It’s Time to Bar Corporate Criminals from Federal Contracting

By Charlie Cray 
Published October 7, 2005

Editor’s note: The author published an earlier version of this article in the San Diego Tribune.

Shortly after Katrina hit, FEMA, the Federal Emergency Management Agency, gave out huge no-bid contracts for post-hurricane debris removal and reconstruction: contracts guaranteeing that many of the companies now looting U.S. taxpayers in Iraq will be cleaning up from the Gulf Coast disaster. Because there was enough public outcry, FEMA pledged to a Senate Committee on October 6 that it would re-bid the contracts.

People whose jobs and homes were washed away in the U.S. hurricanes are finding it difficult to get in on the action.

First, President George Bush signed a waiver of the wage requirements that apply to federal contractors. He also junked affirmative-action requirements for contractors. Minority contractors say they are being shut out — just as many Iraqi-owned companies are excluded from working on their own country’s reconstruction.

FEMA has made the contracting process even more opaque by outsourcing procurement and contracting processes to such companies as Ashbritt and Acquisition Solutions.

Ashbritt’s ties to Mississippi Gov. Haley Barbour may be one reason that company got a $500 million contract. Barbour knows how the game works; he helped Ashbritt get similar work in Florida last year, and he consulted for companies bidding on contracts in Iraq, along with former FEMA head Joseph Allbaugh. Allbaugh, whose Baton Rouge offices are in the eye of the current contracting windfall, is reportedly consulting for Halliburton and for Shaw, another no-bid FEMA contractor.

Back in Washington, Sen. Mel Martinez (R.-Fla.) held a “Katrina Reconstruction Summit” for contractors. The Sept. 26 meeting was co-sponsored by Halliburton.

The Bush administration should have learned from the botched reconstruction of Iraq that success requires the involvement in planning of those with the most at stake. But the administration apparently can’t figure out why, when it’s got so many friends working as lobbyists and contractors, it should bother talking to anyone else.

Of course, the Gulf Coast is not the Persian Gulf. And a modest effort is afoot to prevent the kind of contracting abuses witnessed in Iraq. House and Senate appropriations committees have sent dozens of inspectors to monitor the Katrina contractors. In addition, a bipartisan group of senators, led by Susan Collins (R.-Maine) and Joseph Lieberman (D.-Conn.), wants to let the inspector general — whose office uncovered the fraud and waste in Iraq — oversee the Katrina contracts. Meanwhile, Sen. John Cornyn (R.-Texas) has introduced a bill that would establish stiff criminal penalties for misuse of relief and reconstruction funds.

These are good ideas. But if Congress really wants to prevent the waste, fraud, and other abuses seen in Iraq, it must exclude companies with a record of contracting abuses from participating in any contracts.

On the same day that Republican Senator Martinez was helping Halliburton, 19 members of the Congressional Progressive Caucus called on (pdf) President Bush to suspend Halliburton from any new federal contracts, because of its history of fraud, bribery, and other abuses, in Iraq and elsewhere.

The caucus’s proposal will probably be dismissed as partisan sniping. But it makes sense: The federal government suspended Enron from any new federal contracts after that company’s crimes were revealed, even before any of its executives were indicted or convicted. Similarly, we should protect taxpayers by applying the same exclusion to Halliburton.

Federal acquisition regulations require the use of “responsible contractors.” Surely there are few companies with Halliburton’s astonishing record of bribery, fraud, and other abuses. Recall the truckloads of overpriced gas imported from Kuwait to Iraq; the $100 laundry bags’; the $45 cases of soda; the deliberate torching of $85,000 trucks in need of repair; multiple cases of bribery in Iraq and Nigeria; the use of a Cayman Islands subsidiary to do business in Iran (in violation of U.S. policy); and so forth. Numerous investigations into Halliburton’s contracting practices and abuses are still under way at the Department of Justice, the Securites and Exchange Commission, and the Treasury Department.

The Army Corps of Engineers cannot be trusted to enforce the requirement of “responsible contractors.” It recently demoted Bunnatine Greenhouse, the high-ranking whistleblower who told Congress that contracts awarded to Halliburton represented “the most blatant and improper contract abuse I have witnessed during the course of my professional career.” Greenhouse says she was “removed because I steadfastly resisted and attempted to alter what can be described as casual and clubby contracting practices.”

Another federal-government office charged with enforcing responsible-contracting standards has been undermined by Bush’s penchant for placing political cronies with questionable competence in high-level bureaucratic positions. David Safavian — whose Office of Procurement Policy at the General Services Administration oversees an estimated $300 billion worth of annual government contracts — was recently arrested for lying to investigators and obstructing an investigation of Republican lobbyist Jack Abramoff.

With incompetent or corrupt cronies in charge of enforcing responsible-contracting rules, it’s not surprising that Halliburton got a $16 million contract after Katrina. But if Congress is serious about preventing the kind of waste, fraud, and other abuses that we witnessed in Iraq, Congress must exclude such corporate criminal recidivists as Halliburton from any future contracts.

Charlie Cray is the co-author of The People’s Business, director of the Center for Corporate Policy, and co-director of .