The Observer: An American law firm with ties to the Bush administration has been hired to help set up a legal system in Iraq.

The firm, Squire, Sanders & Dempsey, has been drafted in by USAID to advise on privatising former government-held industries, structuring government economic and regulatory agencies, and developing a tax structure.

The legal deal is part of a larger package worth up to $79.6 million taken on by Bearingpoint, formerly called KPMG consultants, to advise on the restructuring of Iraq. The deal is expected to lead to several million dollars of work for Squire, Sanders, effectively as sub-contractor.

The number of contracts awarded to companies with close connections to the Bush administration is increased by the Squire, Sanders' deal. The firm donated $41,350 to George W Bush's election campaign in 2000, and earlier this year a Sanders partner, Ronald James, was made personnel chief of the new Department of Homeland Security.