Pentagon Deputy's Probes in Iraq Weren't Authorized

Shaw's actions are the latest to raise concerns that senior Republican officials working in Washington and Iraq have used the rebuilding effort in Iraq to reward associates and political allies. One of Shaw's close friends, the former top U.S. transportation official in Iraq, is under investigation for his role in promoting an Iraqi national airline with a company linked to the Saddam Hussein regime.Shaw, who held top positions in the Reagan and George H.W. Bush administrations, declined to comment for this article. In previous interviews, he has denied any financial links to the companies involved or receiving any promises of future employment or other benefit.

Shaw justified his investigations under a special agreement with the Pentagon inspector general, Joseph E. Schmitz. The August agreement created a temporary office headed by Shaw called the International Armament and Technology Trade Directorate. Its mission was to cooperate with the inspector general on issues related to the transfer of sensitive U.S. technologies or arms to foreign countries.

Shaw frequently cited the agreement in his dealings with reporters and the military, telling them it allowed him to "wear an IG hat" to conduct investigations. In a recent letter to the inspector general, he said the agreement gave him "broad investigatory authority."

That contention is the subject of dispute, however. The agreement states that Shaw "may recommend" that the inspector general initiate audits, evaluations, investigations and inquiries, but it does not appear to give him investigative powers.

"Jack Shaw was never authorized to do any kind of investigation or auditing on his own," said one source close to Schmitz. "The agreement was not for that. He's trying to cram more authority into that agreement than it gives him."

Schmitz canceled the agreement two weeks after Shaw was first accused of tampering with the emergency phone network contract. Schmitz declined to comment, but in his letter canceling the arrangement, he praised Shaw for "outstanding leadership."

Shaw used the agreement to win permission to visit Iraq last fall. In an Oct. 28 letter to Army Gen. John P. Abizaid, head of the U.S. Central Command, Shaw said he wanted to "investigate those who threatened the national security of the United States through the transfer of advanced technologies to Iraq."

Specifically, Shaw said he planned to identify countries that had smuggled contraband weapons into Iraq and catalog existing conventional weapons stockpiles.

Although he did not mention it in the letter, Shaw also was interested in investigating operations at the port of Umm al Qasr.

Last summer, Shaw was visited by Richard E. Powers, a longtime friend and lobbyist. Powers was representing SSA Marine, a Seattle-based port operations company that had won a controversial limited-bid contract in the early days of the war to manage the troubled port.

He also was representing a small business owned by Alaskan natives called Nana Pacific. Under federal regulations, small companies owned by Alaskan Native Americans can bypass the normal process and receive unlimited, no-bid contracts.

Powers suggested there were serious problems with dredging at the port that could be quickly remedied by having a no-bid contract awarded to Nana, which then could subcontract to SSA Marine, sources said.

Powers did not respond to requests for comment. Public lobbying records show that Nana and SSA Marine paid Powers $80,000 last year for his work.

In December, Shaw flew to Kuwait to inspect the port. The military refused to allow him into the facility, however, because of the danger involved, Pentagon sources said.

Shaw and several staffers then went to the port dressed like employees of KBR, the Halliburton subsidiary that has a contract to supply the military with food and other items.

In a KBR hat, Shaw and his staff spent less than an hour at the port, taking pictures and talking with soldiers, current and former Pentagon sources said. The group documented well-known problems there, including the presence of unexploded mines.

A Defense official in Shaw's office acknowledged that they had entered the port despite the military's concerns. He described the disguise as an attempt to conceal Shaw's status, for safety reasons.

He said the military's negative reaction to the proposed visit convinced him that there was serious trouble at the port.

"This Army two-star said, 'We won't let you in the country.' I said, there's something there," said the Defense official, who did not want to be identified. "Everybody had declared victory at the port…. We looked at the port and there were still tremendous problems."

When coalition officials learned that Shaw was at the port, they made a frantic effort to locate him, but didn't reach him until after his return to Kuwait.

"I get this call from [the U.S. military command in Iraq] that said: 'We have an undersecretary of Defense roaming the countryside. We need to locate and secure him,' " recalled a former CPA official. "He's in the country illegally, but we can't arrest him, so we let him finish the tour."

Shaw spent about a week in Iraq, meeting with top U.S. and Iraqi officials. He told several officials that the trip to Umm al Qasr had convinced him that work at the port had to be accelerated. He then suggested that the work could be expedited by awarding the contract to Nana, several former CPA officials said.

"The only time I heard Nana's name was when [Shaw and his team] were in Baghdad," said a former CPA official involved in the ports. "The notion was that this might well be a vehicle where you could in fact get things moving quickly that needed to be done, such as dredging and so forth."

Soon after Shaw's visit, the CPA granted Nana a construction and communications contract worth up to $70 million. Nana then subcontracted $3.5 million in work to SSA Marine, which recently completed the dredging.

Nana also is linked to Shaw's other investigation.

Late last year, Shaw began looking into the award of cellphone licenses in Iraq after receiving complaints from a longtime friend, Don DeMarino, who had worked under Shaw at the Commerce Department.

DeMarino was a director of a consortium called Liberty Mobile, one of the losing bidders in the contest that awarded the cellphone licenses, potentially worth hundreds of millions of dollars, to three other firms.

Relying on information from DeMarino and Liberty Mobile's president, Declan Ganley, Shaw cast doubt on the validity of the awards by leaking to several media outlets information that he said showed corruption in the process, said current and former Pentagon sources. He also provided the evidence he had gathered to the inspector general.

In December, the inspector general's office released a report saying that no basis had been found for Shaw's accusations. The office referred part of the complaint to the British government for further investigation of two British CPA officials involved in the licensing process, according to a copy of the report obtained by The Times.

British authorities exonerated the men. Later, Deputy Defense Secretary Paul D. Wolfowitz wrote to the British ambassador clearing them. "Below the deadly serious efforts to restore security and legitimacy to Iraq lies a muted gold rush mentality."