Cronyism In Iraq?

By Romesh Ratnesar

When U.S. authorities in Iraq picked three companies last month to build a wireless telephone network for the country, they were pleased that no Americans were among the winners, a fact they hoped would silence those who charge that the Bush Administration is handing reconstruction contracts only to business cronies and campaign contributors. But some telecom-industry insiders complain that the winners of the licenses, which cost just $5 million but could eventually be worth as much as $1 billion a year, benefited from ties to prominent Iraqis on the U.S.-backed Governing Council. The majority partner in the consortium that was awarded the southern-Iraq license, for instance, is Dijla Telecommunications Corporation, a Baghdad outfit headed by Ali Shawkat, the son of Mudhar Shawkat, a senior adviser to Iraqi National Congress President Ahmad Chalabi. Coalition officials and the Shawkats denied to TIME that the family's connections were behind the decision to grant Dijla the license. But others contend the deal reeks of cronyism. "The mobile contracts were all politically divided," says an Iraqi emigre who returned as a consultant for a telecom firm. "It's the same as Saddam's time. It's about who you know."

Now another deal is coming under scrutiny. A senior Pentagon official told TIME that the U.S. is reviewing its decision to grant the mobile license for Baghdad and central Iraq to a consortium led by Egyptian telecom giant Orascom because of its ties to Nadhmi Auchi, an Iraqi-born billionaire who built his fortune partly through arms deals with the Iraqi regime in the 1980s. Industry sources say Auchi provided Orascom with a $20 million loan to help pay down its $500 million debt. The sources say the loan gave Auchi, who faced French prosecutors earlier this year for his role in a corruption and embezzlement scandal, a controlling stake in Orascom. A senior U.S. official says Orascom's ties to Auchi are being investigated. As a result, no mobile licenses have yet been issued.

--By Romesh Ratnesar. With reporting by Hassan Fattah and Vivienne Walt

With reporting by Hassan Fattah and Vivienne Walt