Image: Fuel tankers drive through the western Iraqi desert
Charles J. Hanley  /  AP file
National Guard troops guard a tanker truck entering al-Asad Air Base in Iraq in March 2006.
By Investigative producer
NBC News
updated 6/18/2008 4:00:34 PM ET 2008-06-18T20:00:34
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Editor's note: NBC News has learned that this story has sparked a congressional investigation. Click here to read more.

A little-noticed civil lawsuit in Florida is shining a light on an unusual but hugely profitable Pentagon contract to ship millions of gallons of aviation fuel to U.S. bases in Iraq through the kingdom of Jordan.

The deal involves a cast of influential characters, including the king of Jordan’s brother-in-law, who is suing Harry Sargeant III, a top Florida-based fundraiser for Sen. John McCain's presidential bid.

Sargeant is a Florida businessman and former Marine Corps pilot hailed by the McCain campaign as a "Trailblazer" for raising $100,000 or more in political donations. Through a company called International Oil Trading Co., or IOTC, Sargeant and a partner have a lucrative contract worth hundreds of millions of dollars per year to supply American military forces in Iraq with fuel, especially aviation fuel. The firm ships the fuel to Jordan and then trucks it across the border, where U.S. forces escort the convoys to air bases.

Sargeant’s IOTC has experienced phenomenal growth since the Iraq war started, transforming itself from an unknown business in 2004 to a major Pentagon contractor in only a few years.

The way the American military structured the deal, only a company with the blessing of the Jordanian government could win the contract.  A bidder was required to have a Jordanian government "Letter of Authorization," and only IOTC received such a letter.

The lawsuit against Sargeant was filed April 10 in Florida state court by Mohammad Al-Saleh, who is married to the half sister of King Abdullah of Jordan. Al-Saleh’s suit says he essentially brokered Sargeant's contract by arranging the approval and cooperation of the Jordanian government, using his "connections and influence." The lawsuit alleges that Al-Saleh arranged for the Jordanian government “to issue a letter of authorization to IOTC.” Al-Saleh’s lawyer, Jonathan Frank, said, “Were it not for my client, they would not have been able to get that letter.”

‘Whoever got the letter got the contract’
"Without the letter, you can't bid," Al-Saleh said in an interview with NBC News. "Whoever got the letter got the contract."

Al-Saleh says he also arranged a deal with a company owned by the Jordanian Army which ensured that oil could be offloaded at a Jordanian port "without interference, bureaucratic or otherwise." So in essence a Jordanian Army-owned company was operating as a subcontractor in the IOTC deal.

A representative of IOTC, speaking on condition of anonymity because the company has not yet responded to the lawsuit in court, denied Al-Saleh’s contentions. “He did not arrange that deal with the Jordanian military,” the representative said. The IOTC representative also said Al-Saleh was not the key figure in obtaining the letters of authorization which were so crucial. The IOTC representative acknowledged that Al-Saleh played a role in obtaining one of the letters of authorization.

Jordan is a close U.S. ally in the Middle East. Although Jordan is not an oil-producing country, unlike other neighbors of Iraq such as Saudi Arabia or Kuwait, the Pentagon had insisted that fuel be brought in through Jordan.

IOTC has won three successive contracts to perform the work. The company — a partnership between Sargeant, Al-Saleh and a third man — first won the Pentagon Iraq fuel contract in 2004 with another company. When the Pentagon put the contract up for competition in 2005, IOTC, now incorporated in Florida, won with a bid of $213 million, even though other companies offered lower bids. The Defense Energy Support Center, or DESC, which awarded the contract, said in a statement to NBC News that none of those lower bidders met contract requirements.

Then, in 2007, when the Defense Department put the contract up for bid again, IOTC won again.

Latest contract worth $913 million
The latest IOTC contract is worth $913 million over two years. For 2007 the obscure company was the seventh-largest fuel provider to the U.S. military worldwide, sharing the list with such giants as BP, Exxon and Shell, according to Aviation Week’s Aerospace Daily and Defense Report.

The Pentagon confirmed to NBC News that IOTC was not the lowest bidder in 2007, but said it was the only company that had the required letter from the Jordanian government. In an e-mail, a DESC spokesman said "the decision was made on the basis of best value rather than low price. The award was made to a firm that had a higher price, but was rated higher from both a technical capability and past performance standpoint."

According to minutes of a company meeting in Amman attached to the lawsuit, Sargeant tried to exclude all rivals from the Pentagon contract and pushed for "maximizing profits by getting all the contracts and not leaving hope for the competitors."

The 2007 contract is potentially extremely profitable. For each gallon of jet fuel that is delivered to the U.S. military in Iraq, IOTC charges the Pentagon $1.08 over the market price. That $1.08 "differential" includes costs, such as transportation and security and profit.

Company says risk merit reward
Ron Uscher, a lawyer for IOTC, would not confirm the profit margins, but he said it was an extremely dangerous contract to perform. "There are risks involved," he said. “There are mishaps and misadventures along the way — road accidents in Jordan, hostile acts once we cross the border and go to areas in Iraq."

Al-Saleh alleges in the lawsuit that after he arranged the deal, he was cut out in a scheme meant to defraud him. He claims that he and Sargeant and the third partner, Mustafa Abu-Naba'a, a Jordanian businessman, had invested in IOTC Jordan in 2004. But, he says, Sargeant and Abu-Naba'a committed fraud by forming another company called IOTC USA in Florida without informing him and by channeling the Pentagon contracts through that firm. Al-Saleh is suing Sargeant, Abu Naba’a and the company for $13 million as his share of the profit from the 2005 contract, plus an unspecified amount of profit from the 2007 contract.

The IOTC representative who spoke on condition of anonymity denied Al Saleh’s allegations. He says Al Saleh knew that Sargeant and Abu-Naba’a were running the contracts through a different company and had agreed to the arrangement.

Sargeant has been politically active in Florida, chiefly as a supporter of Gov. Charlie Crist. He is finance chairman of the Republican Party of Florida. In March he hosted a $2,300-a-seat fundraiser for Sen. John McCain in Florida, according to the Palm Beach Post.

McCain's office declined to comment.

Aram Roston is a producer with the Investigative Unit at NBC News. He is the author of the newly published "The Man Who Pushed America to War: The Extraordinary Life, Adventures and Obsessions of Ahmad Chalabi."

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