State Dept. reviews ties with firm criticized for Iraq embassy flaws | McClatchy Washington Bureau

WASHINGTON — The State Department is reviewing its relationship with the Kuwaiti company building the trouble-plagued new U.S. Embassy in Iraq, senior U.S. officials said Friday.

The officials said the review is looking at three other subcontracts given to First Kuwaiti General Trading & Contracting Co. to build embassies and consulates in Saudi Arabia, Indonesia and the African country of Gabon.

The company's future role in the lucrative embassy construction business, they said, depends on how quickly it resolves the problems in Baghdad, where the massive $740 million embassy complex is behind schedule due to a series of fire safety, electrical and other flaws.

The officials spoke on condition of anonymity because no decisions have been made in the matter.

Secretary of State Condoleezza Rice revealed the review near the end of almost three hours of testimony before the House Oversight and Government Reform committee Thursday.

"I have asked that we review all of our contract possibilities with First Kuwait(i), and that review is under way," Rice said.

Rice was answering questions from Rep. Tom Davis, R-Va., about why the State Department awarded the Baghdad contract to First Kuwaiti in 2005 despite allegations that the company and its founder, Lebanese businessman Wadih al Absi, engaged in a $200,000 kickback scheme on unrelated Army contracts in Iraq.

Rice said the department wasn't aware of the allegations, contained in a sealed indictment against an official of construction firm KBR, Anthony J. Martin. Martin pleaded guilty in July to taking kickbacks.

First Kuwaiti denied the allegations Friday. "Martin made his allegations to receive a reduced sentence. First Kuwaiti's work is always subject to the oversight of the U.S. government, and we welcome their review," it said in a statement.

McClatchy Newspapers reported this week that, despite the troubles in Baghdad, First Kuwaiti continues to receive significant State Department construction work as a subcontractor. On Sept. 28, Maryland-based Grunley Walsh, a partner firm, signed a $122 million contract to build a U.S. consulate in Jeddah, Saudi Arabia, with First Kuwaiti as the prime subcontractor.

State Department and First Kuwaiti officials portray the problems in Baghdad as routine for a complex construction project in a war zone, but Rice wouldn't offer a firm date for opening the new embassy.

"We're going to be reviewing First Kuwaiti's performance in Baghdad" to fix the problems, a senior State Department official said. If further problems arise, "we would probably have a conversation with Grunley Walsh" about the continued partnership.

Robert Farah, a Lebanese-American businessman associated with First Kuwaiti, confirmed Friday that he's holding talks to buy Grunley Walsh's international operations. Farah, in a phone interview, described himself as a former consultant to First Kuwaiti. The Defense Department is reviewing the potential sale.