Does the Pentagon Operate Beyond US Anti-Corruption Laws at Manas?

A US Congressional investigation into fuel contracting at the Manas Transit Center in Kyrgyzstan could test the US Department of Justice’s willingness to apply to the Foreign Corrupt Practices Act (FCPA) to Pentagon contracting, observers say.

The National Security and Foreign Affairs Subcommittee of the House Committee on Oversight and Government Reform opened a probe into Manas fuel contracts on April 12, less than a week after the collapse of former president Kurmanbek Bakiyev’s administration in Bishkek. [For background see the EurasiaNet archive].

The subcommittee’s first hearing on the matter, entitled Crisis in Kyrgyzstan: Fuel, Contractors, and Revolution along the Afghan Supply Chain, is scheduled to be held April 22 in Washington.

Manas Transit Center handles both troops and goods heading to and from Afghanistan. It plays a pivotal role in the Northern Distribution Network (NDN), a resupply route running from Europe through Central Asia. It is designed to ease the logistics strain on the main overland supply route to Afghanistan, via Pakistan.

Red Star Enterprises Ltd., one of the companies at the center of the congressional investigation, is among the US Department of Defense’s top 100 contractors, and in the Defense Logistics Agency’s top 10 having won more than $1.069 billion in contracts in 2008. [For background see the EurasiaNet archive].

Since the passage of the anti-corruption act in 1977, the Department of Justice (DoJ) has appeared reluctant to prosecute FCPA cases involving Department of Defense (DoD) contractors. This reluctance appears rooted in a desire not to have the FCPA damage US national security interests.

However, experts argue that this softly-softly approach to the Pentagon’s contracting activities, from which private and publicly held entities reap billions of dollars, does more harm than good. It can undermine confidence in the US justice system, and, in the case of Kyrgyzstan and the Manas facility, potentially hurts Washington’s standing in the eyes of the new leadership in Bishkek.

Mike Koehler -- an assistant professor of business law at Butler University in Indiana, and an FCPA expert -- suggested that the DoD seems to enjoy an exemption from the Act, even though there is no provision in the FCPA for such an exemption.

"The FCPA applies to any time a US company, and under some circumstances a non-US company, provides anything of value to a foreign individual or entity to retain business. There is no industry exception. There is no DoD exception," Koehler said.

"But DoJ is going to tread very lightly here, as it raises national security concerns and political issues that are not found in all instances of FCPA cases," Koehler continued.

Koehler pointed to a case settled this past February that he characterized as "FCPA-like." In that case, BAE Systems, a major weapons supplier, agreed to pay a Justice Department-imposed fine of $400 million, and plead guilty to making false statements to the US government. But the company was not required to "plead guilty or otherwise acknowledge responsibility" for improper conduct concerning an investigation that was opened in 2007, Koehler said.

"The reason is because BAE is the fifth largest defense contractor to the US government," Koehler stated. "I think it is pretty clear that in this case the company was treated differently to another company that may violate the FCPA, [treated differently to] a company that sells a different product to a different customer."

DoJ guidelines allow for the consideration of "collateral effects" when making a decision on whether or not to launch a criminal investigation into a possible FCPA violation. This clause theoretically enables national security concerns to trump justice in the broadest sense, Koehler said. But the approach is questionable, he argued.

"I don’t like it because, for one, we have this thing called the rule of law in America and the law is supposed to be applied equally to everybody based on the same set of facts," he said. "In other words, it should not matter if we talking about a company that sells fighter jets or a company that sells dental floss."

"It shouldn’t matter, but, as a practical matter, it does," Koehler continued.

The FCPA, according to the Justice Department's website, "was enacted for the purpose of making it unlawful for certain classes of persons and entities to make payments to foreign government officials to assist in obtaining or retaining business."

Potential FCPA cases involving Central Asian states could pose a particular problem for US prosecutors. On the one hand, the governments of the region are notoriously corrupt and authoritarian-minded. On the other, their cooperation with the United States is needed to ensure the smooth operation of the Northern Distribution Network.

In its most recent survey of global corruption, the watchdog organization Transparency International ranked Kyrgyzstan 162nd out of the 180 nations surveyed, with 1 being the least corrupt and 180 being the most corrupt. Other important NDN transit states also ranked poorly, with Uzbekistan at 174th and Tajikistan at 158th. The least corrupt Central Asian state was Kazakhstan, which still ranked 120th. [For background see the EurasiaNet archive].

Alexander Tiperov, a prominent lawyer in Bishkek and a staunch opponent of the Manas Transit Center, told EurasiaNet.org that any failure by US authorities to apply FCPA legislation evenly in relation to the Manas investigation would have an adverse effect on Kyrgyz public opinion. Already, many Kyrgyz believe that Washington is willing to overlook fundamental flaws in governance in Bishkek, as long as American troops can retain access to the Manas facility.

"I think it is very important for the credibility of the United States to hold an investigation into this. And if for any reason they fail to come to a conclusion, it will definitely show that they support this corruption and are not interested in a proper examination of the issue," Tiperov said. He also called on Kyrgyz authorities to launch a similar investigation.

In April 2009, a memo issued by US Central Command, and signed by CENTCOM commander Gen. David Petraeus, instructed officers involved in NDN procurement to "make every attempt, within operational, legal and regulatory constraints, to use [South Caucasus/Central and South Asian States’] services and products." Petraeus also gave US procurement officials broad latitude to award contracts based advancing US strategic and operational goals in Afghanistan.

"I challenge our leadership at all levels to be creative and aggressive in carrying out this effort," he wrote. Some experts contend that such an impulse toward creativity had the tacit effect of discouraging adequate oversight. [For background see the EurasiaNet archive].

When contacted by EurasiaNet.org regarding the application of the FCPA to DoD contracting, Cheryl Irwin, a spokeswoman for the Pentagon, said it was a DoJ matter. "Our lawyers say this is a Department of Justice issue, not DoD-specific," the Defense Department representative said on April 20.

In turn, Justice Department representative Alisa Finelli declined to discuss the FCPA in relation to DoD contracting, saying she could not comment on "specific cases."