Those who blow whistle on contractor fraud in Iraq face penalties

BY DEBORAH HASTINGS
AP National Writer

08/25/07 "AP" -- --One after another, the men and women who have stepped forward to report corruption in the massive effort to rebuild Iraq have been vilified, fired and demoted.

Or worse.

For daring to report illegal arms sales, Navy veteran Donald Vance says he was imprisoned by the American military in a security compound outside Baghdad and subjected to harsh interrogation methods.

There were times, huddled on the floor in solitary confinement with that head-banging music blaring dawn to dusk and interrogators yelling the same questions over and over, that Vance began to wish he had just kept his mouth shut.

He had thought he was doing a good and noble thing when he started telling the FBI about the guns and the land mines and the rocket-launchers - all of them being sold for cash, no receipts necessary, he said. He told a federal agent the buyers were Iraqi insurgents, American soldiers, State Department workers, and Iraqi embassy and ministry employees.

The seller, he claimed, was the Iraqi-owned company he worked for, Shield Group Security Co.

''It was a Wal-Mart for guns,'' he says. ''It was all illegal and everyone knew it.''

So Vance says he blew the whistle, supplying photos and documents and other intelligence to an FBI agent in his hometown of Chicago because he didn't know whom to trust in Iraq.

For his trouble, he says, he got 97 days in Camp Cropper, an American military prison outside Baghdad that once held Saddam Hussein, and he was classified a security detainee.

Also held was colleague Nathan Ertel, who helped Vance gather evidence documenting the sales, according to a federal lawsuit both have filed in Chicago, alleging they were illegally imprisoned and subjected to physical and mental interrogation tactics ''reserved for terrorists and so-called enemy combatants.''

Corruption has long plagued Iraq reconstruction. Hundreds of projects may never be finished, including repairs to the country's oil pipelines and electricity system. Congress gave more than $30 billion to rebuild Iraq, and at least $8.8 billion of it has disappeared, according to a government reconstruction audit.

Despite this staggering mess, there are no noble outcomes for those who have blown the whistle, according to a review of such cases by The Associated Press.

''If you do it, you will be destroyed,'' said William Weaver, professor of political science at the University of Texas-El Paso and senior advisor to the National Security Whistleblowers Coalition.

''Reconstruction is so rife with corruption. Sometimes people ask me, 'Should I do this?' And my answer is no. If they're married, they'll lose their family. They will lose their jobs. They will lose everything,'' Weaver said.

They have been fired or demoted, shunned by colleagues, and denied government support in whistleblower lawsuits filed against contracting firms.

''The only way we can find out what is going on is for someone to come forward and let us know,'' said Beth Daley of the Project on Government Oversight, an independent, nonprofit group that investigates corruption. ''But when they do, the weight of the government comes down on them. The message is, 'Don't blow the whistle or we'll make your life hell.'

''It's heartbreaking,'' Daley said. ''There is an even greater need for whistleblowers now. But they are made into public martyrs. It's a disgrace. Their lives get ruined.''

Bunnatine ''Bunny'' Greenhouse knows this only too well. As the highest-ranking civilian contracting officer in the U.S. Army Corps of Engineers, she testified before a congressional committee in 2005 that she found widespread fraud in multibillion-dollar rebuilding contracts awarded to former Halliburton subsidiary KBR.

Soon after, Greenhouse was demoted. She now sits in a tiny cubicle in a different department with very little to do and no decision-making authority, at the end of an otherwise exemplary 20-year career.

People she has known for years no longer speak to her.

''It's just amazing how we say we want to remove fraud from our government, then we gag people who are just trying to stand up and do the right thing,'' she says.

In her demotion, her supervisors said she was performing poorly. ''They just wanted to get rid of me,'' she says softly. The Army Corps of Engineers denies her claims.

''You just don't have happy endings,'' said Weaver. ''She was a wonderful example of a federal employee. They just completely creamed her. In the end, no one followed up, no one cared.''

But Greenhouse regrets nothing. ''I have the courage to say what needs to be said. I paid the price,'' she says.

Then there is Robert Isakson, who filed a whistleblower suit against contractor Custer Battles in 2004, alleging the company - with which he was briefly associated - bilked the U.S. government out of tens of millions of dollars by filing fake invoices and padding other bills for reconstruction work.

He and his co-plaintiff, William Baldwin, a former employee fired by the firm, doggedly pursued the suit for two years, gathering evidence on their own and flying overseas to obtain more information from witnesses. Eventually, a federal jury agreed with them and awarded a $10 million judgment against the now-defunct firm, which had denied all wrongdoing.

It was the first civil verdict for Iraq reconstruction fraud.

But in 2006, U.S. District Judge T.S. Ellis III overturned the jury award. He said Isakson and Baldwin failed to prove that the Coalition Provisional Authority, the U.S.-backed occupier of Iraq for 14 months, was part of the U.S. government.

Not a single Iraq whistleblower suit has gone to trial since.

''It's a sad, heartbreaking comment on the system,'' said Isakson, a former FBI agent who owns an international contracting company based in Alabama. ''I tried to help the government, and the government didn't seem to care.''

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One way to blow the whistle is to file a ''qui tam'' lawsuit (taken from the Latin phrase ''he who sues for the king, as well as for himself'') under the federal False Claims Act.

Signed by Abraham Lincoln in response to military contractors selling defective products to the Union Army, the act allows private citizens to sue on the government's behalf.

The government has the option to sign on, with all plaintiffs receiving a percentage of monetary damages, which are tripled in these suits.

It can be a straightforward and effective way to recoup federal funds lost to fraud. In the past, the Justice Department has joined several such cases and won. They included instances of Medicare and Medicaid overbilling, and padded invoices from domestic contractors.

But the government has not joined a single quit tam suit alleging Iraq reconstruction abuse, estimated in the tens of millions. At least a dozen have been filed since 2004.

''It taints these cases,'' said attorney Alan Grayson, who filed the Custer Battles suit and several others like it. ''If the government won't sign on, then it can't be a very good case - that's the effect it has on judges.''

The Justice Department declined comment.

Most of the lawsuits are brought by former employees of giant firms. Some plaintiffs have testified before members of Congress, providing examples of fraud they say they witnessed and the retaliation they experienced after speaking up.

Julie McBride testified last year that as a ''morale, welfare and recreation coordinator'' at Camp Fallujah, she saw KBR exaggerate costs by double- and triple-counting the number of soldiers who used recreational facilities.

She also said the company took supplies destined for a Super Bowl party for U.S. troops and instead used them to stage a celebration for themselves.

''After I voiced my concerns about what I believed to be accounting fraud, Halliburton placed me under guard and kept me in seclusion,'' she told the committee. ''My property was searched, and I was specifically told that I was not allowed to speak to any member of the U.S. military. I remained under guard until I was flown out of the country.''

Halliburton and KBR denied her testimony.

She also has filed a whistleblower suit. The Justice Department has said it would not join the action. But last month, a federal judge refused a motion by KBR to dismiss the lawsuit.

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Donald Vance, the contractor and Navy veteran detained in Iraq after he blew the whistle on his company's weapons sales, says he has stopped talking to the federal government.

Navy Capt. John Fleming, a spokesman for U.S. detention operations in Iraq, confirmed the detentions but said he could provide no further details because of the lawsuit.

According to their suit, Vance and Ertel gathered photographs and documents, which Vance fed to Chicago FBI agent Travis Carlisle for six months beginning in October 2005. Carlisle, reached by phone at Chicago's FBI field office, declined comment. An agency spokesman also would not comment.

The Iraqi company has since disbanded, according the suit.

Vance said things went terribly wrong in April 2006, when he and Ertel were stripped of their security passes and confined to the company compound.

Panicking, Vance said, he called the U.S. Embassy in Baghdad, where hostage experts got on the phone and told him ''you're about to be kidnapped. Lock yourself in a room with all the weapons you can get your hands on.'''

The military sent a Special Forces team to rescue them, Vance said, and the two men showed the soldiers where the weapons caches were stored. At the embassy, the men were debriefed and allowed to sleep for a few hours. ''I thought I was among friends,'' Vance said.

The men said they were cuffed and hooded and driven to Camp Cropper, where Vance was held for nearly three months and his colleague for a little more than a month. Eventually, their jailers said they were being held as security internees because their employer was suspected of selling weapons to terrorists and insurgents, the lawsuit said.

The prisoners said they repeatedly told interrogators to contact Carlisle in Chicago. ''One set of interrogators told us that Travis Carlisle doesn't exist. Then some others would say, 'He says he doesn't know who you are,''' Vance said.

Released first was Ertel, who has returned to work in Iraq for a different company. Vance said he has never learned why he was held longer. His own interrogations, he said, seemed focused on why he reported his information to someone outside Iraq.

And then one day, without explanation, he was released.

''They drove me to Baghdad International Airport and dumped me,'' he said.

When he got home, he decided to never call the FBI again. He called a lawyer, instead.

''There's an unspoken rule in Baghdad,'' he said. ''Don't snitch on people and don't burn bridges.''

For doing both, Vance said, he paid with 97 days of his life.

AP-WS-08-24-07 1512EDT