U.S. tax money goes to Taliban

A prominent U.S. contractor in Afghanistan may have inadvertently funneled millions of dollars in U.S. taxpayer dollars to Taliban insurgents in the form of bribes and protection money, according to a review by the inspector general of the U.S. Agency for International Development (USAID).

The suspected payments were allegedly made by Afghan subcontractors of Development Alternatives, Inc. (DAI), a company based in Bethesda, Maryland that carries out USAID reconstruction projects in some of Afghanistan's most remote and risky war zones. Afghan representatives of the company in Jalalabad are also under investigation for charging kickbacks to Afghan companies in exchange for USAID contracts, according to the report.

A spokesman for the company said that it has fired 17 Afghan employees who operated at or near the company's Jalalabad office, and restored greater international auditing and oversight over the operations.

"We're doing outstanding, mission-critical development work right at the tip of the spear, and we're proud of it," said DAI President and CEO James Boomgard. "And DAI is leading the way in addressing those problems. Without giving up on our commitment to support U.S. Government efforts even in the most unstable regions of Afghanistan, we have, when necessary, closed down projects entirely, stopped working in problem areas, fired employees -- and done so in a very public, very accountable way, not through the back door -- and continually tightened monitoring and accounting procedures."

The review began with an examination of the costs of a British security company, Edinburgh International, on three USAID projects operated by Development Alternatives. The report found "no indication that Edinburgh International had misused funds to pay the Taliban or others in exchange for protection," noting that it had "employed a strong system of controls over cash transactions."

However, U.S. and DAI officials "expressed concerns that insurgents may have extorted protection payments" amounting to as much $5.2 million in 2009 from Afghan representatives carrying out projects in remote areas under the USAID-funded Local Governance and Community Development program.

The program is designed to show residents in contested regions of Afghanistan that the U.S.-backed government is capable of providing basic services. An indication of the dangers of working in the region, DAI officials said, came Sunday, when a female British employee of the company, together with three Afghan nationals, were abducted between Jalalabad and Kunar province.

While the report does not assert that DAI's international officials paid any money to the Taliban, it cites lax oversight, noting that many projects are subjected to virtually no monitoring. "Neither USAID nor DAI could provide reasonable assurance of preventing USAID funds from going to the Taliban or others in exchange for protection while trying to implement community development projects in a war zone and in insurgency stronghold areas where little or no monitoring can be conducted," the report stated.

In response to the report, USAID's Afghanistan director, Earl W. Gast, said the U.S. agency has instructed DAI to tighten up its financial controls, but he vowed to continue the program in contested areas, noting that it is "designed to turn communities away from the insurgency and towards the Government of the Islamic Republic of Afghanistan."

"The core operational aspects of the program include working in unstable areas that pose risk," he added. "USAID is accountable for deploying its stabilization programs and field staff as far forward as possible in partnership with our U.S. civil military partners on the ground, to contribute to ultimate victory over the insurgency."

Gastquestioned the strength of some  of the evidence the Inspector General has presented to demonstrate that the practices are endemic in USAID programs, and he said the Inspector General did not provide supporting documentation for its allegations that fraud occurred in Jalalabad."This report riddled with ‘may haves', ‘likelies' and ‘mights'," said Steven O'Connor, a spokesman for DAI. "It's all very speculative." The Inspector General's report countered that it does not release evidence that could compromise ongoing fraud investigations.

The Inspector General's probe was triggered after a series of online and newspaper articles  -- including this piece in Global Post -- documented the diversion of millions of dollars in U.S. aid money to the Taliban. But DAI insisted that it took the initiative in bringing the corruption case in Jalalabad to the attention of the investigators. "Where there are problems or suspected problems," said Boomgard, "it is DAI that has brought them to USAID's and the Inspector General's attention -- showing collaboration that has been, in their words, ‘superb.'"

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