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TRANSMISSION: Tuesday 1st February 2005 2000 - 2040
REPEAT: Sunday 6th February 2005 1700 - 1740
REPORTER: Gerry Northam
PRODUCER: Jenny Chryss
EDITOR: David Ross
Transmission: Tuesday 1st February 2005
Repeat: Sunday 6th February 2005
Producer: Jenny Chryss
Reporter: Gerry Northam
Editor: David Ross
NORTHAM: The news from Washington was deliberately held
back until after the Iraqi elections, for fear of the consequences. Auditors in the US
Government have checked the accounts of the oil fund as managed by the Coalition after
the war, and found $8.8 billion missing - more than 40% of the total. They can’t say
where it’s gone, but they certainly can’t be sure it’s been spent on reconstructing the
country for the benefit of its people, which is what the oil money was supposed to do.
At the same time, details have begun to emerge of how huge sums of Iraqi and American
money were lost under the Coalition. File On 4 has investigated allegations of negligence,
waste, dodgy contracts and outright fraud, which swept up hundreds of millions of dollars.
LEENDERS: We can only guess how much disappears in private
pockets. I really fear that Iraq reconstruction will turn into one of the biggest corruption
scandals in history.
REPORTER: …five years of hatred and rage as they jump up on
the statues, chanting …
NORTHAM: As both the statue and the regime tumbled in
Baghdad, Iraqis saw the end of decades of tyranny. They hoped it would also bring an end
to corruption. But even some former exiles who worked with the Americans to resuscitate
government and the economy have begun to wonder what happened to the symbols of
Saddam’s opulence. The political scientist, Dr Isam al-Khafaji, was a leading member of
the post-war Iraqi Reconstruction and Development Council, until he resigned in
disillusion only months after the war.
KHAFAJI: The Ba’ath Party, the ruling party during Saddam
Hussein, had huge palaces. Who decided to give them to the new Iraqi elite? Where are
the Lamborghinis and the hundreds of cars that they used to own? Nobody is accounting
for them, nothing was presented to the Iraqis.
NORTHAM: No account?
KHAFAJI: No account.
NORTHAM: So what did happen to all the Lamborghinis and the
art treasures and so on?
KHAFAJI: They were plundered, as simple as that. You almost
cry with tears, literally speaking.
NORTHAM: One thing the Ba’ath Party did well – all too well –
was to keep order in Iraq. After defeating him, officials in the Pentagon and the victorious
Coalition found themselves presiding over near-chaos.
KROHN: It was kind of a wild west thing. The Americans
were a long way from home, we were in the Green Zone, a walled area, working in the old
palace for the most part, getting mortared virtually every night, so we felt we were at the
edge of civilisation doing the important work for the nation. There was a lot of money that
was being spent rather freely, and there wasn’t a great deal of accountability in the money
that flowed through the system.
NORTHAM: As a senior official in the US Army, Colonel Charles
Krohn served time as the Coalition spokesman in Baghdad after the war. Under a UN
mandate, the Coalition Provisional Authority was responsible for the country’s assets –
most importantly its oil and the revenues from it - to safeguard them for the reconstruction
of the country and the humanitarian needs of its people. Huge hoards of cash from oil
squirreled away by the old regime were seized by the Coalition. But where Saddam
Hussein had insisted that precise accounts be kept even of shady payments in commissions
and bribes, Colonel Krohn found the Coalition had a new, more casual attitude to
KROHN: There was $700 or $800 million in cash that was
captured by US forces early in the war, cash that belonged to Saddam and his people. I
don’t know what happened to that money and I don’t know who does know. I suspect a
lot of it was used for high-minded purposes, given to commanders to spend freely in their
areas of operation.
NORTHAM: And what kind of accounts were kept of that?
KROHN: I don’t know that any accounts were kept of that.
When I raised a question about it to one of my associates, he pointed out that, ‘Well, you
know, Krohn, that $700 million physically is a lot of money and if somebody comes in and
wants a couple of million for a particular purpose, it simply takes a long time to count that
much.’ And I said, ‘Well, as a minimum you could have waited. At least that would have
shown an intent to maintain some kind of accountability. That at such-and-such an hour of
such-and-such a day I gave such-and-such a person 50lb of hundred dollar bills.’
NORTHAM: Fifty pounds weight?
KROHN: Weight, fifty pounds weight.
NORTHAM: Was that a serious suggestion?
KROHN: I would have done it. I would never handle
government money without some kind of accountability. We get involved in some covert
programmes and the advice of my best mentor was, the blacker the money, the cleaner the
NORTHAM: But you’re saying that the Coalition, as a matter of
fact, didn’t keep accounts of that money?
KROHN: To the best of my knowledge, they did not keep
accounts of that money.
NORTHAM: Many questions about assets and finance throughout
the year of the Coalition’s rule remain unanswered. In one office, millions of dollars were
kept in a safe, the key to which was in an open backpack. In the last days of the Coalition
last summer, a mind-boggling quantity of cash was suddenly flown up from Baghdad to
the Kurdish Regional Government in Erbil in the north of Iraq. The amount was
$1.4 billion, and its fate has become a matter of some mystery. Ginger Cruz, of the US
Government auditors specifically charged with monitoring Coalition finances, was on
hand to ensure that the cash was kept safe.
CRUZ: For us to transfer $1.4 billion to the Kurdish region
required three pallets of $100 bills, which are shrink-wrapped into bricks, to be loaded
onto helicopters and then flown up to Erbil and then driven to the Central Bank, where it
was deposited.
NORTHAM: It’s supposed to have weighed 14 tons. Is that right?
CRUZ: Yes. It’s quite a sight to physically see $1.4 billion
sitting on pallets, but it’s an incredible strain on the security crew, who understands that if
at any moment those helicopters are shot down or if something should happen along the
way, that there’s no way to recoup that money.
NORTHAM: And once it had been paid into the bank, apparently
someone forgot to ask for a deposit slip?
CRUZ: Yes. The group that dropped off the money thought
that that had been taken care of and so they did not actually fill out a deposit slip for the
$1.4 billion, so it took about two weeks for the controller to fix that problem with the
Central Bank in Erbil.
NORTHAM: The fate of this cash since it was deposited remains
unclear. The Kurdish Regional Government has told File On 4 that it will all go on
strategic projects to boost the economy, none of it has yet been spent and it is all still in the
Kurdish region. But it’s reported in the Financial Times that efforts have been made to
transfer it to a Swiss Bank. The Kurdish Prime Minister acknowledges that this may have
been discussed - ‘probably talks have been made’, he says, but they weren’t official talks.
When a team of accountants from KPMG were sent under the United Nations to check the
Kurdish region, they reported that they were unable to obtain information regarding the
intended use of this $1.4 billion. In fact, they were kept in the dark about almost all the
Kurds’ finances:
READER IN STUDIO: During our procedures in Erbil, we were denied
access by the Kurdish Regional Government to their accounting records.
NORTHAM: The Kurds’ response is that the accountants didn’t
approach them, though we know that KPMG were in Erbil and even met the Minister of
Finance. Breaches of the normal rules of financial accountability went remarkably far
under the Coalition. A report on Iraqi Reconstruction by an eminent NGO, the
International Crisis Group, points to a lack of control after the war that looks close to
shambolic. Dr Reinoud Leenders, the report’s author, was surprised to find that even some
basic elements of businesslike housekeeping were not observed.
LEENDERS: Unlike most, if not all oil-producing countries, Iraq
still has not any oil metering in place.
NORTHAM: They don’t meter the output of oil?
LEENDERS: That’s right.
NORTHAM: How does anyone know how much there is then?
LEENDERS: Well that’s exactly the problem. We don’t know
how much oil is being produced, so we don’t know what kind of revenues are going into
the development fund for Iraq.
NORTHAM: Does this open the possibility that some oil may be
smuggled and lost to revenue to the country?
LEENDERS: Yes, and given the lax border controls, given the
intransparency of Iraqi institutions, you might well assume that that is the case.
NORTHAM: Why did the Coalition not insist that there should be
proper metering and accounting for the oil?
LEENDERS: Well that’s everybody’s guess, and on top of that
they have resisted for a very long time for the auditing agency …
NORTHAM: Under the UN?
LEENDERS: Under the UN, to start monitoring and auditing the
funds. This is only very recent. And the conclusions they are coming up with are
devastatingly critical of the CPA’s behaviour in Iraq.
NORTHAM: What are they saying?
LEENDERS: Well they are saying that not only is there no oil
metering equipment in place, on top of that some oil revenues are not going into the
development fund for Iraq, in violation of the UN resolutions. I really fear that, given all
the factors in Iraq, which constitute a fertile ground for corruption, and the lax attitude by
US officials in Iraq, that corruption will be huge and Iraq reconstruction will turn into one
of the biggest corruption scandals in history.
NORTHAM: But even what the Coalition did know about Iraq’s
finances wasn’t always passed on. Among Iraqis who were supposed to be working as
partners with the Coalition in the Iraqi Governing Council, a sense of frustration grew after
NORTHAM cont: the war at the paucity of information, let alone
consultation, they were permitted over financial matters. Mahmoud Othman, a Kurdish
member of the Council, came to believe they were sidelined.
OTHMAN: We didn’t know exactly where the money was going.
Most of the things we are not aware of. The CPA themselves at that time, when we were
in the Governing Council, they were spending, they were making the budget, they were the
rulers of Iraq. For sure I didn’t see mass transparency and no accountability, they were
unaccountable to us. We were not partners in making the budget, in making the spending
and so on. They were the boss and they were ruling and we were consultants sometimes
and sometimes not.
NORTHAM: Did you ever say that you wanted to know more
about where the money was going?
OTHMAN: Of course. That was one of the points, we always
were discussing it with them. Sometimes we had ten sessions together, and we thought we
should know first where the money is going, second the priorities of how to spend the
money, and third there should be more information about the contractors who will take it –
whether they are Americans or Iraqis or Kuwaitis or Lebanese or whatever. In all three we
hardly were consulted.
NORTHAM: Even the United Nations monitoring body for Iraq,
which sent the KPMG accountants to examine financial controls under the Coalition, was
able to make only limited headway. The team reported some of the obstacles they faced.
READER IN STUDIO: KPMG has encountered resistance from Coalition
staff regarding the submission of information required to complete our procedures.
Particular issues noted include:
Responses to queries extremely slow, requiring frequent follow-up.
A lack of individual accountability by Coalition staff.
A lack of interest demonstrated by Coalition staff.
NORTHAM: One of the areas of greatest concern is the awarding
of contracts, together worth billions of dollars, supposedly for reconstruction and
humanitarian needs. If oil revenues are to be spent properly, then the business of
contracting needs to be tightly monitored. But Iraqis complain of weak controls, leaving
scope for negligence, waste and fraud. Dr Isam al Khafaji, who worked with the US State
Department before the war, has been dismayed to see millions after millions of dollars
disappear into a web of profligate, sometimes corrupt, businesses.
KHAFAJI: The contracts were given according to, first, who
knows whom; second, the Commissions. We have compiled tens of cases whereby the
contract is given to companies. But none of these companies implemented the work on the
ground. So when you investigate it, you discover that the first contractor subcontracts it to
a second, the second to a third, who happens to be a Kuwaiti or a Lebanese, so we have
not reached the Iraqi layer, to a fourth, to a fifth. Normally those who implement the
project are the sixth.
NORTHAM: And the middlemen are all taking their cut.
KHAFAJI: Imagine you are paying six times subcontracting, and
to the sixth, who implements the job, does it and feels happy because they are still making
profits out of that sixth of the amount that was taken. Now none of these cases that I have
heard of was taken through proper tenders.
NORTHAM: One of the contractors under suspicion has an office
on this busy commuter street at Tysons Corner, a few miles to the west of Washington DC.
This area consists almost entirely of tall office buildings with floor after floor of
corporations, many in the defence and security fields. On the second floor of this block,
number 8201, above the Vietnamese restaurant and the hair salon, is the office suite of
Custer Battles, advertising a ‘very skilled breed of security professionals’. When they
opened an office in Baghdad just after the war, one of the founders, Mike Battles, said, “In
all my years of experience, I’ve rarely seen such opportunities.” And it appears the
company took them.
GRAYSON: Custer Battles is a private company. It’s owned by
Mr Custer and Mr Battles. The government somehow saw fit to give them over $100
million in security contracts in thirteen months.
NORTHAM: Alan Grayson is a lawyer representing two
whistleblowers against the company. In court documents, they allege a number of scams
which they claim Custer Battles used to milk millions from both US and Iraqi funds. One
of the most blatant frauds they allege was in the security operation to protect Iraq’s
distribution of a new currency – the dinars without Saddam Hussein’s head on them.
According to Alan Grayson, the scheme was simple: Custer Battles sub-contracted some
of the work out, and then generated false documents showing inflated costs, which they
then claimed back from the Coalition.
GRAYSON: Custer Battles established fraudulent sham
companies in the Cayman Islands. They manufactured fake invoices that were purportedly
issued by these controlled sham companies, which they then turned around and billed to
the government.
NORTHAM: And the Coalition paid these invoices that were
actually fake, did they?
GRAYSON: Yes. One example is the fact that there were forklifts
that Custer Battle found in the course of performing the Baghdad International Airport
contract. These were Iraqi Airways forklifts, and Custer Battles found them simply
because they were on site and occupying that site and there was nobody else there. What
they did was they painted them over so that no one could see anymore that these were Iraqi
Airways forklifts, and then they turned around and leased them to a shell entity of their
own making and then in turn billed that to the US Government.
NORTHAM: They charged for forklift trucks which they had
actually found at the airport?
GRAYSON: That’s right. They charged for equipment that they
never owned. Another example, a helicopter pad, which cost something on the order of
$50,000, the company made up fake invoices and ended up billing the government over
$130,000 for it.
NORTHAM: Altogether, how much fraud do you think Custer
Battles committed in Iraq?
GRAYSON: Our best estimate at this point is approximately
$50 million.
GRAYSON: $50 million, that’s correct.
NORTHAM: One of the whistleblowers in this case is
Robert Isakson, Managing Director of a separate security company, which worked with
Custer Battles on its contracts in Iraq. In an affidavit, he describes a conversation with the
other founder, Scott Custer, about the idea of creating phoney, and very lucrative,
READER IN STUDIO: Mr Custer brought up and discussed the possibility of
using shell companies to increase the profits. He advised that he had a second company
through which assets and purchases could be funnelled. I stated my view that such an
arrangement would be illegal and that we were not interested in participating in such a
scheme. I told Mr Custer that everyone would go to jail.
NORTHAM: An internal company document from one of its
managers, included in the court papers, sets out what it calls ‘enormous areas of
discrepancies and irregularities that lend themselves to elements of criminal fraud’. It’s
dated February 28th last year. The company has not yet had to file a substantive defence,
and our repeated attempts to arrange an interview have met with no response. A statement
on Custer Battles’ website dismisses the whistleblowers’ claims as ‘baseless’ and accuses
them of business rivalry. But the American-led Coalition has itself lost faith in the
NORTHAM cont: company’s ‘skilled breed of professionals’. This
happened, according to the lawyer Alan Grayson, after an apparent slip made by the
GRAYSON: A meeting was called with Custer and with Battles,
the two principals, who were called in to explain some of the mishaps that had occurred
under this contract. At this meeting, one or the other left a spreadsheet on the table, and
the spreadsheet had several columns. The column indicating what Custer Battles had
spent totalled $3.5 million. The column indicating what Custer Battles had billed was
almost $10 million. So even at that early date in the performance of this contract, the
government knew from that spreadsheet that Custer Battles had cheated it out of at least
$6.5 million, and somehow or other they managed to leave the spreadsheet on the table
when they left the meeting.
NORTHAM: And what did the Coalition do once it had that
spreadsheet, with evidence that there may have been a fraud?
GRAYSON: Well, if you mean, were these people punished, the
answer is no. It’s more than a year later. In fact, nobody has been indicted, nobody has
gone to prison, the government has done nothing to get that money back, except to – quote
– investigate.
NORTHAM: Once the Coalition had evidence from that
spreadsheet that there may have been a fraud, did it stop the contract?
GRAYSON: No, and in fact this is one of the most disturbing
elements of this entire situation. Custer Battles received new contracts from the US
Government all the way from October 2003 until the very end of September 2004.
NORTHAM: The 30th September last year was the date the
Pentagon announced that Custer Battles was provisionally suspended as a contractor, and
banned from competing for any future US government business. The company is
appealing the decision. There’s no explanation from the Pentagon of why, having found
the spreadsheet, it took almost a year to ban Custer Battles from government contracts. No
one from the Pentagon would be interviewed for File On 4. Nor is it clear why the US
NORTHAM cont: Department of Justice has refused to join the
whistleblowers’ action against the company. Their lawyer, Alan Grayson, wonders if
Washington may actually be happy to see this case fail. We understand there are more
than thirty cases pending involving other companies.
GRAYSON: Behind this case are larger cases, cases that are still
under seal that people aren’t even allowed to talk about at this point, as a matter of law.
And if this case is swept under the carpet, and this case is one where people escape all
punishment, despite the serious amounts of money involved here, then the even better
connected people will benefit from this directly as well, because if Custer Battles gets
away with this, then so will they.
NORTHAM: There are two fundamental aspects of the Coalition’s
contracts which left Iraq’s oil wealth vulnerable to waste, overcharging and fraud.
The first is that two-thirds of the early contracts were awarded without competition -
they’re known as sole-source, a breach of the normal government rules defended on the
grounds of emergency. The other potential problem is that many were so-called cost-plus
contracts, in which a company is paid whatever it spends, plus a management percentage.
The defence given for this is the uncertainty of what would be required in the chaotic
aftermath of the war, but it creates the opposite of conventional market forces – the higher
the company’s costs, the more profit it makes. But these departures from normal standards
demand special care to ensure probity. In President Bush’s first term, the lawyer Angela
Styles was his Administrator for Federal Procurement Policy. She accepts both types of
contract in principle, but only on condition that they’re tightly monitored.
STYLES: I certainly think there are a lot more risks when it’s a
sole source situation. There’s a lot more risk that other people out there who could have
done it better or cheaper didn’t have the opportunity to do that, and that’s why competition
is so important.
NORTHAM: So if you’ve got a contractor who not only has a cost-
plus contract, but got it without competition, they’re in a very strong position, aren’t they?
STYLES: Absolutely. These contracts don’t work unless
there’s a significant amount of oversight by the government. When the government’s
pressed, when they have to do things quickly, when they can’t have all the normal
constraints that they would usually have in place, I think there are always going to be
people out there that take advantage of the system. We have to find those people and we
have to make sure that they’re held accountable if they do.
NORTHAM: Cost-plus contracts awarded without competition are
at the heart of complaints against the largest contractor in Iraq by far. It’s one of the best-
connected companies in the world, the one the US Vice-President used to run, Halliburton.
The company’s internal control of its contracts is criticised by a whistleblower.
Marie de Young was a logistics specialist working in the sub-contracts department for
Iraq, based across the border in Kuwait. By the time she began work there, early last year,
the company had had more than six months to get its financial house in order.
Marie de Young knew that that could be done, she’d seen it happen in an earlier
Halliburton operation in Kosovo. But last year, for Iraq, she saw a very different pattern.
DE YOUNG: I was shocked because I had seen Halliburton’s
system. I was very surprised that they weren’t monitoring costs as you go, because I have
managed army budgets for many years and you get a report every month saying, ‘You’ve
accomplished so much spending and you’ve accomplished so much work.’ Well, they
weren’t generating these kinds of reports.
NORTHAM: Halliburton didn’t have those kind of monthly
DE YOUNG: No, they did not. They were not controlling the
spending, and when I suggested to my first manager there that we needed to do this, that it
was a good, sound accounting practice, I was told stop, cease and desist. There was a
resistance to creating documents that would prove cost overruns were really inflated
charges. In so many other contracts, for example automobiles, we were paying but I spent
a good six or seven weeks trying to track down automobiles that we were paying for, we
didn’t even know where they were. They didn’t know who had what vehicle, because they
didn’t have a process. I mean, they’d have a manual that’s about 3” thick, but the
supervisory team weren’t following legitimate normal business practices.
NORTHAM: What most troubled Marie de Young was that she
thought Halliburton didn’t properly control its payments to sub-contractors, by ensuring
that work had actually been done and goods actually provided as invoiced. These, under
the contract, were costs that were passed straight on to the Coalition with a percentage
charge on top. If Halliburton wasn’t keeping an eye on them, who was?
DE YOUNG: I was horrified to discover, when I went into detail,
that they were asking us to sign off on contracts that weren’t ours.
NORTHAM: Who was asking you to sign off on contracts?
DE YOUNG: The sub-contracts department …
NORTHAM: Halliburton’s sub-contracts department …
DE YOUNG: Correct.
NORTHAM: … were telling you what?
DE YOUNG: They would lay out these contracts for the managers
to sign, and there wouldn’t be any supporting documentation showing, you know, this is
what you are paying for.
NORTHAM: So are you saying that you’ve seen cases where
contracts have been paid without Halliburton verifying that those services had actually
been delivered?
DE YOUNG: Routinely.
NORTHAM: Routinely?
DE YOUNG: Routinely. I can say that, routinely. My question is,
why would you pay on something, why would you recommend paying on something if
there are no invoices? Why are you not in contact with the vendor, with the end user?
DE YOUNG cont: That is not to say that the people who are trying to do
the job at the site, that they weren’t intentionally trying to rip off the government. They
were working with a procurement system that was broken. They were working with a
paper system that was just out of control.
NORTHAM: Halliburton’s response to the suggestion that it paid
invoices without verifying that services were delivered is a flat denial. Its statement to File
on 4 says, ‘This is absolutely not the case’. We’d have liked to test this confidence in an
interview, but no one was available.
MAN: Good morning. Our Committee will come to order
and I want to welcome everybody this morning to our full Committee oversight hearing
entitled ‘Contracting and the Rebuilding of Iraq, part 4’.
NORTHAM: At the Congressional Committee on Government
Reform, Halliburton’s conduct in Iraq has come under scrutiny. The senior Democrat on
the Committee, Congressman Henry Waxman of California, commissioned a staff study of
the price Halliburton charged for the fuel imports it needed for vehicles working to restore
Iraq’s oil industry - one of the contracts it was awarded without competition. Halliburton
challenged his findings. But Congressman Waxman’s conclusion, published as a minority
report, is that the company overcharged by $167 million, a mark-up of 90%.
WAXMAN: The evidence for the overcharging was simply to
look at what the charges were from other sources of gasoline in Iraq. The defense agency
that was bringing the gasoline for our troops was paying a fraction of the amount that
Halliburton was paying. The Kuwaiti oil company that was bringing in oil was paying a
much smaller amount than Halliburton was paying. It didn’t add up, whenever we talked
to any of the energy experts, to figure out why they were spending as much as they did,
one energy expert told us it looked like highway robbery to him. My staff estimated
around $167 million was overcharged before Halliburton was relieved of the job of
bringing in gasoline and the defense department agency took over the responsibility,
paying much less than Halliburton did.
NORTHAM: Has any of that money been paid back?
WAXMAN: It should be paid back, in my opinion, but none of
that money has been paid back, nor has Halliburton had any withholding of money that
should be paid to them in order to make sure that the government is reimbursed.
Halliburton has not paid much of a penalty for the documented overcharging of the
taxpayers of the United States and the Iraqi oil money that was used for part payment for
their activities.
NORTHAM: Congressman’s Waxman’s suspicion of overcharging
by Halliburton is raised further by a Pentagon audit covering only part of the time the
Coalition ran Iraq, which concludes that in the early months after the war, the company
may have overcharged for fuel by a total of $61 million. The Department of Defense calls
it a ‘potential overpricing’. In the absence of an interview for this programme, a statement
from Halliburton says it undertook substantial efforts to find the lowest possible price for
fuel and claims that the Pentagon’s auditors started from an ‘erroneous premise’.
It’s a dispute between the company and the government, which has never been put to the
test. Once the Defense auditors had identified this potential overpricing, Halliburton
should have been made to produce evidence that its prices were indeed fair. But the US
Army suddenly waived this requirement, in circumstances which remain disputed, and it
was back to business as usual. The most serious charges made against Halliburton concern
bribery. A State Department document reports complaints to the US Embassy in Kuwait
from a leading oil contracting company. Their allegations could hardly be more stark:
READER IN STUDIO: It is common knowledge in Kuwait that Halliburton
officers are on the take; that they solicit bribes openly; that anyone visiting their seaside
villas at the Kuwaiti Hilton who offers to provide services will be asked for a bribe.
NORTHAM: This was reported to the Pentagon in August 2003
and released to the Congressional Committee on Government Reform late last year.
The senior Democrat on that Committee, Congressman Henry Waxman, has called for
new hearings on the allegations, which the Republican majority has not arranged.
WAXMAN: We don’t know whether it’s true or not, we don’t
know whether there’s an investigation going on or not, and we don’t know if anything will
come of it, but we’re going to keep on asking the questions and try to insist that action be
taken. There was one other example of corruption with Halliburton, that Halliburton
acknowledged, and that was a couple of Halliburton employees were taking kickbacks in
order to give the sub-contract. Halliburton fired those employees, they openly admitted it.
We haven’t been able to get all the information about that as well. We can’t even get the
names of the people who took the bribes. In this case, where we’re seeing US taxpayers’
money being squandered, you would think that they would want to let the American
people know that the government officials are on top of it and going to make sure this
doesn’t happen any longer. What I get from the whole picture of Halliburton’s activities
in Iraq is they’ve been gouging the American taxpayers, improperly taking Iraqi oil
money, and getting away with it because this administration so far is letting them get away
with it.
NORTHAM: Allegations of demanding bribes for contracts go
beyond Halliburton. They also point to officials of the Coalition Provisional Authority
itself. As the Coalition ran Iraq after the war, a British advisor to the Iraqi Governing
Council, Claude Hankes-Drielsma, was concerned at information he received in Baghdad.
HANKES-DRIELSMA: The perception by Iraqis, government officials, civil
servants and ordinary Iraqis was that many people within the CPA behaved in a corrupt
manner. Contracts were not necessarily awarded to the benefit of the Iraqi people, but
sometimes at the expense of the Iraqi people. It was brought to my attention by those who
I have known for many years that officials within the CPA demanded significant bribes in
order to obtain contracts. I am aware of figures up to $300,000 in cash.
NORTHAM: Just to get this quite clear, you are saying that people
working for the Coalition demanded, in plain terms, bribes in order for contracts to be
HANKES-DRIELSMA: Correct. It was most unfortunate, given that the
Coalition forces, the liberation of Iraq, it was a great achievement, it was recognised as
such by the Iraqi people, but the subsequent handling of events was a disaster.
NORTHAM: Claude Hankes-Drielsma says he reported these
allegations of bribery up the Coalition hierarchy and he believes that, behind the scenes,
they are under investigation in Washington. In all, something over $20 billion of Iraq’s oil
wealth and an estimated $3 billion of US taxes were spent under the Coalition –
supposedly for the reconstruction and development of the country. But the lamentable
state of much of Iraq’s infrastructure and public services lead many to question where the
money actually went. The US government auditors, who have this week identified the
problem of the missing $8.8 billion of Iraq’s oil revenues, say there’s no assurance that
this huge sum was used for reconstruction or humanitarian needs. They blame ‘severe
inefficiencies and poor management’ under the Coalition Provisional Authority, the CPA,
and the auditors’ Chief of Staff, Ginger Cruz, politely points to less than adequate controls
of money and contracts.
CRUZ: We believe that there was insufficient internal
control to assure that the CPA could meet the mandates of the United Nations and assure
that that money was spent for the benefit of the Iraqi people, as the UN Security Council
resolution mandated. We do understand that there was a war at the time and there were
very extenuating circumstances. You’re talking about an Iraqi government that was still in
place at the time, although all of the management was gone. So when the CPA came in
and they placed advisors at the ministries, there was a combination of responsibility. The
degree to which we believe the CPA should have been responsible for the establishment
and tracking of controls is a point of disagreement with the officials from the CPA. They
feel that they provided adequate supervision and we contend that there needed to be more
supervision due to the fact that you had such a chaotic situation after the war.
NORTHAM: How high in the Coalition did this failing go? Did it
go right to the top, to Ambassador Bremer?
CRUZ: We believe that it did, and we believe that there
should have been better management controls placed over money that was turned over to
the Iraqi ministries.
NORTHAM: Ambassador Paul Bremer, the former Head of the
Coalition, wouldn’t be interviewed by File On 4. But in a scathing letter to the auditors, he
says they fail to understand the context in which the Authority was operating - you can’t
NORTHAM cont: apply Western accounting standards in the midst of a
war. The auditors acknowledge that, but believe he should have done a great deal better
than he did. For the Democrats in Washington, in a minority on the key investigative
Committees, it’s proving difficult to drag information and a full accounting of Coalition
spending from an apparently reluctant Administration. Congressman Henry Waxman of
California hopes that the full story will one day be known, but isn’t confident.
WAXMAN: When people have spent a lot of time trying to keep
the Congress even of the United States from knowing how the taxpayers’ money is being
spent, along with the Iraqi oil money, and when the US Government goes out of the way to
keep elected members of Congress from knowing the information, it makes us worry that
what we’ve heard about may just be the tip of an iceberg of an enormous waste and abuse
and perhaps corrupt use of money. We need to realise that we’ve done a lot of harm by
having this money used for purposes that were not as important as where it could have
been spent.
NORTHAM: What harm?
WAXMAN: If the Iraqi people don’t have electricity or running
water, infrastructure rebuilt, this money was supposed to help provide for them, we
prolong the agony of what is going on every single day in Iraq and we give ammunition
for the insurgents to recruit others, because they can say, ‘See, the Iraqis’ oil has been used
by Americans for purposes other than helping the Iraqis.’
NORTHAM: The United Nations is under scrutiny because of a
report it’s commissioned on its oil revenues scandal - the mishandling of billions of dollars
of Iraqi funds before the war. Supporters of the Bush administration are already having a
field day with the evidence. There’s hostile lobbying for the removal of Kofi Annan, daily
denunciations on talk radio, and full-scale investigations on Capitol Hill. In marked
contrast, there’s almost complete silence over the evidence emerging of America’s own
financial scandal in Iraq – the mysterious disappearance of a huge amount of the country’s
own money, under the stewardship of the American-led Coalition.