How
Iraq Was Looted
By Evelyn Pringle
24 April, 2007
Countercurrents.org
When
President Bush announced "Mission Accomplished," and the end
of the war in May 2003, he also said we would help the citizens of Iraq
rebuild their country. "Now that the dictator's gone," he
stated, "we and our coalition partners are helping Iraqis to lay
the foundations of a free economy."
Apparently he was referring
to the Coalition Provisional Authority that took up residence in Saddam's
luxurious palace in May 2003, with the newly appointed King, Paul Bremer.
The CPA was granted the authority to award reconstruction contracts
in Iraq and it used that authority to implement what will go down in
the history books as the most blatant war profiteering scheme of all
time.
In large part, the masterminds
of the reconstruction disaster that would occur after the CPA took over
Iraq were Secretary of Defense, Donald Rumsfeld, and Undersecretary
of Defense, Douglas Feith.
But to ensure control of
the contracting process on the ground in Iraq, Bush filled the top slots
of the CPA with the administration cronies. For instance, a friend of
Cheney's, Peter McPherson, took a leave of absence as president of Michigan
State University to serve as Bremer's economic deputy.
The leader of the CPA's private
development sector was Thomas Foley, an old college classmate of Bush,
who served as finance chairman for his Presidential campaign in Connecticut
and also raised more than $100,000 for Bush.
Relatives of the administration
were also given jobs, such as Ari Fleischer's brother Michael, and Simone
Ledeen, the daughter of Michael Ledeen. Cheney's daughter Liz, also
did a short stint. However, it should be noted that none of them lounged
around for too long in what soon became a hellhole in Iraq.
On May 16, 2003, the CPA
issued its first regulation and described its authority in no uncertain
terms stating:
"The CPA is vested with
all executive, legislative, and judicial authority necessary to achieve
its objectives, to be exercised under relevant U.N. Security Council
resolutions, including resolution 1483 (2003), and the laws and usages
of war. This authority shall be exercised by the CPA Administrator."
With one swipe of the pen,
Bremer granted himself the authority to run the government ministries,
appoint Iraqi officials and award contracts for reconstruction. Next
he fired 500,000 Iraqis, most of them soldiers, but pink slips also
went out to many doctors, nurses, teachers and other public employees
as well.
For the most part, the CPA
financed its activities with billions of dollars that belonged to the
Iraqis. On May 22, 2003, a UN Security Council passed a resolution that
directed the proceeds from Iraqi oil to be placed in a Development Fund
for Iraq, and the CPA was granted authority to control the fund and
decide which profiteers would get contracts.
During the year that Bremer
controlled the purse strings, the Iraqi Development Fund received $20.2
billion, including $8.1 billion from the UN's oil-for-food program,
$10.8 billion from Iraqi oil, and the rest from repatriated funds, vested
assets and donations.
The CPA accounting system
was cash and carry and a steady stream of cash was flown into Bagdad
from the US. Inspector General, Stuart Bowen later said that he knew
of one $2 billion flight.
A report released by the
House Government Reform Committee in February 2007, shows that in the
13 months that Bremer ruled, from May 2003 to June 2004, the Federal
Reserve Bank in New York shipped nearly $12 billion in a cash to Iraq.
One can only imagine the
Bank service charges associated with these shipments because to accomplish
this feat, according to the Democratic chairman of the Reform Committee,
Henry Waxman, the cash weighed 363 tons and the Bank had to count and
pack 281 million individual bills, including more than 107 million $100
bills, and then load them onto wooden pallets to be shipped to Bagdad
on C-130 cargo planes.
Inspector Bowen later said
that he determined that some of this cash went to pay salaries for thousands
of "ghost employees" and Iraqi civil servants who did not
exist.
Within a few months of the
CPA's arrival in Iraq reports of corruption in the contracting process
began appearing in the media. A British adviser to the Iraqi Governing
Council told the BBC that officials in the CPA were demanding bribes
of up to $300,000 in return for contracts.
Reports of flat out-fraud
remained steady throughout Bremer's reign in Iraq. One audit showed
that the CPA Ministry of Finance could not provide documentation for
about $17 million spent on employee salaries in February 2004, and a
CPA Advisor to the Ministry of the Interior said the Ministry was paid
for 8,602 guards but only 602 could be verified.
A CPA advisor to the Ministry
of Finance was so concerned about payroll corruption that he submitted
a formal complaint that stated in part: "Of the 1.6 million government
employees currently on payroll, credible estimates put the number of
ghost workers at somewhere between 250,000-300,000 employees."
An October 2004, audit performed
for the International Advisory and Monitoring Board, created by the
UN to monitor the spending of Iraqi money, found one case where a payment
of $2.6 million was authorized by a CPA senior adviser to the Ministry
of Oil, and auditors were unable to obtain an underlying contract or
any evidence that the services had been rendered.
The auditors in this group
found 37 cases where files could not be located for contracts worth
$185 million all total. In another 52 cases, there was no record that
goods had been received for a total of $87.9 million.
People on the ground in Iraq
said that doing business with the CPA was reminiscent of the Wild West.
Former CPA employees told a congressional committee that sackfuls of
cash were tossed around like footballs. Franklin Willis, showed pictures
of himself and others holding up bundles of $100 notes totaling $2 million,
which he said was used to pay the contractor Custer Battles. "We
told them to come in and bring a bag," Willis said.
He also testified that millions
of dollars in $100 bills were stored in the basement of the CPA offices
and distributed to favored contractors with little accounting discipline.
For instance, in the year that the CPA ruled, Custer was awarded contracts
worth more than $100 million.
Two former Custer employees
ended up filing a lawsuit under the Federal False Claims Act, saying
Custer had swindled $50 million from the CPA with scams like double-billing
for salaries and repainting the forklifts found at the Baghdad airport
and then leasing them back to the US government.
The employees said the CPA
paid the Custer $15 million to provide security for Iraq's civilian
airline, when no services were needed because the airline was grounded
during the time covered by the contract.
These employees said they
kept informing the CPA about Custer's fraudulent conduct for more than
a year and when they asked why the firm continued to get contracts,
they were told: "Battles is very active in the Republican party,
and speaks to individuals he knows in the Whitehouse almost daily."
In June 2004, the Government
Accounting Office estimated that more than $1 billion in had been wasted
due to illegal overcharges by contractors since the war began. A later
audit by the Iraqi government found that as much as $1.27 billion was
lost to accounting irregularities between June 2004 and February 2005.
Inspector Bowen cited two
examples of poor oversight in a November 3, 2005 interview on National
Public Radio where $28 million was paid to build 5 power plants and
$1.8 million was paid to rebuild a library, but the work was never performed
and the money
"simply disappeared," he said.
A recent report by Bowen
says DynCorp was paid $43.8 million for a residential camp for police
training personnel and has been empty for months and that the company
may also have billed $18 million in other unjustified costs.
About $4.2 million, he says,
was improperly spent on 20 VIP trailers and an Olympic-size pool and
an additional $36.4 million in spending for weapons such as armored
vehicles, body armor and communications equipment that cannot be accounted
for.
Not surprisingly, Cheney's
Halliburton remained the top profiteer under Bremer's rule. A July 23,
2004, audit conducted by Bowen, showed the company had received 60%
of all contracts paid for with Iraq money, including 5 no-bid contracts
worth $222 million, $325 million, $180 million, and the last 2 together
totaled $194 million for the last two. In comparison, the audit showed
that the CPA awarded only 2% of the reconstruction contracts to Iraqi
companies.
In one example of blatant
fraud, an audit found that Halliburton was charging for more than 41,000
meals a day for soldiers when only about 14,000 were served.
By the fall of 2003, the
country was realizing that the rational for war was based on lies and
that the only ones drawing any benefits were the profiteers. So when
Bush asked Congress for another $20 billion for the CPA, Bremer was
summoned to Washington to explain where all the money was going and
of course he testified in full stonewall mode.
Before the Appropriations
Committee on September 22, 2003, Bremer said the CPA had detailed records
of all its receipts and outlays that could be audited by Congress. But
when he testified before the Armed Services Committee 3 days later he
said the Office of Management and Budget was responsible for maintaining
the CPA records and that Congress would have to go to the White House
to access the records.
That arrogant assertion went
over like a lead balloon with many members of Congress. Senator Robert
Byrd said he was outraged over the inability to monitor CPA spending.
"There is no reason why any arm of the executive branch charged
with making such significant spending decisions," he said, "should
not be working directly with Congress."
"When we're talking
about handing over another $20 billion to the CPA," he said, "there
is a real need for Congress to confirm that the CPA has its finances
in order and that it is managing the taxpayer's money responsibly."
"We don't even know
how much of the $20 billion," Byrd said, "will flow to government
contractors in Iraq."
"Whatever the amount
is," he noted, "we know that the size and scope of the profits
being made will be enormous."
"Former Bush Administration
officials," he warned fellow Senators, "are even setting up
consulting firms to act as middlemen for contractors hoping to take
part in the bonanza."
"Are we turning the
U.S. Treasury into a grab bag for favorite campaign contributors to
be financed at taxpayer expense?" he asked.
The answer was yes, and what
a grab bag it was. Media reports revealed that Bush's ex-campaign manager
and Feith's former law partner had set up consulting firms to profit
off the war by lining up contracts for clients through their partners
in crime within the CPA.
Other reports revealed that
contracts worth $407 were awarded to a firm called Nour that was formed
less than 2 months after the war began. The names linked to the profits
from Nour, among many others, included former Secretary of Defense,
William Cohen, Ahmad Chalabi via a $2 million kickback, his nephew Salam
Chalabi as the attorney handling the deal, and the money trail even
led to the First Brothers, Marvin and Jeb Bush.
But come to find out, Doug
Feith the ringleader on the ground in Washington, had awarded a batch
of no-bid contracts to a favored company the month before the war began
for the purpose of controlling the media in post-war Iraq.
In October 2003, the Center
for Public Integrity obtained copies of 7 contracts awarded to the San
Diego-based Science Applications. The total value of the contracts was
redacted but the Center was able to determine that they were all awarded
in February 2003, and called for the work to be directed by Feith.
However, the Center's most
stunning discovery was that when the contracts were awarded, Feith's
top deputy at the time, Christopher "Ryan" Henry, had been
a senior vice president at SAIC until October 2002.
In addition, one of SAIC's
board members was Army General, Wayne Downing, who ran counterterrorism
in the Bush administration for almost a year after 9/11, and had even
went to the CIA with Cheney to discuss intelligence on Iraq. Downing
had also served as an advisor to Ahmed Chalabi and the Iraqi National
Congress, and was well-known advocate for a war against Saddam.
Some of the SAIC contracts
required that specific persons referred to as "executive management
consultants" be hired and the pay range listed went as high as
$209 and $273 per hour. The Center said congressional sources estimated
the value of the media contract as $38 million for the first year and
as high $90 million in 2004.
The SAIC had no special expertise
to justify the award of these contracts. One company executive, quoted
in the media, said the firm's only credential for setting up an independent
media, supposedly modeled after the BBC, was military work in "informational
warfare"-signal jamming, "perception management," and
the like.
Under these contracts, the
Iraq Media Network (IMN) was established and journalist, Mark North,
who covered the Iraq invasion for National Public Radio, was hired to
train Iraqi journalists to report for the IMN.
In one of the many Congressional
hearings, North testified about the control of the IMN by the CPA and
said CPA officials regularly directed and censored the activities of
the news station and provided "a laundry list of CPA activities"
to cover in the news reports instead of stories about security or the
lack of electricity and jobs
While testifying, he also
described the CPA's shabby treatment of Iraqi employees and its refusal
to pay their wages. "For the first two months," North said,
"the local staff of about 200 journalists and technicians were
not paid their salaries."
When the staffers went on
strike in attempt to get paid, he said, the CPA told the Iraqis to get
back to work or the US Army would remove them from the studios.
All total, the CPA had control
of Iraqi money for one year between June 2003 and June 2004, but unfortunately
no auditors arrived to take a look at the agency's spending until April
2004, two months before the CPA's rule was scheduled to end.
And as so often happens when
it comes to giving solid advice or warnings, the senior Senator from
Virginia was absolutely right. It was far too late for audits, because
the CPA and its gang of profiteers had already robbed the Iraqis blind.
The favored companies enjoyed
a fraud-free-all. For instance, Halliburton said it had lost over $60
million worth of government property including trucks, office furniture
and computers. Inspector Bowen reported that 6,975 items valued at $61.1
million were lost, and in June 2005, the Defense Contract Audit Agency
reported that the Halliburton had overcharged or presented questionable
bills for close to $1.5 billion.
In the end, Bowen's audit
concluded that "the CPA's internal controls for approximately $8.8
billion in DFI funds disbursed to Iraqi ministries through the national
budget process failed to provide sufficient accountability for the use
of those funds."
As of February 2007, according
to Bowen, audits of the CPA have resulted in 300 criminal and civil
investigations, 5 arrests and convictions, and another 23 cases are
currently under prosecution at the DOJ, and he is working on 76 on-going
investigations.
One of the convictions involved
Robert Stein, a former CPA comptroller and funding officer, who recently
pleaded guilty to 5 felony counts including conspiracy, money laundering,
and bribery in stealing more than $2 million of reconstruction funds
and taking more than $1 million in kickbacks to rig the bids on contracts
that exceeded $8 million.
The whistleblower case against
Custer Battle went to trial and a jury found that Custer had committed
37 acts of fraud and filed $3 million in false claims, and rendered
a verdict with a $10 million penalty. However, the verdict was overturned
by Republican appointed US District Court Judge TS Ellis III, who ruled
that the CPA was not a US entity and therefore the false claims act
does not apply to it.
In the ruling, the judge
said Custer's accusers "failed to prove that the U.S. government
was ever defrauded. Any fraud that occurred was perpetrated instead
against the Coalition Provisional Authority, formed to run Iraq until
a government was established."
Legal experts say this ruling
is great news for the CPA and contractors because from now on anyone
charged with any act of fraud related to the Iraqi money doled out by
the CPA in Bagdad will use it in attempt to avoid civil or criminal
prosecution.
Evelyn Pringle
can be reached at: evelyn- [email protected]
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