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When Robert Stein was hired to serve as a key administrator in Iraq for the U.S.-led Coalition Provisional Authority, apparently no one noticed he'd had a 1996 conviction for credit card fraud. And so Stein was assigned to dole out lucrative government contracts as part of the reconstruction meant to help bring democracy to Iraq and let U.S. troops come home quickly.
But Stein's interests lay elsewhere, specifically his bank account. According to a guilty plea he entered in federal court in February, Stein stole at least $2 million and bought (or accepted as bribes) luxury items like a Porsche, a Lexus, a Cessna airplane, and even diamond rings. Stein also admitted that he took sexual favors from women provided by Philip Bloom, a U.S. businessman to whom Stein funneled more than $8.6 million in contracts through a rigged bidding process. According to federal auditors, Bloom was paid to renovate a library and a police academy, but the work was either shoddy or not done at all.
Bloom is awaiting trial and his attorney declined to comment.
It's sickening to know that someone would put profit and pleasure ahead of the war effort while our troops and Iraqis are dying. But what's even more infuriating is the lack of oversight of a multibillion-dollar commitment. According to a 2005 report, there was no accurate accounting for about $9 billion spent early in the occupation. U.S. officials in Iraq have done a terrible job of auditing reconstruction dollars, the lion's share of which comes from taxpayers like you and me. And it's not just scheming contractors; Iraqis are skimming big bucks too. There are even reports that money is being diverted to fund the insurgency.
All of which extends our stay in Iraq. The longer Iraqis wait for restoration of electricity, a trained police force and safe roads, the longer we're stuck there trying to provide those services.
So who's to blame when huge piles of cash are missing, and guys like Stein are walking around with diamond rings? Well, you can take your pick. There are the greedy businessmen, Iraqis and Americans, who are ripping off the government; there are the bureaucrats who are abusing their power for personal profit; and there are U.S. officials who haven't kept close enough watch to stop all this from happening. It adds up to a huge headache for Stuart Bowen, the inspector general for Iraq reconstruction -- a man heading an office that didn't even exist for the first nine months of the war, and whose small staff is overwhelmed with investigations into kickbacks and corruption.
The climate for graft in Iraq couldn't be more perfect. Many deals in this chaotic country must be in cash. And there are huge wads of cash being thrown around -- literally. Frank Willis, a former U.S. official in Iraq, told Senators he had "played football" with plastic-wrapped packets of $100 bills. One soldier is suspected of gambling away up to $60,000 in reconstruction money.
Naturally, you can't manage a military occupation like a Fortune 500 company. L. Paul Bremer, the former U.S. administrator of Iraq, has argued that Iraq lacks modern accounting practices, and that his priority was to get projects and paychecks moving fast in a chaotic war zone. In those circumstances, the process was hardly going to be pristine.
Perhaps perfection wasn't a realistic goal, but common sense and observance of basic accounting principles should have been.
"I didn't see any oversight at all," says Willis. For instance, a January audit by Bowen's office said that U.S. military personnel in south-central Iraq didn't keep any record of the huge sums of cash they stored in a vault. By the time proper procedures were set up and enforced, "tens of millions of dollars had gone in and out of the vault without any tracking of who deposited or withdrew the money, and why it was taken out."
Incompetent accounting is bad enough, but in Iraq fraud and theft abound as well. Take the case of the security firm Custer Battles. According to a whistle-blower lawsuit, the company landed several big contracts, one of which was a $15 million deal to distribute the new Iraqi currency throughout the country.
As part of that project, Custer Battles acquired trucks to transport the money. Under a complex scheme using shell companies, Custer Battles leased the trucks to the provisional government, marking them up substantially. But many of these trucks that were so profitable for Custer Battles were flawed. According to the testimony of a retired U.S. general overseeing the program, one of them actually lost its brakes and crashed, injuring four of his men.
In March, a Virginia jury agreed with the whistle-blowers, finding that Custer Battles had committed fraud and ordered it to pay $10 million in fines and damages. We may never know, though, how much money was actually wasted: Even after Custer Battles came under suspicion, the company continued to bill the government for millions of dollars.
"It's a microcosm of what's happened in Iraq, which is that profiteering has severely undermined the war effort," says Alan Grayson, a lawyer for the Custer Battles whistle-blowers.
The feds may finally be waking up. Inspector General Bowen now has more than 50 employees in Baghdad, and a spokeswoman for the office, Kristine Belisle, says malfeasance has dropped as a result. Still, that's not a lot of people to monitor billions of dollars being passed around in a country the size of California. "Unfortunately, we can't have enough boots on the ground to look into every single project that's taking place," says Belisle. And that's just how war-zone sleazeballs like it.
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