As a congressional committee heard testimony last
week that billions of Iraqi dollars held in trust by the U.S. government
still cannot be accounted for, the inspector general charged with tracking
the funds said he has referred three contractors to the Justice Department for
possible criminal prosecutions for fraud.
Stuart W. Bowen Jr., the special inspector general for Iraq reconstruction,
told a House subcommittee hearing focused on U.S. handling of the Development
Fund for Iraq (DFI) that his office has turned the information over to the U.S.
attorney for the Eastern District of Virginia.
He declined to provide details of the cases, which have the potential to set
precedents in the largely untested legal realm of crimes committed by U.S. civilians
in Iraq. The cases stemmed from spending by U.S. officials at an outpost in
Hillah, Iraq, south of Baghdad.
The DFI is the successor to the United Nations' oil-for-food program. The multi-billion-dollar
fund, which is composed of Iraqi oil revenue and other Iraqi assets, was run
by the U.S.-led Coalition Provisional Authority until last year.
That fund is separate from the $18 billion that Congress earmarked in late
2003 for rebuilding Iraq.
Previous reports by the inspector-general have faulted the CPA for failing
to implement adequate controls over $8.8 billion in DFI money.
The hearing before the House of Representatives' Subcommittee on Government
Reform was the first to focus on the DFI. Pressure to convene it has been led
by the panel's Democrats, led by California's Henry Waxman, but the magnitude
of the apparently mismanaged funds appeared to produce bipartisan shock.
Both Republicans and Democrats appeared taken aback by the volume of cash sent
to Iraq: nearly $12 billion over the course of the U.S. occupation from March
2003 to June 2004.
Rep. Christopher Shays, the Connecticut Republican chairman of the committee,
criticized Pentagon witnesses for their handling of the money.
"It's very clear that we didn't have systems in place to account"
for the funds, he said.
Jack Behrman, professor emeritus at the University of North Carolina Business
School, told IPS, "The misuse, abuse, and misdirection of funds to Iraq
are a perfect example of the U.S. historical approach to crises abroad and development
aid throw money at the problem quickly to demonstrate concern and activity."
"But the government has apparently never heard or has not heeded the admonition
of Aristotle that 'It is easy to give money away, but it is exceedingly difficult
to give it away wisely,'" he said.
A separate report prepared by Waxman's staff and released Monday found "an
appalling level of incompetence, mismanagement, waste, fraud, and greed."
Waxman's report cited examples of "wasteful and potentially corrupt spending,"
The largest single recipient of Iraqi funds was Halliburton, the oil services
firm once led by U.S. Vice Pres. Dick Cheney, which received $1.6 billion in
Iraqi oil proceeds under a contract to import fuel and repair oil fields. According
to DCAA auditors, Halliburton's overcharges under this contract are more than
A security firm, Custer Battles, received over $11 million in Iraqi funds,
including over 4 million in cash. The company has been barred from receiving
federal contracts and faces a False Claims Act lawsuit for multiple fraudulent
Over $600 million in cash was shipped from Baghdad to four regions in Iraq
to allow commanders flexibility to fund local reconstruction projects. An audit
of one of the four regions found more than 80 percent of the funds could not
be properly accounted for and that over $7 million in cash was missing.
CPA officials gave over $8 billion in cash to Iraqi ministries. The Special
Inspector General found significant funds paid to "ghost employees"
and billion-dollar discrepancies in some expenditures.
The cash generated mostly from oil revenues was Iraqi funds that
had been held in trust by the Federal Reserve under the terms of a United Nations
Waxman said the largest single recipient of DFI funds was Halliburton. "The
company vastly overcharged to import gasoline into Iraq and to provide other
oil-related services. These overcharges which exceed $200 million
were billed to U.S. Army Corps of Engineers. But U.S. officials arranged for
over 80 percent of them to be paid out of the DFI."
The DFI, which was run by the United States, is the successor to the Oil-for-Food
Program, which was run by the United Nations. More than $8 billion in the Oil-for-Food
Program was transferred into the DFI by the UN Security Council.
In a separate development, Democratic legislators stepped up criticism of Halliburton
for what they said was "war profiteering," citing Pentagon audits
that question more than $1 billion of the company's bills for work in Iraq.
At a Democrat-sponsored forum on Tuesday, Sen. Byron Dorgan of North Dakota
said that estimates of excessive spending and improper billing by Halliburton
are more than twice as high as those in previous official reports.
Prof. Beau Grosscup of California State University at Chico told IPS, "Like
most politicians these days, the Bush-Cheney team campaigned with the promise
to run government like a business. Apparently it is true. Unfortunately for
the North American taxpayer, it is the Enron-Arthur Anderson business model."
Enron, a Texas-based energy company, became synonymous with corporate malfeasance
when its top executives wildly inflated earnings figures, leading to the largest
bankruptcy in U.S. history and to thousands of employees losing their life-savings
in plans tied to Enron stock.
Arthur Andersen, Enron's auditing firm, was charged with obstruction of justice
for shredding Enron documents while on notice of a federal investigation.
"These problems evince a lack of concern for people in Iraq," added
Brian J. Foley, a professor at Florida Coastal School of Law. "They and
their land are being treated as a profit center for businesses well-connected
to our government."
(Inter Press Service)