Outrageous: Baghdad Boondoggle

Iraqi swindlers are plundering American millions--while their own oil money flows.

At the peak of the Iraq war, with billions of U.S. dollars pouring into their country, a group of Iraqi men saw a way to get rich quick. They put up $2,000 in cash, formed a company named Al-Aian Al-Jareya, and used their connections at Iraq's defense ministry to win an $850 million military equipment contract.

Their company was a joke. But there was nothing funny about what happened next. Al-Aian Al-Jareya bilked the U.S.-funded Iraqi army out of millions by peddling old equipment at outrageously inflated prices. In just one example, Al-Aian Al-Jareya charged $4.5 million each for 64 Mi-8 military helicopters-three times the amount that they should have cost.

Almost everything the company delivered was dangerously faulty. According to Salam Adhoob, a former Iraqi corruption watchdog, an inspection of the merchandise found "four repainted defective helicopters that were more than 25 years old." He also recently told a Senate investigative committee that weapons and bulletproof vests provided by Al-Aian Al-Jareya were damaged goods. "And yet not one of these criminals has been held accountable by the U.S. or Iraqi government," he testified, not even the Iraqi defense ministry officials who allegedly skimmed millions off the top for themselves.

Six years after the war began, we're still learning about the great looting of American tax dollars in Iraq. Tens of billions have been stolen, wasted, or simply lost with almost no oversight or accountability. Now that Iraq is running an oil-fueled surplus of its own—as America spirals into an economic crisis—it's time to demand some money back.

Getting it won't be easy. Corruption in Iraq is a familiar tale. One 2005 report found that up to $8.8 billion in U.S. dollars meant to help rebuild the country had simply gone missing. But that revelation apparently did nothing to stop the rip-offs: A May 2008 government audit showed that $15 billion in Pentagon payments to contractors could not be accounted for. To hear Adhoob tell it, that's just the tip of the iceberg. He told the Senate committee about scores of "ghost projects" that had been funded, including a $24.4 million electricity venture in Iraq's northern Nineveh province that had been paid for but never built.

It gets worse. A former senior U.S. adviser to the Iraqi government testified that top Iraqi officials have collaborated with al Qaeda to steal Iraqi oil, selling it both for personal profit and to fund al Qaeda terrorists attacks. Said Adhoob, "I am convinced that American soldiers died because of this corruption."

Billions more of your money is on its way to Baghdad. And late last year, several top fraud monitors within the Iraqi government were fired, apparently for political reasons—making it easier for some people to help themselves. (Adhoob was not one of them; he had already fled the country, fearing for his life.)

So what can be done? Some cynics insist that corruption is now too deeply entrenched to root out. Still, the United States can hardly expect to leave behind a functioning Iraqi government if profiteering isn't exposed. The Obama administration should demand the reinstatement of fraud monitors in Baghdad. It should then push for a high-profile crackdown on those responsible for the looting of government coffers.

Back home, Congress should freeze the assets of those prosecuted for wrongdoing. And it should grant more resources to investigators like Stuart Bowen, the special inspector general for Iraq reconstruction, who has exposed and prosecuted several big corruption cases. The severity of the situation calls for a special congressional panel to investigate this plague as well.

Apart from tough laws and severe penalties, there needs to be adequate follow-up to make certain that perpetrators pay. Of the tiny number of officials in Iraq who have been prosecuted so far, many have quickly landed back on the street thanks to bribery and political connections. Some have even established cushy lives outside Iraq, funded with the money they stole. In one case, a former electricity minister accused of taking huge kickbacks and misspending millions hired private contractors to break him out of jail and help him flee the country. His new home? Chicago.

Maybe if Iraq had more of its own money in its treasury, officials in Baghdad would be less inclined to condone theft. In the past six years, Americans have spent $48 billion on reconstruction projects. Between 2005 and 2007, Iraq earned a whopping $90 billion in oil revenues, according to an August report by the nonpartisan Government Accountability Office. And yet Iraq has spent a mere 10 percent of this money on reconstruction (while U.S. billions have rolled in unabated). What's more, in 2007, the U.S. Treasury shelled out $435.6 million in interest payments to the Iraqi government for the $10 billion in surplus oil revenues it has stashed at the Federal Reserve Bank of New York.

As a stunned Sen. Carl Levin (D-MI) put it at one hearing last year, "What kind of an absurdity is it that we are paying for the reconstruction of Iraq if Iraqi oil sales … are going into foreign banks and not being used for reconstruction?"

It's time to demand Iraq spend more of their own cash on rebuilding and begin reimbursing us for out-and-out theft. It's time they stopped playing us for suckers.

Do More

• Stay informed. The special inspector general for Iraq reconstruction, Stuart Bowen, posts his audits, reports, and investigations.


• Be a watchdog. If you are aware of any Iraq-related corruption involving U.S. companies, you can report it anonymously to the Project on Government Oversight.


• Keep the pressure on. Call your congressional representatives and tell them not to let our tax dollars go to waste in Iraq.

From Reader's Digest - March 2009

 

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