KGL – A Test Case on Sanctions?
Despite Ongoing Federal Probe, Pentagon Asserts Big Contractor Has No Iranian Ties
A Whistleblower Alleges Death Threats
Kuwait and Gulf Link Transport Company (KGL), a major U.S. military contractor, is facing renewed allegations that it is working with Iran, possibly violating U.S. sanctions. In the political climate where sanctions on Iran are one of the few things people can agree on, KGL may become a test case for what happens when a U.S. contractor violates those sanctions.
Adam Zagorin – (POGO) – April 4, 2012 – If there’s one thing most Americans support in foreign policy, it’s sanctions against Iran to halt its alleged drive for nuclear weapons. From President Obama to Mitt Romney, Rick Santorum, and Newt Gingrich, leading candidates all want to put the economic squeeze on Tehran and to signal their support for Israel. President Obama recently announced he will ratchet up sanctions on the country’s oil exports and declared a “national emergency” to deal with the Islamic Republic. The Senate will try to iron out its differences over anti-Iran measures in coming weeks, as bus stations around Washington, DC, are studded with advertisements questioning the President’s resolve on the issue.
In this politicized environment, the last thing any candidate or legislator would countenance is gobs of U.S. taxpayer money going to a military contractor caught doing business with the Islamic Republic. Indeed, Congress specifically addressed that possibility in 2010, when contractors were required to certify in writing that they have no ties to Iran’s sanctioned enterprises.
And that’s why the current situation surrounding one big military contractor known as Kuwait and Gulf Link Transport Company, or KGL, seems so puzzling. Amid renewed allegations that the Kuwait-based behemoth is involved in dealings with Iranian shipping interests, ports, and front companies, KGL continues to hold up to $1 billion worth of contracts with America’s armed forces. No contractor to the U.S. military has ever been debarred for doing business with Iran, so KGL could emerge as a test case.
At the Pentagon, its number two official has repeatedly told skeptical Members of Congress that KGL is free of ties to Iran and has broken no law. Yet documents reviewed and interviews conducted by POGO show that the FBI and the Pentagon’s own Defense Criminal Investigative Service (DCIS) are apparently conducting a non-public probe of KGL that is at least a year old, taking evidence from former employees and others about alleged business dealings that could violate Iran sanctions laws.
The upshot is that instead of projecting a message of American resolve and clarity, the case of KGL seems to offer an ambiguous quagmire of mixed signals as key issues surrounding the company remain to be sorted out. Indeed, as the undisclosed federal probe of KGL drags on, the giant logistics provider continues to have access to U.S. military facilities and provide support for American troops in the tense Gulf theater.
The Pentagon Response: All is Well
The letter from the Pentagon, dated July 15, 2011, was polite.
Addressed to Senator Mark Kirk (R-IL), it said that, “we have found no substantial information” to support reams of internal company documents purporting to show KGL’s illegal business ties to Iran. Kirk had provided the documents to the Pentagon, and asked for an explanation.
The reply came from Ashton Carter, who has since become the number two official at the Department of Defense (DoD). Carter asserted that, after a careful check, he could offer nothing to support the contractor’s purported links to Iran. There was “no indication,” he wrote, that the company had ever “violated U.S. law,” notably U.S. sanctions designed to thwart Iran’s alleged drive for nuclear weapons.
Sen. Kirk is not the only Member of Congress upset about KGL’s supposed ties to Iran. In fact, the company has long been a nexus of controversy over Iran and other matters. Sen. Claire McCaskill (D-MO), who chairs the Senate Subcommittee on Contracting Oversight, Sen. Marco Rubio (R-FL), who sits on the Intelligence Committee, and Sen. Tom Coburn (R-OK), Ranking Member of the Permanent Subcommittee on Investigations, as well as current and former House Members Brad Sherman (D-CA) and Ron Klein (D-FL) have all posed their own pointed questions about ties to Iran, and received similar assurances from Carter.
Now, months after Carter’s last public pronouncement on the issue, Sen. Bob Menendez (D-NJ) is expressing his own concerns. On March 19, 2012, he sent a letter to the Treasury and its Office of Foreign Assets Control (OFAC), which draws up the official language defining U.S. sanctions against Iran. Menendez’s new letter cites a number of the same troubling issues about KGL and Iran that Carter knocked down last year, with a few additional queries of his own. Menendez also says this:
I understand that the FBI and Defense Criminal Investigative Service may be actively investigating these allegations [about Iran].
What Gives? An Ongoing U.S. Probe
As the Iranian nuclear crisis continues to occupy center stage, POGO has seen evidence of what Menendez alluded to in his letter: an undisclosed, apparently ongoing, multi-agency U.S. inquiry into KGL, an investigation that seems aimed at answering the same questions about ties to Iran that Dep. Sec. Carter told Members of Congress are groundless.
As one witness in the case told POGO several weeks ago, “The investigators are very clearly looking for evidence that any U.S. [military contract] money went to Iran.”
In light of the apparent probe (unmentioned in any of Carter’s letters to lawmakers), his assurances that everything is fine appear, at the least, incomplete and possibly misleading. According to documents and interviews, the FBI, the Defense Criminal Investigative Service, and other U.S. agencies have been actively examining links between Iran and KGL—a process that apparently began well before Carter sent many of his reassuring letters and that seems to be continuing.
KGL has long denied any intentional links to banned entities in Iran, and continues to do so in a little-noticed lawsuit pending in Washington, DC. In the lawsuit, the company does acknowledge a few past ties to Iranian shipping interests, but claims they were quickly severed after the U.S. imposed a ban on those enterprises. KGL also claims that allegations of its continuing connections to Iran originate in “fabricated” documents given to Members of Congress, who, in turn, sent queries to the Pentagon and elsewhere—all part of what the company calls a slander campaign tied to one of its chief competitors and others.
“This case is very difficult and political, even within the U.S. Government, and there is little that we can do to protect you…”
But the FBI’s probe apparently remains active. A number of sources close to the case report that as recently as January 2012, federal agents pulled a senior KGL executive out of line for hours of questioning about the firm’s ties to Iran as the executive tried to enter the country, supposedly at Washington’s Dulles airport. It has been impossible to officially verify these accounts of the incident. Neither the FBI nor KGL would deny it occurred. Both declined any comment. An FBI spokesman noted that Bureau policy in many cases precludes confirming an investigation, or discussing what, if anything, might be involved.
A lawyer speaking on KGL’s behalf also would not comment on whether the firm faces an ongoing federal inquiry. The lawyer added that if there were such a probe, KGL would be cooperating fully.
KGL, which trades on the Kuwait stock exchange, participates in U.S. military contracts worth up to $1 billion. Last May, KGL won a share of a five-year, $870 million contract with the U.S. Army to provide logistical services in Kuwait, Iraq, and Saudi Arabia. In February 2011, it was awarded a U.S. military storage contract that could be worth up to $157 million. The contracts required the company to certify in writing that it is not engaged in business activity with Iranian entities subject to sanctions under U.S. law. A KGL executive, who is an American citizen, signed at least one of the certifications.
As for Dep. Sec. Carter at the Pentagon, it’s unclear whether he was aware of FBI and DoD inquiries at the time he gave KGL a clean bill of health last year in letters to lawmakers. Made aware of questions raised by Sen. Menendez about a federal investigation of KGL, a Pentagon spokesperson told POGO that Carter’s position on KGL was unchanged.
“We’ve checked again carefully, gone through all our databases, and we have no indication of any changes,” the spokesperson said.