Iraq's billions and the White House connection

The US company appointed to advise the US government on the economic reconstruction of Iraq has paid hundreds of thousands of dollars into Republican Party coffers and has admitted that its own finances are in chaos because of accounting errors and bad management. BearingPoint is fighting to restore its reputation in the US after falling more than a year behind in reporting its own financial results, prompting legal actions from its creditors and shareholders. According to the Center for Responsive Politics, BearingPoint employees gave $117,000 to the 2000 and 2004 Bush election campaigns, more than any other Iraq contractor. Other recipients include three prominent Congressmen on the House of Representatives' defense sub-committee, which oversees defense department contracts. One of the biggest single contributors to BearingPoint's in-house political fund was James Horner, who heads the company's emerging markets business which is working in Iraq and Afghanistan. He donated $5,000 in August 2005. BearingPoint is being paid $240 million for its work in Iraq, winning an initial contract from the US Agency for International Development (USAID) within weeks of the fall of Saddam Hussein in 2003. It was charged with supporting the Coalition Provisional Authority to introduce policies "which are designed to create a competitive private sector." Its role is to examine laws, regulations and institutions that regulate trade, commerce and investment, and to advise Iraqi government ministries and the central bank. A BearingPoint employee, based in the US embassy in Baghdad, has been tasked with advising the Iraqi Ministry of Oil on drawing up a new hydrocarbon law. The legislation will give Western oil companies a large slice of profits from the country's oil fields in exchange for investing in new oil infrastructure. BearingPoint's first task in Iraq in 2003 was to help to plan the introduction of a new currency, and it was hoped that it would eventually organize small loans to Iraqi entrepreneurs to stimulate a significant market economy. The contract award was immediately criticized by public integrity watchdogs and by the company's rivals, because BearingPoint advisers to USAID had a hand in drafting the requirements set out in the deal. It spent five months helping USAID to write the job specifications and even sent some employees to Iraq to begin work before the contract was awarded, while its competitors had only a week to read the specifications and submit their own bids after final revisions were made. USAID's independent inspector ruled that "BearingPoint's extensive involvement in the development of the Iraq economic reform program creates the appearance of unfair competitive advantage in the contract award process." The company said it was selected through a transparent and competitive bidding process. Across the world, BearingPoint has become, thanks to USAID funding, a part of the US government's strategy of spreading free market reforms to developing countries and US allies. Elsewhere in the Middle East it is advising the government of Jordan on how to minimize the regulation of business and reform its tax policies in order to attract foreign investment; in Egypt it is advising on customs reform and respect for international companies' patents. It has won more than $100 million of business in Afghanistan since US troops invaded in 2002, and has been helping to build a banking system, training civil servants in the finance ministry and offering advice on economic policy. Its economic reconstruction work grew out of early work in eastern Europe after the fall of communism, and became a significant contributor to the business after it won contracts in the former Yugoslavia following US intervention there. The company changed its name to BearingPoint from KPMG Consulting in 2002, shortly after separating from its parent company. In the years since, contracts with the US government have proved the highlight of the business, while its work for private company clients has failed to live up to hopes. In part because of its reliance on the US federal government–which accounts for about 30 percent of revenues–BearingPoint has dramatically stepped up its attempts to buy influence in Washington. Its contracts in Iraq and Afghanistan coincide with a big increase in its lobbying efforts on Capitol Hill. In 2005, the latest year for which figures have been collated, BearingPoint paid $1 million to lobbyists, equaling the record total it paid in 2003. That is five times its average annual bill for lobbyists prior to the war in Iraq. It also dramatically increased its political contributions in the run-up to the midterm elections, distributing $120,000 to candidates and campaign groups from its employee-sponsored political fund. That compares with $61,000 in the 2004 elections.