The Thief of Baghdad

[Guest guest]

http://www.alternet.org/waroniraq/19620/

 

Missing: one-third of the Pentagon's equipment and

$1.8 billion

of Iraqi money. Guess who has it?

 

 

The Thief of Baghdad

By Pratap Chatterjee, AlterNet

 

Posted on August 23, 2004,

http://www.alternet.org/story/19620/

 

Missing: One giant generator owned by the United

States military. Estimated cost: $734,863

 

Last seen: Somewhere in Iraq.

 

While much of the media is focused on the pitched

battle over the control of the holy shrine in Najaf, a

bigger scandal is brewing in Iraq that may well have

an equally important effect on the future of the U.S.

occupation.

 

A team of auditors was dispatched to Iraq in late

January this year after a string of internal reports

showed that the military was wasting billions of

dollars of taxpayer money. They have issued eleven

reports since June 25, almost all of which have

pointed to the misuse of the money allocated for

reconstruction, be it Iraqi or Congress-appropriated

funds.

 

According to two of these reports issued in late July

by Stuart Bowen, the auditor-inspector general of the

Coalition Provisional Authority (CPA), not only have a

full one-third of the items purchased by the Pentagon

gone MIA (including the pricey generator), but a

whopping. $1.9 billion or more of Iraqi oil revenue

has also mysteriously disappeared.

 

Embarrassed military authorities did eventually track

down the missing generator and much of the money, both

of which seemed to have ended up with none other than

Halliburton. As it turns out they weren't missing

after all; it's just that Dick Cheney's former

employer had misplaced or conveniently forgotten to

turn in the receipts to the correct people.

 

But the Pentagon was not able to explain just how

Halliburton gained possession of Iraqi funds when

neither the United States Congress nor the Iraqi

government authorized their transfer to Halliburton in

the first place. Worse yet, the man who authorized the

allocation – CPA chief Paul Bremer – had already

quietly left Iraq just as the reports were being

released.

 

Yet days after the much-touted " transfer of

sovereignty, " the White House revealed an even more

startling detail about the reconstruction effort: In

over a year, the CPA had managed to spend just 2

percent of the $18.4 billion earmarked for the

immediate reconstruction of Iraq. And not a penny was

spent on the two areas where the Iraqi people were

suffering the most: healthcare or water and

sanitation.

 

So what is really going on? Is the United States

spending too much or too little money in Iraq?

 

To answer that question, we need to separate the

apples from the pears and the oranges.

 

Other People's Money

 

There are three treasure chests that the Occupation

authorities are allowed to dip their hands into. The

$87 billion appropriation that Congress granted to the

Bush administration in September 2003 was divided into

two funds: the bigger chunk, some $65 billion, for

military operations and $18.4 billion for

reconstruction. The Development Fund of Iraq (a.k.a.

the revenues accrued from the sale of Iraqi oil) is

the third treasure chest.

 

Treasure Chest No. 1 was quickly spent after the

invasion on hiring Halliburton to supply the soldiers.

In fact, the Pentagon has reportedly exceeded this

allotment by an estimated $12 billion. This

appropriation has been the source of most of the money

spent in Iraq. It is also the money that has been

subjected to a series of careful audits by the Defense

Contract Audit Agency, the General Accounting Office

(the investigative arm of Congress), and Stuart

Bowen's team of auditors in Baghdad – all of whom have

fiercely criticized Halliburton for its pricing and

spending practices.

 

The CPA barely touched the $18.4 billion allocated by

Congress for reconstruction (Treasure Chest No.

2)because of stringent bidding and oversight

requirements to prevent fraud or waste. Many of the

reconstruction bills were instead paid for with

revenue from the sale of Iraqi oil (Treasure Chest No.

3). Some of this money was spent on Halliburton for

the repair of the oil infrastructure; some was simply

handed out in cash to local people by soldiers in

return for favors such as rebuilding offices or

building football fields.

 

A New York Times article in late June 2004, described

the lax oversight of this money thus:

 

" The teams have become famous in Iraq for the way

they have spread across the country, commissioning

repairs and paying for them from satchels bulging with

$100 bills shipped by plane from a Federal Reserve

vault in East Rutherford, New Jersey. At least $1

billion has been distributed in this fashion – by some

estimates more than $2 billion. 'The military

commanders love that program, because it buys them

friends,' said an administration official, referring

to the cash distribution. 'You want to hire everybody

on the street, put money in their pockets and make

them like you. We have always spent Iraqi money on

that.' "

 

So here is what it all means:

 

One, the U.S. taxpayers spent a lot of money on the

soldiers, but the Pentagon paid Halliburton to do the

work. The company billed the military top dollar

knowing that the brass would look the other way. The

gravy train finally ground to a halt when two brave

members of Congress inquired about the results of the

internal audit.

 

Two, almost none of the money that American taxpayers

provided for reconstruction was spent because the

rules were too stringent for the CPA's taste.

 

And three, we dished out Iraqi money to companies like

Halliburton like it was going out of style because the

United States government knew that neither Congress

nor the United Nations would ask us difficult

questions about what we were doing with other people's

money. Equally importantly, Bush officials were

worried that the new Iraqi government might ask us

difficult questions about their money once they gained

any modicum of power. So they were eager to spend the

money while they could.

 

In other words, despite access to billions of dollars

for reconstruction, the CPA has done little to serve

the interests of either the American taxpayer or the

Iraqi people. The reconstruction effort has, however,

been a cash bonanza for companies like Halliburton.

 

The Billion-dollar Corporate Expense Account

 

Halliburton has been the biggest beneficiary of the

CPA and Pentagon's liberal spending policies – the

company alone got $3.9 billion last year to repair oil

fields and provide food, laundry, sanitation and

transportation services to the military.

 

Where did the money go? Whistle-blowers from the

company have sent testimony to Congress detailing the

many wasteful practices: paying $100 for a bag of

laundry; abandoning $85,000 trucks for the lack of a

spare tire. Meanwhile, other companies like Science

Applications International Corporation of San Diego

were shipping armored Humvees for company executives

on specially chartered jets and paying themselves $200

an hour to run a U.S. propaganda television station

that no one was watching.

 

An internal Pentagon audit completed two weeks ago and

reported in the Wall Street Journal earlier this month

found that Halliburton failed to adequately account

for " more than $1.8 billion " it has received so far

for providing logistical support to troops in Iraq and

Kuwait.

 

When challenged by military auditors to account for

its missing equipment and receipts, the Houston-based

Halliburton told the Pentagon that it did not have

enough staff to keep track of the $400 million it was

spending in Iraq – an explanation that the Defense

Department was surprisingly quick to accept. Linda

Theis, a spokeswoman for the Army Materiel Command,

told reporters, " It was the pace. It was the magnitude

of this contract. "

 

In statements to the press, on the other hand,

Halliburton flatly denies any problems with its

accounting procedures. Randy Harl, president of

Kellogg, Brown and Root, the Halliburton subsidiary

that conducts the work in Iraq, said, " In general, we

have found that the subcontractors are properly

billing on the basis provided in the subcontracts. We

are operating in a remote, hostile and ever-changing

environment in Iraq. In such an environment, there are

bound to be challenges. Any issues related to billings

will not only be resolved quickly and responsibly, but

also resolved in such a way that it will not affect

any services provided to our soldiers. "

 

But in written testimony submitted to Congress,

Halliburton's own auditor, Marie de Young, revealed

that the company's internal auditors (nicknamed the

" Tiger Team " ) were not doing their job properly. De

Young, who was hired in December 2003 to help oversee

Operation Iraqi Freedom contracts, told Congress:

 

When the Tiger Team examined a subcontract, they

just checked to make sure that all the forms were in

the file. ... They didn't assess the reasonableness of

the price or consult with site managers. The team's

sole purpose was to close as many subcontracts as

possible, under the mistaken assumption that

everything that was closed prior to the arrival of the

government audit team would be exempt from further

scrutiny.

 

De Young also made clear the company's intentions: " I

had been advised by subcontract administrators who

quit the company that employees get moved around when

they get too close to the truth. ... Ironically, other

previous managers who tolerated bad practices were

promoted to better paying jobs in Iraq or Houston or

Jordan. "

 

The final touch of irony: Halliburton housed the Tiger

Team at the five-star Kempinski Hotel in Kuwait,

paying each of them a whopping $10,000 per month for

their troubles. At the time, U.S. soldiers were

required to live in tents at a cost of $1.39 a day.

When the military asked Halliburton employees to move

into the tents, they refused.

 

Crimes and Consequences

 

The audit reports have produced little real action on

the part of the Pentagon thus far. Last Monday,

Halliburton announced that the Pentagon had told the

company that it plans to withhold 15 percent ($60

million) of its monthly payment until they find all

the missing receipts. But the Pentagon reversed its

decision the very next day, announcing that it will

give the company more time to find the missing paper

work and prove their costs before imposing the

penalty. Halliburton has already been granted extra

time twice.

 

The audits may also not have much effect on the future

of the reconstruction effort, which remains grim.

Bremer's departure in June was only one in an exodus

of occupation officials and contractors, derisively

labeled by a U.S. soldier as " The League of Frightened

Gentleman, " fleeing the dangerous situation in Iraq.

The German engineers hired to repair the Daura power

plant in Baghdad left behind enormous disassembled

machines strewn across the plant floor. " They didn't

contact me, " said Bashir Khalif Omir, the plant

director at the time. " They took their luggage at

midnight and they left. "

 

When Bremer caught his jet plane out of Iraq, two

heavily armed Blackwater private military watched his

back, rifles pointed menacingly at camera crews. There

were no flowers from an adoring Iraqi public, not even

anything similar to the dramatic lift-off from the

roof of the U.S. embassy in Saigon marked the occasion

– just a quiet, top-secret escape to freedom (and a

lucrative book contract). But Bremer left behind a

nation that was not just more dangerous but also

poorer for his efforts.

 

© 2004 Independent Media Institute. All rights

reserved.

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