David Pallister / The Guardian & NBC News – 2007-02-08 00:00:35
NOTE: Scores of news stories covering this scandal have gone to great lengths to name the individuals who accepted the bribes and have provided a detailed list of the expensive gifts lavished on them. Missing in most of these reports was any mention of the company responsible for offering the bribes in the first place.
The following information needs to be at the top of every report covering this story. Please note:
A 25-count indictment, filed in US District Court in New Jersey, marks the latest development in an investigation of $8.6 million in Iraq contracts awarded to construction mogul Philip H. Bloom. Bloom, an American citizen who ran construction and services companies under Global Business Group, has admitted to laundering at least $2 million that was stolen from reconstruction funds managed by the US-led Coalition Provisional Authority in Iraq. He awaits sentencing.
How the US Sent $12 Billion in Cash to Iraq.
And Watched It Vanish
David Pallister / Guardian
WASHINGTON (February 8, 2007) — The US flew nearly $12bn in shrink-wrapped $100 bills into Iraq, then distributed the cash with no proper control over who was receiving it and how it was being spent.
The staggering scale of the biggest transfer of cash in the history of the Federal Reserve has been graphically laid bare by a US congressional committee.
In the year after the invasion of Iraq in 2003, nearly 281 million notes, weighing 363 tonnes, were sent from New York to Baghdad for disbursement to Iraqi ministries and US contractors. Using C-130 planes, the deliveries took place once or twice a month with the biggest of $2,401,600,000 on June 22 2004, six days before the handover.
Details of the shipments have emerged in a memorandum prepared for the meeting of the House committee on oversight and government reform which is examining Iraqi reconstruction.
Its chairman, Henry Waxman, a fierce critic of the war, said the way the cash had been handled was mind-boggling. “The numbers are so large that it doesn’t seem possible that they’re true. Who in their right mind would send 363 tonnes of cash into a war zone?”
The memorandum details the casual manner in which the US-led Coalition Provisional Authority disbursed the money, which came from Iraqi oil sales, surplus funds from the UN oil-for-food programme and seized Iraqi assets.
“One CPA official described an environment awash in $100 bills,” the memorandum says. “One contractor received a $2m payment in a duffel bag stuffed with shrink-wrapped bundles of currency. Auditors discovered that the key to a vault was kept in an unsecured backpack.
“They also found that $774,300 in cash had been stolen from one division’s vault. Cash payments were made from the back of a pickup truck, and cash was stored in unguarded sacks in Iraqi ministry offices. One official was given $6.75m in cash, and was ordered to spend it in one week before the interim Iraqi government took control of Iraqi funds.”
The minutes from a May 2004 CPA meeting reveal “a single disbursement of $500m in security funding labelled merely ‘TBD’, meaning ‘to be determined’.”
The memorandum concludes: “Many of the funds appear to have been lost to corruption and waste … thousands of ‘ghost employees’ were receiving pay cheques from Iraqi ministries under the CPA’s control. Some of the funds could have enriched both criminals and insurgents fighting the United States.”
According to Stuart Bowen, the special inspector general for Iraq reconstruction, the $8.8bn funds to Iraqi ministries were disbursed “without assurance the monies were properly used or accounted for”. But, according to the memorandum, “he now believes that the lack of accountability and transparency extended to the entire $20bn expended by the CPA”.
To oversee the expenditure the CPA was supposed to appoint an independent certified public accounting firm. “Instead the CPA hired an obscure consulting firm called North Star Consultants Inc. The firm was so small that it reportedly operates out of a private home in San Diego.” Mr Bowen found that the company “did not perform a review of internal controls as required by the contract”.
However, evidence before the committee suggests that senior American officials were unconcerned about the situation because the billions were not US taxpayers’ money. Paul Bremer, the head of the CPA, reminded the committee that “the subject of today’s hearing is the CPA’s use and accounting for funds belonging to the Iraqi people held in the so-called Development Fund for Iraq. These are not appropriated American funds. They are Iraqi funds. I believe the CPA discharged its responsibilities to manage these Iraqi funds on behalf of the Iraqi people.”
Bremer’s financial adviser, retired Admiral David Oliver, is even more direct. The memorandum quotes an interview with the BBC World Service. Asked what had happened to the $8.8bn he replied: “I have no idea. I can’t tell you whether or not the money went to the right things or didn’t – nor do I actually think it’s important.”
Q: “But the fact is billions of dollars have disappeared without trace.”
Oliver: “Of their money. Billions of dollars of their money, yeah I understand. I’m saying what difference does it make?”
Mr Bremer, whose disbanding of the Iraqi armed forces and de-Ba’athification programme have been blamed as contributing to the present chaos, told the committee: “I acknowledge that I made mistakes and that with the benefit of hindsight, I would have made some decisions differently. Our top priority was to get the economy moving again. The first step was to get money into the hands of the Iraqi people as quickly as possible.”
Millions of civil service families had not received salaries or pensions for months and there was no effective banking system. “It was not a perfect solution,” he said. “Delay might well have exacerbated the nascent insurgency and thereby increased the danger to Americans.”
Guardian Unlimited © Guardian News and Media Limited 2007
5 Americans Indicted in Iraq bid-rigging Probe
3 Officers among those Accused of Taking Cash
NBC News and news services
WASHINGTON — Three Army Reserve officers and a US contractor were indicted Wednesday as part of a bid-rigging scam that steered millions of dollars of Iraq reconstruction projects to a contractor for cash, luxury cars, jewelry and other pricey goods.
The husband of one of the military officials also was charged with helping to smuggle at least $10,000 into the United States that the couple used to pay for improvements to their New Jersey house.
The scam was outlined in a 25-count indictment filed Wednesday in U.S. District Court in New Jersey.
The reservists are charged with pushing the contracts to companies hired for working on nearly 30 reconstruction projects. They included work to build police stations, libraries, and a shelter for women who were victims of domestic violence.
“These defendants actually took bricks of stolen cash and smuggled them out of Iraq and back to the United States for their own personal use,” said Paul McNulty, the deputy attorney general.
“These individuals were placed in positions of trust and used Iraq reconstruction funds as their own personal ATM machines,” he said.
Lavish Gifts Alleged
The three Army Reserve officers were responsible for supervising how the U.S.-managed Coalition Provisional Authority spent an estimated $2.1 billion available for reconstruction projects.
The indictment says the three officers — Col. Curtis G. Whiteford of Utah, Lt. Col. Debra M. Harrison of New Jersey and Lt. Col. Michael B. Wheeler of Wisconsin — directed at least $8 million to a construction and services company. In return, they allegedly demanded cash, a Nissan sports car, a Cadillac SUV, real estate, a Breitling watch, business-class plane tickets and other items.
The contractor, identified in the indictment as Seymour Morris Jr., allegedly acted as a go-between for the military officers and the construction company by illegally wiring money and securing the goods. Morris is a U.S. citizen who lived in Romania, and owned and operated a Cyprus-based financial services business.
Last week, a former Pentagon contractor was sentenced to nine years in prison for helping steer millions in Iraq rebuilding funds to a company operated by U.S. citizen and businessman Philip H. Bloom. Bloom already has pleaded guilty to the scam and awaits sentencing.
Justice Department officials say the contract fraud scheme cost nearly $3.6 million, of which nearly $2 million has been recovered.
The break in the case, according to Stuart Bowen, the special inspector general for Iraq, came three years ago when a whistle-blower reported concerns about contracting. An audit was launched.
Wednesday’s indictments were announced the day after House Democrats grilled the former U.S. occupation chief in Iraq over how he doled out up to $12 billion in Iraqi money without accounting for it.
Firing back in a House Committee on Oversight and Government Reform hearing Tuesday, L. Paul Bremer III insisted that he did the best he could in the middle of a war and repeatedly said he had spent Iraqi — not U.S. — money. Bremer ran the country for 14 months.
The Associated Press and NBC’s Pete Williams and Mike Kosner contributed to this report.