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Pentagon gives large fuel contract to secretive firm

By Andrew Higgins and Walter Pincus
Thursday, November 4, 2010; A03

In a move that could anger a vital ally in the war in Afghanistan, the Pentagon on Wednesday awarded a major jet fuel contract to Mina Corp., a secretive company that has declined to reveal its ownership but has nonetheless become a trusted partner with the U.S. military.

The contract, which may be worth more than $600 million, covers supplies for a U.S. Air Force base in Kyrgyzstan, an impoverished former Soviet republic where public anger over alleged corruption in jet fuel deals has helped topple two presidents in the past five years. All American troops entering and leaving Afghanistan pass through the American base outside the Kyrgyz capital, Bishkek. The base is also home to aero-tankers that refuel U.S. aircraft operating over Afghanistan.

The Pentagon's dealings with Mina and an associated firm, Red Star Enterprises, have been under investigation for the past six months by the House subcommittee on national security and foreign affairs. Since the Afghan war began, the companies have come from nowhere to win Pentagon contracts worth about $3 billion.

Congressional investigators, people close to the inquiry say, have found no evidence of wrongdoing but, in a report due later this month, will fault the Pentagon contracting process as paying little heed to the diplomatic and strategic fallout of deals cloaked in secrecy.

Wednesday's announcement of a new contract for Mina, which is registered in Gibraltar, follows a bitter row between the White House and the U.S. Central Command over how much information should be disclosed about the jet fuel deals. When the Pentagon awarded a contract to Mina last year, it cited unspecified "reasons of national security" to avoid competitive bidding. The contract announced Wednesday, by contrast, followed a review of rival offers by different firms.

"We understand how it looks. We are trying to change how it looks. . . . We are not hiding anything extraordinary," said a senior Defense Department official who spoke on the condition of anonymity. The goal, he said, is "maximum transparency."

In a statement, the Pentagon said the Defense Logistics Agency selected Mina out of nine companies that bid for the contract, which is initially for one year and valued at $315 million but includes a possible extension of another year. Previous one-year contracts awarded to Mina and Red Star have usually been extended.

Rep. John F. Tierney (D-Mass.), who heads the congressional subcommittee investigating the deals, said in a statement Wednesday that the competitive bidding process marked "an important step forward." He urged the Pentagon and Kyrgyz authorities to "work together to ensure transparency" and "maximize mutual confidence . . . in the integrity of contracting."

Contracting regulations do not require that companies detail their ownership, even though U.S. law makes it illegal to do business with firms owned by certain individuals and countries.

The refusal of Mina and Red Star to make public their owners, the Pentagon official said, "creates smoke. It raises questions. What are they trying to hide? We recognize this." But he added that there is no evidence of "any fire" that would disqualify the firms.

Mina and Red Star are controlled by Douglas Edelman, an elusive California businessman who used to run a bar and hamburger joint in Bishkek, and a young Kyrgyz partner, Erkin Bekbolotov, according to people familiar with the business. Bekbolotov, in a recent interview with The Washington Post, said the firms have about 450 employees. But he declined to say where they are, citing security concerns.

The firms' secrecy has fueled allegations of corruption, particularly from officials in Kyrgyzstan. Representatives of the companies have steadfastly denied those claims, and have said their low profile is essential for firms that operate in countries where there is hostility toward U.S. interests.

Kyrgyz President Roza Otunbayeva, a former ambassador to Washington who took power after violent protests in April, has denounced Mina and Red Star and demanded that they be banished in favor of a state-controlled Kyrgyz-Russian fuel venture. She raised her concerns in a September meeting in New York with President Obama.

The senior Defense Department official said Washington is "not dismissing their concerns" and could still give business to the proposed Kyrgyz-Russian joint venture. But, he said, "the bottom line for us is that we have an uninterrupted and secure supply so we can continue the war fight."

The announcement of a new contract for Mina comes at a sensitive time in Kyrgyzstan. The country is now struggling to form a new government following parliamentary elections last month.

The final results, announced Monday after weeks of delay, boosted the clout of politicians who oppose Mina and Red Star. These include Omurbek Babanov, who controls interests in a rival fuel company.

higginsandrew@washpost.com pincusw@washpost.com

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