It wasn't just run of the mill fraud either, these guys were dealing arms to the insurgency so he did what I would hope every American would do, he contacted the FBI. The FBI then, in turn informed the military who raided the company. Vance was swept up in the raid as the Army didn't know he was an informant. That's understandable, what happened next isn't. From the NYT:
She [Pentagon Spokewoman First Lt. Lea Ann Fracasso] said officials did not reach Mr. Vance’s contact at the F.B.I. until he had been in custody for three weeks. Even so, she said, officials determined that he “posed a threat” and decided to continue holding him. He was released two months later, Lieutenant Fracasso said, based on a “subsequent re-examination of his case,” and his stated plans to leave Iraq.
It's bad enough that it took three weeks to confirm with the FBI that he was working with them, but to hold him for two additional months is pretty egregious, and as bad as that is, they also held him an additional eighteen days after the "subsequent re-examination of his case" where it was decided he wasn't a threat.
These are the consequences for taking long standing procedures for treating detainees and simply throwing them out the window for whatever whims Rumsfeld on any given day. It's a good thing he's gone and I wish Vance all the best on the lawsuit he is planning to file against him.