US Presses Investigation of Alleged Afghanistan Overbilling by US Contractor

August 18th, 2010 - by admin

Brett J. Blackledge and Richard Lardner / Associated Press & CorpWatch Investigative Report – 2010-08-18 01:55:41

US Presses Investigation of Alleged Afghanistan Overbilling by Berger Group
Brett J. Blackledge and Richard Lardner / Associated Press/AP Online

WASHINGTON (August 14, 2010) — A US contractor managing more than $1 billion in reconstruction contracts in Afghanistan faces federal criminal and civil investigations of claims that it overcharged the government for work, according to federal court documents.

Federal prosecutors are focusing on whether the Louis Berger Group, based in Morristown, NJ, submitted inflated invoices to the US Agency for International Development, which oversees many of the government’s international development projects.

The allegations come as US officials spar with Afghan President Hamid Karzai over allegations of corruption in his government. Karzai has questioned US-led investigations of corruption in Afghanistan and argued that international donors have ignored corruption in billions of dollars worth of development projects they have handled.

Louis Berger has been a major player in US-funded reconstruction projects in Iraq and Afghanistan, now leading a $1.4 billion USAID infrastructure project to build roads and power plants in Afghanistan.

Prosecutors acknowledged their ongoing criminal and civil investigations in response to a federal lawsuit filed last week by Derish Wolff, chairman of Louis Berger’s parent company Berger Group Holdings. Wolff is attempting to block efforts to have his nearly one-third ownership stake in the company held in escrow following his resignation, which he argues was forced as part of the company’s negotiations to end the federal investigations.

Wolff’s lawsuit, filed in federal court in New Jersey, said the federal investigation began at least three years ago and negotiations on settling the allegations began with prosecutors about a year ago.

Louis Berger has handled more than $2 billion worth of USAID contracts in Iraq and Afghanistan, agency records show. The company received more than $510 million for Iraq economic development programs, including developing agribusiness and agricultural markets. Its work in Afghanistan has included building schools, health clinics, roads and helping in overseeing energy projects, including a $305 million diesel plant outside Kabul that tripled in cost and was delivered more than a year behind schedule, agency records show.

Court filings do not make it clear which projects prosecutors have focused on in their investigations. Louis Berger officials declined to comment Saturday after issuing a brief statement.

“LBG has and will continue to cooperate fully with the US government throughout the process as we work toward a resolution. As it is an ongoing investigation, we cannot comment further at this time,” the statement said.

Prosecutors named Wolff as a subject in their investigations when filing their response last week denying that they influenced Wolff’s resignation. They also acknowledged that they were negotiating a settlement with Louis Berger on the claims of overcharging the government in invoices for reconstruction contracts.

The company could be forced to shut down without a settlement, Wolff said, and he argues he’s been made a scapegoat while others at Louis Berger were named by prosecutors as targets in the investigations.

“It is critical to LBG that they resolve the potential claims without any criminal charges, or even a deferred prosecution agreement, because in either event it may be debarred from any federal or state contracts, which would essentially put the company out of business,” Wolff’s complaint states.

A federal judge denied Wolff’s request Wednesday for a temporary restraining order to block attempts to place his stock holdings in escrow after prosecutors argued Wolff’s payout could hurt the government’s efforts to collect against Louis Berger.

“Because the United States is negotiating a resolution of the investigations with the company, the government has concerns that a substantial payout … could compromise the company’s ability to satisfy its obligations,” prosecutors said in a motion filed Tuesday opposing Wolff’s requested restraining order.

In August 2006, USAID awarded one of its largest Afghanistan contracts to a joint venture that included Louis Berger, a move later criticized by US lawmakers, who questioned the company’s earlier work. Louis Berger’s performance on a 2002 USAID contract to build dozens of schools and health clinics in Afghanistan came under fire after some work had to be redone and the company was accused of submitting fraudulent work claims, according to an investigation conducted by Republican Sen. Tom Coburn’s staff.

Those allegations of fraudulent work statements focused on disputes over Louis Berger claims of progress on construction projects that later were challenged by Afghan officials and others. Louis Berger denied submitting fraudulent claims in those cases, and USAID defended the contractor’s work in 2007 discussions with lawmakers.

USAID officials said Louis Berger had fallen behind schedule on the schools and clinics. But they argued the company’s performance on road projects was one of the reasons USAID decided to include Louis Berger in the $1.4 billion infrastructure contract.

Posted in accordance with Title 17, Section 107, US Code, for noncommercial, educational purposes.

Afghanistan, Inc.:
Contractors in Afghanistan Are Making Big Money for Bad Work

A CorpWatch Investigative Report

(October 6, 2006) — A highway that begins crumbling before it is finished. A school with a collapsed roof. A clinic with faulty plumbing. A farmers’ cooperative that farmers can’t use. Afghan police and military that, after training, are incapable of providing the most basic security. And contractors walking away with millions of dollars in aid money for the work. The Bush Administration touts the reconstruction effort in Afghanistan as a success story. Perhaps, in comparison to the violence-plagued efforts in Iraq and the incompetence-riddled efforts on the American Gulf Coast, everything is relative. A new report “Afghanistan, Inc.,” issued by the non-profit organization CorpWatch, details the bungled reconstruction effort in Afghanistan.

Massive open-ended contracts have been granted without competitive bidding or with limited competition to many of the same politically connected corporations which are doing similar work in Iraq: Kellogg, Brown & Root (a subsidiary of Halliburton), DynCorp, Blackwater, The Louis Berger Group, The Rendon Group and many more. Engineers, consultants, and mercenaries make as much as $1,000 a day, while the Afghans they employ make $5 per day.

These companies are pocketing millions, and leaving behind a people increasingly frustrated and angry with the results.

Instead of reprimanding these contractors for their poor work, USAID announced a new contract totalling $1.4 billion awarded to the joint venture of The Louis Berger Group, Inc. and Black & Veatch Special Projects Corp. on September 22.

“It’s a shame that after the disasterous performance of Louis Berger in Afghanistan in the last five years, the company has been awarded with such a large sum of money. It’s telling that the punishment for wasting millions of taxpayers’ money can get you millions more from our government,” Nawa said of the new contract.

Fariba Nawa, an Afghan-American who returned to her native country to examine the progress of reconstruction, uncovers some examples of where the money has (and hasn’t) gone, how the system of international aid works (and doesn’t), and what it is really like in the villages and cities where outsiders are rebuilding the war-torn countryside.

In Afghanistan, Inc., you’ll get an inside look at a system gone out of control, with little accountability and plenty of opportunity for graft and abuse. It isn’t a story you want to read; it’s a story you must read.

CorpWatch investigates and exposes corporate violations of human rights, environmental crimes, fraud and corruption around the world. Through its independent media work, CorpWatch fosters global justice, accountability and democratic control of corporations.

Click here to download the complete report.

Click here to see the USAID press release for the $1.4 billion contract awarded to the joint venture of The Louis Berger Group, Inc. and Black & Veatch Special Projects Corp on September 22, 2006. The report is also now available in Dari and Pashto.

Posted in accordance with Title 17, Section 107, US Code, for noncommercial, educational purposes.