IRAQ: US Army Reservist Faces Graft Charges

WASHINGTON -- Investigators in a widening corruption probe of reconstruction contracts in Iraq brought charges yesterday against an Army lieutenant colonel who is accused of accepting bribes in exchange for awarding lucrative contracts to a private contractor, and of stealing $100,000 from funds earmarked for Iraq reconstruction.

Michael Brian Wheeler, a 47-year-old firefighter and Army reservist from Wisconsin who was in charge of granting contracts to rebuild the city of Al-Hillah, is the first uniformed officer to face charges in the federal probe. Critics say the case shines a spotlight on the degree of bureaucratic chaos and lack of accountability that prevailed in some corners of the former American-led Coalition Provisional Authority, which governed Iraq from the summer of 2003 until June 2004.

Stuart W. Bowen Jr., the special inspector general for Iraq reconstruction, says billions in reconstruction funds can't be accounted for. Bowen, tasked with overseeing the rebuilding of Iraq, has told Congress that the CPA had ''less than adequate controls" for $8.8 billion in Iraqi funds generated by Iraq's Oil for Food program. Bowen's office, in conjunction with the Department of Justice, the Internal Revenue Service, and other federal authorities, has 11 investigators in Iraq looking into more than 50 other cases of graft involving civilians and the US military.

''The investigation is continuing," said Bryan Sierra, a Justice Department spokesman.

The probe is likely to spark more outrage about the lack of planning for post-war Iraq, and comes as the Bush administration tries to persuade the American people that the massive reconstruction enterprise in the war-torn country is succeeding. It's also likely to further agitate Iraqi critics who contend the administration invaded their country to get control of their resources and raid their treasury.

A separate investigation by Representative Henry Waxman, a California Democrat, concluded in June that $12 billion in cash -- shrink-wrapped bricks of $100 bills -- was handled during the 15-month stewardship of the CPA and that ''the cash was spent and disbursed with virtually no appropriate financial controls."

Waxman said much of that money belonged to Iraqis, not US taxpayers. Held by the Central Bank/> of Iraq, some of the funds were generated by Iraq's Oil for Food program, which had been set up to allow Iraq to sell oil in exchange for basic goods during the era of international sanctions. After the US-led invasion, the CPA controlled the oil-for-food funds, which were kept in bank accounts belonging to the Central Bank of Iraq at the Federal Reserve Bank of New York.

Wheeler was arrested in Wisconsin on Wednesday. His lawyer, Bruce Rosen, said in a telephone interview that Wheeler was released from custody and is expected to plead not guilty in federal court in Washington, D.C. The conditions of Wheeler's release weren't clear.

Court papers filed yesterday in Wheeler's case alleged that he and several ''co-conspirators" stole hundreds of thousands of dollars from CPA-controlled funds belonging to Iraq's Central Bank.

Wheeler is accused of setting up a scheme to defraud the CPA and illegally dole out lucrative contracts to an alleged co-conspirator.

Last month, Philip Bloom, the owner of numerous construction and service companies in Iraq, was arrested for allegedly paying hundreds of thousands of dollars in cash, real estate, cars, and jewelry to US officials in exchange for contracts worth millions in Al-Hillah. Robert Stein, a civilian funding officer who worked in Al-Hillah, was arrested last month for allegedly accepting bribes from Bloom. Both men remain in custody.

Though Wheeler's criminal complaint didn't identify Bloom or Stein by name, details of the case point to them as Wheeler's co-conspirators. A third unidentified co-conspirator, who was also involved in issuing contracts, is cooperating with authorities, according to papers filed yesterday in federal court in Madison, Wis.

Bloom, believed to be ''co-conspirator One," got rebuilding contracts despite having been convicted of fraud in 1996. According to the affidavit, Wheeler was part of a larger scheme to steer contracts to co-conspirator one's company by allowing him to submit numerous bids on the same CPA reconstruction contracts, sometimes under the names of companies that did not exist.

''The investigation has revealed there were no legitimate competing bids for any of the contracts awarded," according to an affidavit signed by Patrick McKenna Jr. of the Special Inspector General's office.

According to court papers in his own case, Bloom won contracts to build a police academy in Al-Hillah, renovate a public library in Karbala, and for the construction of the Regional Tribal Democracy center.

Though court papers say Wheeler helped co-conspirator one pocket $3.5 million for several CPA contracts between January and June 2004, no work was done on some of these contracts, according to an audit by the Special Inspector General.

The affidavit filed yesterday said co-conspirator two, believed to be Stein, was authorized to request ''large amounts of cash" from the CPA-controlled accounts belonging to the Central Bank of Iraq at the Federal Reserve Bank of New York. Wheeler and other public officials ''stole hundreds of thousands of dollars in cash from these CPA funds," it states.

Wheeler is also accused of smuggling $100,000 in stolen funds back into the United States to buy grenade launchers and other military-grade weapons for his personal use. Wheeler also used the cash to pay a fire alarm company $58,000 for high-end tools.

Co-conspirator two, according to the affidavit, told investigators that he thought that Wheeler would ship the weapons back to Iraq for the personal protection of the CPA employees.

But court papers filed yesterday alleged that co-conspirator two kept much of this military equipment in his garage in Wisconsin. 

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