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Iraq's missing $1bn

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    What has happened to Iraq s missing $1bn? By Patrick Cockburn in Baghdad 19 September 2005 http://news.independent.co.uk/world/middle_east/article313538.ece
    Message 1 of 1 , Oct 4 12:37 PM
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      What has happened to Iraq's missing $1bn?
      By Patrick Cockburn in Baghdad
      19 September 2005

      One billion dollars has been plundered from Iraq's defence ministry in
      one of the largest thefts in history, The Independent can reveal,
      leaving the country's army to fight a savage insurgency with
      museum-piece weapons.

      The money, intended to train and equip an Iraqi army capable of
      bringing security to a country shattered by the US-led invasion and
      prolonged rebellion, was instead siphoned abroad in cash and has

      "It is possibly one of the largest thefts in history," Ali Allawi,
      Iraq's Finance Minister, told The Independent.

      "Huge amounts of money have disappeared. In return we got nothing but
      scraps of metal."

      The carefully planned theft has so weakened the army that it cannot
      hold Baghdad against insurgent attack without American military
      support, Iraqi officials say, making it difficult for the US to
      withdraw its 135,000- strong army from Iraq, as Washington says it
      wishes to do.

      Most of the money was supposedly spent buying arms from Poland and
      Pakistan. The contracts were peculiar in four ways. According to Mr
      Allawi, they were awarded without bidding, and were signed with a
      Baghdad-based company, and not directly with the foreign supplier. The
      money was paid up front, and, surprisingly for Iraq, it was paid at
      great speed out of the ministry's account with the Central Bank.
      Military equipment purchased in Poland included 28-year-old
      Soviet-made helicopters. The manufacturers said they should have been
      scrapped after 25 years of service. Armoured cars purchased by Iraq
      turned out to be so poorly made that even a bullet from an elderly
      AK-47 machine-gun could penetrate their armour. A shipment of the
      latest MP5 American machine-guns, at a cost of $3,500 (£1,900) each,
      consisted in reality of Egyptian copies worth only $200 a gun. Other
      armoured cars leaked so much oil that they had to be abandoned. A deal
      was struck to buy 7.62mm machine-gun bullets for 16 cents each,
      although they should have cost between 4 and 6 cents.

      Many Iraqi soldiers and police have died because they were not
      properly equipped. In Baghdad they often ride in civilian pick-up
      trucks vulnerable to gunfire, rocket- propelled grenades or roadside
      bombs. For months even men defusing bombs had no protection against
      blast because they worked without bullet-proof vests. These were often
      promised but never turned up.

      The Iraqi Board of Supreme Audit says in a report to the Iraqi
      government that US-appointed Iraqi officials in the defence ministry
      allegedly presided over these dubious transactions.

      Senior Iraqi officials now say they cannot understand how, if this is
      so, the disappearance of almost all the military procurement budget
      could have passed unnoticed by the US military in Baghdad and civilian
      advisers working in the defence ministry.

      Government officials in Baghdad even suggest that the skill with which
      the robbery was organised suggests that the Iraqis involved were only
      front men, and "rogue elements" within the US military or intelligence
      services may have played a decisive role behind the scenes.

      Given that building up an Iraqi army to replace American and British
      troops is a priority for Washington and London, the failure to notice
      that so much money was being siphoned off at the very least argues a
      high degree of negligence on the part of US officials and officers in

      The report of the Board of Supreme Audit on the defence ministry
      contracts was presented to the office of Ibrahim al-Jaafari, the Prime
      Minister, in May. But the extent of the losses has become apparent
      only gradually. The sum missing was first reported as $300m and then
      $500m, but in fact it is at least twice as large. "If you compare the
      amount that was allegedly stolen of about $1bn compared with the
      budget of the ministry of defence, it is nearly 100 per cent of the
      ministry's [procurement] budget that has gone Awol," said Mr Allawi.

      The money missing from all ministries under the interim Iraqi
      government appointed by the US in June 2004 may turn out to be close
      to $2bn. Of a military procurement budget of $1.3bn, some $200m may
      have been spent on usable equipment, though this is a charitable view,
      say officials. As a result the Iraqi army has had to rely on cast-offs
      from the US military, and even these have been slow in coming.

      Mr Allawi says a further $500m to $600m has allegedly disappeared from
      the electricity, transport, interior and other ministries. This helps
      to explain why the supply of electricity in Baghdad has been so poor
      since the fall of Saddam Hussein 29 months ago despite claims by the
      US and subsequent Iraqi governments that they are doing everything to
      improve power generation.

      The sum missing over an eight-month period in 2004 and 2005 is the
      equivalent of the $1.8bn that Saddam allegedly received in kick- backs
      under the UN's oil-for-food programme between 1997 and 2003. The UN
      was pilloried for not stopping this corruption. The US military is
      likely to be criticised over the latest scandal because it was far
      better placed than the UN to monitor corruption.

      The fraud took place between 28 June 2004 and 28 February this year
      under the government of Iyad Allawi, who was interim prime minister.
      His ministers were appointed by the US envoy Robert Blackwell and his
      UN counterpart, Lakhdar Brahimi.

      Among those whom the US promoted was a man who was previously a small
      businessman in London before the war, called Hazem Shaalan, who became
      Defence Minister.

      Mr Shalaan says that Paul Bremer, then US viceroy in Iraq, signed off
      the appointment of Ziyad Cattan as the defence ministry's procurement
      chief. Mr Cattan, of joint Polish-Iraqi nationality, spent 27 years in
      Europe, returning to Iraq two days before the war in 2003. He was
      hired by the US-led Coalition Provisional Authority and became a
      district councillor before moving to the defence ministry.

      For eight months the ministry spent money without restraint. Contracts
      worth more than $5m should have been reviewed by a cabinet committee,
      but Mr Shalaan asked for and received from the cabinet an exemption
      for the defence ministry. Missions abroad to acquire arms were
      generally led by Mr Cattan. Contracts for large sums were short
      scribbles on a single piece of paper. Auditors have had difficulty
      working out with whom Iraq has a contract in Pakistan.

      Authorities in Baghdad have issued an arrest warrant for Mr Cattan.
      Neither he nor Mr Shalaan, both believed to be in Jordan, could be
      reached for further comment. Mr Bremer says he has never heard of Mr



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