The U.S.-led Coalition Provisional Authority governing Iraq denied on Tuesdayclaims thatcontracts to build an Iraqi cellphone network had been put on hold to investigate allegations of nepotism.

“The CPA does not require, has not requested and is not carrying out further investigations into the winning companies and their investors,” said Charles Heatly, spokesman for the CPA.

U.S. officials told the Financial Times on Monday the CPA had been advised to put on hold hundreds of millions of dollars worth of mobile telephone contracts, while they investigate allegations that the bidding process was hijacked by associates of the new Iraqi governing council.

When the Iraqi Ministry of Communications last month awarded three Middle Eastern consortia two-year licenses to build and operate wireless phone networks, the deals were heralded as a breakthrough for regional operators willing to invest in the new Iraq.

But a U.S. administration official speaking on condition of anonymity said the U.S.-led Coalition Provisional Authority in Iraq has been advised to postpone signing the contracts. CPA lawyers in Iraq made the recommendation to delay signing the contracts for 10 days to allow time to investigate claims of cronyism by the Iraqi authorities in awarding the licenses, the official said.

At the Pentagon, the Department of Defense’s Inspector General has separately been asked to investigate how the telecom licences were awarded.

The request is understood to focus on the role of Nadhmi Auchi, the Iraqi-born billionaire businessman, in the Orascom group, one of the successful consortia.

Another senior CPA official said the U.S. occupying authorities have been struck by the resilience of corrupt business practices in Baghdad, where members of the new Iraqi regime have used power for personal gain.

Commenting on the Iraqi ministry’s award of the licenses, a U.S. official said on Monday: “The question is who did what due diligence, and when?” Amid increasing suggestions of cronyism in handing out contracts, the CPA is preparing to establish a new Iraq Infrastructure Reconstruction Office to oversee how contracts are awarded.

Haider al-Abadi, Iraq’s communication’s minister, dismayed the CPA last month when he announced that he would hold discussions with the three winners about awarding a fourth license before their contracts had expired, the official said.

© The Financial Times Ltd 2013. "FT" and "Financial Times" are trademarks of the Financial Times.

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