Fraud and corruption
Forget
the UN. The US occupation regime helped itself to $8.8 bn of mostly Iraqi money
in just 14 months
George Monbiot
Tuesday February 8, 2005
Guardian
The Republican senators who have devoted their careers
to mauling the United Nations are seldom accused of shyness. But they went
strangely quiet on Thursday. Henry Hyde became Henry Jekyll. Norm Coleman's
mustard turned to honey. Convinced that the UN is a conspiracy against the
sovereignty of the United States, they had been ready to launch the attack
which would have toppled the hated Kofi Annan and destroyed his organisation. A
report by Paul Volcker, the former chairman of the US federal reserve, was
meant to have proved that, as a result of corruption within the UN's oil-for-food
programme, Saddam Hussein was able to sustain his regime by diverting oil
revenues into his own hands. But Volcker came up with something else.
"The major source of external financial resources to the Iraqi
regime," he reported, "resulted from sanctions violations outside the
[oil-for-food] programme's framework." These violations consisted of
"illicit sales" of oil by the Iraqi regime to Turkey and Jordan. The
members of the UN security council, including the United States, knew about them
but did nothing. "United States law requires that assistance programmes to
countries in violation of UN sanctions be ended unless continuation is
determined to be in the national interest. Such determinations were provided by
successive United States administrations."
The government of the US, in other words, though it had been informed
about a smuggling operation which brought Saddam Hussein's regime some $4.6bn,
decided to let it continue. It did so because it deemed the smuggling to be in
its national interest, as it helped friendly countries (Turkey and Jordan)
evade the sanctions on Iraq. The biggest source of illegal funds to Saddam
Hussein was approved not by officials of the UN but by officials in the US.
Strange to relate, neither Mr Hyde nor Mr Coleman have yet been bellyaching
about it. But this isn't the half of it.
It is true that the UN's auditing should have been better. Some of the
oil-for-food money found its way into Saddam Hussein's hands. One of its
officials, with the help of a British diplomat, helped to ensure that a
contract went to a British firm, rather than a French one. The most serious
case involves an official called Benon Sevan, who is alleged to have channelled
Iraqi oil into a company he favoured, and who might have received $160,000 in return.
Kofi Annan, the UN secretary general, has taken disciplinary action against
both men, and promised to strip them of diplomatic immunity if they are
charged. There could scarcely be a starker contrast to the way the US has
handled the far graver allegations against its own officials.
Four days before Volcker reported his findings about Saddam Hussein, the
US inspector general for Iraq reconstruction published a report about the
Coalition Provisional Authority (CPA) - the US agency which governed Iraq between
April 2003 and June 2004. The inspector general's job is to make sure that the
money the authority spent was properly accounted for. It wasn't. In just 14
months, $8.8bn went absent without leave. This is more than Mobutu Sese Seko
managed to steal in 32 years of looting Zaire. It is 55,000 times as much as Mr
Sevan is alleged to have been paid.
The authority, the inspector general found, was "burdened by severe
inefficiencies and poor management". This is kind. Other investigations
suggest that it was also burdened by false accounting, fraud and corruption.
Last week a British adviser to the Iraqi Governing Council told the
BBC's File on Four programme that officials in the CPA were demanding bribes of
up to $300,000 in return for awarding contracts. Iraqi money seized by US
forces simply disappeared. Some $800m was handed out to US commanders without
being counted or even weighed. A further $1.4bn was flown from Baghdad to the
Kurdish regional government in the town of Irbil, and has not been seen since.
Contracts to US companies were awarded by the CPA without any financial
safeguards. They were issued without competition, in the form of
"cost-plus" deals. This means that the companies were paid for the
expenses they incurred, plus a percentage of those expenses in the form of
profit. They had a powerful incentive, in other words, to spend as much money
as possible. As a result, the authority appears to have obtained appalling
value for money. Auditors at the Pentagon, for example, allege that, in the
course of just one contract, a subsidiary of Halliburton overcharged it for
imported fuel by $61m. This appears to have been officially sanctioned. In
November, the New York Times obtained a letter from an officer in the US Army
Corps of Engineers insisting that she would not "succumb to the political
pressures from the ... US embassy to go against my integrity and pay a higher
price for fuel than necessary". She was overruled by her superiors, who
issued a memo insisting that the prices the company was charging were
"fair and reasonable", and that it wouldn't be asked to provide the
figures required to justify them.
Other companies appear to have charged the authority for work they never
did, or to have paid subcontractors to do it for them for a fraction of what
they were paid by the CPA. Yet, even when confronted by cast-iron evidence of
malfeasance, the authority kept employing them. When the inspector general
recommended that the US army withhold payments from companies which appear to
have overcharged it, it ignored him. No one has been charged or punished. The
US department of justice refuses to assist the whistle-blowers who are taking
these companies to court.
What makes all this so serious is that more than half the money the CPA
was giving away did not belong to the US government but to the people of Iraq.
Most of it was generated by the coalition's sales of oil. If you think the UN's
oil-for-food programme was leaky, take a look at the CPA's
oil-for-reconstruction scheme. Throughout the entire period of CPA rule, there
was no metering of the oil passing through Iraq's pipelines, which means that
there was no way of telling how much of the country's wealth the authority was
extracting, or whether it was paying a fair price for it. The CPA, according to
the international monitoring body charged with auditing it, was also
"unable to estimate the amount of petroleum ... that was smuggled".
The authority was plainly breaching UN resolutions. As Christian Aid
points out, the CPA's distribution of Iraq's money was supposed to have been
subject to international oversight from the beginning. But no auditors were
appointed until April 2004 - just two months before the CPA's mandate ran out.
Even then, they had no power to hold it to account or even to ask it to
cooperate. But enough information leaked out to suggest that $500m of Iraqi oil
money might have been "diverted" (a polite word for nicked) to help
pay for the military occupation.
I hope that Messrs Hyde and Coleman won't stop asking whether Iraqi oil
money has been properly spent. But perhaps we shouldn't be surprised if their
agreeable silence persists.
http://www.guardian.co.uk/print/0,3858,5121725-103677,00.html