The US Justice Department said Army Reserve Lieutenant Colonel Debra Harrison, 47, who served with the Coalition Provisional Authority, was arrested on Thursday on charges involving bribery, money laundering and fraud.
Harrison is the second army officer and the fourth person charged in the past few weeks in connection with the scheme.
The Justice Department said Harrison was on active duty for the US Army in 2003 and 2004, and was responsible for developing contract solicitations and ordering contracts for reconstruction efforts for the Coalition Provisional Authority office in Hillah.
A second Army Reserve lieutenant colonel, Michael Brian Wheeler, and a former official, Robert Stein Jr., 50, were arrested last month.
Also arrested in November was Philip Bloom, a US businessman who has lived in Romania for many years.
Prosecutors say Bloom paid the kickbacks in return for more than $13 million in CPA contracts for companies that Bloom controls.
According to court papers, Harrison and her co-conspirators accepted money and gifts in return for using their official positions to rig contract bids.
Harrison was on active duty for
An affidavit filed in the US District Court in New Jersey said she used the money to add a deck and put in a hot tub at her home in Trenton, New Jersey, accepted a Cadillac Escalade worth about $50,000 and a $6,000 airline ticket from a contractor in return for rigging the bids.
Harrison was also accused of laundering funds from the CPA.
In the affidavit, Harrison was also charged with numerous firearms charges, including conspiring to embezzle and possess pistols, automatic machine guns and grenade launchers bought with CPA funds.
She is charged along with her co-conspirators of using the CPA funds to buy dozens of firearms and related military-grade hardware in North Carolina for their own use.
Harrison admitted to getting the Cadillac, but denied she stole money or guns, the complaint said.
The government has not indicted any of those arrested in the case.
If convicted, Harrison faces up to 30 years in prison.