Pentagon Confirms It Gave $1.4 Billion in No-Bid Fuel Contracts to Mysterious Companies

The Pentagon's main supply agency has acknowledged awarding $1.4 billion in no-bid contracts to two foreign companies whose ownership and management seem extremely mysterious. The contracts, involving delivery of aviation fuel to U.S.-run air bases in Kyrgyzstan and Afghanistan, are currently under investigation by a subcommittee of the House Committee on Oversight and Government Reform, one of Congress's most powerful panels. Among other things, the subcommittee is examining allegations by human-rights activists and others that the companies are connected to the families of two former Kyrgyz leaders who were toppled in the past several years amid allegations of corruption.

The Defense Logistics Agency said in a written statement to Declassified that last year it awarded a contract to a company called Mina Corp. Ltd. for supplying fuel to the Manas Transit Center, as the U.S.-run air base in Kyrgyzstan is known. The agency said Mina received the contract, potentially worth $729 million over three years, under a section of federal purchasing regulations allowing "contracting without providing for full and open competition." (The contract's initial term, the agency said, is for one year, with options for two one-year extensions.) The agency also said it had awarded a $720 million contract under the same provisions to a company called Red Star Enterprises for the provision of Russian-grade aviation fuel and JP-8 jet fuel. The agency said Red Star was "the only company that had the capability to meet operational needs."

NEWSWEEK asked the agency earlier this month to disclose what it knows about the ownership and management of the two companies, both of which reportedly have offices, or at least official corporate registrations, in Britain and the British territory of Gibraltar, a famous tax haven. But in an e-mail on Wednesday, a Defense Logistics Agency spokesman told Declassified: "Red Star Enterprises and Mina Corporation are two separate legal enterprises. For information on their structure, ownership and management, you would need to contact the companies directly."

At a hearing on April 22, the oversight subcommittee's chairman, Rep. John Tierney (D-Mass.), said his panel is conducting a "wide-ranging investigation into allegations that the contractors who supply fuel to the Manas Air Base in Kyrgyzstan had significant dealings with the family" of Kurmanbek Bakiyev, the president of Kyrgyzstan who was deposed and fled the country after a popular uprising earlier this month. One of the witnesses at the subcommittee's hearing, human-rights law professor Scott Horton, alleged in public testimony that the fuel deals, involving Red Star and two companies that seem to have been Mina's forerunners, originated under the presidency of Bakiyev's predecessor, Askar Akayev.

Horton alleged that in the years before Bakiyev toppled Akayev in 2005, Akayev's son-in-law received subcontracts from Mina's forerunners. Upon taking power, Bakiyev's government launched an investigation into alleged corruption surrounding the contracts, but the inquiry was subsequently dropped. Horton testified that he personally observed Bakiyev's son Maksim palling around with Chuck Squires, a retired U.S. Army intelligence officer identified in a 2008 Defense Logistics Agency publication as Red Star's "director of operations." Kyrgyz opposition leaders who were involved in Bakiyev's ouster have been quoted in The New York Times as charging that companies controlled by Maksim Bakiyev "skimmed as much as $8 million a month from fuel sales to the [American] base." And a recent article by investigative reporter Aram Roston in The Nation quotes the new government's chief of staff as alleging that Mina and Red Star served as "an indirect way for the Pentagon to bribe the ruling families of Kyrgyzstan." An article on the EurasiaNet Web site describes the tangled corporate histories of Mina and Red Star.

Red Star and the families of Akayev and Bakiyev could not be reached for immediate comment, but late Wednesday afternoon Declassified received this statement from a Washington PR firm that represents Minacorp: "BISHKEK, April 28, 2010 — Over the past week Minacorp has been in close contact with the U.S. Government and the Interim Government of Kyrgyzstan to respond to media articles containing false and misleading information about the company's activities in Kyrgyzstan. Minacorp has confirmed to both governments that it has never had any ownership affiliations with Kyrgyz government officials, nor has it ever directed any US Government funds to Kyrgyz officials . . . The company is continuing to perform on a daily basis its vital role in the supply of U.S. forces in support of Operation Enduring Freedom. Minacorp is addressing the inquiry by the Congressional Subcommittee on National Security and Foreign Affairs . . . The company welcomes this opportunity to correct misperceptions about the nature of its business in Kyrgyzstan and uphold its reputation."

A representative of the PT firm confirms that Mina and Red Star are "related" companies, but denies that Squires ever met Maksim Bakiyev, and maintains that the two companies chose subcontractors based purely on commercial considerations. The representative added that Mina's initial Pentagon contracts were competitively bid.