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A SUMMARY OF THE BLOOMSTEIN CONSPIRACY

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A SUMMARY OF THE BLOOMSTEIN CONSPIRACY Powered By Docstoc
					                                                                                      Appendix J




A summAry of tHe
BLoom/stein conspirAcy
As reported in the July 30, 2006 Quarterly          launder funds. Hopfengardner also admitted
Report, contractor Philip Bloom and Coali-          to smuggling stolen currency into the United
tion Provisional Authority (CPA) Comptroller        States in March 2004 when he returned from
and Funding Officer Robert Stein pled guilty        Iraq on leave. He faces up to 20 years in prison,
to participating in a scheme to defraud the         a 5-year term of supervised release, and a
CPA of more than $8.6 million. Bloom faces          $500,000 fine.
up to 40 years in prison and a fine of $750,000.       A SIGIR audit of the finances of CPA South
Under the terms of his plea agreement, Bloom        Central Region (CPA-SC) in late 2004 found
must pay $3.6 million in restitution. Stein         numerous indicators of financial irregulari-
admitted to stealing $2 million and taking          ties, including fraud, bid-rigging, and bribery
bribes to award contracts to Bloom; he faces        on many CPA-SC contracts. Further audits,
up to 30 years in prison. This quarter, the court   inspections, and investigative work also discov-
set a sentencing date for Bloom on February 9,      ered these irregularities:
2007, and for Stein on January 12, 2007.            • The co-conspirators would submit artifi-
   In addition, LTC Bruce Hopfengardner,                cially high bids from some of their com-
USAR, was convicted this quarter as part of the         panies to make the bids of their other
Bloom/Stein conspiracy. Hopfengardner con-              companies appear more competitive in the
spired with Stein to direct millions of dollars         awarding process.
in construction contracts to a company owned        • Other co-conspirators would certify the
by Bloom. Hopfengardner also gave Bloom                 progress and completion of the projects.
material information to ensure that Bloom’s         • Contract values were set at under $500,000
company received the contracts.                         to avoid review by CPA-Civil Affairs
   In return for this information, Bloom                (CPA-CA).
rewarded Hopfengardner with an initial              • Payments of up to $498,000 were made
$100,000 bonus and $10,000 per month, as                through CPA Form 44—intended for pur-
well as several other enticements. On August            chases of $15,000 or less—to avoid review.
25, 2006, Hopfengardner pled guilty to two          • Contracting officers and CPA-CA officers
conspiracy charges in the scheme, including             were paid money from the contractors and
conspiracy to commit wire fraud and to                  the Development Fund for Iraq (DFI) for
                                                        their participation.




                                                                     October 30, 2006 i REPORT TO CONGRESS   i J-
Appendix J




   Figure J-1 shows the links between mem-                                 owned or controlled by Bloom through a
bers of the conspiracy.                                                    rigged bidding process.
   SIGIR criminal investigators opened a crim-                           • The work was ordered or overseen by cer-
inal case and confirmed many of the concerns                               tain of Bloom’s co-conspirators, including
addressed by SIGIR Audit and Inspections.                                  Harrison, Wheeler, and Hopfengardner.
It was later confirmed that Bloom conspired                              • Such contracts were authorized for pay-
with U.S. government contract employees                                    ment by others, including co-conspirators
(Stein) and military officials, including Army                             (in some cases without any performance of
Reserve Lieutenant Colonels Debra M. Har-                                  the contracts by Bloom’s companies).
rison, Michael B. Wheeler, and Hopfengardner
to obtain fraudulently awarded CPA contracts                                The investigation further revealed that
for the reconstruction and stabilization of Iraq.                        Bloom, through his businesses and personal
The investigation has revealed that:                                     bank accounts, provided money, bribes,
• Contracts were awarded to businesses                                   kickbacks, and gratuities to U.S. government
                                                                   Contract Appeals Division

                                                            The Bloom/Stein Conspiracy

                                                                              Philip H. Bloom
                                                                       d/b/a Global Business Group,
                             Direct and Indirect                   Global Business Group Logistics S.R.L.,              Direct and Indirect
                                  Payments                        GBG Holdings, and GBG Logistics Division                   Payments




                                                                  Contract Awards and Progress Payments



                                        Robert J. Stein                                               LTC Debra M. Harrison
                                                                           Cash and Weapons
                                    CPA-SC Comptroller and                                         CPA-SC Assistant Comptroller and
                                        Funding Officer                                               Funding Officer 358th CA BDE



                                                          Performance                              Performance
                                                          Certification                             Certification


                                                                    LTC Michael B. Wheeler, USAR
                                                                                Team Chief
                                                                                432d CA BN




   Figure J-1 $8.6 Million Bid-rigging Scheme–Bloom/Stein Conspiracy



J-2 i SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION
                                                                                                    Appendix J




Contracting	Actions	Affected	by	Bloom
Contract                                                                                           Contract	Value
Construction of Regional Tribal Democracy Center                                                            $397,000
500 kV Generator for Babil Government Building                                                                95,000
500 kV Generator for Regional Tribal Democracy Center                                                        105,000
Demolition of Ba’ath Party Headquarters and Grading of Hilla Police Academy Site                             452,800
Security Facility Upgrades at Hilla Police Academy                                                           448,500
Renovation of Kerbala Library                                                                                373,400
Landscaping of Kerbala Library                                                                               197,500
Furniture for Kerbala Library                                                                                224,010
Internet Capability for Kerbala Library                                                                      498,900
Total Value                                                                                               $2,792,110

Table J-1


officials, including Harrison, Wheeler, Hopfen-                 payments to Bloom as part of a bid-rigging
gardner, and other co-conspirators.                             scheme although project work did not meet
                                                                the terms of the contract
pHilip H. Bloom                                               • has a 1996 federal conviction for viola-
• president and sole stockholder of Global                      tion of 18 U.S.C. §1029 (fraud and related
  Business Group S.R.L., a construction and                     activity in connection with access devices—
  management consulting services company                        credit card fraud; sentenced to 8 months
  headquartered in Bucharest, Romania                           confinement and ordered to pay $45,339.25
• arrested on arrival in Newark, New Jersey,                    in restitution enforcement actions)
  in November 2005
• suspended by Army Suspension/Debar-                         These enforcement actions were taken against
  ment Official (SDO), in November 2005                       Stein:
• pled guilty in March 2006                                   • arrested in Fayetteville, North Carolina,
• faces up to 40 years in prison and a                            November 2005
  $750,000 fine, $3.6 million in restitution,                 • suspended by Army SDO, December 2005
  and $3.6 million in forfeiture of assets                    • pled guilty, February 2006
• sentencing set for February 9, 2007                         • sentencing set for January 12, 2007, in U.S.
                                                                  District Court, Washington, D.C., facing up
   Table J-1 shows the contracts affected by                      to 30 years in prison and $250,000 fine
Bloom’s actions.
                                                              Stein received these payments: $434,348 in
roBert J. stein, Jr.                                          direct and indirect payments, and weapons
• CPA-SC Comptroller and Funding Officer                      valued at approximately $69,620:
  as an employee of S&K Technologies, part                    • 4 M-203 grenade launchers
  of contract with the U.S. Army for adminis-                 • 20 HK53A3 fully automatic submachine
  trative support in Iraq                                         guns
• controlled expenditure of approximately                     • 12 SA58 .308-caliber machine guns
  $82 million in DFI funds                                    • 12 MK23 .45-caliber, pistols
• awarded contracts and authorized cash                       • 100 5.56-caliber 30-round magazines
                                                                                   October 30, 2006 i REPORT TO CONGRESS   i J-
Appendix J




• 4 MK23 .45-caliber silencers                            ltC deBra m. Harrison
• 60 Mk23 .45-caliber magazines                           • Army Reservist assigned to 358th Civil
                                                            Affairs Brigade as Assistant CPA-SC Comp-
ltC miCHael B. WHeeler                                      troller and Funding Officer
• Army Reservist assigned to 432nd Civil                  • allegedly awarded contracts to Bloom as
  Affairs Battalion as a Team Chief                         part of bid-rigging scheme
• responsible for implementing civil affairs              • allegedly authorized cash payments to
  operations and overseeing contracting                     Bloom despite defective or non-perfor-
  progress in Hilla                                         mance of contract terms
• drafted contract specifications for affected            • reported to Stein and assumed his position
  projects                                                  at CPA-SC on his departure
• allegedly certified completion of work and              • allegedly assisted LTC Wheeler in the
  authorized cash payments to Bloom despite                 delivery of military weapons to Stein
  defective work or non-performance of con-
  tract terms                                             LTC Harrison allegedly received these
• allegedly improperly authorized the release             payments:
  of military weapons from 3rd SFG armory,                • at least $80,000 of the $330,000 she person-
  Ft. Bragg, North Carolina, and gave them to                ally transported from Iraq to the Conti-
  Stein                                                      nental United States (CONUS) on comple-
                                                             tion of her deployment that was used for
LTC Wheeler allegedly received these                         home improvements
payments:                                                 • business class airline tickets from Kuwait to
• $100,000 cash in DFI funds he transported                  CONUS
   from Iraq to CONUS for his personal use                • a 2005 Cadillac Escalade from Bloom
   after completing deployment                            • two .45-caliber pistols from Stein
• two .45-caliber pistols and two HK53A3
   submachine guns from Stein                             These enforcement actions were taken against
                                                          LTC Harrison:
These enforcement actions were taken against              • arrested in Trenton, New Jersey, December
LTC Wheeler:                                                 2005
• arrested in Amherst Junction, Wisconsin,                • suspended by Army SDO, December 2005
   November 2005
• suspended by Army SDO, December 2005




J-4 i SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION

				
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