Global Policy Forum

US Prosecutors Say Officer Helped to
Rig Contracts, Stole Reconstruction Funds

By Yochi J. Dreazen

Federal prosecutors accused a U.S. Army Reserve lieutenant colonel of bribery, theft and a variety of other crimes stemming from a scheme to steer millions of dollars in Iraq reconstruction contracts to an American businessman, expanding a probe into Iraq-related corruption by U.S. officials.

The officer, Michael Brian Wheeler, formerly served in southern Iraq and is the highest-ranking U.S. official charged with wrongdoing in connection with the $18.4 billion effort to rebuild Iraq. In addition to contract rigging, prosecutors allege that he smuggled $100,000 of stolen reconstruction money into the U.S. and used other stolen money to buy heavy weaponry such as machine guns and grenade launchers.

Prosecutors said Col. Wheeler, 47 years old, of Amherst Junction, Wis., was in league with a former civilian occupation official charged with similar crimes last month, and court filings said that other former civilian and military officials remain under investigation in connection to the case. If convicted, Col. Wheeler faces as many as 30 years in prison and a fine of $250,000. Col. Wheeler didn't return a call seeking comment.

The charges against Col. Wheeler, who was arrested on Wednesday, further highlight the mismanagement and outright criminality marring the U.S. rebuilding effort in Iraq. A variety of reports by congressional investigators and the special inspector general for Iraq reconstruction have found evidence that hundreds of millions of dollars were spent without proper authorization, given to contractors who performed shoddy work or paid to firms charging unreasonably high prices. Large sums of money remain unaccounted for, and auditors say they have little sense yet of how much may have been stolen.

According to court papers, Col. Wheeler was sent to an outpost of the Coalition Provisional Authority in the southern Iraqi city of Hillah in 2003 as a contracting officer for reconstruction projects. Prosecutors said he soon began working with other government officials to rig contracts for the benefit of an American businessman seeking lucrative reconstruction work. The other conspirators in the case aren't named in the indictment, but officials familiar with the matter said the terms refer to businessman Philip H. Bloom and former contracting official Robert J. Stein, both of whom were arrested last month and charged with nearly identical offenses.

Prosecutors said Col. Wheeler and the other officials submitted fake bids for contracts that Mr. Bloom's firms were seeking and then awarded the work to Mr. Bloom as the low bidder. To evade scrutiny, Mr. Stein -- who had the authority to award contracts of as much as $500,000 -- typically awarded contracts to Mr. Bloom in amounts of as much as $498,900. All told, Mr. Bloom allegedly collected $3.5 million in Iraq contracts. Auditors later found most of the work he performed was deficient.

Prosecutors said that Col. Wheeler on other occasions simply stole large amounts of reconstruction money. According to court papers, he and other government officials in Hillah stole hundreds of thousands of dollars in cash that they smuggled into the U.S. aboard commercial or military flights that faced no Customs inquiries. In the affidavit, prosecutors said Mr. Stein told them Mr. Wheeler personally took at least $100,000 in cash from the reconstruction funds into the U.S.

Law-enforcement officials also said that Col. Wheeler and Mr. Stein laundered other stolen money through Mr. Bloom and used it to buy weaponry, including four grenade launchers and dozens of machine guns. Mr. Stein initially told investigators the weapons were being sent back to Hillah for the protection of officials there, but prosecutors said the two men instead kept the weapons in the U.S. and "converted them to their own personal use." It is unclear what the two men planned to do with the weapons.

Messrs. Bloom and Stein have both pleaded not guilty, though the affidavit cites several instances where the two men admitted to various offenses related to the probe of Col. Wheeler.