[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]





    WAR PROFITEERING AND OTHER CONTRACTOR CRIMES COMMITTED OVERSEAS

=======================================================================

                                HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON CRIME, TERRORISM,
                         AND HOMELAND SECURITY

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 19, 2007

                               __________

                           Serial No. 110-103

                               __________

         Printed for the use of the Committee on the Judiciary










      Available via the World Wide Web: http://judiciary.house.gov

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                       COMMITTEE ON THE JUDICIARY

                 JOHN CONYERS, Jr., Michigan, Chairman
HOWARD L. BERMAN, California         LAMAR SMITH, Texas
RICK BOUCHER, Virginia               F. JAMES SENSENBRENNER, Jr., 
JERROLD NADLER, New York                 Wisconsin
ROBERT C. ``BOBBY'' SCOTT, Virginia  HOWARD COBLE, North Carolina
MELVIN L. WATT, North Carolina       ELTON GALLEGLY, California
ZOE LOFGREN, California              BOB GOODLATTE, Virginia
SHEILA JACKSON LEE, Texas            STEVE CHABOT, Ohio
MAXINE WATERS, California            DANIEL E. LUNGREN, California
MARTIN T. MEEHAN, Massachusetts      CHRIS CANNON, Utah
WILLIAM D. DELAHUNT, Massachusetts   RIC KELLER, Florida
ROBERT WEXLER, Florida               DARRELL ISSA, California
LINDA T. SANCHEZ, California         MIKE PENCE, Indiana
STEVE COHEN, Tennessee               J. RANDY FORBES, Virginia
HANK JOHNSON, Georgia                STEVE KING, Iowa
LUIS V. GUTIERREZ, Illinois          TOM FEENEY, Florida
BRAD SHERMAN, California             TRENT FRANKS, Arizona
TAMMY BALDWIN, Wisconsin             LOUIE GOHMERT, Texas
ANTHONY D. WEINER, New York          JIM JORDAN, Ohio
ADAM B. SCHIFF, California
ARTUR DAVIS, Alabama
DEBBIE WASSERMAN SCHULTZ, Florida
KEITH ELLISON, Minnesota

            Perry Apelbaum, Staff Director and Chief Counsel
                 Joseph Gibson, Minority Chief Counsel
                                 ------                                

        Subcommittee on Crime, Terrorism, and Homeland Security

             ROBERT C. ``BOBBY'' SCOTT, Virginia, Chairman

MAXINE WATERS, California            J. RANDY FORBES, Virginia
WILLIAM D. DELAHUNT, Massachusetts   LOUIE GOHMERT, Texas
JERROLD NADLER, New York             F. JAMES SENSENBRENNER, Jr., 
HANK JOHNSON, Georgia                Wisconsin
ANTHONY D. WEINER, New York          HOWARD COBLE, North Carolina
SHEILA JACKSON LEE, Texas            STEVE CHABOT, Ohio
MARTIN T. MEEHAN, Massachusetts      DANIEL E. LUNGREN, California
ARTUR DAVIS, Alabama
TAMMY BALDWIN, Wisconsin

                      Bobby Vassar, Chief Counsel

                    Michael Volkov, Minority Counsel



























                            C O N T E N T S

                              ----------                              

                             JUNE 19, 2007

                                                                   Page

                           OPENING STATEMENTS

The Honorable Robert C. ``Bobby'' Scott, a Representative in 
  Congress from the State of Virginia, and Chairman, Subcommittee 
  on Crime, Terrorism, and Homeland Security.....................     1
The Honorable J. Randy Forbes, a Representative in Congress from 
  the State of Virginia, and Ranking Member, Subcommittee on 
  Crime, Terrorism, and Homeland Security........................     3

                               WITNESSES

The Honorable Stuart W. Bowen, Jr., Special Inspector General for 
  Iraq Reconstruction, Arlington, VA
  Oral Testimony.................................................     7
  Prepared Statement.............................................     8
Mr. Thomas F. Gimble, Principal Deputy Inspector General, U.S. 
  Department of Defense, Washington, DC
  Oral Testimony.................................................    11
  Prepared Statement.............................................    13
Mr. Barry M. Sabin, Deputy Assistant Attorney General, U.S. 
  Department of Justice, Washington, DC
  Oral Testimony.................................................    27
  Prepared Statement.............................................    29
Mr. Alan Grayson, Grayson & Kubli, P.C., McLean, VA
  Oral Testimony.................................................    40
  Prepared Statement.............................................    42
Ms. Erica Razook, Legal Advisor to the Business and HuMAN Rights 
  Program, Amnesty International, New York, NY
  Oral Testimony.................................................    44
  Prepared Statement.............................................    46
Mr. Scott Horton, Adjunct Professor of Law, Columbia University 
  School of Law, New York, NY
  Oral Testimony.................................................    48
  Prepared Statement.............................................    51

                                APPENDIX

Material Submitted for the Hearing Record........................    79









 
             WAR PROFITEERING AND OTHER CONTRACTOR CRIMES
                           COMMITTED OVERSEAS

                              ----------                              


                         TUESDAY, JUNE 19, 2007

              House of Representatives,    
              Subcommittee on Crime, Terrorism,    
                              and Homeland Security
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 2:05 p.m., in 
Room 2141, Rayburn House Office Building, the Honorable Robert 
C. ``Bobby'' Scott (Chairman of the Subcommittee) presiding.
    Present: Representatives Scott, Delahunt, Johnson, Forbes, 
Coble, and Chabot.
    Staff Present: Bobby Vassar, Subcommittee Chief Counsel; 
Ameer Gopalani, Majority Counsel; Veronica Eligan, Professional 
Staff Member; Caroline Lynch, Minority Counsel; and Kelsey 
Whitlock, Minority Staff Assistant.
    Mr. Scott. The Subcommittee will come to order.
    I am pleased to welcome you today to the hearing before the 
Subcommittee on Crime, Terrorism, and Homeland Security on 
``War Profiteering and Other Contractor Crimes Committed 
Overseas.''
    Over the last 4 years, reconstruction fraud has run rampant 
during the engagement of U.S. forces in Iraq and Afghanistan. 
The United States has devoted more than $50 billion to relief 
and reconstruction activities in Iraq and Afghanistan, and the 
inspectors general that are here before us today have reported 
that millions of these dollars still are unaccounted for.
    Millions may have been lost to fraud and other misconduct, 
and these inspectors general have opened hundreds of 
investigations into fraud, waste and abuse in Iraq, Kuwait and 
Afghanistan involving illegal kickbacks, bid rigging, 
embezzlements and fraudulent overbilling.
    In addition to the fraud, there is well-documented evidence 
of detainee abuse perpetrated by contractors as well as 
evidence of unjustified shootings and killings by private 
security contractors.
    Private contractors have been used to a greater extent that 
at any other time in our history. With the exponential use of 
contractors comes the greater scrutiny of which laws, if any, 
they are exposed to, and we currently have a situation in which 
many contractors act with impunity and no accountability 
because they operate outside of the physical jurisdiction of 
the United States and, therefore, outside of the jurisdiction 
of the U.S. Criminal Code.
    I hope at this hearing we will be able to explore the 
following questions: What is the extent of the problem, why are 
there so few prosecutions, what are the reasons for the lack of 
transparency in investigations and prosecutions, and are the 
existing laws adequate to address these problems?
    With respect to the first point, considering the vast 
amount of evidence and investigations, there have been 
relatively few prosecutions for fraud or detainee abuse. 
Inspectors general before us have more than 70 open and active 
investigations in contracting fraud and abuse in the war. In 
addition, private whistleblowers have filed numerous civil 
claims involving Iraq fraud under the False Claims Act.
    Despite the breadth of all of these investigations and 
cases, the Department of Justice has pursued only a relatively 
small number of the cases, and it has not even participated at 
all in the whistleblower cases.
    With respect to detainee abuse in Iraq, there has only been 
one successful prosecution of a civilian contractor, and that 
was for the conviction of a CIA contractor for beating a 
detainee who later died.
    Another question that arises with respect to prosecutions 
and investigations is a lack of transparency. For example, 17 
pending cases of detainee abuse, including the abuse at Abu 
Ghraib prison by contractors, have remained on the docket of 
the U.S. attorney's office in the Eastern District of Virginia 
for 3 years.
    In some of these cases, the Army has investigated the 
circumstances behind them and found probable cause that a crime 
has been committed and referred these cases to the Department 
of Justice for prosecution. But we are not told why these cases 
are being held up and what the next steps are for prosecution.
    On the fraud side, the Department of Justice has ignored 
the False Claims Act cases by obtaining court orders sealing 
the cases. Most of the cases filed regarding the war 
profiteering in Iraq have remained under seal.
    Finally, we need to examine whether the present laws on the 
books are sufficient to address the problem. Although there are 
antifraud laws to protect against waste of the United States 
dollars at home, no law expressly forbid war profiteering or 
expressly confers jurisdiction of the U.S. Federal court to 
hear fraud cases outside the normal bounds of the United States 
Criminal Code.
    To this end, the gentleman from Hawaii, Mr. Abercrombie, 
has introduced H.R. 400, the ``War Profiteering Prevention Act 
of 2007,'' a companion bill to Senator Leahy's War Profiteering 
Act.
    The legislation would criminalize overcharging taxpayers to 
defraud and to profit extensively from a war military action or 
reconstruction effort. The crime would be a felony subject to 
criminal penalties of up to 20 years in prison and fines up to 
a million dollars or twice the illegal gross profits of the 
crime, whichever is higher.
    The bill also prohibits false statements connected with the 
provision of goods and services in connection with war or 
reconstruction effort. This crime would be a felony subject to 
the criminal penalties of up to 10 years in prison and fines up 
to $1 million or twice the illegal gross profits of the crime, 
whichever is higher.
    In sum, the bill sends a clear message that all contracting 
fraud, whether it occurs in Iraq or elsewhere overseas, for 
exorbitant gain is not only unacceptable and reprehensible; it 
will be illegal.
    With respect to the detainee abuse and other human rights 
crimes committed overseas, we need to examine whether the 
Federal courts have the appropriate authority to hear such 
cases. While some abuses by military and some security 
contractors may be prosecuted under current U.S. law, there 
have been calls to clarify and amend the Military Exterritorial 
Jurisdiction Act, the MEJA.
    When that was signed into law in 2000, it provided the 
United States Courts with jurisdiction over only those civilian 
employees, contractors and subcontractors affiliated with the 
Defense Department who create crimes overseas. That law was 
later amended in 2005 to include employees of any Federal 
agency supporting the mission of the Department of Defense 
overseas.
    We need to make sure that the growing number of contractors 
overseas do not escape accountability simply because they are 
not deemed to be supporting the mission of the Department of 
Defense. To this end, on January 10, the gentleman from North 
Carolina, Mr. Price, introduced H.R. 369, the Transparency and 
Accountability and Security Contracting Act of 2007.
    The bill includes two provisions which will close the 
loophole to cover all private security contractors, not just 
those associated with the Department of Defense, to ensure that 
they are accountable under U.S. law. He also recently 
introduced the provision as a standalone bill, H.R. 2740, the 
MEJA Expansion and Enforcement Act of 2007.
    So, today, I hope we can determine what kind of priority 
the Department of Justice assigns to reconstruction fraud 
cases, why many cases have not been prosecuted and what can be 
done to correct the situation, whether it is through 
legislation, more resources or other action.
    It is now my privilege to recognize our esteemed colleague, 
the Ranking Member of the Subcommittee, my colleague from 
Virginia, Randy Forbes, for his opening statement.
    Mr. Forbes. Thank you, Mr. Chairman.
    And to all of our witnesses, we appreciate you being here 
today and taking your time both in preparing for this testimony 
and presenting it to us and responding to our questions.
    I want to thank Chairman Scott for holding this hearing on 
H.R. 400, the ``War Profiteering Prevention Act of 2007'' and 
H.R. 369, the ``Transparency and Accountability and Security 
Contracting Act of 2007.''
    First of all, something we all agree on, it is not new, it 
is not novel, and that is that fraud against the United States 
and the defense industry or in relief or reconstruction 
activities undermines our national security. Criminals who 
enrich themselves at the expense of our military effort deserve 
stiff sentences. Their actions threaten the safety and security 
of our men and women in uniform and the success of our military 
operations.
    Unfortunately, we see it in Iraq, we see it in New Orleans 
when we have relief efforts down there, and we act as if 
sometimes this has just been birthed today or it has just been 
birthed in this war.
    As I look at the parties and the stakeholders and 
discussing this legislation, there are a number of currents 
that all start coming together. There are representatives from 
Government whose job it is to oversee this and do a good job in 
trying to find out and make sure the Government gets what it 
has paid for. We have attorneys who make a lot of money off 
this kind of litigation and, obviously, have a strong interest 
in making sure that it takes place. And then we have 
politicians who love to always point their fingers and act like 
this is something new and different, and it just arrived.
    I have looked at some of the history of war profiteering, 
and, you know, we have had arms merchants that have been 
profiteering for centuries. During the Civil War, Lincoln 
denounced war profiteers as worse than traitors. He pushed for 
the first Federal laws against abuse. These were called the 
False Claims Act.
    Congressional investigations were conducted, and Congress 
passed antiwar profiteering statutes after World War I, World 
War II and the Korean War. A provision from a statute in World 
War II was used as a model for a provision which was attempted 
to be added to legislation in 2003, but was stripped out of the 
final bill.
    August 31, 1990, Senator Jim Sasser of Tennessee challenged 
oil companies to reduce their prices or face profiteering 
charges as the crisis in the Middle East escalated.
    September 12, 1990, then President Bush warned the U.S. 
would not tolerate profiteering during the then Persian Gulf 
crisis after legislation was introduced in both the House and 
the Senate to prohibit excess fuel price increases during 
national emergencies.
    A U.S. renegotiation board, a separate entity created the 
Korean War to guard against profiteering by defense 
contractors--in 1978, it returned $34.4 million in profits it 
had found to be unwarranted, while spending only $6.2 million. 
Its demise came in 1976 after Congress refused to extend the 
budget.
    And during Lyndon Johnson's presidency, allegations were 
made against some corporations who had contributed hugely to 
his campaign, suggesting that they had close ties to the 
President which dated back to the 1940's and that there was 
huge profiteering involved then.
    Today's witnesses will outline the significant effort that 
has been made by the Justice Department, the Department of 
Defense and the special investigator for the government of Iraq 
reconstruction to identify and prosecute fraudulent schemes in 
the global war against terrorism.
    These cases are difficult to bring since they occur in or 
close to the theater of war. Fraud cases require extensive 
investigative resources and documentation. Gathering such 
evidence in a dangerous setting like Iraq or Afghanistan makes 
it extremely difficult sometimes to build a successful 
prosecution.
    Despite these difficulties, as the witnesses will explain, 
many successful prosecutions have been brought by the Justice 
Department, and it is likely that more will be brought. These 
cases are not unique to any national effort in our Nation's 
history.
    When large amounts of money are expended, criminals see an 
opportunity to steal from the Government. Those criminals must 
be punished, and justice must be swift and sure.
    Some may use this issue for political advantage by alleging 
that such criminal activity reflects cronyism in the 
Administration. Such claims are made without any factual base 
and are actually contradicted by the prosecutions against its 
contractors.
    I am interested in focusing on the nature of the problem 
and what, if any, additional resources are needed to fix the 
problem. It is easy just to say or propose that additional FBI 
resources should be added to investigate these cases without 
considering the impact on other FBI responsibilities. 
Similarly, some may argue that more cases should be brought. We 
all agree on that.
    My concern is how to deal and how to do that in the most 
effective way possible, making the most from the resources that 
are available and considering what resources may be needed to 
help this effort.
    With respect to the specific proposals before us, the 
Justice Department has raised significant problems with H.R. 
400, the ``War Profiteering Prevention Act of 2007.'' 
Specifically, the Justice Department raises several significant 
concerns with the wording of the bill which would actually 
hinder rather than help the prosecution of war profiteering 
cases.
    Moreover, the Justice Department is currently prosecuting 
these cases under a variety of existing fraud and racketeering 
statutes, and acting anew in separate criminal statute for war-
related fraud could make it, some would argue, more difficult 
to prosecute some of these cases.
    It is important to keep in mind that criminal prosecutions 
do not occur in a vacuum. Criminal statutes are accompanied by 
a body of case law that guides their use. Adding a separate 
statute for war profiteering may score a political point, while 
actually weakening U.S. efforts to prosecute these crimes. 
Sometimes more is not better. It is just more.
    I also have concerns about H.R. 369, the Transparency and 
Accountability and Security Contracting Act of 2007. H.R. 369 
extends extraterritorial jurisdiction to include a person 
employed under a contract or subcontract at any tier awarded by 
any department or agency of the United States government where 
the work under such contract is carried out in a region outside 
the United States in which the armed forces are conducting a 
contingency operation.
    Such authority is not needed to prosecute fraud committed 
in the defense industry or in the relief or reconstruction 
efforts. This is an attempt to extend jurisdiction of the 
Federal criminal code to war crimes, alleged torture and other 
criminal acts committed by persons under contract with non-DoD 
agencies.
    Congress is legislating in response to allegations of such 
crimes. We must be cautious in extending the Military 
Extraterritorial Jurisdiction Act because, as written, the 
proposed language may be struck down as an unconstitutional 
assertion of criminal jurisdiction.
    I urge Chairman Scott to hold a separate hearing on the 
issues raised by H.R. 369. Our Subcommittee works best when we 
deal with issues in a fair and full debate. Such process brings 
greater consensus and sharpens the issue.
    I look forward to hearing from today's witnesses and 
working together to address these important issues.
    Mr. Chairman, thank you again for having this hearing, and 
I yield back the balance of my time.
    Mr. Scott. Thank you. Thank you. And I thank you for your 
statement.
    We have been joined by Mr. Delahunt from Massachusetts, Mr. 
Johnson from Georgia, and Mr. Coble is with us from North 
Carolina.
    Our witnesses today--we will begin with Mr. Stuart Bowen, 
who has served as special inspector general for Iraq 
reconstruction since October 2004. He previously served as 
inspector general for the Coalition Provisional Authority, a 
position to which he was appointed in January of 2004. He holds 
a BA from the University of the South, attended Vanderbilt Law 
School and received a JD from St. Mary's Law School.
    After he testifies, our next witness will be Mr. Thomas 
Gimble, principal deputy inspector general for the Department 
of Defense. He also served as acting inspector general until 
April 30, 2007. As principal deputy inspector general, he 
reports directly to the DoD inspector general. He attended 
Lamar University where he received a BBA and the University of 
Texas at San Antonio where he received an MBA. He is a 
certified public accountant and certified government financial 
manager.
    Mr. Barry Sabin, Deputy Assistant Attorney General in the 
criminal division of the United States Department of Justice. 
Since 2006, he has been responsible for overseeing the fraud 
section, criminal appellate section, gang squad and capital 
case unit. He received his bachelor's and master's degrees from 
the University of Pennsylvania and a law degree from New York 
University School of Law.
    Next will be Mr. Alan Grayson who is the principal at 
Grayson & Kubli. Before he started the firm, he was a founder 
and president of IDT Corporation. He received his juris 
doctorate from Harvard Law School, holds a master's from the 
Kennedy School of Government at Harvard, and completed his 
undergraduate work at Harvard.
    Next is Erika Razook who for 2 years has advised Amnesty 
International's Business and Human Rights Program where she 
conducted research and analysis of applicable laws, agency 
regulations, proposed bills and other mechanisms for holding 
private, military and security contractors accountable for 
human rights violations and criminal acts committed on foreign 
soil. She holds a law degree from Brooklyn Law School.
    Our final witness will be Scott Horton who is an adjunct 
professor at Columbia Law School where he teaches law of armed 
conflict and commercial law courses. He is also chair of the 
committee on international law at The Association of the Bar of 
the City of New York. Since February of this year, he has 
managed the project on accountability of private military 
contractors on Human Rights First. He is an author of more than 
100 publications dealing with issues of international public 
and private law, and he is currently working on a book on legal 
policy issues relating to private military contractors.
    Each of our witnesses' written statements will be made part 
of the record in its entirety.
    We would ask that each witness summarize his or her 
testimony in 5 minutes or less, and to help stay within that 
time, there is a timing device at your table which will begin 
on green. When you have 1 minute left, it will switch from 
green to yellow, and then finally to red, when the 5 minutes 
are up.
    Our first witness will be Mr. Bowen.

   TESTIMONY OF THE HONORABLE STUART W. BOWEN, JR., SPECIAL 
    INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION, ARLINGTON, VA

    Mr. Bowen. Thank you, Mr. Chairman.
    Chairman Scott, Ranking Member Forbes, and Members of the 
Subcommittee, thank you for this opportunity to address you 
today on the work of my office, the special inspector general 
for Iraq reconstruction.
    Permit me to outline several points essential to 
understanding the challenges of investigating and prosecuting 
fraud in Iraq.
    First, corruption within the Iraqi government, indeed 
within the fabric of Iraqi society, is a serious problem that 
inhibits progress on many fronts. This is widely recognized by 
the government of Iraq and the international community. SIGIR 
has called Iraq's endemic corruption problem a second 
insurgency.
    I returned last month from my 16th trip to Iraq since my 
appointment, and during my visit, I met with the commissioner 
of Public Integrity, who heads the institution created by the 
CPA, the Coalition Provisional Authority, charged with 
increasing accountability in Iraq for corruption. I also had 
met with the president of the Board of Supreme Audit, which is 
the analogue to the Government Accountability Office.
    The CPI commissioner told me that he currently has over 
2,000 cases involving $5 billion in alleged corruption, and the 
president of the Board of Supreme Audit has hundreds of audits 
ongoing, and in virtually every case, as he has reported to us, 
he has found a serious lack of accountability within the Iraqi 
government.
    Now let me emphasize that the CPI and the BSA both oversee 
Iraqi money, of course, not U.S. money, Iraqi money that has 
been stolen from Iraqi programs.
    During my recent visit, I was also informed about political 
interference with the work of these Iraqi anti-corruption 
entities. For example, I learned that ministers and former 
ministers are exempt from prosecution unless assent is received 
from the prime minister of Iraq.
    Each minister also, under Article 134 B of the Iraqi 
criminal code, can exempt from prosecution any employee of 
their respective ministries from insight. This effectively 
creates an undemocratic bulwark against the enforcement efforts 
to fight corruption in Iraq.
    SIGIR's specific role in reviewing the anti-corruption 
efforts is to report on, through audits, the ethicacy of U.S. 
efforts to build up the rule of law system.
    In July 2006, we released a survey on American efforts and 
found that a very modest amount, specifically $65 million, had 
been allocated to support anti-corruption efforts within the 
Iraq government. My auditors found that our efforts have not 
been sufficiently coordinated or focused and that more adequate 
leadership and organization was needed
    The embassy has responded to a number of our concerns, but 
we are prepared to soon release an update on last year's report 
that will address both progress made and problems that remain.
    My second point is that the incidence of corruption within 
the U.S. reconstruction program appears to constitute a 
relatively small component of the overall American financial 
contribution to Iraq reconstruction. Based on the work of the 
18 criminal investigators on my staff, I believe that losses to 
American taxpayers from fraud in reconstruction programs have 
amounted and will likely amount to a relatively small component 
of the overall investment in Iraq reconstruction.
    However, the fact that the fraud we have detected is a 
relatively small component does not diminish the aggressiveness 
with which we pursue these allegations. We have found egregious 
incidents of fraud, and we have pursued those investigations 
and, in conjunction with the Department of Justice, have 
pursued and succeeded in prosecutions.
    Four subjects of our investigations have been prosecuted 
and are in prison now. Faheem Salam was caught in a sting 
operation run by my agency. He is in prison for 3 years. Philip 
Bloom and Robert Stein, the comptroller for CPA's south region, 
were caught in a conspiracy to steal millions of dollars in 
Development Fund for Iraq money. Bloom is now in prison for 
almost 4 years; Stein, for 9 years. Others caught in that web 
include Steven Merkes who is in prison for just over a year. 
Bruce Hopfengardner will be sentenced later this month. And we 
have five more that will be prosecuted soon.
    There are also, as you mentioned, Mr. Chairman, over 70 
cases ongoing managed by my investigators and over 30 under 
prosecution at the Department of Justice, and I expect in the 
course of this year we are going to see significant progress, 
the fruits of these investigations and the results of these 
prosecutions.
    Ultimately, it is about coordination, with both the DOJ and 
with my colleagues here at the table, through a series of task 
forces that helped get the job done in Iraq today. And most 
importantly, I think, the latest significant development is the 
formation of the Joint Operations Center co-located at the FBI 
wherein a variety of all of the U.S. government entities with 
oversight in Iraq are working together, communicating about 
leads, pursuing cases and ultimately achieving prosecutions.
    Mr. Chairman, Members of the Committee, thank you for your 
time and attention to these important matters, and I look 
forward to answering your questions.
    [The prepared statement of Mr. Bowen follows:]
               Prepared Statement of Stuart W. Bowen, Jr.
    Chairman Scott, Ranking Member Forbes, and members of the 
Subcommittee, thank you for this opportunity to address you today on 
the role of the Office of the Special Inspector General for Iraq 
Reconstruction on oversight and investigations into Iraq 
reconstruction.
    To ensure accurate context, permit me to outline several points 
essential to understanding the challenges of investigating and 
prosecuting fraud in Iraq.
    First, corruption within the Iraqi government, indeed within the 
fabric of Iraqi society, is a serious problem that inhibits progress on 
many fronts in Iraq. This is widely recognized by the Government of 
Iraq and the international community. In our quarterly reports, SIGIR 
has called Iraq's endemic corruption problem a ``second insurgency.''
    I returned last month from my 16th trip to Iraq and, during my 
visit, I met with the Commissioner of Public Integrity, who heads the 
institution created by the CPA to increase accountability for public 
corruption in Iraq--and the President of the Board of Supreme Audit, 
the analogue to the Government Accountability Office, which has existed 
in Iraq for many decades. The Iraqi anti-corruption authorities again 
emphasized to me the widespread nature of the problem of corruption, 
which stretches across the government, afflicting virtually every 
ministry. And they outlined for me the difficulties they face in 
implementing their respective anti-corruption mandates.
    The CPI Commissioner told me that he currently has 2,000 cases 
involving $5 billion in alleged corruption. And the President of the 
Board of Supreme Audit has hundreds of audits ongoing. In virtually 
every case, he is uncovering a lack of accountability. Let me emphasize 
that the CPI and the BSA oversee Iraqi money--not U.S. money--that is 
missing or has been stolen from Iraqi programs.
    During my visit, I was informed about political interference with 
the work of Iraqi investigators and prosecutors. For example, I learned 
that Ministers and former Ministers are exempt from prosecution unless 
the assent of the Prime Minister is obtained; and each Minister is 
entitled, under an Iraqi criminal code provision, to immunize 
selectively ministry employees from being held accountable for 
corruption.
    Iraq must make progress on rule of law enforcement, in general, and 
corruption, in particular; political interference with fighting 
corruption remains a problem, undermining the effectiveness of the 
developing rule of law system and consequently eroding the Iraqi 
people's confidence in their government.
    Iraq is a sovereign state. The role of the United States thus is to 
encourage the development of an efficient Iraqi justice system. We do 
this for its own sake and for the sake of maintaining and building upon 
the efforts made, at great cost in blood and treasure, by Americans and 
Iraqis since the liberation of Iraq.
    SIGIR's specific role in this process has been to review the 
effectiveness of United States efforts to improve the rule of law 
system and to build up the corruption-fighting capacity of the Iraqi 
government.
    On July 28, 2006, SIGIR released a survey on this subject and found 
that American efforts were funded at a very modest level, given the 
scope of the problem, receiving about $65 million (about three-tenths 
of one percent of our total reconstruction spending). My auditors found 
that American efforts have not been sufficiently coordinated and 
focused and that more adequate leadership and organization was needed. 
The U.S. Embassy has responded to some of these concerns since the 
review was released. SIGIR will soon release another review on the 
issue, updating our previous report.
    SIGIR has a continuing investigative responsibility to detect and 
investigate malfeasance in American relief and reconstruction programs 
in Iraq. As part of this effort, we have developed good working-level 
and leadership-level relationships with the CPI and the BSA. We 
coordinate with these Iraqi agencies whenever we come across evidence 
of potential wrongdoing by Iraqis. SIGIR, of course, concentrates its 
law enforcement efforts on American targets and works with the 
Department of Justice in their effective prosecution.
    My second point is that the incidence of corruption within the U.S. 
reconstruction program--judging from those cases that we have uncovered 
thus far--appears to constitute a relatively small component of the 
overall American financial contribution to Iraq's reconstruction. Based 
on the work of our 18 career investigators on SIGIR staff, I believe 
that losses to American taxpayers from fraud within reconstruction 
programs will likely amount to a relatively small percentage of the 
overall investment in Iraq, totaling in the tens of millions (rather 
than hundreds of millions or billions, as is sometimes imagined). 
However, the fact that the fraud we have detected is relatively small 
(to date) does not diminish the aggressiveness with which SIGIR pursues 
allegations of fraud in Iraq. We have found egregious incidents of 
fraud. And in partnership with the Department of Justice, SIGIR has 
produced clear results in prosecutions and convictions.
    For example, in January, two individuals were sentenced to prison 
as a result of SIGIR investigations. In early February, indictments 
were announced of five more individuals, resulting from SIGIR 
investigations. To date, SIGIR has opened over 300 cases, and we have 
over 70 ongoing investigations. Thirty-two of those cases are under 
prosecution at the Department of Justice.
    We believe that the publicity our enforcement actions have received 
has helped to deter misconduct in the U.S reconstruction program. And 
we also believe that enforcement will be an increasingly important part 
of SIGIR's mission over the next 18 months. Moreover, in the course of 
this year, we expect to produce concrete investigative results as 
significant current cases come to fruition.
    SIGIR remains committed to a robust, deterrent presence in Iraq as 
long as our temporary organization exists. Today, I have five 
investigators on the ground in Iraq investigating fraud. Although there 
are other law enforcement agencies fighting fraud in Iraq, SIGIR has 
maintained over the past three years the largest contingent of fraud 
investigators in Iraq. My investigators travel the country under 
dangerous conditions, pursuing leads, interviewing witnesses, and 
piecing together evidence on a wide variety of cases. Their work also 
takes them to other countries in the region. Of note, SIGIR is 
currently reducing its overall personnel ``footprint'' in Baghdad to 
conjunction with the reduction in spending of appropriated dollars on 
Iraq reconstruction.
    One of the most important aspects of our investigative efforts is 
the development of task-force relationships with other agencies 
involved in oversight in Iraq, including my colleagues from the Office 
of Inspector General of the Department of Defense and the Defense 
Criminal Investigative Service, as well as the Federal Bureau of 
Investigation. SIGIR has 16 investigators in Arlington, and we are 
participating in the new Joint Operations Center located at the FBI to 
coordinate and enhance fraud investigations in Iraq.
    SIGIR's first task force was the Special Investigative Task Force 
for Iraq Reconstruction (SPITFIRE), and it combined the efforts of the 
Internal Revenue Service, the Department of Homeland Security, 
Immigrations and Customs enforcement office, the FBI and the Department 
of State Office of Inspector General. That task force was able to 
effectively pursue the Bloom-Stein conspiracy that my auditors 
uncovered in Hillah, Iraq--a very egregious kickback and bribery scheme 
involving over $10 million in reconstruction funds that Philip Bloom, 
the contractor, and Robert Stein, the Coalition Provisional Authority 
comptroller for that region, engineered for their own criminal ends. 
SPITFIRE continues its work today; and we continue to pursue a number 
of leads that arose from the Bloom-Stein case.
    The other major task-force initiative that SIGIR has initiated with 
the FBI is the International Contract Corruption Task Force (ICCTF). 
ICCTF prompted the creation of the Joint Operations Center mentioned 
above, which is producing the effective collection and coordination of 
investigative leads and source development. Although I am not at 
liberty to discuss details of these case, I am very pleased with the 
very significant progress the JOC investigators have made, the news of 
which I expect to be forthcoming later this year.
    Along with SIGIR, the ICCTF includes the U.S. Army's Criminal 
Investigative Division's Major Procurement Fraud Unit, the Defense 
Criminal Investigative Service, the FBI, and the inspectors general of 
the Department of State and the Agency for International Development.
    SIGIR is also part of the DOJ National Procurement Fraud Task 
Force. We continue to work closely with DOJ in the investigation and 
prosecution of our cases.
    Finally, to coordinate efforts in oversight in Iraq, I formed the 
Iraq Inspector General's Council (IIGC) three years ago, which brings 
together every agency with oversight authority in Iraq for a meeting 
every quarter. The IIGC exists to deconflict and coordinate the member 
agencies' oversight efforts in Iraq.
    SIGIR is not limiting its efforts just to addressing contractor 
misconduct through the criminal justice system. We also refer cases to 
the U.S. government's administrative debarment and suspension 
processes. To date, the competent oversight authorities have, through 
established rules that preserve due process, suspended 17 companies and 
individuals, debarred ten more, and have another 9 pending debarments.
    To date, SIGIR has produced 13 quarterly reports, 86 audit reports, 
and 90 inspection reports. Our auditors and inspectors regularly refer 
investigative leads to our investigators some of which have developed 
into very significant cases. The Bloom-Stein case is just one example.
    SIGIR's three lessons-learned reports produced to date have 
provided recommendations on policies designed to improve economy, 
efficiency and effectiveness for the Iraq program and for future 
reconstruction and stabilization operations. The reports have prompted 
the introduction of reform measures in the Congress that will improve 
contracting processes. SIGIR is at work on a lessons-learned capping 
report, which will be produced at the end of this year. It is my hope 
that our lessons learned reports will prompt reforms that will improve 
the capacity of law enforcement to deter crime.
    Mr. Chairman, with respect to H.R. 400, Representative 
Abercrombie's bill entitled the ``War Profiteering Prevention Act of 
2007, our position is essentially what it was when we were asked to 
reflect on its counterpart at a Senate hearing this past March. SIGIR 
remains a strong proponent of legislation that would strengthen efforts 
to punish fraud or abuse in contracting programs in Iraq or elsewhere. 
We look forward to working with the Department of Justice to enforce 
H.R. 400, should it become law. That having been said, I must add that, 
as we have developed criminal cases in Iraq, we have not become aware 
of instances where the Justice Department was unable to prosecute, 
under existing law, on the facts we developed in our investigations.
    One of our responsibilities in Iraq is to encourage efficiency in 
the reconstruction effort. In that role, we have prompted management to 
seek the widest possible participation by business enterprises 
(especially Iraqi firms) in reconstruction. The security risks in Iraq 
are self-evident, and thus the risks to any business enterprise 
operating in such an environment are mammoth. International companies 
likely will not get into the business of reconstruction in Iraq without 
incentives that render the risk-taking worthwhile. This reality should 
figure in the development of legislation that affects contracting in 
Iraq or similarly insecure environments.
    Whether H.R. 400 becomes law, SIGIR will continue to aggressively 
pursue investigations, provide robust oversight through audits and 
inspections, and will press for more efforts to improve contract 
administration, quality assurance, and quality control. It is my hope 
that our continuing efforts will help promote an aim we all share--a 
reconstruction program that is administered and executed honestly, and 
is as well-managed and efficient as possible under very challenging 
circumstances.
    Mr. Chairman, members of the Committee, thank you for your time and 
attention to these important matters, and I look forward to answering 
your questions.

    Mr. Scott. Thank you.
    Mr. Gimble?

   TESTIMONY OF THOMAS F. GIMBLE, PRINCIPAL DEPUTY INSPECTOR 
      GENERAL, U.S. DEPARTMENT OF DEFENSE, WASHINGTON, DC

    Mr. Gimble. Mr. Chairman, Members of the Subcommittee, 
thank you for the opportunity to appear today before you.
    The global war on terror is a top priority for the 
Inspector General and, currently, we have about 180 people 
providing oversight.
    To date, $558 billion in DoD funds have been appropriated 
to support the fight against terrorism and to support the men 
and women of our Armed Forces in Southwest Asia.
    To accomplish our oversight mission, we have a combination 
of initiatives, to include establishing an in-theater oversight 
presence and improving interagency coordination to minimize 
duplication within the oversight community. This includes 
participation in the Iraq Inspectors General Council chaired by 
the Special Inspector General for Iraq Reconstruction.
    In March of 2006, we established our forward field site in 
Qatar. In February of 2007, we established two sites, Camp 
Victory and the International Zone, in Iraq. This month, we are 
establishing our forward field site at Bagram Air Base in 
Afghanistan. We are also assessing the need for the 
establishment of a Defense Criminal Investigative Service 
office in Afghanistan.
    Of the 22 ongoing global war on terror-related audits, 19 
are Iraq-related audit projects involving critical readiness 
issues that directly impact the warfighter, such as personnel 
operational equipment readiness; sustainability of small arms 
programs; and the resetting of ground vehicles and equipment 
with the combatant commands. Our audits also include the 
oversight of contracting, cash management, and other monetary 
assets within Iraq, as well as the execution of the 
supplemental funds used to train and equip Iraq and Afghanistan 
security forces.
    The Defense Criminal Investigative Service, or DCIS, the 
criminal investigative arm of the DoD inspector general, has 
been engaged in investigating DoD-related matters pertaining to 
the Iraqi theater since the start of the war. The presence of 
the DCIS in the region has led to 93 investigations in areas 
such as corrupt business practices; loss of U.S. funds through 
contract fraud; and the theft of military equipment.
    DCIS is currently conducting 78 investigations related to 
the war effort, which include war profiteering, contract fraud, 
and contract corruption. Fourteen of these investigations are 
being conducted by DCIS special agents in the Iraqi theater. 
The remaining 64 investigations are being conducted by special 
agents in our CONUS and Germany-based DCIS offices.
    Both closed and ongoing investigations have resulted in 
four Federal criminal indictments, nine Federal criminal 
informations, and two Article 32 hearings under the Uniform 
Code of Military Justice.
    As a result of the investigations, nine U.S. persons and 
one foreign person were convicted of felony crimes. It resulted 
in a total of approximately 15 years confinement and 11 years 
of probation. Additionally, two contractors signed settlement 
agreements with the U.S. Government.
    In all, about $9.8 million was paid to the U.S. in 
restitution; $323,000 levied in fines and penalties, $3,500 was 
forfeited; and $61,000 was seized.
    In addition to the above judicial actions, four individuals 
and one company were debarred from contracting with the U.S. 
Government, and 19 companies and personnel were suspended.
    Our policy and oversight component continues to play a key 
role in developing and promoting the establishment of effective 
oversight and security organizations in both Afghanistan and 
Iraq, to include the development of a viable self-sustaining 
Inspector General system.
    Our intelligence component currently has two ongoing 
projects related to improving the intelligence support to the 
combatant commanders and warfighters.
    We are committed to ensuring that the appropriated 
resources are used effectively.
    I would like to submit my written statement for the record, 
and I am prepared to answer your questions.
    [The prepared statement of Mr. Gimble follows:]
                 Prepared Statement of Thomas F. Gimble






    Mr. Scott. Thank you very much.
    Mr. Sabin?

TESTIMONY OF BARRY M. SABIN, DEPUTY ASSISTANT ATTORNEY GENERAL, 
           U.S. DEPARTMENT OF JUSTICE, WASHINGTON, DC

    Mr. Sabin. Chairman Scott, Ranking Member Forbes, Members 
of the Subcommittee, thank you for the opportunity to be here 
today to discuss the efforts of the Department of Justice to 
combat procurement fraud relating to spending on the wars and 
rebuilding efforts in Iraq and Afghanistan.
    I would like to reiterate the Department of Justice's 
commitment to a strong and vigorous enforcement effort in this 
area and address three primary points.
    First, the Department of Justice has made the investigation 
and prosecution of procurement fraud, including procurement 
fraud related to the wars in Iraq and Afghanistan, a priority 
and has devoted significant prosecutorial and investigative 
resources to that effort.
    Second, the Department is working through the International 
Contract Corruption Task Force, including the Special Inspector 
General for Iraq Reconstruction and others Inspectors General, 
and traditional law enforcement partners to investigate and 
prosecute procurement fraud and has already developed a track-
record of success in this area.
    Third, in order to leverage law enforcement resources and 
more effectively address procurement fraud, the Department 
formed the National Procurement Fraud Task Force last year. The 
task force is off to a successful start, has formed key working 
committees, and is already working to identify and remove 
barriers to preventing, detecting and prosecuting procurement 
fraud.
    The Department of Justice has taken an aggressive, 
proactive leadership position to help ensure that dollars from 
the public fist are used for the purpose to which they have 
been appropriated and not to line the pockets of corrupt 
individuals or companies. We take that responsibility 
seriously. Working with the interagency community, the 
Department has demonstrated this commitment at the 
investigative and prosecution stages for both civil and 
criminal matters.
    These DOJ prosecutive components include the criminal, 
anti-trust and civil divisions at main Justice, the United 
States attorney's offices and the investigative resources at 
the FBI.
    Just last week, training for prosecutors from across the 
country was conducted at the National Advocacy Center in 
Columbia, South Carolina. It was productive, and one of the key 
themes that emerged and we address was how to streamline these 
complex cases in order to bring them more expeditiously.
    The Department has been and is working closely with and 
through the International Contract Corruption Task Force. It 
was established in October 2006 as an operational task force. 
The charter agencies and mission are set forth in my written 
statement.
    These types of procurement fraud cases are usually very 
complex and resource intensive. The cases often involve 
extraterritorial conduct as well as domestic conduct requiring 
coordination between appropriate law enforcement agencies. 
Investigating the international component often proves 
difficult due to the need to cooperate with foreign law 
enforcement officials and due to the burden of providing 
adequate security to prosecutors and investigators working 
abroad. Indeed, the difficulty of locating and collecting 
evidence and interviewing witnesses in an active combat zone 
cannot be overstated.
    Despite these challenges, the Department of Justice will 
continue to pursue these cases wherever the evidence leads.
    The Department has charged 25 individuals criminally for 
public corruption and government fraud relating to the war on 
terror, which includes matters involving Iraq, Kuwait and 
Afghanistan.
    For example, on February 1 of this year, three Army 
officials and two civilians were indicted for various crimes 
related to a scheme to defraud the Coalition Provisional 
Authority South Central Region in Iraq. Defendant Whiteford was 
once the second most senior official in this area. Defendant 
Wheeler was an advisor for CPA projects for the reconstruction 
of Iraq. In August of last year, a lieutenant colonel in the 
United States Army Reserves pleaded guilty to conspiracy to 
commit wire fraud and money laundering in connection with this 
scheme.
    The charges against these individuals emanated from an 
investigation into illegal conduct by Robert Stein, CPA South 
Central's comptroller and funding officer, and Philip Bloom, a 
U.S. citizen who resided in Romania and Iraq. Both have pleaded 
guilty to conspiracy, bribery and money laundering.
    The LOGCAP Working Group, which operates out of the U.S. 
attorney's office in the Central District of Illinois, has also 
filed criminal charges against eight individuals for bribery 
and kickbacks associated with Iraq reconstruction efforts and 
military operations in Kuwait, and they include a defendant 
formerly serving as the Army's theater food service advisor for 
Kuwait, Iraq and Afghanistan who pled guilty to bribery, and a 
former subcontracts manager for Kellog, Brown & Root who 
pleaded guilty to major fraud against the United States and 
conspiracy to commit money laundering.
    The Department formed the National Procurement Fraud Task 
Force in October of last year. The task force has been and will 
continue to focus on the objectives and missions articulated in 
my written statement. To accomplish these objectives, the task 
force has created working committees to address particular 
issues, such as legislation, training and private-sector 
outreach relating to procurement fraud. Each committee is 
chaired by a high-level member of the Inspector General 
community or the FBI.
    In conclusion, the Justice Department has already taken 
significant steps to improve the effectiveness of Federal law 
enforcement in this area and will continue to maintain the 
investigation and prosecution of procurement fraud as a 
priority. We look forward to working with the Subcommittee in 
this area.
    I will do my best to answer any questions you may have.
    [The prepared statement of Mr. Sabin follows:]
                  Prepared Statement of Barry M. Sabin




    Mr. Scott. Thank you very much.
    Mr. Grayson?

  TESTIMONY OF ALAN GRAYSON, GRAYSON & KUBLI, P.C., McLEAN, VA

    Mr. Grayson. Good afternoon, and thank you very much for 
the opportunity to be here today and to speak before this 
honorable Subcommittee.
    My name is Alan Grayson. I am an attorney, and I represent 
whistleblowers in numerous cases involving fraud by government 
contractors in Iraq. At the moment, there are only four such 
cases in litigation that have been unsealed, and I am attorney 
of record in all four of them. There are three of them against 
KBR.
    Needless to say, there have been far more than four 
instances of war profiteering in Iraq. Billions of dollars are 
missing, and many billions more wasted. How it came be that 
only four such cases are unsealed and in litigation and how it 
is that even in those four cases, the Bush Administration is 
not participating are the subject of my testimony today.
    As I will explain, in our 5th year in the war in Iraq, the 
Bush administration has not litigated a single case against any 
war profiteer under the False Claims Act.
    For over a century, war profiteering cases have been 
brought under the Civil False Claims Act. This statute was 
enacted in 1863 to combat war profiteering during the Civil 
War. Lawyers often refer to that statute as the Lincoln law.
    In 1986, when Congress enacted Congressman Howard Berman's 
amendments to the Civil False Claims Act, it lauded the act as 
the ``government's primary litigative tool for combating 
fraud,'' and the Supreme Court has recognized the Civil False 
Claims Act is intended to reach all types of fraud, without 
qualification, that result in financial loss to the government.
    The Civil False Claims Act imposes treble damages and 
penalties on war profiteers, and the threat of having to pay 
three times what you steal can be a real deterrent, if that 
threat is perceived as real.
    Moreover, the Civil False Claims Act deputizes 
whistleblowers to bring lawsuits in the name of the U.S. 
Government against war profiteers. The whistleblowers can keep 
between 15 percent and 30 percent of the recovery, but with 
treble damages, the government ends up well ahead.
    The Civil False Claims Act yielded total recoveries of over 
$3 billion last year alone. But in Iraq, where there has been 
war and war profiteering for over 4 years, the total recovery 
to date is less than $6 million--in the midst of what Senator 
Dorgan rightly has called an orgy of greed by military 
contractors.
    Why has the Civil False Claims Act so far been unsuccessful 
in punishing and preventing war profiteering committed in Iraq, 
and what can be done to change that?
    One reason is that the Bush administration has swept cases 
under the rug by obtaining and perpetuating court orders 
sealing the cases. These orders allow the Administration to 
threaten whistleblowers with dismissal of their cases or 
contempt of court simply for telling people what they know.
    To prevent the abuse of this sealing provision, which is 
only supposed to be in effect for 60 days--but, in this case, 
60 days becomes 60 weeks and almost 60 months--there needs to 
be a firm limit on extensions of the seal. Clearly, 1 year is 
enough. The seal is meant to help to uncover fraud, not to bury 
it.
    A second reason why the Civil False Claims Act has been 
unsuccessful in punishing and preventing war profiteering in 
Iraq is that after cases are unsealed, the courts create and 
apply rules to the cases that have no basis in the statute. For 
instance, the act punishes anyone who knowingly makes, uses or 
causes to be made or used a false record or statement to cause 
a false claim to be paid or approved by the government.
    Last year, in our Custer Battles case, the first Iraq war 
profiteering case to go trial, a jury found the defendants 
guilty of over 40 acts of fraud, but the judge suspended the 
verdict because he added a presentment requirement, a 
requirement that simply does not exist in the statute.
    Long ago, the U.S. Supreme Court said the courts should 
refuse to accept any rigid restrictive reading of the Civil 
False Claims Act, but that is exactly what is happening. Based 
on my experience, Congress needs to make the Supreme Court's 
wise words law by providing that the act shall be broadly and 
liberally construed, in accordance with its remedial purpose. 
Other acts have that language; and this act needs it.
    Thanks to Congress, the Civil False Claims Act already 
makes it clear that a defendant's knowledge of the fraud is all 
that is required, not the specific intent to defraud, and only 
a preponderance of the evidence of that is required.
    What is needed now is for Congress to provide that, for a 
complaint under the Civil False Claims act, only a short and 
plain statement of the claim showing that the pleader is 
entitled to relief is required. That is the normal standard 
under Federal Civil Rule 8(a). It is the standard when a 
contractor sues the government, and it would be the standard 
when the government sues a contractor, if the lower courts had 
not imposed a higher standard.
    Now a third reason why the Civil False Claims Act has been 
unsuccessful in punishing and preventing war profiteering is 
that the Bush administration has done virtually nothing to 
pursue such cases. It has settled two cases without litigation 
for pennies on the dollar, and it declined to prosecute 10 
more. All the rest remain under seal.
    As I said before, in our 5th year of the war in Iraq, the 
Bush administration has not litigated a single case against any 
war profiteer under the False Claims Act. For all the Bush 
administration claims to do in the war on terrorism, it is a 
no-show in the war against war profiteers.
    Congress needs to fix that flaw by providing that the 
executive branch's see-no-evil-hear-no-evil-speak-no-evil 
policy regarding fraud perpetrated against the soldiers and the 
taxpayers in a war zone is no longer an option. I recommend 
that the False Claims Act be amended to provide that the 
Administration shall participate in all war profiteering cases, 
whenever the whistleblower complaint establishes a prima facie 
case of fraud. Both the troops and the taxpayers deserve no 
less.
    Fraud against the taxpayers is bad enough, but when that 
fraud is committed against the U.S. Army, engaged in battle, it 
is intolerable. As Lincoln said 144 years ago, ``Worse than 
traitors in arms are the men who pretend loyalty to the flag, 
feast and fatten on the misfortunes of the nation, while 
patriotic blood is crimsoning the plains, and their countrymen 
moldering in the dust.''
    For 4 years, I have fought the war profiteers who have been 
feasting and fattening on our misfortune. Let us acknowledge 
how far we have fallen from President Lincoln's standards and 
ideals and amend the Lincoln law to remind this President and 
future Presidents of their constitutional duty to see that the 
laws are faithfully executed.
    Thank you very much.
    [The prepared statement of Mr. Grayson follows:]
                   Prepared Statement of Alan Grayson
    Good afternoon. Thank you very much for the opportunity to be here 
today, and to speak before this honorable Subcommittee.
    My name is Alan Grayson. I'm an attorney. I represent 
whistleblowers in numerous cases involving fraud by government 
contractors in Iraq. At the moment, there are only four such cases in 
litigation that have been unsealed, and I am attorney of record in all 
four of them. Three of them are against KBR.
    Needless to say, there have been far more than four instances of 
war profiteering in Iraq. Billions of dollars are missing, and many 
more billions wasted. How it came be that only four such cases are 
unsealed and in litigation--and how it is that even in those four 
cases, the Bush Administration is not participating--are the subjects 
of my testimony today.
    War profiteering cases often are brought under the Civil False 
Claims Act. This statute was enacted in 1863, to combat war 
profiteering during the Civil War. Lawyers often refer to the statute 
as the ``Lincoln Law.''
    In 1986, when Congress enacted Congressman Howard Berman's 
amendments to the Civil False Claims Act, it lauded the Act as the 
``Government(s primary litigative tool for combating fraud.'' \1\ The 
U.S. Supreme Court has recognized that the Civil False Claims Act is 
``intended to reach all types of fraud, without qualification, that 
might result in financial loss to the Government.'' \2\
---------------------------------------------------------------------------
    \1\ S. Rep. No. 99-345, at 2 (1986).
    \2\ United States v. Neifert-White Co., 390 U.S. 228, 232 (1968).
---------------------------------------------------------------------------
    There are criminal laws, such as mail fraud, wire fraud, false 
statements, and criminal false claims statutes, that could be used to 
address war profiteering.\3\ These laws do little to punish war 
profiteering corporations, however. There are several reasons for this. 
First, the burden of proof--beyond a reasonable doubt--may be difficult 
to establish. Second, corporations cannot be incarcerated. Third, the 
fines often are so small that crime does pay.
---------------------------------------------------------------------------
    \3\ 18 U.S.C. 287, 1001, 1341 & 1343 (2000).
---------------------------------------------------------------------------
    The Civil False Claims Act, in contrast, imposes treble damages and 
penalties on war profiteers. The threat of having to pay three times 
what you steal can be a real deterrent.
    Moreover, the Civil False Claims Act ``deputizes'' whistleblowers 
to bring lawsuits in the name of the U.S. Government, against war 
profiteers. The whistleblowers can keep between 15% and 30% of the 
recovery, but with treble damages, the U.S. Government ends up well 
ahead.
    The Civil False Claims Act yielded total recoveries of over $3 
billion last year alone.\4\ Yet in Iraq, where there has been war and 
war profiteering for over four years, the total recovery to date is 
less than $6 million--in the midst of what Senator Dorgan rightly has 
called ``an orgy of greed'' by military contractors. Why has the Civil 
False Claims Act so far been unsuccessful in punishing or preventing 
war profiteering committed in Iraq? And what can be done to change 
that?
---------------------------------------------------------------------------
    \4\ ``Justice Department Recovers Record $3.1 Billion in Fraud and 
False Claims in Fiscal Year 2006,'' DOJ News Release (Nov. 21, 2006), 
www.usdoj.gov/opa/pr/2006/November/06_civ_783.html
---------------------------------------------------------------------------
    One reason is that the Bush Administration has swept such cases 
under the rug, by obtaining and perpetuating court orders sealing the 
cases. These orders allow the Administration to threaten whistleblowers 
with dismissal of their cases, or even contempt of court, for simply 
telling people what they know.
    According to SIGIR information, most of the Civil False Claims Act 
cases filed regarding war profiteering in Iraq remain under seal. The 
False Claims Act requires whistleblower cases to be kept under seal for 
60 days.\5\ Thanks to extensions that the Bush Administration has 
obtained, those 60 days have become 60 weeks, and are heading toward 60 
months. Although the judges almost always rubber-stamp these 
extensions, in one recent case against KBR, the judge refused to do so, 
and the case was unsealed.
---------------------------------------------------------------------------
    \5\ 31 U.S.C. 3730(b)(2) (2000).
---------------------------------------------------------------------------
    To prevent the abuse of the sealing provision, there should be a 
firm limit on extensions. Certainly, one year is enough. If the 
Executive Branch simply wants more time to investigate a case, and can 
show good cause, it might have that extra time, but not at the expense 
of keeping the public and Congress in the dark. The seal is meant to 
help uncover fraud, not to bury it.
    A second reason why the Civil False Claims Act has been 
unsuccessful in punishing and preventing war profiteering in Iraq is 
that after cases are unsealed, the courts create and apply rules to the 
cases that have no basis in the statute. For instance, the Act punishes 
anyone who ``knowingly makes, uses, or causes to be made or used, a 
false record or statement to get a false or fraudulent claim paid or 
approved by the Government.'' \6\ Last year, in our Custer Battles case 
``the first Iraq war profiteering case to go trial,'' a jury found the 
Defendants guilty of over 40 acts of fraud. The judge suspended the 
verdict, however, because he added a ``presentment'' requirement--a 
requirement that simply doesn't appear in the statute.
---------------------------------------------------------------------------
    \6\ 31 U.S.C. 3729(a)(2) (2000).
---------------------------------------------------------------------------
    Another recent case alleged that KBR, under its infamous cost-plus 
LOGCAP Contract, ran empty trucks back and forth across the desert in 
Iraq, in order to run up the bill on the taxpayers. The judge dismissed 
the 24-page complaint because, he said, it wasn't ``specific'' enough. 
Yet this ``specificity'' requirement also doesn't appear in the 
statute.
    Long ago, the U.S. Supreme Court said that the courts should 
``refuse[] to accept a rigid restrictive reading'' of the Civil False 
Claims Act, and should ``broadly construe[]'' it.\7\ That is simply not 
happening. Based on my experience, Congress needs to make the Supreme 
Court's wise words the law, by providing that the Act shall be 
liberally construed, in accordance with its remedial purpose. Other 
Acts have such language; this Act needs it.
---------------------------------------------------------------------------
    \7\ Niefert-White, 390 U.S. at 786 & 788.
---------------------------------------------------------------------------
    Thanks to Congress, the Civil False Claims Act already makes it 
clear that only a preponderance of the evidence, not ``clear and 
convincing evidence,'' is required. It also makes it clear that only a 
defendant's knowledge of the fraud, not a specific intent to defraud, 
is required.\8\ What is needed now is for Congress to provide that as 
for the Complaint, only ``a short and plain statement of the claim 
showing that the pleader is entitled to relief'' is required. This is 
the normal standard under Federal Rule 8(a), it is the standard when a 
contractor sues the Government, and it would be the standard when the 
Government sues a contractor, if the lower courts had not imposed a 
higher standard on their own.
---------------------------------------------------------------------------
    \8\ 31 U.S.C. 3729(b) (2000).
---------------------------------------------------------------------------
    A third reason why the Civil False Claims Act has been unsuccessful 
in punishing and preventing war profiteering in Iraq is that the Bush 
Administration has done virtually nothing to pursue such cases. It has 
settled two cases, without litigation, for pennies on the dollar. It 
has declined to prosecute nine more cases. All the others remain under 
seal. In our fifth year of the War in Iraq, the Bush Administration has 
not litigated a single case against any war profiteer under the False 
Claims Act. It evidently has not even sued any U.S. contractor in Iraq, 
for breach of contract. Two years ago, Senator Grassley wrote to the 
Attorney General, asking why the Administration was taking no action in 
such cases. There was no reply. For all the Bush Administration claims 
to do in the war against terrorism, it is a no-show in the war against 
war profiteers.
    It appears the Civil False Claims Act has a flaw that remained 
hidden for 138 years, but is now apparent--it gives a do-nothing 
Administration the opportunity to do nothing. Congress can try to fix 
that flaw by providing that the Executive Branch's ``see no evil, hear 
no evil, speak no evil'' policy regarding fraud perpetrated against the 
soldiers and the taxpayers--in a war zone--is no longer an option. I 
recommend that the False Claims Act be amended to provide that the 
Administration shall participate in all war profiteering cases, 
whenever the whistleblower complaint establishes a prima facie case of 
fraud. Both the troops and the taxpayers deserve no less.
    Fraud against the taxpayers is bad enough. But when that fraud is 
committed against the U.S. Army, engaged in battle, it is intolerable. 
As Lincoln said, 144 years ago, ``worse than traitors in arms are the 
men who pretend loyalty to the flag, feast and fatten on the 
misfortunes of the Nation, while patriotic blood is crimsoning the 
plains . . . and their countrymen moldering the dust.''
    For four years, I have fought the war profiteers, who have been 
feasting and fattening on our misfortune. The Bush Administration has 
not fought them, not in the least. Let us acknowledge how far we have 
fallen from President Lincoln's standards and ideals, and amend the 
Lincoln Law, to remind this President and future Presidents of their 
constitutional duty to see that the laws are faithfully executed.

    Mr. Scott. I want to recognize Mr. Chabot from Ohio who has 
joined us.
    Ms. Razook?

 TESTIMONY OF ERICA RAZOOK, LEGAL ADVISOR TO THE BUSINESS AND 
   HUMAN RIGHTS PROGRAM, AMNESTY INTERNATIONAL, NEW YORK, NY

    Ms. Razook. Thank you, Mr. Chairman, Ranking Member Forbes, 
Members of the Subcommittee. My name is Erika Razook, and I am 
here on behalf of Amnesty International.
    Amnesty International has been investigating and reporting 
on human rights abuses for over 40 years, and one of the most 
constant themes in our work has been that we see the most 
horrible and worst abuses when there is a culture of impunity 
for them, and that is what we have seen in this area of private 
military and security contractors working on behalf of the 
United States government in countries around the world and in 
particular in Iraq and Afghanistan.
    Literally, there are over 100,000 contractors in Iraq and 
Afghanistan alone. Numerous reports of human rights abuses, 
including torture, cruel and inhumane, degrading treatment, and 
shootings and killings of innocent civilians have surfaced and 
have even come to light in the Army's own investigations. Yet, 
despite these large numbers of contractors and reports of 
abuse, we have seen only two indictments of abuse by 
contractors.
    What I would like to talk to you briefly about today is the 
scope of the problem, the lack of prosecution and the 
environment of impunity for contractor crime abroad, and the 
solution that Amnesty sees that Congress can take a step toward 
in the immediate future with the present proposed legislation 
that is before Congress now.
    We have been in dialogue with both government agencies that 
are contracting private military and security firms and with 
the companies themselves, and we understand that the companies 
are working in a difficult and complex environment, inherently 
risky to work in.
    However, the problem here and the problem that we see is 
that there is virtually no control or oversight over these 
contracted personnel, which has led to this environment of 
impunity, where a contractor can shoot an Iraqi civilian in the 
street who later dies and never sees any punishment, redress or 
prosecution.
    It is essential that the Department of Justice prosecutes 
cases of criminal misconduct of contractors. To continue to 
allow cases of human rights abuses to languish on the court's 
dockets, as they have been in the Eastern District of Virginia 
where there are 17 cases of detainee abuse which have been on 
the court's docket since 2004, is to sanction impunity and to 
deny meaningful access to justice to the victims of these 
abuses.
    But, right now, Congress has an opportunity before it to 
take a step forward to address this problem of impunity, and 
that is why Amnesty is supporting Representative Price's H.R. 
369 and H.R. 2740.
    There are three crucial areas that these bills address and 
that I will discuss briefly here.
    First is the expansion of the Military Extraterritorial 
Jurisdiction Act, otherwise known as MEJA. The expansion would 
cover contractors who are not only supporting a DoD mission, 
but contractors whose work is carried out in a region where 
there is a contingency operation.
    This is a very important provision because where we have 
seen the growth of contractors carrying out work for the U.S. 
Government is not in the more intimately DoD-aligned roles, but 
in ancillary roles, such as security for reconstruction 
projects, even border control, and now there is discussion of 
contractors working in peacekeeping roles as well.
    So, for these extended functions, it is necessary that 
Congress extend the application of MEJA so that these 
contractors do not escape accountability.
    The second is the enforcement mechanisms that are included 
in H.R. 369 and 2740. These bills establish an FBI 
investigative unit which would be on the field in the area of 
the contingency operation. This will help the Department of 
Justice to overcome the practical hurdles of investigating 
cases, securing witness testimony and locating evidence.
    The third area is the transparency provisions which require 
reporting of the DOJ to Congress on the number of complaints 
received, the investigations into these complaints of 
contractor misconduct, the cases that have been opened, the 
results of the cases that have been closed, and the capacity 
and effectiveness of the Department of Justice in prosecuting 
such misconduct.
    These transparency positions are crucial and vital to 
ensuring accountability for human rights violations because 
what we have seen thus far is that Congress does not know, the 
public does not know, and we at Amnesty do not know why these 
cases have not been prosecuted.
    Why have about 3 years passed since the horrendous torture 
and inhumane treatment at Abu Ghraib, since these pictures came 
to light, and since the Army investigations indicated that 
contractor personnel were involved in these abuses? Why have 
there still not been prosecutions? These transparency 
provisions will give Congress the power o further legislative 
and to ensure that these human rights violations do not go 
unaddressed.
    Finally, Amnesty International has previously stated in its 
2004 report, Human Dignity Denied, that human rights 
violations, whether they are committed by military or civilian 
personnel, should be tried in civilian court, and these 
civilian trials should conform, of course, to international 
standards of fair trials, and the death penalty should not be 
imposed., and I bring that point up because the death penalty 
is an option under the UCMJ and under the torture statute.
    For these reasons, Amnesty International asks Members of 
Congress and you particularly in the Subcommittee who are 
paying careful attention to this issue to pass this very 
important legislation to close loopholes and to ensure that 
there is accountability for human rights violations committed 
by contracted personnel hired by our government.
    Thank you.
    [The prepared statement of Ms. Razook follows:]
                   Prepared Statement of Erica Razook
    Thank you Mr. Chairman and members of Congress; Amnesty 
International (AI) is pleased to testify at this important and timely 
hearing.
                                summary
    In May of 2006, AI publicly called on the Department of Justice to 
immediately investigate and, where clear evidence of human rights 
violations exists, prosecute employees or contractors of private 
military and security firms operating overseas for their involvement in 
human rights violations. However, despite the passing of more than a 
year since Amnesty International made these demands, to date, the same 
17 pending cases of detainee abuse, including abuse at Abu Ghraib, by 
civilians remain languishing on the docket of the U.S. Attorney's 
Office in the Eastern District of Virginia.
    In addition to the cases of detainee abuse, Amnesty International 
is aware of hundreds of serious incident reports (SIRs) voluntarily 
filed by contractors, and reported shootings and killings by security 
contractors that have also apparently been unaddressed by the Justice 
Department. AI filed a brief in support of the Los Angeles Times' suit 
requesting that more information in the SIRs be released, which was 
denied on national security grounds and contract personnel privacy 
concerns. In this environment of apparent impunity for serious criminal 
conduct and human rights violations and complete lack of transparency, 
the U.S. government's reliance on private contractors has grown 
tremendously, creating a dire need for Congress to establish adequate 
regulation of the industry. For these reasons, Amnesty International 
commends the attention the Judiciary Committee is committing to this 
issue and calls for (i) immediate investigation and prosecution of 
cases of human rights violations committed by U.S. contractors under 
currently available law, (ii) expansion of the Military 
Extraterritorial Jurisdiction Act (MEJA) and other current U.S. law to 
ensure that security contractors, hired by various agencies of the U.S. 
government, do not escape accountability and (iii) greater transparency 
to Congress on the status of cases referred to the Department of 
Justice, in particular, any circumstances prohibiting it from 
prosecuting referred cases of contractor criminal conduct.
    Amnesty International emphatically supports the Transparency and 
Accountability in Security Contracting Act of 2007 (H.R. 369) and the 
MEJA Expansion and Enforcement Act of 2007 (H.R. 2740), introduced by 
Representative David Price, which contain several important provisions 
not addressed by the Defense Authorization Act (H.R. 1585), and which 
largely answer AI's calls for transparency and accountability for human 
rights violations in private military and security contracting.
   current u.s. law providing for jurisdiction over contractor crime 
                                overseas
    The U.S. Justice Department currently has the authority to 
prosecute civilian contractors for certain crimes committed outside the 
United States under several U.S. laws, including:
    The War Crimes Act. This law, 18 U.S.C. Sec. 2441, criminalizes 
certain war crimes committed inside or outside the United States by 
anyone who is a member of the armed forces or is a U.S. national. Under 
the Act, a war crime includes conduct defined as a grave breach of the 
Geneva Conventions, or constituting a violation of common Article 3 of 
the Conventions. The latter prohibits, inter alia, cruel treatment, 
torture, and outrages upon personal dignity, in particular humiliating 
and degrading treatment.
    The Torture Statute. This law, 18 U.S.C. Sec. 2340, makes it a 
criminal offense for any U.S. national acting in an official capacity 
``outside the United States'' to commit or attempt to commit torture. 
The law was enacted in 1994. Anyone who conspires to commit the acts 
prohibited under the statute can be subject to the same penalties as 
the actual perpetrator. This law, however, defines torture in an 
arguably narrower way than the U.N. Convention against Torture.
    The Military Extraterritorial Jurisdiction Act (MEJA) of 2000. This 
law, 18 U.S.C. Sec. 3261, criminalizes conduct committed by ``members 
of the Armed Forces and by persons employed by or accompanying the 
Armed Forces outside the United States'' that would be punishable by 
more than one year's imprisonment if engaged in within the United 
States. The text of MEJA (18 U.S.C. Sec. 3267(1)(A)) was amended in 
2005 to define the term ``employed by the Armed Forces outside the 
United States'' to include civilian employees, contractors, or 
employees of contractors, not only of the Department of Defense, but 
also of ``any other Federal agency, or any provisional authority, to 
the extent such employment relates to supporting the mission of the 
Department of Defense overseas.'' The U.S. Attorney's Office in the 
District of Arizona used MEJA to bring charges against a security 
contractor for Assault with a Deadly Weapon and Assault Resulting in 
Serious Bodily Injury in February 2007.
    The USA PATRIOT Act. Section 804 of this law, 18 U.S.C. Sec. 7 (9), 
extends the jurisdiction of U.S. federal courts over military 
personnel, including civilian contractors, for violations of federal 
criminal law committed at U.S. facilities abroad. The U.S. Department 
of Justice has used this provision to bring criminal charges against a 
CIA contractor who allegedly beat a detainee who later died in custody 
in Afghanistan. The contractor was indicted by a North Carolina grand 
jury of Assault with a Dangerous Weapon and Assault Resulting in 
Serious Bodily Injury, was found guilty of multiple counts of assault 
and was sentenced to over eight years in prison.
          expansion of law supported by amnesty international
    While past abuses by military and some security contractors may be 
prosecuted under current U.S. law, Amnesty International also supports 
an expansion of the MEJA and any other U.S. law that would ensure that 
contractors, who are taking on a growing number of functions, for 
example in security, border patrol and reconstruction projects, do not 
escape accountability simply because they may be deemed to not be 
``supporting the mission of the Department of Defense''.
    The MEJA Expansion and Enforcement Act of 2007 (H.R. 2740) and its 
predecessor (H.R. 369) accomplish such an expansion by establishing 
jurisdiction over all U.S. government contractors, as long as their 
work is carried out outside of the United States in an Armed Forces 
contingency operation, compared to the current jurisdiction MEJA 
grants, over contractors whose work supports a Department of Defense 
mission. The Judiciary Committee should consider amending language to 
even further the expansion to all U.S. contractors operating overseas, 
as long as they are working to support a mission or effort of the U.S. 
government.
    Further, Amnesty International supports a clear establishment of 
enforcement mechanisms, including organization of any existing 
enforcement resources, to ensure that prosecutions are not thwarted due 
to practical problems such as collecting evidence and making available 
witness testimony. While enforcement mechanisms must be established in 
accordance with certain Constitutional protections, and with 
consideration to the sovereignty of the host country, international law 
recognizes the nationality principle, under which a state may apply and 
enforce its criminal law outside of its territorial jurisdiction in 
order to hold accountable its own citizens and people who otherwise 
avail themselves of its nationality, for their criminal misconduct. The 
environment of impunity in which tens of thousands of U.S. contractors 
have been and are currently operating overseas is the exact type of 
situation necessitating application of this principle.
    Thus far, it appears that some investigations overseas have been 
conducted, leading to the referral of at least twenty cases of detainee 
abuse to the Department of Justice. However, the status of those cases, 
and the reason(s) why they have not been acted on in the more than 
three years they have been on the docket of the U.S. Attorney's Office 
in Eastern Virginia, are unknown. In order to ensure that victims of 
human rights abuses have meaningful access to justice, Congress should 
mandate, in accordance with H.R. 2740, that the Department of Justice 
report to it the status of cases of contractor misconduct overseas to 
the extent that, at a minimum, Congress is aware of (i) the number and 
type of complaints received, (ii) the number of investigations into 
complaints received, (iii) the number of cases opened, (iv) the number 
and result of cases closed, and (v) the reasons why prosecutions could 
not be brought in cases that were not opened.
        preference of civilian prosecutions over application of 
                    uniform code of military justice
    The Uniform Code of Military Justice (UCMJ) is applicable to U.S. 
troops worldwide and, since the 2007 Defense Authorization Act (P.L. 
109-364), can also be used to prosecute certain civilians ``in time of 
declared war or contingency operation . . . serving with or 
accompanying an armed force in the field.'' The fact that a person is 
eligible for trial by court-martial under the UCMJ does not make him or 
her ineligible for trial in the ordinary U.S. courts.
    In order to prevent arbitrariness--with, for example, civilian 
contractors charged with similar or the same crimes as military 
personnel, but tried in different jurisdictions--and to avoid any 
perception of inappropriate military justice leniency or lack of 
impartiality, Amnesty International believes that all personnel, 
civilian or military, of low rank or high, should be tried for human 
rights abuses in civilian courts. Any trials must conform fully to 
international standards for fair trial, and the death penalty--which 
could be available under the UCMJ, the War Crimes Act and the Torture 
Statute in cases of torture or ill-treatment resulting in death--must 
not be imposed.

    Mr. Scott. Thank you.
    Professor Horton?

 TESTIMONY OF SCOTT HORTON, ADJUNCT PROFESSOR OF LAW, COLUMBIA 
             UNIVERSITY SCHOOL OF LAW, NEW YORK, NY

    Mr. Horton. Thank you, Chairman Scott, Ranking Member 
Forbes and Members of the Subcommittee. I want to thank you for 
the opportunity to speak with you today about this very 
important subject.
    I would like to highlight three points from the written 
remarks I have submitted, and I would also like to come back at 
the end and address the question of constitutionality which was 
raised by Ranking Member Forbes in his comments.
    First, we are facing a major accountability problem. The 
force profile has changed dramatically. The current mix draws 
far more heavily on civilians than at any time in our history, 
and prior to the time the current surge began, there were about 
100,000 contractors in Iraq, for instance, against 125,000 
Americans in uniform. So this is approaching parity.
    If we compare this with the situation in World War II, in 
the Korean War, for instance, in both of those conflicts, the 
percentage of contract personnel involved would have run 
between 3 percent and 5 percent.
    But even though this configuration has changed radically, 
the way we handle accountability issues has not. That is we 
continue to have a focus on those in uniform. So, as a result 
today, we are performing at historical levels with respect to 
military accountability, but with respect to the civilians, the 
system clearly has broken down.
    Now the current legislation has some holes in it. In 
particular, we have legislation that is tied to the Department 
of Defense and legislation which is tied to U.S. installations. 
In my own review of individual cases reported in the media and 
from other sources, there are a significant number of cases 
that are going to fall in the gap between these two categories.
    In fact, I would say generally the group of cases I am most 
troubled by right now involves homicide and assault and 
involves a particular group of security contractors contracted 
by the Department of the State where their contract states that 
their mission is diplomatic protection.
    So I can see if a prosecution were brought under MEJA 
today, we would have an immediate squabble--and lawyers would 
get to earn a lot of fees--over whether they are covered by 
this statute, and I think that would be unfortunate, a waste of 
prosecutorial and judicial resources.
    H.R. 369 is going to bridge this problem by expanding the 
scope of covered persons under the MEJA to cover any U.S. 
Government contractor or subcontractor with the focus of their 
deployment in the region where the contingency operation is 
going on. That strikes me as exactly the correct approach.
    Second, we need to consider that the exercise of criminal 
jurisdiction may, in fact, be essentially protective in nature. 
A significant number of the cases that I have looked at involve 
American contractors as victims, not simply as actors.
    There may not be a basis to prosecute and investigate those 
cases, as things stand right now, and that particularly arises 
as a result of the order, Order 17 that was issued by Jerry 
Bremer on his last day in Iraq granting complete immunity to 
American contractors and contract employees under the Iraqi 
criminal justice system.
    So they are out under that system, and that means that 
there has to be a pro tanto substitute. There has to be a 
provision of criminal investigatory authority and criminal 
oversight by the United States.
    We need to consider here as well if granting this immunity 
from the Iraqi system is an objective that the United States 
has going forward.
    General Petraeus has stated in the last few days that he 
sees a Korea-style solution here, a situation where there will 
be a substantial force presence in Iraq for the next 50 years. 
If that is true, there will be a substantial civilian presence 
there as well, and if we want to negotiate the status of forces 
agreement with the Koreans that continues this immunity 
arrangement, we have to provide the ability to handle criminal 
investigations and prosecutions.
    Third, I see a false conflict emerging here between the 
Uniform Code of Military Justice--its use has been advocated by 
Senator Graham--and the MEJA, and I do support Senator Graham's 
initiative. It strikes me as an appropriate underscoring of the 
authority of military command. I see these things as 
complementary and mutually reinforcing and supporting, not as 
in conflict.
    Finally, Ranking Member Forbes raised questions concerning 
the constitutionality of MEJA, and I think it is important to 
note that law of war concepts and law of war enforcement have 
never been subject to the sort of territoriality rules that 
apply generally to criminal law. In fact, if we look at the law 
of war norms from the time of the drafting of the American 
Constitution, Vattel and Grotius, the two major writers who 
were relied upon and known to the framers, both of them argued 
that the sovereign has the right and the responsibility to 
enforce the laws of war with respect to all those who are 
deployed by the sovereign in connection with the war effort. 
That includes soldiers, mercenaries, camp followers and 
contractors.
    Now the Constitution gave Congress the authority to define 
the law of nations in this regard, and the proposal that is 
made here with respect to MEJA is defining the law of nations 
in the way that is completely consistent with the historical 
understanding of the criminal law jurisdiction to enforce the 
laws of war.
    We also have to understand this against the backdrop of the 
immunity that is granted here from Iraqi criminal prosecution 
because if the result is that there is no available criminal 
jurisdiction, neither American nor Iraqi, then we have done 
something that is a serious violation of the law. Then there is 
a responsibility with Congress, not just a right, to legislate 
this.
    Thank you.
    [The prepared statement of Mr. Horton follows:]
                   Prepared Statement of Scott Horton



    Mr. Scott. Thank you very much.
    I thank all the witnesses for testifying.
    And we will now have questions for the panel limited to 5 
minutes, and I will recognize myself first for 5 minutes.
    I wanted to follow up, Professor Horton. Well, I guess I 
will start with Mr. Sabin.
    He has indicated a lot of kind of areas where there may be 
gaps in coverage. When we passed MEJA in 2000, we thought we 
had covered the problem of people overseas committing crimes 
and find themselves, because they are outside of the 
continental United States, not under the criminal code. They 
could do it with impunity, and we thought we had covered 
everybody. There have been a number of kind of categories of 
people--Iraqis committing crimes, either fraud or assault, 
contractors of other agencies, other than the Department of 
Defense, subcontractors, spouses, I guess, crimes committed off 
base.
    Has the Department of Justice looked into possible gaps 
that need to be closed?
    Mr. Sabin. Yes.
    Mr. Scott. And do you have a list of recommendations for 
us?
    Mr. Sabin. We have two different concepts being discussed 
here. One is the war profiteering under H.R. 400 and the 
problems that that would address, and we can talk about our 
discussion in that regard.
    The MEJA issue, the statute has been amended. The Patriot 
Act provision that deals with the subject matter of the special 
maritime and territorial jurisdiction, that was addressed in 
the amendment under 2004 and 2005.
    As a result of that, it added certain language which would 
include the language that the professor referred to, a 
contractor in support of DoD mission abroad. So the concern 
that he articulated is a fair one, where you have folks that 
would be in support of that mission which would raise a factual 
issue that prosecutors would need to address in order to have 
appropriate ability to bring a case under MEJA.
    And remember, MEJA relates to, as articulated, common-law 
crime--murder, assault and the like--and we have been able to 
exercise MEJA jurisdiction in relationship to the Iraq theater 
as well as in other----
    Mr. Scott. Well, some people could be over there doing 
things that might not be technically Department of Defense. It 
might be Department of State in the theater.
    Mr. Sabin. Correct. And if it is outside the Patriot Act 
extension relating to the special and maritime territorial 
jurisdiction of the United States, MEJA looks to the status of 
the individual as opposed to Title 18 Section 7 Subsection 9 
which is a blend between who the person is, the offender or the 
person who is the victim of the crime, blended with the 
location of the particular incident occurring.
    So, under MEJA, you look to who is involved here, what is 
the status of that individual, is it a dependent, is it someone 
who is accompanying someone abroad, is it an actual present 
service member of the military or a former service member of 
the military? So we look through where we are, who it is, and 
then figure out is there appropriate jurisdiction under either 
the Patriot Act or traditional extraterritorial offenses or 
MEJA.
    Mr. Scott. Well, let's get to the bottom line. Does the 
Department of Justice see any gaps in coverage?
    Mr. Sabin. Originally, we are here to talk about the War 
Profiteering Act, so I do not have cleared comments to 
recommend to you with respect to either H.R. 369 or 2740. 
However, I do have comments that I could provide to you 
regarding certain constitutional issues that arise from as 
presently drafted.
    Mr. Scott. Okay. Does anybody else have a list of 
categories of people that we need to be covering just in terms 
of MEJA jurisdiction? There are----
    Professor Horton, you have indicated a number of different 
categories that did not seem to be covered. Do you have a list?
    Mr. Horton. Yes, sir. I think the specific example I cited 
was diplomatic protection under Department of State, and I come 
to that just on the reverse analysis, looking at specific 
incidents and asking whether a prosecutor looking at all the 
tools that are available to him now is going to be able to deal 
with it.
    Now I agree with Mr. Sabin. I think, obviously, a 
prosecutor is going to be able to assert jurisdiction of some 
sort, but, because of the way this language has been drafted, 
because of it being tied to a mission of the DoD, we are going 
to look at a preliminary skirmish in a lot of these cases about 
whether the contract really is tied to the DoD, and when it is 
written by the Department of the Interior, the Department of 
State, USAID, and when it is a subcontractor, we are going to 
see that over and over again. That is a waste.
    Mr. Scott. Ms. Razook, do you have any comments on just 
jurisdiction, who ought to be covered by the criminal code?
    Ms. Razook. Yes. And I just want to clarify what Mr. Sabin 
said, that the USA Patriot Act covers people who committed a 
crime on a U.S. facility abroad, so the category that I 
mentioned with contractors doing security for reconstruction 
efforts, that is not going to be necessarily on a U.S. 
facility. So those types of contractors potentially would fall 
in the loopholes left under MEJA and the USA Patriot Act.
    Mr. Scott. Thank you.
    Mr. Forbes?
    Mr. Forbes. Thank you, Mr. Chairman.
    Once again, I thank all of you for taking your time to be 
here today. I wish we had time to sit down with each of you for 
a long period of time, but we are limited to 5 minutes, just 
like you are. So I am going to try to be quick on my questions.
    And one of the things that I get from listening to all of 
you is that we are going to have private contractors in every 
contingency operation, every conflict we have from now on, and 
I think even Professor Horton acknowledged those percentages 
are increasing, and that is just the nature of the beast. We 
cannot deliver troops. We cannot do a lot of things without the 
contractors there.
    Mr. Bowen, I want to first thank you--Mr. Gimble--both of 
you for the jobs you do. We have had you in a number of 
hearings, and both Republicans and Democrats always laud your 
work, and we appreciate that.
    I may have misunderstood you, Mr. Bowen, but it is my 
thought that your testimony is, despite this growing number of 
contractors that we have involved, when really you look at the 
amount of war profiteering and fraud that is there, it is a 
small percentage of the overall operations. Is that accurate 
or----
    Mr. Bowen. That is right. You did not misunderstand it. It 
is a small component of the overall investment in Iraq 
reconstruction, which amounts to about $38 billion, and to 
date, the convictions and imprisonments we have obtained, 
results of egregious fraud we have uncovered, primarily focused 
on misuse and fraudulent misuse of Development Fund for Iraq 
money. That is Iraqi money. However, we have, as I said, over 
70 cases ongoing, 30 at the Department of Justice, most of 
those involving U.S. money.
    Mr. Forbes. And it does not matter whether it is a small 
percentage or not. We are still aggressively prosecuting the 
ones that we discover and find. Is that fair and accurate?
    Mr. Bowen. That is right.
    Mr. Forbes. Mr. Sabin, I would just ask you a question. 
What is the process for sealing a case under the False Claims 
Act?
    Mr. Sabin. You would look to Title 31 United States Code 
Section 3730. An extension for sealing under the False Claims 
Act is issued by a judge. It is presented upon a factual 
showing by the government for keeping the case to be sealed.
    The government must demonstrate to that court that good 
cause is shown for its request to extend the time to have the 
matter sealed, and that for a variety of reasons, in order to 
continue to conduct these complex investigations, to protect 
witnesses, informants, and it is consistent with congressional 
intent for the government to determine whether it should 
intervene in a matter which otherwise may have been brought or 
not brought by the United States that the relater, the term of 
art, the whistleblower has filed in a court of law.
    Mr. Forbes. So the judge is the one that would ultimately 
make that----
    Mr. Sabin. Absolutely. Present it to a judge who makes the 
determination upon a specific factual showing by the government 
for good cause.
    Mr. Forbes. Let me ask you this. And I do not mean to cut 
you off. It is just I am short on my time here.
    Mr. Sabin. Yes, sir.
    Mr. Forbes. The Department has been criticized today for 
disingenuously seeking to seal these cases in order to threaten 
whistleblowers with dismissal of their cases. Any response to 
that?
    Mr. Sabin. Patently false. I absolutely disagree with that 
assertion. I do not believe it is a well-founded assertion. The 
government professionally and thoroughly reviews the 
allegations made and, if appropriate, will intervene; if not, 
will decline and the matter can go forward if the relater wants 
to and counsel wants to.
    Mr. Forbes. Mr. Grayson, thank you for being here, and I 
know that this hearing, as you know, is at least a discussion 
of H.R. 400 and H.R. 369. Do you support both of these pieces 
of legislation?
    Mr. Grayson. Well, I am here primarily to address the lack 
of enforcement that has occurred under existing law under the 
False Claims Act, and I point out----
    Mr. Forbes. So you are not here to speak on those two 
pieces of legislation?
    Mr. Grayson. Indirectly, I am, but directly not. I would 
point out that Mr. Sabin has no responsibilities with regard to 
seal False Claims Act at all, and I do.
    Mr. Forbes. I will leave those to somebody else, but if you 
are not here on those two pieces of legislation, let me move to 
Ms. Razook.
    And I hope I am pronouncing that correctly. Thank you for 
being here. And one of the things I noticed in your testimony 
is that you believe that all personnel--civilian and military--
should be tracking human rights violations in civilian courts, 
and then you mentioned the fact that these 17 cases in the 
Eastern District of Virginia are languishing, I think was your 
term that you had. Is that a civilian court?
    Ms. Razook. Yes.
    Mr. Forbes. Have you practiced in that court before?
    Ms. Razook. In the Eastern District of Virginia? No.
    Mr. Forbes. I have, and one of the things in that court 
that they are known for is the judges controlling the dockets 
and not the attorneys, be they prosecutors or defense 
attorneys. So here we have a civilian court that is handling 
these matters, and the judges apparently are moving the dockets 
in the way that they think are preferential, but you are really 
upset with those judges and how they are handling their dockets 
as well. Is that not correct?
    Ms. Razook. Well, there are two parts of it. First is 
that----
    Mr. Forbes. Just be quick because my time is out.
    Ms. Razook. I am sorry.
    Mr. Forbes. That is okay. You go ahead. You go ahead.
    Ms. Razook. The first is that there has not been 
prosecution of what even the Army's own investigation has said 
has been evidence of serious human rights violations, and in 3 
years, we have not seen anything, but not just that we have not 
seen a prosecution or any evidence of an investigation. But the 
second part of the problem is the transparency issue which we 
cannot even figure out why that is not happening.
    Mr. Forbes. But my question to you was you have 17 cases in 
that court that you say are languishing. Is that accurate? That 
is a civilian court. Is there anything that takes the movement 
of that docket and changes it from the way that those judges 
would normally handle their dockets in their court?
    Ms. Razook. The reason why Amnesty International supports 
civilian trials for prosecution of human rights violations is 
because, first of all, we would want prevent potential 
arbitrariness between military personnel being tried under one 
system, the UCMJ, and civil contractors being tried under 
another system. And the other--there are actually a couple of 
other reasons--is the perception of inappropriate military 
justice leniency for----
    Mr. Forbes. Mr. Razook, I am happy with that. I mean, you 
have submitted all that, but my question was your discussion 
about civilian courts and your frustration with the Eastern 
District Court of Virginia and how those judges are handling 
their dockets, and I was wondering if you could explain what 
those judges are doing wrong because they control their 
dockets.
    Ms. Razook. Well, that is the problem, is that we do not 
know what they are doing.
    Mr. Forbes. But your complaint there is not with the 
Department of Justice. It is with the judges in handling their 
dockets.
    Ms. Razook. Well, on the one hand, we have seen other 
districts, the District of Arizona and the District of North 
Carolina, prosecute. However, the Department of Justice is the 
body charged with this responsibility in general, and so we 
have----
    Mr. Forbes. But they do not control that docket in the 
Eastern District of Virginia, do they?
    Ms. Razook. Well, they are charged with responsibility, 
and----
    Mr. Forbes. Thank you, Mr. Chairman. I yield back.
    Mr. Scott. The gentleman from Georgia?
    Mr. Johnson. Thank you, Mr. Chairman.
    Mr. Bowen, I heard you say that there is about $38 billion 
worth of fraud in Iraq that----
    Mr. Bowen No, sir. About $38 billion has been invested in 
Iraq in taxpayer money.
    Mr. Johnson. Oh, okay. In terms of reconstruction?
    Mr. Bowen. That is right. Relief and reconstruction 
efforts, including security money.
    Mr. Johnson. All right. And so you are saying that it is 
about $5 billion in alleged corruption that has been uncovered?
    Mr. Bowen. On the Iraqi side, that is what the commissioner 
on Public Integrity told me.
    Mr. Johnson. And on the Iraqi side, you have Iraqi 
ministers who are immune from prosecution, if you will, for 
corruption?
    Mr. Bowen. That is right.
    Mr. Johnson. And they have the ability to immunize their 
subordinates for corruption?
    Mr. Bowen. That is right.
    Mr. Johnson. And that corruption involves U.S. taxpayer 
dollars?
    Mr. Bowen. Iraqi dollars.
    Mr. Johnson. Iraqi dollars?
    Mr. Bowen. Yes, sir.
    Mr. Johnson. It does not include United States taxpayer 
money?
    Mr. Bowen. No, sir.
    Mr. Johnson. I see. So does current law allow for the 
United States to prosecute Iraqis for fraudulent obtaining of 
Iraqi money which came from American taxpayers' money?
    Mr. Bowen. To prosecute Iraqis for the fraudulent----
    Mr. Johnson. Iraqis for stolen money from Iraq which 
basically came to Iraq from the American taxpayer.
    Mr. Bowen. That is a jurisdictional question that we work 
with the Department of Justice on. I am going to defer to Mr. 
Sabin to give you that answer, but SIGIR focuses on prosecuting 
U.S. citizens involved in corruption.
    Mr. Johnson. All right.
    Mr. Sabin?
    Mr. Sabin. The United States has traditional fraud 
statutes, mail fraud, wire fraud, which have had 
extraterritorial application in order to assert jurisdiction 
over individuals that have a scheme to defraud, make false 
representations in order to obtain taxpayers' money.
    So, as a general proposition, the extraterritorial 
application of fraud-based statutes that the U.S. attorney's 
office could assert in a U.S. district court. So the direct 
answer is yes to that general proposition.
    Depending upon the status of the individual, whether there 
is extradition treaties for particular locations, then you get 
into the details.
    Mr. Johnson. Thank you.
    Mr. Grayson, according to your testimony, one of the 
reasons why the Civil False Claims Act has been unsuccessful in 
punishing and preventing war profiteering is because the Bush 
administration has done nothing to pursue those cases, and you 
just heard from Mr. Sabin taking strong offense at your 
characterization of what you call perpetual court orders 
sealing cases as evidence. He takes issue with your assertion 
that the sealing of these cases actually stops the process. How 
would you respond to that?
    Mr. Grayson. Well, there has never been a case under the 
False Claims Act in 144 years of history where an entire class 
of cases has remained under seal for years and years until now. 
The Iraq False Claims Act cases have remained under seal for 
years and years even though the statute says 60 days is the 
prescribed period.
    Mr. Sabin is in the criminal division. He has no 
responsibilities regarding the Civil False Claims Act. So he is 
literally not competent to testify about this.
    It is also true that----
    Mr. Johnson. Well, now hold on. Let me give Mr. Sabin an 
opportunity to respond to that.
    Mr. Sabin. I had, with all due respect, Counsel, the 
opportunity to discuss the matters with our civil division 
folks. He is correct that I am in the criminal division--and 
proud of that--at the Department of Justice, but had the 
opportunity to chat with our colleagues in the civil division 
regarding Mr. Grayson's comments in his statement.
    I believe some are inaccurate. Some are accurate with 
respect to the Custer Battles case. For example, he refers to 
that particular case. The Department of Justice civil division 
2 weeks ago filed a brief in the Fourth Circuit Court of 
Appeals supporting Mr. Grayson's position. We filed pleadings 
in the district court in the Eastern District of Virginia in 
support of Mr. Grayson's position there.
    So we take issue that cases have not been brought. We have 
had two matters that have been specifically addressed by the 
civil division.
    Mr. Johnson. Why are there so many cases that are still 
under seal?
    Mr. Sabin. A number of reasons. I can talk you through 
them.
    One is lack of verifiable evidence that is in the complaint 
filed by the relater.
    Second, we need timely cooperation by counsel as well as 
the relater to be interviewed to provide the information to 
further the investigations to determine whether or not to 
intervene in the particular matter.
    Third, as discussed previously, the gathering of evidence 
is a challenge, especially in the international forum and 
especially in war theaters and combat zones.
    Additionally, you need the cooperation of defendants and 
third parties, and that cooperation varies widely. It is not 
necessary in each matter, but in some matters, that cooperation 
can help facilitate the expeditious development of the case, 
and non-compliance, for example, with inspectors generals' 
subpoenas that are issued in that regard.
    You have the coordination in parallel investigations 
between the criminal prosecutors and the civil prosecutions.
    You have the administrative aspect relating to suspension 
and debarment, so you have the coordination in terms of a 
potential global resolution of administrative, civil and 
criminal all coming together in order to appropriately address 
the matter.
    Mr. Johnson. How many people in the civil division dealing 
with these kinds of----
    Mr. Sabin. At the headquarters civil division, there are 13 
line attorneys and three supervisors. That does not include the 
number of civil attorneys around the country in the United 
States attorney's office and in particular the Central District 
of Illinois that are addressing the matters.
    Mr. Johnson. All right. And last question, do you agree 
with Mr. Bowen's assertion that $5 billion is the extent of the 
alleged corruption, alleged fraudulent misconduct in Iraq?
    Mr. Sabin. I believe he and his staff are in a better 
position to know. So I would defer to that. I have no reason to 
doubt that number, but those individuals are the experts that 
are working through these matters in a professional and 
thorough fashion, and I have no reason to doubt that number.
    Mr. Bowen. The $5 billion has to do with the 2,000 cases 
that the Iraqis have on----
    Mr. Scott. Did you say billion or million?
    Mr. Bowen. Five billion dollars that are involving cases 
that are being conducted by the Iraqi Commission on Public 
Integrity.
    Mr. Johnson. I am sorry. All right. Thank you.
    Thank you.
    Mr. Scott. Thank you.
    The gentleman from North Carolina?
    Mr. Coble. Thank you, Mr. Chairman.
    Mr. Chairman, today has been one of those days when I had 
to be at five places simultaneously, so I apologize to you and 
the witnesses for my belated arrival.
    Mr. Sabin, how do the Departments of Defense and Justice 
and the Office of SIGIR coordinate to investigate and prosecute 
alleged criminal acts associated with the war in Iraq?
    Mr. Sabin. In a variety of fashions. We try to be working 
together in a coordinated fashion through the task forces that 
we have set up, the ones I referred to, the International 
Contract Corruption Task Force. That is the operational 
component.
    And we are sharing information, exploiting intelligence, 
trying to figure out where the evidence will yield most 
productive investigation and prosecution. So that sharing of 
information, prosecutors and agents sitting down at an early 
stage in order to proactively address it, through training, 
through coordination in what I refer to as the National 
Procurement Fraud Task Force, which has----
    It is really pretty damn impressive because you have 
inspectors general themselves chairing each of the different 
subcommittees on legislation and training and private-sector 
outreach, governmentwide, to really make it a significant long-
term institutional change.
    So not to look at just the individual criminal prosecution, 
but what as an industry in this unique time in our country's 
history should we be doing in order to fill regulatory gaps, 
really provide effective and robust coordination and 
prosecution, and it is something, I think, we are proud of and 
we are looking forward to successes in the coming months and 
years.
    Mr. Coble. Thank you, sir.
    Mr. Bowen, is the FBI a part of the task force, the ICCTF, 
A; are they in theater, B; and are they the lead investigators 
on these cases? A three-prong question I have hurled at you.
    Mr. Bowen. Yes, Mr. Coble. The FBI is part of the 
International Contract Corruption Task Force, and the Joint 
Operations Center, which is the central facilitating 
operational arm of that task force, is co-located at FBI 
headquarters. I visited there a month ago, and, as I said in my 
statement, the Joint Operations Center is producing important 
work in support of our cases.
    The FBI does have agents in Iraq. Many of them are involved 
in counterterrorism investigations, but we are working with 
them on our fraud cases as well, and I expect that it is a 
joint relationship, and, as you know, our organization is a 
temporary organization. Many of our cases will continue after 
SIGIR's expires at the end of next year, and I expect that the 
FBI will be inheriting a number of those cases.
    Mr. Coble. Thank you, Mr. Bowen.
    Mr. Gimble, before my red light illuminates, if you will, 
briefly describe the investigations involving KBR and LOGCAP.
    Mr. Gimble. The KBR and LOGCAP are joint investigations 
that have been conducted by the members of the International 
Contract Fraud Task Force of which our DCIS investigators are a 
part, and there is still an ongoing number of efforts in that 
respect largely run out of the Rock Island District.
    Mr. Coble. I did not hear the last part you said.
    Mr. Gimble. Largely, the LOGCAP investigations are being 
done in theater, but also back in Rock Island, IL.
    Mr. Coble. But how long has the investigation extended or 
lasted?
    Mr. Gimble. They started fairly early. They continue on. It 
started in 2004, I believe.
    Mr. Coble. Okay. So it has been going on about 2 or 3 years 
then.
    Mr. Gimble. Yes, that is right.
    Mr. Coble. About 3 years.
    Mr. Gimble. About 3 years.
    Mr. Coble. Thank you, Mr. Gimble.
    Do you want to weigh in on that, Mr. Sabin?
    Mr. Sabin. Yes, it is being conducted with the 
investigators out of the Central District of Illinois with 
assistance from main Justice. There have been eight different 
criminal matters brought as a result of those investigations. 
Some of those involve individuals associated with Kellog, Brown 
and Root.
    Mr. Coble. Thank you, Mr. Sabin.
    I yield back, Mr. Chairman.
    Mr. Scott. Thank you.
    The gentleman from Massachusetts?
    Mr. Delahunt. Mr. Sabin, I think I heard something about 
the docket in the Eastern District and that it is the court 
that controls the docket.
    Mr. Sabin. I could clarify. I think what the witness was 
referring to was not the court's docket because these matters 
have not been criminally charged and are on the court's docket. 
To the extent that there has been public confirmation--and I am 
not going to get into specifics regarding any investigation--
those matters may be ongoing within the Department of Justice 
as a grand jury investigation.
    Mr. Delahunt. So there is not an indictment or any formal 
charge now?
    Mr. Sabin. Correct. It is a misunderstanding.
    Mr. Delahunt. So it is a misunderstanding.
    Mr. Sabin. Yes.
    Mr. Delahunt. So, for 3 years now, the Department of 
Justice has been doing presumably something?
    Mr. Sabin. I am not going to comment upon any ongoing 
investigation, but the Department of Justice has set up a 
detainee abuse task force being operated out of the Eastern 
District.
    Mr. Delahunt. If I can address this to Ms. Razook, how do 
you come up with the number 17?
    Ms. Razook. That number was reported several times, one in 
the By the Numbers report published by Human Rights First, New 
York University, and Human Rights----
    Mr. Delahunt. So we do not know what the government is 
doing?
    Ms. Razook. Correct. That is the problem.
    Mr. Delahunt. That is the problem. And neither, I can 
assure you, does this Committee know what the government is 
doing in this particular matter either, which is the problem as 
well, but----
    Mr. Sabin. Mr. Delahunt, as a former prosecutor, you know 
that ongoing grand jury investigations and because of 
separation of powers and prosecutorial discretion, Congress 
should not----
    Mr. Delahunt. I certainly understand that, but if there are 
17, hypothetically, if that number is accurate, I would expect 
that, given the talent our Department of Justice has available 
to it, it could have, you know, proceeded in a more expeditious 
fashion. Three years even for the Federal Government is a 
Federal case, I would say.
    Mr. Sabin. I am not going to confirm the timeframe with 
respect to each of those matters, but I have the highest 
confidence in the prosecutors in the Eastern District of 
Virginia and the U.S. Attorney Chuck Rosenberg to pursue those 
cases as appropriate.
    Mr. Delahunt. Well, I would hope that that is the case. Of 
course, we do not know.
    Mr. Bowen, once more, thank you for what you have done for 
this country. You have been a bright light in a rather dark 
chapter.
    Mr. Bowen. Thank you.
    Mr. Delahunt. You know, I just read Mr. Gimble's testimony, 
and almost $10 million was paid to the U.S. in restitution, 
$323,000 was levied in fines and in penalties, $3,500 was 
forfeited, and $61,000 was seized in some litigation. Were we 
ever able to account for that $9 billion that your report 
indicated was unaccounted for?
    Mr. Bowen. Yes. You are referring to our January 30, 2005, 
audit of the----
    Mr. Delahunt. Yes, I am.
    Mr. Bowen [continuing]. CPA's management of the Development 
Fund for Iraq money. That is Iraqi money.
    Mr. Delahunt. Correct.
    Mr. Bowen. It was transferred by the CPA to the interim 
Iraqi government, and the answer is, no, the Iraqi government 
has not accounted well for what happened to----
    Mr. Delahunt. And I understand the distinction, but I do 
understand--and you can correct me, please--that money was 
disbursed to the Iraqi government by the CPA
    Mr. Bowen. That is correct.
    Mr. Delahunt. Nine billion dollars. And we are talking 
about $3,500 was forfeited. In Mr. Gayson testimony, when he 
uses billions in terms of fraud--and I guess you quoted someone 
in the other body about an orgy of greed--I have this uneasy 
feeling that we are missing something here. We are missing a 
potential substantial recovery.
    Mr. Sabin, why hasn't the government participated under the 
whistleblower statute?
    Mr. Sabin. We have brought two civil cases that have been 
resolved totaling $5.8 million in recovery, we have declined to 
intervene for a variety of reasons in, I believe, four others, 
and I believe three others that are public have been 
voluntarily dismissed by the relaters. The other matters, we 
will continue to review as appropriate, and when it is 
appropriate to unseal and/or decline to intervene, the 
Department of Justice will so advise.
    Mr. Delahunt. Mr. Grayson?
    Mr. Grayson. The Bush administration has not actually 
litigated a single case under the False Claims Act. The two 
settlements that Mr. Sabin is referring to were settlements. 
There was not litigation involved. They recovered a grand total 
of $5 million when $9 billion, as you just pointed out, Mr. 
Delahunt, is missing from the Development Fund of Iraq alone.
    Not only that, but Senator Grassley wrote to the Attorney 
General 2 years ago asking why nothing is being done on these 
cases under the False Claims Act, and he never received a 
reply. Not only that, but KBR has never been sued for anything 
it has done wrong in Iraq by the U.S. Government. It has never 
been sued in any whistleblower case that the U.S. Government 
has participated in. The only people who have had to suffer for 
this are the taxpayers.
    Mr. Sabin. Just a comment on that point. The letter that 
Senator Grassley sent on February 17 of 2005 was responded to 
by the Department of Justice on April 20 of 2005, 60 days 
later.
    Mr. Delahunt. That is very good speed. That is a quick 
response. I wish all my letters were responded to as quickly, 
Mr. Sabin. So I will take note, and I will credit the alacrity 
with which that response came. But I would hope and encourage 
you to have further conversations with Mr. Grayson regarding 
the cases which he is alluding to.
    Mr. Sabin. And Mr. Grayson can correct me if I am wrong, 
but my understanding is the civil division does have ongoing, 
in certain matters, conversations with Mr. Grayson with respect 
to some of the matters that he is aware of. Some of them are 
sealed, so we cannot talk about specifics here today. But it is 
my understanding that in some matters that have been extended--
and, again, Mr. Grayson can correct me if I am wrong--there has 
been a consent by him to that extension.
    Mr. Grayson. There has never been a single case picked up 
by the Justice Department that I have brought or that any other 
attorney has brought under the whistleblower statute since the 
war began. That is a fact.
    Mr. Delahunt. Well, I think my time has expired, but I am 
not defending the Justice Department, Mr. Grayson. That has not 
been my customary practice, but I do think it is an issue 
sometimes of resources, and Mr. Sabin is not in a position to 
say that. But I think we underresource the Department in 
situations where it works to wreak an injustice, if you will, 
but that will, I guess, be the subject of another hearing in 
another day.
    Mr. Scott. The gentleman's time has expired.
    Mr. Sabin can get an opportunity to respond to whether or 
not you have sufficient resources to effectively prosecute the 
issues before you----
    Mr. Sabin. In the last few weeks----
    Mr. Scott [continuing]. Or not.
    Mr. Sabin. I have been up to Congress to talk about just 
just the fraud context: the Foreign Corrupt Practices Act and 
resources, the securities and corporate fraud endeavors of the 
Department of Justice, the mortgage fraud activity, the health 
care fraud activities and identity theft, and we want to speak 
with one voice with respect to the matter of resources. So----
    Mr. Scott. When you come to speak, are you asking for more 
resources?
    Mr. Sabin. And what I say is that, as Mr. Delahunt pointed 
out, there are appropriate channels for those discussions to 
occur in terms of appropriations and budget authority.
    Of course, an individual prosecutor would want to come up 
here and say, ``Give us more resources in order to undertake 
legitimate efforts in a priority area,'' but given all the 
different matters that are before the Congress and before the 
Justice Department, we say there are appropriate channels, we 
welcome an opportunity to engage us in dialogue in order to 
address the resource allocations.
    Mr. Scott. Well, those are some choices, I guess, we have. 
If you would just tell us what you can do with what you have 
and what you could do if you had a little bit more. I mean, 
last time we had one of these hearings, it was on identity 
theft, and I had a bill to give you more money, as you may 
remember. I think you were the one testifying, as a matter of 
fact.
    Mr. Sabin. I do not think it was identity theft. I have 
been up here a few times, but I do not think it was identity 
theft.
    Mr. Scott. On identity theft. And we asked if you had 
enough resources, and you said, ``Sure.'' You do not need my 
bill.
    Mr. Sabin. No, I would not have said that, sir. That was 
not me.
    Mr. Scott. Well, somebody did. Somebody did. And then I 
gave an example of the U.S. senator who had had his identity 
stolen and fraud run up, why that case had not been prosecuted, 
and the answer was it is a matter of resources.
    Mr. Sabin. Again, I do not know----
    Mr. Scott. So if you----
    Mr. Sabin [continuing]. The specifics of that interaction.
    Mr. Scott. If you just tell us what you can do with what 
you have and what more you can do, then we can decide whether 
or not we want that extra done, but if we all get is, ``This is 
what we have, and we are not going to ask for more,'' we do not 
know the answers to his question.
    Mr. Sabin. So what I am saying is we have a track record of 
success. With additional resources, we would work to use them 
effectively and efficiently consistent with budgetary 
restrictions in order to bring more civil cases and criminal 
cases, or at least sort through the matters, as you could, with 
more resources.
    Mr. Scott. Well, we have a kind of vague idea of what the 
problem is.
    Mr. Grayson, did I understand you to say that you believe 
that $9 billion--with a B--is missing over in Iraq?
    Mr. Grayson. Yes, from the Development Fund of Iraq alone.
    Mr. Scott. Okay.
    Mr. Bowen, you, as I understand your testimony, were in the 
low double-digit millions.
    Mr. Bowen. Yes. The Development Fund for Iraq money is not 
U.S. money. It is Iraqi money. I was talking about U.S. money.
    Mr. Scott. Okay. So the $9 billion Iraqi money--you are not 
disagreeing with that figure?
    Mr. Bowen. No, that was the result from our audit January 
30, 2005, looking at the CPA's transfer of Development Fund for 
Iraq money to the interim Iraqi government.
    Mr. Scott. Mr. Grayson, who is in charge of the $9 billion?
    Mr. Grayson. Well, a substantial amount of the Development 
Fund of Iraq money actually came from the United States. It 
included seized funds that were seized in the battlefield, 
vested funds that the Administration seized in bank accounts in 
this country and appropriated funds as well. So the----
    Mr. Scott. And, Mr. Bowen, we are not interested in that 
money being spent appropriately?
    Mr. Bowen. To clarify, it is Iraqi money. It was Iraqi 
money that, as a result of the Oil for Food process, was kept 
in the Federal Reserve Bank of the Southern District of New 
York. However, it was Iraqi money. None of the Development Fund 
for Iraq money was U.S. money.
    Mr. Scott. Okay. In terms of U.S. money, have any of the 
no-bid, cost-plus contracts and multiple layers of 
subcontracting resulted in the actual cost of the work being 
escalated because you had to go up through many channels? Has 
that caused any waste of the United States taxpayers' money?
    Mr. Bowen. Yes, it has. And our audits point that out. For 
example, in our inspections, the Baghdad Police College 
inspection, which we have reported on several times, the 
primary health care clinic program, and we have analyzed 
lessons learned from that process in our Contracting Lessons 
Learned report to Congress which was provided last August.
    Mr. Scott. And has anything been done to cure these 
problems?
    Mr. Bowen. Yes, Senator Collins has a bill she introduced 
to implement a number of the recommendations in our Contracting 
Lessons Learned report that will improve--significantly, in my 
view--the cost-plus contract process.
    Mr. Scott. Has the Administration done anything 
administratively to address that yet?
    Mr. Bowen. Yes. As our Lessons Learned report lays out, the 
story of contracting in Iraq is the story of lessons learned 
itself, gradual progress in the formation of entities, like the 
Joint Contracting Command in Iraq that provided adequate 
numbers of contracting options, that provided adequate systems 
to keep track of how quality control, quality assurance were 
carried out, more specifically to keep track of how those 
contracts were monitored from a financial perspective.
    Mr. Scott. And Ms. Collins' bill is pending now over in the 
Senate?
    Mr. Bowen. Yes, sir. That is right.
    Mr. Scott. And your recommendation is that we pass that 
legislation?
    Mr. Bowen. Very strongly. Yes, sir.
    Mr. Scott. Mr. Sabin, just two other questions. You 
indicated that you had some comments to make on the new bill on 
war profiteering, I think your definitions and some of the 
complications that may take place if you try to change the law 
midstream.
    Mr. Sabin. Yes, sir. Yes. And you could find that laid out 
in detail in my May 18 response to Senate testimony and 
questions for the record on the Senate side dealing with the 
War Profiteering Act, and we can get you those in particular. 
But they fall into three general concerns: definitional, intent 
and jurisdictional. I could go through them if you are 
interested.
    Mr. Scott. Well, it is your position that you can work with 
the present law to chase after war profiteers better than a new 
law?
    Mr. Sabin. No, I am saying that in the new law, there are 
some good recommendations relating to venue and penalties and 
other aspects. If you decide not to pursue the War Profiteering 
Act, that you could augment existing fraud-based statutes to 
provide additional tools and additional penalties for criminal 
prosecutions. If you choose to pursue the War Profiteering Act 
as a mechanism, in terms of those definitional terms and 
jurisdictional concerns, we would be happy to work with you in 
order to address that.
    Mr. Scott. Okay. And finally, the gentleman from Georgia 
asked you why things were under seal for so long. I think your 
answer tended to speak to why the cases are taking so long, but 
not specifically why they are still under seal.
    Mr. Sabin. They are under seal because a judge had ruled 
that they should remain under seal based upon the submission 
for good cause by the government in terms of its actual 
assertions in the civil realm relating to False Claims Act 
matters.
    Mr. Scott. And those pleadings would be under seal, too?
    Mr. Sabin. Correct.
    Mr. Scott. So does the other side get to see those 
pleadings?
    Mr. Sabin. In certain instances, I believe there are 
discussions with counsel and relaters, but not all aspects of 
that are in every case undertaken.
    Mr. Scott. Well, in civil litigation, if it is a Civil 
False Claims Act, you may not be involved in the case. Is that 
right?
    Mr. Sabin. Well, it depends. If we decide not to 
intervene----
    Mr. Scott. You can intervene. No, you do not have to 
intervene.
    Mr. Sabin. Correct. And that is----
    Mr. Scott. But you intervene and it is an ex parte 
proceeding as to whether it stays under seal?
    Mr. Sabin. Correct.
    Mr. Scott. I want to thank all of the witnesses for their 
testimony.
    Mr. Delahunt. Mr. Chairman, are we having a second round?
    Mr. Scott. Yes. The gentleman from Massachusetts?
    Mr. Delahunt. Yeah, I posed the question to the Chair 
because I thought the Chair had a second.
    Mr. Scott. Yes, you are right.
    Mr. Delahunt. Professor Horton, you earlier talked about 
almost reaching parity in terms of private contractors and 
military personnel. I think your figures were 120,000 to 
100,000. It might have been before the surge.
    Mr. Bowen, if you know the breakdown in terms of 
compensation for the 100,000 contractors--you might not have 
this available--I suspect that it is considerably higher than 
the remuneration for military personnel. If you can give us a 
comparison, it would be most welcome.
    Mr. Bowen. Mr. Delahunt, I do not have that yet. We have 
ongoing audits of Blackwater, and we expect to have that 
completed for our fall quarterly report, and we will have 
follow-on reviews of security contractors, so I do not want to 
venture a number until we have supportable data.
    Mr. Delahunt. Thank you.
    Professor Horton, would you be willing to take a stab, and 
I understand this is an estimate.
    Mr. Horton. Well, on an individual basis, I, in fact, 
interviewed in Baghdad a number of security contractors about 
their pay background and, of course, a large part of them, 
particularly among the elite units, came from our Special 
Services. They were being compensated at a level of around 
$30,000 a year, some a little bit more than that. And going 
into high-level security contractor operation, the compensation 
level was running between $110,000 and $135,000. So it is quite 
substantially larger.
    Of course, this is a very, very simple way of approaching 
it.
    Mr. Delahunt. I understand.
    Mr. Horton. One needs to fold in a number of other 
criteria, health benefits, pension and so forth.
    Mr. Delahunt. But it is still the American taxpayer that is 
paying those private contracts, as well as the military 
personnel. And is it a fair statement to say that our military 
loses something in terms of its talent available by pursuing a 
private army, if you will?
    Mr. Horton. Well, I will just say I have repeatedly heard 
representatives of the industry say that they are a cheaper 
alternative, and I have never been able to put together numbers 
that would show that. It seems to me that that would be very, 
very difficult to display.
    And, of course, we are looking at hemorrhaging from our 
most talented people in the Special Forces Operations. A lot of 
them describe to me the fact that they were looking for the 
earliest opportunity to exit and get higher pay. So we are 
working against ourselves in that respect.
    Mr. Delahunt. Thank you, Professor.
    Mr. Grayson, why is it preferable from the perspective of a 
whistleblower to have the participation of the government?
    Mr. Grayson. Well, the government has the imprimatur of 
speaking on behalf of the taxpayer. In fact, interestingly 
enough, the statute provides that the whistleblower gets more 
money when the whistleblower proceeds with the case himself 
without the government's assistance, but whistleblowers want 
the government's assistance because it is the government's 
money that is out there.
    When you look at it from a judge's point of view, the judge 
asks himself, ``If the Justice Department does not care about 
this case, why should I?'' and that is an uphill battle for 
every whistleblower in every case that the Department of 
Justice declines to prosecute, including the many cases that it 
has declined to prosecute against KBR already.
    Mr. Delahunt. In terms of resources and access to 
information, I presume--you can correct me--and, Mr. Sabin, you 
can join in--correct if I am wrong--but I would presume that 
access to information would be much more readily available with 
the participation of the government.
    Mr. Grayson. That is true, and I believe the government's 
allocated substantial resources within DoD for this purpose. It 
has allocated substantial resources within the FBI for this 
purpose. The Defense Criminal Investigative Service has done 
very thorough investigations of the cases that I have been 
involved in. The roadblock, the barrier is the Department of 
Justice. The Department of Justice will not go forward with 
whistleblower cases brought concerning contractor fraud in 
Iraq.
    Mr. Delahunt. Thank you.
    Mr. Sabin, if you are aware in terms of ex parte, as we 
were referring to earlier when you were being questioned, has 
the government ever been denied its motion?
    Mr. Sabin. I can get back to you on specifics, but the 
general answer is yes as to the extent of the length of the 
time that we had----
    Mr. Delahunt. So it is a time issue? It is not----
    Mr. Sabin. I believe that is accurate.
    Mr. Delahunt. But you can renew that request, I presume.
    Mr. Sabin. No, I think that, for example, a judge may say 
you cannot go past X date in certain jurisdictions. It varies 
jurisdiction to jurisdiction, is my understanding, and some 
judges will not go in certain jurisdictions past a particular 
time period, and we work with that, obviously, under the 
court's order.
    Mr. Delahunt. Thank you.
    Mr. Scott. The gentleman's time has expired.
    We want to thank the witnesses.
    Do any of the witnesses have any last-minute very brief 
comment to make? I am not inviting it, but I noticed at one 
point Professor Horton was about to jump out of his seat, but I 
think that issue had been explained.
    I want to thank you very much for your testimony. There may 
be additional questions that we would ask you to respond to in 
writing for the Committee, but if there is no further business, 
the Committee stands adjourned.
    [Whereupon, at 3:47 p.m., the Subcommittee was adjourned.]
                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record

       Prepared Statement of the Honorable Sheila Jackson Lee, a 
    Representative in Congress from the State of Texas, and Member, 
        Subcommittee on Crime, Terrorism, and Homeland Security




Prepared Statement of the Honorable Neil Abercrombie, a Representative 
                  in Congress from the State of Hawaii
Chairman Conyers and Members of the Judiciary Committee:

    I am grateful to the Committee and its distinguished Chairman for 
today's hearing on HR 400, the ``War Profiteering Prevention Act of 
2007,'' and for affording me the privilege of submitting testimony for 
the record.
    Mr. Chairman, among the many significant consequences of the Bush 
Administration's decision to invade and occupy Iraq, marked by a 
complete dismissal of the need for intelligent planning and stunning 
incompetence in the conduct of the war, one area has received too 
little attention from the news media, the public and the Congress.
    The United States Government, directly and through the late 
Coalition Provisional Authority, has outsourced the war in Iraq like no 
other in our history, spending more than $50 billion to hire private 
contractors to provide food, water, gasoline and other supplies, guard 
bases, drive trucks and many other activities in support of our troops. 
But consistent with the Administration's overall attitude toward 
spending public money with private companies, little or no thought was 
given to contract oversight or accountability.
    As a result, The U.S. occupation of Iraq has been viewed by some of 
these contractors as ``open season'' on the American taxpayer. At least 
ten companies, with billions of dollars in contracts, have already been 
forced to pay more than $300 million in penalties to resolve 
allegations of bid rigging, fraud, gross overcharging, delivery of 
faulty military parts and environmental damage. Some of these same 
companies have faced such allegations during past military operations 
in other countries, but have had no problem receiving new contracts in 
Iraq.
    Cleaning up this mess has been hampered by the fact that while 
there are anti-fraud laws to protect against the waste or theft of U.S. 
tax dollars in the United States, there have been no statutes 
prohibiting such sleazy business practices by American companies 
overseas. Legal jurisdiction continues to be a question.
    As examples:

          One contractor was found guilty of 37 counts of 
        fraud, including false billing, and was ordered to pay more 
        than $10 million in damages. However, the decision was 
        subsequently overturned because contracts were let through the 
        Coalition Provisional Authority, and since CPA was not strictly 
        considered to be part of the U.S. Government, U.S. laws against 
        fraud did not apply.

          Despite millions of dollars in payments to U.S. 
        companies, key pieces of Iraq's infrastructure, such as power 
        plants, telephone exchanges, and sewage and sanitation systems, 
        have either not been repaired, or have been fixed so poorly 
        that they still don't function.

          A large U.S. construction company was paid tens of 
        millions to repair raq's schools. Many of the schools were 
        never touched, and several that were ``repaired'' were left in 
        shambles; one filled with unflushed sewage.

    Mr. Chairman, there is example after example of the flagrant abuse 
of the public's trust and the public's money during a time of war:
    According to testimony before the House Appropriations Defense 
Subcommittee, when the wrong computer equipment arrived in Iraq, the 
contractor dumped it into a mammoth ``burn pit'' and placed an order 
for a replacement rather than sending it back. The government paid for 
both the wrong computer and the replacement, and the contractor 
collected a fee for each, thanks to a cost-plus contract.
    Halliburton had drivers driving empty trucks between bases in 
Iraq--unnecessarily exposing drivers to danger--because the company was 
paid by the trip, not by the amount of materiel hauled or a flat fee.
    $186 million was spent over two years to build 142 health care 
centers. Yet, only 15 were completed and only eight are open. According 
to testimony, the contractor lacked qualified engineers, hired 
incompetent subcontractors, failed to supervise construction work and 
failed to enforce quality control.
    Obviously, these practices cannot be allowed to continue. My bill, 
House Resolution 400, the War Profiteering Prevention Act of 2007, 
would:

        1.  Criminalize ``war profiteering,'' defined as bid rigging, 
        contract fraud or overcharging for goods and services during a 
        time of war, military action or a reconstruction effort.

        2.  Violations of the law would be a felony, and punishable by 
        up to 20 years in prison and fines of up top $1 million or 
        twice the illegal profits of the crime.

        3.  Jurisdiction for such cases, no matter where the alleged 
        crimes are committed, would be in United States Federal Court.

    There is a companion bill in the other body, S. 119 by Senate 
Judiciary Committee Chairman Patrick Leahy. S. 119 has been approved by 
the Judiciary Committee and awaits floor action. Senator Leahy referred 
to the rampant contactor fraud and abuse in Iraq as a ``second 
insurgency.''
    Mr. Chairman, most of the cases of fraud, questionable business 
practices and outright corruption have been uncovered and investigated 
through the efforts of the Special Inspector General for Iraq 
Reconstruction (SIGIR), Mr. Stuart W. Bowen, Jr., who is scheduled to 
give testimony before your committee today. Mr. Bowen and his superb 
staff, both here in the U.S. and on the ground in Iraq, have provided 
the sole oversight, under the most difficult conditions imaginable, for 
billions of American tax dollars intended to support our troops in 
combat. They deserve the gratitude of the Congress and the nation for a 
tough job done well.
    A testament to the effectiveness of Mr. Bowen's operation is that 
in the closing hours of the 109th Congress, there was an attempt to 
insert a provision in the conference report of the 2007 National 
Defense Authorization Act that would have prematurely shut down the 
Special IG's office. Only the wary eye House Armed Services Committee 
Chairman Ike Skelton caught the attempt and immediately introduced and 
passed a bill to, not only continue, but extend the life or SIGIR.
    Mr. Chairman, I appreciate today's House Judiciary Committee 
hearing on HR 400 and on the continuing problem of wartime profiteering 
in Iraq, and I am grateful for the opportunity to submit testimony for 
the record. I will do anything I can to assist the Committee in its 
deliberations.




                                 
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