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Congress Votes to Crack Down on Fraud By Private Contractors in Iraq

The House of Representatives voted Tuesday to make it easier to convict private contractors of defrauding the U.S. government during wartime, which is aimed at curbing abuse that has plagued the Iraqi reconstruction effort.

The bill, sponsored by Democratic Rep. Neil Abercrombie, would create a new federal criminal statute banning contracting abuse associated with military operations and reconstruction efforts. It also would ensure federal courts have jurisdiction in all cases, closing what Abercrombie says is a loophole in existing law that has let many contractors off the hook.

"Some of these contractors have declared the U.S. occupation of Iraq open season on the American taxpayer," Abercrombie said. "Cleaning up this mess has been hampered by the fact that while anti-fraud laws protect against the waste or theft of U.S. tax dollars in the United States, there have been no statutes prohibiting sleazy business practices by American companies overseas." The measure passed by 375-3.

A similar measure by Sen. Patrick Leahy, also a Democrat, was approved in April by the Senate Judiciary Committee. A spokesman for Leahy said Republican objections have prevented it from getting a quick floor vote.

The proposal is the latest attempt by Democrats to pass legislation that both attracts enough Republican votes to pass and highlights management problems associated with the war. Still lacking a veto-proof majority to force troops home, Democrats have decided to delay debate on President George W. Bush's war spending request until early next year.

Last week, the House voted 389-30 for legislation by Democratic Rep. David Price that would extend the criminal jurisdiction of U.S. courts to any federal contractor working alongside military operations.

Federal officials say fraud committed by government contractors in Iraq is a problem but is not as severe as some critics have suggested.

Stuart W. Bowen Jr., inspector general for Iraq reconstruction, told Congress this summer that losses to American taxpayers probably will amount to "relatively small components of the overall investments in Iraq, totaling in the tens of millions" of dollars (euros) and not in the "hundreds of millions or billions as is sometimes imagined."

Still, Bowen, Democrats and many Republicans say more controls are needed on the money spent to rebuild Iraq and that the Justice Department should move more aggressively in prosecuting fraud cases.

Republican Sen. Arlen Specter, who co-sponsored the Leahy bill, said during a spring hearing on the issue that heavy fines against contractors simply amounted to "an inexpensive license to cheat the taxpayers."

The House bill also outlines specific penalties for contractors convicted of abuse.

Deliberately defrauding the United States, by overstating the value of a good or service, for example, could result in a jail term of up to 20 years. Concealing information or presenting false statements or documents related to wartime contracts can result in a fine of $1 million (euro710 million) or twice the amount of money received in the scheme, whichever penalty is greater.

Rep. Tom Davis, a Republican, said he opposed the bill because it did not take into account existing laws and could have unintended consequences, including stifling innovation by contractors who fear stiff penalties.