Witnesses cite prostitution, other contracting abuses in Iraq

Whistle-blowers regaled a Senate Democratic panel Monday with stories of rampant waste, fraud, looting, intimidation and other abuses -- including the operation of a prostitution ring -- by private contractors in Iraq.

Testifying before the Democratic Policy Committee, Barry Halley said the site manager of one of the defense contractors he worked for in Iraq used armored cars to shuttle prostitutes from Kuwait to Baghdad hotels run by the company.

When top company officials found out about the arrangement, they merely transferred the ringleader to another project in Haiti instead of firing him, Halley said.

In the meantime, another company employee was shot and killed in an unsecured car while on a high-risk mission. "I believe my co-worker would have survived if he had been riding in an armored car," Halley said.

He was one of three witnesses appearing at the 13th hearing the committee has held on private contractor fraud and abuse in Iraq in the past three years. Aides said the panel gave the allegations made by the witnesses an initial vetting and then passed them along to the Department of Justice for further investigation.

Halley told the Democratic panel of billing and contract fraud, including the award of contracts to an environmental cleanup firm, CAPE Environmental Management - another company he worked for in Iraq - for the construction of bridges that were never completed.

In retaliation for reporting these and other "discrepancies" to company officials, he was locked in a room at gunpoint, beaten by security guards, fired and left stranded in Iraq, Halley testified.

Another witness, Frank Cassaday, an ice plant manager for the contractor KBR, Inc., said he saw large amounts of construction wood and military equipment, such as flak jackets, combat boots, tires and ammunition crates, thrown into "burn pits" and destroyed. He also charged that plant foremen and other company supervisors shortchanged troops of ice bags to trade them for DVDs, food and other items in Iraqi shops, and stole military refrigerators and ordnance, including artillery rounds and rocket launchers.

After he reported the thefts and the Marines "descended on our camp and found everything I had seen," he was placed in a company jail tent and told by a KBR site manager that as far as he was concerned "Frank Cassaday doesn't exist anymore," Cassaday told the committee.

In other testimony, Linda Warren a KBR laundry foreman in Baghdad, said company employees assigned to do construction work inside Iraqi palaces and municipal buildings looted them of art works, rugs, crystal and gold, and set up a system for transporting the goods out of the country to sell on the Internet.

After she called the KBR ethics hotline to report the pilfering, company security officials showed up at her quarters at night, and "gave me a satellite radio and asked if I felt my life was in danger," Warren testified. "I told them 'yes.' "

She said the company subsequently evacuated her from Baghdad but did no follow-up investigation of any possible threats leveled against her. "Based on my experience, if appeared as though the only way you could be disciplined at KBR would be if you reported illegal actions by other KBR employees," she told the committee.