reform its approach to SROs. 

Th e fraud and the waste that occurred during the reconstruction 

program—certainly matched in Afghanistan—caused fi scal loss, 

but they also damaged U.S. national security interests. Resolving the 

weaknesses in U.S. planning and management structures for SROs 

would increase the likelihood of future success and better protect U.S. 

national security interests.

Aft er a challenging start, SIGIR’s Investigations Directorate enjoyed 

considerable success, forcing crooks to pay a just penalty for their criminal wrongdoing. But the total number of wrongdoers caught by SIGIR 

is probably less than the number that escaped justice. Nevertheless, the 

Congress’s creation of the Special IG offi ce was a successful remedial 

measure because it met the need for increased oversight during the 

initial stages of the Iraq rebuilding operations. SIGIR certainly reduced 

the level of fraud and waste that might otherwise have occurred. Creating a permanent Special IG would prevent the recurrence of the kind of 

fraud, waste, and abuse encountered early on in Iraq. But it would not 

resolve the larger issue that still daunts SRO planning and management: 

the lack of unity of command and unity of eff ort.

If the Congress addresses current weaknesses in planning and executing contingency rebuilding operations in a straightforward manner, 

then the United States could strengthen the protection of its national 

security interests. To date, the varying attempts to reform the U.S. 

structure for resourcing and executing SROs have failed to produce an 

enduring remedy. Absent meaningful and permanent reform, there is 

every reason to expect that the serious levels of fraud, waste, and abuse 

that occurred in Iraq will recur in future stabilization operations.
APRIL 2012 I SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION I 43

Acronyms and Defi nitions

AFMLS Asset Forfeiture and Money Laundering Section

AIRP Accelerated Iraqi Reconstruction Program

ATF Bureau of Alcohol, Tobacco, Firearms, and Explosives

AUSA Assistant U.S. Attorney

CERP Commander’s Emergency Response Program

CID U.S. Army Criminal Investigation Command

CIDMPFU U.S. Army Criminal Investigation Command Major Procurement Fraud Unit

COR Contracting Offi cer’s Representative

CPA Coalition Provisional Authority

CPA-IG Coalition Provisional Authority Offi ce of Inspector General

DCIS Defense Criminal Investigative Service

DEA Drug Enforcement Administration

DFI Development Fund for Iraq

DoD Department of Defense

DoJ Department of Justice

DoS Department of State

DoS OIG Department of State Offi ce of Inspector General

FERRET Forensic Evaluation Research and Recovery Enforcement Team

FBI Federal Bureau of Investigation

ICE U.S. Immigration and Customs Enforcement

IG Inspector General

IRRF 1

$2.475 billion Iraq Relief and Reconstruction Fund provided by P.L. 108-11 

for the program of humanitarian relief and reconstruction planned by the 

National Security Council 

IRRF 2

$18.6 billion Iraq Relief and Reconstruction Fund ($18.4 billion after 

subtracting $210 million assistance for Jordan, Liberia, and Sudan) provided 

by P.L. 108-106

IRS Internal Revenue Service

IRS-CI Internal Revenue Service Criminal Investigation

LSA Logistical Support Area

MCTF Major Crimes Task Force

Continued on next page
44 I IRAQ RECONSTRUCTION: LESSONS LEARNED FROM INVESTIGATIONS, 2004–2012

Acronyms and Defi nitions

NCIS Naval Criminal Investigative Service

PCO Project and Contracting Offi ce

SIGIR Special Inspector General for Iraq Reconstruction

SIGOCO Special Inspector General for Overseas Contingency Operations

SIGPRO SIGIR Prosecutorial Initiative

SPITFIRE Special Investigative Task Force for Iraq Reconstruction

SRO Stabilization and Reconstruction Operation

USAID United States Agency for International Development