Arms fraud inquiry takes political turn

Times Staff Writers

A top-priority federal investigation of military procurement fraud in Afghanistan has been forced to shift direction because of a congressional panel’s allegation that a senior U.S. diplomat sought to cover up the scheme.

The accusation against the ambassador appears to be unraveling, however, and prosecutors are scrambling to assess the effects on a case involving what is considered to be one of the most serious procurement abuses in years.

The case centers on a Miami arms dealer who sold ammunition to the U.S.-backed Afghan army through a $298-million Pentagon contract. Investigators found evidence that the contractor bought millions of aging Chinese rifle and machine-gun cartridges stored in Albania during the Cold War, then had them repackaged and shipped to Afghanistan.

The arms dealer, who has been indicted and is facing trial in Miami, is free on bond after being arraigned last week. The government has halted all shipments from the dealer and suspended payments to his firm.

The prosecution was complicated when the chairman of the House Oversight and Government Reform Committee, Henry A. Waxman (D-Beverly Hills), said his panel heard from a witness last month that a U.S. diplomat may have played a key role in helping hide evidence of fraud.


Waxman, in a letter to Secretary of State Condoleezza Rice, cited information that John L. Withers II, the U.S. ambassador to Albania, had approved a plan to cover up the Chinese origins of the munitions being shipped to Afghanistan.

The U.S. prosecutor overseeing the case, racing to answer questions raised by Waxman’s allegation, took the unusual step last week of summoning Withers and five other senior officials from the U.S. Embassy in Tirana, Albania, to Miami, where a grand jury is taking testimony.

A lawyer for principal defendant Efraim Diveroli, the 22-year-old president of arms dealer AEY Inc., said the allegations from the committee might provide new grounds to seek dismissal of the case.

“It doesn’t appear to be a crime if the U.S. ambassador approved it,” said Howard Srebnick, the lawyer.

Important questions about Waxman’s allegations emerged last week as Withers spoke out for the first time in interviews with The Times, denying any embassy involvement in a cover-up and insisting officials there worked closely with investigators to secure evidence for the prosecution.

Withers’ version has been supported by at least four other U.S. officials. In addition, a criminal investigator working on the case credited embassy staff with providing “outstanding support” to the criminal inquiry, according to a Nov. 28, 2007, Defense Department e-mail that was reviewed by The Times.

“Far from covering this up, we were helpful to this investigation, and proud of it,” said Withers, a 24-year Foreign Service veteran. Withers has been given permission by State Department officials to speak publicly providing he does so as an individual and not as a representative of the U.S. government or the State Department.

The developments have sharpened tensions between State Department officials and Waxman’s committee, an aggressive panel that frequently embarrasses the Bush administration. Withers and his supporters say the panel moved too hastily in this case to publicize an erroneous allegation.

Withers’ decision to speak out is likely to further inflame the tensions and represents a rare instance in which a career diplomat personally and publicly challenges a high-ranking lawmaker.

On Saturday, he wrote Waxman to ask for a meeting “to refute the unfounded aspersions that have been cast upon the reputations of an outstanding and dedicated cadre of public officials.” He said Waxman’s conclusions were “wrong in their entirety.”

Diveroli has been the largest provider of munitions to the Afghan security forces, and the investigation that began last year led the U.S. military to reassess how it purchased arms for Afghan and Iraqi forces.

Investigators think AEY was buying the Chinese cartridges, having them repackaged by an Albanian subcontractor and shipped to Afghanistan. The ammunition was part of a mountain of aging and deteriorating munitions stockpiled in Albania.

The events that drew Waxman’s attention to Withers occurred Nov. 19, when, U.S. officials say, the Pentagon’s investigation was nearly complete. Differing accounts of what transpired that night are the source of the dispute over Withers’ role.

Withers said he received messages that a panicked Fatmir Mediu, then Albania’s defense minister, needed to see him.

Fearing the defense minister had news about terrorism or similarly grave problems, Withers agreed to meet him with other embassy officials. The meeting lasted from 11 p.m. until midnight.

Mediu told the U.S. officials he was upset by a call he received from a New York Times reporter, asking about past legal problems and possible corruption and asking to visit the airport the next day to see a munitions stockpile under ministry control, Withers said.

The airport also was the site of the AEY repackaging operation, which had been part of the U.S. investigation but was closed down by then.

Mediu begged Withers to help prevent a potentially damaging story. Withers said that Mediu, in an emotional state, had “outlandish” suggestions such as blocking the reporter’s access and repackaging the munitions to hide their Chinese origin.

Withers said that he and the other U.S. officials present gave no sign that they approved of his ideas, suggesting only that Mediu prepare a rebuttal to the article once it appeared.

Mediu resigned in March after an explosion at a nearby munitions depot that killed 26 people. The Albanian government has stripped him of immunity from prosecution. He has been accused of corruption but denies it.

One embassy employee who was at the meeting saw things differently, which drew Waxman’s attention.

Army Maj. Larry Harrison, a Defense Department aide in the embassy, said in an internal memo obtained by the committee that he believed the ambassador had approved of Mediu’s decision that night to order the removal of Chinese markings from the munitions.

Harrison also charged in memos that embassy officials overruled his suggestions for providing information to Waxman’s committee.

On the basis of Harrison’s memos and his comments to the committee, Waxman wrote a pointed letter to Rice on June 23 citing evidence that Withers “approved removing evidence” that the Albanian ammunition was actually Chinese.

Waxman’s letter, published on the committee’s website the same day, seemed to implicate Withers and others at the embassy in AEY’s scheme and was widely reported the next day.

Waxman’s letter also criticized diplomats for what he considered an inadequate response to committee questions, saying he sought answers on many occasions.

Withers said he was blindsided by Waxman’s public accusation, which he considered preposterous in light of the embassy’s cooperation with criminal investigators.

Waxman’s suspicion was fueled by the embassy’s failure to mention the Nov. 19 meeting after the committee had asked about contacts with Albanian officials “regarding AEY’s contract and activities.”

But Withers and others saw no need to report the meeting because the name of the arms dealer did not come up. At the time, AEY’s work in Albania had been suspended, and a member of the embassy staff worked to ensure that the defense minister did not endanger the criminal case.

Further, the meeting centered on the defense minister’s concern over a newspaper reporter, not government investigators, Withers said.

Waxman’s staff has said they remain interested in how the embassy handled the newspaper’s request to Mediu; the newspaper’s first article on AEY appeared several months later and detailed Albania’s stock of Chinese weaponry.

Withers and other U.S. officials said Harrison had since denied in private conversations that he intended to accuse Withers of wrongdoing, and had claimed that his words were taken out of context by the committee.

Harrison and his lawyer refused to comment. Waxman, in a statement to the Los Angeles Times, defended his panel’s work, saying it had been “methodical and careful.”

He said he was disappointed that Withers had not yet agreed to speak with the committee’s staff. The State Department on Thursday granted Withers and other embassy staff members permission to speak voluntarily to committee staff members.

“It is a significant development if embassy officials are being compelled to testify before a criminal grand jury,” Waxman said.

In 34 years in the House, Waxman has developed a reputation as a tenacious investigator. When Democrats regained control of the House last year, Waxman, as a newly seated committee chairman, assigned investigators to a range of subjects including Blackwater, the controversial private security contractor, and the role of the Bush administration in disclosing former CIA agent Valerie Plame’s identity.

Prosecutors at the U.S. attorney’s office in Miami declined to comment on the effect of the committee’s allegation on their case.

But former prosecutors and lawyers involved in the case said the allegation had raised sensitive issues by compelling prosecutors to take additional testimony after indictments had been returned.

Srebnick, the lawyer for Diveroli, has denied his client broke any laws, saying that the statute under which he was charged does not apply to munitions manufactured in China before a 1989 embargo. He said the Waxman letter opened up additional grounds to contest the criminal complaint.

Srebnick said he was concerned that grand jury testimony was taken from people he might want to call as defense witnesses, saying it could be “an improper use of a grand jury.”

Withers is incensed that Waxman’s letter could aid the defense and considers it one of the insults to his reputation and that of the embassy staff.

Withers, the son of a former director of the U.S. Agency for International Development, has served in a series of overseas posts and was director of the State Department’s Operations Center from 2003 to 2005.

“I do not know what House committee I can go to to reclaim my reputation,” Withers said.