U.S. hit for $8.8 billion lost in Iraq

So, Mr Bremer, where did all the money go? At the end of the Iraq war, vast sums of money were made available to the US-led provisional authorities, headed by Paul Bremer, to spend on rebuilding the country. By the time Bremer left the post eight months later, $8.8bn of that money had disappeared. Ed Harriman on the extraordinary scandal of Iraq's missing billions

Thursday July 7, 2005The Guardian When Paul Bremer, the American pro consul in Baghdad until June last year, arrived in Iraq soon after the official end of hostilities, there was $6bn left over from the UN Oil for Food Programme, as well as sequestered and frozen assets, and at least $10bn from resumed Iraqi oil exports. Under Security Council Resolution 1483, passed on May 22 2003, all these funds were transferred into a new account held at the Federal Reserve Bank in New York, called the Development Fund for Iraq (DFI), and intended to be spent by the Coalition Provisional Authority (CPA) "in a transparent manner ... for the benefit of the Iraqi people".

The US Congress also voted to spend $18.4bn of US taxpayers' money on the redevelopment of Iraq. By June 28 last year, however, when Bremer left Baghdad two days early to avoid possible attack on the way to the airport, his CPA had spent up to $20bn of Iraqi money, compared with $300m of US funds. The "reconstruction" of Iraq is the largest American-led occupation programme since the Marshall Plan - but the US government funded the Marshall Plan. Defence secretary Donald Rumsfeld and Paul Bremer have made sure that the reconstruction of Iraq is paid for by the "liberated" country, by the Iraqis themselves.

The CPA maintained one fund of nearly $600m cash for which there is no paperwork: $200m of it was kept in a room in one of Saddam's former palaces. The US soldier in charge used to keep the key to the room in his backpack, which he left on his desk when he popped out for lunch. Again, this is Iraqi money, not US funds.

The "financial irregularities" described in audit reports carried out by agencies of the American government and auditors working for the international community collectively give a detailed insight into the mentality of the American occupation authorities and the way they operated. Truckloads of dollars were handed out for which neither they nor the recipients felt they had to be accountable.

The auditors have so far referred more than a hundred contracts, involving billions of dollars paid to American personnel and corporations, for investigation and possible criminal prosecution. They have also discovered that $8.8bn that passed through the new Iraqi government ministries in Baghdad while Bremer was in charge is unaccounted for, with little prospect of finding out where it has gone. A further $3.4bn appropriated by Congress for Iraqi development has since been siphoned off to finance "security".

Although Bremer was expected to manage Iraqi funds in a transparent manner, it was only in October 2003, six months after the fall of Saddam, that an International Advisory and Monitoring Board (IAMB) was established to provide independent, international financial oversight of CPA spending. (This board includes representatives from the United Nations, the World Bank, the IMF and the Arab Fund for Economic and Social Development.)
The IAMB first spent months trying to find auditors acceptable to the US. The Bahrain office of KPMG was finally appointed in April 2004. It was stonewalled.

"KPMG has encountered resistance from CPA staff regarding the submission of information required to complete our procedures," they wrote in an interim report. "Staff have indicated ... that cooperation with KPMG's undertakings is given a low priority." KPMG had one meeting at the Iraqi Ministry of Finance; meetings at all the other ministries were repeatedly postponed. The auditors even had trouble getting passes to enter the Green Zone >>>continued

http://www.guardian.co.uk/Iraq/Story/0,2763,1522983,00.html