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Company Linked to Terrorism Gets U.S. Contract Work

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Last week, a government watchdog notified the Pentagon that a company was hired for a U.S.-funded reconstruction project in Afghanistan even though the company had been blacklisted for supporting the insurgency.

On Friday, the Special Inspector General for Afghanistan Reconstruction (SIGAR) sent an alert letter to Secretary of Defense Chuck Hagel. The letter informed him that, late last year, an Afghan company accused of providing bomb-making components to insurgents worked as a subcontractor on a reconstruction project site close to a U.S. military base.

While investigating the unfinished Parwan Justice Center complex earlier this year, SIGAR discovered that Zurmat Material Testing Laboratory (ZMTL) performed subcontracting work at the site for two days in November 2012. Seven months earlier, the Department of Commerce added ZMTL and several affiliated companies to its Entity List of national security threats after determining they were involved in “supply networks that provide components used to make improvised explosive devices (IEDs) used against U.S. and coalition troops in Afghanistan.” The Parwan complex is located next to Bagram Airfield, the largest U.S. military base in Afghanistan.

It is not known how much ZMTL was paid for its work. According to SIGAR, at the time the Department of Defense (DoD) terminated the contract with prime contractor CLC Construction Company in June 2013, CLC had been paid $396,000. It is also not known if ZMTL or its affiliates are currently working on other U.S.- or coalition-funded reconstruction contracts.

The funneling of U.S. taxpayer money to terrorist groups in Afghanistan has long been a serious problem. Our policy of relying on local Afghan contractors to carry out reconstruction was intended to save money and reduce the burden on our troops while stimulating the local economy. Unfortunately, it has also increased the incidence of corruption and the diversion of funds to those intending to harm the U.S. and coalition partners. SIGAR estimates that, over the past five years, the U.S. has awarded more than $150 million in construction, logistics, and information technology contracts and subcontracts to companies and individuals accused of providing material assistance to terrorist organizations. (It is unknown how much has come from other countries involved in the reconstruction effort—most notably Britain, which provides approximately $283 million annually in reconstruction aid.)

Congress tried to remedy this with Section 841 of the Fiscal Year 2012 National Defense Authorization Act. This provision requires the Commander of the United States Central Command (CENTCOM) to review recipients of U.S. contracts, grants, and cooperative agreements exceeding $100,000 to determine if they are actively supporting insurgents or are otherwise working to undermine U.S. or coalition forces. If a person or company is positively identified, CENTCOM puts DoD contracting officials on notice to restrict, terminate, or void the contracts, grants, and cooperative agreements. Section 841 only applies to DoD, so SIGAR compiled a list last year of 43 companies and individuals, including ZMTL, identified by CENTCOM or the Commerce Department as affiliated with al Qaeda, the Taliban, or the al Qaeda-linked Haqqani network who were either seeking or had obtained U.S. contracts in Afghanistan. SIGAR provided the list to the State Department and USAID and also referred the named companies and individuals for government-wide suspension or debarment.

But Congress and SIGAR’s efforts have been in vain. The government continues doing business in Afghanistan with entities linked to terrorists. Last month, Reuters profiled one of the people on SIGAR’s list, Afghan businessman Haji Khalil Zadran. Zadran is alleged to have channeled millions of dollars in U.S. reconstruction funds to the Haqqani network, an insurgent group accused of carrying out vicious attacks on U.S. and coalition troops and installations. Zadran and two of his businesses are on the SIGAR list, yet they are still eligible to win U.S. contracts. In fact, according to Reuters, Zadran is currently the odds-on favorite to win an $11 million deal to construct an airport in Khost.

Watch the report from ABC News

Earlier this year, the Army rejected all of SIGAR’s suspension and debarment referrals, claiming it would be unfair to ban a company or individual from contracting based on classified evidence that cannot be shown to the accused. Special Inspector General John Sopko tartly summed up the absurdity of the Army’s concern for the due process rights of contractors linked to terrorists when he recently told ABC News, “We can probably attack them via drone on Monday and we’ll issue them a contract on Tuesday.”

SIGAR found that the security lapse involving ZMTL was caused by gaps in how contractor information is shared between the three principal Afghanistan reconstruction agencies—DoD, State, and USAID—and between the U.S. government and its prime contractors. SIGAR made sure that contracting officials at all three agencies knew about the Commerce Department and CENTCOM designations; unfortunately, no one bothered to notify the Parwan Justice Center prime contractor. But as SIGAR pointed out to Secretary Hagel in the alert letter, had the Army pursued SIGAR’s suspension and debarment referrals and put ZMTL on the list of excluded entities, the prime contractor might not have hired ZMTL.

SIGAR will resubmit ZMTL and its affiliates and subsidiaries to the Army for debarment. However, until action is taken on all 43 cases SIGAR referred last year, our troops remain at risk and U.S. funds will continue to be diverted to terrorists.

By: Neil Gordon
Investigator, POGO

Neil Gordon, Investigator Neil Gordon is an investigator for the Project On Government Oversight. Neil investigates and maintains POGO's Federal Contractor Misconduct Database.

Topics: Contract Oversight

Related Content: SIGAR, Contractor Accountability, Inspector General Oversight, Iraq & Afghanistan Reconstruction Contracts, Federal Contractor Misconduct

Authors: Neil Gordon

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