USDOJ: DAG: Speech - Transcript of Press Conference on Indictment of Five Defendants in Case Involving Bribery, Fraud and Money Laundering Scheme in al-Hillah, Iraq

Transcript of Press Conference on Indictment of Five Defendants in Case Involving Bribery, Fraud and Money Laundering Scheme in
al-Hillah, Iraq

Washington, D.C.

February 7, 2007

DEPUTY ATTORNEY GENERAL McNULTY: Good afternoon. I am Paul McNulty, Deputy Attorney General, and I want to introduce those who are with me here on the stage. I am joined by Stuart Bowen, who is the Special Inspector General for Iraq Reconstruction; IRS Commissioner Mark Everson; Mike Mason, the Executive Assistant Director of the Criminal Division -- Criminal Branch of the FBI; and Kumar Kibble, the National Security Division Deputy Assistant Director for Immigration and Customs Enforcement. And each of those gentlemen will speak to you in just a moment.

Today a federal indictment was unsealed in the District of New Jersey that charged five people, three former officers of the United States Army, and two U.S. civilians, for their roles in a complex bribery scheme involving the theft of millions of dollars from the Coalition Provisional Authority in Iraq.

And as you know, the CPA was the entity created by the United States and the United Kingdom to rebuild and reconstruct Iraq.

This indictment is part of the first major investigation being prosecuted by the Department of Justice to root out corruption and fraud in the awarding of Iraq reconstruction contracts. The indictment alleges that these five defendants, along with several other individuals, conspired to steal millions of dollars from funds slated for the reconstruction of Iraq.

These individuals, including three military reserve officers, Army colonels and lieutenant colonels, were placed in positions of trust, used the CPA funds as their own personal ATM machines. They allegedly stole millions of dollars from the CPA and rigged valuable reconstruction projects, all while helping themselves to cash, SUVs and luxury cars, jewelry and other valuable items.

These defendants actually took bricks of stolen cash, cash that was stolen from the CPA, and smuggled them out of Iraq and back to the United States for their own personal use. In one trip, one defendant carried more than $300,000.

Two of the defendants even went so far as to use the money from this scheme to build a new hot tub and deck on their own home in New Jersey, according to the indictment.

The following individuals are named in the indictment unsealed today: U.S. Army Colonel Curtis Whiteford, once the second most senior official in the CPA's South Central Region in Al-Hillah, Iraq, charged with conspiracy, bribery and honest services wire fraud.

U.S. Army Lieutenant Colonel Debra Harrison at one time the acting comptroller at CPA's South Central Region, who oversaw funding for reconstruction projects, charged with several counts, including conspiracy, bribery, honest services wire fraud, interstate transportation of stolen property, and money laundering.

William Driver, Harrison's husband, charged with four counts of money laundering. U.S. Army Lieutenant Colonel Michael Wheeler, an advisor on Iraqi reconstruction projects, charged with conspiracy, bribery, honest services wire fraud, interstate transport of stolen property, and bulk cash smuggling.

And Michael Morris, a United States citizen in Romania, who owns and operates a Cyprus-based financial services business, charged with conspiracy and honest services wire fraud. Morris was arrested on Tuesday in Romania, allowing for the unsealing of the indictment, and we intend to seek his extradition to the United States on these charges.

The indictment alleges that over a two-year period, from December 2003 through December 2005, Whiteford, Harrison, and Wheeler conspired with at least three others to rig the bids on contracts being awarded by the CPA's South Central Region, so that all the contracts were awarded to one man, Philip Bloom, an American citizen who owned and operated several companies in Iraq and Romania.

Bloom showed his gratitude for receiving those contracts, worth more than $8.6 million total, by showering the three Army officers and others with a long list of extravagant things, more than $1 million in cash, a Cadillac Escalade, a Lexus, a Porsche, a GMC Yukon, a Nissan 350Z sports car, a Cessna airplane, real estate, a motorcycle, jewelry, computers, business class airline tickets, and even future employment with Bloom.

Bloom, I should mention, has already pled guilty in federal court to related charges of conspiracy, bribery and money laundering.

Another co-conspirator, Robert Stein, a former comptroller of the CPA's South Central Region, an Army Ranger, also pleaded guilty to related charges and was sentence late last month to nine years in prison.

A third co-conspirator, U.S. Army Lieutenant Colonel Bruce Hopfengardner, pleaded guilty to charges of conspiracy to commit wire fraud and money laundering.

The CPA fund lost more than $3.6 million because of the corruption we allege in this indictment. The good news is that, to this date, we have already recovered more than $2 million from conspirators who pled guilty.

The work of prosecutors and investigators in bringing this case is vital to the American taxpayer and Iraqi people. We cannot allow a mission as important as the reconstruction of Iraq to fall victim to fraud, corruption and theft. Thousands upon thousands of courageous, patriotic soldiers and civilians from the United States have devoted themselves to the mission of creating a free and democratic society in Iraq. We will not allow a handful of greedy individuals to undermine the self-sacrificing labors of these heroes.

The Department of Justice is committed to the pursuit and prosecution of anyone who attempts to exploit the reconstruction efforts in Iraq for their own personal or financial gain.

Now it's important to remember that we are discussing an indictment which contains allegations brought forth by the U.S. government, and the defendants charged in this indictment are presumed innocent until proven guilty in a court of law.

This case is part of the Department of Justice's Procurement Fraud Initiative. It's a national initiative designed to promote the detection, identification, prevention and prosecution of procurement fraud associated with the increase in contracting activity for national security and other government programs.

Investigations like the one involving alleged fraud and corruption at Al-Hillah are the reasons why this initiative was launched and why the National Procurement Fraud Task Force, chaired by Assistant Attorney General Alice Fisher, was created.

We will do everything in our power to protect the integrity of billions of dollars in federal contracts and other government programs from thieves, con artists and dirty businessmen. And we'll do everything in our power to prosecute those who abuse their positions of trust and try to steal from the American taxpayers or the people of Iraq, working hard to rebuild their nation.

There are a lot of people who put time and effort into this investigation and prosecution, including James Crowell and Ann Brickley from the Public Integrity Section, and Patrick Murphy from the Asset Forfeiture and Money Laundering Section, both from those sections of the Criminal Division here at the Department of Justice.

And these cases are being prosecuted by the Office of the Special Inspector General for Iraq Reconstruction, Stuart Bowen; the FBI's Washington Field Office; the U.S. Immigration and Customs Enforcement, or ICE, at the Department of Homeland Security; the IRS Criminal Investigative Agents; and the Army's Criminal Investigations Division; and the State Department's Office of Inspector General.

And now it is my honor to introduce to you and to give someone an opportunity to speak. Stuart Bowen is our Special Inspector General for Iraq Reconstruction. And everything I've said here today about our commitment to guarding tax dollars and ensuring the integrity of the reconstruction effort is something that he labors tirelessly for. And we are honored to have him with us today as he continues his great work in trying to promote integrity in what is being done in Iraq.

STUART BOWEN, SPECIAL INSPECTOR GENERAL FOR IRAQ: Thank you, Paul. Three years ago this week, I made my first trip to Iraq as Inspector General. Two months after I arrived there, a whistleblower walked into my office to report concerns that he had about what was going on in the comptroller's office in Hillah, which governed the South Central Region of the Coalition Regional Authority. Hillah is about 50 miles south-southwest of Baghdad.

The concerns that he outlined were significant enough for me to deploy my auditors immediately down there to investigate those issues. And shortly after they got down there, I received a phone call that outlined more than just issues that needed auditing, but issues that needed investigating.
And as their audits progressed, we accumulated more evidence, and then I deployed investigators down to Hillah, and then commenced a coordinated and rigorous investigation in Iraq and in Romania, in the United States, coordinated among the agencies represented here today, and now effectively carried forth by the Department of Justice prosecutors.

What this says is that we are rooting out fraud, waste and abuse in Iraq where we find it. It has not been a significant component of the American reconstruction experience over there, but where we found it, it has been egregious, and this is an egregious example of it. We will not tolerate corruption in contractors or U.S. officials, and those that engage in the conspiracy in this case are an example of those that we will continue to pursue.

We have 80 cases ongoing under investigation now. I have 10 investigators in Iraq operating today, and I will return to join them and support their work next week.

This is also a story about the importance of whistleblowers. This case evolved from an official who worked in that office and came in and told us the truth about what was going on there. And it's also the story about coordination among federal agencies to accumulate evidence that can produce effective prosecutions.

Robert Stein has already been convicted, and he's gone to prison. Philip Bloom is on his way. And these prosecutions will commence forthwith.

So, thank you to all the agencies that participated in this effort, and especially Department of Justice prosecutors who've very effectively carried forth our evidence and brought it to fruition in these indictments unsealed today.

Thank you. And I'm pleased to introduce my friend, Mark Everson, the Commissioner of the IRS.

IRS COMMISSIONER MARK EVERSON: Thank you, Stuart. Good afternoon. The job of the Coalition Provisional Authority was to temporarily exercise the responsibility of government before Iraq could fully form its own democracy. This was an important responsibility.

What we have here at its core is a serious instance of public corruption by some officials entrusted with these important duties. It's a sad situation with all the trappings of personal greed and blatant criminal conduct.

As the indictment makes clear, the individuals charged manipulated the contracting process to escape proper oversight and enrich themselves. They stole the money in Iraq and then smuggled vast sums into the United States to support lavish lifestyles.

The conspiracy took the form of a maze of financial transactions designed, of course, to escape detection. IRS criminal investigators helped unravel this mess. Sometimes tracing the flow of funds is the fastest and most direct way to document criminal activity and hold accountable those who violate the public trust.

Before closing, I want to congratulate Stuart Bowen and his team for this very important work. Members of the Special Inspector General's staff spent many months in dangerous situations to get at the truth. Stuart, I want to express my personal admiration for your work and that of your colleagues. Our nation owes you a debt of gratitude.

MIKE MASON, FBI EXECUTIVE ASSISTANT DIRECTOR, CRIMINAL BRANCH : Thanks. Good afternoon. There are many things in the Iraqi combat theater which can be -- terrible things -- which can be attributed to the fog of combat, the fog of war. But the diversion of public funds for personal use, funds intended for the rebuilding of Iraq, is not one of those things. It is a reprehensible crime.

According to the indictment, these five people and their co-conspirators, high ranking military personnel and civilians alike, abused the public trust. They abused their positions of authority, and they have betrayed those with whom they serve. In short, they traded their integrity for cash, computers and luxury automobiles.

They may have believed that they were too far from the watchful eyes of law enforcement to get caught, but they were wrong. Today's indictment reinforces the importance of all the agencies represented here today, and those not here today, of working together to ensure those who break the law in this manner are brought to justice.

There are many ways to contribute to the war in Iraq. We in the FBI are fully committed to working with our partners in law enforcement, the Inspector General's office and others in the military to investigate all allegations of fraud emanating from the Iraqi theater.

KUMAR KIBBLE, DEPUTY ASSISTANT DIRECTOR, NATIONAL SECURITY DIVISION, ICE: Thank you, Mike. When the Special Inspector General for Iraq was established, ICE joined the team effort at targeting those motivated by greed and illicit profits at the expense of progress and stability. Several ICE entities supported the Inspector General's efforts.

Our Computer Crime Center conducted forensic examinations of computer hard drives, PDAs, GPS units, cell phones and other electronic storage devices. This center analyzed more than half a million files and provided evidence to other SIGIR Task Force members for investigative action.

ICE's D.C.-based Special Agents provided the SIGIR Task Force with the financial investigative expertise that helped to identify the primary conspirators by following the money trail.

Our headquarters-based financial investigative section provided the analysis that identified the contract fraud and bank accounts that helped to lead to today's indictments.

Our International Affairs Attache Office in Vienna, Austria, provided the Romanian authorities with the leads that led to the arrest of Seymour Morris, Jr. yesterday in Bucharest on a provisional arrest warrant.

The SIGIR Task Force is made up law enforcement authorities wearing a number of different badges. But we have one common goal. And that is to ensure that illegal war profiteering doesn't go unnoticed or unpunished.

DEPUTY ATTORNEY GENERAL McNULTY: Thank you, gentlemen, for your contributions, and more importantly, for the work of your agencies. I'm happy now to answer any questions you might have.

QUESTION: Yes. For both you and Mr. Bowen, as you know, there was a -- in fact, Mr. Bowen was at the hearing yesterday on Capitol Hill on this very subject, and it's clear that not just a few million but actually billions are yet unaccounted for.

And the question is, you said this is the first prosecution. Much of the money may be lost because of corruption by Iraqis, and they have no judicial system to deal with that. When and how can charges eventually be brought against either Americans or Iraqis down the line, and is there any statute of limitations to deal with the fact that there's no -- no yet any judicial system to speak of to deal with this in Iraq?

DEPUTY ATTORNEY GENERAL McNULTY: Thanks. The question about the -- when we will see additional charges -- first let me clarify on this being the first prosecution. As Stuart mentioned and I said in my statement, we've already had a couple individuals plead in this case, and therefore, it's an ongoing matter.

But the scheme or the conspiracy associated here is the first conspiracy scheme brought in for prosecution, and this is the next major step in this large investigation.

Stuart mentioned earlier the number of investigations that they have underway. And that's just the right thing for them to be doing, along with other agencies that are working in partnership with the Inspector General there, to gather up all the facts they can, to work vigorously to try to uncover information, and to bring that really to the Department of Justice so that we can see if we have enough information to bring charges.

And so we have a group of people who are dedicated to the process of trying to make cases from this evidence, and we will bring every charge we can as soon as we have a sufficient amount of evidence to meet the standard we have to meet for proving our cases before a jury beyond a reasonable doubt.

We have set up the national task force in large measure to try create a kind of energy and cooperative attitude among all the agencies involved with procurement fraud, but there's a subgroup within the task force focused just on Iraq and trying to create as much momentum and energy as possible to continue this great work.

So we will be trying to find as many prosecutable cases in the midst of all this evidence that's being gathered and investigation work that's being done.

There is a possibility also on the Iraqi side of a possible prosecution. We have our own statutes of limitation, and we always have to keep an eye on those. And I don't think we're in danger any time soon of running up against one of those, but that's something we deal with here on a regular basis.

MR. BOWEN: Thank you. First of all, we have no jurisdiction over Iraqis. However, I do work in coordination with the Commissioner on Public Integrity, the Board of Supreme Audit and the Iraqi Inspector General, who do have that jurisdiction. And I have a working agreement with the Commissioner on Public Integrity, that's their FBI, created by the CPA to share information with respect to ongoing cases. Commissioner Roddey, who directs that agency, has over 2,000 cases against Iraqi officials.

With respect to the $8.8 billion issue that you alluded to that was subject of a hearing yesterday, that does not involve fraud; that involves a finding by my office that there should have been more accountability with respect to that money that was provided to the interim Iraqi government for its national budget expenses.

QUESTION: I have a couple of detailed questions.

DEPUTY ATTORNEY GENERAL McNULTY: Yes.

QUESTION: First, I think Ambassador Bremer also yesterday made -- tried to make the point that this was Iraqi money that had been not accounted for properly yesterday. The money we're talking about today is U.S. and Iraqi money, correct?

DEPUTY ATTORNEY GENERAL McNULTY: This money today is the CPA -- Iraqi money, right. So it's not the U.S. tax dollars appropriated for the war and reconstruction effort, but the CPA Iraqi money.

QUESTION: So Congress didn't appropriate any of the money that was going to the CPA? It just -- the indictment outlines something like $26 billion, and I'm just unclear where the $8.6 million that we're talking about in these cases, where that pot is coming from. Is that out of the $26 billion total in the CPA for reconstruction?

MR. BOWEN: The CPA had oversight of the Development Fund For Iraq, which was formerly the Oil For Food money. And some of that money went for the national budget to pay for the ministry's expenses; and that was the $8.8 billion. Other parts of it went for contract, including the Regional Rapid Response Program in Hillah that this money was part of.

And so it was Iraqi money that was allocated by the CPA across the country for quick turnaround projects, in this case projects that didn't get done and money that was stolen.

QUESTION: How much money was smuggled back into the United States by all of the parties? I know the deputy attorney general said $300,000 in one instance alone; I'm wondering how much cash came back through.

MR. BOWEN: I think those evidentiary issues are still being developed but about $500,000.

QUESTION: And the hot tub incident, was that -- that was, I assume, by Harrison and Driver, was that their total cut, the total money that they stole?

DEPUTY ATTORNEY GENERAL McNULTY: What happened there was Harrison took a large portion of money that was brought back, over $300,000, with her to her home in New Jersey. And then the work that was done in her home was paid for out of that money, so there was other money as well that was recovered from the house.

QUESTION: And then can you talk a little bit more about Morris' role in this? I'm a little unclear. The indictment makes it sound like he was kind of the go-between who was wiring some of the money and setting up the car exchanges and all of that, but who is this guy?

DEPUTY ATTORNEY GENERAL McNULTY: I may have to call on someone in the criminal division to provide more information on Morris. Do you want to do that?

MR. CROWELL: Mr. Morris, in summary, was a -- Mr. Morris was a U.S. citizen living in Romania. He was a personal friend of Mr. Bloom, and as alleged in the indictment, he served as a conduit to launder some of the funds and purchase some of the vehicles that are listed in the earlier plea agreements that are -- Mr. Stein, Mr. Hopfengardner and Mr. Bloom's plea agreements reflect wire transfers from Mr. Bloom's accounts in Switzerland and Romania, and they were transferred to Cyprus, which were accounts under the control of Mr. Morris.

Mr. Morris then returned domestic wires to the United States to pay for a Lexus, a Porsche, the Cadillac Denali (sic) that's alleged in the indictment you're looking at today.

QUESTION: Okay. So his total involvement was all illicit? He was never at any time hired by the United States government or the CPA to do any actual work?

MR. CROWELL: He is a civilian who received stolen CPA money and then used that money to purchase bribe payments for the other coconspirators.

DEPUTY ATTORNEY GENERAL McNULTY: I said two earlier, so let me correct that. Yes?

QUESTION: There are several coconspirators named, but I guess there are unindicted coconspirators. Could you talk a little bit about the status of some of the others involved just so we get it straight?

DEPUTY ATTORNEY GENERAL McNULTY: Well, we have an investigation that's ongoing here, so we won't discuss other individuals at this point.

QUESTION: I also have a question for Mr. Bowen in that Mr. Everson pointed out that you're conducting these investigations in very hazardous conditions. Could you talk a little bit about what it was like to follow this trail, and is there anything that really surprises you about how these guys carried out their plot?

MR. BOWEN: Well, the Green Zone is a dangerous place, and everyone who works in Iraq knows that. And it's certainly more dangerous today than it has been -- it was dangerous in 2004, and indeed my auditors, when they went down there -- during one of their trips down, their convoy, the convoy right adjacent to them as they were traveling together, was hit by an IED.

And so that danger affects everyone, and that's just one example of the close calls. I'm happy to say that all of my employees who've worked over there to date have -- are fine, and have come away unscathed. But it still continues to be a dangerous environment.

QUESTION: And in terms of -- did anything surprise you about the plot, about the extent to which they were carrying out these activities or anything like that or does nothing surprise you at this point?

MR. BOWEN: I was surprised at the audacity of the fraudulent -- the fraud and the scope of the conspiracy. Robert Stein was a CPA official, the comptroller for the South Central Region. He had three military officers working with him, and that officer in conjunction with him, and they knew that these contracts weren't being done and that Philip Bloom was simply pocketing the proceeds of money that was meant to relieve and reconstruct Iraq. And again, that speaks to the egregiousness of the fraud contained in this conspiracy.

QUESTION: Speaking of the audacity and scope, does any oversight now exist, you know, that came out of this investigation? Is there anything that would stop this sort of thing now before it gets to the criminal level?

MR. BOWEN: Yes, what exists is we now have a robust investigative team on the ground in Iraq. Special Inspector General's office was a startup. It's a temporary organization and has expanded over time. Now, three years into this, our presence is well known, and thus has an appropriate deterrent effect.

QUESTION: Is there -- beyond the deterrent effect, are there systems in place now so that there are self checks for groups that are actually doing these contracts? You know, one of the things that they did was they were all under $500,000, so they never had to go up to Baghdad to be reviewed. Has any of that changed?

MR. BOWEN: Yes, that's changed. That's because that was the function of the CPA regulations. The CPA has been gone for two-and-a-half years. The current oversight mechanisms are run through the Department of Defense, the United States Agency for International Development, Department of State, and primarily coordinated through the Joint Contracting Command, Iraq. And that is a much, much larger contingent of contracting officers overseeing how these contracts are managed than there was during CPA.

And that was the subject of one of our lessons learned in our contracting study. We said, there needs to be more coordination, more information sharing, and more personnel carrying out this important mission. And that's a lesson learned applied in Iraq.

QUESTION: Can you also tell us a little bit about this company that Bloom was running? Was it in any way legitimate? Did they make -- did they complete any projects at all? Is everything listed on that sheet not constructed?

MR. BOWEN: Well, I'll let Mr. Crowell speak to that, but I'll just say that in the Green Zone there was a small plaza with a few shops there, and one of them was Bloom's Coffee Shop, and it was sort of a testament to him. After he was arrested it stayed open; it's now closed. But he was everywhere.

There was something called GBG Logistics. Wherever you drove, whenever I traveled around Baghdad, there were signs, man camp built by GBG Logistics. And for me those were signs to pursue more investigations. And we have, and we continue to look at other things that he has done.

DEPUTY ATTORNEY GENERAL McNULTY: Any more questions on this subject before we move on?

QUESTION: Just on the military guys, are they going to be -- the three military officers, the Reserve officers, are they going to be appearing in court in New Jersey and when? What is their status?

DEPUTY ATTORNEY GENERAL McNULTY: Well, they will have to make an appearance, their initial appearance pursuant to these indictments in New Jersey. I don't believe that date has been set yet.

DEPUTY ATTORNEY GENERAL McNULTY: James, do you want to tell us where they are?

MR. CROWELL: COL Whiteford lives in Utah. LTC Harrison lives in New Jersey. And LTC Wheeler lives in Wisconsin.

MR. CROWELL: Both Colonels Wheeler and Harrison have been arrested on criminal complaints. One was issued out of the District of Columbia. That was on COL Wheeler. And the one out of New Jersey, the criminal complaint, was on COL Harrison. Both of those were entered or returned in November of '05. They've been arrested and they remain on bond.

DEPUTY ATTORNEY GENERAL McNULTY: I think James will stay behind, by the way, in case you have any more factual things like this, periods of sentences, stuff like that.

QUESTION: Well, just to follow up on the last question, I believe somebody said that these cases have amounted to $3.6 million worth of corruption. And if Bloom's business got $8.6 million in contracts -- so there's about $5 million in legitimate work that was done, correct? I mean it wasn't all --

MR. CROWELL: It was actually -- a report prepared that actually delineates some of the work that was done, and some of that was not. The $3.6 million reflects the total loss to the United States, including -- and the Iraqi people, including the stolen money as well as what we deemed the failure to complete the projects.

QUESTION: I just want to make sure it's clear that I say that Bloom did sound, legit work.

DEPUTY ATTORNEY GENERAL McNULTY: Any more questions for us? And then we'll leave James behind to keep going on some of this. Yes.

QUESTION: Let me ask you a question about this international porn ring that was busted up in Vienna.

QUESTION: Because you're always saying about the seriousness of the problem and the ability of governments to cooperate in trying to deal with it?

DEPUTY ATTORNEY GENERAL McNULTY: Well, it's a good sign that we can reach across the ocean to handle these cases. That's very important if we're going to make progress against child pornography and child exploitation because so many of the perpetrators are overseas.

The Department of Justice, of course, is thrilled that efforts are being made of this magnitude. This is one of our top priorities, as you know. Attorney General Gonzales has put a lot of personal time into promoting investigation and prosecution of child exploitation offenses. Project Safe Childhood is something that we are pushing hard within our federal law enforcement system and with our state and local partners.

So what this case represents is another way that enforcement work can be done where other countries are in partnership with us and making cases, and then coming or bringing to the United States information that we can pursue and that we can pick up from the leads and other information we receive.

DEPUTY ATTORNEY GENERAL McNULTY: Well, we have been working on a lot of international investigations, and we have been involved with this one. As to specific involvement, I'm not sure. I'll ask Mike Mason if he has any details. Otherwise we may have to get back to you on that.

MR. MASON: The only details I have on that is many of the ISP addresses resolve back to the United States, and much of the internet traffic has passed through ISPs that are located in the United States. So we are working with those to identify the computers, identify the people, and move forward with the prosecutions.

MR. MASON: It's hard to say. This is way too early to say at this point in time what will become of the people who we find at the end of the trail.