U.S. hires firms with questionable pasts for Afghan jobs

McClatchy NewspapersNovember 14, 2010 

WASHINGTON — For years, the U.S. government has entrusted Michael Drannan with one of its most important foreign policy efforts: rebuilding Afghanistan.

Yet as Drannan's company won millions of dollars in government contracts in the war-torn country, he was never questioned about his unpaid U.S. taxes or his four months in a Florida jail over unpaid child support.

Drannan's troubled background exposes the U.S. government's failure to thoroughly vet companies that are winning contracts in Afghanistan.

In all, McClatchy found nearly $4.5 billion in contracts that were awarded to companies even though they violated laws or had high-profile disputes over previous projects. Such legal or financial troubles could indicate that a company isn't prepared to finish a project or is prone to wasting taxpayer money.

The lax scrutiny, critics say, has created an American contracting culture where almost any past indiscretion can be overlooked.

"The government should care if someone hasn't paid their taxes," said Nick Schwellenbach, the director of investigations for the Project on Government Oversight, a Washington-based watchdog. "They should care if a company has admitted to overbilling."

Contracting giants are even more likely to get a pass than smaller companies because of a perception that some jobs are too big or too important to trust to an untested or smaller competitor and because political connections help pave the way to winning contracts, he said.

In other cases, the lapses can be blamed on the government's sloppy recordkeeping or inadequate background checks.

"Sometimes, they're just lazy," Schwellenbach said.

Congress, meanwhile, has admonished U.S. agencies in Afghanistan for their failure to aggressively root out waste and corruption that auditors estimate have led to $1 billion in questionable costs.

Making matters worse, U.S. agencies have acknowledged that their databases are so unreliable that they can't account for how much money they've spent rebuilding Afghanistan. The U.S. Agency for International Development, for instance, is one of the main agencies overseeing projects in Afghanistan, but it couldn't vouch for information submitted to the government's federal contracting database.

Even without access to reliable documents, McClatchy was able to find numerous examples of companies getting multimillion-dollar contracts despite past financial or legal troubles.

  • Louis Berger continues to jointly hold a $1.4 billion contract for rebuilding Afghanistan, despite settling with the Justice Department this month in an overbilling investigation. As the settlement talks proceeded, the U.S. military awarded a portion of a $490 million contract to the company as well. As part of the settlement, the company will be permitted to continue bidding for future contracts.
  • A subsidiary of Xe Services, formerly known as Blackwater, was awarded a quarter of all contracts issued in Afghanistan by the Army Space and Missile Defense Command from 2007 to 2009, according to government records. McClatchy reported earlier this year that the Obama administration decided not to bring criminal charges against the security contractor after a nearly four-year investigation found sanctions violations, illegal exports and bribery.
  • ITT Corp. was awarded $800 million in contracts for building maintenance and training in Afghanistan this year, despite violating export laws. The firm admitted in 2007 to sending classified materials to foreign nations, including China.
  • Northrop Grumman, which paid millions to resolve allegations of improperly testing military parts, is also a leading firm in Afghanistan.
  • A subsidiary of Agility was tapped along with two partners to oversee a one-year, $643.5 million contract that could eventually total almost $6 billion. At that point, Agility, formerly known as Public Warehousing Co., was being investigated for overbilling the military for food services. Five months later, in November 2009, the company was indicted for what federal agents described as "major fraud." DynCorp, one of the partners, then removed Agility from the contract, citing the indictment.

In written statements, representatives of Northrop Grumman and ITT said the companies cooperated with the government and consider the cases closed.

"We have no further comment on the matter," said Northrop Grumman spokesman Gustav Gulmert.

"The government stated that ITT could move forward as its trusted partner and fully reinstated ITT as an exporter in good standing," said David J. Albritton, an ITT spokesman.

In Drannan's case, it's unclear whether the government knew of his financial troubles. USAID said it wasn't aware of Drannan's child support issue, but didn't respond to questions about the tax problems.

USAID and the U.S. Army Corps of Engineers have awarded Drannan's joint venture, Venco-Imtiaz Construction Co., at least $27 million in contracts since 2007, according to government records.

"In some cases, an individual's status may or may not have a bearing on a company's financial capabilities or capability to perform," the agency said in the statement, without elaborating on whether it concluded that in Drannan's case.

The Corps didn't immediately respond to questions.

Drannan said his company continues to win contracts because it does a good job. He said the U.S. government also appreciated his company's push to hire mostly Afghan workers and invest profits back into the country.

"I'm proud of our work," he said.

However, Drannan said his finances should be of no concern to McClatchy and declined to answer questions about his background.

"How I run my business and what happens in my business is none of your business," he said.

Drannan said he was aware of a $38,000 federal tax lien against him dating from 2005, but hadn't had time to resolve it. He settled the child support matter in January by paying nearly $100,000 after an informant brought it to the attention of U.S. government officials in Kabul.

Drannan had little experience that would prepare him for handling major government contracts in a war-torn country, according to government records and former business associates.

One of his first ventures in Afghanistan failed after he was given thousands of dollars by a Florida businessman to drum up contracts for him.

"It just didn't work out," he said.

Shortly after he formed his joint venture with an Afghan company, however, the Corps picked his company to oversee the construction of a series of projects, including a hospital, an office building and an Afghan police headquarters. USAID later selected his company for renovations of Kabul University and the Ministry of Transportation.

His former engineer who worked on the USAID projects, which are currently under way, raised questions about the company's ability to handle the contracts.

Diego Passarella, a Fort Lauderdale, Fla., engineer who formed an engineering firm on behalf of Venco-Imtiaz in 2008, said he was fired in September after telling the company it needed to follow U.S. standards.

"The problem is when we start designing by the codes and involving American engineers, they tell me that we are blowing out their budget," he said.

At one point, the company sent him proposed plans that one of his engineers said was in violation of U.S. codes.

"He said 'Diego, they're dumping waste in a river'," he said.

Drannan declined to discuss the matter and denied that Passarella had been fired.

Jafar Khan, the senior project manager for the joint venture in Afghanistan, said the U.S. government doesn't always require contractors to follow U.S. codes because they're unrealistic in Afghanistan. For instance, requiring fire sprinkler systems in a country where there are no fire hydrants or water pressure.

However, Passarella questioned how any company would know what U.S. standards to follow without an American engineer. When he tried to call Drannan, who now lives part-time in Dubai, to ask him about the matter, he said he couldn't reach him.

"It's frustrating," Passarella said. "I have to put 11 Americans on unemployment."

(Warren P. Strobel and Dion Nissenbaum in Kabul, Afghanistan, and Tish Wells and James Rosen in Washington contributed to this article.)

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