- The Washington Times - Thursday, January 19, 2006

Finding out what happened to Iraq’s $37 billion in oil-financed reconstruction funds — its stacks of plastic-wrapped hundred-dollar bills popping up all over the country like play money — has taken investigators down many paths, including one to the Defense Ministry office of Ziyad al Qattan.

Questions about what happened to the fund, once held by the United Nations and turned over to the Bush administration, are part of a broader story of how the United States has spent billions in American and Iraqi money after Saddam Hussein was ousted in April 2003.

So far, the United States has spent $226 billion to wage war in Iraq, and the reconstruction costs have proven to be another expensive challenge.

Along with the $37 billion fund, another $24 billion from U.S. taxpayers has been ordered for Iraqi reconstruction. Together with $4 billion pledged by other countries, more than $60 billion is pegged for reconstruction costs alone. The problem is U.S. and Iraqi officials aren’t sure just how much money has been stolen or misspent.

The situation is crucial for Iraq: The World Bank has estimated the country needs another $40 billion in reconstruction money and Iraq can ill afford massive corruption which would jeopardize future funding.

A confidential report by Iraq’s Supreme Board of Audit provides a peek at accounting problems, which date back to May 2003, when the Bush administration created the Coalition Provisional Authority (CPA) and made L. Paul Bremer Iraq’s first post-Saddam leader. Mr. Bremer’s office received a huge infusion of funds at that time and began spending it on rebuilding efforts at a furious pace — in cash.

The Iraqi audit dug into Mr. al Qattan’s defense ministry office to find evidence of front companies, out-of-country banks and cash payments to arms dealers before anything was delivered. Sometimes, nothing was.

Today, Iraq’s Commission on Public Integrity is trying to determine how much of the CPA-distributed cash was stolen or misspent, and how much went for legitimate projects. Mr. al Qattan could probably answer some of those questions, but he’s now thought to be hiding in Warsaw.

Ali Shabot, the commission’s spokesman, said investigators estimate at this point that corrupt officials took multimillions of dollars. “They are still investigating the cases,” Mr. Shabot said through an interpreter. “They don’t have a final number yet.”

Mr. Shabot and American officials say they think most of the money in question was stolen in 2003, when the CPA exercised few safeguards, and in 2004, when Interim Prime Minister Iyad Allawi ruled Iraq without the benefit of financial oversight laws that later became part of the new constitution in 2005.

Defense dollars wasted

It was Mr. al Qattan who negotiated contracts totaling hundreds of millions of dollars, according to the 32-page, English-translated report, a copy of which was obtained by The Washington Times.

The Iraqi audit of 2004-05 also said the Defense Ministry paid too much for a “rest house” for an army commander, complete with 24-karat gold-plated chandeliers. It said commanders signed for their men’s salaries and pocketed the cash. The ministry paid a middle man more than $1 million as a down payment for 20 armored BMWs and Land Cruisers. Auditors could not determine whether the cars were ever delivered.

The ministry would pay cash up front, then sign a contract and wait for the military equipment to arrive, if it ever did. Cash went to arms dealers in Poland, Ukraine, Jordan, Pakistan and elsewhere.

“We would like to state that taking out of cash money related to acquisition of materials abroad represents a flagrant violation of the state monetary policy,” the Supreme Board of Audit concluded. It told of “poor and organizational wording of the ministry’s contracts in which it was seen that the interests of the supplier were taken into account while the contracting rights of the ministry were not.”

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