Contract Tied To Sen's Husband Criticized

special inspector General for Iraq Reconstruction, Stuart Bowen Jr 2006/3/4
CBS News producer Laura Strickler wrote this story for

Lack of oversight, insufficient documentation and a $7.9 million bonus for a job well done.

Critical audits of contracts for hundreds of millions of dollars, especially in Iraq, may not seem too unusual but this contract has a connection to California Senator Dianne Feinstein.

When the Perini contract was awarded in 2004, the controlling investor of the company was private equity financier Richard Blum, Feinstein's husband. He divested his interests in 2005. Feinstein's spokesperson Scott Gerber says there was no conflict of interest and notes the Senate Ethics Committee reviewed the potential conflict and found nothing of concern. He says Feinstein had nothing to do with the appropriation of the contract.

Perini Corporation was audited by the Special Inspector General for Iraq Reconstruction (SIGIR) for their work in the electricity sector in Iraq. Auditors concluded, "Less was accomplished under this contract than expected because the contractor's projected costs for the projects were perceived by the U.S. government to be too high…"

Representatives from Perini Corporation deny that their work was not accomplished. "That's not true at all," says Robert Band, Chief Operating Officer of Perini Corporation, "All of that work was completed satisfactorily." Band says it was his understanding the government terminated parts of the contract because they did not have the funds, not because costs were too high. Band noted his company was very proud of their employees and their work for the American military.

"The point of criticism here is in the very high overhead," says Stuart Bowen, the Special Inspector General for Iraq Reconstruction. Bowen says of the five contracts of its kind that have been audited by his office, Perini had the highest overhead costs. Bowen says canceling chunks of the contract and re-bidding the work to local companies enabled the government to save money.

*This story was updated on April 30, 2008

By Laura Strickler