Welch pursuing investigation into why overseas contractors exempted from law

03/26/08 5:50PM By Bob Kinzel
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(Host intro) Congressman Peter Welch says he wants to know why the Bush administration is exempting overseas contractors from the fraud and fiscal abuse laws of the United States.

Welch says this is critically important, because over the past five years, more than 100 billion dollars has been spent on independent contracts in Iraq and Afghanistan.

VPR's Bob Kinzel reports.

(Kinzel) Welch is calling for a special investigation into this matter as a member of the House Oversight and Government Reform Committee. The chairman of the panel, California Rep. Henry Waxman, has announced his support for Welch's plan.

Last fall, the Department of Justice put rules into place to crack down on fraud in government contracts. The rules require independent contractors to report fraud or overpayment of government contracts if the abuse exceeds $5 million.

However, at the last minute, a provision was added to the rule to exempt all overseas contracts from the new regulations.

Welch wants to know why the Bush administration exempted these contracts - contracts that he says total hundreds of billions of dollars.

(Welch) "So the money that would be subject to this requirement is very substantial. I mean, the bottom line here is that we have to be intolerant of fraud, ripping off taxpayers. And we've seen that. There's been an immense amount of waste, fraud and abuse with money that's been spent on these government contracts in Iraq and Afghanistan. ...What this exemption would basically say to contractors is, `It's OK to rip off American taxpayers in Iraq and Afghanistan. Just don't do it in Vermont or Mississippi.'"

(Kinzel) Welch says there's no doubt in his mind that the exemption for overseas contracts was a conscious effort to shield these independent contractors from charges of fraud and abuse.

(Welch) "It was definitely a deliberate decision. What we don't know is who made it, on whose request was it done. But when you had the original draft that included, as it should, fraud prohibition in foreign as well as domestic spending, that had the recommendation of the Department of Justice and the Department of Defense. But at the last minute, the foreign provision was deleted, you know, the fix was in by somebody and we just don't know who."

(Kinzel) The House Oversight Committee plans to hold a special hearing on this issue in the next few weeks.

For VPR News, I'm Bob Kinzel in Montpelier

AP Photo/Alden Pellett

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