Go Back
Print this page
Skip to content

Preview the current issue of Vanity Fair

E-MailPrintRSS

The War

The army's Tina Ballard (far left) is sworn in with five contracting executives at a hearing on Capitol Hill, February 7, 2007. Alex Wong/Getty Images.

The People vs. the Profiteers

Americans working in Iraq for Halliburton spin-off KBR have been outraged by the massive fraud they saw there. Dozens are suing the giant military contractor, on the taxpayers' behalf. Whose side is the Justice Department on?

by David Rose November 2007

On first meeting him, one might not suspect Alan Grayson of being a crusader against government-contractor fraud. Six feet four in his socks, he likes to dress flamboyantly, on the theory that items such as pink cowboy boots help retain a jury's attention. He and his Filipino wife, Lolita, chose their palm-fringed mansion in Orlando, Florida, partly because the climate alleviates his chronic asthma, and partly because they wanted their five children to have unlimited access to the area's many theme parks.

So help them, God: Anti-fraud crusader Alan Grayson. Photograph by Gasper Tringale.

Grayson likes theme parks, too. Toward the end of two long days of interviews, he insists we break to visit Universal Studios, because it wouldn't be right for me to leave his adopted city without having sampled the rides. Later he sends me an e-mail earnestly inquiring which one I liked best.

He can be forgiven a little frivolity. In his functional home-office in Orlando, and at the Beltway headquarters of his law firm, Grayson & Kubli, Grayson spends most of his days and many of his evenings on a lonely legal campaign to redress colossal frauds against American taxpayers by private contractors operating in Iraq. He calls it "the crime of the century."

His obvious adversaries are the contracting corporations themselves—especially Halliburton, the giant oil-services conglomerate where Vice President Dick Cheney spent the latter half of the 1990s as C.E.O., and its former subsidiary Kellogg, Brown & Root, now known simply as KBR. But he says his efforts to take on those organizations have earned him another enemy: the United States Department of Justice.

Over the past 16 years, Grayson has litigated dozens of cases of contractor fraud. In many of these, he has found the Justice Department to be an ally in exposing wrongdoing. But in cases that involve the Iraq war, the D.O.J. has taken extraordinary steps to stand in his way. Behind its machinations, he believes, is a scandal of epic proportions—one that may come to haunt the legacy of the Bush administration long after it is gone.

Consider the case of Grayson's client Bud Conyers, a big, bearded 43-year-old who lives with his ex-wife and her nine children, four of them his, in Enid, Oklahoma. Conyers worked in Iraq as a driver for Kellogg, Brown & Root. Spun off by Halliburton as an independent concern in April, KBR is the world's fifth-largest construction company. Before the war started, the Pentagon awarded it two huge contracts: one, now terminated, to restore the Iraqi oil industry, and another, still in effect, to provide a wide array of logistical-support services to the U.S. military.

In the midday heat of June 16, 2003, Conyers was summoned to fix a broken refrigerated truck—a "reefer," in contractor parlance—at Log Base Seitz, on the edge of Baghdad's airport. He and his colleagues had barely begun to inspect the sealed trailer when they found themselves reeling from a nauseating stench. The freezer was powered by the engine, and only after they got it running again, several hours later, did they dare open the doors.

The trailer, unit number R-89, had been lying idle for two weeks, Conyers says, in temperatures that daily reached 120 degrees. "Inside, there were 15 human bodies," he recalls. "A lot of liquid stuff had just seeped out. There were body parts on the floor: eyes, fingers. The goo started seeping toward us. Boom! We shut the doors again." The corpses were Iraqis, who had been placed in the truck by a U.S. Army mortuary unit that was operating in the area. That evening, Conyers's colleague Wallace R. Wynia filed an official report: "On account of the heat the bodies were decomposing rapidly.… The inside of the trailer was awful."

It is not unheard of for trucks in a war zone to perform hearse duty. But both civilian and U.S.-military regulations state that once a trailer has been used to store corpses it can never again be loaded with food or drink intended for human consumption. According to the U.S. Army's Center for Health Promotion and Preventive Medicine, "Contact with whole or part human remains carries potential risks associated with pathogenic microbiological organisms that may be present in human blood and tissue." The diseases that may be communicated include aids,hepatitis, tuberculosis, septicemia, meningitis, and Creutzfeldt-Jakob disease, the human variant of mad cow.

But when Bud Conyers next caught sight of trailer R-89, about a month later, it was packed not with human casualties but with bags of ice—ice that was going into drinks served to American troops. He took photographs, showing the ice bags, the trailer number, and the wooden decking, which appeared to be stained red. Another former KBR employee, James Logsdon, who now works as a police officer near Enid, says he first saw R-89 about a week after Conyers's grisly discovery. "You could still see a little bit of matter from the bodies, stuff that looked kind of pearly, and blood from the stomachs. It hadn't even been hosed down. Afterwards, I saw that truck in the P.W.C.—the public warehouse center—several times. There's nothing there except food and ice. It was backed up to a dock, being loaded."

Former KBR driver Bud Conyers's photo of a truck carrying beverage ice less than a month after it hauled rotting corpses.

As late as August 31, 11 weeks after trailer R-89 was emptied of the putrefying bodies, a KBR convoy commander named Jeff Allen filed a mission log stating that it had carried 5,000 pounds of ice that day. This ice, Allen wrote, was "bio-contaminated." But to his horror, on that day alone, "approx 1,800 pounds [were] used."

Conyers and Logsdon say that R-89 was not the only truck that was loaded with ice after being used as a mortuary. They attribute this state of affairs to a chronic shortage of trucks brought about by systemic failures in KBR's operation. The firm had purchased some 200 reefers in Iraq, but only a quarter of them worked. "We had crap-assed trucks they'd bought from local dealers," Logsdon says. "Often you'd be driving one they'd pieced together from several just to get it on the road." He and other former KBR workers say that even new vehicles, some of which cost hundreds of thousands of dollars, often broke down because of an absence of affordable spare parts. Instead of paying to repair them, the company often burned disabled trucks in pits or by the side of the road. Conyers tried repeatedly to draw his superiors' attention to these and other alleged abuses, but to no avail. (In an e-mailed statement, KBR denied that it "did or does" order defective vehicles, adding that it disposes of equipment only with "the approval of designated Army personnel.")

Like many of KBR's employees, Conyers was risking his life on the job, which paid about $7,000 a month. He had already lost half a leg in an accident—coincidentally, while working for Halliburton—in 1990. Twice, in August and October 2003, his convoy was hit by roadside bombs, and although he was not seriously injured, his prosthetic leg was damaged. A third attack caused swelling and infection, making it impossible to wear the prosthesis. Then, three days after Christmas of 2003, about three months after he'd reported the contaminated ice, he was fired. His superiors accused him of refusing to work, an allegation he denies. Conyers says he had already been warned by KBR management that he was "not a team player," and he believes that the real reason for his dismissal was his refusal to keep quiet. Along with his job went his health insurance. Now confined to a wheelchair, he is still unable to work.

Others in the world of Iraq contracting have fared much better. Halliburton's stock price rose fourfold between the time of the invasion and early 2006, from $10 to $40. And in 2006 alone, according to Forbes, Halliburton C.E.O. David Lesar collected nearly $30 million in compensation.

In the fall of 2006, Conyers told me he was planning to file a lawsuit against KBR under the False Claims Act, a law crafted by Abraham Lincoln to punish war profiteers. Under the act's "qui tam," or whistle-blowing, provisions, anyone who comes across a suspected fraud can file a suit on taxpayers' behalf. ("Qui tam" is an abbreviation of a Latin phrase that means "He who sues for the king as well as for himself.") If the government—in the shape of the Department of Justice—decides that the case has merit, it "intervenes," adopting the suit as its own and bearing its costs. The original whistle-blower will get a proportion (usually about 18 percent) of the damages, which can be considerable: when qui tam cases succeed, contractors have to pay back three times as much as they stole.

Whistle-blower Bud Conyers. Photograph by Gasper Tringale.

A suit ordinarily remains sealed for 60 days while the D.O.J. makes up its mind about whether or not to proceed. During this period, anyone who divulged the suit's contents—plaintiff, lawyer, or journalist—would risk prosecution, fines, and imprisonment. According to court precedents, a violation of the seal might also cause the case in question to collapse. But when the seal expires, the lawsuit's contents are made public—whether the D.O.J. intervenes or not.

We must assume that Conyers did file his suit, because he now says he's unable to talk at all about his experiences with KBR in Iraq. This is presumably because the case remains under seal, though neither he nor Grayson can confirm even that. The seal is, in effect, a sweeping gag order, preventing them or anyone else from discussing the case in any way. Vanity Fair is able to publish Conyers's story only because he told it before any gag was imposed, to a writer for Hustler magazine, and to me. If he spoke about his allegations now, he could go to jail.

So far, Alan Grayson estimates, his efforts to pursue qui tam cases against contractors in Iraq have cost him about $10 million. The severe terms of the False Claims Act mean that he cannot even reveal how many fraud whistle-blowers he represents, but there are dozens. Stuart Bowen is the special inspector general for Iraqi reconstruction (sigir), a unique watchdog whose office reports to both the Pentagon and State Department. He reported last year that his office knew of 79 suppressed qui tam cases, some of which have multiple plaintiffs. As of August, 66 are still under seal. There may be many more. (KBR refuses to say how many qui tam cases have been filed against it.)

If some of Grayson's clients win their cases, he could see a return on his investment, in the shape of reimbursed costs and a percentage of any damages. There is also the possibility that he won't see a dime. Fortunately for him, he doesn't need the money. In 1990 he launched a telecommunications company and installed its switching system in a bathroom above a New York funeral home. It grew to become IDT, the world's largest calling-card corporation, nearly half of which was sold in 1998 to AT&T for $1 billion. More recently, Grayson has realized impressive returns in far-flung locations: he is, for example, the third-largest shareholder in Kentucky Fried Chicken Indonesia. "I made all this money in my spare time," he says with a shrug. "I don't quite know how it happens. I'm like Dustin Hoffman in RainMan."

He certainly didn't start with much. Born in 1958, he grew up in the Bronx in a 21st-floor apartment next to an elevated train. His father was the principal of an elementary school where a third-grader once threatened him with a knife. Grayson's mother spent much of her time attending to her son's asthma. "I had a lot of trouble breathing, and needed special injections four times a week," he remembers. "Each time, she had to take me to the hospital. She also made huge efforts to ensure I got a good education."

Those efforts paid off. Admitted as a student at the highly selective Bronx High School of Science, Grayson went on to Harvard and then HarvardLawSchool. (While still a law student, he somehow managed to obtain a master's degree in public policy and to pass the exam for a Ph.D. in government.) But his struggles weren't over yet. A brief first marriage left him so broke that he once found himself locked out of the motel room where he'd been living.

In 1984, he got a job as a clerk for the D.C. federal appeals court, where he worked for future Supreme Court justices Antonin Scalia and Ruth Bader Ginsburg. The following year, he joined Ginsburg's husband, Marty, at his renowned Washington law firm, Fried, Frank, Harris, Shriver & Jacobson. "There," Grayson says, "I learned the smallest details of the law that applies to government contracting." The Federal Acquisition Regulation, 600 small-type pages of rules governing every aspect of commercial relationships between the U.S. government and private business, became his bible.

A cynic might argue that Grayson is hoping for political dividends from his Iraq-fraud campaign. He mounted a run for Congress last year in his local Florida district and, after joining the race very late, came within 2,000 votes of winning the Democratic primary. But he maintains that his emergence as a whistle-blowers' white knight was anything but calculated.

He had, he says, handled a "trickle" of qui tam cases for years, representing both whistle-blowers and contractors. Many of those cases were swiftly adopted by the D.O.J. But when the Bush administration came to power and the "war on terror" began, he quickly came to realize that the scale of fraud spawned in its wake was of a different order of magnitude. More and more would-be plaintiffs began to contact his firm after hearing about it on the informal whistle-blowers' grapevine or through nonprofit organizations such as Taxpayers Against Fraud and the Project on Government Oversight, both based in D.C. "I certainly could be doing a lot of different things in my life," says Grayson. "It's possible that when all is said and done on these cases I will have lost a substantial amount of money. I'm O.K. with that. Some things you do because they're really worthwhile and important."

It is perfectly normal, Grayson says, for the D.O.J. to seek to extend the seal on a qui tam suit for 6 or 12 months while it carries out investigations. But with many of the Iraq cases it has gone back to court time and again, successfully asking judges for extension after extension. As a result, even many suits first filed in 2003 and 2004 remain entirely secret.

"What you have here is a uniform practice that goes across an entire class of cases, something I've never seen before," says Grayson. "They're being treated in a fundamentally different way from normal cases that don't involve fraud in Iraq. They're being bottled up indefinitely."

In fiscal year 2006, according to Taxpayers Against Fraud, the D.O.J. won damages in 95 separate qui tam cases in fields ranging from Medicare to homeland security, recovering a total of almost $3.2 billion. Yet not a cent of this sum arose from suits against contracting firms in Iraq. In four years, the total False Claims Act damages from Iraq amount to just $14 million, the result of four cases that were settled out of court, according to the D.O.J.

Nine other cases have been unsealed, but the D.O.J. decided not to intervene in any of them. Five promptly collapsed, because neither the whistle-blowers nor their lawyers were prepared to bear what might have been huge costs. That leaves four suits that are being fought in public, all by Alan Grayson.

Given that the same lawyers who are suppressing the Iraq cases continue to be cooperative on other matters, Grayson suspects that they are following orders from on high. Would it be so outlandish, he wonders, to suggest that the same Justice Department that has been accused of firing U.S. attorneys for political reasons might be suppressing war-related fraud claims for political purposes?