Crossing the Lines

How a top Pentagon official and a host of influential Republicans almost made sure that one American company gained a key stake in Iraq's lucrative wireless market.

The auctioning off of Iraq began in the summer of 2003 in a packed conference room at the Grand Hyatt in Amman, Jordan. More than 300 executives had gathered from around the world to vie for a piece of one natural resource Saddam Hussein never managed to exploit—the nation's cellular phone frequencies. With less than 4 percent of Iraqis connected to a phone, the open spectrum could earn billions of dollars for the eager executives working the room. Conference organizers tried to keep everyone focused on the prize. "Iraq needs a mobile communications system and it needs it now," stressed Jim Davies, a British expert with the Coalition Provisional Authority (CPA) who was leading the effort. "We want quick results."

But back in Washington, D.C., the focus had already turned from the needs of Iraq to the bottom lines of a select few corporations. "The battle for Iraq is not over oil," said one Defense Department official involved in communications. "It's over bandwidth." And no one was fighting harder for a piece of the spectrum than the consortium led by American cellular giant Qualcomm with such business partners as Lucent Technologies and Samsung of South Korea. They wanted to follow U.S. troops into Iraq with Qualcomm's patented cellular technology, called CDMA, a system no nation in the Middle East had yet been willing to adopt. Even as the bombs fell over Baghdad, Rep. Darrell Issa (R-Calif.), whose district includes many Qualcomm employees, had tried to wrap his favored company in the flag. He denounced the cellular system used by Iraq's neighbors as "an outdated French standard," and proposed a law that would effectively mandate Qualcomm on Iraq. "Hundreds of thousands of American jobs depend on the success of U.S.-developed wireless technologies like CDMA," Issa wrote in a March 26, 2003, letter to Defense Secretary Donald Rumsfeld. A swarm of lobbyists rallied to the companies' cause, including William Walker, a former protégé of Rumsfeld from the Ford White House, and Stacy Carlson, who ran President George W. Bush's California campaign in 2000.

At the conference in Amman, CPA officials promised an apolitical selection process that would accept any workable technology. In the weeks that followed, Col. Anthony Bell, the chief military procurement officer in Iraq, personally oversaw the selection of three cellular companies, assigning a panel of Iraqi and Coalition experts to a locked room where they reviewed blind proposals. "No names, only a number," said Bell, who handled $1.9 billion in contracts during his nine months in Baghdad. On October 6, Iraq's new minister of communications, Haider al-Abadi, announced the winners—two Kuwaiti firms and one Egyptian company. Not one of them used the Qualcomm standard.

If any officials in Baghdad or Washington thought such a decision would be the end of Qualcomm's quest, the next six months would prove them wrong. Like dozens of American corporations looking to influence U.S. policy—shaping everything from the banking and insurance markets to foreign-investment rules—Qualcomm, Lucent, Samsung, and their partners would only expand their efforts and broaden their reach into the CPA. With the guidance of a deputy undersecretary of Defense, John Shaw, this effort became one of the most brazen lobbying campaigns of the postwar reconstruction, one that has brought Shaw under investigation for potentially breaking federal ethics rules.

According to documents provided to Senator John McCain (R-Ariz.), the companies' supporters in Washington, D.C., attempted to sneak a new cellular license into an unrelated contract for Iraqi police and fire communications, tried to oust the CPA officials who resisted their efforts, and ultimately caused the delay of plans for a badly needed Iraqi 911 emergency system. "The American corporate leaders would not let a system be built that they couldn't make an obscene amount of money off of," said one former technical adviser to the Iraqi Ministry of Communications, who has since returned to the United States.

Senator Conrad Burns felt the sting of Qualcomm's defeat in October. As chairman of the Communications subcommittee, the Montana Republican had strong ties to the company: Qualcomm was Burns' 12th-largest campaign donor, and one of the company's founders, Klein Gilhousen, had recently given $5 million to Montana State University. Gilhousen also sits on the board of the Burns Telecom Center, an academic research program, of which the senator is chairman. During a trip to Iraq in October, Burns spoke with officials one-on-one about the process that had denied the Qualcomm consortium a license. "I think the bidding was open, transparent, and fair," he said upon his return on October 14. That same day, however, one of his chief aides began working behind the scenes to plan a new way to get Qualcomm into Iraq, a plan described in the aide's internal emails, which were obtained by Mother Jones. "As you know, Senator Burns is taking flak for defending the CPA on Iraqi telecommunications contracts which ignore CDMA," wrote Burns aide Myron Nordquist to one of the Pentagon's chief networking officials. "The Senator remains determined to support CDMA."

And Burns had a powerful motivation. The stakes for Qualcomm, and by extension Burns, were far larger than just the Iraqi market of 25 million people. For nearly a decade, Qualcomm had been engaged in an international battle with the non-American companies pushing GSM, a rival technology that had been developed in Europe and now controlled 72 percent of the world market. A CDMA beachhead in Iraq would set the stage for an expansion throughout the region, with Lucent and Samsung well positioned to prosper as leading makers of the CDMA switches and phones. As Nordquist explained to the Pentagon last fall, Iraq could provide a "communications link between Turkey and the Gulf."

Deputy Undersecretary Shaw, an old Republican hand who had served in the Nixon, Ford, and Reagan White Houses, quickly became the point man for the initiative to bring CDMA to Iraq. Shaw and other officials in the Pentagon and Congress reasoned that establishing CDMA in the Middle East would be possible if they could find a way for Qualcomm and its partners to offer cellular service in Iraq under the rubric of the police and fire communications system that the CPA planned to purchase for the Iraqis. "The CDMA system could then morph into a commercial service with our having total control over it," Shaw wrote in a November email to a Coalition adviser in Baghdad.

To dodge contracting rules that prevent officials such as himself from cherry-picking favored companies, Shaw proposed using Nana Pacific, which is exempt from many contracting laws because it is an Alaska Native American-owned business. Nana Pacific agreed to then hire the same Qualcomm consortium that had failed to win a CDMA cellular license, a company that had been renamed Guardian Net. Senator Burns, wrote Shaw, was "strongly supportive" of the plan. So was the South Korean government, which sang its praises in a letter to CPA chief L. Paul Bremer, National Security Adviser Condoleezza Rice, and Senator Ted Stevens, the powerful Alaska Republican who was responsible for the provision exempting Alaska Native American corporations from the contracting rules requiring competitive bidding. "I would like to ask for your support," wrote Daeje Chin, the South Korean minister of information and communication, noting that he hoped the emergency system would be converted by this summer to a "commercial service."

Like the South Korean government and Qualcomm's supporters in Congress, Deputy Undersecretary Shaw appeared to have reasons for pushing the plan that went beyond the interests of the Iraqi people, and his actions over the last year may violate federal contracting and conflict-of-interest rules. In fact, his intervention on behalf of the Qualcomm consortium, with whose lobbyists and investors he had close ties, has led the Defense Department's inspector general to begin an investigation into his activities.

One of those lobbyists, Don De Marino, was a close friend and former deputy of Shaw from the Commerce Department during the early 1990s. Early this year, Shaw helped appoint De Marino to an official Defense Department assessment mission to Baghdad on behalf of Rumsfeld. Although De Marino had recently been a registered lobbyist of the Qualcomm consortium, he was given access to the CPA telecommunications office. "He spent hours in our office just being our buddy. Yucking it up," said a former adviser to the ministry, who added that no one there knew that De Marino, who works with the National U.S.-Arab Chamber of Commerce, was also a member of the board of directors of the Qualcomm consortium, and had helped the group to investigate the backgrounds of the winning cellular companies in Iraq. "Now we suspect what his motives were in coming over," added the former ministry adviser.

Another member of the Qualcomm consortium board who had ties to Shaw was Julian Walker, a former British ambassador to Qatar who had also been a liaison to the Iraqi resistance to Saddam Hussein. Shaw hired Walker as a contract investigator to look into the illegal arms trade in Iraq, a position that had him working out of Shaw's office in the Pentagon. In a recent interview with the Los Angeles Times, Shaw dismissed claims that such mixing of friendship and business was improper. "Hey, we won the war," said Shaw, who, like De Marino and Qualcomm officials, declined to comment for this story. "Is it not in our interests to have the most advanced system that we possibly can, that can then become the dominant standard in the region?"

But Shaw did not just line up support for a new cellular license. He also worked to undermine Qualcomm's rivals in Iraq. Weeks after the licenses were awarded, he began investigating the winning bidders, creating a list of alleged improprieties—including claims of bribery and illegal investments by former Ba'athist supporters. After looking into the matter, the Defense Department's inspector general declined to bring charges. Shaw's allegations, however, did make their way into several newspaper reports, and have since been referred, at Shaw's request, to the Federal Bureau of Investigation.

Shaw clearly spelled out his goals in documents obtained by Mother Jones, detailing the scenario for bringing Qualcomm to Iraq if the initial licenses were thrown out. "It is recommended that the remaining bidders who are currently capable of immediately taking over the build out of the cellular system be identified," Shaw wrote in one submission to the inspector general. "Such a choice should include a CDMA component."

Toward the end of 2003, Shaw even asked the Pentagon and the National Security Council to replace the Iraqi minister of communications with Sheik Sami al-Majoun, the Iraqi minister of labor, who, according to a CPA document, was a participant in the Qualcomm consortium bid. "Strong medicine but necessary if we are to succeed," Shaw wrote in a December email to a Pentagon colleague. "I need hardly add that this will allow the telecom system to develop with the kind of speed and focus that is essential to the entire development of Iraq."

Around that same time Shaw also pressed the case for the Qualcomm consortium when Daniel Sudnick, the senior American adviser to the Iraqi Ministry of Communications, visited Washington, D.C. Shaw invited him to dinner at the exclusive Metropolitan Club, located across the street from the White House, took him to meet Senator Burns, and then hosted a meeting at his office on January 12 with representatives of Nana Pacific and the Qualcomm consortium.

For all the work Qualcomm's supporters did to arrange for its entry into Iraq, the final authority over Iraq's telecom future still rested with the American advisers, like Sudnick, working in Saddam's former palace in Baghdad. Although Sudnick met with Shaw and Senator Burns, he told colleagues that he remained determined to not effectively award a new cellular phone license for Iraq under the cover of a network for the nation's police and fire officials. In January, he defined the scope of the Iraqi needs in a report to the White House's Office of Management and Budget. The first-responder network, he wrote, "will not compete with commercial mobile cellular operators."

In March, this dispute reached a critical turning point when Sudnick and other advisers in Baghdad discovered that Nana Pacific had added language to a contract for a pilot first-responder program that would allow such competition, opening the door for the consortium to establish a CDMA network. Sudnick and his colleagues promptly challenged Nana officials about the new provision. Within hours, they received a blistering phone call from Shaw, who shouted at Sudnick's deputy, Bonnie Carroll, that there would be "hell to pay" if they did not sign off on the additional language, according to Carroll.

Within days, Sudnick received an email from Shaw: "If you can't lead or follow get the hell out of the way." The first-responder system, Shaw wrote, was "the last opportunity to install a viable cellular network that is responsive to our needs and requirements." And in another email, Shaw added that Sudnick's actions "rightly raised the concerns of the Qualcom [sic] folks."

Also shortly after the contentious phone conversation between Shaw and Carroll, Sheik Sami al-Majoun and his entourage paid a visit to CPA headquarters, says Carroll, recalling that they entered her office and that Majoun appeared upset. He told her that he had spoken with Shaw and asked her to come meet with him outside the CPA offices, presumably to discuss the Nana Pacific contract; after she declined the invitation, he left. When Mother Jones interviewed Majoun this summer at his home, he denied that he had any stake in the Qualcomm consortium, despite the document that lists him as a participant. Then he turned to a translator in the room and said in Arabic, "Of course I am involved in contracts, but I'm not going to talk about any of it."

Unmoved by Shaw's demands, Sudnick decided to recommend stopping the first-responder pilot program in its tracks. He quickly sent a memo to CPA administrator Bremer. "I have observed a series of events I consider to be highly irregular," Sudnick wrote on March 9, explaining his decision. It would be a fateful one for Sudnick and others in the office, who suddenly had an enemy high in the Pentagon. "In 48 hours, [Shaw] goes from [Sudnick's] biggest defender to his biggest fucking adversary," says a Defense Department official familiar with the incident. Over the next several weeks, the Pentagon had a new team relieve Sudnick of many of his responsibilities. He and his deputy Carroll resigned within a month. By June, Shaw had added Sudnick's name to his report about improprieties with the initial cellular bids. Citing "unsubstantiated" allegations from Iraqi sources, Shaw told Defense Department investigators that Sudnick may have taken bribes and kickbacks, details that were soon leaked to Newsweek and the Washington Times. Sudnick has denied the allegations.

With a new team of advisers at the Communications Ministry, plans for the Iraqi first-responder network have moved forward—though they are now months behind schedule. In addition, the Pentagon has given the design authority for the system to Lucent Technologies, which was included as a principal supplier in Qualcomm's bid to bring CDMA to Iraq. Although the company is one of the world's leading makers of CDMA equipment, John Procter, who works for the Pentagon's contracting arm in Baghdad, says that the contract does not call for CDMA cell phone technology, but instead will solely involve building a police and fire radio system. While a June 4, 2004, cost-benefit analysis prepared by Lucent and obtained by Mother Jones estimated the cost of establishing a nationwide first-responder system at $450 million, Procter says only about $90 million has been appropriated for the job.

But the infighting over the first-responder system has cost the Iraqi people more than money. The negotiations over the Nana Pacific proposal were a waste of precious time. Because of the delay in establishing the new emergency-response system, said a former CPA technical adviser, "people have died."

Bonnie Carroll has been back in the U.S. for months now, visiting her family and working with TAPS, a support group for military families she founded in 1994, after her husband died in an Army National Guard plane crash. Nothing about her résumé would suggest that she was destined to become a whistleblower. She worked in the West Wing for President Ronald Reagan, and then as an aide to the White House counsel for President Bush's father. After September 11, she returned to government service at the Department of Veterans Affairs before accepting a detail in the office of Deputy Undersecretary Shaw and then traveling to Baghdad to work for the CPA.

Early this summer, she sat down for a midday omelette at the Hamburger Hamlet in Crystal City, Virginia, a mall frequented by military officers from the nearby Pentagon. Sipping hot water with lemon, she worried that the effort to influence the first-responder award has caused irreparable damage—the delay in bringing first-responder radios to Iraq, the attempts to smear the integrity of her and Sudnick in the press, the added costs to Iraq and the U.S. "I like to believe in people," she said, looking very much the Republican stalwart, dressed in a pastel sweater and pearls. "And this is a deputy undersecretary of Defense. You would hope he has integrity."

Since returning to the United States, Carroll has devoted herself to clearing the names of those who advised the Communications Ministry in Baghdad. She has met with Pentagon officials and congressional staffers at their request. And she provided Senator McCain with a packet of documents detailing an expansive "web of those who stood to benefit had the deal gone through."

"Simply stated, we were used in an attempt to 'rig' a contract," Carroll wrote. "This is truly not my Defense Department."