Corruption in Iraq under US-led CPA may dwarf UN oil-for-food scandal.

Christian Science Monitor
April 7, 2005
By Tom Regan

A former senior advisor to the US-led Coalition Provisional Authority (CPA), which ran Iraq until the election of an interim Iraq government last January, says that the US government's refusal to prosecute US firms accused of corruption in Iraq is turning the country into a "free fraud zone."

Newsweek reported earlier this week that Frank Willis compared Iraq to the "wild west," and that with only $4.1 billion of the $18.7 billion that the US government set aside for the reconstruction of Iraq having been spent, the lack of action on the part of the government means "the corruption will only get worse."

More than US money is at stake. The administration has harshly criticized the United Nations over hundreds of millions stolen from the Oil-for-Food Program under Saddam [Hussein]. But the successor to Oil-for-Food created under the occupation, called the Development Fund for Iraq, could involve billions of potentially misused dollars.

In late March, the New Standard reported, the annual Global Corruption Report issued by the "corruption watchdog," Transparency International (TI), heavily criticized the US for "mismanaging" Iraq's oil revenues and "for using faulty procedures for awarding reconstruction contracts."

The report also criticizes efforts to rapidly privatize Iraqi assets and industries as a means of reducing the country’s debt. TI warns that unless immediate corrective measures are taken, Iraq’s reconstruction could become 'the biggest corruption scandal in history.'

The BBC reported that a UN report that came out in January also criticized the US as being a "poor role model" in "keeping corruption at bay."

The Christian Science Monitor reported on other allegations of corrpution in Iraq leveled against companies, including a "report by special inspector Stuart Bowen [which] found that $8.8 billion dollars had been disbursed from Iraqi oil revenue by US administrators to Iraqi ministries without proper accounting."

Meanwhile the Washington Post reported recently that both the Clinton and George W. Bush administrations had long known that monies used in the in the UN oil-for-food program were lining the pockets of Saddam Hussein, and did little to stop it.

CNN reported in February that "unclassified State Department documents sent to congressional committees with oversight of US foreign policy" show that the US actually condoned Jordan and Turkey breaking the UN sanctions against Iraq.

Rep. Robert Menendez, a New Jersey Democrat on the House International Relations Committee, one of five panels probing the oil-for-food program, told CNN the United States was 'complicit in undermining' the UN sanctions on Iraq.

"How is it that you stand on a moral footing to go after the UN when they're responsible for 15 percent maybe of the ill-gotten gains, and we were part and complicit of him getting 85 percent of the money?" Menendez asked.

One of the corruption cases that has drawn the most attention has been the attempts by two former employees of Custer Battles, a "private security company that was one of the highest-profile firms operating in Iraq" to sue the company on behalf of the US government. The whistler-blowers allege that the company and founders Mike Battles and Scott Custer, set up "shell companies in the Cayman Islands to falsely bill the government on two Iraq contracts."

The Washington Post reported last Friday that the Justice Department gave "strong support" to the men suing the company, "concluding that the company can be held liable for allegedly defrauding authorities in Iraq of tens of millions of dollars." Twice before the US governmment had declined to participate in the case when asked to do so by lawyers for the plaintiffs.

The judge, however, had asked the Justice Department "Does federal fraud law apply when the contract was administered by the Coalition Provisional Authority, which governed Iraq for a year after the US invasion?"

Newsweek reported that lawyers for Custer Battles, and until last week, the Bush administration, had argued the CPA was an "international authority" and thus US laws could not be used.

It [the US government] has argued privately that the occupation government, known as the Coalition Provisional Authority, was a multinational institution, not an arm of the US government. So the US government was not technically defrauded. Lawyers for the whistle-blowers point out, however, that President George W. Bush signed a 2003 law authorizing $18.7 billion to go to US authorities in Iraq, including the CPA, 'as an entity of the United States government.' And several contracts with Custer Battles refer to the other party as 'the United States of America.'

Max Boot, senior fellow at the Council on Foreign Relations, writes in the Los Angeles Times, the heavy use of contractors by the Bush administration not only lead to corruption problems, but is impeding the US military's progress in Iraq.

Peter W. Singer, a fellow at the Brookings Institution and author of 'Corporate Warriors,' estimates that there are 20,000 to 30,000 civilians in Iraq performing traditional military functions, from maintaining weapons systems to guarding supply convoys. If you add foreigners involved in reconstruction and oil work, the total soars to 50,000 to 75,000.

To put this into perspective: All of Washington's allies combined account for 23,000 troops in Iraq. In the latest issue of Foreign Affairs, Singer quips that "President George W. Bush's 'coalition of the willing' might thus be more aptly described as the 'coalition of the billing.' "

And the corruption problems go far beyond US contractors and other international firms. Reuters reported in March that one of the biggest problems facing the establishment of a legitimate government in Iraq is the corruption rampant in many Iraq government departments.

Radhi Hamza al-Radhi, head of the Commission on Public Integrity (CPI), an agency set up by the CPA to fight fraud committed by Iraqis, said that he faces many obstacles to fighting corruption in Iraq, including pressure from government officials to not work so hard.

"Our work is new in Iraq and being an observer is not welcomed by many. We were asked many times by the government via official letters or phone calls not to speak to the media or not to speak to ministers. There were too many cases of 'Don't...'."

Copyright © 2005 The Christian Science Monitor

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