Costs of war: Iraq waste

Despite ruinous expenses, US efforts to reconstruct Iraqi infrastructure and arm its security forces have proved ineffective because much of the funds to do so have been stolen, Shaun Waterman writes for ISN Security Watch.

If you measured success by the amount of impressive statistics generated, US reconstruction and security-building efforts in Iraq would have been, to coin a phrase, a slam dunk.

A recent Senate hearing was told that since the invasion in 2003 484 freight pallets of US currency had been flown to Iraq from New York, each weighing 1,500 lbs and bearing 640 bundles of 1,000 bills each: a total of more than 363 tonnes, or US$12 billion, of cash alone - leaving aside the tens of billions more paid by electronic transfers to US and Iraqi contractors.

About US$44 billion of US taxpayer funds have been spent on reconstruction alone, according to congressional auditors.

And tens of billions more have been funneled into the effort through the Development Fund for Iraq - now controlled by the Iraqi government - money from the proceeds of internationally monitored oil sales and Iraqi funds seized by the US prior to the restoration of Iraqi sovereignty in 2004.

But in reality, as much as one dollar in six of this tidal wave of money is unaccounted for, according to auditors. Much of it, they report, has quite literally vanished: wasted or stolen outright, with little or often nothing by way of a paper trail as to how it was spent or by whom.

The hearing heard testimony from some of Iraq's top former anti-corruption investigators that US$1.7 billion of US aid to the Iraqi Defense Ministry, supposed to buy airplanes, armored vehicles, guns and other military equipment, was paid to two front companies set up by relatives of senior officials.

Only "a small percentage" of the equipment was ever delivered, Salam Adhoob, a former chief investigator for Iraq's Commission on Public Integrity, told the hearing.

"The money is gone, and those that may well have directed that money to Swiss bank accounts are now living in London," added Senator Byron Dorgan, chairman of the Democratic Policy Committee, which heard the testimony last month.

Adhoob gave some new details about previously reported allegations that some embezzled funds and stolen or re-directed munitions had found their way into the hands of anti-US insurgents.

He said that one of the owners of one of the front companies, the brother-in-law of the Iraqi defense minister, "diverted a portion of these [misdirected] funds to al-Qaida in Iraq.

"Informers have told me," Adhoob continued, that the owner, Naya Mohammed Ahmed Jemali, "traveled to Amman, Jordan, to deposit money into the accounts of al-Qaida operatives," and was given safe passage on the way back through the Iraqi city of Ramadi, which was controlled by insurgents at the time.

He said that Jemali's al-Qaida sympathies were well-known and that his attorney worked with the Defense Minister to win the release of suspected insurgents in Iraqi custody. Despite this he continued to operate "as a middleman for contracts between the Iraqi government and American companies."

Overall, Adhoob estimated that "at least" US$18 billion has been lost to corruption and waste in Iraq, more than half of it US taxpayer funds and that US$4 billion in the Defense Ministry alone has been stolen or paid in kickbacks.

The hearing heard of multi-million dollar projects which turned out to exist only on paper, and of demands for bribery that had become a part of daily life.

"Large- and small-scale corruption is endemic in Iraqi society," testified Abbas Mehdi, former Chairman of the board at the Iraq National Investment Commission, a cabinet-level post in the government of Prime Minister Nouri al-Maliki.

"Based on my experience and firsthand observation in Iraq, I would estimate that a significant percentage of Iraqi official are involved in corruption in one way or another," he said, adding that his personal observations were borne out by a recent study by Transparency International, ranking Iraq 192 out of 194 countries in its corruption index, ahead of only Somalia and Myanmar.

Already leadenly documented in a whole series of 100-plus page reports by inspectors general and other government investigators; this bacchanalia of waste, fraud and abuse has resulted in only a trickle of prosecutions by US authorities, according to veteran Democratic senator and powerful chairman of the Appropriations Committee, Robert Byrd of West Virginia, who has sent staff to Baghdad to look into the issue.

"Many cases that are painstakingly built in Iraq by investigators are, my staff was told, turned over to the Department of Justice or US attorney offices for prosecution only to fall into a black hole, an abyss of cynical indifference to punishing criminals and recovering billions in lost funds," he told the hearing.

"We are not deterring fraud and corruption, and we are not demonstrating the benefits of a just 'Rule of Law'" to the Iraqis, Byrd concluded.

Evidence presented at the hearing showed how the huge sums of money lost to corruption have created a criminal caste in Iraq's bureaucracy - networks of corrupt officials and businessmen who tried to shut down investigations, and in extremis seemed willing to kill to protect their profits.

Senators heard that 31 employees of Adhoob's Commission on Public Integrity had been assassinated, along with 12 members of their families - and Adhoob himself now lives in the US, where he has been granted asylum because of the threats to his life.

"How can we ask Iraqi investigators and judges to arrest and prosecute their citizens for these crimes, often at great risk to their personal safety, when the Americans there doing the same thing go unpunished?" asked Byrd.

For their part, Justice Department officials defend their record of prosecuting where the evidence meets their criteria and point to a steady drip, drip of cases every week or two - some involving millions of dollars - launched against corrupt US officials and contractors.

As stunning as the theft and corruption have been, more may have been lost to waste, painstakingly documented in an audit earlier this year by the US Special Inspector General for Iraqi Reconstruction, or SIGIR, Stuart Bowen.

More than 2,000 facilities - power plants, schools, clinics - that were successfully built with US funds have had to be turned over, not to the Iraqi government, which failed to take responsibility for them, but rather to local individuals or entities, which often lack the skills and expertise to keep them going, he found.

"The asset transfer process that had been worked out with the Iraqi government has been off the rails for about a year and other means have had to be used to transfer projects such as local transfer or unilateral transfer," Bowen said. That "raises grave questions about the sustainability of what the United States has constructed in Iraq."

There is no doubt that more staff could helpfully be thrown at the problem. The Department of State Inspector General, for example, has no full time investigators or auditors in Iraq, according to Byrd. "Other offices urged that their manpower and resources be expanded to match the magnitude of their workload," the senator said.

But a new, more aggressive attitude on the part of investigators would also yield results. As US forces draw down next year, there is likely to be a diminution of contractor funds, too - but there will still be a lot of money to be guarded against waste fraud and abuse.

View Shaun Waterman's latest columns here:

Costs of war: Bogeymen; Costs of war: Conceptual confusion; Costs of war: 'Tell me how this ends'

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