The Cowboys of Kabul

It was March 2002, and Del and Barbara Spier were flat broke. The Texas couple, grandparents of five and owners of a small, Houston-based private investigations firm, were more than $260,000 in debt. They carried balances as high as $18,600 on more than a dozen credit cards and were saddled with $80,000 in outstanding bank loans and a $95,000 mortgage. In their bankruptcy filing, the Spiers' company, which they founded in 1987 and named the Agency for Investigation and Protective Services, was deemed of "no marketable value."

Although their circumstances looked dire, the Spiers were about to become millionaires. By May, Barbara Spier had filed the paperwork to form a new corporation called US Protection and Investigations. Soon, thanks to the contracting sweepstakes that was the war in Afghanistan, she was signing an $8.4 million deal with the Louis Berger Group. The multinational construction and engineering company had landed a $214 million contract to rebuild Afghanistan's infrastructure—roads, water and sanitation, power and dams—from the United States Agency for International Development (USAID). USPI's job was to provide security for contractors repairing a 300-mile road stretching from Kabul to Kandahar.

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Much of the work was to be done in remote and dangerous territory, prone to sporadic Taliban assaults and blighted with unexploded Soviet-era ordnance and land mines. "Sections of the Road are subject to hijackings, robberies, and killings," Berger acknowledged in its contract with USPI. "Organized terrorist groups are operating within the Road corridor environs, and expatriates have been intentionally targeted in recent incidents." Safeguarding the hundreds of contractors working on the road, the construction conglomerate warned, would be "challenging."

Given the stakes of the project—key to the effort to stabilize Afghanistan—USPI was a strange choice. Berger could have turned to a well-established security outfit with deep experience in conflict zones. Instead, it handed a noncompete contract to a firm with no reputation to speak of and a freshly bankrupted management team.

For the Spiers, the Berger windfall engineered a life-changing turnaround. And they might have lived happily ever after, too, except for one thing: They were defrauding the government, according to the Justice Department, filing phony receipts and billing for ghost employees to bilk millions of dollars from programs aimed at rebuilding the country's war-ravaged infrastructure. (The case will go to trial in September.) Their alleged exploits, many of which have not previously been reported, offer one of the most vivid pictures yet to emerge from Afghanistan's Wild West contracting bonanza.

Tales of epic fraud—of double billing and bid rigging, of kickbacks and theft—have dogged the reconstruction efforts in Iraq and Afghanistan. Not only are taxpayers unwittingly enriching fly-by-night contractors, corrupt officials, and local power brokers, but unscrupulous operators are undermining the prospects for progress that US troops have given their lives to make possible.

And it's proven very tough to stop them. In Iraq, despite great efforts to improve accountability, investigations and audits have barely scratched the surface, Stuart Bowen, the special inspector general for Iraq reconstruction, has acknowledged. Afghanistan has received even less scrutiny. In conflict zones, it's always difficult to weed out fraudulent invoices from legitimate expenses, to discern patronage contracts from necessary ones. Afghanistan's cash-based economy, primitive infrastructure, corrupt government, and deteriorating security situation make it exponentially harder. With oversight woefully thin and auditors scarce, the bombed-out country has been a Disneyland for profiteers. "It's just a shame," says a former Louis Berger official. "That money should have gone towards the development of Afghanistan rather than into people's pockets."