WASHINGTON - An American-owned company operating from Kuwait paid hundreds of thousands of dollars in bribes to American contracting officers in efforts to win more than $11 million in contracts, the government says in court documents.
The Army last month suspended the company, Lee Dynamics International, from doing business with the government, and the case now appears to be at the center of a contracting fraud scandal that prompted Defense Secretary Robert M. Gates to dispatch the Pentagon inspector general to Iraq to investigate.
Court documents filed in the case say the Army took action because the company was suspected of paying hundreds of thousands in bribes to Army officers to secure contracts to build, operate and maintain warehouses in Iraq that stored weapons, uniforms, vehicles and other matÃƒ©riel for Iraqi forces in 2004 and 2005.
A lawyer for the company denied the accusations.
One of the officers, Maj. Gloria D. Davis, a contracting official in Kuwait, shot and killed herself in Baghdad in December 2006. Government officials say the suicide occurred a day after she admitted to an Army investigator that she had accepted at least $225,000 in bribes from the company. The United States has begun proceedings to seize Major Davis's assets, a move her heirs are contesting.
The company has been known as American Logistics Services.
Details of the case have come to light because the company contested the Army's decision, on July 9, to suspend it from obtaining contracts. That forced the government to disclose details in court papers, including a seven-page statement by an Army investigator.
Howell Roger Riggs, a lawyer or the company, denied the accusations and said the company was appealing to have the suspension lifted. Mr. Riggs acknowledged that the company was under a Justice Department investigation but said that no charges had been filed against the company or its officials.
"This is based solely on a declaration that is unsubstantiated and uncorroborated," Mr. Riggs said in a telephone interview. "If they want to come forward with hard evidence and accusations, we'll deal with it at that time."
The case is now part of a broader investigation in which the Army has a high-level team reviewing 18,000 contracts valued at more than $3 billion that the Kuwait office has awarded over four years.
The Army has suspended 22 companies and individuals, at least temporarily, from pursuing government work because of contract fraud investigations in Iraq, Kuwait and Afghanistan, an Army spokesman said Thursday. A total of 18 companies and individuals are barred for a definite period from government work. Seven more face debarment.
The court papers make clear that investigators have concluded that Lee Dynamics paid large bribes to numerous United States officials in Iraq and Kuwait. Major Davis is one official cited. Another is an Army officer, identified in the investigator's report as "Person B," because he is now cooperating with the investigation. He acknowledged receiving $50,000 in cash bribes from the company, the court papers said. Two people with direct knowledge of the investigation or the contracting office in Iraq at the time said "Person B" was Lt. Col. Kevin A. Davis, who worked with an officer who has emerged as a focus of the investigation in the weapons case in Iraq.
That officer, Lt. Col. Levonda Joey Selph, was at the heart of the effort to strengthen the fledgling Iraqi security forces in 2004 and 2005. She worked closely with Gen. David H. Petraeus, who commanded the effort at the time. The general is now the top commander in Iraq. There is no indication that investigators have uncovered any wrongdoing by General Petraeus.
In a brief phone conversation Thursday, Colonel Selph confirmed the connection between her and Colonel Davis in Iraq. "I worked for Kevin Davis," Colonel Selph said. She said she wanted to consult her lawyer before speaking further and did not respond to subsequent messages.
A woman identifying herself as Kevin Davis's wife said on the phone that he was out of town and not available for comment. She said that he had gone to work for Lee Dynamics after retiringfrom the army. It is not believed he is related to Gloria Davis.
As the case expands, investigators are looking at the possibility that it has connections to what had appeared to be a separate major corruption scandal. Last week, Maj. John Cockerham, a former Army contracting officer in Kuwait, and his wife and his sister were indicted on charges that they accepted up to $9.6 million in bribes for defense contracts in Iraq and Kuwait.
Court documents, say Major Davis also served as a contracting officer at Camp Arifjan, Kuwait, from in 2003 and 2004 and awarded millions of dollars in contracts to American Logistics and its affiliate companies, raising the question of whether the cases are related.
Lee Dynamics appears to be emblematic of scores of companies formed since the Iraqi government fell to take advantage of billions of dollars in contracts to clothe, feed and arm American troops in Kuwait and to sustain Iraq security forces in Iraq.
According to a July 9 statement by Larry S. Moreland, an agent with the Army's Criminal Investigation Command, the company's founder, George H. Lee, and an unnamed person formed American Logistics Services, a Kuwait-based company, to provide logistical support to the military.
In 2004, the company was awarded $11.7 million in contracts to build, operate and maintain several warehouses in Iraq. The court papers contend that as a result of bribes, the company illegally received advance information about the contracts.
In May 2005, the document said, Mr. Lee and his son, Justin W. Lee, shifted assets and contracts to Lee Dynamics, and its contract to maintain the warehouses was renewed in July 2005 even though its performance had been abysmal, said two American officials who were in the country at the time.
That month, after Major Davis moved to the Pentagon, Lee Dynamics was awarded a $12 million warehousing contract. Before the award, Major Davis told George Lee that his company would receive a "glowing report" during the bidding, court documents in the government's case to seize Major Davis's assets say.
Between August 2005 and April 2006, the company transferred more than $220,900 in three separate deposits to bank accounts controlled by Major Davis, according to the court filings.
According to its Web site, Lee Dynamics' warehouses in Taji, Umm Qasr, Ramadi, Mosul and Tikrit, all in Iraq, "have received, stored and issued a large part of the more than a billion dollars worth of materials and equipment that has been ordered for the reconstruction of Iraq."
Eric Schmitt reported from Washington, and James Glanz from Baghdad. Margot Williams contributed reporting from New York.
Copyright 2007 The New York Times Company