The Pentagon inspector general will investigate whether the deputy undersecretary for international technology security tried to fix a lucrative scam.
According to documents obtained by the Los Angeles Times on Thursday, John Shaw tried to push through a communications deal allowing the creation of an Iraq-wide commercial cellular network worth hundreds of millions of dollars.
Shaw put pressure on officials at the US-led occupation authority in Baghdad to change the contract language and grant the consortium a non-competitive bid, according to the paper's sources.
The consortium consisted of an Irish telecommunications entrepreneur, former friends in the first Bush administration and such leading telecommunications companies as Lucent and Qualcomm.
But Shaw said he was trying to push the mobile phone contract because it could save American lives by helping police and fire services in Iraq communicate more easily.
The official also said promoting a US-based mobile phone technology called CDMA was necessary to deal with what he called a "rigged" competition last year won by companies using European-based technology.
CDMA, which was developed by Qualcomm, is used in the US and some countries in Asia.
"Hey, we won the war. Is it not in our interests to have the most advanced system that we possibly can that can then become the dominant standard in the region?"
deputy undersecretary for international technology security
Its rival, a standard developed by Europeans called GSM, is used in the US, Europe and the Middle East.
"Hey, we won the war," Shaw said in an interview. "Is it not in our interests to have the most advanced system that we possibly can that can then become the dominant standard in the region?"
Additionally, Shaw said that he had been been put under pressure by Republican Senator Darrell Issa, whose San Diego County district is packed with Qualcomm employees.
Criminal charges possible
The Pentagon's Defence Criminal Investigative Services began its investigation after two senior officials with the US-led occupation authority reported Shaw had demanded they make changes to the contract.
They refused. Daniel Sudnick, who was the senior adviser to Iraq's minister of communications, the highest-ranking American in the ministry, and Bonnie Carroll, a chief deputy, resigned this month.
A Pentagon spokeswoman said the inspector general was "unable to discuss this matter at this time".
But she confirmed that contracting officials, not political appointees, are supposed to have full discretion when issuing government contracts.
She also agreed that promoting a private company led by friends could present conflict-of-interest issues.
Criminal charges could result if there were any financial ties between Shaw and members of the consortium.
The inquiry into Shaw's actions is believed to be the first for a senior Pentagon official in connection with the massive $18.4-billion package funded by US taxpayers for Iraq contracts.