Although this story comes to us via the far left British rag The Guardian, much of the information about what happened to $12 billion dollars in Iraqi reconstruction funds is a matter of public record gleaned from court cases, pending criminal trials, and other more reliable sources.
The short answer to what happened to $12 billion in Iraq is that it was stolen. And for the most part, the US government knows it and refuses to prosecute the thieves.
At the start of the Iraq war, around $23bn-worth of Iraqi money was placed in the trusteeship of the US-led coalition by the UN. The money, known as the Development Fund for Iraq and consisting of the proceeds of oil sales, frozen Iraqi bank accounts and seized Iraqi assets, was to be used in a “transparent manner”, specified the UN, for “purposes benefiting the people of Iraq”.
For the past few months we have been working on a Guardian Films investigation into what happened to that money. What we discovered was that a great deal of it has been wasted, stolen or frittered away. For the coalition, it has been a catastrophe of its own making. For the Iraqi people, it has been a tragedy. But it is also a financial and political scandal that runs right to the heart of the nightmare that is engulfing Iraq today.
[...]
Because the Iraqi banking system was in tatters, the funds were placed in an account with the Federal Reserve in New York. From there, most of the money was flown in cash to Baghdad. Over the first 14 months of the occupation, 363 tonnes of new $100 bills were shipped in - $12bn, in cash. And that is where it all began to go wrong.
“Iraq was awash in cash - in dollar bills. Piles and piles of money,” says Frank Willis, a former senior official with the governing Coalition Provisional Authority. “We played football with some of the bricks of $100 bills before delivery. It was a wild-west crazy atmosphere, the likes of which none of us had ever experienced.”
First of all, a good question to ask would be what nincompoop authorized the shipping of 363 tons of cash to a place where there was absolutely no chance of keeping track of it? With no banking system, it is laughable to think someone actually believed that corruption and thievery wouldn’t be rampant with so much cash lying around.
In fact, they probably knew and didn’t care:
The environment created by the coalition positively encouraged corruption. “American law was suspended, Iraqi law was suspended, and Iraq basically became a free fraud zone,” says Alan Grayson, a Florida-based attorney who represents whistleblowers now trying to expose the corruption. “In a free fire zone you can shoot at anybody you want. In a free fraud zone you can steal anything you like. And that was what they did.”
A good example was the the Iraqi currency exchange programme (Ice). An early priority was to devote enormous resources to replacing every single Iraqi dinar showing Saddam’s face with new ones that didn’t. The contract to help distribute the new currency was won by Custer Battles, a small American security company set up by Scott Custer and former Republican Congressional candidate Mike Battles. Under the terms of the contract, they would invoice the coalition for their costs and charge 25% on top as profit. But Custer Battles also set up fake companies to produce inflated invoices, which were then passed on to the Americans. They might have got away with it, had they not left a copy of an internal spreadsheet behind after a meeting with coalition officials.
Not only brazen crooks but stupid ones as well. Sounds like the cat burglar who dropped his wallet inside the house he was robbing.
The spreadsheet showed the company’s actual costs in one column and their invoiced costs in another; it revealed, in one instance, that it had charged $176,000 to build a helipad that actually cost $96,000. In fact, there was no end to Custer Battles’ ingenuity. For example, when the firm found abandoned Iraqi Airways fork-lifts sitting in Baghdad airport, it resprayed them and rented them to the coalition for thousands of dollars. In total, in return for $3m of actual expenditure, Custer Battles invoiced for $10m. Perhaps more remarkable is that the US government, once it knew about the scam, took no legal action to recover the money.
This is just one company. And it’s not the worst of it either:
But this is just one story among many. From one US controlled vault in a former Saddam palace, $750,000 was stolen. In another, a safe was left open. In one case, two American agents left Iraq without accounting for nearly $1.5m.
Perhaps most puzzling of all is what happened as the day approached for the handover of power (and the remaining funds) to the incoming Iraqi interim government. Instead of carefully conserving the Iraqi money for the new government, the Coalition Provisional Authority went on an extraordinary spending spree. Some $5bn was committed or spent in the last month alone, very little of it adequately accounted for.
One CPA official was given nearly $7m and told to spend it in seven days. “He told our auditors that he felt that there was more emphasis on the speed of spending the money than on the accountability for that money,” says Ginger Cruz, the deputy inspector general for Iraqi reconstruction.
Certainly some corruption was bound to occur with all that money being thrown around. But it is depressing to see the hogs and vultures in a feeding frenzy at a time when a small fraction of what was stolen or lost or wasted might have made a difference in the lives of ordinary Iraqis and given them something to hope for following the fall of Saddam.
Instead, they got more of the same kind of corruption and thievery that sapped their confidence in the Coalition Authority and its ability to make their lives better.
Read the entire article. Along with the usual Guardian anti-war blather, there are some other eye-opening examples of malfeasance that should cause your blood to boil.
11:42 am
Now seriously, can you point to a government operation of any sort that has functioned properly since Bush was elected? Be honest, look at what has happened to the US budget, look at how there has not been a single oversite hearing by the Congress - not even one - and not one veto of pork-loaded bills.
And look at the Abramoff bribery conviction, indictments in the White House for taking bribes, and pending indictments of members of Congress. Look at the whole Reed, Norquist, DeLay thing.
At some point you just have to admit that the whole “conservative movement” thing got corruptd and started using ideology as a cover for corruption and cronyism. Seriously. Absolute power corrupts. And here you are.
WHy not even one oversite hearing by the Congress since Bush was elected?
12:46 pm
The name-calling of the Guardian - an excellent newspaper which shames much of the American media in comparison - is inaccurate, but this site apparently has the false view that ‘liberal’ is just wrong.
But kudos for being ‘reality-based’ enough, unlike so much of the right, to see the corruption issue as the scandal it is. That’s one step closer to seeing other wrongs.
12:53 pm
welcome to the party!!! try the canapes …
1:41 pm
This article also neglects to bring up that repugs refused to add a war profiteer amendment (offered by dems)to the initial Iraq spending bills…if they didn’t plan on looting the treasury then why were they against accountability?
1:47 pm
Damn, why oh why didn’t I get that job in the Green Zone way back when the going (and getting) was good.
Heritage Foundation must have lost my resume.
3:22 pm
Thank you for having the intellectual honesty to look at this corruption for what it is.
The Right and the Left can differ ideologically in any number of different ways. But we should all definitely agree that it’s inexcusable to let contractors blatantly steal taxpayer money, that could instead saviung soldiers’ lives, and help the whole war effort be successful.
5:30 pm
The Bush Administration will break all records for corruption. Custer Battles is just the tip of the ice-berg. Look at Halliburton. They’ve billed $9 Billion in unbid contracts. Halliburton was nearly bankrupt due to Cheney’s failure to do due diligence when he bought asbestos-related companies. Halliburton has billed about $4,000,000.00 for every dead GI. Cheney’s personal stock options have gone from $250K to $8 Million - so Dick “I Had Other Priorities” Cheney has personally profited to the tune of $3,400.00 for every dead GI.
These guys have never seen a sleazy deal they didn’t like. DeLay, Frist, Cheney, Bush, Rumsfeld: common criminals each and every one, but wrapped in the flag and the false glow of evangelical Christians who support them for their repressive social strategies.
If Thomas Jefferson were alive he would be leading the revolt against these thieves.
6:11 pm
An additional horror is that after the invasion the most effective foreign aid was Iraqi money handed to field commanders to fund projects and local councils. This brought employment to the people and solved real problems.
A total of 28 million was distributed in the first 4 months. Imagine if real money was spent. Billions dissapeared and we spent 28 million actually rebuilding the country!
6:25 pm
What Anna said. One of many distressing scenes in George Packer’s book, The Assassins Gate involves an Army Officer trying to get some of this money, and being told it won’t happen.
6:59 pm
Thanks for having an open-minded blog. But I do respectfully suggest that the phrase “anti-war blather” isn’t really very accurate. The Iraq war worked out far, far worse than all but the most rabid peacenik ever predicted. Even the Guardian didn’t have the temerity to predict that we’d still be there with no end in sight three years after we started, with thousands of Americans dead and tens of thousands mutilated…
7:21 pm
WOW, the comments today sure seem awfully angry, and well… “KOS” sounding. Let’s not condem a whole administration or imply President Bush knew, planned for, and approved the corruption mentioned in this article. That would be extreme and hateful and so unlike this website. As for Iraq being worse off, tell that to the women victimized in the “rape rooms”. Or the families of the men fed into the wood chippers. Or the families of the KURDS gassed to death by Sadam. Things are tough, sure, but progress is being made. Three years isn’t that long, considering that we have been warned repeatedly thst it would be a long hard slog. Buck up friends!
7:36 pm
Mitzi:
It is indeed disturbing to find so many who actually believe the President and the Vice President of the United States made war to personally enrich themselves and their friends.
If true - and the “evidence” for such a charge is laughable - Bush would indeed be on a par with Hitler as far as evil is concerned. The fact that for proof, all the President’s accusers offer are nebulous connections to eeeevvvill Haliburton (the idea that Haliburton was going bankrupt because of asbestos related lawsuits is so outrageously ignorant that the particular commenter should try something more realistic - like Elvis did it) and the fact that the President is friends with rich people (as most politicians are) passes for “proof” of Bush’s crimes.
Ascribing the worst possible motives to the Presidents actions flies in the face of inside information from a variety of sources (including that well known Bush cultist Bob Woodward) that point to a President who agonzized over the decision to go to war. That hardly sounds like someone who invaded Iraq to make his friends who are already fabulously wealthy even richer.
It’s why the American people do not take the left seriously about anything. Until mainstream democrats rid themselves of people who hold many of the views expressed in this comment thread, they will continue to lose elections despite the Republicans in Congress stumbling and bumbling like the incompetents they have demonstrated themselves to be.
The graft and corruption described can be laid squarely at the feet of Rumsfeld and the civilians in the Pentagon whose post-war planning was about one half of what it should have been. And while I have faulted the President on numerous occasions for not firing Rummy, the fact is that the responsibility for this fiasco ultimtaely is Bush’s. That’s where the buck stops.
8:21 pm
The unbelievable shallowness of thought and one dimensional thinking that passes for dialogue on the left is really starting to piss me off.
Any conservative worth his salt has already blogged about the problems with reconstruction and the corruption involved. What kind of arrogance does it take to believe that the “reality based community” (itself an arrogant, self righteous idiocy coming from people who believe in so many conspiracy theories they’ve lost track) has a corner on anything except cruel, unreasoning, hatred against Bush?
Criticism is one thing. Loathing and conspiracy mongering are revealing of a mindless hate that colors everything the left says and does. I hardly need congratulating from such nincompoops.
9:14 pm
What’s $12 billion out of a trillion. Nothing to get worked up over.
Move along, nothing to see here…
3:13 am
This world is full of dishonest people. Custer is just one of them and exposing them will or will not act as a deterrent. People are drenched in bad deeds and we are ALL suffering because of it. It is pretty sad.
Best
9:40 am
What you’re seeing is a lot of frustration on the Left. We have been telling people since before Bush got in, just how bad he would be. And no one believed us. And he has turned out to be far worse than we imagined he could be.
Who would have thought a deficit this size, corporate giveaways to this degree, a Medicare plan that was this irresponsible, a two-front war that now appears to be installing a religous theocracy that could outlaw Christianity in Afghanistan, etc. etc…
We can and do differ on our interpretations of the facts. I just want to say, I feel pretty sure that if you thought Bush was responsible the way that we do, you would probably be just as angry.
Please understand us. We love this country too. And we hate, hate, hate what he has done and continues to do to this country, it’s citizens, it’s honor, and it’s future.
9:43 am
I also disagree with ‘picture of zoroastrianism’ ( a very interesting name ). I think that refusing to expose crime encourages it, and that prosecution does act as a deterrent. This is taxpayer money that’s being stolen while our country is on the line. It’s disgusting.
12:04 pm
That’s just Iraq. Just wait until people start becoming aware of the giant fiasco around the re-building of the Gulf Coast. The problem in a nutshell is that the people running the government don’t believe in government and are terrible at it. Their only guiding principle is the lining the their pockets and the pockets of their cronies at the expense of the rest of us. There is a class war going on and it’s not just between the rich against the poor and middle class, it’s between the ultra-rich against everyone else. The conservative movement is dead. The end result of the Ayn Rand inspired greed revolution is a culture of corruption so deep and rampant, it threatens our way of life.
6:23 pm
I don’t believe that President Bush started this war to enrich anyone, though I’m sure Dick Cheney isn’t unhappy that one side effect is the enrichment of his portfolio. On the other hand, the buck has to stop somewhere, and the corruption did take place on his watch. I don’t know if Iraq ia worse off or not, but I do know that at least two thirds of Iraqis, if recent polls are to be believed, want U.S. troops out, which would lead me to believe that the people who know best think things are worse.
9:36 pm
Randy
Raight on.
There is only so much money to go around. Bush and the Republicans insisted on having their tax cuts in the middle of two wars and the math just does not add up. The reconstruction after Katrina is simply not working because of lack of adecuate resources.
What ever happened to the Conservative Republican Ideals of fiscal responsibility?.
1:09 am
Any conservative worth his salt has already blogged about the problems with reconstruction and the corruption involved.
I can tell you from many months of experience that when I have commented on right-wing sites about this waste and corruption (which has been documented for a long time in Waxman’s report), I have been called a Michael Moore loony and much much worse. The denial on the right on this issue has been incredible, with most trying to explain it away with the “fog of war” defense.
Which does not hold up AT ALL when this admin is running away from prosecutions.
It’s no accident that it’s a UK paper, and the Guardian no less, that follows up on this. You won’t be seeing any in-depth reporting on this in the US MSM.
4:47 pm
Sadly, this sort of waste is typical for the government. You think Iraq is unique? The government has a very primitive system for measuring progress: if you are spending money, you are making progress.
This is the case in Iraq, and at NASA, (where I worked for several years), and other agencies I’m sure. If you don’t spend the money, you lose it, and no one wants to lose their money.