MFA CONTINUES ADVOCACY ON BEHALF OF FIRST

C O N F I D E N T I A L KUWAIT 000526 SIPDIS DEPT FOR NEA/FO, NEA/EX, A/LM/AQM E.O. 12958: DECL: 05/13/2018 TAGS: ABLD AMGT ECON IZ KU PREL SUBJECT: MFA CONTINUES ADVOCACY ON BEHALF OF FIRST KUWAITI'S WORK AT EMBASSY BAGHDAD REF: A. KUWAIT 91 ¶B. MAY 13 CONLON-VIVIAN EMAILS Classified By: DCM Alan G. Misenheimer for reasons 1.4 (b) and (d). ¶1. (SBU) During the Secretary's visit to Kuwait for the April 22 Iraq Neighbors Conference in Kuwait, the Amir's Chief of Protocol, Shaykh Khaled Al-Abdullah Al Sabah, called DCM to request a meeting with the Secretary for Mohammed Al-Marafie, the owner of First Kuwaiti Trading and Contracting Company (FKTC),the builder of the New Embassy Compound in Baghdad. After consulting with the Ambassador and the Secretary's advance team, Post informed Shaykh Khaled that the Secretary's schedule would not allow for such a meeting. Econcouns spoke with Al-Marafie by phone to thank him for the request but reiterate that the Secretary's schedule was already overloaded. ¶2. (SBU) MFA subsequently sent Embassy Kuwait a dipnote, letter, and DVD in support of First Kuwaiti Trading and Contracting Company's work in building the NEC. The dipnote requests the USG's assistance in "rehabilitating FKTC's public reputation and resolving completely all pending investigations of the company as soon as possible." ¶3. (SBU) The letter and DVD are similar but not identical to a letter and DVD passed to Embassy Kuwait by the MFA during the President's visit to Kuwait in January (Ref A). The DVD, apparently produced by First Kuwaiti and bearing the State Department Seal and a "confidential" label, contains video and still photos documenting the progress of the NEC construction with a musical soundtrack but no voice-over. In a May 13 phone conversation with econoff, FKTC General Manager Wadih Al-Absi insisted that the DVD had been fully reviewed and cleared by Diplomatic Security. He added that several thousand copies of the DVD have been made and distributed as promotional material. Furthermore, FKTC has plans to incorporate some of the video into a documentary film. ¶4. (SBU) Al-Absi subsequently forwarded a letter dated April 16, 2008 from State Department Contracting Officer David Vivian (A/LM/AQM) to FKTC which states that DS has reviewed the videos an poses no objection to their release pending the deletion of several specifically identified portions. The letter goes on to explain that the DVDs, once they have been edited as directed, can be released for the purposes of external marketing, submission to the House Oversight Committee, and dissemination to the press to defend against inaccurate allegations of shoddy construction. Even though the letter also stipulates that FKTC must remove the State Department Seal, the DVD delivered to the Embassy still bears the Seal. Post was unable to conclusively determine whether the designated sections of video had been deleted. On May 13, Econoff separately emailed Mr. Vivian (Ref B),who confirmed the authenticity of the letter and verified that the edits identified in the letter were incorporated into the final approved for release copy of the DVD that FKTC sent to him. He said he would review the Embassy's copy once it is received at the Department. ¶5. (C) Comment: It is clear from this second intervention, coming during the Secretary's visit and conveyed by the Amir's own senior staff, that First Kuwaiti has major connections in Kuwait -- including with the Al Sabah leadership -- and remains agitated over its reputation within the Department and elsewhere. While in January the FKTC packet was handed over to then A/DCM with little commentary, albeit passed on by MFA U/S Jarallah on the margins of the Amir's dinner with the President, this time the Amir's office specifically intervened to request a meeting. The Amir's office and Mr. Marafie appeared satisfied with the lobbying effort made, but it is clear they are keen to clear the name of First Kuwaiti of any stigma associated with the construction of the NEC. It is notable that this aim has spurred the company, and its high-profile patrons, to direct the lobbying effort at the USG rather than to the public. End Comment. ¶6. (SBU) The complete text of the dipnote and letter follows. MFA Diplomatic Note dated 21 April (unofficial translation) -------------- ¶7. (SBU) Begin Text of diplomatic note: The Kuwait Ministry of Foreign Affairs offers its warmest regards to the United States Embassy in Kuwait, and request the below to be sent to the US Department of State: Relations between the United States and the State of Kuwait are strong and enduring. Over the past two decades, our two countries have cooperated to enhance security and stability in the Gulf region, and Kuwait has provided critical support to the war in Iraq and reconstruction efforts in that country. The Ministry of Foreign Affairs, however, has serious concerns about unfounded allegations made against the Kuwaiti company responsible for building the new U.S. Embassy complex in Baghdad. First Kuwaiti Trading and Contracting Company (FKTC),about which we have previously communicated to your government, is one of the best contracting companies in the Middle East, is distinguished by its excellent record of integrity and credibility, and has a reputation for completing complex construction projects on time and within budget. FKTC plays and important role in Kuwait's economy, and the Government of Kuwait provided FKTC with major facilities to support its work in Iraq, including the execution of more than 200 contracts for the U.S. Departments of State and Defense and, most prominently, construction of the New Embassy Compound in Baghdad. FKTC has been subject to numerous unfounded allegations regarding shoddy construction of the Baghdad embassy project, specifically by U.S. Members of Congress and some American media. These allegations have now been completely discredited by the fact that the U.S. Department of State has certified final completion of the Baghdad Embassy and accepted possession of the complex after rigorous inspection of all buildings and systems, which proved to be of very high quality. The Ministry has monitored closely FKTC,s progress on the embassy project and has requested periodic updates from the company (see attached). Despite our full confidence in the abilities of FKTC, which has now been confirmed by the U.S. Department of State, the Government of Kuwait has serious concerns that persistent, unfounded allegations and investigations by the U.S. Congress will diminish FKTC,s capacity to fulfill other pressing obligations in Kuwait and elsewhere in the world. We respectfully request your assistance in rehabilitating FKTC,s public reputation and resolving completely all pending investigations of the company as soon as possible. We believe that these investigations are totally without merit and look forward to their swift conclusion. Based on the above, Kuwait,s Ministry of Foreign Affairs takes this opportunity to forward its best regards and respect to the U.S. Department of State. Letter from First Kuwaiti to MFA U/S dated 14 February -------------- -------------- ¶8. (SBU) Begin text of letter: Dear Sir, In response to your request, this letter provides more details regarding the status of the new U.S. embassy complex in Baghdad and issues related to the project,s final completion. As you know, the embassy project has become a target for criticism by members of the U.S. Congress, the media and corporate competitors. Our company is grateful for the Government of Kuwait,s continued support, and is confident that these issues can be resolved expeditiously. In August 2007, FKTC substantially completed its portion of the Baghdad embassy and is currently awaiting final acceptance of the compound by the U.S. State Department. As you know, the 104 acre, 28 building site is the largest U.S. embassy in the world and the most complex infrastructure project yet completed in wartime Iraq. Yet, despite the ongoing insurgency, compromised supply routes and unrelenting risk to the lives and safety of First Kuwaiti workers, the project was completed in just over two years within the original fixed budget of $474 million. This success would not have been possible without the active support of the Kuwait Government. Not only did the Government of Kuwait facilitate the immigration of foreign workers for the project, it also assisted greatly with the re-export of construction materials; exempted the import and export of materials from customs; and provided extraordinary facilities for the staging of shipments to Iraq. For example, the NEC required casting over 150,000 cubic meters of reinforced concrete using more than 120,000 tons of cement and 30,000 tons of steel. Because these commodities were not available in Iraq, they had to be transported from Kuwait, which was only made possible through the close cooperation between the Kuwait Government and the Government of the United States. At the time, steel and cement were in extremely tight supply in Kuwait; nonetheless, the Government to Kuwait permitted FKTC to export large quantities of the commodities because of the importance of the embassy project. Unfortunately, by making sensational allegations about FKTC and the Baghdad embassy project, partisan critics of the U.S. Administration and the Iraq War have generated significant media attention and portrayed the U.S. State Department in a negative light. Of course, in the American political context, it is generally easier to make baseless allegations against a foreign company than against one located in the U.S. This situation has been made worse, however, by the State Department's own conduct: its persistent leaking of inaccurate and misleading information; its silence in the face of demonstrably false allegations, such as worker conditions in the U.S. Government-controlled Green Zone; and its continued refusal to permit FKTC to defend itself in the press. The most damaging allegations are that: (1) FKTC,s construction of the new embassy compound has been substandard; (2) FKTC brought foreign workers to the Baghdad embassy site against their will; and (3) FKTC was involved in an illegal bribery and kickback scheme. All three of these accusations are unfounded and can be refuted by ample evidence. First, a congressional committee chairman and strong critic of the Bush Administration alleged that FKTC installed counterfeit wiring at a diplomatic guard camp next to the embassy compound and that there are widespread deficiencies in the embassy's fire suppression system. The U.S. State Department itself investigated the wiring allegation, which was originally made by our U.S. competitor KBR, and concluded that no counterfeit wiring was found. Moreover, on October 9, 2007, the U.S. Assistant Secretary of State for Public Affairs characterized any problems with the fire suppression system as mere punch list items. The U.S. State Department has closely monitored and recorded every stage of FKTC,s performance, from procurement of materials to installation. Much of the confusion over the sufficiency of the embassy's fire suppression centers on whether the system meets the specifications required by the State Department. It is our understanding that the State Department modified its global fire suppression system specifications in 2006, but failed to notify its Bureau of Overseas Building Operations (OBO) team in Iraq or FKTC, which built the system to comply with the specification in force at the time the embassy contract was signed. At no time did the State Department propose to modify its contract with FKTC, yet we have made every effort to accommodate the State Department's demands. For example, FKTC commissioned an independent review of the fire suppression system, the preliminary results of which were subpoenaed by the State Department Inspector General. We are now concerned that the State Department is using this incomplete and confidential information to gain a commercial advantage over FKTC. Most recently, the acting director of OBO stated in the press that he has voided the State Department's previous certification of the embassy as substantially completed. While FKTC has yet to be formally informed of this decision, it raises a number of troubling issues. If true, OBO has unilaterally repudiated the work performed by the State Department's own officials observed, approved, certified, and testified as to the high quality and extent of completion of FKTC,s work, in full compliance with the contract terms. As we work to finish this project, it is critical that there be a defined, reliable and transparent path toward final completion, insulated from State department bureaucratic infighting. Second, congressional Democrats have highlighted implausible claims that FKTC brought laborers from foreign countries to work at the embassy compound against their will. These serious allegations were investigated thoroughly by three different entities: the Philippine Government, the Inspector General of the U.S. State Department, and the Inspector General of the Multinational Force Iraq. All three investigations concluded that the accusations of trafficking were without merit. Nonetheless, these accusations are still repeated by Members of Congress and in the press. Third, critics of the war and Democratic members of Congress have alleged that FKTC participated in an illegal kickback scheme to obtain subcontracts under the Army's multi-billion dollar logistical support contract. This false allegation is based on an unsubstantiated and self-motivated assertion by a former KBR contracting officer who claims he accepted $10,000 from FKTC. This matter continues to be under review by the U.S. Department of Justice. Regrettably, the American politicization of these issues is having real consequences for FKTC. FKTC has repeatedly been the subject of unfair and inaccurate reporting in the media and the unwarranted target of congressional hearings. KBR is using the allegations as an excuse to suspend payment of nearly $90 million to FKTC for materials supplied and work completed under unrelated contracts, some of which date back to 2004. FKTC has also encountered significant problems as a subcontractor to KBR. FKTC leased 150 trucks to KBR but starting last summer, KBR stopped paying their bills and refused to respond to our inquiries and demands to either make payments or return the trucks. FKTC believes that KBR has effectively misappropriated our property. Additionally, the United Nations has suspended FKTC from bidding on contracts not because FKTC has been found guilty of any wrongdoing, but merely because certain members of Congress are investigating the allegations against FKTC. We also understand that FKTC may not qualify for the 2008 program for U.S. embassy construction despite the magnitude of our achievement in Baghdad and our ability to compete on the basis of cost, quality and time to completion. We dare say that no American company would suffer the same treatment. Finally, we are concerned that the size, scope and location of the project; infighting and mistrust within the U.S. State Department; multiple internal and external U.S. government investigations; and high-profile criticism of FKTC and the U.S. Administration, have made it nearly impossible for any U.S. Government official to sign-off on final acceptance of the new embassy compound. Meanwhile, FKTC has been forced to remain on-site at great expense and inconvenience. In particular, delays in the issuance of the requisite occupancy certificates for the embassy compound have required FKTC to maintain senior managers, equipment and a significant workforce at the embassy site, thus diminishing the company's ability to focus on critical projects within Kuwait and pursue other business opportunities. We are proud of our record of achievement in Iraq and regard the completion of the new U.S. embassy compound in Baghdad as an absolute success. It is unfortunate that critics of the war have given credence to spurious accusations and blown minor construction issues completely out of proportion. We look forward to working with the Government of Kuwait to clarify these issues, correct the record and restore our reputation. Sincerely, For First Kuwait Trading & Contracting (FKTC) WADIH AL-ABSI GENERAL MANAGER ********************************************* * For more reporting from Embassy Kuwait, visit: http://www.state.sgov.gov/p/nea/kuwait/?cable s Visit Kuwait's Classified Website: http://www.state.sgov.gov/p/nea/kuwait/ ********************************************* * JONES