How U.S. taxpayer dollars may have bought a Kurdish strongman’s Beverly Hills mansions
27 Jul 2020

Bribing one politician is bad. Bribing all the politicians is worse. The U.S. Department of Justice is investigating a group of companies in Kurdistan, Iraq’s semi-independent northern region, that appears to be doing the latter in order to secure a monopoly on Pentagon fuel contracts worth hundreds of millions of dollars.

A previous New Republic investigation outlined how Kurdish and American firms used shell companies with connections to the Patriotic Union of Kurdistan, one of the region’s two major political parties, to dominate fuel sales to the U.S. military and inflate prices. But PUK-aligned groups aren’t the only ones cashing in on these American fuel purchases: A tangled network of corruption illustrates how ostensible rivals can cooperate to rip off the Defense Department.

According to Kurdish government documents provided to the Government Accountability Project, where I work, additional shell companies also connect the fuel-fleecing to the Kurdistan Democratic Party, the region’s other major political faction, led by former President Massoud Barzani and his powerful family, a clan of American-sponsored kleptocrats. The billionaire Barzanis are Kurdistan’s “unofficial monarchs,” said Kamal Chomani, a nonresident fellow at the Tahrir Institute for Middle East Policy and editor in chief of the Kurdistan Times, an independent news outlet. “We always referred to them as the Mafia,” said a former U.S. government adviser in Iraq, who requested anonymity to speak candidly.

The Barzani family’s assets span the globe. “It was never practical to keep track of that stuff,” a former U.S. anti-corruption official said about the vast Barzani holdings, which were spread from Syria to Switzerland. And, in an awkward twist, some of the millions swindled from the U.S. military may have ended up as investments in California’s luxury real estate market.

While the scope of the Barzanis’ wealth is vast, its source is simple: The money comes from Kurdistan’s rich oil and gas industry and deals like the Pentagon fuel purchases. Requests for comment sent to an adviser for Kurdish Prime Minister Masrour Barzani, as well as to a public relations firm that previously worked for the Barzani family, went unanswered.

Tracing the Kurdish fuel deals leads to a Virginia-based logistics company, DGCI. For at least half a decade, DGCI has been the Pentagon’s go-to fuel provider in Kurdistan and has been dogged by questions about its connections to Kurdish politicians.

Most recently, DGCI was contracted by the U.S. military to deliver wildly overpriced jet fuel, at rates as high as $10 a gallon, to an American base at the international airport in Erbil, Kurdistan’s capital. The Erbil airport is a key staging point for fuel deliveries into Syria, part of America’s continued involvement in that country’s civil war.

On the strength of such deals, DGCI’s annual revenue rose from $2 million in 2015 to about $150 million in 2017. That year, it was the fastest-growing corporation in the state of Virginia and No. 20 in the nation, “with three-year revenue growth of 10,999 percent,” according to a 2017 Virginia Business article.

This kind of stratospheric growth isn’t normal, particularly for a firm that only boasted 10 employees at the time. It’s not like DGCI invented the iPhone.

A Kurdish government–backed concession, rather than business genius, explains the windfall. “[DGCI] is the only contractor known to have successfully delivered gasoline and diesel fuel” to the Erbil airport, said a 2015 Pentagon justification letter, the first of many such letters, which awarded exclusive contracts to the company without “full and open competition.” In December 2019, the DOD attempted to award fuel contracts to two other logistics companies, Varec and Strategic Social. But the Kurds prevented the other companies from making deliveries, and the Pentagon ended up purchasing fuel from DGCI at even higher prices.

Repeated requests for comment from Varec, Strategic Social, and DCGI went unanswered. Instead, DCGI officials have warned employees not to speak to reporters about allegations surrounding the company’s business. When I sent follow-up inquiries to company officials from my work email, they were bounced back by the server.

In Kurdistan, monopolies happen because you have power or pay off those who do. DGCI is paired with a Kurdish conglomerate called Zozik Group; together, they share ownership of a subsidiary called Triple Arrow. Zozik, which did not respond to my requests for comment, has faced long-standing allegations that it’s a channel for bribes to PUK officials, as detailed in the earlier New Republic investigation.

But PUK connections alone don’t explain DGCI’s overpriced deliveries to Erbil, which is outside the party’s primary territory. Even early in the U.S. occupation of Iraq, State Department officials conceded internally that corruption in Erbil “centers more on the Barzani clan,” according to diplomatic cables published by Wikileaks. In Erbil, “the Barzanis have to have at least half of the shares of big businesses,” said Abdulla Hawez, a Kurdish journalist and researcher. Sources said that Zozik and DGCI cooperated with companies linked to Barzani’s Kurdistan Democratic Party bloc in order to deliver fuel to the U.S. government.

Identifying the details of each participating shell company, along with the relationships between participating political factions and proxy owners, is complicated and requires incredible attention to detail to even partially unravel. Sources identified a massive network of companies and political leaders designed to grease rails in Erbil, Baghdad, and Syria. Within the network, there is infighting between different factions and companies, and affiliations can change. But leaked Kurdish government documents make one thing clear: The Barzanis are major players.

A December 2017 memo from the Kurdish government’s Regional Security Council granted special privileges to DGCI and its Zozik-connected subsidiary, Triple Arrow, along with a third, related, subcontracting company, called Rainfloods. They were to be “the only companies vetted and approved to deliver fuel products to Erbil International Airport,” the memo said, decreeing that with one narrow exception for civilian fuel business, “no other companies will be given access.”

No one from Rainfloods responded to requests for comment, and public information about the company is limited, but three sources in the Iraqi fuel industry identified Rainfloods as a DGCI partner, owned by Mansour Barzani, brother of the prime minister and head of Kurdistan’s special forces. “Everyone knows Rainfloods is owned by Mansour,” one of them said.

The Barzanis put muscle behind the monopoly: “If I want to take a small jug of fuel [to the airport], my boss must get authorization from airport security,” one worker at the airport told me. According to the 2015 DGCI justification letter, an unidentified company tried to deliver fuel to the U.S. military by breaking through the airport’s security barrier and was permanently banned.

“The fact that no one else has access [to the airport], right then and there, means you’re dealing with a corrupt individual,” said Gary Kalman, the U.S. director of Transparency International, an international anti-corruption organization.

Earlier versions of the Kurdish government memo also reveal Barzani influence. In 2016, PetroKgas—another company with links to the KDP—was also granted access to the Erbil airport. PetroKgas is owned by a former Kurdish government economic adviser, Emad Ballack, who recently served in an honorary Ukrainian diplomatic position in Erbil. “Long live our beloved president BARZANI & God bless America,” Ballack had tweeted the previous fall, when the U.S. recognized Massoud Barzani as Kurdistan’s president. Ballack did not respond to requests for comment.

Documentation of this knot of politically connected subcontractors and bagmen also exists through a Zozik frenemy, a former DGCI subcontractor called Al Shimal Oil that had overlapping management with Rainfloods. A few older contracts identify Shimal delivering overpriced fuel, produced at a Barzanicontrolled refinery, to the U.S. military. Al Shimal, it’s worth mentioning, was placed on a de facto Defense Department fuel blacklist in 2018, along with two other Zozik companies, for allegedly selling Iranian fuel. One source said Al Shimal was ratted out to the Americans because it had tried to break away from DGCI. (In an email, Al Shimal’s CEO refused to answer any questions unless I visited him in person at his office in Erbil.)

This network was built to be confusing in order to deceive its main customer, the Pentagon. But it gets even more convoluted with the introduction of yet another shell company, this one with potential connections to both the fuel deals and the Barzanis’ American assets.

Another leaked document—a directory of approved vendors at the Erbil airport—includes Repeat Consultants International, the Kurdish branch of a Virginia tech consultancy with alleged ties to Zozik and Rainfloods. “Repeat Consultants are one and the same with Rainfloods,” said one Iraqi oil industry source, adding that employees have represented the companies as affiliated.

Repeat Consultants is owned by a Kurdish businessman, Haval Dosky, who is widely believed to run “quite a bit” of the Barzani family business, according to Hawez, the journalist. Another source close to the Barzani family identified Dosky to me as a friend and employee of Mansour Barzani. In 2018, Dosky made U.S. headlines when he used shell companies to facilitate the purchase of two Beverly Hills mansions for the Barzanis. The total cost for both California properties was $47 million, paid in cash—plus at least $2 million more for remodeling.

By Zack Kopplin, The New Republic, 24 July 2020

Read more at The New Republic

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