Sunday, May 4th, 2014
In 1998, an ordained minister with the United Church of Christ and his wife from the war-wrecked region of Bosnia-Herzegovina began a humble international humanitarian effort out of a modest office in downtown Washington.
After the U.S. launched the wars in Iraq and Afghanistan, the mom-and-pop nonprofit corporation boldly ramped up, undertaking some of the federal government’s biggest and most ambitious projects in the battle zones, everything from building roads to funding wheat production.
In doing so, International Relief and Development increased its annual revenues from $1.2 million to $706 million, most of it from one corner of the federal government — the U.S. Agency for International Development. IRD has received more grants and cooperative agreements from USAID in recent years than any other nonprofit relief and development organization in the nation — $1.9 billion.
Along the way, the nonprofit rewarded its employees with generous salaries and millions in bonuses. Among the beneficiaries: the minister, Arthur B. Keys, and his wife, Jasna Basaric-Keys, who together earned $4.4 million in salary and bonuses between 2008 and 2012.
The story of IRD reflects the course of America’s ambitions in Iraq and Afghanistan, which started with great enthusiasm and consumed tremendous resources, only to see many hopes go awry. Nation-building projects aimed at supplanting insurgents and securing the peace that looked promising on paper in Washington proved to be difficult to execute in dangerous and unpredictable war zones.
In Baghdad and Kabul, companies such as IRD were left to manage hundreds of millions of dollars’ worth of taxpayer-funded programs with little meaningful oversight from USAID, according to interviews with government auditors and former IRD employees familiar with the projects.
The nonprofit organization, in turn, has hired at least 19 employees from USAID, the lead government agency for addressing poverty and supporting democracy worldwide. Several of them came directly from their desks at the agency to occupy important posts at the company.
Some of those employees, including the former acting administrator of USAID, received substantial pay raises by crossing the Potomac and joining IRD at its new offices in Arlington, Va., collecting as much as $300,000 or more in annual salaries, bonuses and other compensation.
In the world of humanitarian NGOs — non-governmental organizations — those kinds of salaries are unusual. Rarer still are bonuses of any kind.
“IRD is a nonprofit in name only,” said John E. Bennett, a former career State Department official and ambassador who led a reconstruction team in Baghdad that worked alongside IRD. “They built an organization designed to get USAID money.”
USAID has increasingly turned to NGOs and corporations over the years, as the agency has lost thousands of employees to budget cuts and found itself with far fewer resources. IRD managed a large-scale project to clear trash in Baghdad and hired crews to construct a vast road network through southeastern Afghanistan. For IRD, this would be its first major road project, under some of the most difficult circumstances imaginable.
For years, IRD has been sparring with government auditors over its performance in the field. Auditors reported that one IRD program in Iraq was “highly vulnerable to fraud and exploitation” and said the nonprofit organization neglected to provide sufficient oversight in war zones and inflated the impact of its programs. IRD and top USAID officials have consistently challenged such findings, steadfastly defending IRD’s work. They have criticized the auditors as overreaching andin some instancesflat-out wrong.
Today, IRD finds itself falling out of favor with the agency that was once its most ardent patron. Because of concerns about performance, USAID is considering whether to continue its relationship with IRD, according to two high-ranking government officials who spoke on the condition of anonymity because they were not authorized to speak publicly.
In recent interviews, IRD officials defended the salaries and bonuses, saying they are designed to attract and retain talented employees, some of whom are required to work in hazardous zones. They said the salaries and bonuses are determined by a board of unpaid advisers and are based on outside compensation studies.
The company officials added that they are proud of their work in the field and said they did the best they could under dangerous circumstances. Their programs, they argued, helped to stabilize governments in Iraq and Afghanistan, giving U.S. counterinsurgency efforts a chance to succeed.
“Our take is that things are better in Iraq and Afghanistan today because of these programs,” Keys, 68, said in a recent interview.
A growing company
At its core, IRD is a family affair. Keys, his wife and their daughter created IRD as a nonprofit entity in 1998 after working on numerous church-related relief efforts and social-justice projects. They were later joined by Keys’s brother-in-law.
The nonprofit’s inaugural project was a humanitarian effort funded by the State Department to stabilize portions of the Republic of Georgia. State then selected IRD to expand the program into Azerbaijan, Ukraine and Armenia.
During the past decade, the company has broadened operations into more than 40 nations, employing 150 people at its Arlington headquarters, another 110 across the globe and thousands of contract workers, according to IRD.
Between 2007 and the present, the nonprofit has received 82 percent of its nearly $2.4 billion in USAID funding for projects in Iraq and Afghanistan, according to a Washington Post analysis of federal procurement data.
“Most of our traditional partners would not work in those environments , either for political reasons or security reasons. I found IRD to be courageous and willing to go into harm’s way,” said James Kunder, formerly the acting deputy administrator of USAID who retired in 2009 and is a member of the nonprofit’s advisory board.
“Are they perfect? Are they saints? No. I don’t find too many saints walking along the shores of the Potomac. But they did good work under enormously difficult situations.”
Over time, IRD has assembled an impressive board of advisers that has also included former House majority leader Dick Gephardt and John Negroponte, who served as ambassador to several countries, including Iraq, and was the nation’s first director of national intelligence.
The company also hired an all-star cast of humanitarian officials, drafting them from the top levels of USAID. In addition to the former acting administrator, the officials have included the deputy assistant administrator, the director of contracts and a key operations officer.
It is not unusual for government officials to move into the private sector for higher salaries.
Before joining IRD, the officials received letters from USAID requiring them to pledge not to take part in any programs that may conflict with the responsibilities they had at the agency. IRD officials said they hired the USAID employees for their expertise, not their connections.
As acting director of USAID, Alonzo Fulgham made $199,418. As vice president of IRD, he received $330,000. Jeffrey Grieco made $185,000 as the top public affairs official at USAID. As chief of public affairs at IRD, he received $225,000.
The company also paid handsome bonuses. Grieco received $56,250 in 2010. Between 2008 and 2012, Jasna Basaric-Keys collected $285,174 and Arthur Keys got $560,007 in bonuses. Keys’s brother-in-law, who served as director of information technology, received $148,472. Keys’s daughter received $27,769.
In all, 38 IRD employees received more than $3.4 million in bonuses during the same period, according to the company’s tax filings.
“This is not Wall Street,” said Doug White, an expert on nonprofit entities who teaches at Columbia University and reviewed IRD’s tax returns at the request of The Post. “This is an organization that is supposed to be helping people, not helping themselves.”
Arthur Keys also made more in salary than his counterparts at similar humanitarian organizations with higher revenues. In 2011, he made $485,000 in salary while the heads of Catholic Relief Services and Save the Children made $300,000 and $393,000, respectively.
Employees at other nonprofit organizations that work in Iraq and Afghanistan and in other hazardous environments, such as Somalia and the Democratic Republic of the Congo, generally do not receive bonuses, according to a review of their tax filings.
“That’s not part of our culture,” said Paul Eagle, a spokesman for Catholic Relief Services. “Why would we give bonuses when we’re expected to give everything we have for a good cause?”
IRD said compensation is set with advice from outside consultants, such as Hay Group. Daniel P. Moynihan, senior principal of the group, said he analyzed compensation at other nonprofitsas well as at for-profit firms and large engineering companies to craft compensation parameters for IRD.
“We try to make sure they stay within the range of reasonableness and they won’t run afoul of the IRS,” he said.
Keys defended the salaries and bonuses paid to his employees and family members.
“Everybody in our family works very hard. Everybody in this organization is hired on expertise, and all salaries are comparable and analyzed,” said Keys, who announced his and his wife’s retirement in February after more than 30 years in the field. “Bonuses are important because it links performance and compensation.”
‘Hearts and minds’
Between 2008 and 2011, the U.S. government spent an estimated $206 billion on contracts and grants in Iraq and Afghanistan, with at least $31 billion and as much as $60 billion lost to waste and fraud, according to the congressional Commission on Wartime Contracting in Iraq and Afghanistan.
Much of the spending has gone to programs designed to rid regions of insurgents and win the “hearts and minds” of local populations.
Former ambassador Karl Eikenberry witnessed the spending firsthand as the nation’s top diplomat in Afghanistan between 2009 and 2011. He said the U.S. government’s strategy and the heavy spending on relief and development projects have “produced disappointing results.”
“In Helmand and Kandahar, we threw everything at it,” Eikenberry said in a recent interview. “It would make taxpayers’ eyes water if they saw how much money was being spent.”
Rajiv Shah, the USAID administrator, said that he has been making changes at the agency to improve oversight, track spending and hold contractors more accountable.
“I took a strong position saying that writing big checks to contractors is not development,” said Shah, who took over the agency in 2010.
Shah said that he is limiting the size of awards and now must personally approve those above $75 million. He has also created a team to review the performance of contractors, hired more staff to supervise field work and set up a unit to prevent unethical or poorly performing companies from doing business with the government.
“We have shown a seriousness about taking disciplinary action with partners that had not been seen in the recent past,” he said.
One of IRD’s biggest projects for USAID was in Iraq. The agency had hired IRD to undertake the Community Stabilization Program, a $675 million effort designed to shore up Baghdad and dissuade people from joining the insurgency by putting them to work on trash collection, rehabilitating schools and streets, renovating recreational facilities and undertaking other projects.
But the trash collection portion of the program became notorious after an audit and a widely circulated report in the Nation magazine alleged that money meant to pay for picking up garbage was going to the insurgency.
“It was a complete farce,” said Bennett, the former ambassador who ran one of the reconstruction teams in Baghdad for the Bush administration. “They were pouring money, literally pouring money into the program, and it was spilling all over the place. The money was going to the militias. The money was getting swept into their pockets, and it was going to buy weapons and ammunition to use against us.”
Army Col. Louis Fazekas, who supervised a combat team in Baghdad, said in a recent interview that he and other U.S. officials confronted David Soroko, a USAID official supervising the program in Baghdad.
“We said our money was going into the hands of the people who were killing our soldiers,” Fazekas recalled. “He flat-out denied it and said, ‘We’re not going to change anything.’ ”
Jay R. Rollins, USAID’s inspector general in Baghdad, came across the same allegations and said he suspected that people were being paid for work they never did.
“We saw a lot of anomalies, discrepancies and evidence that USAID funds were actually going to the insurgents,” Rollins said. “We recommended that they shut down the entire operation.”
In a recent interview, Soroko disputed the reports of fraud and money going to the insurgency.
“There was no real evidence of money going to the insurgents. The military told me that,” Soroko said. “Is it possible there were ghost employees? Yeah. How accurate were the numbers in Iraq? I have no idea. Did what we were doing actually suppress violence? I think so.”
USAID and IRD officials also disputed the reports of fraud and the diversion of money, and they noted that eight other monitoring reports had called the overall stabilization program a success. Regarding the fraud allegations, USAID said a senior military official told the agency that “the level of proof is not such that action can be taken.”
Iqbal Al-Juboori, an IRD program officer who oversaw the project, said its impact was clear. “We saw with our own eyes the level of violence, the number of IEDs, the explosions in the streets were lower,” she said. “[The program] was very successful in stabilizing the community.”
As Rollins was conducting his audit, Soroko departed Baghdad. Within a year, he was working at IRD, where he created an office of economic growth and trade for the nonprofit corporation.
He said he did not have a job lined up with IRD while he was with USAID in Baghdad.
“I had a connection with IRD, obviously, and they contacted me with a job offer,” Soroko said. “It looks corrupt, right? It’s a revolving door, I know. But what are you supposed to do? Am I supposed to live on unemployment for the rest of my life?”
Soroko said his new job at IRD included a 20 percent raise over his government salary. Before accepting, he said, he obtained a letter from USAID allowing him to take the job. He has since left IRD.
In 2008, the same year that Soroko went to IRD, the company hired the daughter of Hilda M. Arellano, the director of the USAID mission office in Baghdad between 2006 and 2007. While there, she had helped to oversee IRD’s stabilization program.
For Arellano’s daughter, it was her first full-time job after graduating from college. Between 2008 and 2010, she worked at IRD as a public policy and advocacy assistant, according to her LinkedIn profile. She then worked as a research analyst in the business development division of IRD.
Arellano had already left Baghdad to take over the USAID mission in Cairo at the time of her daughter’s hiring. After her daughter was hired by IRD, Arellano wrote a letter to USAID in which she pledged to “recuse myself from participating in all matters pertaining to International Relief and Development.”
“I do not work with IRD, but in my last position as USAID/Iraq Mission Director I did take official action involving IRD,” Arellano wrote. “I agree that this relationship could cause a reasonable person with relevant knowledge to question my impartiality in any matter involving IRD.”
IRD said in a statement that Arellano called the company’s chief financial officer to ask “if IRD had entry-level positions available.” IRD officials said Arellano’s daughter, who spoke several languages and had lived overseas, then went through the “standard hiring process.” She also had attended Emory University, Keys’s alma mater.
Arellano, now a senior foreign officer at USAID, said she followed the rules.
“I made sure that I complied with all ethics requirements, even though my business relationship with IRD ended a year before that time, and I’ve not had a business relationship with them since,” she said through a USAID spokesman.
‘Awash in cash’
When Eikenberry arrived in Afghanistan as the U.S. ambassador in 2009, he said he was surprised to see the amount of money being spent on agricultural programs. One of the programs, run by IRD, was originally designed to increase wheat production during a critical food shortage that began in 2007.
USAID hired IRD to administer the program under a “cooperative agreement” instead of a contract. Much of IRD’s work for USAID was performed under these agreements. They are far more flexible than contracts, with fewer deadlines and demands, giving companies the freedom to figure out the best way to proceed.
For years, USAID relied heavily on these agreements, partly because they required less oversight from the agency, according to government auditors.
But in the contracting world, cooperative agreements are also considered to be among the easiest to change, adding extra costs to taxpayers. Such agreements also make it difficult to hold contractors accountable because deadlines and deliverables are rarely specified.
“With cooperative agreements, [contractors] get to set the rules,” said Glenn D. Furbish, the former deputy special inspector general for Iraq reconstruction. “You don’t ever have a clear sense that you’re getting your dollars’ worth at the end of the day.”
Since 2006, IRD has received $1.8 billion from USAID under 26 cooperative agreements, according to an analysis of federal procurement records by The Post. The analysis found that IRD received 77 percent of its USAID funding through such agreements, 96 percent of which went to projects in Iraq and Afghanistan.
The agricultural program, for example, began as a $60 million cooperative agreement and morphed within three years into a $470 million project, according to USAID.
The cooperative agreement was broadened at the urging of the military and Richard C. Holbrooke, the then-special envoy to Afghanistan and Pakistan. It was transformed from one that funded a program that helped farmers grow wheat into one that bought farm tools and paid numerous laborers for a series of small jobs, including the clearing of canals, to help stabilize the southern Helmand and Kandahar provinces of Afghanistan.
USAID news releases lauded the program as an alternative to food handouts and said it was stabilizing those provinces in Afghanistan.
But auditors criticized the project, and Eikenberry said it spent too much money and had questionable impact.
“Once the decision was made, we threw efficiency out the window,” he recalled. “Some of the districts were awash in cash. The projects were not properly scaled, and they were overly ambitious.”
He said the projects, also designed to dissuade farmers from growing poppy, did help to secure some areas in southern Afghanistan. But he said that the progress came at a high cost and that it is “too early to tell whether the projects will be sustainable.”
USAID officials decided to request fresh bids for a new cooperative agreement. IRD won again. The second project was worth nearly $70 million.
Since then, USAID has changed the way it evaluates and awards work to contractors so that past performance is given greater weight and now accounts for 20 to 30 percent of a winning bid. IRD defended its performance, noting that USAID had extended the program six times before rebidding it.
“These extensions strongly suggest that USAID felt IRD was meeting its expectations,” the nonprofit said in a statement.
Auditors also found problems with the second agricultural program, reporting that there was “poor coordination, waste and mismanagement” because of little oversight by USAID. The auditors said that they could not locate at least one third of the 95 tractors that had been purchased for farmers, worth more than $560,000. IRD disputed those findings and said finding the tractors was not its responsibility.
Another IRD-run project in Afghanistan prompted more changes to USAID contracting policy. In 2007, USAID awarded a cooperative agreement to IRD worth an estimated $400 million to build more than 900 miles of roads in southeastern Afghanistan. The project was supposed to connect villages, create jobs and reach out to communities vulnerable to the Taliban.
The effort involved 22 local Afghan construction companies and 32 subcontractors trained by IRD to design and build roads. But many of the Afghanistan subcontractors were ill-equipped to handle the heavy workload, according to former IRD employees and government auditors. Conditions also changed on the ground.
“There was a lot of security deterioration,” said Ronald E. Neumann, U.S. ambassador to Afghanistan until 2007.
A report that IRD recently released on its experience in Afghanistan noted the rising Taliban attacks. While no IRD employees lost their lives, 123 Afghan contractors were killed.
“The result was serious delays, and worse, severe casualties as IRD local staff attempted to mount program activities in contested or highly vulnerable territories,” the report said.
In 2010, USAID scaled back the project and eventually ended it a year later. About 100 miles of roads were completed, and an additional 195 miles were partially constructed, according to the agency. USAID officials said in a recent statement that the program was plagued by security concerns and “serious managerial, technical and oversight deficiencies.” They declined to be more specific.
Keys disputed USAID’s assessment, and IRD issued a statement that said “it is flatly false” that the road project “was terminated due to poor performance.” He said critics are “looking back on it as Monday morning quarterbacks.”
“I think the thing that is overlooked is that this was active [and] going on during the war,” Keys said. “People were killed building these roads, but they believed in these roads.”
The Special Inspector General for Afghanistan Reconstruction is investigating claims of civil fraud on the road project, which wound up costing $317 million. The inspector general, John F. Sopko, said in a letter to USAID that his office had opened an investigation into allegations of “significant waste and mismanagement” and “kickbacks and bribery by IRD senior employees.”
IRD officials said they are cooperating with the probe and have complied with subpoenas for company documents. They said that they are confident the company will be cleared of any wrongdoing and that they are proud of the work they did on the project.
“I think the road program was very successful,” Keys said.
Since ending the road program, USAID has decided it will no longer use cooperative agreements for large-scale construction projects.
“As part of the reform effort, we took action to eliminate and reduce the size of poor performing projects, as we did with Strategic Provincial Roads,” said Shah, the USAID administrator.
Sopko said he was pleased to hear about the changes at the agency, but he called them too little, too late, as U.S. troops are leaving the country.
“They’re sort of Johnny-come-lately on this thing,” he said. “I haven’t seen anybody held accountable for the waste of taxpayer money out there.”
Some of the people who might know the most about what has happened with IRD-run programs — former company employees — say they have been barred from speaking about their experiences. Before leaving IRD, they said, they were asked to sign confidentiality agreements.
The agreements warn employees that they could be sued for making any “derogatory, disparaging, negative, critical or defamatory statements” about IRD to anyone, including “funding agencies” or “officials of any government.” Lawyers who reviewed the agreements at the request of The Post said it appeared that they could violate federal protections afforded to whistleblowers under the False Claims Act.
At first, IRD said in a statement that the agreements did not violate the law and that “none of these provisions would prevent an employee from complying with a subpoena.” After consulting with several lawyers, IRD reversed itself.
“IRD has sought the advice of three outside law firms and is changing its policy to ensure that our policies conform to the latest developments in employment law,” the nonprofit said.
Keys said he sets high ethical standards for his company.
“IRD is one of the major implementors for USAID, so there’s no reason we would do anything that would impede that relationship,” he said. “I don’t tolerate any kind of activity that’s either inappropriate or would bring discredit on our name or the U.S. government. We follow all the rules.”
Washington Post staff writer Rajiv Chandrasekaran and researcher Alice Crites contributed to this report.
Jessica Schulberg is a graduate researcher and reporter at the Investigative Reporting Workshop and is attached to The Post’s Investigative Unit through a program led by Workshop Senior Editor and Post investigative reporter John Sullivan.