Rogue Planet

Did the U.S. Army Arrange a 'Sweetheart' Deal to Sell Russian Helicopters to Iraq?

By Sharon Weinberger

The Defense Deprtment quietly gave a U.S. company a contract to provide 22 new Russian-made Mi-17 troop transport helicopters to the Iraqi military in a deal worth an eyebrow-raising $325 million, DANGER ROOM has learned.

Iraq's effort to re-equip its military has been marred with corruption, including a notorious plan to buy used Mi-17s from Poland in a deal that involved accusations of shoddy equipment and was eventually scrapped. This new Mi-17 contract, which involves Iraqi money routed through the Pentagon's foreign military sales process, was designed to avoid problems that occurred in the previous sale. But in an unusual move, the U.S. Army sole sourced the contract to ARINC, a Carlyle Group-owned company.

The deal, which was consummated earlier this year, may represent the highest price ever paid for the Russian-produced helicopters, which are sold by a number of brokers, as well as directly from the manufacturers in Russia.

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Weldon's Firm Lobbied White House to Buy East European Arms for Iraq

By Sharon Weinberger 

In may, Defense Solutions, the Pennsylvania-based arms-dealer employing former Congressman Curt Weldon, paid a visit to the White House to discuss weapons sales to Iraq. The company's hope was to convince White House officials that Iraq should buy East European arms, rather than those made in the United States. After meeting with staff in the vice president's office, Defense Solutions CEO Timothy Ringgold sent an e-mail, a copy of which was provided to DANGER ROOM, to some of his colleagues. In it, he sums up his sales pitch. The idea, Ringgold says, is to supply former Soviet Bloc tanks, armored personnel carriers, and fighting vehicles as a "near term solution" for beefing up the Iraqi military.

We learned that the US government has not agreed, but "is considering" providing M1A1 Abrams to Iraq... Our [p]rogram was presented as a near term solution (next 1-4 years) to Iraq's need for wheeled and tracked armor vehicles... to speed the operational readiness of the Iraqi Army... 

Should a decision be made to supply Abrams, it doubtful that more than 20 or 30 could be supplied in the first two years... while we could supply [former Soviet bloc armor, like] 500+ modernized T-72s [tanks], 500+ upgraded BMPs [fighting vehicles], and nearly 400 new production BTRs [armored personnel carriers]. We are likely months, perhaps longer from a decision on Abrams. In the mean time, the Iraqi Defense Minister is apparently making no decisions.

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If, someday, there are T-shirts sold in Iraq that read, "the United States invaded our country and all we got were these crappy tanks," here is the explanation for what happened.

In 2005, Defense Solutions, the Pennsylvania-based arms dealer that employs former Congressman Curt Weldon, got itself a contract to refurbish Soviet-era T-72 tanks for the Iraqi government.

The essence of Defense Solutions' proposal was to arrange a donation of of some 77 Hungarian-owned T-72s. The Hungarian were likely happy unload the outdated tanks for free, and the Iraqi government would pay Defense Solutions to refurbish them. That sounds fine, excep the contract was what many might consider a sweetheart deal. The contract appears to be a "cost plus percentage of cost fee" agreement, meaning Defense Solutions was essentially guaranteed a profit regardless of what condition the tanks were in or how much it cost to get them running (a copy of the contract,posted here as a PDF, was provided to DANGER ROOM).

Defense Solutions estimates the cost to refurbish the tanks at about $3.2 million, and the company is entitled to a fee based on eight percent of the costs. If the contract goes 75 percent over cost, Defense Solutions must notify the Iraqis, but that amount "will not act as a ceiling on the actual price of performance," the contract states.

Under typical U.S. defense contracts, fees are tied to performance (thus giving the contractor an incentive to keep costs down). Defense Solutions gets its fee, regardless. And with an eight percent fee, the more you spend, the more you earn. This would be a most unusual arrangement, at least in the United States, where cost plus percentage of cost contracts are prohibited under U.S. law. As federal acquisition regulations state quite clearly: "The cost-plus-a-percentage-of-cost system of contracting shall not be used (see 10 U.S.C. 2306(a) and 41 U.S.C. 254(b))."

Weldon Firm's Defective Tank Deal With Iraq

If, someday, there are T-shirts sold in Iraq that read, "the United States invaded our country and all we got were these crappy tanks," here is the explanation for what happened.

In 2005, Defense Solutions, the Pennsylvania-based arms dealer that employs former Congressman Curt Weldon, got itself a contract to refurbish Soviet-era T-72 tanks for the Iraqi government.

The essence of Defense Solutions' proposal was to arrange a donation of of some 77 Hungarian-owned T-72s. The Hungarian were likely happy unload the outdated tanks for free, and the Iraqi government would pay Defense Solutions to refurbish them. That sounds fine, excep the contract was what many might consider a sweetheart deal. The contract appears to be a "cost plus percentage of cost fee" agreement, meaning Defense Solutions was essentially guaranteed a profit regardless of what condition the tanks were in or how much it cost to get them running (a copy of the contract,posted here as a PDF, was provided to DANGER ROOM).

Defense Solutions estimates the cost to refurbish the tanks at about $3.2 million, and the company is entitled to a fee based on eight percent of the costs. If the contract goes 75 percent over cost, Defense Solutions must notify the Iraqis, but that amount "will not act as a ceiling on the actual price of performance," the contract states.

Under typical U.S. defense contracts, fees are tied to performance (thus giving the contractor an incentive to keep costs down). Defense Solutions gets its fee, regardless. And with an eight percent fee, the more you spend, the more you earn. This would be a most unusual arrangement, at least in the United States, where cost plus percentage of cost contracts are prohibited under U.S. law. As federal acquisition regulations state quite clearly: "The cost-plus-a-percentage-of-cost system of contracting shall not be used (see 10 U.S.C. 2306(a) and 41 U.S.C. 254(b))."