U.S. suspends major contractor in Iraq and Afghanistan over misconduct

Man carries bag away at a wheat seed distribution event for the International Relief and Development-managed AVIPA Plus program in Afghanistan. (Credit: USAID Afghanistan)

The largest non-profit contractor for the United States government in Iraq and Afghanistan was suspended from receiving future contracts. The United States Agency for International Development, USAID, announced late Monday that International Relief and Development, IRD, was guilty of “serious misconduct,” based on a review of its performance. It is a major blow to the group that took on more than $1 billion in contracts over the past nine years.

“The agency’s review revealed serious misconduct in IRD’s performance, management, internal controls and present responsibility,” said USAID said in a statement. “USAID has a zero tolerance policy for mismanagement of American taxpayer funds and will take every measure at our disposal to recover these funds.”

The suspension follows a lengthy investigation carried out by USAID into the practices of IRD. A story by the Washington Post in May uncovered the troubling practices employed by IRD, including the generous salaries and bonuses for employees. For example, founder Arthur B. Keys, and his wife, Jasna Basaric-Keys, took home $4.4 million between 2008 and 2012, after salaries and bonuses. Bonuses from the non-profit far outstripped similar non-profit organizations. Since then, Basaric-Keys has returned some of the money without explanation.

The once-small non-profit founded in 1998 grew $1.2 million annually to $706 million in a matter of years. It quickly expanded, thanks to it winning contracts from USAID. The overwhelming majority of the money IRD took in was from USAID for work in Iraq and Afghanistan. More than 80 percent of the nearly $2.4 billion awarded to IRD by USAID since 2007 was spent in the two countries. Its largest project in Iraq was marred by problems and concerns that money was making its way into the hands of insurgents.

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The report and problems found in other audits of IRD’s work raised flags within USAID. An official told the Washington Post for the May story that the organization was considering cutting its projects with IRD. Eight months later, USAID finally announced that IRD contracts were suspended. It may be in part the result of increasing pressure from political leaders in Washington. Senator Bob Corker, R-Tenn., chairman of the Senate Foreign Relations Committee, openly questioned the continued partnership between USAID and two contractors – IRD and Louis Berger Group Inc., LBG.

“Given that USAID programs in Afghanistan are a critical component of U.S. national security policy in the region, including addressing issues of governance, rule of law, and corruption, USAID’s continued reliance on such organizations is highly questionable at best. As a result, surely you will review whether continuing forward with these two partners is at all appropriate,” wrote Corker in a letter to USAID Administrator Rajiv Shah.

The letter urged USAID to report back the results of its review into the two contractors by the end of January. There is no word yet as to the fate of LBG, but it too may be on the outs with USAID. Its former CEO Derish Wolff pleaded guilty to over-billing USAID for its reconstruction work in Iraq and Afghanistan, in early December. LBG defrauded USAID for two decades, starting in 1990.

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The decision to suspend IRD was championed as an effort by USAID to root out corruption and hold its contractors accountable.

“USAID places the highest priority on ensuring that U.S. government funds deliver results and are used wisely, effectively and for their intended purpose,” said the USAID statement. “Over the past several years, the agency has increased oversight of its contracts and grants and the suspension of IRD demonstrates USAID’s continued commitment to accountability.”

Investigations by the independent Office of the Inspector General into IRD will continue, said the USAID statement. Currently, IRD will be allowed to complete the projects it already started. Government officials told the Washington Post that USAID will look to recoup the mismanaged money from IRD. Meanwhile, IRD must try to find a way to recover after seeing the majority of its budget disappear overnight.

“It is what it is, and we have to deal with it,” said Roger Ervin, who took over IRD as president six weeks ago, to the Washington Post. “I take this as an opportunity to make some changes, and many of them are already under way. I think we can show in short order that we can demonstrate that we are a good service provider for USAID, and I think we can address this pretty quickly.”

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Tom Murphy

Tom Murphy is a New Hampshire-based reporter for Humanosphere. Before joining Humanosphere, Tom founded and edited the aid blog A View From the Cave. His work has appeared in Foreign Policy, the Huffington Post, the Guardian, GlobalPost and Christian Science Monitor. He tweets at @viewfromthecave. Contact him at tmurphy[at]humanosphere.org.