Lt. Col. Gutierrez

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Inside the Greed Zone

by Glenn R. Simpson, Wall St. Journal

Lt. Col. Gutierrez was a whistleblower. Was he also tainted bycorruption around him?

October 20, 2007; Page A1

Camp Arifjan, Kuwait

Marshall Gutierrez was classic military material, a working-classkid whose father and both grandfathers served in the armedforces.

He joined the Army and marched steadily up the hierarchy,

ultimately becoming a lieutenant colonel and chief logisticsofficer at this sprawling base in Kuwait. His Army record wasspotless, and he developed a reputation as a bit of a straightarrow. [Lt. Col. Gutierrez] Lt. Col. Marshall Gutierrez

So it isn't surprising how Lt. Col. Gutierrez reacted in 2005when he discovered signs of rampant overcharging by theArmy's main food supplier for the Iraq war. Bags of Coca-Colasyrup available in the U.S. for about $10, for example, weregoing for $90. He blew the whistle. That triggered a massivecriminal probe of Kuwait-based Public Warehousing Co. that isnow raising questions for such major American food companiesas Perdue Farms Inc. and Sara Lee Corp., and is shaping up asone of the biggest fraud probes of the Iraq War.

Then the tables turned. The Kuwaiti contractor accused Col.Gutierrez of seeking bribes, setting in motion a bizarre chain ofevents that left his military career and his 22-year marriage inruins. On Sept. 4, 2006, he was found dead in his quarters atthe age of 41. Next to his body were an empty container ofprescription sleeping pills and a plastic bottle of antifreeze.

The story of Col. Gutierrez, who Army investigators allegewound up tainted by the very corruption he complained about,is one thread in the expansive fraud and corruption

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investigation into firms supplying food to troops in Iraq. TheJustice and Defense Departments are investigating overchargingand possible favoritism in awarding of contracts. Col.Gutierrez's role in the inquiry emerges from interviews withmilitary officials, contractors and others involved, as well asemails, letters, court filings and other written material.

Marshall Gutierrez grew up in the little town of Las Vegas in thefoothills of New Mexico's Sangre de Cristo Mountains, a

descendant of the original farmers who received Spanish landgrants to settle the area. He was a driven and intensely proudman, both of his achievements as a soldier and his Hispanicheritage, says his widow Brenda, also a Las Vegas native. FROMTHE ARCHIVE

U.S. Pushes Probe of Iraq Food Deals1 10/18/07 FoodCompanies Face Probe Over Iraq Deals2 10/17/07

The two met a quarter-century ago at a church event. He was15, she was 13. At the age of 16, Brenda discovered she waspregnant -- a harsh predicament for two teenagers in a small,conservative Catholic community. "His mother offered to send

him away to another school elsewhere in the state, and hedidn't. He married me," Ms. Gutierrez recalled. "This was not aguy that ran away from trouble or from any type of a difficultsituation."

They married two years later, and he started serving in the ArmyNational Guard the very next weekend. After high school, heworked his way through college on a scholarship from the ArmyReserve Officers' Training Corps and became a commissionedofficer in 1987. The couple commenced the itinerant life of amilitary family, bouncing from Newport News, Va., to ColoradoSprings, Colo., to Saudi Arabia after the 1991 Persian Gulf War.In Panama, Capt. Gutierrez led the 1097th Transportation

(Medium Boat) Company, which moved thousands of tons ofmateriel and in 1994 won a prestigious Army award.

"He was a hard charger. He did not accept any sort of failure.His way or the highway was how he was," recalls Sgt. SeanKelly, who served under him in Panama. "But he also was ableto motivate the people who worked under him to literallyaccomplish the impossible."

Eventually Mr. Gutierrez rose to the rank of lieutenant colonel,and in 2005, he shipped out to Camp Arifjan in Kuwait, a largelogistics and staging facility with fast-food restaurants andInternet cafs.

CAMP ARIFJAN is now at the center of the U.S. inquiries intocontracting corruption. One Saudi catering company, TamimiGlobal, allegedly had a "party house" frequented by contractorsand at least five military contract officers, according to a swornstatement in July 2006 by a former Army officer, contained inU.S. court records. The officer admitted taking $8,000 in bribesand gifts from a Tamimi executive and another $50,000 fromanother catering firm. He claimed he had witnessed at least fiveother Army officers taking bribes in the course of roughly adozen parties at the Tamimi house.

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Camp Arifjan sends numerous truck convoys to Iraq every day.Most of the freight is handled by Public Warehousing, whichbegan as a modest Kuwaiti government spinoff. Now publiclytraded, it is one of the largest transport companies in the world.Under a series of contracts worth more than $6 billion, PublicWarehousing is designated a "Prime Vendor" for virtually allfood served to U.S. forces in Iraq and Kuwait -- some 150,000stomachs.

Within months of arriving in Kuwait, Col. Gutierrez clashedwith Public Warehousing over its prices for various items,according to emails he sent that are now part of the Army recordof the case. He questioned why Public Warehousing wascharging the Army about $90 for five-gallon bags of Coca-Colasyrup when they could be found for around $40 from KuwaitCity merchants, the emails indicate.

Col. Gutierrez began supplying information via email to GaryShifton, a top official at the Pentagon's Defense Supply Centerin Philadelphia. In November 2005, Pentagon officials launchedan investigation. The inquiry focused on Public Warehousing'spricing agreements with its own suppliers.

Investigators suspect the military wound up paying inflatedprices for everything from preserved milk to lobster tails,according people involved in the investigation and courtsrecords from U.S. civil litigation between Public Warehousingand the Defense Department. The investigators are looking intowhether Public Warehousing passed along high prices from itssuppliers to the military, then was improperly compensated bythose suppliers through large rebates and discounts, the courtrecords and the people involved say. One focus is Sultan Center,a supplier with close ownership and managerial ties to PublicWarehousing, which refunded to Public Warehousing some 10%of the military sales it received.

Food wholesalers often give customers such as PublicWarehousing "prompt payment" discounts of a few percentagepoints. The Pentagon agreed that Public Warehousing couldkeep such discounts, according to emails cited in the U.S. civillitigation. What's in dispute is whether those discounts were soexcessive they amounted to kickbacks, or whether they wereimproperly used to pump up prices.

Public Warehousing says in a statement that its prices include"not only the cost of the food it supplies, but also the costsassociated with storing, handling and delivering it at multiplelocations in a war zone." More than 30 of its employees, it adds,

have been killed on the job.

Col. Gutierrez and his aides began systematically analyzingPublic Warehousing's prices. He found some troublingnumbers, including that the Army was paying $8 a pound forgreen beans, his emails indicate. Public Warehousing says themilitary required a hard-to-find style of green beans. Priceswere high on some other items that were perishable or hard tofind from qualified suppliers, it says.

Col. Gutierrez and his team were getting help from PublicWarehousing's chief competitor, Tamimi Global. In January


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2006, Tamimi's director of operations in Iraq and Kuwait,Shabbir Khan, provided Col. Gutierrez and other officials with aspreadsheet comparing Public Warehousing's prices to the localmarket.

AT THE TIME, Mr. Khan was already the subject of a majorinvestigation involving fraud and bribery at Camp Arifjan. Hewas subsequently convicted. A spokesman for Tamimi says Mr.Khan's illegal conduct occurred "without the company's

knowledge." Army officials say the investigation into Tamimi iscontinuing, and investigators are looking into Mr. Khan'scontact with Col. Gutierrez. Tamimi is cooperating, itsspokesman says. [Lt. Col. Gutierrez and his wife, Brenda, atthe Great Pyramids of Egypt.] Lt. Col. Gutierrez and his wife,Brenda, at the Great Pyramids of Egypt.

A week after he received the spreadsheet from Mr. Khan, Col.Gutierrez submitted his own analysis to his superiors at CampArifjan. "I have started looking at the items we are purchasingfrom Public Warehousing," he wrote to the camp's commander."We are being charged way too much for food."

Two days later, on Feb. 8, 2006, Mr. Shifton of the Pentagon'scontracting office in Philadelphia sent an email to PublicWarehousing declaring that "the urgent concern is that we arepaying too much" for local items from Sultan Center. "Thismatter is urgent."

That triggered alarm at an outside consulting firm used byPublic Warehousing to help it deal with the Pentagon. A fewhours after Mr. Shifton sent his email to Public Warehousing,an executive at the consulting firm, Professional ContractAdministrators of Albuquerque, N.M., sent an email marked"URGENT" to Public Warehousing. It advised PublicWarehousing's chief executive, retired Navy officer Charles

"Toby" Switzer, to "fire somebody, blame it on them and coverup" by revising the local-market prices. "ASAP -- THIS IS VERYSERIOUS." Mr. Switzer forwarded the messages tosubordinates, adding that he agreed, "except the firing part."

Public Warehousing officials say the tone of the emails ismisleading. The company, they say, was merely seeking to beattentive to customer complaints. On Feb. 12, Mr. Switzer metwith Col. Gutierrez and other contracting officials and promiseda thorough price review.

But soon Col. Gutierrez was making decisions that weren't goodfor either Public Warehousing or Sultan Center. In early May,

for example, he requested that some $21 million in purchases ofvegetables, dairy and baked goods be shifted from PublicWarehousing to Tamimi.

In July 2006, the investigation took a strange turn. Col.Gutierrez had a meeting at Camp Arifjan with a PublicWarehousing sales executive, Mike Abdul Rahman. He passedMr. Rahman a piece of paper which read: "I need 1,000 KD, canyou help?" according to a subsequent affidavit from an Armyinvestigator who interviewed Mr. Rahman. KD is theabbreviation for Kuwaiti dinars. A thousand dinars is wortharound $3,500.


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Mr. Rahman told other officials at Public Warehousing, thecompany said. While top executives at the company debatedwhat to do, the two men met again on Aug. 6. On Aug. 9, casedocuments state, Public Warehousing's chief, Mr. Switzer,approached one of the most senior officers at Camp Arifjan,Brig. Gen. Raymond Mason, and revealed the alleged bribesolicitation. The general referred the matter to criminalinvestigators at Camp Arifjan.

On Aug. 13, Col. Gutierrez and Mr. Rahman met once again,this time at the officer's home. They allegedly discussed a$3,500 payoff in exchange for inside information on bulk fueland laundry services contracts, the Army case record states. Butagain no money changed hands. The officer claimed to needcash because he had taken a young Kuwaiti woman as agirlfriend, according to an investigator's affidavit. [screen] U.S.Army A few days before Col. Gutierrez was arrested, his formerhousekeeper called his American wife and alleged he hadsecretly converted to Islam and married an 18-year-old Kuwaitiwoman. Investigators found several text messages he allegedlysent to the housekeeper denying her claims and urging her to

retract them.

At the time, Col. Gutierrez's American wife, who had been livingwith him in Kuwait, had returned to the U.S. to attend to a sickrelative. Days later, she received the news that he hadpurportedly married the Kuwaiti girlfriend in a phone call fromher husband's former housekeeper in Kuwait, who was angryabout being fired.

On Aug. 18, Mr. Rahman met Col. Gutierrez a little beforemidnight at an upstairs corner table at Diva's, a restaurant withEnglish sports playing on the television and pictures ofAmerican movies stars such as Marilyn Monroe and John

Travolta stripped across the marquee. The two men smokedtobacco through a shisha, a traditional Arab water pipe. Mr.Rahman was wearing a hidden microphone. Both Kuwaiti andArmy criminal investigators were monitoring from nearby, caserecords indicate.

The two men left in Col. Gutierrez's car for Mr. Rahman'shome, the case record says. As they drove, Mr. Rahman offeredthe officer a bundle containing the 1,000 dinars, according totwo people with knowledge of the investigation. Col. Gutierreztold him to put it in the car's center console, they say. Agentsthen surrounded the car and arrested Col. Gutierrez.

The colonel protested that he was being set up. His widow and alawyer hired by his family now say they suspect he was framedby Public Warehousing because the company knew he hadblown the whistle on it. A spokesman for Public Warehousingsay the company had merely "notified the government of asuspected corruption ring within the U.S. military in Kuwait"and "played a pivotal role in a successful sting operation thatstemmed from the investigation."

FOLLOWING THE ARREST, Army investigators searched Col.Gutierrez's home off the base and found alcohol and a magazineit termed pornography. Both are illegal in Kuwait. They also


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found some $27,000 in U.S. and Kuwaiti currency and atwo-week-old Kuwaiti marriage certificate, which described Col.Gutierrez as the husband of an 18-year old Kuwait residentnamed Fatima Al-Rahdi under the religion of Islam. Ms.Al-Rahdi, also known as Yasmine, couldn't be located forcomment.

Col. Gutierrez was charged with bribery, mishandling secretinformation, accepting illegal gifts and illegal possession of

weapons, alcohol and pornography, and bigamy.

Col. Gutierrez was locked in an 8-by-8-foot steel cage next tosome soldiers accused of murdering Iraqi detainees. During hisfirst hours of detention, his lawyer wrote in a later legal filing,he "momentarily succumbed to the weight of his circumstances"and underwent "a brief bout with momentary anxiety over hiscurrent predicament." Military officials describe it as a suicidalepisode, but decline to elaborate. Later, Col. Gutierrez wascaught with a makeshift knife fashioned from a plastic spoon,and charged with illegal possession of a weapon. Two days later,he was caught allegedly attempting to make a weapon from asafety razor.

FIVE DAYS AFTER his arrest, his military lawyer, Capt. StephenMcGaha, motioned to release him from preventive detention."The government has chosen to materially misrepresent thestrength of their case by charging one alleged instance of bribery5 separate ways," he complained. About a week later, Col.Gutierrez was released from detention and transferred to nearbyCamp Victory to await court-martial proceedings.

On Sept. 4, shortly after 9 a.m., Col. Gutierrez went to arestaurant at the camp, the Green Beans Caf, and bought $1.50worth of muffins. Later that day, his body was found in hiscamp quarters. There was no note. Two autopsies concluded

that he had died of poisoning from ingesting ethyl glycol, theactive ingredient of antifreeze. The Army ruled his death asuicide.

In an interview, his widow Brenda expresses bewildermentabout his death, which she is reluctant to characterize as asuicide. "The last time I spoke to him, he said, 'We're going tofight this.' The lawyer said it looks good. So there's no way."

Many questions about the case remain. How did he meet hissecond wife and why did they decide to marry? What was thenature of the Col. Gutierrez's relationship with the Tamimiexecutive later convicted of bribery?

And more broadly, how pervasive is fraud and corruption in theArmy's food-procurement system? The amount in dispute inthe Public Warehousing investigation is, at a minimum, $100million, according to people involved in the probe.

Col. Gutierrez probably violated military law in his relationshipwith the Kuwaiti woman. Official records show the marriagewas legally registered with Kuwait's Ministry of Justice on July29. The document states that Ms. Al-Rahdi was his second wife(taking a second wife is legal in most Islamic countries), andlists his religion as Muslim. He agreed to pay her a $20,000


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penalty in the event they divorced.

James Culp, a lawyer who represents the Gutierrez family,argues that the evidence of corruption by the colonel is far fromclear. The audiotape of the sting operation, he says, is of poorquality and hard to understand, and the other evidence is "weakat best, if it even existed." The Army says it cannot talk aboutthe Public Warehousing probe because it is still open.

NO EVIDENCE has been found indicating that Col. Gutierrezhad any substantial hidden assets. The evidence inventory inthe case listed a silver-and-gold Rolex watch, but it was recentlyreturned to his family after Mrs. Gutierrez produced a receiptshowing her husband bought it before his deployment toKuwait. Several receipts seized by the agents showed that theliquor found in his home consisted of $400 in purchases fromthe U.S. Embassy's American Employees Welfare Association.Liquor sales are legal at the embassy, but Kuwaiti law bars thepossession of liquor outside foreign embassies.

The government claims in a civil-forfeiture action that the$27,000 in cash is the proceeds of bribery. Mrs. Gutierrez says

she insisted that her husband have a large sum of cash on hand"to make sure we could get [the family] out of Kuwait fairly easyshould something happen."

Mrs. Gutierrez says she doesn't know what to think about herlate husband's purported second marriage. But she refuses tobelieve that he was corrupt. "None of this stuff f its in hischaracter at all," she says. "He had never been involved inanything like this, and he has been in several other positionslike this where he had access to lots of money, millions andbillions."

"I'm very upset that he was put in that situation in the first

place," she continues, referring to his assignment to a baseallegedly riddled with corruption. "Either way, whether he didcommit suicide or not, the military has blood on their hands, inmy opinion."

Write to Glenn R. Simpson at [email protected]

Hyperlinks in this Article: (1) http://online.wsj.com/article/SB119267275391362998.html (2) http://online.wsj.com/article/SB119258983531961678.html (3)mailto:[email protected] Copyright 2007 Dow Jones &Company, Inc. All Rights Reserved

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