WASHINGTON—The Pentagon’s criminal investigations arm is probing one of the American military’s largest suppliers in Afghanistan over allegations that it violated U.S. law by moving supplies through Iran, the Defense Department told lawmakers.
Anham FZCO, a company based in Dubai and Virginia, won a contract in 2012 worth an estimated $8.1 billion to supply food and water to American forces inside Afghanistan, one of the largest of the 12-year war in the Central Asian country.
An article in The Wall Street Journal in September, which prompted the investigation, disclosed that Anham relied on the Iranian port of Bandar Abbas and on Iranian supply routes to move steel, tractors and refrigeration panels into Afghanistan to build warehouses and other logistical centers.
Anham’s actions may have violated strict U.S. sanctions laws that prohibit American entities from conducting trade with Iran or Iranian companies by moving materials through the country, Obama administration officials said.
In September, Anham said it had voluntarily notified the U.S. Treasury and Commerce Departments that some of its supplies in Afghanistan were moved by foreign subcontractors through Bandar Abbas. At the time, the company said it was conducting an internal review of these shipments to ascertain if it broke any U.S. laws. On Monday, it said that review was continuing.
Anham’s lawyer, Clif Burns, said Monday the company hadn’t been notified of the probe and that the Inspector General’s office wouldn’t confirm to him any investigation.
The probe introduces an unexpected turn in a contract that is likely to be one of the last major wartime-support awards in Afghanistan. It underscores the challenges facing the U.S. in the region after pursuing wars on Iran’s borders—in Iraq and Afghanistan—since 2001 and enacting a series of sanctions against Tehran in recent years in an effort to curb its nuclear program.
The debate over Iran sanctions has intensified in Washington in recent weeks, after the Obama administration struck an interim deal with Tehran in November that seeks to curb the most advanced parts of Iran’s nuclear program, including the production of near weapons-grade fuel, in return for the West easing financial sanctions.
The White House has opposed congressional efforts to impose new sanctions, and Iranian officials have chafed over recent U.S. enforcement of the existing sanctions.
Senators Mark Kirk (R., Ill.) and Kelly Ayotte (R., N.H.) pressed the Pentagon’s Inspector General to open an investigation into Anham due to concerns the company may have directly done business with Iran’s elite military unit, the Revolutionary Guard Corps. The corps controls some of the container ports at Bandar Abbas, the U.S. Treasury says.
The U.S. lawmakers asked in an October letter to the Inspector General whether Anham’s contract could be restricted or terminated and if any disciplinary action had been taken against Anham executives.
“Until the investigation is able to establish the relevant facts, we will not be able to respond meaningfully to the three questions posed,” Acting Assistant Inspector General Larry Turner responded to Mr. Kirk in a letter late last month.
In that letter, the Inspector General’s office notified Mr. Kirk that it has “initiated an investigation into the public revelations concerning Anham FZCO’s alleged use of Iranian ports to supply U.S. forces in Afghanistan.”
Anham executives also said Monday that the company’s chief executive officer, A. Huda Farouki, will step away from the day-to-day management of Anham in January, but will continue as the company’s board chairman and oversee an executive committee. Mr. Farouki will be succeeded by Jay Ward, who has served for the past year as Anham’s chief operating officer.
Anham executives said Mr. Farouki’s resignation as CEO wasn’t tied to any Iran shipments and that his departure had been planned by the company for more than a year.
“With the transition of the prime vendor contract complete the timing made sense,” said a spokesman for Anham. “It’s a natural moment for Mr. Farouki to evolve into this function.”
The investigation into Anham comes at a sensitive time in Washington’s relations with Iran.
The White House has vigorously opposed recent moves by U.S. lawmakers, including Mr. Kirk, to impose new sanctions on Iran, saying they could harm the international efforts to end the standoff over Tehran’s nuclear program.
American and European officials involved in the negotiations with Iran said they believed success on the nuclear issue opened the potential for cooperation with Tehran in resolving a number of conflicts in the Middle East and Central Asia—including in Syria, Iraq and Afghanistan.
Still, the White House and Treasury have vowed to vigorously enforce the Iran sanctions already passed into law, including the bans on trading with the Revolutionary Guards and on U.S. citizens or companies moving supplies through Iran.
That has complicated U.S. war efforts. American military officials have long viewed Iran as the cheapest and quickest route for moving supplies into Afghanistan. The questionable shipments by Anham came after Pakistan in 2011 closed its supply routes into Afghanistan in protest of a strike by U.S. warplanes that mistakenly killed Pakistani troops. Other supply routes from the north are far more expensive.
Anham last year won a multiyear supply contract to provide food and water to troops in Afghanistan worth an estimated $8.1 billion. The U.S. Government Accountability Office said Anham submitted a bid for the contract that was more than $1 billion below the bid of its main competitor, Supreme Foodservice GmbH.
The Afghanistan troop-supply deal is a massive undertaking. In mid-2012, Supreme was delivering to around 250 delivery locations around the country, feeding around 100,000 troops and moving 22.7 million pounds of food, water and produce each week.
While the number of bases has dwindled as the U.S. and its allies draw down troops, the supply deal remains a complex logistics operation. Supreme won an interim contract from the Pentagon to continue deliveries for up to a year while Anham took over delivery locations.
According to the Defense Logistics Agency, the Pentagon agency that oversees the contract, Anham has now completed that handover.
Anham made a voluntary disclosure in September to the Treasury and Commerce Departments regarding transshipments through Iran, after the company was contacted about the matter by the Journal. The logistics agency said Anham was “still in the process of providing documentation on the matter.”
It added that “no changes have been made to the SPV Afghanistan contract” since the disclosure.
“As Anham is still in the process of preparing their official disclosure to the Department of Commerce and Department of Treasury, any actions would be premature,” the statement read. “We will make an informed decision on next steps once we have all the facts.”
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