Today’s Must Read

Prepare to have your credulity tested.

Back in February, the AP broke the story that the White House had secretly modified a proposed rule to crack down on contract fraud. The rule, originally drafted by the Justice Department, was intended to force contractors to police themselves and report evidence of fraud or abuse. But the White House’s version of the rule specifically exempted contractors working overseas on contracts that exceeded $5 million.

The Justice Department, which needs all the help it can get in busting corrupt contractors, was dismayed. But it made the major overseas contractors (like, say, Blackwater, KBR, CACI International, etc.), who had been opposing the rule, very happy.

When the AP asked why the White House had inserted the loophole, no answers were forthcoming. A spokeswoman from the Office of Management and Budget would only say that it was a “proposed rule,” and that they were reviewing public comments.

And that was it. Over the ensuing months, members of Congress from both parties denounced the rule and vowed investigations. Even the Special Inspector General for Iraq Reconstruction publicly criticized the rule. But the White House otherwise stayed mum.

The first Congressional hearing was set for today. And the White House has let it be known that the loophole is gone — and that it was all a big misunderstanding:

Reversing itself after months of criticism, the administration closed the loophole that was quietly slipped last year into a proposed Justice Department crackdown on government contract fraud….

Government policywriters said the original rule was drawn up quickly, and chided the Justice Department for not explicitly making sure that overseas contracts should be included in the crackdown. “It was only after publication of the proposed rule … that DoJ and other respondents expressed concern about the overseas exemption,” the draft states….

A Bush administration official on Monday called the loophole “a drafting error” that happened when policywriters merely cut and pasted a 20-year-old Defense Department regulation into the contracting crackdown.

Oh well. Mistakes do happen.

Rep. Peter Welch (D-VT), who had called for the hearing, seems not to take the White House’s story at face value: “This investigation proves why oversight works…. The question is why it required a congressional investigation to prevent the Bush administration from giving overseas contractors a free pass to defraud taxpayers.”