Skip to site content

Private Companies Profit From War

War in Iraq and Afghanistan has produced a windfall for politically connected contractors in the private sector, according to an ethics and public-policy watchdog group.

More than 70 American companies and individuals have won up to $8 billion in government contracts during the last two years for work in postwar <?xml:namespace prefix = st1 ns = “urn:schemas-microsoft-com:office:smarttags” />Iraq and Afghanistan, according to a report released Thursday by the Washington-based Center for Public Integrity.<?xml:namespace prefix = o ns = “urn:schemas-microsoft-com:office:office” />
 
Those companies contributed more than $500,000 to the George W. Bush presidential campaign, more than to any other politician during the last dozen years.
 
“These two wars in two years and their aftermaths have brought out the Beltway Bandit companies in full force, and there is a stench of political favoritism and cronyism surrounding the contracting process in both Iraq and Afghanistan,” said Charles Lewis, head of the non-profit, non-partisan group, reporting results of a six-month investigation.
 
The top recipient of federal contracts was Kellogg, Brown & Root, a subsidiary of Halliburton, the company that Vice President Dick Cheney led prior to becoming Bush’s running mate in Aug. 2000. The company, which received $2.3 billion in government contracts, has been politically active, donating $2.3 million to political campaigns between 1990 and 2002, according to the report.
 
The Bechtel Group ranked second, earning just over $1 billion in post-war contracts. Its hires include George Schultz, secretary of state under Ronald Reagan, who rejoined the company as a member of its board of directors after retiring from the State Department in 1989. Schultz had previously been executive vice president at Bechtel before returning to Washington, where he was treasury secretary in the Nixon administration before being hired the first time by the San Francisco-based engineering and construction firm.
 
Beyond those, the report named dozens of lower-profile companies, with similar political clout, sharing in reconstruction profits. Nearly 60 percent had employees or board members who either served in or had close ties with the White House, Congress or high levels of the military.
 
Companies sharing in the contracts contributed nearly $49 million to political campaigns or parties in the 12 years leading up to 2002, according to the report. Donations to Republican committees outpaced those to Democratic committees $12.7 million to $7.1 million.
 
In one case, the spouse of a current Pentagon official has been getting Iraq contracts. Terry Sullivan of the company Sullivan Haave is married to Carol Haave, deputy assistant secretary of defense for security and information operations since November 2001. Questioned about the apparent conflict of interest, Sullivan told the center his wife signed the business over to him before taking her current job. “People need to know how we operate as a husband and wife,” he said. “We keep things completely separate and always have.”
 
Contract spending in Iraq was nearly double that in Afghanistan, $5.7 billion compared to $2.7 billion, according to the study.
 
But the biggest surprise, Lewis said, was the lackadaisical nature of the process of awarding government contracts. The report found no uniformity in how the values of government contracts are reported, and few requirements for disclosure. In fact, federal officials were reluctant to release information, prompting the center to file a lawsuit against the State Department and the Army for failure to comply fully with the Freedom of Information Act.
 
“This is all outrageous,” Lewis remarked in prepared comments to reporters. “We are talking about the expenditure of billions of dollars in taxpayer money. As Americans, we have a right to know how our hard-earned money is spent. When American soldiers are at risk or worse, are being killed, the stunning incompetence and deliberate stonewalling become even more offensive and unacceptable.”
 
Companies named in the report criticized the study.
 
“Halliburton was selected on its merits to do the work in Iraq because it is the only company with the right skills and experience to handle such wartime emergencies,” Wendy Hall, a company spokeswoman, said in an e-mail to the Washington Times.
 
Hall said political contributions are normal for such a large firm and have “nothing to do with receiving political favors or government contracts as a result of those contributions.”
 
Bechtel accused the center of “inaccurate and misleading statements”‘ about its work in Iraq.
 
“These charges simply are not true. It is important to get the facts straight about such allegations,” Bechtel said, according to Reuters.
 
The U.S. has reduced the size of its military force from 2.1 million in 1990 to 1.4 million today, according to the Associated Press. With postwar violence in Iraq and Afghanistan, along with continued peacekeeping commitments in Bosnia and Kosovo, the Pentagon has begun running out of soldiers, and is turning over nearly every task but battlefield operations to the private sector.
 
The government has signed more than 3,000 contracts with private military firms over the last decade, said Peter Singer of the Brookings Institute, who estimates the ratio of private contractors to military personnel in the Gulf at roughly one to 10.
 
Another watchdog group, Citizens Against Government Waste, earlier criticized federal agencies for granting waivers allowing MCI, formerly WorldCom, to continue to receive government contracts despite being suspended by the Government Services Administration for lack of internal controls and ethics violations.
 
“This is the wrong message to send to corporate America,” CAGW President Tom Schatz said in a statement. “A company that committed the largest fraud in history ends up being punished on paper and not in reality. This contradictory action does not even amount to a slap on the wrist.”
 
Halliburton, a Houston-based oilfield services company, on Wednesday reported a rise in third-quarter revenues, largely due to government work related to Iraq, while earnings fell 38 percent because of legal charges, according to Reuters.
 
The Center for Public Integrity opened its doors in May 1990. It has issued more than 250 investigative reports and 12 books containing reference material for journalists, academics, policymakers and citizens. It is funded by foundations, individuals and sale of publications. The group does not accept advertising or contributions from companies, labor unions or governments. It does not take positions or lobby on specific issues, and lists the names of major donors on its Web site, www.publicintegrity.org.
 
Bob Allen is managing editor of EthicsDaily.com