It's too high poly, for one thing. It has 14,958 polygons. That's way too high for a simple bag. Take it down to about 1,000 polygons, at most, 2,000.
In Blender, edit mode, press A to select everything, W > remove doubles.
Make sure you're in face select mode. In the UV editor, enable Keep UV and Edit Mode Mesh Selection in Sync (the button is on the bottom), hold shift + L, and select the UV islands for the bag and the straps. Press H to hide them. A to select what's been revealed, X > faces to delete. Alt + H to unhide.
Put your cursor in the 3D window, press A then ctrl + N to recalculate the normals.
Edge select, hold shift + alt, and select some edge loops around the bag, X > dissolve edges. You can remove a ton of edge loops and the mesh will not change shape at all so be brutal.
Pan your camera around and examine your mesh. Look for faces smashed between other faces--you have some on the sides and they should be removed. You can hide any faces or edges in your way if that's what you need to do to remove smashed faces.
The tops of the straps are intersecting. You should remove the geometry that's overlapping; once you do there will be an opening on the tops of the straps. Enter vertex select and select two vertices on either side, W > merge > at center. Merge the vertices in sets of two until the openings in the straps have been closed.
Object mode. Add a solidify modifier. You adjust the thickness to your liking but if your thickness is low uncheck fill rim. Fill rim will just add to the polycount but you won't notice a filled rim in the game. Click apply to apply the modifier.
For the lower LODs you can remove more edge loops, but you can also use the decimate modifier. It'll wreck your topology so be aware of that.
Don't clone a plant for your base. Plants have been tuned in a way to allow transparency and isn't like other objects in the game. If this is just a decor item, clone the stack of books if you want something that will sit on a table and on the floor.
And don't forget you need to replace the bump map and specular map or your texture will not look right. These maps are found in the warehouse.
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