LOS ANGELES - The Pentagon is investigating allegations that a Defense Department official attempted to alter a contract proposal in Iraq to benefit friends and colleagues, a newspaper reported for its Thursday editions. John Shaw, the deputy undersecretary for international technology security, tried to turn a small communications proposal into a contract to create an Iraq-wide commercial cellular network, sources told the Los Angeles Times.
He then allegedly pressured officials in the U.S.-led Coalition Provisional Authority in Baghdad to grant a noncompetitive bid to a mobile phone consortium called Guardian Net, which included Shaw's friends and telecommunications giants Lucent and Qualcomm.
His efforts on behalf of the consortium led to a dispute that has delayed the contract and angered some officials, who say a better communications infrastructure could have improved coordination between U.S. and Iraqi forces and prevented numerous deaths, the paper reported.
Shaw defended his support of the consortium, saying he was backing the best available technology.
"Hey, we won the war," he told the newspaper. "Is it not in our interests to have the most advanced system that we possibly can that can then become the dominant standard in the region?"
Shaw was supporting the adoption of CDMA-type cell phone technology, which was rejected last year in favor of a European platform. He maintained that competition for commercial licenses was rigged.
According to e-mails obtained by the newspaper, Shaw allegedly tried to get around the bidding process by creating a new consortium - Guardian Net - with a small business owned by native Alaskans.
Native Alaskan-owned businesses can be awarded large government contracts without having to go through the standard competitive bidding process.
The Pentagon's inspector general began an investigation after two officials quit, saying Shaw had pressured them to change the contract.
Shaw said he has been friends with one of Guardian Net's directors, Don DeMarino, for decades. Another board member is Julian Walker, who is under contract with Shaw's office to perform research.
Shaw told the newspaper he does not have any financial ties to Guardian Net and has no agreement for future employment. Criminal charges could result if Shaw does have financial ties to the consortium.
John Shaw, the deputy undersecretary for international technology security, tried to turn a small communications proposal into a contract to create an Iraq-wide commercial cellular network, sources told the Los Angeles Times.
He then allegedly pressured officials in the U.S.-led Coalition Provisional Authority in Baghdad to grant a noncompetitive bid to a mobile phone consortium called Guardian Net, which included Shaw's friends and telecommunications giants Lucent and Qualcomm. His efforts on behalf of the consortium led to a dispute that has delayed the contract and angered some officials, who say a better communications infrastructure could have improved coordination between U.S. and Iraqi forces and prevented numerous deaths, the paper reported.
Lucent?
See this thread : Squeeze here
Lucent awarded $25 million reconstruction subcontract Bechtel National, Inc has recently awarded Lucent Technologies a $25 million subcontract to carry out emergency repair and rehabilitation on Iraq's communications network.
(Thanks to Jack Shaw?)
Alleged Violations Could Cost Lucent Millions
By Tom Becker
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Lucent Technologies Inc.'s (LU) alleged violation of a federal statute could cost the company millions of dollars and land some of its employees in jail.
The Justice Department and the Securities and Exchange Commission are investigating whether Lucent violated a provision of the Foreign Corrupt Practices Act of 1977 by bribing a Saudi Arabian official with money, gifts and free use of private jets to make business decisions in Lucent's favor. The alleged bribes are valued at roughly $15 million.
Any employee found guilty of violating the statute could face up to five years in prison and the telecommunications-maker could be forced to shell out millions to cover a large fine, a spokesman with the U.S. Department of Justice said.
Lucent denies the allegations, which were originally made in a lawsuit filed by National Group for Communications and Computers Ltd., a Saudi telecommunications company, and said it is cooperating with the Justice Department and SEC investigations.
The Foreign Corrupt Practices Act was penned to discourage U.S. businesses from bribing foreign officials to steer business their way. Along with bribery, entities can be charged with failing to properly book the payments made to foreign officials and for failing to have adequate controls in place to prevent such acts, legal experts said.
Two of the biggest cases under the act involved General Electric Co. (GE), which paid $69 million in penalties in 1992 after an employee was found to have bribed a former Israeli general, and Lockheed Martin Corp. (LMT), which paid $24.8 million in 1995 after an executive was found to have bribed an Egyptian politician to win a contract. The Justice Department is currently investigating whether Exxon Mobil Corp.
(XOM), formerly known as Mobil Oil Corp., participated in a scheme to route $78 million to Swiss bank accounts belonging to Kazakhstan's president and others.
A former Mobil vice president, J. Bryan Williams, recently pleaded guilty to tax evasion after he neglected to pay taxes on $2 million he allegedly received in association with the scheme.
"This is not slap-on-the-wrist type stuff," said Robert N. Kaplan, a partner with the law firm of Kaplan & Fox, which has defended entities accused of violating the act. "When the government investigates you for violating this act, it's serious business and it comes with serious penalties."
The Securities and Exchange Commission can levy its own fines and place restrictions on the violating businesses. The fines are typically smaller than the Justice Department fines. Only violations pursued by the Justice Department can result in jail time.
Kaplan said Lucent's best bet is to cooperate with the federal investigations. Fines are generally smaller in cases where settlements are reached.
The attorney said a typical defense is for an entity to claim it didn't know it was actually bribing anyone when it made the payments.
"You'll hear companies say we hired this consultant because he is a guy who knows his way around and said he could help put us in a position to get business but we had no idea he was just putting money into some official's bank account," Kaplan said.
In addition to the federal investigations, Lucent executives may wind up defending themselves from derivative actions for their role in the alleged violation, Kaplan said. In a derivative action, a shareholder can sue officers and directors of a corporation on behalf of the company for failing to instill proper controls to prevent the violations. The shareholder can seek to recover monetary damages from the officers and directors.
-By Tom Becker; Dow Jones Newswires; 201-938-2020
(END) Dow Jones Newswires
08-25-03 1715ET
1 posted on 09/04/2003 4:14:30 PM PDT by fight_truth_decay