GOP Donor Is Accused of Overcharging Pentagon

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The New York Times

GOP Donor Is Accused of Overcharging Pentagon

by
James Glanz & Michael Luo

Harry Sargeant III is the finance chairman of the Florida Republican Party. (S.V. Date/Palm Beach Post)

The Democratic chairman of a House investigative committee presented documents to the Pentagon on Thursday charging that a top Republican fund-raiser, Harry Sargeant III, made tens of millions of dollars in profits over the last four years because his contracting company vastly overcharged for deliveries of fuel to American air bases in Iraq.

In a written statement on Thursday, a lawyer for Mr. Sargeant, who is the finance chairman of the Florida Republican Party and a major fund-raiser for Senator John McCain's presidential campaign, called the allegations "deeply disappointing" and asserted that they were not supported by the facts.

The contracting company, called the International Oil Trading Company, or I.O.T.C., was briefly in the news over the summer when a former partner filed a lawsuit against Mr. Sargeant in a Florida circuit court.

The former partner, a Jordanian named Mohammad al-Saleh, is a brother-in-law of King Abdullah II of Jordan. The court papers laid out his assertion that he obtained special governmental authorizations for the company to transport the fuel through Jordan and was then unlawfully forced out by Mr. Sargeant, who strongly disputed those allegations.

But the latest claims of impropriety by the company, presented by Representative Henry A. Waxman, Democrat of California, in a letter to Defense Secretary Robert M. Gates, go much further. Mr. Waxman uses e-mail messages, company documents, Pentagon reports and other information to make the case that Mr. Sargeant repeatedly received contracts to deliver the fuel even though his company was not the lowest bidder.

In one case, the letter from Mr. Waxman, chairman of the House Committee on Oversight and Government Reform, asserts that Mr. Sargeant's company submitted the highest of six bids, but received the contract anyway. In fact, Pentagon contracting officers complained that the company's prices were unreasonably high and initially said they could not justify giving the work to Mr. Sargeant.

But for reasons the company was never able to explain, Mr. Waxman's letter indicates, no other American company was given an authorization to transport the fuel through Jordan. And when the United States Central Command declared that the need for the fuel was urgent, the Pentagon was forced to award the contract to Mr. Sargeant's company.

Nothing in the documents Mr. Waxman's staff assembled indicated that there was any attempt by Mr. McCain, the Republican presidential nominee, or his staff to influence the granting of the contracts.

According to the documents, the Pentagon tried to negotiate a lower price with Mr. Sargeant, but he held firm, saying the prices were reasonable given his expenses. But as a result, Mr. Waxman's letter says, the company has been paid $1.4 billion on four different contracts for the fuel deliveries and made a profit of $210 million after expenses.

The letter and other documents indicate that Mr. Sargeant currently has just one other partner in the venture, suggesting that they would largely divide those profits. "Mr. Sargeant's personal gain from these four contracts may have been $70 million or higher," Mr. Waxman's letter says.

A spokesman for Mr. Gates, Chris Isleib, said that the Pentagon had supplied all the documents that Mr. Waxman had requested in the case. "As a result of these documents and subsequent discussions with the committee, Congressman Waxman asked the secretary of defense to investigate allegations that I.O.T.C. has overcharged for the delivery of fuel," Mr. Isleib said in an e-mail message. The Pentagon will respond directly to the committee on that request, Mr. Isleib said.

Jim Greer, the chairman of the Republican Party of Florida, said, "Since Harry Sargeant has been the finance chairman, he has always demonstrated the highest degree of ethics and integrity and has always served the party well."

Brian Rogers, a spokesman for the McCain campaign, said: "This obviously has nothing do with the McCain campaign. John McCain has always called for full transparency in military contracting, and if there's a nonpolitical mechanism for looking at credible allegations, then that should obviously go forward."

Ryan Alexander, president of Taxpayers for Common Sense in Washington, said that further investigation was warranted even though the initial inquiry did not turn up direct evidence of political meddling. Mr. Waxman estimated that if the lowest bidder had been awarded the contracts, taxpayers would have saved some $180 million.

"The fact that the contracting officer warned them lends credence to the general allegation that this is profiteering and that this is an unfair contract," Ms. Alexander said. "To allow that high of a profit to deliver fuel to the troops is not the kind of management we need right now."

But Mr. Sargeant's lawyer, Mark H. Tuohey III, said in his statement that "the interests of the U.S. taxpayer would have been better served if the authors had sought all of the facts and visited the Middle East to see, firsthand, how we supply fuel to U.S. forces in Iraq." He called the deliveries "a highly complex, risky and, at times, life-threatening effort."

Mr. Tuohey said the prices charged by the I.O.T.C. were justified in this environment. "The price paid by the U.S. government is driven by the complex, highly challenging supply chain that transports fuel to Iraq," Mr. Tuohey wrote. After detailing some of those challenges, he added: "The conclusions in Chairman Waxman's letter aren't supported by the facts."

Mr. Sargeant is one of several dozen people who are listed on Senator McCain's Web site as having raised $500,000 or more for him. He was the host of a fund-raiser for Mr. McCain at his mansion in Delray Beach, Fla., this year.

Mr. Sargeant came under scrutiny in August when media reports highlighted a cluster of more than $50,000 in unusual campaign contributions bundled together by Mr. Sargeant from a single extended family in California and a few of their friends. The donations set off questions of whether they might have been made by donors in name only who were reimbursed by someone trying to skirt contribution limits.

It turned out that the donations were not actually solicited by Mr. Sargeant but by another Jordanian business partner, Mustafa Abu Naba'a. The McCain campaign later said it would return all contributions solicited by Mr. Abu Naba'a and review all donations collected by Mr. Sargeant.

The conclusions from Mr. Waxman's committee are sure to be wielded by Democrats as a cudgel against Mr. McCain.

Costs for delivering fuel to the troops in Iraq have an extremely contentious history. Late in 2003 Mr. Waxman charged that Kellogg Brown & Root, then part of Halliburton, the company led by Dick Cheney before he became vice president, had been overcharging for fuel.

Although the company strongly disputed allegations of overcharging, the Pentagon eventually terminated fuel-delivery duties for KBR, which is the company's name now that it has left Halliburton. When the work was divided up and re-bid, the I.O.T.C. won four successive contracts to bring fuel through Jordan.

"The documents show that Mr. Sargeant's company took advantage of U.S. taxpayers," Mr. Waxman said in a statement. "His company had the only license to transport fuel through Jordan, so he could get away with charging exorbitant prices. I've never seen another situation like this. Mr. Sargeant rejected repeated pleas of senior officials to lower his unfair and unreasonable prices."

 

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