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Billions of dollars stolen or squandered
Washington's reconstruction rip-off in Iraq

February 16, 2007 | Page 5

NICOLE COLSON looks at the scandalous failure of the U.S. reconstruction program in Iraq.

"I CAN'T tell you whether or not the money went to the right things or didn't--nor do I actually think it is important...Billions of dollars of their money disappeared, yes, I understand. I'm saying what difference does it make?"

David Oliver was intentionally vague when the BBC interviewed him recently, and it's easy to see why.

As director of management and budget for the Coalition Provisional Authority (CPA) when the U.S. began occupying Iraq in 2003, Oliver was one of the "money men" in the early days following the U.S. invasion of Iraq. He oversaw the distribution of huge sums to various agencies to get "reconstruction" efforts off the ground.

But billions of that money remains completely unaccounted for today--and tens of billions more has been squandered on corrupt contractors and shoddy rebuilding efforts, leaving ordinary Iraqis to suffer with substandard electricity, water, food distribution and medical care.

In the nearly four years since the U.S. invasion, Congress has appropriated approximately $38 billion for Iraq reconstruction, 80 percent of which has already been spent.

What else to read

The Office of the Special Inspector General for Iraq Reconstruction has links to all of its reports and audits available online. Information about the record of many of the individual contractors operating in Iraq can be found at the CorpWatch Web site.

For a book that chronicles the colossal blunders made by the U.S. occupiers, see Imperial Life in the Emerald City: Inside Iraq's Green Zone, by Washington Post reporter Rajiv Chandrasekaran.


But despite U.S. claims to be rebuilding Iraq, life for ordinary Iraqis remains one of deprivation--often because of waste, mismanagement and fraud. According to a 579-page audit released in late January by the Office of the Special Inspector General for Iraq Reconstruction (SIGIR), many necessary services in Iraq remain unstable, and the reconstruction process is rife with unfinished or shoddy projects.

Baghdad today receives on average just 6.5 hours of electricity a day, down from pre-war estimates of 16 to 24 hours of electricity per day. According to SIGIR, power levels in Baghdad actually fell drastically in mid-October--available electricity dropped to only two hours a day over the course of several days.

According to the International Herald Tribune, while the U.S. has spent just $2.7 billion on electricity projects in Iraq, the Electricity Ministry estimates that at least $20 billion more is needed throughout the country.

And since electricity is also necessary to run water and sewage systems, those services remain subject to chronic shortages and problems as well. Overall, a number of large water projects slated for reconstruction have yet to be completed, leaving millions without a consistent source of potable water.

Oil production remains below pre-war levels, and inflation and fuel shortages--especially of kerosene and liquefied gas, which many Iraqis now depend on due to a lack of electricity--are common.

Health care is likewise in a shambles. According to SIGIR, as of October, just seven of 142 planned primary health care centers (PHCs) had been built, and of 20 hospitals slated for rehabilitation, just over half had been completed. Millions of dollars of expensive medical equipment was warehoused due to the lack of completed clinics--and a significant part of it has gone missing.

Nevertheless, according to a January CorpWatch report by Pratap Chatterjee, "If Iraqis have failed to benefit from the idle PHCs, the $70 million contract to supply them has been a shot in the arm for Parsons Global.

"The Pasadena, California-based engineering company reaped a $3.3 million profit according to an audit report issued by the Special Inspector General for Iraq Reconstruction...And that is in addition to the $186 million that U.S. taxpayers shelled out to Parsons to build dozens of clinics that have yet to dispense a single aspirin."

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SUCH WAR profiteering is commonplace in the new Iraq.

In August, the U.S. government was forced to cancel a $50 million contract with Bechtel after a SIGIR audit exposed gross mismanagement of the building of a children's hospital in Basra--including a string of subcontractors who had done no work on the project. So far, 14 contractors have been suspended and eight removed from their "reconstruction" projects for similar reasons.

Earlier this month, three Army reserve officers and two civilians were indicted on charges that they steered more than $8.6 million in Iraqi reconstruction funds to a contractor in exchange for kickbacks that included $1 million in vehicles, jewelry and real estate.

One audit from SIGIR found that the State Department paid $43.8 million to "security" contractor DynCorp International to build a temporary police training camp outside Baghdad's Adnan Palace grounds--but the camp has never been used. About $4.2 million of that money was spent on 20 "VIP" trailers and an Olympic-size pool.

DynCorp has a long and rotten record of waste, corruption and human rights abuses in its operations in Haiti, Bosnia, Afghanistan and elsewhere.

According to a 2005 report by independent journalist Jeremy Scahill, in Bosnia, a DynCorp whistleblower alleged that "employees and supervisors from DynCorp were engaging in perverse, illegal and inhumane behavior, [and] were purchasing illegal weapons, women, forged passports and [participating in] other immoral acts."

As Scahill commented, "Using private military contractors like DynCorp in places like Afghanistan and Iraq allows the government greater secrecy and less transparency and accountability. The real question is: Why are these particular firms needed in the United States for what should be relief and reconstruction operations? The answer is that they are not, but their road to the lucrative contracts is paved with political connections and the offer to their employers of plausible deniability."

Democrats, eager to appear tough on the Bush administration's handling of the war, recently held hearings into some of the Iraq reconstruction corruption and fraud.

In one of the most outrageous instances, during the year after the invasion, massive shipments of cash--money held by the U.S. Federal Reserve Bank in New York before the invasion, which consisted of a fund that succeeded the United Nations oil-for-food program--were sent to Iraq by the U.S. to be doled out by the CPA.

Using C-130 planes, the U.S. flew shipments containing tons of shrink-wrapped $100 bills into the country, sometimes once or twice a month--a total of $12 billion in all.

"One CPA official described an environment awash in $100 bills," states a memo from the office of Rep. Henry Waxman (D-Calif.), the chair of the House Oversight and Government Reform Committee chair, which held the hearings. "One contractor received a $2 million payment in a duffel bag stuffed with shrink-wrapped bundles of currency. Auditors discovered that the key to a vault was kept in an unsecured backpack...Cash payments were made from the back of a pickup truck, and cash was stored in unguarded sacks in Iraqi ministry offices."

At least 10 disbursements ranging from $120 million to $900 million have no documentation at all, and a total of $8.8 billion--possibly more--is thought to "have been lost to corruption and waste."

To oversee the expenditure, the CPA was supposed to appoint an independent certified public accounting firm. "Instead," according to a 2005 SIGIR report, "the CPA hired an obscure consulting firm called North Star Consultants, Inc. The firm was so small that it reportedly operates out of a private home in San Diego."

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INCREDIBLY, THE outright theft of billions in Iraqi reconstruction aid was all but shrugged off by former CPA head Paul Bremer when he recently appeared in front of Waxman's panel.

"[T]he subject of today's hearing is the CPA's use and accounting for funds belonging to the Iraqi people held in the so-called Development Fund for Iraq," Bremer reminded the committee. "These are not appropriated American funds. They are Iraqi funds."

In other words--who cares if the U.S. squandered Iraqi money?

SIGIR's Stuart Bowen likewise has stated that the biggest problem in Iraq is not mismanagement by the U.S., but the Iraqis themselves--for example, "insurgents" targeting electricity and oil plants, which forces contractors to spend billions on "security" instead of rebuilding, according to Bowen.

On the other hand, Democrats seem all too willing to counterpose Iraq reconstruction with providing services at home. Sen. Jim Webb (D-Va.), for example, has publicly suggested the U.S. is spending too much money on Iraq reconstruction at the expense of rebuilding New Orleans.

But the devastation in Iraq was caused by the U.S., and the U.S. government should pay for it--without stealing money from programs needed by the victims of Katrina to rebuild their lives.

While the U.S. military is spending more than $100 billion annually to carry out its war and occupation, new reconstruction aid has dwindled to just $750 million in the current fiscal year.

Bush's new budget asks for nearly three-quarters of a trillion dollars in defense spending--including $245 billion to cover the cost of fighting in Iraq and Afghanistan and other elements of the "global war on terror." That's money ordinary people--both Americans and Iraqis--deserve.

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