Sunday, October 28, 2007
Tainted by Corruption or an Innocent Victim?
By Glenn R. Simpson
The Wall Street Journal
CAMP ARIFJAN, KUWAIT Marshall Gutierrez was classic military material, a working-class kid whose father and both grandfathers served in the armed forces.
He joined the Army and marched steadily up the hierarchy, ultimately becoming a lieutenant colonel and chief logistics officer at this sprawling base in Kuwait. His Army record was spotless, and he developed a reputation as a bit of a straight arrow.
So it isn't surprising how Gutierrez reacted in 2005 when he discovered signs of rampant overcharging by the Army's main food supplier for the Iraq war. Bags of Coca-Cola syrup available in the U.S. for about $10, for example, were going for $90. He blew the whistle.
That triggered a massive probe of Kuwait-based Public Warehousing Co. that is raising questions for such major American food companies as Perdue Farms Inc. and Sara Lee Corp., and is shaping up as one of the biggest fraud probes of the Iraq War.
Then, the tables turned. The Kuwaiti contractor accused Gutierrez of seeking bribes, setting in motion a bizarre chain of events that left his military career and his 22-year marriage in ruins. On Sept. 4, 2006, he was found dead in his quarters at the age of 41. Next to his body were an empty container of prescription sleeping pills and a jug of antifreeze.
The story of Lt. Col. Marshall Gutierrez, who Army investigators allege wound up tainted by the very corruption he complained about, is one thread in the expansive fraud and corruption investigation into firms supplying food to troops in Iraq. The Justice and Defense Departments are investigating overcharging and possible favoritism in awarding of contracts. Gutierrez's role in the inquiry emerges from interviews with military officials, contractors and others involved, as well as e-mails, letters, court filings and other written material.
Marshall Gutierrez grew up in Las Vegas, a descendant of farmers who received Spanish land grants to settle the area. He was a driven and intensely proud man, both of his achievements as a soldier and his Hispanic heritage, says his widow, Brenda, also a Las Vegas native.
The two met a quarter-century ago at a church event. He was 15, she was 13. At the age of 16, Brenda was pregnant a harsh predicament for two teenagers in a small community. "His mother offered to send him away to another school elsewhere in the state, and he didn't. He married me," Brenda Gutierrez recalled. "This was not a guy that ran away from trouble or from any type of a difficult situation."
They married two years later, and he started serving in the Army National Guard the next weekend. He worked his way through college on a scholarship from the Army Reserve Officers' Training Corps and became a commissioned officer in 1987.
The couple commenced the itinerant life of a military family, bouncing from Newport News, Va., to Colorado Springs, Colo., to Saudi Arabia after the 1991 Persian Gulf War. In Panama, Gutierrez led the 1097th Transportation Company, which moved materiel and, in 1994, won a prestigious Army award.
"He was a hard charger. He did not accept any sort of failure," recalls Sgt. Sean Kelly, who served under him.
Eventually, Gutierrez rose to the rank of lieutenant colonel, and, in 2005, he shipped out to Camp Arifjan in Kuwait, a large logistics and staging facility with fast-food restaurants and Internet cafes.
Camp Arifjan is now at the center of U.S. inquiries into contracting corruption. One Saudi catering company, Tamimi Global, allegedly had a "party house" frequented by contractors and military contract officers, according to a sworn statement in July 2006 by a former Army officer, contained in U.S. court records.
Camp Arifjan sends truck convoys to Iraq every day. Most freight is handled by Public Warehousing, which began as a modest Kuwaiti government spinoff. Now publicly traded, it is one of the largest transport companies in the world. Under a series of contracts worth more than $6 billion, Public Warehousing is designated a "prime vendor" for virtually all food served to U.S. forces in Iraq and Kuwait some 150,000 stomachs.
Within months of arriving in Kuwait, Gutierrez clashed with Public Warehousing over its prices, according to e-mails he sent that are now part of the Army record of the case.
Gutierrez began sending information via e-mail to Gary Shifton, a top official at the Defense Supply Center in Philadelphia. In November 2005, Pentagon officials launched an investigation focused on the company's pricing agreements with suppliers.
Investigators are looking into whether Public Warehousing passed along high prices from its suppliers to the military, then was improperly compensated by those suppliers through large rebates and discounts, court records and the people involved say. One focus is Sultan Center, a supplier with close ownership and managerial ties to Public Warehousing, which refunded to Public Warehousing some 10 percent of its military sales.
Public Warehousing says in a statement that its prices include "not only the cost of the food it supplies, but also the costs associated with storing, handling and delivering it at multiple locations in a war zone." More than 30 of its employees, it adds, have been killed on the job.
Gutierrez and his aides began systematically analyzing Public Warehousing's prices.
They were getting help from Public Warehousing's chief competitor, Tamimi Global. In January 2006, Tamimi's director of operations in Iraq and Kuwait, Shabbir Khan, gave Gutierrez and others a spreadsheet comparing Public Warehousing's prices to the local market.
At the time, Khan was already the subject of an investigation into fraud and bribery at Camp Arifjan. He was subsequently convicted. A spokesman for Tamimi says Khan's conduct occurred without company knowledge. Army officials say the Tamimi investigation is continuing, and investigators are looking into Khan's contact with Gutierrez. Tamimi is cooperating, its spokesman says.
A week after he received the spreadsheet from Khan, Gutierrez submitted his own analysis to superiors at Camp Arifjan. "I have started looking at the items we are purchasing from Public Warehousing," he wrote to the camp's commander. "We are being charged way too much for food."
Two days later, on Feb. 8, 2006, Shifton of the Pentagon's contracting office in Philadelphia sent an e-mail to Public Warehousing declaring "the urgent concern is that we are paying too much" for local items from Sultan Center.
That triggered alarm at an outside consulting firm used by Public Warehousing to help it deal with the Pentagon. A few hours after Shifton sent his e-mail to Public Warehousing, an executive at the consulting firm, Professional Contract Administrators of Albuquerque sent an e-mail marked "URGENT" to Public Warehousing.
It advised Public Warehousing's chief executive, retired Navy officer Charles "Toby" Switzer, to "fire somebody, blame it on them and cover up" by revising local-market prices. "ASAP THIS IS VERY SERIOUS." Switzer forwarded the messages to subordinates, adding that he agreed, "except the firing part."
Public Warehousing officials say the tone of the e-mails is misleading. The company, they say, was merely seeking to be attentive to customer complaints.
On Feb. 12, Switzer met with Gutierrez and other contracting officials and promised a thorough price review.
But soon Gutierrez was making decisions that weren't good for Public Warehousing or Sultan Center. In early May, for example, he requested that some $21 million in purchases of vegetables, dairy and baked goods be shifted from Public Warehousing to Tamimi.
In July 2006, the investigation took a strange turn. Gutierrez met at Camp Arifjan with Public Warehousing sales executive Mike Abdul Rahman. He passed Rahman a note which read: "I need 1,000 KD, can you help?" according to an affidavit from an Army investigator. KD is the abbreviation for Kuwaiti dinars, and 1,000 are worth around $3,500.
Rahman informed other officials at Public Warehousing, the company said.
While company executives debated what to do, the two men met again Aug. 6. On Aug. 9, case documents state, Switzer approached one of the most senior officers at Camp Arifjan, Brig. Gen. Raymond Mason, and revealed the alleged bribe solicitation. The general referred the matter to criminal investigators.
On Aug. 13, Gutierrez and Rahman met again, this time at the officer's home. They allegedly discussed a $3,500 payoff in exchange for information on fuel and laundry services contracts, the Army case record states. The officer claimed to need cash because he had taken a young Kuwaiti woman as a girlfriend, according to an affidavit.
At the time, Brenda Gutierrez, who had been living with her husband in Kuwait, had returned to the United States to attend to a sick relative.
Days later, in a phone call from a former housekeeper in Kuwait who was angry about being fired, she was told her husband had married the Kuwaiti.
On Aug. 18, Rahman met Gutierrez at an upstairs corner table in Diva's, a restaurant. Rahman was wearing a hidden microphone. Kuwaiti and Army criminal investigators were monitoring from nearby, case records indicate.
The two men left in Gutierrez's car for Rahman's home, the case record says. As they drove, Rahman offered the officer a bundle containing 1,000 dinars, according to people with knowledge of the investigation. Gutierrez told him to put it in the car's console, they say. Agents surrounded the car and arrested Gutierrez.
Was it a setup?
The colonel protested he was being set up. His widow and a lawyer hired by his family now say they suspect he was framed by Public Warehousing because the company knew he had blown the whistle on it.
A spokesman for Public Warehousing says the company had merely "notified the government of a suspected corruption ring within the U.S. military in Kuwait."
After the arrest, Army investigators searched Gutierrez's home off the base and found alcohol and a magazine it termed pornography. Both are illegal in Kuwait.
They also found about $27,000 in U.S. and Kuwaiti currency and a two-week-old Kuwaiti marriage certificate, which described Gutierrez as the husband of an 18-year old Kuwait resident named Fatima Al-Rahdi.
Gutierrez was charged with bribery, mishandling secret information, accepting illegal gifts, illegal possession of weapons, alcohol and pornography and bigamy.
On Sept. 4, shortly after 9 a.m., Gutierrez went to a restaurant at Camp Victory, where he was awaiting court-martial proceedings, and bought $1.50 worth of muffins. Later that day, his body was found in his camp quarters. There was no note.
Two autopsies concluded he had died of poisoning from ingesting ethyl glycol, the active ingredient of antifreeze. The Army ruled his death a suicide.
In an interview, his widow expressed bewilderment about his death, which she is reluctant to characterize as a suicide. "The last time I spoke to him, he said, 'We're going to fight this.' The lawyer said it looks good. So there's no way."
Many questions remain. How did he meet his second wife and why did they decide to marry? What was the nature of Gutierrez's relationship with the Tamimi executive later convicted of bribery?
And, more broadly, how pervasive is fraud and corruption in the Army's food-procurement system? The amount in dispute in the Public Warehousing investigation is at least $100 million, according to people involved in the probe.
James Culp, a lawyer who represents the Gutierrez family, argues that evidence of corruption by the colonel is far from clear. The audiotape of the sting operation, he says, is hard to understand, and the other evidence is "weak at best, if it even existed." The Army says it cannot talk about the Public Warehousing probe because it is still open.
No evidence has been found indicating Gutierrez had any substantial hidden assets.
The government claims in a civil-forfeiture action that the $27,000 in cash is the proceeds of bribery. Brenda Gutierrez says she insisted that her husband have a large sum of cash on hand "to make sure we could get (the family) out of Kuwait fairly easy should something happen."
She says she doesn't know what to think about the purported second marriage. But she refuses to believe he was corrupt. "None of this stuff fits in his character at all," she says. "He had never been involved in anything like this, and he has been in several other positions like this where he had access to lots of money, millions and billions."
"I'm very upset that he was put in that situation in the first place," she continues, referring to his assignment to a base allegedly riddled with corruption. "Either way, whether he did commit suicide or not, the military has blood on their hands, in my opinion."