A 'Fraud' Bigger Than Madoff

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The Independent/UK

A 'Fraud' Bigger Than Madoff

Senior US soldiers investigated over missing Iraq reconstruction billions

Patrick Cockburn in Sulaimaniyah, Northern Iraq


In what could turn out to be the greatest fraud in US history, American
authorities have started to investigate the alleged role of senior military
officers in the misuse of $125bn (£88bn) in a US -directed effort to
reconstruct Iraq after the fall of Saddam Hussein. The exact sum missing may
never be clear, but a report by the US Special Inspector General for Iraq
Reconstruction (SIGIR) suggests it may exceed $50bn, making it an even
bigger theft than Bernard Madoff's notorious Ponzi scheme.

"I believe the real looting of Iraq after the invasion was by US
officials and contractors, and not by people from the slums of
Baghdad," said one US businessman active in Iraq since 2003.

one case, auditors working for SIGIR discovered that $57.8m was sent in
"pallet upon pallet of hundred-dollar bills" to the US comptroller for
south-central Iraq, Robert J Stein Jr, who had himself photographed
standing with the mound of money. He is among the few US officials who
were in Iraq to be convicted of fraud and money-laundering.

the vast sums expended on rebuilding by the US since 2003, there have
been no cranes visible on the Baghdad skyline except those at work
building a new US embassy and others rusting beside a half-built giant
mosque that Saddam was constructing when he was overthrown. One of the
few visible signs of government work on Baghdad's infrastructure is a
tireless attention to planting palm trees and flowers in the centre
strip between main roads. Those are then dug up and replanted a few
months later.

Iraqi leaders are convinced that the theft or waste
of huge sums of US and Iraqi government money could have happened only
if senior US officials were themselves involved in the corruption. In
2004-05, the entire Iraq military procurement budget of $1.3bn was
siphoned off from the Iraqi Defence Ministry in return for 28-year-old
Soviet helicopters too obsolete to fly and armoured cars easily
penetrated by rifle bullets. Iraqi officials were blamed for the theft,
but US military officials were largely in control of the Defence
Ministry at the time and must have been either highly negligent or
participants in the fraud.

American federal investigators are now
starting an inquiry into the actions of senior US officers involved in
the programme to rebuild Iraq, according to The New York Times, which
cites interviews with senior government officials and court documents.
Court records reveal that, in January, investigators subpoenaed the
bank records of Colonel Anthony B Bell, now retired from the US Army,
but who was previously responsible for contracting for the
reconstruction effort in 2003 and 2004. Two federal officials are cited
by the paper as saying that investigators are also looking at the
activities of Lieutenant-Colonel Ronald W Hirtle of the US Air Force,
who was senior contracting officer in Baghdad in 2004. It is not clear
what specific evidence exists against the two men, who have both said
they have nothing to hide.

The end of the Bush administration
which launched the war may give fresh impetus to investigations into
frauds in which tens of billions of dollars were spent on
reconstruction with little being built that could be used. In the early
days of the occupation, well-connected Republicans were awarded jobs in
Iraq, regardless of experience. A 24-year-old from a Republican family
was put in charge of the Baghdad stock exchange which had to close down
because he allegedly forgot to renew the lease on its building.

the expanded inquiry by federal agencies, the evidence of a small-time
US businessman called Dale C Stoffel who was murdered after leaving the
US base at Taiji north of Baghdad in 2004 is being re-examined. Before
he was killed, Mr Stoffel, an arms dealer and contractor, was granted
limited immunity from prosecution after he had provided information
that a network of bribery - linking companies and US officials awarding
contracts - existed within the US-run Green Zone in Baghdad. He said
bribes of tens of thousands of dollars were regularly delivered in
pizza boxes sent to US contracting officers.

So far, US officers
who have been successfully prosecuted or unmasked have mostly been
involved in small-scale corruption. Often sums paid out in cash were
never recorded. In one case, an American soldier put in charge of
reviving Iraqi boxing gambled away all the money but he could not be
prosecuted because, although the money was certainly gone, nobody had
recorded if it was $20,000 or $60,000.

Iraqi ministers admit the
wholesale corruption of their government. Ali Allawi, the former
finance minister, said Iraq was "becoming like Nigeria in the past when
all the oil revenues were stolen". But there has also been a strong
suspicion among senior Iraqis that US officials must have been
complicit or using Iraqi appointees as front-men in corrupt deals.
Several Iraqi officials given important jobs at the urging of the US
administration in Baghdad were inexperienced. For instance, the arms
procurement chief at the centre of the Defence Ministry scandal, was a
Polish-Iraqi, 27 years out of Iraq, who had run a pizza restaurant on
the outskirts of Bonn in the 1990s.

In many cases, contractors
never started or finished facilities they were supposedly building. As
security deteriorated in Iraq from the summer of 2003 it was difficult
to check if a contract had been completed. But the failure to provide
electricity, water and sewage disposal during the US occupation was
crucial in alienating Iraqis from the post-Saddam regime.

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