WASHINGTON – A federal grand jury in Trenton, N.J. has indicted three former U.S. Army officers and two U.S. civilians for their role in a bribery, fraud and money laundering scheme involving the theft of millions of dollars from the Coalition Provisional Authority (CPA) in Iraq, Deputy Attorney General Paul J. McNulty announced today.

The 25-count indictment unsealed today charges U.S. Army Colonel Curtis G. Whiteford, U.S. Army Lt. Colonels Debra M. Harrison and Michael B. Wheeler, and civilians Michael Morris and William Driver with various crimes related to a scheme to defraud the CPA - South Central Region (CPA-SC) in al-Hillah, Iraq. Whiteford, once the second-most senior official at CPA-SC, was charged with one count of conspiracy, one count of bribery, and 11 counts of honest services wire fraud. Harrison, at one time the acting Comptroller at CPA-SC who oversaw the expenditure of CPA-SC funds for reconstruction projects, was charged with one count of conspiracy, one count of bribery, 11 counts of honest services wire fraud, four counts of interstate transport of stolen property, one count of bulk cash smuggling, four counts of money laundering, and one count of preparing a false tax form. Wheeler, an advisor for CPA projects for the reconstruction of Iraq, was charged with one count of conspiracy, one count of bribery, 11 counts of honest services wire fraud, one count of interstate transport of stolen property, and one count of bulk cash smuggling.

Morris, a U.S. citizen in Romania who owns and operates a Cyprus-based financial services business, was charged with one count of conspiracy and 11 counts of honest services wire fraud. Morris was arrested by Romanian authorities on Feb. 6, 2007. The United States is seeking to have him extradited to New Jersey on these charges. Driver, Harrison’s husband, was charged with four counts of money laundering. Harrison and Wheeler, who were previously charged in criminal complaints, remain released on bond.

“This indictment alleges that the defendants flagrantly enriched themselves at the expense of the Iraqi people – the very people they were there to help,” said Deputy Attorney General McNulty. “U.S. government officials working in Iraq are not for sale. We will prosecute anyone who attempts to exploit the reconstruction efforts in Iraq for their personal gain.”

According to the indictment, from December 2003 through December 2005, Whiteford, Harrison, Wheeler and Morris conspired with at least three others—Robert Stein, at the time the Comptroller and Funding Officer for the CPA-SC; Philip H. Bloom, a U.S. citizen who owned and operated several companies in Iraq and Romania; and U.S. Army Lt. Colonel Bruce D. Hopfengardner—to rig the bids on contracts being awarded by the CPA-SC so that all of the contracts were awarded to Bloom. In total, Bloom received more than $8.6 million in rigged contracts. The indictment alleges that Bloom, in return, provided Whiteford, Harrison, Wheeler, Stein, Hopfengardner and others with over $1 million in cash, SUVs, sports cars, a motorcycle, jewelry, computers, business class airline tickets, liquor, promise of future employment with Bloom, and other items of value.

The indictment alleges that Bloom laundered over $2 million in currency that Whiteford, Harrison, Wheeler, Hopfengardner, Stein and others stole from the CPA-SC that had been designated for the reconstruction of Iraq. Bloom then used his foreign bank accounts in Iraq, Romania and Switzerland to send some of the stolen money to Harrison, Stein, Hopfengardner, and other Army officials in return for them awarding contracts to Bloom and his companies. Morris allegedly assisted Bloom in making these wire transfers of stolen CPA funds and in funneling those monies to the co-conspirators. Harrison and her husband, William Driver, for example, allegedly received a Cadillac Escalade as a bribe and used tens of thousands of dollars for improvements to their home in Trenton. Whiteford allegedly received at least $10,000 in cash, a $3,200 watch, a job offer from Bloom, and other valuables.

The indictment further alleges that during the course of the conspiracy, Whiteford, Harrison, Wheeler, Stein and Hopfengardner used U.S. currency stolen from the CPA-SC to funnel funds to Bloom for the purchase of weapons which they converted to their own personal use in the United States, including machine guns, assault rifles, silencers and grenade launchers.

Stein was sentenced on Jan. 29, 2007, to nine years in prison. He previously pleaded guilty to conspiracy, bribery, money laundering, possession of machine guns, and being a felon in possession of a firearm for his role in the scheme to defraud the CPA-SC.

On March 10, 2006, Bloom pleaded guilty to related charges of conspiracy, bribery, and money laundering in connection with the same scheme as Stein. Bloom is scheduled to be sentenced on Feb.16, 2007.

On Aug. 25, 2006, Hopfengardner, pleaded guilty to charges of conspiracy to commit wire fraud and money laundering in connection with the same scheme as Bloom and Stein. Hopfengardner is scheduled for a status conference on March 23, 2007.

These cases are being prosecuted by Trial Attorneys James A. Crowell IV and Ann C. Brickley of the Public Integrity Section, headed by Acting Section Chief Edward C. Nucci, and Trial Attorney Patrick Murphy of the Asset Forfeiture and Money Laundering Section, headed by Chief Richard Weber, of the Criminal Division. These cases are being investigated by the Special Inspector General for Iraq Reconstruction (SIGIR), Internal Revenue Service Criminal Investigations (IRS), the U.S. Immigration and Customs Enforcement at the Department of Homeland Security (ICE), Army Criminal Investigations Division, the U.S. Department of State Office of Inspector General, and the FBI’s Washington Field Office in support of the Justice Department’s National Procurement Fraud Task Force and the International Contract Corruption Initiative. The investigation has received substantial assistance from the ICE Cybercrimes Division. “These indictments not only serve as a deterrent to future crimes of this nature, but also demonstrate the direct benefits of independent oversight and interagency cooperation in guarding American tax dollars invested in Iraq,” said Special Inspector General for Iraq Stuart Bowen. “SIGIR’s investigative team, now in Baghdad for more than three years, should be proud of their significant contribution in bringing these individuals to justice.”

“No matter how complex the fraud scheme, the individuals indicted today illustrate that even military officers are not above the law and will be brought to justice if they engage in procurement fraud in the Iraqi reconstruction.  The FBI, in support of the National Procurement Fraud Task Force and the International Corruption Initiative, stands ready to work with our partners to investigate, as appropriate, and to eliminate contract bid rigging, bribery, fraud, and money laundering schemes that hinder the rebuilding efforts in Iraq,” said Assistant Director Michael A. Mason, Criminal, Cyber, Response and Services Branch of the FBI. “Criminals motivated by profit and greed don’t deserve to work alongside the brave men and women of our military serving in Iraq,” said Julie Myers, Assistant Secretary of Homeland Security for ICE. “These charges highlight the federal government’s commitment in targeting suspected bribery, fraud and money laundering involving Iraq reconstruction funds and the war in Iraq. ICE is proud to have contributed its financial investigative expertise to this important joint operation.”

“The IRS will use the tax code and money laundering authorities to go after corrupt officials and contractors,” said IRS Commissioner Mark W. Everson. “Sometimes this is the fastest and most direct way to hold accountable those who abuse the public trust, as is clearly the case in this instance.” “We are committed to investigating and rooting out these types of crimes to the fullest, wherever the truth may lead us,” said Brig. Gen. Rodney Johnson, commanding general, U.S. Army Criminal Investigation Command and Provost General of the Army. “This goes against the very fabric of our values as an Army and we will continue to aggressively pursue individuals, in or out of uniform, and companies who commit crimes against the Army, the American taxpayer, and the people we serve.”

An indictment is merely an allegation. Defendants are presumed to be innocent until proven guilty. Deputy Attorney General McNulty announced the creation of the National Procurement Fraud Initiative in October 2006, designed to promote the early detection, identification, prevention and prosecution of procurement fraud associated with the increase in contracting activity for national security and other government programs. As part of this initiative, the Deputy Attorney General has created the National Procurement Fraud Task Force (www.usdoj.gov/criminal/npftf), includes federal prosecutors, the FBI, SIGIR, and the Offices of Inspectors General for key federal agencies, and is chaired by Assistant Attorney General Alice S. Fisher of the Criminal Division. The Task Force has formed regional working groups around the country and is addressing many important topics relating to procurement fraud, including international procurement fraud issues, training, potential legislation, and information sharing between agencies.

Since the formation of the Task Force, federal prosecutors have brought or resolved 15 different criminal cases involving procurement fraud and have recovered more than $100 million through vigorous enforcement of civil remedies available in procurement fraud cases. Other examples of fraud and abuse cases prosecuted by the Department of Justice in recent months include the following:

*On Feb. 2, 2007, former U.S. Army civilian translator Faheem Salam of Michigan was sentenced to three years in prison for offering bribes to a senior Iraqi police official, in violation of the Foreign Corrupt Practices Act;

*On Jan. 30, 2007, Gheevarghese Pappen, a U.S. Army Corps of Engineers employee at Camp Arifjan in Kuwait, was sentenced to two years in prison for accepting $50,000 in illegal gratuities from a Kuwaiti contractor;

*On Jan. 25, 2007, Peleti “Pete” Peleti Jr., a U.S. Army Chief Warrant Officer, was charged in the Central District of Illinois with receiving a $50,000 bribe in exchange for influencing a food supplies services contract. Peleti served as Army’s Theater Food Service Advisor and was stationed at Camp Arifjan in Kuwait;

*On Nov. 13, 2006, four members of the California Army National Guard pleaded guilty to conspiracy charges related to their embezzlement from the U.S. Army while deployed in Iraq.

WASHINGTON – A federal judge has ordered that William J. Kennedy, of Livermore, Calif., be barred from selling “corporation sole” tax fraud schemes, the Justice Department announced today. The preliminary injunction order was entered following a hearing before Judge Jeffrey White of the U.S. District Court for the Northern District of California.

Some states authorize corporations sole to enable religious leaders to hold property and conduct business, the government complaint in the case states. But tax benefits are available to a corporation sole (or any other organization) only if the organization qualifies as a tax-exempt religious or charitable organization under federal tax laws. The court order states that Kennedy falsely advised customers that corporations sole used for their personal benefit can qualify as tax-exempt religious organizations.

According to papers filed in the case, Kennedy charged customers $25,000 to participate in the scheme. The court’s order requires Kennedy to give the government a list with his customers’ names, addresses, and to notify them of the injunction. More information related to this case can be found at http://www.usdoj.gov/tax/txdv06587.htm.

Corporation-sole scams are listed in the IRS’s annual list of the “Dirty Dozen” tax scams at http://www.irs.gov/newsroom/article/0,,id=136337,00.html. The Justice Department has obtained permanent injunctions against a number of people who sell corporation-sole scams. Two examples are found at http://www.usdoj.gov/tax/txdv05657.htm and http://www.usdoj.gov/tax/txdv05030.htm.

Since 2001, the Justice Department’s Tax Division has obtained injunctions against more than 220 tax preparers and tax-fraud promoters. More information about the Justice Department's efforts against tax-scam promoters can be found at http://www.usdoj.gov/tax/taxpress2007.htm. Information about the Justice Department's Tax Division can be found at http://www.usdoj.gov/tax.

PETALUMA, Calif., Feb. 7, 2007 -- Primetime news program Lou Dobbs Tonight dropped an investigative story exposing the diversion of billions of dollars in federal small-business set-aside contracts to some of the nation's largest corporations and defense contractors just hours before the segment was to air on CNN.

As part of Dobb's series, "The Attack on the Middle Class,"
the show's producers spent several weeks researching and filming the segment featuring Lloyd Chapman, contracting expert and president of the American Small Business League. During his interview with CNN, Chapman discussed a series of 13 federal investigations by the Government Accountability Office, Small Business Administration Office of Advocacy and the SBA Office of Inspector General that found billions of dollars in federal small business contracts were diverted to Fortune 500 corporations. The Bush Administration reported these contracts - awarded to firms like L3-Communications, General Dynamics, Halliburton and major CNN advertisers Boeing and Lockheed - as "small business" awards.

CNN producers told Chapman that the segment had been pulled
in the wake of more pressing news stories but assured him
that it would air shortly. After three months of waiting, Chapman has concluded that the station abruptly pulled the story to avoid embarrassing its major advertisers and has no intention of ever airing the segment.

"CNN is never going to run that story," said Chapman. "I think they pulled it because it was unflattering to its major advertisers, Lockheed Martin and Boeing. CNN's
reputation as the most trusted name in news obviously doesn't apply when you're talking about its advertisers."

Chapman points to a story featured on the highly rated blog
The Daily Kos, "Advertising as Payola: Who really owns CNN," that also suggests firms like Lockheed and Boeing, who have no products to sell to the general public, advertise on major networks to gain influence over the media outlet.

The latest government figures report Boeing with 37 federal small business awards, totaling $495,319,668. Lockheed Martin received $223,210,917 in federal small business awards and Fortune 500 defense contractor L-3 Communications was the top recipient of small business contracts with $650,143,831. The ASBL projects that up to $65 billion a year in federal small business contracts are diverted to the top two percent of firms in the US.

For more information about the American Small Business
League, see http://www.asbl.com.

WASHINGTON – Vetco Gray Controls Inc., Vetco Gray Controls Ltd., and Vetco Gray UK Ltd., wholly owned subsidiaries of Vetco International Ltd., have pleaded guilty to violating the anti-bribery provisions of the Foreign Corrupt Practices Act, or FCPA, Deputy Attorney General Paul J. McNulty announced today.

At a hearing today before U.S. District Judge Lynn N. Hughes in the Southern District of Texas, the companies pleaded guilty to violations of the anti-bribery provisions of the FCPA, as well as conspiracy to violate the FCPA. Additionally, Aibel Group Ltd., another wholly owned subsidiary of Vetco International, simultaneously entered into a deferred prosecution agreement with the Justice Department regarding the same underlying conduct. As part of the plea and deferred prosecution agreements, it was agreed that Vetco Gray Controls Inc., Vetco Gray Controls Ltd., and Vetco Gray UK Ltd. would pay criminal fines of $6 million, $8 million, and $12 million, respectively, for a total of $26 million. This total fine amount represents the largest criminal fine to date in a FCPA prosecution by the Justice Department.

In the charging and plea documents, Vetco Gray Controls Inc., Vetco Gray Controls Ltd., and Vetco Gray UK Ltd. admitted that they violated and conspired to violate the FCPA in connection with the payment of approximately $2.1 million in corrupt payments over approximately a two-year period to Nigerian government officials. These corrupt payments were paid through a major international freight forwarding and customs clearance company to employees of the Nigerian Customs Service, and coordinated largely through Vetco Gray Controls Inc.'s offices in Houston. Additionally, Aibel Group Ltd. agreed in its deferred prosecution agreement to accept responsibility for similar conduct by its employees.

As the charging and plea documents reflect, beginning in February 2001, Vetco Gray UK began providing engineering and procurement services and subsea construction equipment for Nigeria's first deepwater oil drilling project, the Bonga Project. Several Vetco Gray UK affiliates, including Aibel Group Ltd., Vetco Gray Controls Inc., and Vetco Gray Controls Ltd., supplied Vetco Gray UK with employees and manufacturing equipment for the project. From at least September 2002 to at least April 2005, each of the defendants engaged the services of a major international freight forwarding and customs clearing company and, collectively, authorized that agent to make at least 378 corrupt payments totaling approximately $2.1 million to Nigerian Customs Service officials to induce those officials to provide the defendants with preferential treatment during the customs process.

“This case represents the largest criminal penalty the Department of Justice has ever sought in a Foreign Corrupt Practices case and confirms our commitment to root out corruption,” said Deputy Attorney General McNulty. “The Department of Justice will continue its efforts to assure a level playing field for businesses operating abroad.”

This is the second time since July 2004 Vetco Gray UK has pled guilty to violating the FCPA. On July 6, 2004, Vetco Gray UK, previously named ABB Vetco Gray UK Ltd., and an affiliated company pleaded guilty to violating the antibribery provision of the FCPA in connection with the payment of more than $1 million in bribes to officials of NAPIMS, a Nigerian government agency that evaluates and approves potential bidders for contract work on oil exploration projects. ABB Vetco Gray UK Ltd. was renamed Vetco Gray UK Ltd. following an acquisition by a group of private equity entities of the upstream oil and gas businesses and assets of its parent corporation, ABB Handels-und Verwaltungs AG (“ABB”). The July 12, 2004 acquisition included the sale of Vetco Gray UK and the predecessors to the two other Vetco International subsidiaries that pleaded guilty today. In anticipation of the July 12, 2004 acquisition, the private equity acquirers requested and the Justice Department issued an FCPA Opinion Release (No. 2004-02) ( http://www.usdoj.gov/criminal/fraud/fcpa/o0402.htm). The Opinion Release required the acquirers to effectively institute and implement a compliance system, internal controls, training, and other procedures sufficient to have deterred and detected violations of the FCPA, among other obligations. The corrupt payments underlying today’s guilty pleas continued unabated from the period prior to the acquisition until at least mid-2005, notwithstanding the acquirer’s commitments to the Justice Department under the Opinion Release. The sale to new owners, the prior directives issued by the Department of Justice, and Vetco Gray UK’s prior FCPA conviction were all taken into account under the U.S. Sentencing Guidelines in calculating the $12 million criminal fine against Vetco Gray UK Ltd.

The resolution of the criminal investigation of Vetco International and its subsidiaries resulted, in large part, from the actions of Vetco International in voluntarily disclosing the matter to the Justice Department and Vetco International’s subsidiaries’ agreement to take significant remedial steps. In addition to the criminal fines, the plea agreements also require the defendants to: (1) hire an independent monitor to oversee the creation and maintenance of a robust compliance program; (2) undertake and complete an investigation of the companies’ conduct in various other countries as originally required under FCPA Opinion Release No. 2004-02; and (3) ensure that in the event that any of the companies are sold, the sale shall bind any future purchaser to the monitoring and investigating obligations.