US fraud in Iraq -- a surprise?
Source Jim Devine
Date 05/02/09/22:34

Fraud and corruption

Forget the UN. The US occupation regime helped itself to $8.8 bn of
mostly Iraqi money in just 14 months

George Monbiot
Tuesday February 8, 2005
The Guardian

The Republican senators who have devoted their careers to mauling the
United Nations are seldom accused of shyness. But they went strangely
quiet on Thursday. Henry Hyde became Henry Jekyll. Norm Coleman's
mustard turned to honey. Convinced that the UN is a conspiracy against
the sovereignty of the United States, they had been ready to launch the
attack which would have toppled the hated Kofi Annan and destroyed his
organisation. A report by Paul Volcker, the former chairman of the US
federal reserve, was meant to have proved that, as a result of
corruption within the UN's oil-for-food programme, Saddam Hussein was
able to sustain his regime by diverting oil revenues into his own hands.
But Volcker came up with something else.

"The major source of external financial resources to the Iraqi regime,"
he reported, "resulted from sanctions violations outside the
[oil-for-food] programme's framework." These violations consisted of
"illicit sales" of oil by the Iraqi regime to Turkey and Jordan. The
members of the UN security council, including the United States, knew
about them but did nothing. "United States law requires that assistance
programmes to countries in violation of UN sanctions be ended unless
continuation is determined to be in the national interest. Such
determinations were provided by successive United States

The government of the US, in other words, though it had been informed
about a smuggling operation which brought Saddam Hussein's regime some
$4.6bn, decided to let it continue. It did so because it deemed the
smuggling to be in its national interest, as it helped friendly
countries (Turkey and Jordan) evade the sanctions on Iraq. The biggest
source of illegal funds to Saddam Hussein was approved not by officials
of the UN but by officials in the US. Strange to relate, neither Mr Hyde
nor Mr Coleman have yet been bellyaching about it. But this isn't the
half of it.

It is true that the UN's auditing should have been better. Some of the
oil-for-food money found its way into Saddam Hussein's hands. One of its
officials, with the help of a British diplomat, helped to ensure that a
contract went to a British firm, rather than a French one. The most
serious case involves an official called Benon Sevan, who is alleged to
have channelled Iraqi oil into a company he favoured, and who might have
received $160,000 in return. Kofi Annan, the UN secretary general, has
taken disciplinary action against both men, and promised to strip them
of diplomatic immunity if they are charged. There could scarcely be a
starker contrast to the way the US has handled the far graver
allegations against its own officials.

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

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

Last week a British adviser to the Iraqi Governing Council told the
BBC's File on Four programme 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 programme 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.

I hope that Messrs Hyde and Coleman won't stop asking whether Iraqi oil
money has been properly spent. But perhaps we shouldn't be surprised if
their agreeable silence persists.

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