Accounts Deceivable: "They Were Double and Triple Billing"
On August 28, 2007, Afghan police, FBI and USAID agents, and Blackwater contractors descended on USPI's Kabul offices, weapons drawn. "Have you ever seen a dynamic entry, where people are clearing rooms out with guns locked and loaded and shoving a gun in your face? That's the way Blackwater did their entry into the house," says a former USPI supervisor. Agents seized computers and contraband weapons and carted off bags full of company records. Meanwhile, federal authorities were executing a search warrant at USPI's Texas headquarters. Since 2005, federal investigators had quietly been amassing evidence that USPI had defrauded the US government in connection with its USAID subcontracts. Now they were making their move.
Suspicions about USPI's business practices had been circulating through USAID's Afghanistan operation since the fall of 2004, according to Patrick Fine, who took over as the agency's mission director that July. "There wasn't anything obvious that made it look like there was obvious corruption there," he says. "My recollection is feeling from just a business point of view, feeling uncomfortable about our ability to verify the bills that we were getting. So you get a bill and it says they're employing 250 guys in a certain sector, at $5 a day. My recollection is of saying, 'How do we verify that this number of people actually worked for this number of days?' It was that kind of question being raised by USAID, by the project managers."
He continues, "That led us to ask questions like, 'Is there some system that you can audit to see that they're actually delivering what they say they're delivering?' As soon as USAID had some suspicion that there might be something awry in the business practices, we brought in the inspector general. There wasn't any delay or dithering there."
The resulting investigation confirmed Fine's concerns, and then some. The search warrant application seeking permission to carry out the Texas raid noted that USPI's initial Berger contract, awarded in June 2003 for $8.4 million, had ballooned to $36 million by August 2005—and it outlined a host of allegations pointing to the potential cause of some of those overruns. Investigators said they'd "obtained evidence showing that USPI deliberately and systematically created phony receipts and invoices to justify the billing of millions of dollars in expenditures for which USPI did not have supporting documentation."
An audit by accounting firm A.F. Ferguson & Company of USPI's billing records between June 2003 and March 2005 had turned up $17 million in costs that lacked "adequate documentation," and another $160,830 in charges that were deemed ineligible. "Officials for USPI initially claimed not to have most of the supporting documentation for the $17 million in questioned costs," according to the warrant application. "However, they later provided receipts and invoices to support the billings." These records, investigators determined, were fakes: "Government investigators learned from a witness that he, with the assistance of other USPI employees in Kabul, Afghanistan, and with the knowledge of Del Spier…witnessed and/or participated in the fabrication of receipts and invoices to support the $17 million in questioned costs." To make the invoices appear authentic, the USPI employee said, he and other employees were directed to deposit them in a warehouse where the company stored fuel.
There was more: Another USPI employee "stated that only about 50 percent of the guards for which USPI billed LBGI actually existed" and that Del Spier regularly overbilled for personnel. Not only were personnel records fabricated, this source said, but Del's executive assistant, an Afghan named Behzad Mehr, routinely created fake invoices from nonexistent companies for fuel and vehicles. According to one USPI informant, Bill Dupre, the company's operations manager in Afghanistan, instructed new employees to inflate costs in order to cover expenses like office supplies, ammo, and other items: "You were to put an extra 10 or 15 guards on the payroll that did not exist." The government alleged that "Del Spier knows about all these activities." It also claims that Barbara had been involved in the fraud as well, and had even been caught trying to deceive a federal auditor about invoicing Berger for an employee who was no longer working for the company.
After the raids in Kabul and Texas, the investigation churned on for more than a year. Then, in early October 2008, the feds swooped in, arresting Del and Barbara Spier in Texas and Bill Dupre in California. Also named in the indictment was Behzad Mehr, though a release issued by USAID noted that Del's right-hand man "remains a fugitive." (Several sources told me that Mehr was in fact imprisoned in a Kabul jail at the time, and he remains there today.) The four were hit with multiple fraud counts, charges that together carry prison sentences of up to 35 years and fines of as much as $1.5 million.
The indictment cites additional evidence of fraud, including a May 29, 2005, email exchange in which Mehr had requested Del Spier's permission to insert addresses and phone numbers on fabricated invoices. Not only did Del direct him to do so, the indictment states, but he also told Mehr "to obtain office space in the event that LBGI requested to see the companies' offices." According to court records, templates used to create phony invoices were discovered on computers belonging to Mehr and Barbara Spier. Image files containing the scanned signatures of MOI officials, presumably used to make invoices look genuine, were also recovered.
"They were double and triple billing for soldiers and screwing the contract on rental cars," a former USPI employee told me. "If they were renting a car for $750, they'd bill USAID $1,500. If they had 1,000 soldiers working, they'd get 3,000 thumbprints on the pay sheets and submit it." He adds, "These were the kinds of things they did."