Ex-Army aide tells of blocking money to Iraq contractor

WASHINGTON — The Army official who managed the Pentagon's largest contract in Iraq says he was ousted from his job when he refused to approve more than $1 billion in questionable payments to KBR, the Houston-based company that has provided food, housing and other services to U.S. troops.

The official, Charles Smith, was the senior civilian overseeing the multibillion-dollar contract with KBR during the first two years of the war. Speaking out for the first time, Smith said he was forced from his position in 2004 after telling KBR officials the Army would impose escalating financial penalties if they failed to improve their chaotic Iraqi operations.

Army auditors had determined that KBR lacked credible data or records for more than $1 billion in spending, so Smith refused to sign off on the payments.

"They had a gigantic amount of costs they couldn't justify," he said. "Ultimately, the money that was going to KBR was money being taken away from the troops, and I wasn't going to do that."

But he was suddenly replaced, he said, and his successors — after taking the unusual step of hiring an outside contractor to consider KBR's claims — approved most of the payments he had tried to block.

Army officials denied that Smith had been removed because of the dispute, but confirmed that they had reversed his decision, arguing that blocking the payments to KBR would have eroded basic services to troops. They said KBR had warned that if it was not paid, it would reduce payments to subcontractors, which, in turn, would cut back on services.

"You have to understand the circumstances at the time," said Jeffrey Parsons, executive director of the Army Contracting Command. "We could not let operational support suffer because of some other things."

Smith's account fills in important gaps about the Pentagon's handling of the KBR contract, which has cost more than $20 billion so far and has come under criticism from lawmakers.

Heather Browne, a spokeswoman for KBR, said in a statement that the company "conducts its operations in a manner that is compliant with the terms of the contract."

Ever since KBR emerged as the dominant contractor in Iraq, critics have questioned whether the company has benefited from its political connections to the Bush administration. Until last year, KBR was known as Kellogg, Brown and Root and was a subsidiary of Halliburton, the Texas oil-services giant, where Vice President Dick Cheney previously served as chief executive.

Smith, a civilian Army employee for 31 years, spent his entire career at the Rock Island Arsenal, the Army's headquarters for much of its contracting work, near Davenport, Iowa. He said he had waited to speak out until after he retired in February. He is giving his account just as the Pentagon has awarded KBR part of a 10-year, $150 billion contract in Iraq.