Ass-reaming part II
Halliburton has frequently been questioned over its poor record keeping, and critics claim that it has a history of overcharging for its services. In May 1967, a company called RMK/BRJ could not account for $120 million in materiel sent to Vietnam and was investigated several times for overcharging on fuel. RMK/BRJ is now known as KBR or Kellogg, Brown and Root, the Halliburton subsidiary that has been the focus of congressional, Department of Defense, and General Accountability Office investigations. Defense Contract Audit Agency auditors have questioned Halliburton’s charges on a $1.6 billion fuel contract, claiming that the overcharges on the contract exceed $200 million. In one instance, the company charged the Army more than $27 million to transport $82,000 worth of fuel from Kuwait to Iraq. Halliburton has also been accused of billing the Army for 42,000 daily meals for soldiers, though it was only actually serving 14,000. In another operation, KBR purchased fleets of Mercedes trucks at $85,000 each to re-supply U.S. troops. The trucks carried no spare parts or even extra tires for the grueling high-speed run across the Kuwaiti and Iraqi deserts. When the trucks broke down on the highway, they were abandoned and destroyed rather than repaired.
Responding to complaints, Halliburton refused to permit independent auditing and inspected itself using so-called “Tiger Teams.” One such team stayed at the five-star Kuwait Kempinski Hotel while it was doing its audit, running up a bill of more than $1 million that was passed on to U.S. taxpayers.
Another U.S. firm well connected to the Bush White House, Custer Battles, has provided security services to the coalition, receiving $11 million in Iraqi funds including $4 million in cash in a sole-source contract to supply security at Baghdad International Airport. The company had never provided airport security before receiving the contract. It also received a $21 million no-bid contract to provide security for the exchange of Iraqi currency. It has been alleged that much of the currency “replaced” by Custer Battles has never been accounted for. The company also allegedly took over abandoned Iraqi-owned forklifts at the airport, repainted them, and then leased them back to the airport authority through a company set up in the Cayman Islands. Custer Battles reportedly set up a number of shell companies in offshore tax havens in Lebanon, Cyprus, and the Cayman Islands to handle the cash flow.
Two former company managers turned whistleblowers have charged that the company defrauded the U.S. government of at least $50 million. The Bush administration’s Justice Department has only reluctantly, and under pressure from a Newsweek exposé, supported the rights of the plaintiffs in the case. The White House has indicated that it is not interested in assisting other investigations of fraud in Iraqi contracting, preferring to regard the CPA as a “multinational entity” and thereby limiting its vulnerability in American courts.
Another American contractor, CACI International, which was involved in the Abu Ghraib interrogations, was accused by the GAO in April 2004 of having failed to keep records on hours of work that it was billing for and of routinely upgrading employee job descriptions so that more could be charged per employee per hour. Both are apparently common practices among contractors in Iraq, and audits routinely determine that there is little in the way of paperwork to support billings. The GAO report also confirms that many private security contractors in Iraq have been charging the U.S. government exorbitant fees for their services, frequently because the contracts allow security costs to be rolled into the overall cost of the contract without being itemized. In one case, contract security guards were effectively being billed at $33,000 per guard per month while the average rate for a security specialist worked out to between $13,000 and $20,000 per month.
The CPA also spread its largesse around the U.S. armed forces, distributing over $600 million in cash to four regional commanders to fund reconstruction projects as part of the Commanders’ Emergency Response Program. An audit of one region disclosed that 80 percent of the funds could not be accounted for, and more that $7 million in cash was missing. It is widely believed that many of the contracting agents working under the regional commands literally stole the money. In one reported instance, an American contracting officer doubled the price of a multimillion-dollar contract and brazenly explained that the extra money would be for his retirement fund.
Unfortunately, the corruption of the occupation outlived the departure of Paul Bremer and the demise of the CPA. A recent high-level investigation of the Iraqi interim government concluded that the corruption is now so pervasive as to be irreversible. One prominent businessman estimates that 95 percent of all business activity involves some form of bribery or kickback. The bureaucrats and fixers who live off of bribery are referred to by ordinary Iraqis as “Ali Babas,” named after the character in The Thousand and One Nights who was able to access riches from a treasure cave by saying “open sesame.” For the average Iraqi businessman, there was formerly only one hand out, that of Saddam’s designated minion. Now every hand is out. The educated and entrepreneurial are leaving the country in droves, as is most of the beleaguered Christian minority. Huge government appropriations are approved by Iraqi lawmakers and then simply disappear. Meanwhile, life for the average Iraqi does not improve, and oil production, water supplies, and electricity generation are all at lower levels than they were when the U.S. took control in 2003. The only thing that everyone knows is that all the money is gone and daily life in Iraq is worse than it was under Saddam Hussein.
The undocumented cash flow continued long after the CPA folded. Over $1.5 billion was disbursed to interim Iraqi ministries without any accounting, and more than $1 billion designated for provincial treasuries never made it out of Baghdad. More than $430 million in contracts issued by the Petroleum Ministry were unsupported by any documentation, and $8 billion were given to government ministries that had no financial controls in place. Nearly all of it disappeared, spent on “payroll,” wages for “ghost employees” in the Ministries of the Interior and Defense. In one case, an Army brigade receiving money to support 2,200 men was found to have fewer than 300 effectives. 602 actual guards at the Ministry of the Interior were billed as more than 8,200 for payroll purposes.
Iraqi Airways carried 2,400 employees even though it had not operated for over a year and had no planes. The airline itself was sold to an unidentified buyer without any paperwork to show for how much it was sold and what assets were included. It has been alleged that the buyer might well have been Pentagon favorite Ahmad Chalabi.
Nearly all payrolls in the national guard and national police were also inflated, leading to uncertainty over how large the security forces actually were—still an open question. Absentees from the nominal rolls of police and soldiers provided by government ministries are believed to number in the tens of thousands, and as the United States Congress has figured out, frequently cited figures on available trained manpower are largely imaginary.
Even the “coalition of the willing” partners have been quick to cash in. Polish helicopters purchased as part of a $300 million deal with arms maker Bumar Ltd. were found to be obsolete, largely unflyable, and were actually rejected by the Iraqis. Bullets purchased from Poland by the Defense Ministry cost three times the normal international price. Five Polish peacekeepers have been arrested for demanding $90,000 in bribes. Both British and American soldiers have also demanded bribes from shopkeepers and travelers.
In yet another instance of take-it-while-you-can, a senior Interior Ministry official flew to Beirut in a helicopter accompanied by $10 million in newly printed Iraqi dinars. He has yet to return. Interim Iraqi President Iyad Allawi’s Defense Minister Hazem Shaalan transferred $500 million to a bank account in Lebanon, allegedly to buy weapons, in a case that continues to be murky. Shaalan is reportedly vacationing abroad and has not returned to Iraq. A Bremer favorite at the Defense Ministry, Ziad Tareq Cattan, was responsible for a number of shady arms-procurement deals. A warrant has been issued for his arrest, an unusual occurrence, and he is avoiding detention by staying with family in Erbil in Kurdistan.
Countless billions will never be accounted for, and the full cost of corruption has yet to be tallied. Sources report that much of the money that was designated for the development of a national army and police force is actually going to units that are exclusively Kurd or Shi’ite in expectation of a day of reckoning over the country’s oil supplies. The Kurds have made no secret of their desire to continue their autonomy-bordering-on-independence and have stated that they regard Kirkuk as their own. The Shi’ites have possession of the oil-producing region to the south and are using their control of the Interior Ministry to fill police ranks with their own pro-Iranian Badr Brigade members as well as militiamen drawn from radical cleric Moqtada al-Sadr’s Mehdi Army. The Sunnis are the odd men out, virtually guaranteeing that, far from becoming the model democracy the U.S. set out to build, Iraq will descend deeper into chaos—aided in no small part by the culture of corruption we helped to fortify.
Philip Giraldi, a former CIA Officer, is a partner in Cannistraro Associates, an international security consultancy.
