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U.S.: $360M lost to corruption in Afghanistan

Aug. 16, 2011 - 01:36PM   |   Last Updated: Aug. 16, 2011 - 01:36PM  |  
A convoy of trucks carries U.S. equipment in Kabul, Afghanistan. The U.S. military estimates that $360 million spent on combat support and reconstruction contracts in Afghanistan has ended up in the hands of people the American-led coalition has battled for nearly a decade: the Taliban, criminals and local power brokers with ties to both.
A convoy of trucks carries U.S. equipment in Kabul, Afghanistan. The U.S. military estimates that $360 million spent on combat support and reconstruction contracts in Afghanistan has ended up in the hands of people the American-led coalition has battled for nearly a decade: the Taliban, criminals and local power brokers with ties to both. (Musadeq Sadeq / The Associated Press file photo)
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WASHINGTON — After examining hundreds of combat support and reconstruction contracts in Afghanistan, the U.S military estimates $360 million in U.S. tax dollars has ended up in the hands of people the American-led coalition has spent nearly a decade battling: the Taliban, criminals, and power brokers with ties to both.

The losses underscore the challenges the U.S. and its international partners face in overcoming corruption in Afghanistan. A central part of the Obama administration's strategy has been to award U.S.-financed contracts to Afghan businesses to help improve quality of life and stoke the country's economy.

But until a special task force assembled by Gen. David Petraeus began its investigation last year, the coalition had little visibility into the connections many Afghan companies and their vast network of subcontractors had with insurgents and criminals — groups military officials call "malign actors."

In a murky process known as "reverse money laundering," payments from the U.S. pass through companies hired by the military for transportation, construction, power projects, fuel and other services to businesses and individuals with ties to the insurgency or criminal networks, according to interviews and task force documents obtained by the AP.

"Funds begin as clean monies," according to one document, then "either through direct payments or through the flow of funds in the subcontractor network, the monies become tainted."

The conclusions by Task Force 2010 represent the most definitive assessment of how U.S. military spending and aid to Afghanistan has been diverted to the enemy or stolen. Only a small percentage of the $360 million has been garnered by the Taliban and insurgent groups, said a senior U.S. military official in Kabul. The bulk of the money was lost to profiteering, bribery and extortion by criminals and power brokers, said the official, who declined to provide a specific breakdown.

The official requested anonymity to discuss the task force's ongoing investigation into the movement of U.S. contract money in Afghanistan. The documents obtained by AP were prepared earlier this year and provide an overview of the task force's work.

Overall, the $360 million represents a fraction of the $31 billion in active U.S. contracts that the task force reviewed. But insurgents rely on crude weaponry and require little money to operate. And the illicit gains buttress what the International Crisis Group, a Brussels-based think tank, referred to in a June report as a "nexus between criminal enterprises, insurgent networks and corrupt political elites" in Afghanistan.

More than half the losses flowed through a large transportation contract called Host Nation Trucking, the official said. Eight companies served as prime contractors and hired a web of nearly three dozen subcontractors for vehicles and convoy security to ship huge amounts of food, water, fuel and ammunition to American troops stationed at bases across Afghanistan.

The Defense Department announced Monday that it had selected 20 separate contractors for a new transportation contract potentially worth $983.5 million to replace Host Nation Trucking. Officials said the new arrangement will reduce the reliance on subcontractors and diminish the risk of money being lost. Under the new National Afghan Trucking Services contract, the military will be able to choose from a deeper pool of companies competing against one another to offer the best price to move supplies. The new arrangement also gives the U.S. more flexibility in determining whether security is needed for supply convoys and who should provide it, according to a description of the contract.

The Pentagon did not provide the names of the 20 companies picked due to worries that larger contractors who weren't selected might try and coerce them into a takeover, the senior defense official said. None of the eight prime contractors affiliated with the Host Nation Trucking contract are part of the new arrangement, the official added.

HEB International Logistics of Dubai, a Host Nation Trucking prime contractor, "made payments directly to malign actors," one of the task force documents reads. In 2009 and 2010, an HEB subcontractor identified in the document only as "Rohullah" received $1.7 million in payments. A congressional report issued last year said Rohullah — whose name is spelled Ruhallah in that report — is a warlord who controlled the convoy security business along the highway between Kabul and Kandahar, the two largest cities in Afghanistan.

Half a dozen attempts to reach officials at HEB's offices in Dubai by telephone were unsuccessful due to calls being transferred and lines going dead. It is also the holy month of Ramadan when many employees work shortened days and offices close early.

The congressional report said Rohullah's hundreds of heavily armed guards operated a protection racket, charging contractors moving U.S. military supplies along the highway as much as $1,500 a vehicle. Failure to pay virtually guaranteed a convoy of being attacked by Rohullah's forces, said the report, "Warlord Inc." Rohullah's guards regularly fought with the Taliban, but investigators believe Rohullah moved money to the Taliban when it was in his interest to do so.

Both Rohullah and the security company he was affiliated with, Watan Risk Management, denied ever making payments to the insurgents, according to the report. But in December, the U.S. placed Watan in "proposed debarment status," which prevented it from signing new contracts or renewing existing contracts. Watan challenged the decision in federal court. Two weeks ago, Watan and U.S. officials signed an agreement that states the company may not bid on any mobile security contracts for the next three years. The ban does not affect other companies controlled by Watan's owners.

The task force also said contractors engaged in profiteering by forming dummy companies. A task force document shows three tiers of subcontractors below Guzar Mirbacha Kot Transportation, an Afghan-owned trucking company known as GMT. Four of the subcontractors appear on the first and second tiers, collecting $14.2 million in payments.

Basir Mujahid, a GMT representative in Kabul, said top company officials were in Dubai and could not be reached for immediate comment.

Power brokers — a term widely used in Afghanistan — refer to Afghans who leverage their political and business connections to advance their own interests.

Another task force document details the case of a power broker who owned a private security company and was known to supply weapons to the Taliban. The power broker, who is not named in the document, received payments from a contractor doing business with the U.S. Over more than two years, the power broker funneled $8.5 million to the owners of an unlicensed money exchange service used by insurgents, according to the document.

Rep. John Tierney, D-Mass., former chairman of the House oversight panel that investigated the wayward payments, said that the U.S. must stop the diversion of taxpayer dollars to the enemy. "When war becomes good business for the insurgents, it is all the more difficult to convince them to lay down their arms," Tierney said.

U.S. authorities in Afghanistan are screening contractors more carefully to be sure they can handle the work and also are trustworthy, the senior military official said. Authorities also are being more aggressive in barring companies if they violate contract terms or are found to be involved in illicit activities. Since the task force was created last year, the number of debarred Afghan, U.S. and international companies and individuals associated with contracting in Afghanistan has more than doubled — from 31 to 78, the official said.

Petraeus, who recently relinquished command in Afghanistan to become CIA director, told his commanders in a September 2010 memo to keep close watch over contracting dollars and "know those with whom we are contracting." Failing to do so could "unintentionally fuel corruption, finance insurgent organizations, strengthen criminal patronage networks, and undermine our efforts in Afghanistan," he wrote.

Tierney, the top Democrat on the House Oversight and Government Reform national security subcommittee, said the new trucking contract announced Monday is a welcome step. But he said he is still worried the military still lacks sufficient visibility and accountability over payments. The subcommittee has scheduled a hearing next month to examine the contract and the risks of outsourcing security in a combat zone.

———

Riechmann reported from Kabul.

———

Clarification

WASHINGTON — In stories sent Aug. 16-17, The Associated Press cited the findings of a U.S. military task force that concluded $360 million in U.S. government contract payments in Afghanistan ended up in the hands of the Taliban, criminals and power brokers with ties to both. The story quoted a 2010 congressional report that said armed guards working for Commander Rohullah operated a protection racket, charging contractors moving military supplies along the Kbul-Kandahar highway as much as $1,500 a vehicle. Rohullah's guards fought regularly against the Taliban, but congressional investigators believe Rohullah also made payments to the Taliban. The AP also cited Rohullah's denial in the report of making any payments to the Taliban.

The story should have noted that the congressional report was a key factor in the Army's move to bar Rohullah from being allowed to bid on U.S. contracts. Rohullah's lawyer, Gerald Posner of New York, challenged the action, and the Army disclosed June 2 that it was dropping debarment proceedings. The Army said Rohullah's statements in May 2010 to congressional Investigators may have been "either misunderstood or misconstrued" due to his lack of English, and he was "less likely" to engage in similar conduct in the future.

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