From the Los Angeles Times

Pentagon official is under investigation

Undersecretary Paul Brinkley, who heads efforts to boost business in Iraq, faces allegations of mismanagement.

By Molly Hennessy-Fiske
Los Angeles Times Staff Writer

August 27, 2007

WASHINGTON — A Bush political appointee and former Silicon Valley executive who has faced opposition in his bid to bail out Iraq's struggling factories is under investigation by the Defense Department on mismanagement allegations.

Deputy Undersecretary of Defense Paul A. Brinkley, who heads an economic task force in Baghdad, is accused of mismanaging government money and engaging in public drunkenness and sexual harassment, a Defense Department spokesman said last week.

The allegations stem from a 12-page memo filed this month by two former members of the task force. The charges are being investigated by the Defense Department's Office of the Inspector General.

Bob Love, director of operations for the task force, said he was shocked by the allegations, saying they were related to "personnel issues." He said the former task force members were dismissed before they filed their complaint.

"As someone who has traveled extensively with Mr. Brinkley, I don't believe any of that is substantiated," Love said, speaking for Brinkley, who is on vacation. "He has dedicated his life to this effort."

Although Brinkley has won support from military commanders for his campaign for taxpayer-funded investment in Iraqi factories, the plan is opposed by State Department officials here who believe the former state-run factories should be privatized.

Brinkley has argued that Iraqi factories need a jump-start to compete with the international companies now serving Iraq, importing everything from fruit to air conditioners.

"They're so worried about having socialism here," Brinkley said of his critics at the State Department. "The free market already won. A free market will take hold -- they just need a shot."

But critics note that despite Brinkley's efforts and millions spent on the factories, only nine of about 200 have been restarted, creating about 4,000 jobs -- fewer than the 11,000 Brinkley's task force projected in December.

Only one U.S. company has contracted with the factories. And the task force's "Buy Iraqi" campaign, which Brinkley launched this month at a news conference in Baghdad's fortified Green Zone, has not yet convinced big retailers that Iraqi factories can deliver on orders, given the country's fragile infrastructure and poor security.

Brinkley is asking U.S. department stores to create "Buy Iraqi" sections in the holiday season to market leather coats and handbags from Baghdad, hand-woven carpets from Kirkuk and clothing with hip-hop motifs from Mosul.

Sami Araji, the deputy minister for industry and mining, said Iraqi goods could compete against low-cost imports from countries such as China, India and Thailand, and he hoped that American shoppers would see them as a way to help the Iraqi economy.

Only Memphis-based Shelmar Inc. has signed on so far, ordering 2,000 items from a youth clothing line for its Marty's apparel stores.

Spokesmen for JC Penney and Wal-Mart said they were not negotiating contracts with the factories. Araji said talks were underway with other major U.S. department stores in a handful of cities as well as with British and other European retail giants.

Brinkley acknowledged that Iraq was still too risky an investment for many companies, and cited that as a reason why the government needed to rebuild existing facilities, rather than bank on attracting new ones. Many of the 600,000 furloughed state workers lack the skills for the service industry jobs the State Department hopes to attract.

"If you haven't created an economy, an industrial base, you can't grow," he said on a recent visit to an automobile factory in Iskandariya, just south of Baghdad, gesturing to workers assembling a bus. "This is industrialization. This is sustained employment. We could blow this country open with industrial activity."

In 2003, the Coalition Provisional Authority deemed the factories obsolete, shuttered most of them and rewrote Iraqi law to bar further state investment. Four years later, unemployment is at 60%, with the average worker supporting eight dependents, twice the U.S. average, Brinkley said.

On the visit to the Iskandariya factory, Brinkley came bearing checks for $5.4 million, part of $50 million that Congress earmarked this year for the task force.

The highlight of the visit was the factory floor, in a warehouse the size of an airport hangar. Visitors walked past scores of workers welding and painting metal bus chasses, across a floor strewn with painted panels, the air thick with the smell of paint and turpentine.

Brinkley first visited the factory a year ago, at the urging of military commanders who saw it as a strategic investment, straddling a fault line between Sunni and Shiite Muslim areas. At the time, the assembly line was all but idle. Today, despite sectarian tensions, the factory has not been looted or attacked, leaving necessary machinery intact.

The undersecretary believed that reopening the factories could defuse sectarian tensions by stimulating trade among neighborhoods and regions. Many military commanders agreed, and threw their support behind him.

"They recognize the value of getting as many unemployed young Iraqis off the streets and into productive employment," said Col. Steven A. Boylan, spokesman for Army Gen. David H. Petraeus, the commander of U.S. troops in Iraq.

"They have helped Brinkley with his effort and they are pleased to see it coming to fruition, as his initiative is an important element in the overall economic effort."

State Department officials disagree. They say the Iraqi factories are bound to fail, even with the infusion of cash. Almost all face major security risks to their supply chains, lack well-developed shipping networks and will probably drain the country's strained electrical grids, a Western official said, speaking on condition of anonymity.

A better alternative, he said, is privatization -- opening up the factories and other Iraqi businesses to private investment. State Department officials are developing private trucking lines to help profitable Iraqi companies deliver goods. They plan to boost private service industries rather than manufacturing, which has never been a large part of Iraq's economy, they say.

The auto factory that Brinkley visited has yet to turn a profit, and until last year was producing only a dozen buses annually, mostly to keep workers' skills updated, a military spokeswoman said. Although managers say its products are priced competitively compared with firms in neighboring countries, they have yet to find major buyers in Iraq.