Sen. Grassley Seeks to Plug Multibillion-Dollar Contractor Accountability Loophole

Last year, at the Justice Department's urging, a rule was proposed that would require federal contractors to report violations of federal criminal law with regard to the award or performance of contracts. The rule, however, contains many exceptions, including the exclusion of contracts that are performed outside the United States.

As POGO explained on this blog last November and in our written comments on the proposed rule, we applaud it as a step in the right direction but worry that its effectiveness will be hindered by loopholes like the exemption of contracts performed abroad. (In our written comments, we focused on the mandatory reporting requirement, recommending that it be clarified and expanded so that contractors are required to disclose a broader array of unethical conduct.)

On Wednesday, Sen. Chuck Grassley (R-IA) promised to push legislation to close the outside-the-U.S. contracts loophole and added a nonbinding resolution condemning the loophole to the government's FY 2009 budget plan. "There are government contracts around the world, so there's the potential for fraud against American taxpayers around the world," Grassley said. "It would be a disservice to taxpayers to exempt overseas contracts when holding bad actors accountable, and it's a no-brainer that this loophole should be rejected."

Grassley is not alone. Both the Justice Department and the Office of the Special Inspector General for Iraq Reconstruction have asked that the loophole be eliminated before the rule goes into effect. Meanwhile, Congress is reportedly calling for an investigation into how this loophole came to be inserted into the rule in the first place – was it added as a favor to some of those aforementioned "bad actors" who want to keep sunshine away from their foreign operations?

According to the article about Grassley that ran in the New York Times, out of $102 billion in Iraq and Afghanistan contracts awarded since 2003, bribes alone have cost the taxpayers $14 million, with 44 people being charged with kickbacks, bribes and other abuses involving those contracts. Halliburton and its former subsidiary KBR have been in the news recently for providing unsafe water to our troops in Iraq.