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Iraq Transition

Five named in alleged Iraq contracting scam

Story Highlights

• Three Army Reserve officers, two civilians accused in bid-rigging scheme
• Indictment says $8.6 million in reconstruction funds steered to a contractor
• Accused allegedly received kickbacks that included vehicles, jewelry, real estate
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WASHINGTON (CNN) -- A grand jury indicted three Army Reserve officers and two civilians Wednesday on charges they steered more than $8.6 million in Iraqi reconstruction funds to a contractor in exchange for kickbacks that included vehicles, jewelry and real estate.

The 25-count indictment, which includes conspiracy, bribery and money-laundering charges, is the latest development in a wave of criminal charges stemming from the alleged fraudulent use of U.S. funds in Iraq.

"This indictment alleges that the defendants flagrantly enriched themselves at the expense of the Iraqi people -- the very people they were there to help," U.S. Deputy Attorney General Paul McNulty said in a news release. (Read the indictment - pdf)

"U.S. government officials working in Iraq are not for sale. We will prosecute anyone who attempts to exploit the reconstruction efforts in Iraq for their personal gain."

McNulty added that the defendants smuggled bricks of stolen cash from Iraq back to the United States for personal use.

The indictment, filed in U.S. District Court in New Jersey, alleges that bids were rigged while the U.S.-led Coalition Provisional Authority was attempting to establish control of Iraq after Saddam Hussein was toppled.

U.S. Army Reserve Col. Curtis Whiteford is the top military official indicted. He was the second-highest-ranking official in the office overseeing construction funds for the CPA in Hilla, Iraq.

The other defendants include Army Reserve Lt. Col. Debra Harrison and Army Reserve Lt. Col. Michael Wheeler, both of whom worked for Whiteford.

Harrison at one time was acting comptroller of the regional authority, responsible for disbursement of reconstruction funds.

Also indicted are civilians Seymour Morris Jr., owner of a Cyprus-based financial services company, and William Driver, who is Harrison's husband. Morris was arrested Tuesday in Romania, where he resides; U.S. authorities are seeking his extradition.

Already convicted or having pleaded guilty to related crimes are Robert Stein, who was comptroller and funding officer for the regional CPA and was sentenced January 29 to nine years in prison; Philip H. Bloom, who owned several companies in Iraq and Romania and pleaded guilty in March 2006; and Army Lt. Col. Bruce D. Hopfengardner, who pleaded guilty in August. Bloom and Hopfengardner have not been sentenced.

Bids rigged, indictment alleges

The indictment alleges that from 2003 through December 2005, Whiteford, Harrison, Wheeler and Morris conspired with Stein, Bloom and Hopfengardner to rig bids so Bloom won $8.6 million in contracts.

In exchange, Bloom allegedly provided them with more than $1 million in cash, automobiles, jewelry, computers, travel, liquor and promises of jobs.

Driver allegedly received a Cadillac Escalade as a bribe and used illegally obtained cash to make improvements to his and Harrison's home, according to the indictment.

Bloom also allegedly used foreign bank accounts to launder more than $2 million in cash that was stolen from the authority.

Efforts to reach the defendants for comment were unsuccessful Wednesday afternoon.

The charges

The case was opened in October and involved investigators from several federal agencies, including the FBI, Immigration and Customs Enforcement, the Internal Revenue Service and the Defense Department's special inspector general.

Whiteford was charged with conspiracy, bribery and wire fraud.

Harrison was charged with conspiracy, bribery, wire fraud, interstate transport of stolen property, bulk cash smuggling, money laundering and preparing a false tax form.

Wheeler, an adviser for reconstruction projects, was charged with conspiracy, bribery, wire fraud, interstate transport of stolen property and bulk cash smuggling.

Morris was charged with conspiracy and wire fraud.

"These individuals, including three military reserve officers, lieutenant colonels, who were placed in positions of trust, used the CPA funds as their own personal ATM machines," McNulty said.

Announcement of the charges came one day after officials who oversaw the CPA faced lawmakers' questions on Capitol Hill about billions of dollars in government funds for which there has been no accounting.

Recent contracting-fraud cases

Other recent contracting-fraud cases:

  • A U.S. Army civilian translator from Michigan was sentenced Friday to three years in prison for offering bribes to an Iraqi police official.
  • An Army Corps of Engineers employee in Kuwait was given two years in prison January 30 for accepting $50,000 in bribes from a Kuwaiti contractor.
  • An Army chief warrant officer in Kuwait was charged January 25 with receiving a $50,000 bribe for influencing a food services contract.
  • Four members of the California National Guard who had been stationed in Iraq pleaded guilty November 13 to conspiracy to embezzlement.
  • CNN's Terry Frieden contributed to this report.

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    U.S. Deputy Attorney General Paul McNulty describes the allegations at a news conference Wednesday.

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