House Passes War Profiteering Prevention Act
October 9, 2007
By a vote of 375-3, the House has just passed the War Profiteering Prevention Act, H.R. 400. The bill makes war profiteering — overcharging in order to defraud or profit excessively from war, military action, or reconstruction efforts — a felony subject to up to 20 years in prison and fines of up to $1 million or twice the illegal profits of the crime. It confers jurisdiction to U.S. federal courts to hear such cases no matter where they might occur. Last week the House also passed H.R. 2740, the MEJA Expansion and Enforcement Act, which made security contractors working in Iraq and other combat zones subject to prosecution by U.S. courts as well. Waste, fraud and abuse in Iraq contracting has been a focal point of oversight in the new Congress, see the Gavel archives on Iraq contractors.
|Rep. Neil Abercrombie, sponsor of the bill:
“Mr. Speaker, this bill and H.R. 2740, legislation passed by this House last week to expand the reach of the Uniform Code of Military Justice to private civilian security operatives in the region, are important steps this Congress is taking to clean up the mess in Iraq… the War Profiteering Prevention Act will help end the open season declared on American taxpayers.”
From our current legislation section, further highlights of some of the bill's provisions and problems it would address:
This bill makes war profiteering a federal felony. This bill strengthens the tools available to federal law enforcement to combat contracting fraud during wartime. Specifically, the bill makes war profiteering — overcharging in order to defraud or profit excessively from war, military action, or reconstruction efforts — a felony, subject to up to 20 years in prison and fines of up to $1 million or twice the illegal profits of the crime. The bill also confers jurisdiction to U.S. federal courts to hear such cases.
War profiteering and reconstruction fraud by U.S. companies has become a significant problem in the Iraq War — with billions unaccounted for. The United States has devoted more than $50 billion to U.S. contractors for relief and reconstruction activities in Iraq alone, with billions of these dollars unaccounted for. For example, the Special Inspector General for Iraq Reconstruction outlined in a report that the former Coalition Provisional Authority in Iraq could not account for nearly $8.8 billion.
The Special Inspector General for Iraq Reconstruction has more than 70 investigations open. The Special Inspector General for Iraq Reconstruction currently has more than 70 open and active investigations regarding contracting fraud and abuse related to the Iraq war. These investigations include, among other things, investigations of illegal kickbacks, bid-rigging, embezzlement, and fraudulent over-billing. However, given the large number of investigations, there have been relatively few prosecutions for reconstruction fraud. This highlights the need for this legislation — giving federal law enforcement additional tools for prosecuting wartime contracting fraud.
Despite the number of investigations, there have been few prosecutions — highlighting the need for this bill. The lack of prosecutions underscores the inadequacies of current law. There is currently no federal statute specifically targeted at prohibiting contracting fraud during times of war, military action, or relief or reconstruction activities. Moreover, no federal law provides enhanced criminal punishment for fraudulent acts during times of war, or relief or reconstruction activities. In addition, none of the current fraud statutes explicitly extend extraterritorial jurisdiction.
According to the Defense Contract Audit Agency, there have been more than $10 billion in suspect billings in Iraqi contracts. In February, the head of the Defense Contract Audit Agency testified before Congress that the agency estimated that there have been more than $10 billion in questioned and unsupported costs relating to Iraq reconstruction and troop support contracts since the war began in 2003.
Of the $10 billion in suspect billings, the Defense Contract Audit Agency has identified $2.7 billion from one contractor alone — Halliburton. The largest private contractor operating in Iraq is Halliburton. Through its KBR subsidiary, Halliburton has held three large contracts in Iraq. The Defense Contract Audit Agency has identified $2.7 billion in suspect billings in these three contracts. Specifically, under Halliburton's largest Iraq contract, providing support services for the troops, Pentagon auditors have found $2.4 billion in questioned and unsupported costs — including $1.9 billion in questioned costs and $450 million in unsupported costs. Former Halliburton employees testified that the company charged $45 for cases of soda, billed $100 to clean 15-pound bags of laundry, and insisted on housing its staff at a five-star hotel in Kuwait. Halliburton procurement officials described the company's informal motto in Iraq as “Don't worry about price. It's cost-plus.” Furthermore, a Halliburton manager was indicted for “major fraud against the United States” for allegedly billing more than $5.5 million for work that should have cost only $685,000 in exchange for a $1 million kickback from a Kuwaiti subcontractor.
The Custer Battles case in 2006, in which a verdict against a U.S. contractor for contract fraud in Iraq was overturned, also highlights the need for this bill. In the famous Custer Battles case, one contractor in Iraq was found guilty of 37 counts of fraud, including false billing, and was ordered to pay more than $10 million in damages. A federal judge subsequently overturned the decision on a technicality that the contracts were let through the Coalition Provisional Authority, which the court held not to be part of the United States government. This legislation addresses such gaps in existing law — including clarifying that the Coalition Provisional Authority is part of the U.S. government.