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THE CONFLICT IN IRAQ

Army Ignored Broker on Arms Deal

U.S. general supervised an Iraq contract that a slain American said was tangled in kickbacks.

March 15, 2005|Ken Silverstein and T. Christian Miller | Times Staff Writers

BAGHDAD — Soon after interim Prime Minister Iyad Allawi took office last summer, he announced plans to create a tank division for the new Iraqi army.

The $283-million project was supposed to display the power of Iraq's new government. But under the guidance of a task force overseen by one of America's top generals, it has become another chapter in a rebuilding process marked by accusations of corruption.

The U.S. contractor working on the project repeatedly warned the task force headed by Army Lt. Gen. David H. Petraeus that a Lebanese middleman involved in the deal might be routing kickbacks to Iraqi Defense Ministry officials. But senior U.S. military officials did not act on the contractor's pleas for tighter financial controls, according to documents and interviews.

"If we proceed down the road we are currently on, there will be serious legal issues that will land us all in jail," the contractor, Dale Stoffel, wrote in a Nov. 30 e-mail to a senior assistant to Petraeus.

Eight days later, Stoffel was shot dead in an ambush near Baghdad. The killing is being investigated by the FBI, according to people who have been interviewed by the bureau.

Since then, senior U.S. military officials have continued to work with the middleman, Raymond Zayna, who has taken over part of Stoffel's contract, documents and interviews show.

Although the U.S. military initially insisted that the Iraqi government was in control of the project, e-mails obtained by The Times show that Petraeus' task force supervised it.

The case raises concerns about the U.S. commitment to accountability in projects involving Iraqi money. The inspector general for Iraq's reconstruction recently criticized the failure of the former U.S.-led Coalition Provisional Authority to properly account for $8.8 billion in contracts issued using Iraqi funds.

A $24.7-million payment on the contract that was supposed to go to Stoffel is unaccounted for.

Through a spokesman, Petraeus declined to be interviewed, referring inquiries to the Iraqi Defense Ministry. Ministry officials did not respond to requests for comment.

In January, Capt. Steve Alvarez, a spokesman for Petraeus' task force, said the arms contract was an "MOD [Ministry of Defense] matter."

"There really isn't much more to our involvement," he said.

Later, after being told about the e-mails indicating that task force officers were directing work on the contract, Alvarez said that "performance under this contract was of interest" to U.S. officials.

"Quite naturally, there were contacts and communications between [the task force] and the parties to the contract in order to coordinate," Alvarez said. He added that Petraeus "was never told of any improprieties."

The weapons deal took shape last year, after Allawi began pressing U.S. military officials for the formation of a tank brigade.

Although the U.S. did not consider the brigade vital to fighting the insurgency, Allawi saw it as a politically important demonstration to Iraqi citizens that the government was reconstituting its armed forces, an official with the U.S.-led coalition said. The Iraqis agreed to pay for an entire mechanized division at an estimated cost of $283 million.

Allawi wanted at least one tank brigade in place before the Jan. 30 national assembly election. The deadline put pressure on the U.S. military to deliver the tanks quickly.

Petraeus backed Stoffel, a weapons dealer with extensive experience in the Eastern European equipment used by the Iraqi army, as a man who could obtain and deliver the goods.

Stoffel had a long history of working with the U.S. government. He acted on behalf of U.S. intelligence agencies to covertly buy foreign military equipment for research and testing by the U.S. military, documents show.

In a letter to Iraqi Defense Minister Hazem Shaalan on July 20, 2004, Petraeus pledged to "fully support" Stoffel, who proposed to refurbish Iraq's tanks and personnel carriers and buy new equipment from Eastern European sources.

On Aug. 16, Stoffel's firm, Wye Oak Technology of Monongahela, Pa., signed a "broker's agreement" with the Defense Ministry, giving Stoffel the exclusive right to buy tanks and other equipment for the mechanized division on the ministry's behalf.

Stoffel was awarded the contract without competitive bidding. The contract was structured so that Stoffel was paid a percentage of the price of goods purchased -- an arrangement barred by U.S. law but allowed in Iraq.

Iraqi Deputy Defense Minister Mashal Sarraf insisted on another unusual provision, according to sources with knowledge of the contract: He required that Stoffel conduct all financial transactions through middleman Zayna.

Sarraf did not respond to requests for comment made through the Defense Ministry.

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