A firm suspended from U.S. government contracts for allegedly bribing Army officers was awarded a new contract in Iraq two days after the suspension was imposed, government investigators found. The Pentagon paid the suspended company more than $1 million under the new contract.

Contracting officers gave Lee Dynamics International a new contract in July 2007 despite warnings from military lawyers, according to a report issued by Stuart Bowen, special inspector general for Iraq reconstruction (SIGIR). The Joint Contracting Command-Iraq did not return calls on why Lee Dynamics was awarded the new contract.

The new, one-year contract allowed Lee Dynamics to continue operating warehouses for the Iraqi security forces. Army Maj. Gloria Davis, who was involved in awarding the company's initial contract in 2005, killed herself in December 2006 after telling investigators that she took $225,000 in bribes from company founder George Lee, federal court records show. Another Army officer, Lt. Col. Levonda Selph, pleaded guilty last year to taking $9,000 in bribes.

Neither Lee nor his company has been charged with a crime. Lee and his lawyer, Howell Riggs, did not respond to messages.

Lee Dynamics, based in Kuwait, was one of three firms in the past two years that the U.S. military awarded new contracts or allowed to continue working on existing ones after they were banned, according to the SIGIR report and interviews with company and military officials. Contracts for the other two firms totaled $10.6 million.

In its Oct. 27 report, the SIGIR office said the U.S. military should "reinforce the importance of screening contractors." Federal regulations allow barred contractors to finish their work, but they are not supposed to get new contracts.

Col. Roger Westermeyer, deputy commander of a joint military contracting office in Baghdad, told SIGIR that contracting officers "will be reminded of the importance" of background checks.

According to SIGIR, 38 companies or individuals have been barred from doing business with the military. An additional 83 have been suspended, a preliminary step the government uses to ban contractors while investigating allegations.

Other cases:

Danube General Contracting was banned for a year in June 2006 after a company representative admitted offering a $36,000 bribe to an Army official on a sewer construction contract in Baghdad, according to Army records released in response to a Freedom of Information Act request by USA TODAY.

Three months after being banned, Danube got a $4.4 million contract for one section of a wastewater treatment project. The Army failed to notify Danube about the ban and, as a result, allowed the Iraqi company to compete for the new contract, according to the SIGIR report.

The U.S. had paid the firm about $2 million by the end of August, the report says. "This has been unbelievably challenging and indescribably dangerous, both from a security and a construction safety standpoint," DeDe Cordell, a spokeswoman for the Army Corps of Engineers in Baghdad, said in an e-mail.

Jamal Al Badry, a Danube director, said in an e-mail that the attempted bribe came from a company subcontractor. He said Danube served its one-year suspension and has since completed other U.S.-funded projects.

AEY Inc. of Florida was suspended in March for allegedly misrepresenting the source and quality of ammunition it provided for the Afghan National Army, the report says.

After the suspension, the U.S. terminated five weapons contracts for default but kept two others worth $6.2 million, the report says.

A federal grand jury indicted AEY and its owner in June on fraud charges. AEY's lawyer, Hy Shapiro, declined to comment.