Congressional Probe to Investigate State Department's Watchdog Office, Fraud Claims

A congressional committee has launched an investigation into the State Department's inspector general, alleging that he blocked fraud investigations, including potential security lapses at the newly built U.S. embassy in Baghdad.

Also under scrutiny is whether Blackwater USA, the private security firm banned this week from working in Iraq for the alleged killing of eight Iraqi civilians, was "illegally smuggling weapons into Iraq," according to a letter to IG Howard J. Krongard that was obtained Tuesday by The Associated Press.

The investigation involves allegations that "your strong affinity with State Department leadership and your partisan political ties have led you to halt investigations, censor reports, and refuse to cooperate with law enforcement agencies," Krongard was told.

Based on allegations made by a number of current and former senior investigators who worked for Krongard, the letter from the House Oversight and Government Reform Committee also questioned whether he adequately investigated illegal labor trafficking allegations involving the Kuwaiti company that was building the Baghdad embassy.

Krongard's office said the inspector general was "on travel" Tuesday and unavailable to comment. A spokesman for the office did not immediately return a call seeking comment.

Sean McCormack, the spokesman for the State Department, said he had not seen the letter from Rep. Henry Waxman, D-Calif., the panel's chairman. The letter was faxed to the department Tuesday morning, and McCormack said he could not speak to the allegations in it.

In addition to outlining a host of allegations against Krongard, the letter raises new problems for Blackwater. Although the company is not named in the letter, a senior administration official confirmed that Blackwater is the firm mentioned as being suspected of smuggling weapons into Iraq illegally.

According to a letter, a federal prosecutor asked Krongard's investigators to assist in the probe of the security contractor, but Krongard sent an e-mail to a senior staff member directing the assistance to "stop IMMEDIATELY" and to wait until he spoke to the prosecutor.

After weeks of delay, Waxman said, Krongard asked someone on his media relations staff — not an investigator — to assist the federal prosecutors. "This unorthodox arrangement has reportedly impeded the investigation," Waxman said.

Krongard, in testimony before the committee in July, dismissed allegations that foreign workers were mistreated in building the new complex in Baghdad. But he acknowledged that some recruiters may have misled foreign workers about pay expectations and living conditions.

According to the letter, staff investigators said Krongard stalled an investigation into allegations that contractors building the Baghdad embassy did not adequately search for mines and other security hazards on the 104-acre compound, which included a number of tunnels.

The embassy, which will be the largest in the world, is expected to be finished this month, at a cost of nearly $600 million.

A central theme running through the letter is that Krongard prevented his investigators from cooperating with Justice Department probes and refused to send his staff to Iraq and Afghanistan to look into allegations of contract fraud and wasteful spending. Waxman also said that he's been told Krongard censored inspection reports and audits to remove information critical of the State Department.

The letter cited e-mails between staffers talking about their frustrations at not being allowed to assist the Justice Department in investigations.

The letter includes allegations that Krongard:

—Was warned about poor workmanship at the U.S. embassy site, where serious electrical problems eventually occurred, but blocked investigations into it

— Prevented investigators from seizing evidence they thought would implicate a large State Department contractor in procurement fraud, involving computers in Afghanistan

— Interfered in an investigation into Voice of America head Kenneth Tomlinson, by providing him information about the inquiry

— Fueled a "dysfunctional office environment" that caused key investigators to leave