Page 1 of 2

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."

Advertise on

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 He denounced the cellular system used by Iraq's neighbors as "an outdated French standard," and proposed a law that would effectively mandate Qualcomm on Iraq.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."

Page 1 of 2