Ex-official charged in fraud scheme

Bid rigging alleged in Iraq reconstruction

November 18, 2005|By PAUL RICHTER | PAUL RICHTER,LOS ANGELES TIMES

WASHINGTON -- A former U.S. contract supervisor in Iraq has become the first current or former American official to face criminal charges in connection with the multibillion-dollar reconstruction of the country, federal authorities said yesterday.

Robert J. Stein, 50, a former Coalition Provisional Authority official in Hillah, Iraq, was arrested in Fayetteville, N.C., in connection with an alleged fraudulent scheme to award construction contracts worth more than $18 million. Philip H. Bloom, 65, a New Jersey businessman, allegedly paid Stein at least $630,000 in kickbacks for his part in a bid-rigging scheme in 2003 and 2004, according to papers filed by the U.S. Justice Department in Washington.

Stein, who was arrested Monday, and Bloom, who was arrested Sunday in New Jersey, are accused of "conspiring to commit money laundering and wire fraud in connection with a bribery and fraud scheme," the papers said. Both are being held in federal custody.

The case grew out of an eight-month investigation of the Hillah office of the Coalition Provisional Authority by the U.S. Special Inspector General for Iraq Reconstruction, an independent agency created by Congress.

Jim Mitchell, a spokesman for the inspector general's office, said there will be more charges. He said investigators are looking at other cases across Iraq. The federal affidavit says that another person who worked with Stein at the CPA has been cooperating with the government. Other public officials were involved in the alleged fraud as well, the affidavit says.

According to the papers, Bloom controls several construction and service companies.

To rig the bidding process, more than one of the companies controlled by Bloom would submit fake or excessively high bids designed to allow another Bloom company to submit the winning bid at a favorable price, the papers said.

Though Stein controlled the disposition of about $82 million in U.S. funds, he was not permitted to award any single contract worth more than $500,000. Several of the winning bids were just below that ceiling.

The contracts were awarded between October 2003 and June 2004 for such projects as the renovation of a public library in Karbala, Iraq; construction of the Hillah Police Academy and related demolition work; and construction of a Regional Tribal Democracy Center.

To reward the U.S. officials, Bloom allegedly would pay bribes, kickbacks or gratuities using funds from bank accounts in Iraq, Switzerland, Romania and the Netherlands. The money would be sent to Stein and his wife and to bank accounts in the United States, the affidavit said.

The papers say that the money was spent on automobiles, jewelry and real estate.

A footnote in the court papers notes that Stein was convicted in 1996 on a fraud case, raising questions about how carefully he was vetted before he was hired by the CPA. Stein has a military background.

If convicted on all charges, the two men face up to 30 years in prison, a fine of up to $250,000, and a three-year term of supervised release, the Justice Department said.

Mitchell, of the Special Inspector General's office, said the case began when a tip was called in on the organization's hot line.

The affidavit said an Iraqi witness has been cooperating with the investigation.

Paul Richter writes for the Los Angeles Times.

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