The Foreign Affairs Select Committee demands to know why the Foreign Secretary had left an investigation into the claims to the same US firm that employed those accused of harassment. Amid claims that the firm's probe was inadequate, the MPs conducted their own 10-month investigation into allegations of a culture of sexual harassment and abuse at the British embassy inside the Green Zone in Baghdad.
The allegations, which are denied, were against British men working for KBR, the largest US contractor in Iraq.
An Iraqi female cleaner, backed by witness statements from two local cooks and a Canadian lawyer working at the embassy on behalf of the Department for International Development, came forward in June 2007 to say she had been asked to sleep with one of the KBR men in exchange for double pay. There were also allegations of some KBR staff "taking turns with female employees" and of threats of violence to anyone who tried to speak out.
In a hard-hitting report, the all-party committee rules: "We do not believe that it is appropriate in such circumstances for the investigation of complaints against contractors' staff to be entrusted solely to the contractors."
One witness to the alleged abuse accused Mr Miliband of a "cover-up" in his failure to launch a Foreign Office probe, despite two formal requests to intervene by the committee.
The row will increase pressure on the Foreign Secretary, who has been under fire for his handling of a series of controversial issues. It also comes after a row involving human rights activist Rachel Reid, who says she was "smeared" by the Ministry of Defence over her dealings with a British Army officer.
Separately, The Independent on Sunday has learned that Sir Sherard Cowper-Coles, Britain's ambassador to Kabul, is to leave his post earlier than expected, after less than two years. But a source denied this was related to UK policy in Afghanistan, insisting Sir Sherard, 54, last week accompanied Mr Miliband in meetings in London with President Obama's advisers on Afghanistan, Richard Holbrooke and General David Petraeus, and that the Foreign Office is to announce he is being promoted.
During the committee's inquiry into the Baghdad embassy, triggered after news of the alleged abuse broke last May, Mr Miliband declined to launch a Foreign Office investigation, insisting KBR had made its own "thorough" inquiry.
Yet at the time of the complaint, Britain's deputy ambassador to Baghdad, Matthew Lodge, had promised the complainants that the embassy had a "moral and actual interest in the welfare of all those who worked and lived" there. He believed the claims warranted further inquiry, witnesses said.
Mr Lodge has since been transferred to the British embassy in Kabul. There is no suggestion that he was moved by the Foreign Office for political reasons, but a source said he was unhappy at being overruled. In a note alongside the testimony of one of the cooks, he wrote: "I explained that the embassy did not have a direct responsibility for KBR staff but that we did have a clear responsibility in ensuring that the behaviour of all staff... was acceptable."
Samer Muscati, the Canadian lawyer working as a consultant to DfID at the time, said in a letter to the committee that the KBR probe was "fundamentally flawed" because they failed to interview any of the complainants.
In a second letter, he wrote: "By washing his hands of this matter and by disingenuously framing what has happened as ... an internal affair of KBR, the Foreign Secretary brings the British Foreign and Commonwealth Office into disrepute... I implore you and the other members of FAC to... resist the Foreign Secretary's attempt to leave [this matter] swept under the rug."
The cleaner and two cooks lost their jobs. And to add to the outrage of those involved, there were claims last night that the men accused of harassment were among those awarded Iraqi Reconstruction Medals, a civilian honour, by the British ambassador to Baghdad on behalf of the Queen, last February.
KBR has denied the allegations and ruled there was no case to answer.
The committee, chaired by Labour MP Mike Gapes, twice wrote to Mr Miliband expressing concern that the KBR investigation had not been thorough. In his first reply of 17 May last year, Mr Miliband said he was satisfied the FCO had reacted promptly and correctly, but because the allegations related to KBR staff, the firm should "take forward" the inquiry.
When the committee wrote again pointing out its concerns, Mr Miliband, on 23 July, wrote there was "nothing more of any substance I can add".
Sir Peter Ricketts, head of the diplomatic service, told the committee in October that the Foreign Office had a "duty of care for all the staff in our compound, in terms of their physical safety", but added that it was for contractors to "manage their staff".
An FO spokesman said: "As soon as we became aware of the allegations last year, we asked the company to conduct an urgent investigation... [this] concluded there was insufficient evidence to support the allegations."
Low points in David Miliband's career: Remember, ministers can go down as well as up
Six months ago, David Miliband's share price was the highest in the Cabinet after he positioned himself as the frontrunner to succeed an embattled Gordon Brown. But the Foreign Secretary's stock now appears to be at rock bottom.
It started with a disastrous photo opportunity with a banana at Labour's conference in September. Then in October he was put in the shade by the return to the Cabinet of Peter Mandelson.
More seriously, he triggered a major diplomatic row with India last month after linking the Mumbai attacks to the conflict in Kashmir.
His handling of the case of Binyam Mohamed – the last British resident to be held at Guantanamo Bay – is widely seen as one of the low points in his career. In a High Court ruling last week, judges said they believed Mr Miliband had been informed that the US would cut off intelligence links with Britain if torture evidence was released. But just a day after the ruling on Wednesday, Mr Miliband's evidence was called into question when he made a hurried statement saying no such threat was made by the US.
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