Shock and oil: Iraq's billions & the White House connection

Firm that advises US on Iraq reconstruction in financial chaos

Stephen Foley reports from New York
Published: 14 January 2007

The American company appointed to advise the US government on the economic reconstruction of Iraq has paid hundreds of thousands of dollars into Republican Party coffers and has admitted that its own finances are in chaos because of accounting errors and bad management.

BearingPoint is fighting to restore its reputation in the US after falling more than a year behind in reporting its own financial results, prompting legal actions from its creditors and shareholders.
According to the Center for Responsive Politics, BearingPoint employees gave $117,000 (£60,000) to the 2000 and 2004 Bush election campaigns, more than any other Iraq contractor. Other recipients include three prominent Congressmen on the House of Representatives' defence sub-committee, which oversees defence department contracts.

One of the biggest single contributors to BearingPoint's in-house political fund was James Horner, who heads the company's emerging markets business which is working in Iraq and Afghanistan. He donated $5,000 in August 2005.

The company's shares have collapsed to a third of their value when the firm listed in 2001, and it faces being thrown out of the New York Stock Exchange altogether. Despite annual revenues of $3.4bn, the company made a loss of $722m in 2005. Those figures were released only last month, nine months late, and the company has not yet been able to report any fully audited figures at all for 2006.

Analysts in the US claim the reason is a culture of poor management controls stretching back to before the company was carved out of KPMG, the global accounting giant, at the start of the decade. A litany of failings included invoices going astray, poorly trained accounting staff and a failure to work out the tax implications of having so many employees working in foreign countries. Continued