WASHINGTON — A former U.S. contract supervisor in Iraq has become the first current or former American official to face criminal charges in connection with the multibillion-dollar reconstruction of the country, federal authorities said Thursday.
Robert J. Stein Jr., 50, a former Coalition Provisional Authority official in Hillah, Iraq, was arrested in Fayetteville, N.C., in connection with an allegedly fraudulent scheme to award construction contracts worth more than $18 million. Philip H. Bloom, 65, a New Jersey businessman, allegedly paid Stein at least $630,000 in kickbacks for his part in a bid-rigging scheme in 2003 and 2004, according to documents filed by the Justice Department in Washington.
Stein, who was arrested Monday, and Bloom, who was arrested Sunday in New Jersey, are accused of "conspiring to commit money laundering and wire fraud in connection with a bribery and fraud scheme," the papers say. Both are in federal custody.
The case grew out of an eight-month investigation of the Coalition Provisional Authority's office in Hillah by the special inspector general for Iraq reconstruction, an independent agency created by Congress.
Jim Mitchell, a spokesman for the inspector general's office, said these were only the first charges, and "there will be more." He said investigators were looking at about 50 potential criminal cases across Iraq.
The federal affidavit says that another person who worked with Stein at the CPA has been cooperating with the government. Other public officials were involved in the alleged fraud as well, the affidavit says.
According to the papers, Bloom, who has lived for years in Romania, controls several construction and service companies.
To rig the bidding process, more than one of Bloom's companies would submit fake or excessively high "bids" designed to allow another to win the bid by submitting a more favorable price, the papers say.
Although Stein controlled the disposition of about $82 million in U.S. funds, he was not permitted to award any single contract worth more than $500,000. Several of the winning bids were just below that ceiling.
The contracts were awarded between October 2003 and June 2004 for such projects as the renovation of a public library in Karbala, the construction of the Hillah police academy and related demolition work, and building a Tribal Democracy Center.
To reward the U.S. officials, Bloom allegedly would pay bribes, kickbacks or gratuities out of bank accounts in Iraq, Switzerland, Romania and the Netherlands. The money for Stein and his wife would be sent to bank accounts in the United States, the affidavit alleges.
The papers say the money was spent on cars, jewelry and real estate.
A footnote in the court papers notes that Stein was convicted in a fraud case in 1996, raising questions about how carefully he was vetted before being hired by the CPA. Stein has a military background.
If convicted on all charges, the two men face up to 30 years in prison, a fine of up to $250,000 and three years of supervised release, the Justice Department said.
Mitchell, of the inspector general's office, said the case stemmed from a tip to the organization's hotline. An audit of the CPA's south-central regional office found discrepancies in the financing for the region's reconstruction, he said.
The affidavit also says an Iraqi witness has been cooperating with the investigation.