Where has all the money gone?

Ed Harriman follows the auditors into Iraq

On 12 April 2004, the Coalition Provisional Authority in Erbil in northern Iraq handed over $1.5 billion in cash to a local courier. The money, fresh $100 bills shrink-wrapped on pallets, which filled three Blackhawk helicopters, came from oil sales under the UN’s Oil for Food Programme, and had been entrusted by the UN Security Council to the Americans to be spent on behalf of the Iraqi people. The CPA didn’t properly check out the courier before handing over the cash, and, as a result, according to an audit report by the CPA’s inspector general, ‘there was an increased risk of the loss or theft of the cash.’ Paul Bremer, the American pro-consul in Baghdad until June last year, kept a slush fund of nearly $600 million cash for which there is no paperwork: $200 million of this was kept in a room in one of Saddam’s former palaces, and the US soldier in charge used to keep the key to the room in his backpack, which he left on his desk when he popped out for lunch. Again, this is Iraqi money, not US funds.

The ‘reconstruction’ of Iraq is the largest American-led occupation programme since the Marshall Plan. But there is a difference: the US government funded the Marshall Plan whereas Donald Rumsfeld and Paul Bremer have made sure that the reconstruction of Iraq is paid for by the ‘liberated’ country, by the Iraqis themselves. There was $6 billion left over from the UN Oil for Food Programme, as well as sequestered and frozen assets, and revenue from resumed oil exports (at least $10 billion in the year following the invasion). Under Security Council Resolution 1483, passed on 22 May 2003, all of these funds were transferred into a new account held at the Federal Reserve Bank in New York, called the Development Fund for Iraq (DFI), so that they might be spent by the CPA ‘in a transparent manner . . . for the benefit of the Iraqi people’. Congress, it’s true, voted to spend $18.4 billion of US taxpayers’ money on the redevelopment of Iraq. But by 28 June last year, when Bremer left Baghdad two days early to avoid possible attack on the way to the airport, his CPA had spent up to $20 billion of Iraqi money, compared to $300 million of US funds.

The ‘financial irregularities’ described in audit reports carried out by agencies of the American government and auditors working for the international community collectively give a detailed insight into the mentality of the American occupation authorities and the way they operated, handing out truckloads of dollars for which neither they nor the recipients felt any need to be accountable. The auditors have so far referred more than a hundred contracts, involving billions of dollars paid to American personnel and corporations, for investigation and possible criminal prosecution. They have also discovered that $8.8 billion that passed through the new Iraqi government ministries in Baghdad while Bremer was in charge is unaccounted for, with little prospect of finding out where it went. A further $3.4 billion earmarked by Congress for Iraqi development has since been siphoned off to finance ‘security’.

That audit reports were commissioned at all owes a lot to Henry Waxman, a Democrat and ranking minority member of the House of Representatives Committee on Government Reform. Waxman voted in favour of the invasion of Iraq. But since the war he’s been demanding that the Bush administration account for its cost. Within six months of the invasion, Waxman’s committee had evidence that the Texas-based Halliburton corporation was being grossly overpaid by the American occupation authorities for the petrol it was importing into Iraq from Kuwait, at a profit of more than $150 million. Waxman and his assistants found that Halliburton was charging $2.64 a gallon for petrol for Iraqi civilians, while American forces were importing the same fuel for $1.57 a gallon.

Halliburton’s chairman, David Lesar, who took over from Dick Cheney in July 2000, robustly defended his firm. But Waxman raised another question: if Halliburton was being allowed to rip off the Iraqi people, was the Bush administration allowing it to milk the US government as well? Waxman’s committee instructed Congress’s General Accountability Office to look into Halliburton’s biggest contract in Iraq: providing virtually all back-up facilities – from meals to laundry soap – to American forces. LOGCAP (Logistics Civil Augmentation Programme) contracts like this one are a product of the new ‘slimmed down’ American military, the quartermaster’s equivalent of Rumsfeld’s ‘invasion lite’. Rather than have uniformed troops peel potatoes and scrub floors, base support services have been privatised and contracted out so that, the idea goes, soldiers can get on with the fighting. The contracts are paid on a cost-plus basis, which allows the contractor to charge for what it has spent, then add on a profit. LOGCAP contracts have not been put out to tender, but rather awarded to a few US firms, the largest being Halliburton and its subsidiary Kellogg, Brown & Root. Article...