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36–173 PDF 2007

WAR PROFITEERING AND OTHER CONTRACTOR 

CRIMES COMMITTED OVERSEAS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON CRIME, TERRORISM, 

AND HOMELAND SECURITY 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

FIRST SESSION 

JUNE 19, 2007 

Serial No. 110–103 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 

(II) 

COMMITTEE ON THE JUDICIARY 

JOHN CONYERS, JR., Michigan, Chairman 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

MARTIN T. MEEHAN, Massachusetts 

WILLIAM D. DELAHUNT, Massachusetts 

ROBERT WEXLER, Florida 

LINDA T. SA ́ NCHEZ, California 

STEVE COHEN, Tennessee 

HANK JOHNSON, Georgia 

LUIS V. GUTIERREZ, Illinois 

BRAD SHERMAN, California 

TAMMY BALDWIN, Wisconsin 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

ARTUR DAVIS, Alabama 

DEBBIE WASSERMAN SCHULTZ, Florida 

KEITH ELLISON, Minnesota 

LAMAR SMITH, Texas 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

STEVE CHABOT, Ohio 

DANIEL E. LUNGREN, California 

CHRIS CANNON, Utah 

RIC KELLER, Florida 

DARRELL ISSA, California 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TOM FEENEY, Florida 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

PERRY APELBAUM, Staff Director and Chief Counsel 

JOSEPH GIBSON, Minority Chief Counsel 

SUBCOMMITTEE ON CRIME, TERRORISM, AND HOMELAND SECURITY

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia, Chairman 

MAXINE WATERS, California 

WILLIAM D. DELAHUNT, Massachusetts 

JERROLD NADLER, New York 

HANK JOHNSON, Georgia 

ANTHONY D. WEINER, New York 

SHEILA JACKSON LEE, Texas 

MARTIN T. MEEHAN, Massachusetts 

ARTUR DAVIS, Alabama 

TAMMY BALDWIN, Wisconsin 

J. RANDY FORBES, Virginia 

LOUIE GOHMERT, Texas 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

STEVE CHABOT, Ohio 

DANIEL E. LUNGREN, California 

BOBBY VASSAR, Chief Counsel 

MICHAEL VOLKOV, Minority Counsel 

(III) 

C O N T E N T S 

JUNE 19, 2007 

Page 

OPENING STATEMENTS 

The Honorable Robert C. ‘‘Bobby’’ Scott, a Representative in Congress from 

the State of Virginia, and Chairman, Subcommittee on Crime, Terrorism, 

and Homeland Security ....................................................................................... 1 

The Honorable J. Randy Forbes, a Representative in Congress from the 

State of Virginia, and Ranking Member, Subcommittee on Crime, Terrorism, and Homeland Security .......................................................................... 3 

WITNESSES 

The Honorable Stuart W. Bowen, Jr., Special Inspector General for Iraq 

Reconstruction, Arlington, VA 

Oral Testimony ..................................................................................................... 7 

Prepared Statement ............................................................................................. 8 

Mr. Thomas F. Gimble, Principal Deputy Inspector General, U.S. Department 

of Defense, Washington, DC 

Oral Testimony ..................................................................................................... 11 

Prepared Statement ............................................................................................. 13 

Mr. Barry M. Sabin, Deputy Assistant Attorney General, U.S. Department 

of Justice, Washington, DC 

Oral Testimony ..................................................................................................... 27 

Prepared Statement ............................................................................................. 29 

Mr. Alan Grayson, Grayson & Kubli, P.C., McLean, VA 

Oral Testimony ..................................................................................................... 40 

Prepared Statement ............................................................................................. 42 

Ms. Erica Razook, Legal Advisor to the Business and HuMAN Rights Program, Amnesty International, New York, NY 

Oral Testimony ..................................................................................................... 44 

Prepared Statement ............................................................................................. 46 

Mr. Scott Horton, Adjunct Professor of Law, Columbia University School 

of Law, New York, NY 

Oral Testimony ..................................................................................................... 48 

Prepared Statement ............................................................................................. 51 

APPENDIX 

Material Submitted for the Hearing Record .......................................................... 79 

(1) 

WAR PROFITEERING AND OTHER 

CONTRACTOR CRIMES 

COMMITTED OVERSEAS 

TUESDAY, JUNE 19, 2007 

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON CRIME, TERRORISM,

AND HOMELAND SECURITY

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:05 p.m., in Room 

2141, Rayburn House Office Building, the Honorable Robert C. 

‘‘Bobby’’ Scott (Chairman of the Subcommittee) presiding. 

Present: Representatives Scott, Delahunt, Johnson, Forbes, 

Coble, and Chabot. 

Staff Present: Bobby Vassar, Subcommittee Chief Counsel; 

Ameer Gopalani, Majority Counsel; Veronica Eligan, Professional 

Staff Member; Caroline Lynch, Minority Counsel; and Kelsey 

Whitlock, Minority Staff Assistant. 

Mr. SCOTT. The Subcommittee will come to order. 

I am pleased to welcome you today to the hearing before the Subcommittee on Crime, Terrorism, and Homeland Security on ‘‘War 

Profiteering and Other Contractor Crimes Committed Overseas.’’ 

Over the last 4 years, reconstruction fraud has run rampant during the engagement of U.S. forces in Iraq and Afghanistan. The 

United States has devoted more than $50 billion to relief and reconstruction activities in Iraq and Afghanistan, and the inspectors 

general that are here before us today have reported that millions 

of these dollars still are unaccounted for. 

Millions may have been lost to fraud and other misconduct, and 

these inspectors general have opened hundreds of investigations 

into fraud, waste and abuse in Iraq, Kuwait and Afghanistan involving illegal kickbacks, bid rigging, embezzlements and fraudulent overbilling. 

In addition to the fraud, there is well-documented evidence of detainee abuse perpetrated by contractors as well as evidence of unjustified shootings and killings by private security contractors. 

Private contractors have been used to a greater extent that at 

any other time in our history. With the exponential use of contractors comes the greater scrutiny of which laws, if any, they are exposed to, and we currently have a situation in which many contractors act with impunity and no accountability because they operate 

2 

outside of the physical jurisdiction of the United States and, therefore, outside of the jurisdiction of the U.S. Criminal Code. 

I hope at this hearing we will be able to explore the following 

questions: What is the extent of the problem, why are there so few 

prosecutions, what are the reasons for the lack of transparency in 

investigations and prosecutions, and are the existing laws adequate 

to address these problems? 

With respect to the first point, considering the vast amount of 

evidence and investigations, there have been relatively few prosecutions for fraud or detainee abuse. Inspectors general before us 

have more than 70 open and active investigations in contracting 

fraud and abuse in the war. In addition, private whistleblowers 

have filed numerous civil claims involving Iraq fraud under the 

False Claims Act. 

Despite the breadth of all of these investigations and cases, the 

Department of Justice has pursued only a relatively small number 

of the cases, and it has not even participated at all in the whistleblower cases. 

With respect to detainee abuse in Iraq, there has only been one 

successful prosecution of a civilian contractor, and that was for the 

conviction of a CIA contractor for beating a detainee who later 

died. 

Another question that arises with respect to prosecutions and investigations is a lack of transparency. For example, 17 pending 

cases of detainee abuse, including the abuse at Abu Ghraib prison 

by contractors, have remained on the docket of the U.S. attorney’s 

office in the Eastern District of Virginia for 3 years. 

In some of these cases, the Army has investigated the circumstances behind them and found probable cause that a crime 

has been committed and referred these cases to the Department of 

Justice for prosecution. But we are not told why these cases are 

being held up and what the next steps are for prosecution. 

On the fraud side, the Department of Justice has ignored the 

False Claims Act cases by obtaining court orders sealing the cases. 

Most of the cases filed regarding the war profiteering in Iraq have 

remained under seal. 

Finally, we need to examine whether the present laws on the 

books are sufficient to address the problem. Although there are 

antifraud laws to protect against waste of the United States dollars 

at home, no law expressly forbid war profiteering or expressly confers jurisdiction of the U.S. Federal court to hear fraud cases outside the normal bounds of the United States Criminal Code. 

To this end, the gentleman from Hawaii, Mr. Abercrombie, has 

introduced H.R. 400, the ‘‘War Profiteering Prevention Act of 2007,’’ 

a companion bill to Senator Leahy’s War Profiteering Act. 

The legislation would criminalize overcharging taxpayers to defraud and to profit extensively from a war military action or reconstruction effort. The crime would be a felony subject to criminal 

penalties of up to 20 years in prison and fines up to a million dollars or twice the illegal gross profits of the crime, whichever is 

higher. 

The bill also prohibits false statements connected with the provision of goods and services in connection with war or reconstruction 

effort. This crime would be a felony subject to the criminal penVerDate Aug 31 2005 11:46 Aug 20, 2008 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6601 H:\WORK\CRIME\061907\36173.000 HJUD1 PsN: 36173
3 

alties of up to 10 years in prison and fines up to $1 million or twice 

the illegal gross profits of the crime, whichever is higher. 

In sum, the bill sends a clear message that all contracting fraud, 

whether it occurs in Iraq or elsewhere overseas, for exorbitant gain 

is not only unacceptable and reprehensible; it will be illegal. 

With respect to the detainee abuse and other human rights 

crimes committed overseas, we need to examine whether the Federal courts have the appropriate authority to hear such cases. 

While some abuses by military and some security contractors may 

be prosecuted under current U.S. law, there have been calls to clarify and amend the Military Exterritorial Jurisdiction Act, the 

MEJA. 

When that was signed into law in 2000, it provided the United 

States Courts with jurisdiction over only those civilian employees, 

contractors and subcontractors affiliated with the Defense Department who create crimes overseas. That law was later amended in 

2005 to include employees of any Federal agency supporting the 

mission of the Department of Defense overseas. 

We need to make sure that the growing number of contractors 

overseas do not escape accountability simply because they are not 

deemed to be supporting the mission of the Department of Defense. 

To this end, on January 10, the gentleman from North Carolina, 

Mr. Price, introduced H.R. 369, the Transparency and Accountability and Security Contracting Act of 2007. 

The bill includes two provisions which will close the loophole to 

cover all private security contractors, not just those associated with 

the Department of Defense, to ensure that they are accountable 

under U.S. law. He also recently introduced the provision as a 

standalone bill, H.R. 2740, the MEJA Expansion and Enforcement 

Act of 2007. 

So, today, I hope we can determine what kind of priority the Department of Justice assigns to reconstruction fraud cases, why 

many cases have not been prosecuted and what can be done to correct the situation, whether it is through legislation, more resources 

or other action. 

It is now my privilege to recognize our esteemed colleague, the 

Ranking Member of the Subcommittee, my colleague from Virginia, 

Randy Forbes, for his opening statement. 

Mr. FORBES. Thank you, Mr. Chairman. 

And to all of our witnesses, we appreciate you being here today 

and taking your time both in preparing for this testimony and presenting it to us and responding to our questions. 

I want to thank Chairman Scott for holding this hearing on H.R. 

400, the ‘‘War Profiteering Prevention Act of 2007’’ and H.R. 369, 

the ‘‘Transparency and Accountability and Security Contracting Act 

of 2007.’’ 

First of all, something we all agree on, it is not new, it is not 

novel, and that is that fraud against the United States and the defense industry or in relief or reconstruction activities undermines 

our national security. Criminals who enrich themselves at the expense of our military effort deserve stiff sentences. Their actions 

threaten the safety and security of our men and women in uniform 

and the success of our military operations. 

4 

Unfortunately, we see it in Iraq, we see it in New Orleans when 

we have relief efforts down there, and we act as if sometimes this 

has just been birthed today or it has just been birthed in this war. 

As I look at the parties and the stakeholders and discussing this 

legislation, there are a number of currents that all start coming together. There are representatives from Government whose job it is 

to oversee this and do a good job in trying to find out and make 

sure the Government gets what it has paid for. We have attorneys 

who make a lot of money off this kind of litigation and, obviously, 

have a strong interest in making sure that it takes place. And then 

we have politicians who love to always point their fingers and act 

like this is something new and different, and it just arrived. 

I have looked at some of the history of war profiteering, and, you 

know, we have had arms merchants that have been profiteering for 

centuries. During the Civil War, Lincoln denounced war profiteers 

as worse than traitors. He pushed for the first Federal laws against 

abuse. These were called the False Claims Act. 

Congressional investigations were conducted, and Congress 

passed antiwar profiteering statutes after World War I, World War 

II and the Korean War. A provision from a statute in World War 

II was used as a model for a provision which was attempted to be 

added to legislation in 2003, but was stripped out of the final bill. 

August 31, 1990, Senator Jim Sasser of Tennessee challenged oil 

companies to reduce their prices or face profiteering charges as the 

crisis in the Middle East escalated. 

September 12, 1990, then President Bush warned the U.S. would 

not tolerate profiteering during the then Persian Gulf crisis after 

legislation was introduced in both the House and the Senate to prohibit excess fuel price increases during national emergencies. 

A U.S. renegotiation board, a separate entity created the Korean 

War to guard against profiteering by defense contractors—in 1978, 

it returned $34.4 million in profits it had found to be unwarranted, 

while spending only $6.2 million. Its demise came in 1976 after 

Congress refused to extend the budget. 

And during Lyndon Johnson’s presidency, allegations were made 

against some corporations who had contributed hugely to his campaign, suggesting that they had close ties to the President which 

dated back to the 1940’s and that there was huge profiteering involved then. 

Today’s witnesses will outline the significant effort that has been 

made by the Justice Department, the Department of Defense and 

the special investigator for the government of Iraq reconstruction 

to identify and prosecute fraudulent schemes in the global war 

against terrorism. 

These cases are difficult to bring since they occur in or close to 

the theater of war. Fraud cases require extensive investigative resources and documentation. Gathering such evidence in a dangerous setting like Iraq or Afghanistan makes it extremely difficult 

sometimes to build a successful prosecution. 

Despite these difficulties, as the witnesses will explain, many 

successful prosecutions have been brought by the Justice Department, and it is likely that more will be brought. These cases are 

not unique to any national effort in our Nation’s history. 

5 

When large amounts of money are expended, criminals see an opportunity to steal from the Government. Those criminals must be 

punished, and justice must be swift and sure. 

Some may use this issue for political advantage by alleging that 

such criminal activity reflects cronyism in the Administration. 

Such claims are made without any factual base and are actually 

contradicted by the prosecutions against its contractors. 

I am interested in focusing on the nature of the problem and 

what, if any, additional resources are needed to fix the problem. It 

is easy just to say or propose that additional FBI resources should 

be added to investigate these cases without considering the impact 

on other FBI responsibilities. Similarly, some may argue that more 

cases should be brought. We all agree on that. 

My concern is how to deal and how to do that in the most effective way possible, making the most from the resources that are 

available and considering what resources may be needed to help 

this effort. 

With respect to the specific proposals before us, the Justice Department has raised significant problems with H.R. 400, the ‘‘War 

Profiteering Prevention Act of 2007.’’ Specifically, the Justice Department raises several significant concerns with the wording of 

the bill which would actually hinder rather than help the prosecution of war profiteering cases. 

Moreover, the Justice Department is currently prosecuting these 

cases under a variety of existing fraud and racketeering statutes, 

and acting anew in separate criminal statute for war-related fraud 

could make it, some would argue, more difficult to prosecute some 

of these cases. 

It is important to keep in mind that criminal prosecutions do not 

occur in a vacuum. Criminal statutes are accompanied by a body 

of case law that guides their use. Adding a separate statute for war 

profiteering may score a political point, while actually weakening 

U.S. efforts to prosecute these crimes. Sometimes more is not better. It is just more. 

I also have concerns about H.R. 369, the Transparency and Accountability and Security Contracting Act of 2007. H.R. 369 extends extraterritorial jurisdiction to include a person employed 

under a contract or subcontract at any tier awarded by any department or agency of the United States government where the work 

under such contract is carried out in a region outside the United 

States in which the armed forces are conducting a contingency operation. 

Such authority is not needed to prosecute fraud committed in the 

defense industry or in the relief or reconstruction efforts. This is 

an attempt to extend jurisdiction of the Federal criminal code to 

war crimes, alleged torture and other criminal acts committed by 

persons under contract with non-DoD agencies. 

Congress is legislating in response to allegations of such crimes. 

We must be cautious in extending the Military Extraterritorial Jurisdiction Act because, as written, the proposed language may be 

struck down as an unconstitutional assertion of criminal jurisdiction. 

I urge Chairman Scott to hold a separate hearing on the issues 

raised by H.R. 369. Our Subcommittee works best when we deal 

6 

with issues in a fair and full debate. Such process brings greater 

consensus and sharpens the issue. 

I look forward to hearing from today’s witnesses and working together to address these important issues. 

Mr. Chairman, thank you again for having this hearing, and I 

yield back the balance of my time. 

Mr. SCOTT. Thank you. Thank you. And I thank you for your 

statement. 

We have been joined by Mr. Delahunt from Massachusetts, Mr. 

Johnson from Georgia, and Mr. Coble is with us from North Carolina. 

Our witnesses today—we will begin with Mr. Stuart Bowen, who 

has served as special inspector general for Iraq reconstruction since 

October 2004. He previously served as inspector general for the Coalition Provisional Authority, a position to which he was appointed 

in January of 2004. He holds a BA from the University of the 

South, attended Vanderbilt Law School and received a JD from St. 

Mary’s Law School. 

After he testifies, our next witness will be Mr. Thomas Gimble, 

principal deputy inspector general for the Department of Defense. 

He also served as acting inspector general until April 30, 2007. As 

principal deputy inspector general, he reports directly to the DoD 

inspector general. He attended Lamar University where he received a BBA and the University of Texas at San Antonio where 

he received an MBA. He is a certified public accountant and certified government financial manager. 

Mr. Barry Sabin, Deputy Assistant Attorney General in the 

criminal division of the United States Department of Justice. Since 

2006, he has been responsible for overseeing the fraud section, 

criminal appellate section, gang squad and capital case unit. He received his bachelor’s and master’s degrees from the University of 

Pennsylvania and a law degree from New York University School 

of Law. 

Next will be Mr. Alan Grayson who is the principal at Grayson 

& Kubli. Before he started the firm, he was a founder and president of IDT Corporation. He received his juris doctorate from Harvard Law School, holds a master’s from the Kennedy School of Government at Harvard, and completed his undergraduate work at 

Harvard. 

Next is Erika Razook who for 2 years has advised Amnesty International’s Business and Human Rights Program where she conducted research and analysis of applicable laws, agency regulations, proposed bills and other mechanisms for holding private, 

military and security contractors accountable for human rights violations and criminal acts committed on foreign soil. She holds a law 

degree from Brooklyn Law School. 

Our final witness will be Scott Horton who is an adjunct professor at Columbia Law School where he teaches law of armed conflict and commercial law courses. He is also chair of the committee 

on international law at The Association of the Bar of the City of 

New York. Since February of this year, he has managed the project 

on accountability of private military contractors on Human Rights 

First. He is an author of more than 100 publications dealing with 

issues of international public and private law, and he is currently 

7 

working on a book on legal policy issues relating to private military 

contractors. 

Each of our witnesses’ written statements will be made part of 

the record in its entirety. 

We would ask that each witness summarize his or her testimony 

in 5 minutes or less, and to help stay within that time, there is a 

timing device at your table which will begin on green. When you 

have 1 minute left, it will switch from green to yellow, and then 

finally to red, when the 5 minutes are up. 

Our first witness will be Mr. Bowen. 

TESTIMONY OF THE HONORABLE STUART W. BOWEN, JR., SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION, 

ARLINGTON, VA 

Mr. BOWEN. Thank you, Mr. Chairman. 

Chairman Scott, Ranking Member Forbes, and Members of the 

Subcommittee, thank you for this opportunity to address you today 

on the work of my office, the special inspector general for Iraq reconstruction. 

Permit me to outline several points essential to understanding 

the challenges of investigating and prosecuting fraud in Iraq. 

First, corruption within the Iraqi government, indeed within the 

fabric of Iraqi society, is a serious problem that inhibits progress 

on many fronts. This is widely recognized by the government of 

Iraq and the international community. SIGIR has called Iraq’s endemic corruption problem a second insurgency. 

I returned last month from my 16th trip to Iraq since my appointment, and during my visit, I met with the commissioner of 

Public Integrity, who heads the institution created by the CPA, the 

Coalition Provisional Authority, charged with increasing accountability in Iraq for corruption. I also had met with the president of 

the Board of Supreme Audit, which is the analogue to the Government Accountability Office. 

The CPI commissioner told me that he currently has over 2,000 

cases involving $5 billion in alleged corruption, and the president 

of the Board of Supreme Audit has hundreds of audits ongoing, and 

in virtually every case, as he has reported to us, he has found a 

serious lack of accountability within the Iraqi government. 

Now let me emphasize that the CPI and the BSA both oversee 

Iraqi money, of course, not U.S. money, Iraqi money that has been 

stolen from Iraqi programs. 

During my recent visit, I was also informed about political interference with the work of these Iraqi anti-corruption entities. For 

example, I learned that ministers and former ministers are exempt 

from prosecution unless assent is received from the prime minister 

of Iraq. 

Each minister also, under Article 134 B of the Iraqi criminal 

code, can exempt from prosecution any employee of their respective 

ministries from insight. This effectively creates an undemocratic 

bulwark against the enforcement efforts to fight corruption in Iraq. 

SIGIR’s specific role in reviewing the anti-corruption efforts is to 

report on, through audits, the ethicacy of U.S. efforts to build up 

the rule of law system. 

8 

In July 2006, we released a survey on American efforts and 

found that a very modest amount, specifically $65 million, had 

been allocated to support anti-corruption efforts within the Iraq 

government. My auditors found that our efforts have not been sufficiently coordinated or focused and that more adequate leadership 

and organization was needed 

The embassy has responded to a number of our concerns, but we 

are prepared to soon release an update on last year’s report that 

will address both progress made and problems that remain. 

My second point is that the incidence of corruption within the 

U.S. reconstruction program appears to constitute a relatively 

small component of the overall American financial contribution to 

Iraq reconstruction. Based on the work of the 18 criminal investigators on my staff, I believe that losses to American taxpayers 

from fraud in reconstruction programs have amounted and will 

likely amount to a relatively small component of the overall investment in Iraq reconstruction. 

However, the fact that the fraud we have detected is a relatively 

small component does not diminish the aggressiveness with which 

we pursue these allegations. We have found egregious incidents of 

fraud, and we have pursued those investigations and, in conjunction with the Department of Justice, have pursued and succeeded 

in prosecutions. 

Four subjects of our investigations have been prosecuted and are 

in prison now. Faheem Salam was caught in a sting operation run 

by my agency. He is in prison for 3 years. Philip Bloom and Robert 

Stein, the comptroller for CPA’s south region, were caught in a conspiracy to steal millions of dollars in Development Fund for Iraq 

money. Bloom is now in prison for almost 4 years; Stein, for 9 

years. Others caught in that web include Steven Merkes who is in 

prison for just over a year. Bruce Hopfengardner will be sentenced 

later this month. And we have five more that will be prosecuted 

soon. 

There are also, as you mentioned, Mr. Chairman, over 70 cases 

ongoing managed by my investigators and over 30 under prosecution at the Department of Justice, and I expect in the course of this 

year we are going to see significant progress, the fruits of these investigations and the results of these prosecutions. 

Ultimately, it is about coordination, with both the DOJ and with 

my colleagues here at the table, through a series of task forces that 

helped get the job done in Iraq today. And most importantly, I 

think, the latest significant development is the formation of the 

Joint Operations Center co-located at the FBI wherein a variety of 

all of the U.S. government entities with oversight in Iraq are working together, communicating about leads, pursuing cases and ultimately achieving prosecutions. 

Mr. Chairman, Members of the Committee, thank you for your 

time and attention to these important matters, and I look forward 

to answering your questions. 

[The prepared statement of Mr. Bowen follows:] 

PREPARED STATEMENT OF STUART W. BOWEN, JR. 

Chairman Scott, Ranking Member Forbes, and members of the Subcommittee, 

thank you for this opportunity to address you today on the role of the Office of the 

9 

Special Inspector General for Iraq Reconstruction on oversight and investigations 

into Iraq reconstruction. 

To ensure accurate context, permit me to outline several points essential to understanding the challenges of investigating and prosecuting fraud in Iraq. 

First, corruption within the Iraqi government, indeed within the fabric of Iraqi 

society, is a serious problem that inhibits progress on many fronts in Iraq. This is 

widely recognized by the Government of Iraq and the international community. In 

our quarterly reports, SIGIR has called Iraq’s endemic corruption problem a ‘‘second 

insurgency.’’ 

I returned last month from my 16th trip to Iraq and, during my visit, I met with 

the Commissioner of Public Integrity, who heads the institution created by the CPA 

to increase accountability for public corruption in Iraq—and the President of the 

Board of Supreme Audit, the analogue to the Government Accountability Office, 

which has existed in Iraq for many decades. The Iraqi anti-corruption authorities 

again emphasized to me the widespread nature of the problem of corruption, which 

stretches across the government, afflicting virtually every ministry. And they outlined for me the difficulties they face in implementing their respective anti-corruption mandates. 

The CPI Commissioner told me that he currently has 2,000 cases involving $5 billion in alleged corruption. And the President of the Board of Supreme Audit has 

hundreds of audits ongoing. In virtually every case, he is uncovering a lack of accountability. Let me emphasize that the CPI and the BSA oversee Iraqi money— 

not U.S. money—that is missing or has been stolen from Iraqi programs. 

During my visit, I was informed about political interference with the work of Iraqi 

investigators and prosecutors. For example, I learned that Ministers and former 

Ministers are exempt from prosecution unless the assent of the Prime Minister is 

obtained; and each Minister is entitled, under an Iraqi criminal code provision, to 

immunize selectively ministry employees from being held accountable for corruption. 

Iraq must make progress on rule of law enforcement, in general, and corruption, 

in particular; political interference with fighting corruption remains a problem, undermining the effectiveness of the developing rule of law system and consequently 

eroding the Iraqi people’s confidence in their government. 

Iraq is a sovereign state. The role of the United States thus is to encourage the 

development of an efficient Iraqi justice system. We do this for its own sake and 

for the sake of maintaining and building upon the efforts made, at great cost in 

blood and treasure, by Americans and Iraqis since the liberation of Iraq. 

SIGIR’s specific role in this process has been to review the effectiveness of United 

States efforts to improve the rule of law system and to build up the corruption-fighting capacity of the Iraqi government. 

On July 28, 2006, SIGIR released a survey on this subject and found that American efforts were funded at a very modest level, given the scope of the problem, receiving about $65 million (about three-tenths of one percent of our total reconstruction spending). My auditors found that American efforts have not been sufficiently 

coordinated and focused and that more adequate leadership and organization was 

needed. The U.S. Embassy has responded to some of these concerns since the review 

was released. SIGIR will soon release another review on the issue, updating our previous report. 

SIGIR has a continuing investigative responsibility to detect and investigate malfeasance in American relief and reconstruction programs in Iraq. As part of this effort, we have developed good working-level and leadership-level relationships with 

the CPI and the BSA. We coordinate with these Iraqi agencies whenever we come 

across evidence of potential wrongdoing by Iraqis. SIGIR, of course, concentrates its 

law enforcement efforts on American targets and works with the Department of Justice in their effective prosecution. 

My second point is that the incidence of corruption within the U.S. reconstruction 

program—judging from those cases that we have uncovered thus far—appears to 

constitute a relatively small component of the overall American financial contribution 

to Iraq’s reconstruction. Based on the work of our 18 career investigators on SIGIR 

staff, I believe that losses to American taxpayers from fraud within reconstruction 

programs will likely amount to a relatively small percentage of the overall investment in Iraq, totaling in the tens of millions (rather than hundreds of millions or 

billions, as is sometimes imagined). However, the fact that the fraud we have detected is relatively small (to date) does not diminish the aggressiveness with which 

SIGIR pursues allegations of fraud in Iraq. We have found egregious incidents of 

fraud. And in partnership with the Department of Justice, SIGIR has produced clear 

results in prosecutions and convictions. 

For example, in January, two individuals were sentenced to prison as a result of 

SIGIR investigations. In early February, indictments were announced of five more 

10 

individuals, resulting from SIGIR investigations. To date, SIGIR has opened over 

300 cases, and we have over 70 ongoing investigations. Thirty-two of those cases are 

under prosecution at the Department of Justice. 

We believe that the publicity our enforcement actions have received has helped 

to deter misconduct in the U.S reconstruction program. And we also believe that enforcement will be an increasingly important part of SIGIR’s mission over the next 

18 months. Moreover, in the course of this year, we expect to produce concrete investigative results as significant current cases come to fruition. 

SIGIR remains committed to a robust, deterrent presence in Iraq as long as our 

temporary organization exists. Today, I have five investigators on the ground in Iraq 

investigating fraud. Although there are other law enforcement agencies fighting 

fraud in Iraq, SIGIR has maintained over the past three years the largest contingent of fraud investigators in Iraq. My investigators travel the country under dangerous conditions, pursuing leads, interviewing witnesses, and piecing together evidence on a wide variety of cases. Their work also takes them to other countries in 

the region. Of note, SIGIR is currently reducing its overall personnel ‘‘footprint’’ in 

Baghdad to conjunction with the reduction in spending of appropriated dollars on 

Iraq reconstruction. 

One of the most important aspects of our investigative efforts is the development 

of task-force relationships with other agencies involved in oversight in Iraq, including my colleagues from the Office of Inspector General of the Department of Defense 

and the Defense Criminal Investigative Service, as well as the Federal Bureau of 

Investigation. SIGIR has 16 investigators in Arlington, and we are participating in 

the new Joint Operations Center located at the FBI to coordinate and enhance fraud 

investigations in Iraq. 

SIGIR’s first task force was the Special Investigative Task Force for Iraq Reconstruction (SPITFIRE), and it combined the efforts of the Internal Revenue Service, 

the Department of Homeland Security, Immigrations and Customs enforcement office, the FBI and the Department of State Office of Inspector General. That task 

force was able to effectively pursue the Bloom-Stein conspiracy that my auditors uncovered in Hillah, Iraq—a very egregious kickback and bribery scheme involving 

over $10 million in reconstruction funds that Philip Bloom, the contractor, and Robert Stein, the Coalition Provisional Authority comptroller for that region, engineered 

for their own criminal ends. SPITFIRE continues its work today; and we continue 

to pursue a number of leads that arose from the Bloom-Stein case. 

The other major task-force initiative that SIGIR has initiated with the FBI is the 

International Contract Corruption Task Force (ICCTF). ICCTF prompted the creation of the Joint Operations Center mentioned above, which is producing the effective collection and coordination of investigative leads and source development. Although I am not at liberty to discuss details of these case, I am very pleased with 

the very significant progress the JOC investigators have made, the news of which 

I expect to be forthcoming later this year. 

Along with SIGIR, the ICCTF includes the U.S. Army’s Criminal Investigative Division’s Major Procurement Fraud Unit, the Defense Criminal Investigative Service, 

the FBI, and the inspectors general of the Department of State and the Agency for 

International Development. 

SIGIR is also part of the DOJ National Procurement Fraud Task Force. We continue to work closely with DOJ in the investigation and prosecution of our cases. 

Finally, to coordinate efforts in oversight in Iraq, I formed the Iraq Inspector General’s Council (IIGC) three years ago, which brings together every agency with oversight authority in Iraq for a meeting every quarter. The IIGC exists to deconflict 

and coordinate the member agencies’ oversight efforts in Iraq. 

SIGIR is not limiting its efforts just to addressing contractor misconduct through 

the criminal justice system. We also refer cases to the U.S. government’s administrative debarment and suspension processes. To date, the competent oversight authorities have, through established rules that preserve due process, suspended 17 

companies and individuals, debarred ten more, and have another 9 pending 

debarments. 

To date, SIGIR has produced 13 quarterly reports, 86 audit reports, and 90 inspection reports. Our auditors and inspectors regularly refer investigative leads to 

our investigators some of which have developed into very significant cases. The 

Bloom-Stein case is just one example. 

SIGIR’s three lessons-learned reports produced to date have provided recommendations on policies designed to improve economy, efficiency and effectiveness 

for the Iraq program and for future reconstruction and stabilization operations. The 

reports have prompted the introduction of reform measures in the Congress that 

will improve contracting processes. SIGIR is at work on a lessons-learned capping 

report, which will be produced at the end of this year. It is my hope that our lessons 

11 

learned reports will prompt reforms that will improve the capacity of law enforcement to deter crime. 

Mr. Chairman, with respect to H.R. 400, Representative Abercrombie’s bill entitled the ‘‘War Profiteering Prevention Act of 2007, our position is essentially what 

it was when we were asked to reflect on its counterpart at a Senate hearing this 

past March. SIGIR remains a strong proponent of legislation that would strengthen 

efforts to punish fraud or abuse in contracting programs in Iraq or elsewhere. We 

look forward to working with the Department of Justice to enforce H.R. 400, should 

it become law. That having been said, I must add that, as we have developed criminal cases in Iraq, we have not become aware of instances where the Justice Department was unable to prosecute, under existing law, on the facts we developed in our 

investigations. 

One of our responsibilities in Iraq is to encourage efficiency in the reconstruction 

effort. In that role, we have prompted management to seek the widest possible participation by business enterprises (especially Iraqi firms) in reconstruction. The security risks in Iraq are self-evident, and thus the risks to any business enterprise 

operating in such an environment are mammoth. International companies likely will 

not get into the business of reconstruction in Iraq without incentives that render 

the risk-taking worthwhile. This reality should figure in the development of legislation that affects contracting in Iraq or similarly insecure environments. 

Whether H.R. 400 becomes law, SIGIR will continue to aggressively pursue investigations, provide robust oversight through audits and inspections, and will press for 

more efforts to improve contract administration, quality assurance, and quality control. It is my hope that our continuing efforts will help promote an aim we all 

share—a reconstruction program that is administered and executed honestly, and 

is as well-managed and efficient as possible under very challenging circumstances. 

Mr. Chairman, members of the Committee, thank you for your time and attention 

to these important matters, and I look forward to answering your questions. 

Mr. SCOTT. Thank you. 

Mr. Gimble? 

TESTIMONY OF THOMAS F. GIMBLE, PRINCIPAL DEPUTY INSPECTOR GENERAL, U.S. DEPARTMENT OF DEFENSE, WASHINGTON, DC 

Mr. GIMBLE. Mr. Chairman, Members of the Subcommittee, 

thank you for the opportunity to appear today before you. 

The global war on terror is a top priority for the Inspector General and, currently, we have about 180 people providing oversight. 

To date, $558 billion in DoD funds have been appropriated to 

support the fight against terrorism and to support the men and 

women of our Armed Forces in Southwest Asia. 

To accomplish our oversight mission, we have a combination of 

initiatives, to include establishing an in-theater oversight presence 

and improving interagency coordination to minimize duplication 

within the oversight community. This includes participation in the 

Iraq Inspectors General Council chaired by the Special Inspector 

General for Iraq Reconstruction. 

In March of 2006, we established our forward field site in Qatar. 

In February of 2007, we established two sites, Camp Victory and 

the International Zone, in Iraq. This month, we are establishing 

our forward field site at Bagram Air Base in Afghanistan. We are 

also assessing the need for the establishment of a Defense Criminal 

Investigative Service office in Afghanistan. 

Of the 22 ongoing global war on terror-related audits, 19 are 

Iraq-related audit projects involving critical readiness issues that 

directly impact the warfighter, such as personnel operational 

equipment readiness; sustainability of small arms programs; and 

the resetting of ground vehicles and equipment with the combatant 

commands. Our audits also include the oversight of contracting, 

12 

cash management, and other monetary assets within Iraq, as well 

as the execution of the supplemental funds used to train and equip 

Iraq and Afghanistan security forces. 

The Defense Criminal Investigative Service, or DCIS, the criminal investigative arm of the DoD inspector general, has been engaged in investigating DoD-related matters pertaining to the Iraqi 

theater since the start of the war. The presence of the DCIS in the 

region has led to 93 investigations in areas such as corrupt business practices; loss of U.S. funds through contract fraud; and the 

theft of military equipment. 

DCIS is currently conducting 78 investigations related to the war 

effort, which include war profiteering, contract fraud, and contract 

corruption. Fourteen of these investigations are being conducted by 

DCIS special agents in the Iraqi theater. The remaining 64 investigations are being conducted by special agents in our CONUS and 

Germany-based DCIS offices. 

Both closed and ongoing investigations have resulted in four Federal criminal indictments, nine Federal criminal informations, and 

two Article 32 hearings under the Uniform Code of Military Justice. 

As a result of the investigations, nine U.S. persons and one foreign person were convicted of felony crimes. It resulted in a total 

of approximately 15 years confinement and 11 years of probation. 

Additionally, two contractors signed settlement agreements with 

the U.S. Government. 

In all, about $9.8 million was paid to the U.S. in restitution; 

$323,000 levied in fines and penalties, $3,500 was forfeited; and 

$61,000 was seized. 

In addition to the above judicial actions, four individuals and one 

company were debarred from contracting with the U.S. Government, and 19 companies and personnel were suspended. 

Our policy and oversight component continues to play a key role 

in developing and promoting the establishment of effective oversight and security organizations in both Afghanistan and Iraq, to 

include the development of a viable self-sustaining Inspector General system. 

Our intelligence component currently has two ongoing projects 

related to improving the intelligence support to the combatant commanders and warfighters. 

We are committed to ensuring that the appropriated resources 

are used effectively. 

I would like to submit my written statement for the record, and 

I am prepared to answer your questions. 

[The prepared statement of Mr. Gimble follows:] 

13 

PREPARED STATEMENT OF THOMAS F. GIMBLE


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Mr. SCOTT. Thank you very much. 

Mr. Sabin? 

TESTIMONY OF BARRY M. SABIN, DEPUTY ASSISTANT ATTORNEY GENERAL, U.S. DEPARTMENT OF JUSTICE, WASHINGTON, DC 

Mr. SABIN. Chairman Scott, Ranking Member Forbes, Members 

of the Subcommittee, thank you for the opportunity to be here 

today to discuss the efforts of the Department of Justice to combat 

procurement fraud relating to spending on the wars and rebuilding 

efforts in Iraq and Afghanistan. 

I would like to reiterate the Department of Justice’s commitment 

to a strong and vigorous enforcement effort in this area and address three primary points. 

First, the Department of Justice has made the investigation and 

prosecution of procurement fraud, including procurement fraud related to the wars in Iraq and Afghanistan, a priority and has devoted significant prosecutorial and investigative resources to that 

effort. 

Second, the Department is working through the International 

Contract Corruption Task Force, including the Special Inspector 

General for Iraq Reconstruction and others Inspectors General, and 

traditional law enforcement partners to investigate and prosecute 

procurement fraud and has already developed a track-record of success in this area. 

Third, in order to leverage law enforcement resources and more 

effectively address procurement fraud, the Department formed the 

National Procurement Fraud Task Force last year. The task force 

is off to a successful start, has formed key working committees, and 

is already working to identify and remove barriers to preventing, 

detecting and prosecuting procurement fraud. 

The Department of Justice has taken an aggressive, proactive 

leadership position to help ensure that dollars from the public fist 

are used for the purpose to which they have been appropriated and 

not to line the pockets of corrupt individuals or companies. We take 

that responsibility seriously. Working with the interagency community, the Department has demonstrated this commitment at the investigative and prosecution stages for both civil and criminal matters. 

These DOJ prosecutive components include the criminal, antitrust and civil divisions at main Justice, the United States attorney’s offices and the investigative resources at the FBI. 

Just last week, training for prosecutors from across the country 

was conducted at the National Advocacy Center in Columbia, South 

Carolina. It was productive, and one of the key themes that 

emerged and we address was how to streamline these complex 

cases in order to bring them more expeditiously. 

The Department has been and is working closely with and 

through the International Contract Corruption Task Force. It was 

established in October 2006 as an operational task force. The charter agencies and mission are set forth in my written statement. 

These types of procurement fraud cases are usually very complex 

and resource intensive. The cases often involve extraterritorial conduct as well as domestic conduct requiring coordination between 

28 

appropriate law enforcement agencies. Investigating the international component often proves difficult due to the need to cooperate with foreign law enforcement officials and due to the burden of 

providing adequate security to prosecutors and investigators working abroad. Indeed, the difficulty of locating and collecting evidence 

and interviewing witnesses in an active combat zone cannot be 

overstated. 

Despite these challenges, the Department of Justice will continue 

to pursue these cases wherever the evidence leads. 

The Department has charged 25 individuals criminally for public 

corruption and government fraud relating to the war on terror, 

which includes matters involving Iraq, Kuwait and Afghanistan. 

For example, on February 1 of this year, three Army officials and 

two civilians were indicted for various crimes related to a scheme 

to defraud the Coalition Provisional Authority South Central Region in Iraq. Defendant Whiteford was once the second most senior 

official in this area. Defendant Wheeler was an advisor for CPA 

projects for the reconstruction of Iraq. In August of last year, a 

lieutenant colonel in the United States Army Reserves pleaded 

guilty to conspiracy to commit wire fraud and money laundering in 

connection with this scheme. 

The charges against these individuals emanated from an investigation into illegal conduct by Robert Stein, CPA South Central’s 

comptroller and funding officer, and Philip Bloom, a U.S. citizen 

who resided in Romania and Iraq. Both have pleaded guilty to conspiracy, bribery and money laundering. 

The LOGCAP Working Group, which operates out of the U.S. attorney’s office in the Central District of Illinois, has also filed criminal charges against eight individuals for bribery and kickbacks associated with Iraq reconstruction efforts and military operations in 

Kuwait, and they include a defendant formerly serving as the 

Army’s theater food service advisor for Kuwait, Iraq and Afghanistan who pled guilty to bribery, and a former subcontracts manager 

for Kellog, Brown & Root who pleaded guilty to major fraud 

against the United States and conspiracy to commit money laundering. 

The Department formed the National Procurement Fraud Task 

Force in October of last year. The task force has been and will continue to focus on the objectives and missions articulated in my 

written statement. To accomplish these objectives, the task force 

has created working committees to address particular issues, such 

as legislation, training and private-sector outreach relating to procurement fraud. Each committee is chaired by a high-level member 

of the Inspector General community or the FBI. 

In conclusion, the Justice Department has already taken significant steps to improve the effectiveness of Federal law enforcement 

in this area and will continue to maintain the investigation and 

prosecution of procurement fraud as a priority. We look forward to 

working with the Subcommittee in this area. 

I will do my best to answer any questions you may have. 

[The prepared statement of Mr. Sabin follows:] 

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PREPARED STATEMENT OF BARRY M. SABIN


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Mr. SCOTT. Thank you very much. 

Mr. Grayson? 

TESTIMONY OF ALAN GRAYSON, GRAYSON & KUBLI, P.C., 

McLEAN, VA 

Mr. GRAYSON. Good afternoon, and thank you very much for the 

opportunity to be here today and to speak before this honorable 

Subcommittee. 

My name is Alan Grayson. I am an attorney, and I represent 

whistleblowers in numerous cases involving fraud by government 

contractors in Iraq. At the moment, there are only four such cases 

in litigation that have been unsealed, and I am attorney of record 

in all four of them. There are three of them against KBR. 

Needless to say, there have been far more than four instances of 

war profiteering in Iraq. Billions of dollars are missing, and many 

billions more wasted. How it came be that only four such cases are 

unsealed and in litigation and how it is that even in those four 

cases, the Bush Administration is not participating are the subject 

of my testimony today. 

As I will explain, in our 5th year in the war in Iraq, the Bush 

administration has not litigated a single case against any war profiteer under the False Claims Act. 

For over a century, war profiteering cases have been brought 

under the Civil False Claims Act. This statute was enacted in 1863 

to combat war profiteering during the Civil War. Lawyers often 

refer to that statute as the Lincoln law. 

In 1986, when Congress enacted Congressman Howard Berman’s 

amendments to the Civil False Claims Act, it lauded the act as the 

‘‘government’s primary litigative tool for combating fraud,’’ and the 

Supreme Court has recognized the Civil False Claims Act is intended to reach all types of fraud, without qualification, that result 

in financial loss to the government. 

The Civil False Claims Act imposes treble damages and penalties 

on war profiteers, and the threat of having to pay three times what 

you steal can be a real deterrent, if that threat is perceived as real. 

Moreover, the Civil False Claims Act deputizes whistleblowers to 

bring lawsuits in the name of the U.S. Government against war 

profiteers. The whistleblowers can keep between 15 percent and 30 

percent of the recovery, but with treble damages, the government 

ends up well ahead. 

The Civil False Claims Act yielded total recoveries of over $3 billion last year alone. But in Iraq, where there has been war and 

war profiteering for over 4 years, the total recovery to date is less 

than $6 million—in the midst of what Senator Dorgan rightly has 

called an orgy of greed by military contractors. 

Why has the Civil False Claims Act so far been unsuccessful in 

punishing and preventing war profiteering committed in Iraq, and 

what can be done to change that? 

One reason is that the Bush administration has swept cases 

under the rug by obtaining and perpetuating court orders sealing 

the cases. These orders allow the Administration to threaten whistleblowers with dismissal of their cases or contempt of court simply 

for telling people what they know. 

41 

To prevent the abuse of this sealing provision, which is only supposed to be in effect for 60 days—but, in this case, 60 days becomes 

60 weeks and almost 60 months—there needs to be a firm limit on 

extensions of the seal. Clearly, 1 year is enough. The seal is meant 

to help to uncover fraud, not to bury it. 

A second reason why the Civil False Claims Act has been unsuccessful in punishing and preventing war profiteering in Iraq is that 

after cases are unsealed, the courts create and apply rules to the 

cases that have no basis in the statute. For instance, the act punishes anyone who knowingly makes, uses or causes to be made or 

used a false record or statement to cause a false claim to be paid 

or approved by the government. 

Last year, in our Custer Battles case, the first Iraq war profiteering case to go trial, a jury found the defendants guilty of over 

40 acts of fraud, but the judge suspended the verdict because he 

added a presentment requirement, a requirement that simply does 

not exist in the statute. 

Long ago, the U.S. Supreme Court said the courts should refuse 

to accept any rigid restrictive reading of the Civil False Claims Act, 

but that is exactly what is happening. Based on my experience, 

Congress needs to make the Supreme Court’s wise words law by 

providing that the act shall be broadly and liberally construed, in 

accordance with its remedial purpose. Other acts have that language; and this act needs it. 

Thanks to Congress, the Civil False Claims Act already makes 

it clear that a defendant’s knowledge of the fraud is all that is required, not the specific intent to defraud, and only a preponderance 

of the evidence of that is required. 

What is needed now is for Congress to provide that, for a complaint under the Civil False Claims act, only a short and plain 

statement of the claim showing that the pleader is entitled to relief 

is required. That is the normal standard under Federal Civil Rule 

8(a). It is the standard when a contractor sues the government, and 

it would be the standard when the government sues a contractor, 

if the lower courts had not imposed a higher standard. 

Now a third reason why the Civil False Claims Act has been unsuccessful in punishing and preventing war profiteering is that the 

Bush administration has done virtually nothing to pursue such 

cases. It has settled two cases without litigation for pennies on the 

dollar, and it declined to prosecute 10 more. All the rest remain 

under seal. 

As I said before, in our 5th year of the war in Iraq, the Bush administration has not litigated a single case against any war profiteer under the False Claims Act. For all the Bush administration 

claims to do in the war on terrorism, it is a no-show in the war 

against war profiteers. 

Congress needs to fix that flaw by providing that the executive 

branch’s see-no-evil-hear-no-evil-speak-no-evil policy regarding 

fraud perpetrated against the soldiers and the taxpayers in a war 

zone is no longer an option. I recommend that the False Claims Act 

be amended to provide that the Administration shall participate in 

all war profiteering cases, whenever the whistleblower complaint 

establishes a prima facie case of fraud. Both the troops and the 

taxpayers deserve no less. 

42 

1S. Rep. No. 99–345, at 2 (1986). 

2 United States v. Neifert-White Co., 390 U.S. 228, 232 (1968). 3 18 U.S.C. 287, 1001, 1341 & 1343 (2000). 

4 ‘‘Justice Department Recovers Record $3.1 Billion in Fraud and False Claims in Fiscal Year 

2006,’’ DOJ News Release (Nov. 21, 2006), www.usdoj.gov/opa/pr/2006/November/ 

06lcivl783.html 

Fraud against the taxpayers is bad enough, but when that fraud 

is committed against the U.S. Army, engaged in battle, it is intolerable. As Lincoln said 144 years ago, ‘‘Worse than traitors in arms 

are the men who pretend loyalty to the flag, feast and fatten on 

the misfortunes of the nation, while patriotic blood is crimsoning 

the plains, and their countrymen moldering in the dust.’’ 

For 4 years, I have fought the war profiteers who have been 

feasting and fattening on our misfortune. Let us acknowledge how 

far we have fallen from President Lincoln’s standards and ideals 

and amend the Lincoln law to remind this President and future 

Presidents of their constitutional duty to see that the laws are 

faithfully executed. 

Thank you very much. 

[The prepared statement of Mr. Grayson follows:] 

PREPARED STATEMENT OF ALAN GRAYSON

Good afternoon. Thank you very much for the opportunity to be here today, and 

to speak before this honorable Subcommittee. 

My name is Alan Grayson. I’m an attorney. I represent whistleblowers in numerous cases involving fraud by government contractors in Iraq. At the moment, there 

are only four such cases in litigation that have been unsealed, and I am attorney 

of record in all four of them. Three of them are against KBR. 

Needless to say, there have been far more than four instances of war profiteering 

in Iraq. Billions of dollars are missing, and many more billions wasted. How it came 

be that only four such cases are unsealed and in litigation—and how it is that even 

in those four cases, the Bush Administration is not participating—are the subjects 

of my testimony today. 

War profiteering cases often are brought under the Civil False Claims Act. This 

statute was enacted in 1863, to combat war profiteering during the Civil War. Lawyers often refer to the statute as the ‘‘Lincoln Law.’’ 

In 1986, when Congress enacted Congressman Howard Berman’s amendments to 

the Civil False Claims Act, it lauded the Act as the ‘‘Government(s primary 

litigative tool for combating fraud.’’ 1 The U.S. Supreme Court has recognized that 

the Civil False Claims Act is ‘‘intended to reach all types of fraud, without qualification, that might result in financial loss to the Government.’’ 2

There are criminal laws, such as mail fraud, wire fraud, false statements, and 

criminal false claims statutes, that could be used to address war profiteering.3

These laws do little to punish war profiteering corporations, however. There are several reasons for this. First, the burden of proof—beyond a reasonable doubt—may 

be difficult to establish. Second, corporations cannot be incarcerated. Third, the fines 

often are so small that crime does pay. 

The Civil False Claims Act, in contrast, imposes treble damages and penalties on 

war profiteers. The threat of having to pay three times what you steal can be a real 

deterrent. 

Moreover, the Civil False Claims Act ‘‘deputizes’’ whistleblowers to bring lawsuits 

in the name of the U.S. Government, against war profiteers. The whistleblowers can 

keep between 15% and 30% of the recovery, but with treble damages, the U.S. Government ends up well ahead. 

The Civil False Claims Act yielded total recoveries of over $3 billion last year 

alone.4 Yet in Iraq, where there has been war and war profiteering for over four 

years, the total recovery to date is less than $6 million—in the midst of what Senator Dorgan rightly has called ‘‘an orgy of greed’’ by military contractors. Why has 

the Civil False Claims Act so far been unsuccessful in punishing or preventing war 

profiteering committed in Iraq? And what can be done to change that? 

One reason is that the Bush Administration has swept such cases under the rug, 

by obtaining and perpetuating court orders sealing the cases. These orders allow the 

43 

5 31 U.S.C. 3730(b)(2) (2000). 

6 31 U.S.C. 3729(a)(2) (2000). 

7 Niefert-White, 390 U.S. at 786 & 788. 8 31 U.S.C. 3729(b) (2000). 

Administration to threaten whistleblowers with dismissal of their cases, or even contempt of court, for simply telling people what they know. 

According to SIGIR information, most of the Civil False Claims Act cases filed regarding war profiteering in Iraq remain under seal. The False Claims Act requires 

whistleblower cases to be kept under seal for 60 days.5 Thanks to extensions that 

the Bush Administration has obtained, those 60 days have become 60 weeks, and 

are heading toward 60 months. Although the judges almost always rubber-stamp 

these extensions, in one recent case against KBR, the judge refused to do so, and 

the case was unsealed. 

To prevent the abuse of the sealing provision, there should be a firm limit on extensions. Certainly, one year is enough. If the Executive Branch simply wants more 

time to investigate a case, and can show good cause, it might have that extra time, 

but not at the expense of keeping the public and Congress in the dark. The seal 

is meant to help uncover fraud, not to bury it. 

A second reason why the Civil False Claims Act has been unsuccessful in punishing and preventing war profiteering in Iraq is that after cases are unsealed, the 

courts create and apply rules to the cases that have no basis in the statute. For 

instance, the Act punishes anyone who ‘‘knowingly makes, uses, or causes to be 

made or used, a false record or statement to get a false or fraudulent claim paid 

or approved by the Government.’’ 6 Last year, in our Custer Battles case ‘‘the first 

Iraq war profiteering case to go trial,’’ a jury found the Defendants guilty of over 

40 acts of fraud. The judge suspended the verdict, however, because he added a 

‘‘presentment’’ requirement—a requirement that simply doesn’t appear in the statute. 

Another recent case alleged that KBR, under its infamous cost-plus LOGCAP 

Contract, ran empty trucks back and forth across the desert in Iraq, in order to run 

up the bill on the taxpayers. The judge dismissed the 24-page complaint because, 

he said, it wasn’t ‘‘specific’’ enough. Yet this ‘‘specificity’’ requirement also doesn’t 

appear in the statute. 

Long ago, the U.S. Supreme Court said that the courts should ‘‘refuse[] to accept 

a rigid restrictive reading’’ of the Civil False Claims Act, and should ‘‘broadly 

construe[]’’ it.7 That is simply not happening. Based on my experience, Congress 

needs to make the Supreme Court’s wise words the law, by providing that the Act 

shall be liberally construed, in accordance with its remedial purpose. Other Acts 

have such language; this Act needs it. 

Thanks to Congress, the Civil False Claims Act already makes it clear that only 

a preponderance of the evidence, not ‘‘clear and convincing evidence,’’ is required. 

It also makes it clear that only a defendant’s knowledge of the fraud, not a specific 

intent to defraud, is required.8 What is needed now is for Congress to provide that 

as for the Complaint, only ‘‘a short and plain statement of the claim showing that 

the pleader is entitled to relief’’ is required. This is the normal standard under Federal Rule 8(a), it is the standard when a contractor sues the Government, and it 

would be the standard when the Government sues a contractor, if the lower courts 

had not imposed a higher standard on their own. 

A third reason why the Civil False Claims Act has been unsuccessful in punishing 

and preventing war profiteering in Iraq is that the Bush Administration has done 

virtually nothing to pursue such cases. It has settled two cases, without litigation, 

for pennies on the dollar. It has declined to prosecute nine more cases. All the others remain under seal. In our fifth year of the War in Iraq, the Bush Administration 

has not litigated a single case against any war profiteer under the False Claims Act. 

It evidently has not even sued any U.S. contractor in Iraq, for breach of contract. 

Two years ago, Senator Grassley wrote to the Attorney General, asking why the Administration was taking no action in such cases. There was no reply. For all the 

Bush Administration claims to do in the war against terrorism, it is a no-show in 

the war against war profiteers. 

It appears the Civil False Claims Act has a flaw that remained hidden for 138 

years, but is now apparent—it gives a do-nothing Administration the opportunity 

to do nothing. Congress can try to fix that flaw by providing that the Executive 

Branch’s ‘‘see no evil, hear no evil, speak no evil’’ policy regarding fraud perpetrated 

against the soldiers and the taxpayers—in a war zone—is no longer an option. I recommend that the False Claims Act be amended to provide that the Administration 

shall participate in all war profiteering cases, whenever the whistleblower complaint 

44 

establishes a prima facie case of fraud. Both the troops and the taxpayers deserve 

no less. 

Fraud against the taxpayers is bad enough. But when that fraud is committed 

against the U.S. Army, engaged in battle, it is intolerable. As Lincoln said, 144 

years ago, ‘‘worse than traitors in arms are the men who pretend loyalty to the flag, 

feast and fatten on the misfortunes of the Nation, while patriotic blood is 

crimsoning the plains . . . and their countrymen moldering the dust.’’ 

For four years, I have fought the war profiteers, who have been feasting and fattening on our misfortune. The Bush Administration has not fought them, not in the 

least. Let us acknowledge how far we have fallen from President Lincoln’s standards 

and ideals, and amend the Lincoln Law, to remind this President and future Presidents of their constitutional duty to see that the laws are faithfully executed. 

Mr. SCOTT. I want to recognize Mr. Chabot from Ohio who has 

joined us. 

Ms. Razook? 

TESTIMONY OF ERICA RAZOOK, LEGAL ADVISOR TO THE BUSINESS AND HUMAN RIGHTS PROGRAM, AMNESTY INTERNATIONAL, NEW YORK, NY 

Ms. RAZOOK. Thank you, Mr. Chairman, Ranking Member 

Forbes, Members of the Subcommittee. My name is Erika Razook, 

and I am here on behalf of Amnesty International. 

Amnesty International has been investigating and reporting on 

human rights abuses for over 40 years, and one of the most constant themes in our work has been that we see the most horrible 

and worst abuses when there is a culture of impunity for them, and 

that is what we have seen in this area of private military and security contractors working on behalf of the United States government 

in countries around the world and in particular in Iraq and Afghanistan. 

Literally, there are over 100,000 contractors in Iraq and Afghanistan alone. Numerous reports of human rights abuses, including 

torture, cruel and inhumane, degrading treatment, and shootings 

and killings of innocent civilians have surfaced and have even come 

to light in the Army’s own investigations. Yet, despite these large 

numbers of contractors and reports of abuse, we have seen only two 

indictments of abuse by contractors. 

What I would like to talk to you briefly about today is the scope 

of the problem, the lack of prosecution and the environment of impunity for contractor crime abroad, and the solution that Amnesty 

sees that Congress can take a step toward in the immediate future 

with the present proposed legislation that is before Congress now. 

We have been in dialogue with both government agencies that 

are contracting private military and security firms and with the 

companies themselves, and we understand that the companies are 

working in a difficult and complex environment, inherently risky to 

work in. 

However, the problem here and the problem that we see is that 

there is virtually no control or oversight over these contracted personnel, which has led to this environment of impunity, where a 

contractor can shoot an Iraqi civilian in the street who later dies 

and never sees any punishment, redress or prosecution. 

It is essential that the Department of Justice prosecutes cases of 

criminal misconduct of contractors. To continue to allow cases of 

human rights abuses to languish on the court’s dockets, as they 

have been in the Eastern District of Virginia where there are 17 

45 

cases of detainee abuse which have been on the court’s docket since 

2004, is to sanction impunity and to deny meaningful access to justice to the victims of these abuses. 

But, right now, Congress has an opportunity before it to take a 

step forward to address this problem of impunity, and that is why 

Amnesty is supporting Representative Price’s H.R. 369 and H.R. 

2740. 

There are three crucial areas that these bills address and that 

I will discuss briefly here. 

First is the expansion of the Military Extraterritorial Jurisdiction Act, otherwise known as MEJA. The expansion would cover 

contractors who are not only supporting a DoD mission, but contractors whose work is carried out in a region where there is a contingency operation. 

This is a very important provision because where we have seen 

the growth of contractors carrying out work for the U.S. Government is not in the more intimately DoD-aligned roles, but in ancillary roles, such as security for reconstruction projects, even border 

control, and now there is discussion of contractors working in 

peacekeeping roles as well. 

So, for these extended functions, it is necessary that Congress extend the application of MEJA so that these contractors do not escape accountability. 

The second is the enforcement mechanisms that are included in 

H.R. 369 and 2740. These bills establish an FBI investigative unit 

which would be on the field in the area of the contingency operation. This will help the Department of Justice to overcome the 

practical hurdles of investigating cases, securing witness testimony 

and locating evidence. 

The third area is the transparency provisions which require reporting of the DOJ to Congress on the number of complaints received, the investigations into these complaints of contractor misconduct, the cases that have been opened, the results of the cases 

that have been closed, and the capacity and effectiveness of the Department of Justice in prosecuting such misconduct. 

These transparency positions are crucial and vital to ensuring accountability for human rights violations because what we have 

seen thus far is that Congress does not know, the public does not 

know, and we at Amnesty do not know why these cases have not 

been prosecuted. 

Why have about 3 years passed since the horrendous torture and 

inhumane treatment at Abu Ghraib, since these pictures came to 

light, and since the Army investigations indicated that contractor 

personnel were involved in these abuses? Why have there still not 

been prosecutions? These transparency provisions will give Congress the power o further legislative and to ensure that these 

human rights violations do not go unaddressed. 

Finally, Amnesty International has previously stated in its 2004 

report, Human Dignity Denied, that human rights violations, 

whether they are committed by military or civilian personnel, 

should be tried in civilian court, and these civilian trials should 

conform, of course, to international standards of fair trials, and the 

death penalty should not be imposed., and I bring that point up beVerDate Aug 31 2005 11:46 Aug 20, 2008 Jkt 000000 PO 00000 Frm 00049 Fmt 6633 Sfmt 6601 H:\WORK\CRIME\061907\36173.000 HJUD1 PsN: 36173
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cause the death penalty is an option under the UCMJ and under 

the torture statute. 

For these reasons, Amnesty International asks Members of Congress and you particularly in the Subcommittee who are paying 

careful attention to this issue to pass this very important legislation to close loopholes and to ensure that there is accountability for 

human rights violations committed by contracted personnel hired 

by our government. 

Thank you. 

[The prepared statement of Ms. Razook follows:] 

PREPARED STATEMENT OF ERICA RAZOOK

Thank you Mr. Chairman and members of Congress; Amnesty International (AI) 

is pleased to testify at this important and timely hearing. 

SUMMARY

In May of 2006, AI publicly called on the Department of Justice to immediately 

investigate and, where clear evidence of human rights violations exists, prosecute 

employees or contractors of private military and security firms operating overseas 

for their involvement in human rights violations. However, despite the passing of 

more than a year since Amnesty International made these demands, to date, the 

same 17 pending cases of detainee abuse, including abuse at Abu Ghraib, by civilians remain languishing on the docket of the U.S. Attorney’s Office in the Eastern 

District of Virginia. 

In addition to the cases of detainee abuse, Amnesty International is aware of hundreds of serious incident reports (SIRs) voluntarily filed by contractors, and reported 

shootings and killings by security contractors that have also apparently been 

unaddressed by the Justice Department. AI filed a brief in support of the Los Angeles Times’ suit requesting that more information in the SIRs be released, which was 

denied on national security grounds and contract personnel privacy concerns. In this 

environment of apparent impunity for serious criminal conduct and human rights 

violations and complete lack of transparency, the U.S. government’s reliance on private contractors has grown tremendously, creating a dire need for Congress to establish adequate regulation of the industry. For these reasons, Amnesty International commends the attention the Judiciary Committee is committing to this 

issue and calls for (i) immediate investigation and prosecution of cases of human 

rights violations committed by U.S. contractors under currently available law, (ii) 

expansion of the Military Extraterritorial Jurisdiction Act (MEJA) and other current 

U.S. law to ensure that security contractors, hired by various agencies of the U.S. 

government, do not escape accountability and (iii) greater transparency to Congress 

on the status of cases referred to the Department of Justice, in particular, any circumstances prohibiting it from prosecuting referred cases of contractor criminal conduct. 

Amnesty International emphatically supports the Transparency and Accountability in Security Contracting Act of 2007 (H.R. 369) and the MEJA Expansion and 

Enforcement Act of 2007 (H.R. 2740), introduced by Representative David Price, 

which contain several important provisions not addressed by the Defense Authorization Act (H.R. 1585), and which largely answer AI’s calls for transparency and accountability for human rights violations in private military and security contracting. 

CURRENT U.S. LAW PROVIDING FOR JURISDICTION OVER CONTRACTOR CRIME OVERSEAS

The U.S. Justice Department currently has the authority to prosecute civilian contractors for certain crimes committed outside the United States under several U.S. 

laws, including: 

The War Crimes Act. This law, 18 U.S.C. § 2441, criminalizes certain war crimes 

committed inside or outside the United States by anyone who is a member of the 

armed forces or is a U.S. national. Under the Act, a war crime includes conduct defined as a grave breach of the Geneva Conventions, or constituting a violation of 

common Article 3 of the Conventions. The latter prohibits, inter alia, cruel treatment, torture, and outrages upon personal dignity, in particular humiliating and degrading treatment. 

The Torture Statute. This law, 18 U.S.C. § 2340, makes it a criminal offense for 

any U.S. national acting in an official capacity ‘‘outside the United States’’ to commit or attempt to commit torture. The law was enacted in 1994. Anyone who conVerDate Aug 31 2005 11:46 Aug 20, 2008 Jkt 000000 PO 00000 Frm 00050 Fmt 6633 Sfmt 6621 H:\WORK\CRIME\061907\36173.000 HJUD1 PsN: 36173
47 

spires to commit the acts prohibited under the statute can be subject to the same 

penalties as the actual perpetrator. This law, however, defines torture in an arguably narrower way than the U.N. Convention against Torture. 

The Military Extraterritorial Jurisdiction Act (MEJA) of 2000. This law, 18 U.S.C. 

§ 3261, criminalizes conduct committed by ‘‘members of the Armed Forces and by 

persons employed by or accompanying the Armed Forces outside the United States’’ 

that would be punishable by more than one year’s imprisonment if engaged in within the United States. The text of MEJA (18 U.S.C. § 3267(1)(A)) was amended in 

2005 to define the term ‘‘employed by the Armed Forces outside the United States’’ 

to include civilian employees, contractors, or employees of contractors, not only of 

the Department of Defense, but also of ‘‘any other Federal agency, or any provisional authority, to the extent such employment relates to supporting the mission 

of the Department of Defense overseas.’’ The U.S. Attorney’s Office in the District 

of Arizona used MEJA to bring charges against a security contractor for Assault 

with a Deadly Weapon and Assault Resulting in Serious Bodily Injury in February 

2007. 

The USA PATRIOT Act. Section 804 of this law, 18 U.S.C. § 7 (9), extends the 

jurisdiction of U.S. federal courts over military personnel, including civilian contractors, for violations of federal criminal law committed at U.S. facilities abroad. The 

U.S. Department of Justice has used this provision to bring criminal charges against 

a CIA contractor who allegedly beat a detainee who later died in custody in Afghanistan. The contractor was indicted by a North Carolina grand jury of Assault with 

a Dangerous Weapon and Assault Resulting in Serious Bodily Injury, was found 

guilty of multiple counts of assault and was sentenced to over eight years in prison. 

EXPANSION OF LAW SUPPORTED BY AMNESTY INTERNATIONAL

While past abuses by military and some security contractors may be prosecuted 

under current U.S. law, Amnesty International also supports an expansion of the 

MEJA and any other U.S. law that would ensure that contractors, who are taking 

on a growing number of functions, for example in security, border patrol and reconstruction projects, do not escape accountability simply because they may be deemed 

to not be ‘‘supporting the mission of the Department of Defense’’. 

The MEJA Expansion and Enforcement Act of 2007 (H.R. 2740) and its predecessor (H.R. 369) accomplish such an expansion by establishing jurisdiction over all 

U.S. government contractors, as long as their work is carried out outside of the 

United States in an Armed Forces contingency operation, compared to the current 

jurisdiction MEJA grants, over contractors whose work supports a Department of 

Defense mission. The Judiciary Committee should consider amending language to 

even further the expansion to all U.S. contractors operating overseas, as long as 

they are working to support a mission or effort of the U.S. government. 

Further, Amnesty International supports a clear establishment of enforcement 

mechanisms, including organization of any existing enforcement resources, to ensure 

that prosecutions are not thwarted due to practical problems such as collecting evidence and making available witness testimony. While enforcement mechanisms 

must be established in accordance with certain Constitutional protections, and with 

consideration to the sovereignty of the host country, international law recognizes the 

nationality principle, under which a state may apply and enforce its criminal law 

outside of its territorial jurisdiction in order to hold accountable its own citizens and 

people who otherwise avail themselves of its nationality, for their criminal misconduct. The environment of impunity in which tens of thousands of U.S. contractors have been and are currently operating overseas is the exact type of situation 

necessitating application of this principle. 

Thus far, it appears that some investigations overseas have been conducted, leading to the referral of at least twenty cases of detainee abuse to the Department of 

Justice. However, the status of those cases, and the reason(s) why they have not 

been acted on in the more than three years they have been on the docket of the 

U.S. Attorney’s Office in Eastern Virginia, are unknown. In order to ensure that victims of human rights abuses have meaningful access to justice, Congress should 

mandate, in accordance with H.R. 2740, that the Department of Justice report to 

it the status of cases of contractor misconduct overseas to the extent that, at a minimum, Congress is aware of (i) the number and type of complaints received, (ii) the 

number of investigations into complaints received, (iii) the number of cases opened, 

(iv) the number and result of cases closed, and (v) the reasons why prosecutions 

could not be brought in cases that were not opened. 

48 

PREFERENCE OF CIVILIAN PROSECUTIONS OVER APPLICATION OF

UNIFORM CODE OF MILITARY JUSTICE

The Uniform Code of Military Justice (UCMJ) is applicable to U.S. troops worldwide and, since the 2007 Defense Authorization Act (P.L. 109–364), can also be used 

to prosecute certain civilians ‘‘in time of declared war or contingency operation . . . 

serving with or accompanying an armed force in the field.’’ The fact that a person 

is eligible for trial by court-martial under the UCMJ does not make him or her ineligible for trial in the ordinary U.S. courts. 

In order to prevent arbitrariness—with, for example, civilian contractors charged 

with similar or the same crimes as military personnel, but tried in different jurisdictions—and to avoid any perception of inappropriate military justice leniency or lack 

of impartiality, Amnesty International believes that all personnel, civilian or military, of low rank or high, should be tried for human rights abuses in civilian courts. 

Any trials must conform fully to international standards for fair trial, and the death 

penalty—which could be available under the UCMJ, the War Crimes Act and the 

Torture Statute in cases of torture or ill-treatment resulting in death—must not be 

imposed. 

Mr. SCOTT. Thank you. 

Professor Horton? 

TESTIMONY OF SCOTT HORTON, ADJUNCT PROFESSOR OF 

LAW, COLUMBIA UNIVERSITY SCHOOL OF LAW, NEW YORK, NY 

Mr. HORTON. Thank you, Chairman Scott, Ranking Member 

Forbes and Members of the Subcommittee. I want to thank you for 

the opportunity to speak with you today about this very important 

subject. 

I would like to highlight three points from the written remarks 

I have submitted, and I would also like to come back at the end 

and address the question of constitutionality which was raised by 

Ranking Member Forbes in his comments. 

First, we are facing a major accountability problem. The force 

profile has changed dramatically. The current mix draws far more 

heavily on civilians than at any time in our history, and prior to 

the time the current surge began, there were about 100,000 contractors in Iraq, for instance, against 125,000 Americans in uniform. So this is approaching parity. 

If we compare this with the situation in World War II, in the Korean War, for instance, in both of those conflicts, the percentage of 

contract personnel involved would have run between 3 percent and 

5 percent. 

But even though this configuration has changed radically, the 

way we handle accountability issues has not. That is we continue 

to have a focus on those in uniform. So, as a result today, we are 

performing at historical levels with respect to military accountability, but with respect to the civilians, the system clearly has broken down. 

Now the current legislation has some holes in it. In particular, 

we have legislation that is tied to the Department of Defense and 

legislation which is tied to U.S. installations. In my own review of 

individual cases reported in the media and from other sources, 

there are a significant number of cases that are going to fall in the 

gap between these two categories. 

In fact, I would say generally the group of cases I am most troubled by right now involves homicide and assault and involves a 

particular group of security contractors contracted by the DepartVerDate Aug 31 2005 11:46 Aug 20, 2008 Jkt 000000 PO 00000 Frm 00052 Fmt 6633 Sfmt 6601 H:\WORK\CRIME\061907\36173.000 HJUD1 PsN: 36173
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ment of the State where their contract states that their mission is 

diplomatic protection. 

So I can see if a prosecution were brought under MEJA today, 

we would have an immediate squabble—and lawyers would get to 

earn a lot of fees—over whether they are covered by this statute, 

and I think that would be unfortunate, a waste of prosecutorial and 

judicial resources. 

H.R. 369 is going to bridge this problem by expanding the scope 

of covered persons under the MEJA to cover any U.S. Government 

contractor or subcontractor with the focus of their deployment in 

the region where the contingency operation is going on. That 

strikes me as exactly the correct approach. 

Second, we need to consider that the exercise of criminal jurisdiction may, in fact, be essentially protective in nature. A significant 

number of the cases that I have looked at involve American contractors as victims, not simply as actors. 

There may not be a basis to prosecute and investigate those 

cases, as things stand right now, and that particularly arises as a 

result of the order, Order 17 that was issued by Jerry Bremer on 

his last day in Iraq granting complete immunity to American contractors and contract employees under the Iraqi criminal justice 

system. 

So they are out under that system, and that means that there 

has to be a pro tanto substitute. There has to be a provision of 

criminal investigatory authority and criminal oversight by the 

United States. 

We need to consider here as well if granting this immunity from 

the Iraqi system is an objective that the United States has going 

forward. 

General Petraeus has stated in the last few days that he sees a 

Korea-style solution here, a situation where there will be a substantial force presence in Iraq for the next 50 years. If that is true, 

there will be a substantial civilian presence there as well, and if 

we want to negotiate the status of forces agreement with the Koreans that continues this immunity arrangement, we have to provide 

the ability to handle criminal investigations and prosecutions. 

Third, I see a false conflict emerging here between the Uniform 

Code of Military Justice—its use has been advocated by Senator 

Graham—and the MEJA, and I do support Senator Graham’s initiative. It strikes me as an appropriate underscoring of the authority of military command. I see these things as complementary and 

mutually reinforcing and supporting, not as in conflict. 

Finally, Ranking Member Forbes raised questions concerning the 

constitutionality of MEJA, and I think it is important to note that 

law of war concepts and law of war enforcement have never been 

subject to the sort of territoriality rules that apply generally to 

criminal law. In fact, if we look at the law of war norms from the 

time of the drafting of the American Constitution, Vattel and 

Grotius, the two major writers who were relied upon and known to 

the framers, both of them argued that the sovereign has the right 

and the responsibility to enforce the laws of war with respect to all 

those who are deployed by the sovereign in connection with the war 

effort. That includes soldiers, mercenaries, camp followers and contractors. 

50 

Now the Constitution gave Congress the authority to define the 

law of nations in this regard, and the proposal that is made here 

with respect to MEJA is defining the law of nations in the way that 

is completely consistent with the historical understanding of the 

criminal law jurisdiction to enforce the laws of war. 

We also have to understand this against the backdrop of the immunity that is granted here from Iraqi criminal prosecution because if the result is that there is no available criminal jurisdiction, 

neither American nor Iraqi, then we have done something that is 

a serious violation of the law. Then there is a responsibility with 

Congress, not just a right, to legislate this. 

Thank you. 

[The prepared statement of Mr. Horton follows:] 

51 

PREPARED STATEMENT OF SCOTT HORTON


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Mr. SCOTT. Thank you very much. 

I thank all the witnesses for testifying. 

And we will now have questions for the panel limited to 5 minutes, and I will recognize myself first for 5 minutes. 

I wanted to follow up, Professor Horton. Well, I guess I will start 

with Mr. Sabin. 

He has indicated a lot of kind of areas where there may be gaps 

in coverage. When we passed MEJA in 2000, we thought we had 

covered the problem of people overseas committing crimes and find 

themselves, because they are outside of the continental United 

States, not under the criminal code. They could do it with impunity, and we thought we had covered everybody. There have been 

a number of kind of categories of people—Iraqis committing crimes, 

either fraud or assault, contractors of other agencies, other than 

the Department of Defense, subcontractors, spouses, I guess, 

crimes committed off base. 

Has the Department of Justice looked into possible gaps that 

need to be closed? 

Mr. SABIN. Yes. 

Mr. SCOTT. And do you have a list of recommendations for us? 

Mr. SABIN. We have two different concepts being discussed here. 

One is the war profiteering under H.R. 400 and the problems that 

that would address, and we can talk about our discussion in that 

regard. 

The MEJA issue, the statute has been amended. The Patriot Act 

provision that deals with the subject matter of the special maritime 

and territorial jurisdiction, that was addressed in the amendment 

under 2004 and 2005. 

As a result of that, it added certain language which would include the language that the professor referred to, a contractor in 

support of DoD mission abroad. So the concern that he articulated 

is a fair one, where you have folks that would be in support of that 

mission which would raise a factual issue that prosecutors would 

need to address in order to have appropriate ability to bring a case 

under MEJA. 

And remember, MEJA relates to, as articulated, common-law 

crime—murder, assault and the like—and we have been able to exercise MEJA jurisdiction in relationship to the Iraq theater as well 

as in other—— 

Mr. SCOTT. Well, some people could be over there doing things 

that might not be technically Department of Defense. It might be 

Department of State in the theater. 

Mr. SABIN. Correct. And if it is outside the Patriot Act extension 

relating to the special and maritime territorial jurisdiction of the 

United States, MEJA looks to the status of the individual as opposed to Title 18 Section 7 Subsection 9 which is a blend between 

who the person is, the offender or the person who is the victim of 

the crime, blended with the location of the particular incident occurring. 

So, under MEJA, you look to who is involved here, what is the 

status of that individual, is it a dependent, is it someone who is 

accompanying someone abroad, is it an actual present service member of the military or a former service member of the military? So 

we look through where we are, who it is, and then figure out is 

63 

there appropriate jurisdiction under either the Patriot Act or traditional extraterritorial offenses or MEJA. 

Mr. SCOTT. Well, let’s get to the bottom line. Does the Department of Justice see any gaps in coverage? 

Mr. SABIN. Originally, we are here to talk about the War Profiteering Act, so I do not have cleared comments to recommend to you 

with respect to either H.R. 369 or 2740. However, I do have comments that I could provide to you regarding certain constitutional 

issues that arise from as presently drafted. 

Mr. SCOTT. Okay. Does anybody else have a list of categories of 

people that we need to be covering just in terms of MEJA jurisdiction? There are—— 

Professor Horton, you have indicated a number of different categories that did not seem to be covered. Do you have a list? 

Mr. HORTON. Yes, sir. I think the specific example I cited was 

diplomatic protection under Department of State, and I come to 

that just on the reverse analysis, looking at specific incidents and 

asking whether a prosecutor looking at all the tools that are available to him now is going to be able to deal with it. 

Now I agree with Mr. Sabin. I think, obviously, a prosecutor is 

going to be able to assert jurisdiction of some sort, but, because of 

the way this language has been drafted, because of it being tied to 

a mission of the DoD, we are going to look at a preliminary skirmish in a lot of these cases about whether the contract really is 

tied to the DoD, and when it is written by the Department of the 

Interior, the Department of State, USAID, and when it is a subcontractor, we are going to see that over and over again. That is a 

waste. 

Mr. SCOTT. Ms. Razook, do you have any comments on just jurisdiction, who ought to be covered by the criminal code? 

Ms. RAZOOK. Yes. And I just want to clarify what Mr. Sabin said, 

that the USA Patriot Act covers people who committed a crime on 

a U.S. facility abroad, so the category that I mentioned with contractors doing security for reconstruction efforts, that is not going 

to be necessarily on a U.S. facility. So those types of contractors potentially would fall in the loopholes left under MEJA and the USA 

Patriot Act. 

Mr. SCOTT. Thank you. 

Mr. Forbes? 

Mr. FORBES. Thank you, Mr. Chairman. 

Once again, I thank all of you for taking your time to be here 

today. I wish we had time to sit down with each of you for a long 

period of time, but we are limited to 5 minutes, just like you are. 

So I am going to try to be quick on my questions. 

And one of the things that I get from listening to all of you is 

that we are going to have private contractors in every contingency 

operation, every conflict we have from now on, and I think even 

Professor Horton acknowledged those percentages are increasing, 

and that is just the nature of the beast. We cannot deliver troops. 

We cannot do a lot of things without the contractors there. 

Mr. Bowen, I want to first thank you—Mr. Gimble—both of you 

for the jobs you do. We have had you in a number of hearings, and 

both Republicans and Democrats always laud your work, and we 

appreciate that. 

64 

I may have misunderstood you, Mr. Bowen, but it is my thought 

that your testimony is, despite this growing number of contractors 

that we have involved, when really you look at the amount of war 

profiteering and fraud that is there, it is a small percentage of the 

overall operations. Is that accurate or—— 

Mr. BOWEN. That is right. You did not misunderstand it. It is a 

small component of the overall investment in Iraq reconstruction, 

which amounts to about $38 billion, and to date, the convictions 

and imprisonments we have obtained, results of egregious fraud we 

have uncovered, primarily focused on misuse and fraudulent misuse of Development Fund for Iraq money. That is Iraqi money. 

However, we have, as I said, over 70 cases ongoing, 30 at the Department of Justice, most of those involving U.S. money. 

Mr. FORBES. And it does not matter whether it is a small percentage or not. We are still aggressively prosecuting the ones that 

we discover and find. Is that fair and accurate? 

Mr. BOWEN. That is right. 

Mr. FORBES. Mr. Sabin, I would just ask you a question. What 

is the process for sealing a case under the False Claims Act? 

Mr. SABIN. You would look to Title 31 United States Code Section 3730. An extension for sealing under the False Claims Act is 

issued by a judge. It is presented upon a factual showing by the 

government for keeping the case to be sealed. 

The government must demonstrate to that court that good cause 

is shown for its request to extend the time to have the matter 

sealed, and that for a variety of reasons, in order to continue to 

conduct these complex investigations, to protect witnesses, informants, and it is consistent with congressional intent for the government to determine whether it should intervene in a matter which 

otherwise may have been brought or not brought by the United 

States that the relater, the term of art, the whistleblower has filed 

in a court of law. 

Mr. FORBES. So the judge is the one that would ultimately make 

that—— 

Mr. SABIN. Absolutely. Present it to a judge who makes the determination upon a specific factual showing by the government for 

good cause. 

Mr. FORBES. Let me ask you this. And I do not mean to cut you 

off. It is just I am short on my time here. 

Mr. SABIN. Yes, sir. 

Mr. FORBES. The Department has been criticized today for disingenuously seeking to seal these cases in order to threaten whistleblowers with dismissal of their cases. Any response to that? 

Mr. SABIN. Patently false. I absolutely disagree with that assertion. I do not believe it is a well-founded assertion. The government 

professionally and thoroughly reviews the allegations made and, if 

appropriate, will intervene; if not, will decline and the matter can 

go forward if the relater wants to and counsel wants to. 

Mr. FORBES. Mr. Grayson, thank you for being here, and I know 

that this hearing, as you know, is at least a discussion of H.R. 400 

and H.R. 369. Do you support both of these pieces of legislation? 

Mr. GRAYSON. Well, I am here primarily to address the lack of 

enforcement that has occurred under existing law under the False 

Claims Act, and I point out—— 

65 

Mr. FORBES. So you are not here to speak on those two pieces 

of legislation? 

Mr. GRAYSON. Indirectly, I am, but directly not. I would point out 

that Mr. Sabin has no responsibilities with regard to seal False 

Claims Act at all, and I do. 

Mr. FORBES. I will leave those to somebody else, but if you are 

not here on those two pieces of legislation, let me move to Ms. 

Razook. 

And I hope I am pronouncing that correctly. Thank you for being 

here. And one of the things I noticed in your testimony is that you 

believe that all personnel—civilian and military—should be tracking human rights violations in civilian courts, and then you mentioned the fact that these 17 cases in the Eastern District of Virginia are languishing, I think was your term that you had. Is that 

a civilian court? 

Ms. RAZOOK. Yes. 

Mr. FORBES. Have you practiced in that court before? 

Ms. RAZOOK. In the Eastern District of Virginia? No. 

Mr. FORBES. I have, and one of the things in that court that they 

are known for is the judges controlling the dockets and not the attorneys, be they prosecutors or defense attorneys. So here we have 

a civilian court that is handling these matters, and the judges apparently are moving the dockets in the way that they think are 

preferential, but you are really upset with those judges and how 

they are handling their dockets as well. Is that not correct? 

Ms. RAZOOK. Well, there are two parts of it. First is that—— 

Mr. FORBES. Just be quick because my time is out. 

Ms. RAZOOK. I am sorry. 

Mr. FORBES. That is okay. You go ahead. You go ahead. 

Ms. RAZOOK. The first is that there has not been prosecution of 

what even the Army’s own investigation has said has been evidence 

of serious human rights violations, and in 3 years, we have not 

seen anything, but not just that we have not seen a prosecution or 

any evidence of an investigation. But the second part of the problem is the transparency issue which we cannot even figure out why 

that is not happening. 

Mr. FORBES. But my question to you was you have 17 cases in 

that court that you say are languishing. Is that accurate? That is 

a civilian court. Is there anything that takes the movement of that 

docket and changes it from the way that those judges would normally handle their dockets in their court? 

Ms. RAZOOK. The reason why Amnesty International supports civilian trials for prosecution of human rights violations is because, 

first of all, we would want prevent potential arbitrariness between 

military personnel being tried under one system, the UCMJ, and 

civil contractors being tried under another system. And the other— 

there are actually a couple of other reasons—is the perception of 

inappropriate military justice leniency for—— 

Mr. FORBES. Mr. Razook, I am happy with that. I mean, you 

have submitted all that, but my question was your discussion about 

civilian courts and your frustration with the Eastern District Court 

of Virginia and how those judges are handling their dockets, and 

I was wondering if you could explain what those judges are doing 

wrong because they control their dockets. 

66 

Ms. RAZOOK. Well, that is the problem, is that we do not know 

what they are doing. 

Mr. FORBES. But your complaint there is not with the Department of Justice. It is with the judges in handling their dockets. 

Ms. RAZOOK. Well, on the one hand, we have seen other districts, 

the District of Arizona and the District of North Carolina, prosecute. However, the Department of Justice is the body charged 

with this responsibility in general, and so we have—— 

Mr. FORBES. But they do not control that docket in the Eastern 

District of Virginia, do they? 

Ms. RAZOOK. Well, they are charged with responsibility, and—— 

Mr. FORBES. Thank you, Mr. Chairman. I yield back. 

Mr. SCOTT. The gentleman from Georgia? 

Mr. JOHNSON. Thank you, Mr. Chairman. 

Mr. Bowen, I heard you say that there is about $38 billion worth 

of fraud in Iraq that—— 

Mr. BOWEN No, sir. About $38 billion has been invested in Iraq 

in taxpayer money. 

Mr. JOHNSON. Oh, okay. In terms of reconstruction? 

Mr. BOWEN. That is right. Relief and reconstruction efforts, including security money. 

Mr. JOHNSON. All right. And so you are saying that it is about 

$5 billion in alleged corruption that has been uncovered? 

Mr. BOWEN. On the Iraqi side, that is what the commissioner on 

Public Integrity told me. 

Mr. JOHNSON. And on the Iraqi side, you have Iraqi ministers 

who are immune from prosecution, if you will, for corruption? 

Mr. BOWEN. That is right. 

Mr. JOHNSON. And they have the ability to immunize their subordinates for corruption? 

Mr. BOWEN. That is right. 

Mr. JOHNSON. And that corruption involves U.S. taxpayer dollars? 

Mr. BOWEN. Iraqi dollars. 

Mr. JOHNSON. Iraqi dollars? 

Mr. BOWEN. Yes, sir. 

Mr. JOHNSON. It does not include United States taxpayer money? 

Mr. BOWEN. No, sir. 

Mr. JOHNSON. I see. So does current law allow for the United 

States to prosecute Iraqis for fraudulent obtaining of Iraqi money 

which came from American taxpayers’ money? 

Mr. BOWEN. To prosecute Iraqis for the fraudulent—— 

Mr. JOHNSON. Iraqis for stolen money from Iraq which basically 

came to Iraq from the American taxpayer. 

Mr. BOWEN. That is a jurisdictional question that we work with 

the Department of Justice on. I am going to defer to Mr. Sabin to 

give you that answer, but SIGIR focuses on prosecuting U.S. citizens involved in corruption. 

Mr. JOHNSON. All right. 

Mr. Sabin? 

Mr. SABIN. The United States has traditional fraud statutes, 

mail fraud, wire fraud, which have had extraterritorial application 

in order to assert jurisdiction over individuals that have a scheme 

67 

to defraud, make false representations in order to obtain taxpayers’ 

money. 

So, as a general proposition, the extraterritorial application of 

fraud-based statutes that the U.S. attorney’s office could assert in 

a U.S. district court. So the direct answer is yes to that general 

proposition. 

Depending upon the status of the individual, whether there is extradition treaties for particular locations, then you get into the details. 

Mr. JOHNSON. Thank you. 

Mr. Grayson, according to your testimony, one of the reasons 

why the Civil False Claims Act has been unsuccessful in punishing 

and preventing war profiteering is because the Bush administration has done nothing to pursue those cases, and you just heard 

from Mr. Sabin taking strong offense at your characterization of 

what you call perpetual court orders sealing cases as evidence. He 

takes issue with your assertion that the sealing of these cases actually stops the process. How would you respond to that? 

Mr. GRAYSON. Well, there has never been a case under the False 

Claims Act in 144 years of history where an entire class of cases 

has remained under seal for years and years until now. The Iraq 

False Claims Act cases have remained under seal for years and 

years even though the statute says 60 days is the prescribed period. 

Mr. Sabin is in the criminal division. He has no responsibilities 

regarding the Civil False Claims Act. So he is literally not competent to testify about this. 

It is also true that—— 

Mr. JOHNSON. Well, now hold on. Let me give Mr. Sabin an opportunity to respond to that. 

Mr. SABIN. I had, with all due respect, Counsel, the opportunity 

to discuss the matters with our civil division folks. He is correct 

that I am in the criminal division—and proud of that—at the Department of Justice, but had the opportunity to chat with our colleagues in the civil division regarding Mr. Grayson’s comments in 

his statement. 

I believe some are inaccurate. Some are accurate with respect to 

the Custer Battles case. For example, he refers to that particular 

case. The Department of Justice civil division 2 weeks ago filed a 

brief in the Fourth Circuit Court of Appeals supporting Mr. Grayson’s position. We filed pleadings in the district court in the Eastern District of Virginia in support of Mr. Grayson’s position there. 

So we take issue that cases have not been brought. We have had 

two matters that have been specifically addressed by the civil division. 

Mr. JOHNSON. Why are there so many cases that are still under 

seal? 

Mr. SABIN. A number of reasons. I can talk you through them. 

One is lack of verifiable evidence that is in the complaint filed 

by the relater. 

Second, we need timely cooperation by counsel as well as the relater to be interviewed to provide the information to further the investigations to determine whether or not to intervene in the particular matter. 

68 

Third, as discussed previously, the gathering of evidence is a 

challenge, especially in the international forum and especially in 

war theaters and combat zones. 

Additionally, you need the cooperation of defendants and third 

parties, and that cooperation varies widely. It is not necessary in 

each matter, but in some matters, that cooperation can help facilitate the expeditious development of the case, and non-compliance, 

for example, with inspectors generals’ subpoenas that are issued in 

that regard. 

You have the coordination in parallel investigations between the 

criminal prosecutors and the civil prosecutions. 

You have the administrative aspect relating to suspension and 

debarment, so you have the coordination in terms of a potential 

global resolution of administrative, civil and criminal all coming together in order to appropriately address the matter. 

Mr. JOHNSON. How many people in the civil division dealing with 

these kinds of—— 

Mr. SABIN. At the headquarters civil division, there are 13 line 

attorneys and three supervisors. That does not include the number 

of civil attorneys around the country in the United States attorney’s office and in particular the Central District of Illinois that are 

addressing the matters. 

Mr. JOHNSON. All right. And last question, do you agree with Mr. Bowen’s assertion that $5 billion is the extent of the alleged corruption, alleged fraudulent misconduct in Iraq? 

Mr. SABIN. I believe he and his staff are in a better position to 

know. So I would defer to that. I have no reason to doubt that 

number, but those individuals are the experts that are working 

through these matters in a professional and thorough fashion, and 

I have no reason to doubt that number. 

Mr. BOWEN. The $5 billion has to do with the 2,000 cases that 

the Iraqis have on—— 

Mr. SCOTT. Did you say billion or million? 

Mr. BOWEN. Five billion dollars that are involving cases that are 

being conducted by the Iraqi Commission on Public Integrity. 

Mr. JOHNSON. I am sorry. All right. Thank you. 

Thank you. 

Mr. SCOTT. Thank you. 

The gentleman from North Carolina? 

Mr. COBLE. Thank you, Mr. Chairman. 

Mr. Chairman, today has been one of those days when I had to 

be at five places simultaneously, so I apologize to you and the witnesses for my belated arrival. 

Mr. Sabin, how do the Departments of Defense and Justice and 

the Office of SIGIR coordinate to investigate and prosecute alleged 

criminal acts associated with the war in Iraq? 

Mr. SABIN. In a variety of fashions. We try to be working together in a coordinated fashion through the task forces that we 

have set up, the ones I referred to, the International Contract Corruption Task Force. That is the operational component. 

And we are sharing information, exploiting intelligence, trying to 

figure out where the evidence will yield most productive investigation and prosecution. So that sharing of information, prosecutors 

and agents sitting down at an early stage in order to proactively 

69 

address it, through training, through coordination in what I refer 

to as the National Procurement Fraud Task Force, which has—— 

It is really pretty damn impressive because you have inspectors 

general themselves chairing each of the different subcommittees on 

legislation and training and private-sector outreach, governmentwide, to really make it a significant long-term institutional change. 

So not to look at just the individual criminal prosecution, but 

what as an industry in this unique time in our country’s history 

should we be doing in order to fill regulatory gaps, really provide 

effective and robust coordination and prosecution, and it is something, I think, we are proud of and we are looking forward to successes in the coming months and years. 

Mr. COBLE. Thank you, sir. 

Mr. Bowen, is the FBI a part of the task force, the ICCTF, A; 

are they in theater, B; and are they the lead investigators on these 

cases? A three-prong question I have hurled at you. 

Mr. BOWEN. Yes, Mr. Coble. The FBI is part of the International 

Contract Corruption Task Force, and the Joint Operations Center, 

which is the central facilitating operational arm of that task force, 

is co-located at FBI headquarters. I visited there a month ago, and, 

as I said in my statement, the Joint Operations Center is producing important work in support of our cases. 

The FBI does have agents in Iraq. Many of them are involved in 

counterterrorism investigations, but we are working with them on 

our fraud cases as well, and I expect that it is a joint relationship, 

and, as you know, our organization is a temporary organization. 

Many of our cases will continue after SIGIR’s expires at the end 

of next year, and I expect that the FBI will be inheriting a number 

of those cases. 

Mr. COBLE. Thank you, Mr. Bowen. 

Mr. Gimble, before my red light illuminates, if you will, briefly 

describe the investigations involving KBR and LOGCAP. 

Mr. GIMBLE. The KBR and LOGCAP are joint investigations that 

have been conducted by the members of the International Contract 

Fraud Task Force of which our DCIS investigators are a part, and 

there is still an ongoing number of efforts in that respect largely 

run out of the Rock Island District. 

Mr. COBLE. I did not hear the last part you said. 

Mr. GIMBLE. Largely, the LOGCAP investigations are being done 

in theater, but also back in Rock Island, IL. 

Mr. COBLE. But how long has the investigation extended or 

lasted? 

Mr. GIMBLE. They started fairly early. They continue on. It started in 2004, I believe. 

Mr. COBLE. Okay. So it has been going on about 2 or 3 years 

then. 

Mr. GIMBLE. Yes, that is right. 

Mr. COBLE. About 3 years. 

Mr. GIMBLE. About 3 years. 

Mr. COBLE. Thank you, Mr. Gimble. 

Do you want to weigh in on that, Mr. Sabin? 

Mr. SABIN. Yes, it is being conducted with the investigators out 

of the Central District of Illinois with assistance from main Justice. 

There have been eight different criminal matters brought as a reVerDate Aug 31 2005 11:46 Aug 20, 2008 Jkt 000000 PO 00000 Frm 00073 Fmt 6633 Sfmt 6601 H:\WORK\CRIME\061907\36173.000 HJUD1 PsN: 36173
70 

sult of those investigations. Some of those involve individuals associated with Kellog, Brown and Root. 

Mr. COBLE. Thank you, Mr. Sabin. 

I yield back, Mr. Chairman. 

Mr. SCOTT. Thank you. 

The gentleman from Massachusetts? 

Mr. DELAHUNT. Mr. Sabin, I think I heard something about the 

docket in the Eastern District and that it is the court that controls 

the docket. 

Mr. SABIN. I could clarify. I think what the witness was referring 

to was not the court’s docket because these matters have not been 

criminally charged and are on the court’s docket. To the extent that 

there has been public confirmation—and I am not going to get into 

specifics regarding any investigation—those matters may be ongoing within the Department of Justice as a grand jury investigation. 

Mr. DELAHUNT. So there is not an indictment or any formal 

charge now? 

Mr. SABIN. Correct. It is a misunderstanding. 

Mr. DELAHUNT. So it is a misunderstanding. 

Mr. SABIN. Yes. 

Mr. DELAHUNT. So, for 3 years now, the Department of Justice 

has been doing presumably something? 

Mr. SABIN. I am not going to comment upon any ongoing investigation, but the Department of Justice has set up a detainee abuse 

task force being operated out of the Eastern District. 

Mr. DELAHUNT. If I can address this to Ms. Razook, how do you 

come up with the number 17? 

Ms. RAZOOK. That number was reported several times, one in the 

By the Numbers report published by Human Rights First, New 

York University, and Human Rights—— 

Mr. DELAHUNT. So we do not know what the government is 

doing? 

Ms. RAZOOK. Correct. That is the problem. 

Mr. DELAHUNT. That is the problem. And neither, I can assure 

you, does this Committee know what the government is doing in 

this particular matter either, which is the problem as well, but—— 

Mr. SABIN. Mr. Delahunt, as a former prosecutor, you know that 

ongoing grand jury investigations and because of separation of 

powers and prosecutorial discretion, Congress should not—— 

Mr. DELAHUNT. I certainly understand that, but if there are 17, 

hypothetically, if that number is accurate, I would expect that, 

given the talent our Department of Justice has available to it, it 

could have, you know, proceeded in a more expeditious fashion. 

Three years even for the Federal Government is a Federal case, I 

would say. 

Mr. SABIN. I am not going to confirm the timeframe with respect 

to each of those matters, but I have the highest confidence in the 

prosecutors in the Eastern District of Virginia and the U.S. Attorney Chuck Rosenberg to pursue those cases as appropriate. 

Mr. DELAHUNT. Well, I would hope that that is the case. Of 

course, we do not know. 

Mr. Bowen, once more, thank you for what you have done for this 

country. You have been a bright light in a rather dark chapter. 

Mr. BOWEN. Thank you. 

71 

Mr. DELAHUNT. You know, I just read Mr. Gimble’s testimony, and almost $10 million was paid to the U.S. in restitution, 

$323,000 was levied in fines and in penalties, $3,500 was forfeited, 

and $61,000 was seized in some litigation. Were we ever able to account for that $9 billion that your report indicated was unaccounted for? 

Mr. BOWEN. Yes. You are referring to our January 30, 2005, 

audit of the—— 

Mr. DELAHUNT. Yes, I am. 

Mr. BOWEN [continuing]. CPA’s management of the Development 

Fund for Iraq money. That is Iraqi money. 

Mr. DELAHUNT. Correct. 

Mr. BOWEN. It was transferred by the CPA to the interim Iraqi 

government, and the answer is, no, the Iraqi government has not 

accounted well for what happened to—— 

Mr. DELAHUNT. And I understand the distinction, but I do understand—and you can correct me, please—that money was disbursed 

to the Iraqi government by the CPA 

Mr. BOWEN. That is correct. 

Mr. DELAHUNT. Nine billion dollars. And we are talking about 

$3,500 was forfeited. In Mr. Gayson testimony, when he uses billions in terms of fraud—and I guess you quoted someone in the 

other body about an orgy of greed—I have this uneasy feeling that 

we are missing something here. We are missing a potential substantial recovery. 

Mr. Sabin, why hasn’t the government participated under the 

whistleblower statute? 

Mr. SABIN. We have brought two civil cases that have been re- solved totaling $5.8 million in recovery, we have declined to intervene for a variety of reasons in, I believe, four others, and I believe 

three others that are public have been voluntarily dismissed by the 

relaters. The other matters, we will continue to review as appropriate, and when it is appropriate to unseal and/or decline to intervene, the Department of Justice will so advise. 

Mr. DELAHUNT. Mr. Grayson? 

Mr. GRAYSON. The Bush administration has not actually litigated 

a single case under the False Claims Act. The two settlements that 

Mr. Sabin is referring to were settlements. There was not litigation 

involved. They recovered a grand total of $5 million when $9 billion, as you just pointed out, Mr. Delahunt, is missing from the Development Fund of Iraq alone. 

Not only that, but Senator Grassley wrote to the Attorney General 2 years ago asking why nothing is being done on these cases 

under the False Claims Act, and he never received a reply. Not 

only that, but KBR has never been sued for anything it has done 

wrong in Iraq by the U.S. Government. It has never been sued in 

any whistleblower case that the U.S. Government has participated 

in. The only people who have had to suffer for this are the taxpayers. 

Mr. SABIN. Just a comment on that point. The letter that Senator 

Grassley sent on February 17 of 2005 was responded to by the Department of Justice on April 20 of 2005, 60 days later. 

Mr. DELAHUNT. That is very good speed. That is a quick response. I wish all my letters were responded to as quickly, Mr. 

72 

Sabin. So I will take note, and I will credit the alacrity with which 

that response came. But I would hope and encourage you to have 

further conversations with Mr. Grayson regarding the cases which 

he is alluding to. 

Mr. SABIN. And Mr. Grayson can correct me if I am wrong, but 

my understanding is the civil division does have ongoing, in certain 

matters, conversations with Mr. Grayson with respect to some of 

the matters that he is aware of. Some of them are sealed, so we 

cannot talk about specifics here today. But it is my understanding 

that in some matters that have been extended—and, again, Mr. 

Grayson can correct me if I am wrong—there has been a consent 

by him to that extension. 

Mr. GRAYSON. There has never been a single case picked up by 

the Justice Department that I have brought or that any other attorney has brought under the whistleblower statute since the war 

began. That is a fact. 

Mr. DELAHUNT. Well, I think my time has expired, but I am not 

defending the Justice Department, Mr. Grayson. That has not been 

my customary practice, but I do think it is an issue sometimes of 

resources, and Mr. Sabin is not in a position to say that. But I 

think we underresource the Department in situations where it 

works to wreak an injustice, if you will, but that will, I guess, be 

the subject of another hearing in another day. 

Mr. SCOTT. The gentleman’s time has expired. 

Mr. Sabin can get an opportunity to respond to whether or not 

you have sufficient resources to effectively prosecute the issues before you—— 

Mr. SABIN. In the last few weeks—— 

Mr. SCOTT [continuing]. Or not. 

Mr. SABIN. I have been up to Congress to talk about just just the 

fraud context: the Foreign Corrupt Practices Act and resources, the 

securities and corporate fraud endeavors of the Department of Justice, the mortgage fraud activity, the health care fraud activities 

and identity theft, and we want to speak with one voice with respect to the matter of resources. So—— 

Mr. SCOTT. When you come to speak, are you asking for more resources? 

Mr. SABIN. And what I say is that, as Mr. Delahunt pointed out, 

there are appropriate channels for those discussions to occur in 

terms of appropriations and budget authority. 

Of course, an individual prosecutor would want to come up here 

and say, ‘‘Give us more resources in order to undertake legitimate 

efforts in a priority area,’’ but given all the different matters that 

are before the Congress and before the Justice Department, we say 

there are appropriate channels, we welcome an opportunity to engage us in dialogue in order to address the resource allocations. 

Mr. SCOTT. Well, those are some choices, I guess, we have. If you 

would just tell us what you can do with what you have and what 

you could do if you had a little bit more. I mean, last time we had 

one of these hearings, it was on identity theft, and I had a bill to 

give you more money, as you may remember. I think you were the 

one testifying, as a matter of fact. 

Mr. SABIN. I do not think it was identity theft. I have been up 

here a few times, but I do not think it was identity theft. 

73 

Mr. SCOTT. On identity theft. And we asked if you had enough 

resources, and you said, ‘‘Sure.’’ You do not need my bill. 

Mr. SABIN. No, I would not have said that, sir. That was not me. 

Mr. SCOTT. Well, somebody did. Somebody did. And then I gave 

an example of the U.S. senator who had had his identity stolen and 

fraud run up, why that case had not been prosecuted, and the answer was it is a matter of resources. 

Mr. SABIN. Again, I do not know—— 

Mr. SCOTT. So if you—— 

Mr. SABIN [continuing]. The specifics of that interaction. 

Mr. SCOTT. If you just tell us what you can do with what you 

have and what more you can do, then we can decide whether or 

not we want that extra done, but if we all get is, ‘‘This is what we 

have, and we are not going to ask for more,’’ we do not know the 

answers to his question. 

Mr. SABIN. So what I am saying is we have a track record of success. With additional resources, we would work to use them effectively and efficiently consistent with budgetary restrictions in order 

to bring more civil cases and criminal cases, or at least sort 

through the matters, as you could, with more resources. 

Mr. SCOTT. Well, we have a kind of vague idea of what the problem is. 

Mr. Grayson, did I understand you to say that you believe that 

$9 billion—with a B—is missing over in Iraq? 

Mr. GRAYSON. Yes, from the Development Fund of Iraq alone. 

Mr. SCOTT. Okay. 

Mr. Bowen, you, as I understand your testimony, were in the low 

double-digit millions. 

Mr. BOWEN. Yes. The Development Fund for Iraq money is not 

U.S. money. It is Iraqi money. I was talking about U.S. money. 

Mr. SCOTT. Okay. So the $9 billion Iraqi money—you are not disagreeing with that figure? 

Mr. BOWEN. No, that was the result from our audit January 30, 

2005, looking at the CPA’s transfer of Development Fund for Iraq 

money to the interim Iraqi government. 

Mr. SCOTT. Mr. Grayson, who is in charge of the $9 billion? 

Mr. GRAYSON. Well, a substantial amount of the Development 

Fund of Iraq money actually came from the United States. It included seized funds that were seized in the battlefield, vested funds 

that the Administration seized in bank accounts in this country 

and appropriated funds as well. So the—— 

Mr. SCOTT. And, Mr. Bowen, we are not interested in that money 

being spent appropriately? 

Mr. BOWEN. To clarify, it is Iraqi money. It was Iraqi money 

that, as a result of the Oil for Food process, was kept in the Federal Reserve Bank of the Southern District of New York. However, 

it was Iraqi money. None of the Development Fund for Iraq money 

was U.S. money. 

Mr. SCOTT. Okay. In terms of U.S. money, have any of the nobid, cost-plus contracts and multiple layers of subcontracting resulted in the actual cost of the work being escalated because you 

had to go up through many channels? Has that caused any waste 

of the United States taxpayers’ money? 

74 

Mr. BOWEN. Yes, it has. And our audits point that out. For example, in our inspections, the Baghdad Police College inspection, 

which we have reported on several times, the primary health care 

clinic program, and we have analyzed lessons learned from that 

process in our Contracting Lessons Learned report to Congress 

which was provided last August. 

Mr. SCOTT. And has anything been done to cure these problems? 

Mr. BOWEN. Yes, Senator Collins has a bill she introduced to implement a number of the recommendations in our Contracting Lessons Learned report that will improve—significantly, in my view— 

the cost-plus contract process. 

Mr. SCOTT. Has the Administration done anything administratively to address that yet? 

Mr. BOWEN. Yes. As our Lessons Learned report lays out, the 

story of contracting in Iraq is the story of lessons learned itself, 

gradual progress in the formation of entities, like the Joint Contracting Command in Iraq that provided adequate numbers of contracting options, that provided adequate systems to keep track of 

how quality control, quality assurance were carried out, more specifically to keep track of how those contracts were monitored from 

a financial perspective. 

Mr. SCOTT. And Ms. Collins’ bill is pending now over in the Senate? 

Mr. BOWEN. Yes, sir. That is right. 

Mr. SCOTT. And your recommendation is that we pass that legislation? 

Mr. BOWEN. Very strongly. Yes, sir. 

Mr. SCOTT. Mr. Sabin, just two other questions. You indicated 

that you had some comments to make on the new bill on war profiteering, I think your definitions and some of the complications 

that may take place if you try to change the law midstream. 

Mr. SABIN. Yes, sir. Yes. And you could find that laid out in detail in my May 18 response to Senate testimony and questions for 

the record on the Senate side dealing with the War Profiteering 

Act, and we can get you those in particular. But they fall into three 

general concerns: definitional, intent and jurisdictional. I could go 

through them if you are interested. 

Mr. SCOTT. Well, it is your position that you can work with the 

present law to chase after war profiteers better than a new law? 

Mr. SABIN. No, I am saying that in the new law, there are some 

good recommendations relating to venue and penalties and other 

aspects. If you decide not to pursue the War Profiteering Act, that 

you could augment existing fraud-based statutes to provide additional tools and additional penalties for criminal prosecutions. If 

you choose to pursue the War Profiteering Act as a mechanism, in 

terms of those definitional terms and jurisdictional concerns, we 

would be happy to work with you in order to address that. 

Mr. SCOTT. Okay. And finally, the gentleman from Georgia asked 

you why things were under seal for so long. I think your answer 

tended to speak to why the cases are taking so long, but not specifically why they are still under seal. 

Mr. SABIN. They are under seal because a judge had ruled that 

they should remain under seal based upon the submission for good 

75 

cause by the government in terms of its actual assertions in the 

civil realm relating to False Claims Act matters. 

Mr. SCOTT. And those pleadings would be under seal, too? 

Mr. SABIN. Correct. 

Mr. SCOTT. So does the other side get to see those pleadings? 

Mr. SABIN. In certain instances, I believe there are discussions 

with counsel and relaters, but not all aspects of that are in every 

case undertaken. 

Mr. SCOTT. Well, in civil litigation, if it is a Civil False Claims 

Act, you may not be involved in the case. Is that right? 

Mr. SABIN. Well, it depends. If we decide not to intervene—— 

Mr. SCOTT. You can intervene. No, you do not have to intervene. 

Mr. SABIN. Correct. And that is—— 

Mr. SCOTT. But you intervene and it is an ex parte proceeding 

as to whether it stays under seal? 

Mr. SABIN. Correct. 

Mr. SCOTT. I want to thank all of the witnesses for their testimony. 

Mr. DELAHUNT. Mr. Chairman, are we having a second round? 

Mr. SCOTT. Yes. The gentleman from Massachusetts? 

Mr. DELAHUNT. Yeah, I posed the question to the Chair because 

I thought the Chair had a second. 

Mr. SCOTT. Yes, you are right. 

Mr. DELAHUNT. Professor Horton, you earlier talked about almost 

reaching parity in terms of private contractors and military personnel. I think your figures were 120,000 to 100,000. It might have 

been before the surge. 

Mr. Bowen, if you know the breakdown in terms of compensation 

for the 100,000 contractors—you might not have this available—I 

suspect that it is considerably higher than the remuneration for 

military personnel. If you can give us a comparison, it would be 

most welcome. 

Mr. BOWEN. Mr. Delahunt, I do not have that yet. We have ongoing audits of Blackwater, and we expect to have that completed for 

our fall quarterly report, and we will have follow-on reviews of security contractors, so I do not want to venture a number until we 

have supportable data. 

Mr. DELAHUNT. Thank you. 

Professor Horton, would you be willing to take a stab, and I understand this is an estimate. 

Mr. HORTON. Well, on an individual basis, I, in fact, interviewed 

in Baghdad a number of security contractors about their pay background and, of course, a large part of them, particularly among the 

elite units, came from our Special Services. They were being compensated at a level of around $30,000 a year, some a little bit more 

than that. And going into high-level security contractor operation, 

the compensation level was running between $110,000 and 

$135,000. So it is quite substantially larger. 

Of course, this is a very, very simple way of approaching it. 

Mr. DELAHUNT. I understand. 

Mr. HORTON. One needs to fold in a number of other criteria, 

health benefits, pension and so forth. 

Mr. DELAHUNT. But it is still the American taxpayer that is paying those private contracts, as well as the military personnel. And 

76 

is it a fair statement to say that our military loses something in 

terms of its talent available by pursuing a private army, if you 

will? 

Mr. HORTON. Well, I will just say I have repeatedly heard representatives of the industry say that they are a cheaper alternative, and I have never been able to put together numbers that 

would show that. It seems to me that that would be very, very difficult to display. 

And, of course, we are looking at hemorrhaging from our most 

talented people in the Special Forces Operations. A lot of them describe to me the fact that they were looking for the earliest opportunity to exit and get higher pay. So we are working against ourselves in that respect. 

Mr. DELAHUNT. Thank you, Professor. 

Mr. Grayson, why is it preferable from the perspective of a whistleblower to have the participation of the government? 

Mr. GRAYSON. Well, the government has the imprimatur of 

speaking on behalf of the taxpayer. In fact, interestingly enough, 

the statute provides that the whistleblower gets more money when 

the whistleblower proceeds with the case himself without the government’s assistance, but whistleblowers want the government’s 

assistance because it is the government’s money that is out there. 

When you look at it from a judge’s point of view, the judge asks 

himself, ‘‘If the Justice Department does not care about this case, 

why should I?’’ and that is an uphill battle for every whistleblower 

in every case that the Department of Justice declines to prosecute, 

including the many cases that it has declined to prosecute against 

KBR already. 

Mr. DELAHUNT. In terms of resources and access to information, 

I presume—you can correct me—and, Mr. Sabin, you can join in— 

correct if I am wrong—but I would presume that access to information would be much more readily available with the participation 

of the government. 

Mr. GRAYSON. That is true, and I believe the government’s allocated substantial resources within DoD for this purpose. It has allocated substantial resources within the FBI for this purpose. The 

Defense Criminal Investigative Service has done very thorough investigations of the cases that I have been involved in. The roadblock, the barrier is the Department of Justice. The Department of 

Justice will not go forward with whistleblower cases brought concerning contractor fraud in Iraq. 

Mr. DELAHUNT. Thank you. 

Mr. Sabin, if you are aware in terms of ex parte, as we were referring to earlier when you were being questioned, has the government ever been denied its motion? 

Mr. SABIN. I can get back to you on specifics, but the general answer is yes as to the extent of the length of the time that we 

had—— 

Mr. DELAHUNT. So it is a time issue? It is not—— 

Mr. SABIN. I believe that is accurate. 

Mr. DELAHUNT. But you can renew that request, I presume. 

Mr. SABIN. No, I think that, for example, a judge may say you 

cannot go past X date in certain jurisdictions. It varies jurisdiction 

to jurisdiction, is my understanding, and some judges will not go 

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in certain jurisdictions past a particular time period, and we work 

with that, obviously, under the court’s order. 

Mr. DELAHUNT. Thank you. 

Mr. SCOTT. The gentleman’s time has expired. 

We want to thank the witnesses. 

Do any of the witnesses have any last-minute very brief comment 

to make? I am not inviting it, but I noticed at one point Professor 

Horton was about to jump out of his seat, but I think that issue 

had been explained. 

I want to thank you very much for your testimony. There may 

be additional questions that we would ask you to respond to in 

writing for the Committee, but if there is no further business, the 

Committee stands adjourned. 

[Whereupon, at 3:47 p.m., the Subcommittee was adjourned.] 

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A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

PREPARED STATEMENT OF THE HONORABLE SHEILA JACKSON LEE, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF TEXAS, AND MEMBER, SUBCOMMITTEE ON CRIME, 

TERRORISM, AND HOMELAND SECURITY


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PREPARED STATEMENT OF THE HONORABLE NEIL ABERCROMBIE, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF HAWAII

Chairman Conyers and Members of the Judiciary Committee: 

I am grateful to the Committee and its distinguished Chairman for today’s hearing on HR 400, the ‘‘War Profiteering Prevention Act of 2007,’’ and for affording me 

the privilege of submitting testimony for the record. 

Mr. Chairman, among the many significant consequences of the Bush Administration’s decision to invade and occupy Iraq, marked by a complete dismissal of the 

need for intelligent planning and stunning incompetence in the conduct of the war, 

one area has received too little attention from the news media, the public and the 

Congress. 

The United States Government, directly and through the late Coalition Provisional Authority, has outsourced the war in Iraq like no other in our history, spending more than $50 billion to hire private contractors to provide food, water, gasoline 

and other supplies, guard bases, drive trucks and many other activities in support 

of our troops. But consistent with the Administration’s overall attitude toward 

spending public money with private companies, little or no thought was given to 

contract oversight or accountability. 

As a result, The U.S. occupation of Iraq has been viewed by some of these contractors as ‘‘open season’’ on the American taxpayer. At least ten companies, with billions of dollars in contracts, have already been forced to pay more than $300 million 

in penalties to resolve allegations of bid rigging, fraud, gross overcharging, delivery 

of faulty military parts and environmental damage. Some of these same companies 

have faced such allegations during past military operations in other countries, but 

have had no problem receiving new contracts in Iraq. 

Cleaning up this mess has been hampered by the fact that while there are antifraud laws to protect against the waste or theft of U.S. tax dollars in the United 

States, there have been no statutes prohibiting such sleazy business practices by 

American companies overseas. Legal jurisdiction continues to be a question. 

As examples: 

• One contractor was found guilty of 37 counts of fraud, including false billing, 

and was ordered to pay more than $10 million in damages. However, the decision was subsequently overturned because contracts were let through the Coalition Provisional Authority, and since CPA was not strictly considered to be 

part of the U.S. Government, U.S. laws against fraud did not apply. 

• Despite millions of dollars in payments to U.S. companies, key pieces of Iraq’s 

infrastructure, such as power plants, telephone exchanges, and sewage and 

sanitation systems, have either not been repaired, or have been fixed so poorly that they still don’t function. 

• A large U.S. construction company was paid tens of millions to repair raq’s 

schools. Many of the schools were never touched, and several that were ‘‘repaired’’ were left in shambles; one filled with unflushed sewage. 

Mr. Chairman, there is example after example of the flagrant abuse of the public’s 

trust and the public’s money during a time of war: 

According to testimony before the House Appropriations Defense Subcommittee, 

when the wrong computer equipment arrived in Iraq, the contractor dumped it into 

a mammoth ‘‘burn pit’’ and placed an order for a replacement rather than sending 

it back. The government paid for both the wrong computer and the replacement, 

and the contractor collected a fee for each, thanks to a cost-plus contract. 

Halliburton had drivers driving empty trucks between bases in Iraq—unnecessarily exposing drivers to danger—because the company was paid by the trip, not 

by the amount of materiel hauled or a flat fee. 

$186 million was spent over two years to build 142 health care centers. Yet, only 

15 were completed and only eight are open. According to testimony, the contractor 

lacked qualified engineers, hired incompetent subcontractors, failed to supervise 

construction work and failed to enforce quality control. 

Obviously, these practices cannot be allowed to continue. My bill, House Resolution 400, the War Profiteering Prevention Act of 2007, would: 

1. Criminalize ‘‘war profiteering,’’ defined as bid rigging, contract fraud or overcharging for goods and services during a time of war, military action or a 

reconstruction effort. 

2. Violations of the law would be a felony, and punishable by up to 20 years 

in prison and fines of up top $1 million or twice the illegal profits of the 

crime. 

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3. Jurisdiction for such cases, no matter where the alleged crimes are committed, would be in United States Federal Court. 

There is a companion bill in the other body, S. 119 by Senate Judiciary Committee Chairman Patrick Leahy. S. 119 has been approved by the Judiciary Committee and awaits floor action. Senator Leahy referred to the rampant contactor 

fraud and abuse in Iraq as a ‘‘second insurgency.’’ 

Mr. Chairman, most of the cases of fraud, questionable business practices and 

outright corruption have been uncovered and investigated through the efforts of the 

Special Inspector General for Iraq Reconstruction (SIGIR), Mr. Stuart W. Bowen, 

Jr., who is scheduled to give testimony before your committee today. Mr. Bowen and 

his superb staff, both here in the U.S. and on the ground in Iraq, have provided 

the sole oversight, under the most difficult conditions imaginable, for billions of 

American tax dollars intended to support our troops in combat. They deserve the 

gratitude of the Congress and the nation for a tough job done well. 

A testament to the effectiveness of Mr. Bowen’s operation is that in the closing 

hours of the 109th Congress, there was an attempt to insert a provision in the conference report of the 2007 National Defense Authorization Act that would have prematurely shut down the Special IG’s office. Only the wary eye House Armed Services Committee Chairman Ike Skelton caught the attempt and immediately introduced and passed a bill to, not only continue, but extend the life or SIGIR. 

Mr. Chairman, I appreciate today’s House Judiciary Committee hearing on HR 

400 and on the continuing problem of wartime profiteering in Iraq, and I am grateful for the opportunity to submit testimony for the record. I will do anything I can 

to assist the Committee in its deliberations. 

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