Monday, June 13, 2011

It's only money. What's to get excited about?

Missing Iraq money may have been stolen, auditors say

U.S. Defense officials still cannot say what happened to $6.6 billion, sent by the planeload in cash and intended for Iraq's reconstruction after the start of the war.

By Paul Richter, Los Angeles Times

June 13, 2011

Reporting from Washington

After the U.S.-led invasion of Iraq in March 2003, the George W. Bush administration flooded the conquered country with so much cash to pay for reconstruction and other projects in the first year that a new unit of measurement was born.

Pentagon officials determined that one giant C-130 Hercules cargo plane could carry $2.4 billion in shrink-wrapped bricks of $100 bills. They sent an initial full planeload of cash, followed by 20 other flights to Iraq by May 2004 in a $12-billion haul that U.S. officials believe to be the biggest international cash airlift of all time.

This month, the Pentagon and the Iraqi government are finally closing the books on the program that handled all those Benjamins. But despite years of audits and investigations, U.S. Defense officials still cannot say what happened to $6.6 billion in cash — enough to run the Los Angeles Unified School District or the Chicago Public Schools for a year, among many other things.

For the first time, federal auditors are suggesting that some or all of the cash may have been stolen, not just mislaid in an accounting error. Stuart Bowen, special inspector general for Iraq reconstruction, an office created by Congress, said the missing $6.6 billion may be "the largest theft of funds in national history."

The mystery is a growing embarrassment to the Pentagon, and an irritant to Washington's relations with Baghdad. Iraqi officials are threatening to go to court to reclaim the money, which came from Iraqi oil sales, seized Iraqi assets and surplus funds from the United Nations' oil-for-food program.

It's fair to say that Congress, which has already shelled out $61 billion of U.S. taxpayer money for similar reconstruction and development projects in Iraq, is none too thrilled either.

"Congress is not looking forward to having to spend billions of our money to make up for billions of their money that we can't account for, and can't seem to find," said Rep. Henry A. Waxman (D-Beverly Hills), who presided over hearings on waste, fraud and abuse in Iraq six years ago when he headed the House Government Reform Committee.

Theft of such a staggering sum might seem unlikely, but U.S. officials aren't ruling it out. Some U.S. contractors were accused of siphoning off tens of millions in kickbacks and graft during the post-invasion period, especially in its chaotic early days. But Iraqi officials were viewed as prime offenders.

The U.S. cash airlift was a desperation measure, organized when the Bush administration was eager to restore government services and a shattered economy to give Iraqis confidence that the new order would be a drastic improvement on Saddam Hussein's Iraq.

The White House decided to use the money in the so-called Development Fund for Iraq, which was created by the Federal Reserve Bank of New York to hold money amassed during the years when Hussein's regime was under crippling economic and trade sanctions.

The cash was carried by tractor-trailer trucks from the fortress-like Federal Reserve currency repository in East Rutherford, N.J., to Andrews Air Force Base in Maryland, then flown to Baghdad. U.S. officials there stored the hoard in a basement vault at one of Hussein's former palaces, and at U.S. military bases, and eventually distributed the money to Iraqi ministries and contractors.

But U.S. officials often didn't have time or staff to keep strict financial controls. Millions of dollars were stuffed in gunnysacks and hauled on pickups to Iraqi agencies or contractors, officials have testified.

House Government Reform Committee investigators charged in 2005 that U.S. officials "used virtually no financial controls to account for these enormous cash withdrawals once they arrived in Iraq, and there is evidence of substantial waste, fraud and abuse in the actual spending and disbursement of the Iraqi funds."

Pentagon officials have contended for the last six years that they could account for the money if given enough time to track down the records. But repeated attempts to find the documentation, or better yet the cash, were fruitless.

Iraqi officials argue that the U.S. government was supposed to safeguard the stash under a 2004 legal agreement it signed with Iraq. That makes Washington responsible, they say.

Abdul Basit Turki Saeed, Iraq's chief auditor and president of the Iraqi Board of Supreme Audit, has warned U.S. officials that his government will go to court if necessary to recoup the missing money.

"Clearly Iraq has an interest in looking after its assets and protecting them," said Samir Sumaidaie, Iraq's ambassador to the United States.

According to available calculations, a billion dollars in $100 bills would weigh roughly 22,000 lbs. That means that a normal C-130J could crawl across the sky with about $1.64 billion in C-notes, not counting pallets, lunches for the crew, and toilet paper. In any event, the Herc will haul a lot of cash. During WWII, the "cargo cult" was established in the Pacific, where islanders believed the airplanes arrived with presents from a supreme being and attempted to attract airplanes with small airstrips and even aircraft "decoys". There's probably a similar feeling among the Iraqis, whose emirs and tribal chieftains have a continual courier shuttle running between Iraq and the banks of Europe and the US, deposting the $100 bills in accounts that will then be tapped for homes in Naples, Florida and London, Harvard tuition, well-bred race horses and plastic surgery.

Naturally, the story continues:
The U.S. watchdog on Iraq reconstruction is disputing a report quoting him suggesting that $6.6 billion in Iraqi oil money entrusted to U.S. hands may have been stolen.
The charge, if true, would make the theft of funds the largest in U.S. history, and has already angered Iraqis reportedly debating whether to sue over the missing funds.
The Pentagon refuses to endorse the charge that the disappearing dollars were stolen -- either by greedy U.S. contractors or others involved in its movement from U.S. holdings to Iraq. And now, Special Inspector General for Iraq Reconstruction Stuart Bowen said he never said that $6.6 billion in missing money was swiped.
"What we concluded in our previous audits is that it's been virtually impossible to account for what happened to that money," Bowen told Fox News in a telephone interview Monday, adding that criminal cases have led to the convictions of people who have stolen money from a special fund set up by the U.N. Security Council.
But Bowen said he did not mean to imply anything more when he answered a Los Angeles Times reporter's question about whether it would be serious if billions of dollars was stolen from the Development Fund for Iraq.
"I said, yes, it would be a very significant serious crime," he said. "So yes, the reporter was correct that some of it, and perhaps a lot of it, has been stolen. But we don't have a factual basis to reach that conclusion. What we said over and over again is that the lack of controls created vulnerabilities to fraud, waste and abuse."
Bowen did not say where the Los Angeles Times derived the $6.6 billion figure in question, a figure that he didn't use.
After the U.S.-led invasion of Iraq in 2003, the Bush administration airlifted to Baghdad a total of $12 billion that was carried by tractor-trailer trucks from the Federal Reserve currency repository in New Jersey to Andrews Air Force Base in Maryland for reconstruction of the country.
Bowen said most of the money was deposited in Iraq's central bank for distribution to Iraqi ministries and contractors, but he doesn't know how much.
"Iraq could have it all," he said. "They probably do have most of it."
The Pentagon has been unable to properly account for the $2.8 billion that it controlled under the Commander's Emergency Response Program, which allowed military commanders to spend money for reconstruction projects. Bowen said the Pentagon's comptroller asked him last year to help audit the flow of money.
"More important, we're trying to work with the Iraq government to find out what happened to the rest of the money," Bowen said.
Bowen emphasized that the missing money is not U.S. taxpayer funds. The revenues in the DFI come from among other sources -- Iraq's oil and gas exports, as well as frozen Iraqi assets and surplus funds from the now-defunct, Saddam Hussein-era oil-for-food program.
But previous audits have shown the Defense Department didn't do a good job of tracking the money and Iraqi officials told The Los Angeles Times that under a 2004 legal agreement, Washington is responsible for the missing funds.
Iraq's chief auditor and president of the Iraqi Board of Supreme Audit has warned Washington that Baghdad will sue if necessary to recoup the money.
"Clearly, Iraq has an interest in looking after its assets and protecting them," the newspaper quoted Iraqi Ambassador to the United States Samir Sumaidaie saying.
Bowen said the U.S. needs Iraq's assistance to obtain the bank data regarding the disbursal of the funds so that his office can close the books on jurisdiction over DFI by the end of the summer since it's been years since the U.S. has had control over it.
"We're going to account for it as best we can," he said.
Fox News' Justin Fishel contributed to this report.

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