Army Official Sacked When He Questioned $1 Billion In Questionable Payments To KBR

jpeyton

Moderator in SFF, Notebooks, Pre-Built/Barebones
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Aug 23, 2003
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According to military officials, the decision to replace Smith went as high as Rumsfeld, and I'm sure Cheney had a word or two with Donald regarding this. But who do you expect Rumsfeld to side with: an Army official who was trying to prevent procurement fraud, or his administration with deep financial and political ties to KBR and the defense industry?

You can bet that KBR is seeing dollar signs dancing around their heads at the thought of a McCain presidency and a 100-year contract for Iraq.

Text

By JAMES RISEN

WASHINGTON ? The Army official who managed the Pentagon?s largest contract in Iraq says he was ousted from his job when he refused to approve paying more than $1 billion in questionable charges to KBR, the Houston-based company that has provided food, housing and other services to American troops.

The official, Charles M. Smith, was the senior civilian overseeing the multibillion-dollar contract with KBR during the first two years of the war. Speaking out for the first time, Mr. Smith said that he was forced from his job in 2004 after informing KBR officials that the Army would impose escalating financial penalties if they failed to improve their chaotic Iraqi operations.

Army auditors had determined that KBR lacked credible data or records for more than $1 billion in spending, so Mr. Smith refused to sign off on the payments to the company. ?They had a gigantic amount of costs they couldn?t justify,? he said in an interview. ?Ultimately, the money that was going to KBR was money being taken away from the troops, and I wasn?t going to do that.?

But he was suddenly replaced, he said, and his successors ? after taking the unusual step of hiring an outside contractor to consider KBR?s claims ? approved most of the payments he had tried to block.

Army officials denied that Mr. Smith had been removed because of the dispute, but confirmed that they had reversed his decision, arguing that blocking the payments to KBR would have eroded basic services to troops. They said that KBR had warned that if it was not paid, it would reduce payments to subcontractors, which in turn would cut back on services.

?You have to understand the circumstances at the time,? said Jeffrey P. Parsons, executive director of the Army Contracting Command. ?We could not let operational support suffer because of some other things.?

Mr. Smith?s account fills in important gaps about the Pentagon?s handling of the KBR contract, which has cost more than $20 billion so far and has come under fierce criticism from lawmakers.

While it was previously reported that the Army had held up large payments to the company and then switched course, Mr. Smith has provided a glimpse of what happened inside the Army during the biggest showdown between the government and KBR. He is giving his account just as the Pentagon has recently awarded KBR part of a 10-year, $150 billion contract in Iraq.

Heather Browne, a spokeswoman for KBR, said in a statement that the company ?conducts its operations in a manner that is compliant with the terms of the contract.? She added that it had not engaged in any improper behavior.

Ever since KBR emerged as the dominant contractor in Iraq, critics have questioned whether the company has benefited from its political connections to the Bush administration. Until last year, KBR was known as Kellogg, Brown and Root and was a subsidiary of Halliburton, the Texas oil services giant, where Vice President Dick Cheney previously served as chief executive.

When told of Mr. Smith?s account, Representative Henry A. Waxman, the California Democrat who is chairman of the House Oversight and Government Reform Committee, said it ?is startling, and it confirms the committee?s worst fears. KBR has repeatedly gouged the taxpayer, and the Bush administration has looked the other way every time.?

Mr. Smith, a civilian employee of the Army for 31 years, spent his entire career at the Rock Island Arsenal, the Army?s headquarters for much of its contracting work, near Davenport, Iowa. He said he had waited to speak out until after he retired in February.

As chief of the Field Support Contracting Division of the Army Field Support Command, he was in charge of the KBR contract from the start. Mr. Smith soon came to believe that KBR?s business operations in Iraq were a mess. By the end of 2003, the Defense Contract Audit Agency told him that about $1 billion in cost estimates were not credible and should not be used as the basis for Army payments to the contractor.

?KBR didn?t move proper business systems into Iraq,? Mr. Smith said.

Along with the auditors, he said, he pushed for months to get KBR to provide data to justify the spending, including approximately $200 million for food services. Mr. Smith soon felt under pressure to ease up on KBR, he said. He and his boss, Maj. Gen. Wade H. McManus Jr., then the commander of the Army Field Support Command, were called to Pentagon meetings with Tina Ballard, then the deputy assistant secretary of the Army for policy and procurement.

Ms. Ballard urged them to clear up KBR?s contract problems quickly, but General McManus ignored the request, Mr. Smith said. Ms. Ballard declined to comment for this article, as did General McManus.

Eventually, Mr. Smith began warning KBR that he would withhold payments and performance bonuses until the company provided the Army with adequate data to justify the expenses. The bonuses ? worth up to 2 percent of the value of the work ? had to be approved by special boards of Army officials, and Mr. Smith made it clear that he would not set up the boards without the information.

Mr. Smith also told KBR that, until the information was received, he would withhold 15 percent of all payments on its future work in Iraq.

?KBR really did not like that, and they told me they were going to fight it,? Mr. Smith recalled.

In August 2004, he told one of his deputies, Mary Beth Watkins, to hand deliver a letter about the threatened penalties to a KBR official visiting Rock Island. That official, whose name Mr. Smith said he could not recall, responded by saying, ?This is going to get turned around,? Mr. Smith said.

Two officials familiar with the episode confirmed that account, but would speak only on the condition of anonymity out of concern for their jobs.

The next morning, Mr. Smith said he got a call from Brig. Gen. Jerome Johnson, who succeeded General McManus when he retired the month before. ?He told me, ?You?ve got to pull back that letter,?? Mr. Smith recalled. General Johnson declined to comment for this article.

A day later, Mr. Smith discovered that he had been replaced when he went to a meeting with KBR officials and found a colleague there in his place. Mr. Smith was moved into a job planning for future contracts with Iraq. Ms. Watkins, who also declined to comment, was reassigned as well.

Mr. Parsons, the contracting director, confirmed the personnel changes. But he denied that pressure from KBR was a factor in the Army?s decision making about the payments. ?This issue was not decided overnight, and had been discussed all the way up to the office of the secretary of defense,? he said.

Soon after Mr. Smith was replaced, the Army hired a contractor, RCI Holding Corporation, to review KBR?s costs. ?They came up with estimates, using very weak data from KBR,? Mr. Smith said. ?They ignored D.C.A.A.?s auditors,? he said, referring to the Defense Contract Audit Agency.

Lt. Col. Brian Maka, a Pentagon spokesman, disputed that. He said in a statement that the Army auditing agency ?does not believe that RCI was used to circumvent? the Army audits.

Paul Heagen, a spokesman for RCI?s parent company, the Serco Group, said his firm had insisted on working with the Army auditors. While KBR did not provide all of the data Mr. Smith had been seeking, Mr. Heagen said his company had used ?best practices? and sound methodology to determine KBR?s costs.

Bob Bauman, a former Pentagon fraud investigator and contracting expert, said that was unusual. ?I have never seen a contractor given that position, of estimating costs and scrubbing D.C.A.A.?s numbers,? he said. ?I believe they are treading on dangerous ground.?

The Army also convened boards that awarded KBR high performance bonuses, according to Mr. Smith.

High grades on its work in Iraq also allowed KBR to win more work from the Pentagon, and this spring, KBR was awarded a share in the new 10-year contract. The Army also announced that Serco, RCI?s parent, will help oversee the Army?s new contract with KBR.

?In the end,? Mr. Smith said, ?KBR got what it wanted.?
 

JSt0rm

Lifer
Sep 5, 2000
27,399
3,947
126
how corrupt do these people have to be before we can impeach them? I mean come on people. All you "conservatives" are nut jobs.
 

Engineer

Elite Member
Oct 9, 1999
39,230
701
126
Originally posted by: JSt0rm01
All you "conservatives" are nut jobs.

Nothing to do only with conservatives. The "average" defense company stock owned by each of the 535 members of Congress is over $400,000 with the DEMOCRATS owning more than the GOP (amazingly enough). Both sides are profiting from war....that's the way it works....and in the end, John Q. Taxpayer gets the bill for it all.
 

GeezerMan

Platinum Member
Jan 28, 2005
2,146
26
91
Sure would be interesting if one could see all of the hidden assets of certain politicians, before and after they leave office
 

JSt0rm

Lifer
Sep 5, 2000
27,399
3,947
126
Originally posted by: Corbett
CAN WE GET ONE THREAD FOR JPEYTON TO POST ALL HIS ANTI-MILITARY THREADS IN?

you think this is anti-military? ha. Do you know people who have died over there? Do you care that soldiers lives are squandered? i think the answer is no to both questions.
 

OrByte

Diamond Member
Jul 21, 2000
9,303
144
106
did I read that right?

KBR just signed a 10 year $150 billion dollar contract for work in Iraq?!

holy crud!
 

Fern

Elite Member
Sep 30, 2003
26,907
173
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Originally posted by: JSt0rm01
how corrupt do these people have to be before we can impeach them? I mean come on people. All you "conservatives" are nut jobs.

You don't impeach military personnel.

No, us conservatives hate this crap. And kindly do not confuse us conservatives with republicans - the two aren't always the same thing.

This is exactly the kind of oversight duty Congress should be exercising. Screw baseball & steriods or taking a day to listen to Scotty McClellen talk about what's in his book. They coulda just had staffers read the d@mn thing.

Since the Dems have been complaining about the war's costs/KBR and campaigning on it, we conservatives would hope they could be beneficial here and could get a d@mn investigation going. Pelosi & Reid suck IMO.

Fern

 

bamacre

Lifer
Jul 1, 2004
21,029
2
61
Originally posted by: Corbett
CAN WE GET ONE THREAD FOR JPEYTON TO POST ALL HIS ANTI-MILITARY THREADS IN?


The only slap in the face to the military has been from those who sent them into Iraq on false pretenses. I simply cannot think of a worse thing that could be done to our men and women in uniform.
 

OrByte

Diamond Member
Jul 21, 2000
9,303
144
106
Originally posted by: Fern
Originally posted by: JSt0rm01
how corrupt do these people have to be before we can impeach them? I mean come on people. All you "conservatives" are nut jobs.

You don't impeach military personnel.

No, us conservatives hate this crap. And kindly do not confuse us conservatives with republicans - the two aren't always the same thing.

This is exactly the kind of oversight duty Congress should be exercising. Screw baseball & steriods or taking a day to listen to Scotty McClellen talk about what's in his book. They coulda just had staffers read the d@mn thing.

Since the Dems have been complaining about the war's costs/KBR and campaigning on it, we conservatives would hope they could be beneficial here and could get a d@mn investigation going. Pelosi & Reid suck IMO.

Fern
any investigation by congress into the Pentagon would get about as far as any investigation by congress into the Justice Dept. And we can see those investigations as highly partisan, highly political, still ongoing as evidence by the continuing committee hearings regarding the CIA leak, and deeply opposed by this administration.

In other words, it might take a while.
 

Craig234

Lifer
May 1, 2006
38,548
350
126
Originally posted by: Fern
Originally posted by: JSt0rm01
how corrupt do these people have to be before we can impeach them? I mean come on people. All you "conservatives" are nut jobs.

You don't impeach military personnel.

No, us conservatives hate this crap. And kindly do not confuse us conservatives with republicans - the two aren't always the same thing.

This is exactly the kind of oversight duty Congress should be exercising. Screw baseball & steriods or taking a day to listen to Scotty McClellen talk about what's in his book. They coulda just had staffers read the d@mn thing.

Since the Dems have been complaining about the war's costs/KBR and campaigning on it, we conservatives would hope they could be beneficial here and could get a d@mn investigation going. Pelosi & Reid suck IMO.

Fern

You'll notice that I consistently distinguish "right-wing" and "conservative".

One of the ways the radical right gets away wit murder is that popular political discussion in the US has not made that seperation - to attack a radical right-winger like the ones above, you are also attacking every 'Republica', every 'Conservative', which is another thing entirely - they are able to hide by wrapping themselves in the whole 'conservative' label, and our media and citizenry has not bothered to notice for the most part, apart from some people like Kevin Phillips and John Dean who scream about their doing it.

The power of the language on an issue like that is remarkable.
 

lupi

Lifer
Apr 8, 2001
32,539
260
126
And JP still hasn't been able to answer how our occupations of PI, SK, GER, PR, JP, and Cuba, which is some 450 years worth has bankrupted this country.

but please don't let that stop your Hussein blogs about 100 years in Iraq.
 

UberNeuman

Lifer
Nov 4, 1999
16,937
3,087
126
Originally posted by: lupi
And JP still hasn't been able to answer how our occupations of PI, SK, GER, PR, JP, and Cuba, which is some 450 years worth has bankrupted this country.

but please don't let that stop your Hussein blogs about 100 years in Iraq.

Why should he answer you when you can't respond in your own threads to questions...
 

AndrewR

Lifer
Oct 9, 1999
11,157
0
0
Yes, there needs to be more oversight of contractors at ALL levels of government. The problem? Every damn elected and appointed official, with very few exceptions, is in the pocket of someone and likely has control over others who may not be through bargaining or purse strings. Yes, boys and girls, that includes Democrats and Republicans.

Congress is fundamentally composed of cowards, but you know what? We share a fair portion of the blame for that. We, as the electorate, fly off the handle at a simple mistake or a misguided position as shoved down our throats by the media eager to make mountains out of mole hills. We do not accept that anyone can change their mind, even in the face of changing economic, social, or political conditions. We do not abide by any hard decisions that might make sense logically but fail the emotional test when even one example of hardship can be found as a result of the decision (Little Johnny went hungry because Congress stole my FHA loan). Instead of the Big Picture, we look at little micro-shots of the world through the soda straw of CNN and are too stupid to see the difference.

I'm too hungry to keep going. I'll try to post more later to relate this to the thread. I have an idea, but it'll take some time to write. :)