Iraq Reconstruction: The Greatest Fraud in US History?

PATRICK COCKBURN

Feb 16, 2009
Arbil, Iraq.

In what could turn out to be the greatest fraud in US history, American authorities have started to investigate the alleged role of senior military officers in the misuse of $125bn (£88bn) in a US -directed effort to reconstruct Iraq after the fall of Saddam Hussein. The exact sum missing may never be clear, but a report by the US Special Inspector General for Iraq Reconstruction (SIGIR) suggests it may exceed $50bn, making it an even bigger theft than Bernard Madoff's notorious Ponzi scheme."I believe the real looting of Iraq after the invasion was by US officials and contractors, and not by people from the slums of Baghdad," said one US businessman active in Iraq since 2003.

In one case, auditors working for SIGIR discovered that $57.8m was sent in "pallet upon pallet of hundred-dollar bills" to the US comptroller for south-central Iraq, Robert J Stein Jr, who had himself photographed standing with the mound of money.

He is among the few US officials who were in Iraq to be convicted of fraud and money-laundering.Despite the vast sums expended on rebuilding by the US since 2003, there have been no cranes visible on the Baghdad skyline except those at work building a new US embassy and others rusting beside a half-built giant mosque that Saddam was constructing when he was overthrown.

One of the few visible signs of government work on Baghdad's infrastructure is a tireless attention to planting palm trees and flowers in the centre strip between main roads. Those are then dug up and replanted a few months later.

Iraqi leaders are convinced that the theft or waste of huge sums of US and Iraqi government money could have happened only if senior US officials were themselves involved in the corruption. In 2004-05, the entire Iraq military procurement budget of $1.3bn was siphoned off from the Iraqi Defense Ministry in return for 28-year-old Soviet helicopters too obsolete to fly and armored cars easily penetrated by rifle bullets.

Iraqi officials were blamed for the theft, but US military officials were largely in control of the Defense Ministry at the time and must have been either highly negligent or participants in the fraud.American federal investigators are now starting an inquiry into the actions of senior US officers involved in the program to rebuild Iraq, according to The New York Times, which cites interviews with senior government officials and court documents.

Court records reveal that, in January, investigators subpoenaed the bank records of Colonel Anthony B Bell, now retired from the US Army, but who was previously responsible for contracting for the reconstruction effort in 2003 and 2004.

Two federal officials are cited by the paper as saying that investigators are also looking at the activities of Lieutenant-Colonel Ronald W Hirtle of the US Air Force, who was senior contracting officer in Baghdad in 2004. It is not clear what specific evidence exists against the two men, who have both said they have nothing to hide.

The end of the Bush administration which launched the war may give fresh impetus to investigations into frauds in which tens of billions of dollars were spent on reconstruction with little being built that could be used. In the early days of the occupation, well-connected Republicans were awarded jobs in Iraq, regardless of experience. A 24-year-old from a Republican family was put in charge of the Baghdad stock exchange which had to close down because he allegedly forgot to renew the lease on its building.

In the expanded inquiry by federal agencies, the evidence of a small-time US businessman called Dale C. Stoffel who was murdered after leaving the US base at Taiji north of Baghdad in 2004 is being re-examined. Before he was killed, Mr Stoffel, an arms dealer and contractor, was granted limited immunity from prosecution after he had provided information that a network of bribery – linking companies and US officials awarding contracts – existed within the US-run Green Zone in Baghdad. He said bribes of tens of thousands of dollars were regularly delivered in pizza boxes sent to US contracting officers.

So far, US officers who have been successfully prosecuted or unmasked have mostly been involved in small-scale corruption.

Often sums paid out in cash were never recorded. In one case, an American soldier put in charge of reviving Iraqi boxing gambled away all the money but he could not be prosecuted because, although the money was certainly gone, nobody had recorded if it was $20,000 or $60,000.

Iraqi ministers admit the wholesale corruption of their government. Ali Allawi, the former finance minister, said Iraq was "becoming like Nigeria in the past when all the oil revenues were stolen". But there has also been a strong suspicion among senior Iraqis that US officials must have been complicit or using Iraqi appointees as front-men in corrupt deals.

Several Iraqi officials given important jobs at the urging of the US administration in Baghdad were inexperienced. For instance, the arms procurement chief at the centre of the Defence Ministry scandal, was a Polish-Iraqi, 27 years out of Iraq, who had run a pizza restaurant on the outskirts of Bonn in the 1990s.

In many cases, contractors never started or finished facilities they were supposedly building. As security deteriorated in Iraq from the summer of 2003 it was difficult to check if a contract had been completed. But the failure to provide electricity, water and sewage disposal during the US occupation was crucial in alienating Iraqis from the post-Saddam regime.

Female suicide bomber kills 39 Shia on pilgrimage

A woman suicide bomber blew herself up in the middle of a crowd of Shia pilgrims who were celebrating a religious festival south of Baghdad yesterday, killing 39 and wounding 69 others. The explosion was the latest in a series of attacks in different parts of Iraq which undermine hopes that the country would become less violent as the government re-establishes its authority.

The bombing took place at Iskandariya, 25 miles south of Baghdad, as hundreds of thousands of Shia marched to the holy city of Kerbala to celebrate the festival of Arbain. Female bombers are increasingly used by al-Qa'ida in Iraq because their long black robes make it easier for them to conceal explosives and because male soldiers and police, 40,000 of whom are protecting the pilgrims, are inhibited from searching women."We came here for the pilgrimage," said Sadia Ali, who was walking to Kerbala from the Sadr City slum. "We aren't afraid. We've been through worse events in the past."

A day earlier another bomber killed eight pilgrims and injured 15 in Kerbala, showing al-Qa'ida still has a network capable of launching sectarian attacks.The success of Iraqi Prime Minister Nouri al-Maliki – running on a non-religious platform – in coming first in the polls in Baghdad and Basra in the provincial elections on January 31 kindled hopes that secularism and nationalism were beginning to overcome sectarian differences.

Recent bombings and shootings show that the Sunni-Shia conflict remains very much alive though casualties are much lower than in the 2005-07 civil war.

In northern Iraq, tension between Arabs and Kurds is increasing in the wake of the election that saw Kurdish control of Nineveh province and its capital Mosul eroded. The Kurds previously had a majority on the local council thanks to a boycott by the Sunni majority in the previous election in 2005.

But in the latest poll the Kurds won 31 per cent, about their proportion of the three million population of Nineveh, and al-Hadba, a Sunni Arab coalition dedicated to rolling back Kurdish influence, won 48 per cent.

In the days since the election, there has been a surge of violence. On Monday, four American soldiers and an interpreter were killed by a roadside bomb. Two important local politicians have been assassinated.

The latest was Ahmed Fathi al-Jabouri who was walking out of a mosque after evening prayers when a car drew up and a gunman shot him in the head. Elsewhere in the city there have been repeated bomb attacks on police and government installations with heavy loss of life.

Some of this violence is a battle for power within the Sunni community but overall friction between Arabs and Kurds has been growing across northern Iraq in the past six months. The government of Mr Maliki has been sending units of the Iraqi army which are Arab to replace those that are Kurdish in both Kirkuk and Nineveh provinces. This is highly sensitive since the Kurds claim all of Kirkuk and Kurdish parts of Nineveh outside Mosul.

Kurdish leaders do not conceal their anger at Mr Maliki's actions in disputed areas. "There is an effort to move away Kurdish officers above a certain rank," says Safeen Dizayee, a senior official of the Kurdistan Democratic Party led by the Kurdish President Masoud Barzani.

He says that last year the Iraqi army's Twelfth Division was moved close to Kirkuk without prior consultation with the Kurds. He adds that Mr Maliki's government is "becoming a one-man show", taking important decisions, such as appointing commanders of the 16 Iraqi army divisions, without consultation with his Kurdish coalition partners.

Mr Maliki's confrontational attitude to the Kurds did him nothing but good with Arab Iraqis in the election. But the Kurds are highly sensitive to any move by non-Kurdish troops into disputed areas which they hope will join their autonomous area, the Kurdish Regional Government, through a referendum as they have long demanded.


Patrick Cockburn is the author of 'The Occupation: War, resistance and daily life in Iraq', a finalist for the National Book Critics' Circle Award for best non-fiction book of 2006. His new book 'Muqtada! Muqtada al-Sadr, the Shia revival and the struggle for Iraq' is published by Scribner.

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