Fraud and Corruption. Four days before Volcker reported his findings about Saddam Hussein, the US inspector general for Iraq reconstruction published a report about the Coalition Provisional Authority (CPA) – the US agency which governed Iraq between April 2003 and June 2004. The inspector general’s job is to make sure that the money the authority spent was properly accounted for. It wasn’t. In just 14 months, $8.8bn went absent without leave. This is more than Mobutu Sese Seko managed to steal in 32 years of looting Zaire. It is 55,000 times as much as Mr Sevan is alleged to have been paid.
The authority, the inspector general found, was “burdened by severe inefficiencies and poor management”. This is kind. Other investigations suggest that it was also burdened by false accounting, fraud and corruption.
Last week a British adviser to the Iraqi Governing Council told the BBC’s File on Four program that officials in the CPA were demanding bribes of up to $300,000 in return for awarding contracts. Iraqi money seized by US forces simply disappeared. Some $800m was handed out to US commanders without being counted or even weighed. A further $1.4bn was flown from Baghdad to the Kurdish regional government in the town of Irbil, and has not been seen since.
Contracts to US companies were awarded by the CPA without any financial safeguards. They were issued without competition, in the form of “cost-plus” deals. This means that the companies were paid for the expenses they incurred, plus a percentage of those expenses in the form of profit. They had a powerful incentive, in other words, to spend as much money as possible. As a result, the authority appears to have obtained appalling value for money. Auditors at the Pentagon, for example, allege that, in the course of just one contract, a subsidiary of Halliburton overcharged it for imported fuel by $61m. This appears to have been officially sanctioned. In November, the New York Times obtained a letter from an officer in the US Army Corps of Engineers insisting that she would not “succumb to the political pressures from the … US embassy to go against my integrity and pay a higher price for fuel than necessary”. She was overruled by her superiors, who issued a memo insisting that the prices the company was charging were “fair and reasonable”, and that it wouldn’t be asked to provide the figures required to justify them.
Other companies appear to have charged the authority for work they never did, or to have paid subcontractors to do it for them for a fraction of what they were paid by the CPA. Yet, even when confronted by cast-iron evidence of malfeasance, the authority kept employing them. When the inspector general recommended that the US army withhold payments from companies which appear to have overcharged it, it ignored him. No one has been charged or punished. The US department of justice refuses to assist the whistle-blowers who are taking these companies to court.
What makes all this so serious is that more than half the money the CPA was giving away did not belong to the US government but to the people of Iraq. Most of it was generated by the coalition’s sales of oil. If you think the UN’s oil-for-food program was leaky, take a look at the CPA’s oil-for-reconstruction scheme. Throughout the entire period of CPA rule, there was no metering of the oil passing through Iraq’s pipelines, which means that there was no way of telling how much of the country’s wealth the authority was extracting, or whether it was paying a fair price for it. The CPA, according to the international monitoring body charged with auditing it, was also “unable to estimate the amount of petroleum … that was smuggled”.
The authority was plainly breaching UN resolutions. As Christian Aid points out, the CPA’s distribution of Iraq’s money was supposed to have been subject to international oversight from the beginning. But no auditors were appointed until April 2004 – just two months before the CPA’s mandate ran out. Even then, they had no power to hold it to account or even to ask it to cooperate. But enough information leaked out to suggest that $500m of Iraqi oil money might have been “diverted” (a polite word for nicked) to help pay for the military occupation. (link)
See also Iraq authority ‘mismanaged $9bn’ and Kucinich Demands Broad Investigation Of Missing $9 Billion In Iraq. [Al-Muhajabah’s Islamic Blogs]
I wonder if we’ll be getting 419 spam in ten years claiming to be from Paul Bremer’s widow?