By KATHERINE SHRADER and ALLISON HOFFMAN
The Associated Press
Tuesday, February 6, 2007; 10:16 PM
WASHINGTON -- CIA officers operating in northern Iraq bought drinking water from a bottling plant there for years prior to the 2003 invasion that ousted Saddam Hussein.
That changed soon afterward. A CIA officer handling logistics for the Middle East and other regions recommended that an American company provide water and other supplies, according to former government officials.
The U.S. contractor that benefited from the multimillion-dollar deal wasn't just anyone. The company had personal ties to the officer, Kyle "Dusty" Foggo, who would soon leave his logistics post in Frankfurt, Germany, and move to Washington to become the CIA's third-ranking official.
In at least one written communication, a Baghdad CIA officer complained about the no-bid contract. According to one official, the officer believed the deal was simply unnecessary because safe water was available commercially, but he was ignored.
The water contract, while small on the scale of the billions that flowed into Iraq, raises questions about why U.S. taxpayer dollars went to well-connected businessmen rather than Iraqis who could have benefited from a share of postwar reconstruction business. And the case provides a window into the murky world of covert government business arrangements.
Foggo retired from the CIA last year. He is now at the center of a federal investigation, nearing completion, into whether he improperly steered contracts to companies controlled by his best friend, San Diego defense contractor Brent Wilkes.
Federal prosecutors in San Diego are preparing to seek indictments against Foggo and Wilkes on charges of honest services fraud and conspiracy, two government officials familiar with the investigation told The Associated Press last week.
Those officials and others spoke on condition that they not be identified because the charges have not been finalized and because CIA contracting is classified. Justice Department and law enforcement officials in San Diego and Washington declined to comment.
Honest services fraud is a charge combining mail and wire fraud often used in public corruption cases involving officials who have engaged in a pattern of improper activities, such as accepting gifts, trips or promises of future employment from private individuals.
The probe of Foggo and Wilkes stems from a broader federal investigation involving at least five federal agencies into how associates of former Rep. Randy "Duke" Cunningham directed government business to a favored network of national security contractors. Cunningham, a San Diego Republican elected to eight terms in Congress, is currently serving more than eight years in jail for taking at least $2.4 million in bribes. Another defense contractor has pleaded guilty to paying some of them.
In June 2002, Wilkes created a government contractor called Archer Defense Technologies, which was registered to the address of his flagship, Wilkes Corp., in Poway, Calif. The company also used the name Liberty Defense Technologies. At the beginning of 2004, his nephew and apprentice, Joel Combs, formed a new company called Archer Logistics, run out of a small Virginia office.
Despite the short history of Wilkes' company, Foggo recommended that the CIA buy water from it, current and former officials said. He was a supervising officer at the CIA supply hub in Germany, and the purchasing officer there went along.
Foggo didn't tell the purchasing officer about his personal ties to Combs or Wilkes, a government official says. With CIA officers literally under fire and other large issues to deal with, the CIA station didn't put up a fight, former officials say.
The issue in the investigation isn't the price but that the contract was awarded without competitive bidding and that Foggo had an obligation to disclose his personal connections, according to these officials.
Foggo's former attorney publicly acknowledged before he died last summer that the investigation includes Archer, but he said his client had no idea that the company was associated with Wilkes. Foggo's current attorney, Mark MacDougall, declined to comment, as did Wilkes' attorney, Mark Geragos.
CIA spokesman Mark Mansfield declined to comment citing the investigation, which includes the spy agency's inspector general. "As a rule, we don't comment publicly about which firms may or may not have a contractual relationship with the agency," he said.
From the beginning of the Iraq invasion, the CIA was forced almost constantly to revise its game plan. Early predictions were that the CIA station set up in Baghdad would move to a peacekeeping mission by fall of 2003 and need less than 100 officers, with the Army handling most key functions.
Instead, the CIA had a station of more than 500 that fall, the former officials said. Sorting out where the water came from had never been a top priority, they recalled.
A veteran officer who served in Central America, Foggo rose through the ranks to become a leading logistics officer for the CIA based in Frankfurt, one of a few CIA bases of its kind in the world. In that position, he handled shipments of supplies on C-130 cargo planes to nearly a third of the CIA's overseas operations _ outfits in Central Europe, Africa, the Balkans and the Middle East that required everything from food and water to phones and computers.
Foggo, 52, was described as a guy who could get things done. When the U.S.-led coalition invaded Iraq in 2003, Foggo was in charge of ensuring CIA personnel in the war zone had what they needed, including bottled water.
The officials say the CIA turned to Foggo's friends, including Wilkes and his nephew, Combs. Wilkes, also 52, was Foggo's best friend from high school, and the two football teammates named their sons after each other. Combs used an address at an office park called Thunderbolt Place in Chantilly, Va., which was also used by other Wilkes' companies. The space in a two-story brick office park has now been vacated.
The review of the logistics operations in Iraq did not begin until after Foggo had been tapped by then-CIA Director Porter Goss to be the agency's No. 3 _ the executive director _ who would run the agency's day-to-day operations.
Such a significant promotion for a logistics officer came as a surprise to many in the agency.
Observers said Foggo embraced the role. He started sending out memos to agency personnel, signed "Yours in Service." He had a nickname for everyone, and he could be seen glad-handing his way through lunch at the CIA's seventh-floor executive dining room.
He and Wilkes also dined at a Washington steakhouse at the foot of Capitol Hill frequented by lobbyists, which caught the attention of a House Intelligence Committee investigator looking into ties between defense contractors and Cunningham. Foggo and Wilkes kept a private wine locker at the restaurant stocked with Cunningham's favorite, a pricey California cabernet.
The meteoric rise ended with a crash.
Foggo retired from the agency in May under investigation by five agencies: the FBI, the IRS, the Defense Criminal Investigative Service, the CIA's inspector general and the U.S. attorney's office in San Diego. A local news helicopter circled his house in the Northern Virginia suburbs as agents sifted through his belongings.
Wilkes' business and personal fortunes have also suffered. In the past two months, his wife has filed for a legal separation, and he has defaulted on a $7.5 million personal mortgage loan. His company, the Wilkes Corp., defaulted on $12.1 million owed on another note.
Associated Press writer Allison Hoffman reported from San Diego.