Wide Plot Seen in Guilty Plea in Iraq Project

Wide Plot Seen in Guilty Plea in Iraq Project
By JAMES GLANZ / NY Times
http://www.nytimes.com/2006/02/02/international/middleeast/02reconstruct.html?th=&emc=th&pagewanted=print

Robert J. Stein Jr. could not have been clearer about his feelings toward the American businessman who was receiving millions of dollars in contracts from Mr. Stein to build a major police academy and other reconstruction projects in Iraq.

"I love to give you money," Mr. Stein wrote in an e-mail message to the businessman, Philip H. Bloom, on Jan. 3, 2004, just as the United States was trying to ramp up its rebuilding program in Iraq.

As it turned out, Mr. Stein had the money to give. Despite a prior conviction on felony fraud that his Pentagon background check apparently missed, Mr. Stein was hired and put in charge of at least $82 million of reconstruction money in the south central Iraqi city of Hilla by the Coalition Provisional Authority, the American-led administration that was then running Iraq.

In United States District Court in Washington, court papers indicate, Mr. Stein will plead guilty today to conspiracy, bribery, money laundering, possession of a machine gun and being a felon in possession of firearms, for essentially giving millions of that money to Mr. Bloom, and taking millions more for himself. Mr. Stein used some of his stolen money, the papers say, to buy items as wildly diverse as grenade launchers, machine guns, a Lexus, "an interest in one Porsche," a Cessna airplane, two plots of real estate in Hope Mills, N.C., a Toshiba personal computer, 18 Breitling watches, a 6-carat diamond ring and a collection of silver dollars. The papers say that the ring of corruption was much wider than previously known, drawing at least seven Americans, including Mr. Stein, Mr. Bloom and five Army reserve officers, into what is portrayed as a maelstrom of greed, sex and gun-running at the heart of the American occupation of a conservative Muslim country.

As part of their bribery scheme, Mr. Stein and his co-conspirators dispensed and received a wide range of other items like cigars, alcohol, first-class plane tickets and "money laundering services," according to the papers. And if all of that were not enough reason for Mr. Stein to love giving money to his partner, the papers say, there was another: Mr. Bloom kept a villa in Baghdad where he provided women who gave sexual favors to officials he hoped to influence, including Mr. Stein. Mr. Bloom's lawyer, Robert A. Mintz, declined to comment on the case.

The court papers say the money was taken by outright theft of millions of dollars in cash — some of it then lugged aboard commercial flights back to the United States — by steering millions of dollars in construction contracts to Mr. Bloom's companies in return for bribes, and through international wire transfers of millions more.

Over all, Mr. Stein is accused of stealing at least $2 million of American taxpayer money and Iraqi funds, which came from Iraqi oil proceeds and money seized from Saddam Hussein's government, accepting at least $1 million in money and goods in direct bribes and grabbing another $600,000 in cash and goods that belonged to the Coalition Provisional Authority. In return, Mr. Stein and his cronies used rigged bids to steer at least $8.6 million in contracts for buildings like the police academy, a library and a center meant to promote democracy, the papers say.

The papers say "Stein and his co-conspirators recommended numerous construction projects in Hilla, Iraq, that were intended to be, and were in fact, steered" to Mr. Bloom. That charge suggests that Mr. Stein, using his perch at the provisional authority, was manipulating at least part of the reconstruction program to enrich himself and his cronies.

There have so far been four arrests in the case, including Mr. Stein, of Fayetteville, N.C., and Mr. Bloom, who lived for many years in Romania. The others, who like Mr. Stein served as C.P.A. officials whose authority extended over a vast territory centered on Hilla, are Lt. Col. Debra Harrison of Trenton and Lt. Col. Michael Wheeler of Amherst Junction, Wis. They were all arrested late last year. Lawyers for Colonel Harrison and Colonel Wheeler did not immediately respond to phone messages left late last night.

The papers covering Mr. Stein's likely plea deal refer to Mr. Bloom, Colonel Harrison and Colonel Wheeler only as numbered co-conspirators, but their names are easily deduced from the context. The remaining three people called co-conspirators have not yet been publicly charged with crimes and their names are not known. The papers also suggest that others may have been involved.

As described in the court papers, reports by the Special Inspector General for Iraq Reconstruction, and other public documents, the story of Mr. Stein's slide into the depths of corruption began shortly after he was sent to Iraq after being hired by S&K Technologies, a St. Ignatius, Mont., company that had won Army contracts to provide administrative support in Iraq.

Although S&K's contract called for Pentagon background checks, some of which were actually carried out, according to former S&K employees, Mr. Stein was given extraordinary authority in Iraq to authorize and spend money, in spite of his fraud conviction in the mid-1990's.

Mr. Stein's control over astonishing sums of cash became so great, interviews with former officials in Hilla indicate, that at one point he and others picked up $58.8 million in shrink-wrapped $100 bills from provisional authority headquarters and drove back with it to Hilla. There Mr. Stein controlled access to the vault where the cash was put — though not before local employees posed for pictures in front of the money.

The story of Mr. Stein's misdeeds begins, according to the court papers, with an e-mail message Mr. Stein sent to Mr. Bloom asking if one of the other conspirators was now "on board." A few days later, Mr. Stein sent an exultant note saying that he had pushed through the first of the police academy contracts, for preparing the ground. "I will give you 200K sometime tomorrow afternoon!" Mr. Stein wrote.

Some $7.3 million in contracts and grants ultimately was written for the academy, with much of it going to Mr. Bloom, the papers say. Agents from the special inspector general's office later found that the work was done improperly or not at all. Mr. Stein had authority only to write contracts for under $500,000. He evaded that limit by writing at least 11 separate contracts, each for under that amount, federal papers say.

A few days after that first e-mail message, in the first of a series of wire transfers, Mr. Bloom sent $30,000 from a bank in Kuwait to an account controlled by Mr. Stein's wife at the Bragg Mutual Federal Credit Union in North Carolina. Two weeks later, the papers indicate, $70,000 more went out by the same route. The bribes had begun.

From that point on, through contract after contract, Mr. Stein, Mr. Bloom and the other conspirators descended into unbridled corruption, the papers indicate. They appeared to draw more people into the scam and became fearful of being exposed. On Feb. 25, 2004, Mr. Stein wrote a message saying that the official who had been brought "on board" had just stomped out of Mr. Stein's office, the papers say. "I guess he was expecting the next chunk for 60 sent," Mr. Stein wrote, referring to a bribe of $60,000, "and he got a call from his wife stating he had not received it."

And after Mr. Bloom wrote back saying "I sent the funds a week ago" and "tell him to stop acting like a child," Mr. Stein replied, seemingly with trepidation: "Shall I go ahead and give" the official "the 50 or 60 to shut him up?" The demands of the co-conspirators seemed to grow more extreme as time went on. By late June, Mr. Bloom carried on a correspondence with a car dealer in the United States to satisfy highly expensive demands by yet another alleged player in the scheme.

"Your friend is seeking a very desirable, hard-to-find color: electric blue," the dealer wrote back. "It appears that there are only two blue Nissan 350Z hardtops in the western United States," adding that the person "wants the following specifications: Touring model, manual transmission, aerodynamics package, cargo convenience package, floor mats, splash guards and trunk mat." Cost: $35,990.

A frantic tone crept into Mr. Stein's correspondence as he realized investigators could be closing in. One official, Mr. Stein wrote on June 25 to the person who wanted the Nissan, "is pushing some things that could snowball out of control."

"I am doing my best to keep a formal investigation from happening," Mr. Stein wrote. He added, "I would like to know if you are going to stand behind me or not!"

Elizabeth Rubin contributed reporting for this article.