WASHINGTON -- The Justice Department has opted out of at least 10 whistle-blower lawsuits alleging fraud and corruption in government reconstruction and security contracts in Iraq, and has spent years investigating additional fraud cases but has yet to try to recover any money.
A congressional subcommittee heard testimony on the matter yesterday, as lawmakers sought to determine why the federal government has not done more to recover tens of millions of dollars that allegedly have been misused or misspent in Iraq.
"I would expect, given the talent that the Justice Department has available to it, . . . that they could have done more," Representative William D. Delahunt, Democrat of Quincy, said at the hearing. "I have the uneasy feeling like we're missing something here, a potential substantial recovery."
The government's reluctance to join in any of the civil suits has sparked allegations of political interference.
One witness, Alan Grayson , a lawyer who represents several whistle-blowers, told the House subcommittee on Crime, Terrorism, and Homeland Security that the Justice Department has been stonewalling and dragging its feet in investigating the whistle-blowers' claims of fraud.
"In our fifth year in the war in Iraq, the Bush administration has not litigated a single case against any war profiteer under the False Claims Act," Grayson said.
Tens of millions of dollars -- and perhaps far more -- allegedly have gone into the pockets of contractors who overbilled for services, paid bribes, and received kickbacks. Under the federal False Claims Act of 1863, employees who say they witnessed such corruption can sue their employers for defrauding the US government and reap a percentage of any money that's recovered.
The federal government normally investigates such cases to determine whether to participate in the suit and bring its investigative and legal resources to bear against the accused company. But if the government declines, whistle-blowers often face an uphill battle in court and often decide to drop the matter -- which has happened in at least three of the Iraq whistle - blower cases.
"The [presiding] judge asks himself, 'If the Justice Department doesn't care about this case, why should I?' " Grayson said.
The government has relied on private contractors in Iraq, issuing contracts for everything from meals for troops to armed security for visiting government officials. Since the 2003 invasion, contractors have come under increasing scrutiny due to allegations of millions, if not billions, of taxpayer dollars that are unaccounted for.
Historically, the False Claims Act has served as an important tool in recovering money defrauded from the federal government. Last year, it was used to return more than $3 billion in domestic cases, but has recovered only about $6.1 million from Iraq since the war began.
Those recoveries, however, were the result of settlements between the Justice Department and two contractors -- not civil lawsuits or prosecutions.
At yesterday's hearing, Deputy Assistant Attorney General Barry Sabin of the Justice Department's criminal division, said the department has done its best to investigate the cases, but has not been able to collect enough evidence in Iraq to prove the whistle - blowers' claims. "The difficulty of locating witnesses in an active combat zone cannot be overstated," he told the committee.
Sabin said that the Justice Department is using other means to root out corruption in Iraq, and pointed to the criminal prosecutions of 25 individuals accused of fraud who were also ordered to pay hundreds of thousands of dollars in restitution.
Yet others wonder why the government has not been more aggressive in filing civil suits against allegedly corrupt companies.
"Basically, they have done nothing , and it is hard to explain what is going on there, other than direct orders from the very top of government," said Patrick Burns , director of communications for Taxpayers Against Fraud, a center that advises whistle-blowers on filing suits to recover government funds. "It can no longer be explained by incompetence alone."
If companies are merely asked to pay settlements when they are caught stealing or overbilling, Burns said, "that isn't much of an incentive not to steal. At this point, there is nothing more profitable than fraud."
Besides the two cases that were settled for $6.1 million, the Justice Department has declined to join in 10 other cases. One was against Custer Battles , a politically connected military contractor in Iraq that was accused of supplying the military with trucks that didn't work and overcharging the US government by as much as $50 million. When the government chose not to participate, the whistle - blower went on with the suit anyway , and a federal jury ordered Custer Battles to pay $10 million in damages.
That judgment, however, was overturned. The case is currently on appeal.
A second, new whistle - blower lawsuit alleges that the company was renamed and sold to former acting Navy secretary Hansford T. Johnson and former acting Navy undersecretary Douglas Combs . It is unclear if it is still doing business.
In April, the Justice Department opted out of a lawsuit against heavyweight military contractor Kellogg Brown & Root and three of its subcontractors. The lawsuit, launched by a former supervisor in Iraq, alleged that the company billed the government for almost 10,000 meals per day that were never served, adding up to more than $10 million in excess charges.
The whistle-blower in that case, Barrington T. Godfrey , alleges that he was forced out of his job after he tried to stop the over billing.
His case, filed in 2005, had been kept secret for two years while the government investigated it. Under the False Claims Act, cases remain secret until the Justice Department decides whether or not to join them.
Farah Stockman can be reached at email@example.com.