Video: U.S. corruption in Iraq exposed

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updated 2/2/2006 8:10:17 PM ET 2006-02-03T01:10:17

Luxury cars, a $20,000 Harley Davidson motorcycle, $10,000 Breitling watches and mountains of cash were all part of an elaborate corruption scheme in Iraq which — court documents allege — involves at least seven Americans, including five Army reserve officers.

A former Iraq reconstruction official, Robert Stein, a convicted felon inexplicably put in charge of $82 million in contracts, pleaded guilty Thursday to corruption, bribery and weapons charges.

"He essentially funneled contracts to his cronies and received bribes," said Stuart W. Bowen, Jr., the Special Inspector General for Iraq Reconstruction, in an interview with NBC News.

Stein, 50, controlled funds in the South Central Region of the now defunct Coalition Provisional Authority, or CPA. He now admits stealing at least $2 million, and accepting at least a million dollars more in bribes. He used the money to buy automatic weapons and an airplane.

Stein also admits steering contracts to an American businessman, Phillip Bloom, who allegedly provided cash, fast cars, even sexual favors from women. Bloom was arrested and charged separately in November. His lawyer on Thursday did not comment.

In one e-mail, cited in court records, Stein tells Bloom that his contract money is coming through. "I love to give you money," he wrote, signing the e-mail, "Bob."

"It shows the brazenness of the people who were around those sums of money and what they thought they could get away with," says Frank Willis, a former official with the Coalition Provisional Authority who has criticized the way the CPA handled cash.

E-mails cited in court records indicate that some unnamed U.S. officials even demanded specific cars: a white SUV and an electric blue sports car.

And what about the projects that were supposed to be built or refurbished in Iraq? A series of audits by Bowen's office found major problems.

"There were millions of dollars in grants and contracts," he says, "that simply went for no work at all."

Bowen says cash was sloppily handled.

"The management of cash in Hilla was haphazard at best. We found that it was kept in footlockers of the trailers that people that lived there," he says. "There was a safe that wasn't locked in the bathroom of the office."

Some of the work that was done was shoddy, according to one audit. For example, a recently repaired elevator at Hilla General Hospital collapsed, killing three Iraqis.

The end result of it all on the ground in Iraq?

"The reconstruction efforts during the CPA, in the South Central Region, around Hilla, failed," says Bowen. "It failed because we had a person of significant responsibility, the person in charge of that money, the controller, simply committed repeated criminal wrongdoing."

The investigation is continuing. As part of his plea, Robert Stein has agreed to restitution of $3.6 million.

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