September 12, 2005
I have come to the conclusion that even if I live to be 100, I will never be able to track down every Bush-connected profiteer involved in this phony war on terror scheme. According to a report released in March 2005, by Transparency International (TI), an international organization that focuses on matters of corruption, Iraq could become "the biggest corruption scandal in history."
"I can see all sorts of levels of corruption in Iraq," report contributor Reinoud Leenders told the Christian Science Monitor, "starting from petty officials asking for bribes to process a passport, way up to contractors delivering shoddy work and the kind of high-level corruption involving ministers and high officials handing out contracts to their friends and clients."
One of the top ten crooks, has got to be Ahmed Chalabi. A former banker in Jordon, Chalabi was forced to flee the country in 1989 before he could be arrested for his involvement in a $200 million financial scam. He was later tried and found guilty in his absence, and sentenced to 22 years in prison for more than 30 charges of theft, embezzlement, misuse of depositor funds, and currency speculation.
However, a little criminal history obviously didn't bother the Bush gang, because Chalabi was one of the first Iraqis flown into Iraq by the Pentagon during the 2003 invasion, supposedly so he could solidify his political base, which pretty much has proved to be non-existent.
By now, I cannot believe that anyone could possibly doubt Chalabi's role in the plot to take over Iraq. He was very much in the loop from day one, according to a March 17, 2005, report by BBC's Newsnight which said, "the Bush administration made plans for war and for Iraq's oil before the 9/11 attacks sparking a policy battle between neo-cons and Big Oil." Insiders told Newsnight that the planning began "within weeks" of Bush taking office.
An Iraqi-born oil industry consultant, Falah Aljibury, told Newsnight that he took part in secret meetings in California, Washington and the Middle East. He described a State Department plan for a forced coup d'etat. Aljibury said that he had even interviewed potential successors for Saddam on behalf of the Bush administration.
However, "The industry-favored plan was pushed aside by yet another secret plan," wrote Newnight, "drafted just before the invasion in 2003, which called for the sell-off of all of Iraq's oil fields."
The sell-off plan was given the OK at a secret meeting headed by none other that Ahmed Chalabi, shortly after the invasion of Baghdad, according to Robert Ebel, a former Energy and CIA oil analyst. He attended the London meeting at the request of the State Department, Ebel told Newsnight.
Falah Aljibury contends that it was the plan to sell off Iraq's oil, which ultimately led to the insurgency and attacks on US occupying forces. "We saw an increase in the bombing of oil facilities, pipelines, built on the premise that privatization is coming," he reported.
Of course it probably didn't help matters when the Iraqis were forced to watch as Halliburton's fortunes increased with money from the Development Fund for Iraq, through the award of 5 no-bid contracts, by the Coalition Provisional Authority, to the tune of $222 million, $325 million, $180 million, and a total of $194 million for the last two, which I just happened to find listed back in the Appendix to a July 28, 2004, report by the CPA Inspector General, titled "Comptroller Cash Management Controls over the Development Fund for Iraq."
The CPA Office of the Inspector General (CPA-IG) was established by Congress on November 6, 2003, to serve as “as an independent, objective evaluator of the operations and activities of the CPA,” according to the official web site. The CPA-IG reported directly to Administrator Paul Bremer, although it had independent authority to conduct audits and investigations without the Administrator’s approval.
A report in January 2005, by CPA Inspector General, Stuart Bowen, concluded that occupation authorities accounted poorly for $8.8 billion in Iraqi funds. "The CPA did not implement adequate financial controls," Bowen said.
That was definitely an understatement. A former CPA senior adviser, Franklin Willis, compared Iraq to the "Wild West," saying he delivered one $2 million payment to one company, Custer Battles, in bricks of cash.
"We called Mike Battles in and said, 'Bring a bag'," Willis said in testimony before Congress in February 2005.
Custer was another piece of work. Two former employees turned whistleblowers filed a law suit against the company with a complaint that said among other things, that Custer Battles double-billed for salaries and repainted the Iraqi Airways forklifts they found at the Baghdad airport, which Custer was hired to secure, and then leased them back to the US government. The two former employees, Pete Baldwin and Robert Isakson, claim Custer swindled the CPA out of about $50 million.
Bush was quick to criticize the UN over millions of dollars stolen from the Oil-for-Food Program under Saddam. But the CPA, as the successor to Oil-for-Food Program, aka Development Fund for Iraq, involves the swindling of billions of dollars.
And Custer represents only one crooked contractor. The investigation by the CPA-IG which resulted in the Comptroller Cash Management Report, determined that when it came to Iraqi cash, proper accountability was not maintained, physical security was inadequate, records were incomplete, and fund managers’ responsibilities were not assigned properly.
The auditors who participated in the investigation were unable to reconcile financial statements for the DFI, in large part due to the CPA’s decision to use cash basis accounting, which is more difficult to track than accrual accounting.
The investigators also found poor oversight of the fund managers who were responsible for transferring payments. While examining 15 disbursement locations, the auditors found that officials routinely failed to properly document advances to paying agents and receipts. For example, officials at 14 of the sites did not even maintain a register of cleared receipts. In examining 26 paid receipts, they found 25 had no supporting invoices, and all 26 were missing one or more of the required signatures.
They determined that of $400 million available for disbursement, as much as $50 million was handed out without proper receipts. “During the review, we found that there were no supporting receipts for some invoices; receipts were cleared with limited explanations of services or materiel received; and funds were disbursed for services that were contradictory to the allowable expenses,” the Inspector General said in the report.
Similarly, a United Nations sanctioned audit concluded that about half of the $5 billion in Iraq reconstruction funds could not be accounted for because of poor financial controls, according to the “Development Fund of Iraq-Report of Factual Findings in connection with Disbursements from January 1, 2004 to 28 June 2004, by the International Advisory and Monitoring Board, in September 2004
Until the summer of 2004, the CPA refused to release the names of companies that were awarded contracts paid for with Iraqi funds. Although information was available about US funded contracts, there was no public information available about companies paid with Iraqi money. In August 2004, information was finally made available for contracts valued at more than $5 million. But to this day, no details have been released about contracts worth less than $5 million.
An analysis of the data released in August 2004, showed that the CPA had awarded 85% of the contracts to US and UK firms. By contrast, Iraqi companies received a mere 2% of the contracts paid for with Iraqi funds.
A March 18, 2004 audit report by the Department of Defense Office of the Inspector General, titled, “Acquisition: Contracts Awarded by the Coalition Provisional Authority by the Defense Contracting Command-Washington," determined that the CPA and its predecessor, the Office for Reconstruction and Humanitarian Assistance (ORHA), had circumvented federal contracting procedures since the early days of the occupation.
The audit found that federal procurement rules were not followed in 22 of 24 contracts awarded by the Defense Contracting Command and that defense department personnel conducted “inadequate surveillance” on more than half of the contracts; did not “perform or support price reasonableness determinations;” and allowed activity that was “out-of-scope” of the original contracts.
The audit said that the DoD cannot be assured that it either “provided the best contracting solution or paid fair and reasonable prices for the goods and services purchased” during the reconstruction process.
However, not only did the CPA fail to follow DoD reporting rules, it failed to follow its own rules. CPA regulation Number 2 required the CPA to retain an independent certified public accounting firm to ensure that the Development Fund of Iraq was being used transparently and for the benefit of the Iraqi people.
But instead of hiring a certified public accounting firm, the CPA awarded a $1.4 million contract to North Star Consultants, a financial services firm, to review its internal controls for the DFI. In the end, neither North Star, nor any other firm, ever performed a review, because the Comptroller “verbally modified the contract and employed the contractor to primarily perform accounting tasks in the Comptroller’s office,” the report said.
In response to the report, the CPA claimed the reason that North Star did not perform a review was because the contract was not signed until shortly before the CPA was dissolved. Although it acknowledged that the contract “should have been modified to reflect the change,” the CPA did not bother to explain why it would award a contract to review its control of the DFI if the organization was about to be dissolved.
The truth is, that the CPA' shabby accounting procedures left all doors open to fraud, waste, bribery, and the misappropriation of funds, and nobody will ever be able to figure out what exactly happened to the Iraqi money.
But the fact remains that Halliburton received 60% of all contracts paid for with Iraqi money, even after it was proven time and time again that its projects involved fraud on every front, from paying over $6 million in kickbacks to a Kuwaiti contractor; to charging for three times as many meals as the company actually served to soldiers; to spending millions on laundry and monogrammed towels; to running up costs by driving empty trucks back and forth across Iraq; to leasing overpriced vehicles from Kuwaiti purchasing offices.
In 2003, Halliburton was delivering gasoline, through the Kuwait subcontractor, Altanmia Commercial Marketing Company, for an average price of $2.65 per gallon. In the spring of 2004, the contract was canceled and the new Iraqi Interim government gave an identical contract to Lloyd Owens International, a British company that manages 700 trucks from 7 separate subcontractors, which left Halliburton resentful toward the new company because of losing the contract.
LOI and its partners, Geotech Environmental Services of Kuwait, only charged 18 cents a gallon to haul the gasoline to the same sites.
An oversight hearing on "Waste, Fraud, and Abuse in U.S. Government Contracting in Iraq" was held on June 27, 2005, conducted by Senator Byron Dorgan of North Dakota, chairman of the Democratic Policy Committee.
Alan Waller, CEO of Lloyd Owens International, and his business partner, Gary Butters, flew to the US to testify at the hearing.
Waller said that over the past year while working in southern Iraq, he had encountered only one Halliburton worker and that every fuel station set up to provide gasoline to the Iraqis was in bad shape, including those that Halliburton was supposed to have repaired.
"As Lloyd-Owen delivers fuel to nearly every refinery or depot in southern Iraq, we find ourselves frequently encountering examples of poor equipment, no equipment or complaints from Iraqi staff," Waller said.
Waller and Butters told lawmakers at the hearing that every morning the drivers of 120 trucks who line up at the Kuwait-Iraq border to deliver gasoline have to cross the border at dawn because if they wait too long, KBR employees who patrol the border during the day, will subject them to far-reaching inspections and effectively shut down the operation.
The LOI also reported that on June 9th, 2005, a convoy of LOI trucks that was on its way to deliver construction materials for a Halliburton dining facility at an army base near Fallujah, came under attack and 3 drivers were presumed dead and six trucks had to be abandoned.
The surviving drivers limped to a military base, expecting to get help from the Halliburton staff running the facility, but instead got the cold shoulder. When the drivers tried to leave Iraq, they hit a roadside bomb and another man was killed.
Waller said Halliburton employees were instructed not to help the drivers and that the company had failed to warn LOI that two other convoy had been attacked in the same area the previous week.
At the start of the hearing, Congressman, Henry Waxman, (D-CA), introduced a new study based mostly on confidential reports originating from the Defense Contract Audit Agency (DCAA).
The study revealed that overall, Halliburton had received roughly 52% of the $25.4 billion that has been paid out to private contractors in Iraq. The 52% was divided between two different contracts. The first, known as LOGCAP, was to provide logistical support like cooking and cleaning for the troops, and was outsourced to civilian workers, for which Halliburton had been paid $8.6 billion.
On the LOGCAP contract, the company was paid for its actual costs, plus an additional commission of between 1 to 3 percent, depending on its performance.
The "Restoring Iraq Oil" contract covered the repair of Iraqi oil fields in the immediate aftermath of the 2003 invasion and imports of consumer fuel. The RIO contract is now complete and ended up costing $2.5 billion. A second RIO contract is now underway.
New evidence of fraud and contract abuse, was released right before the hearing and showed that KGB:
1) Had overcharged or presented questionable bills for close to $1.5 billion, almost four times the previous amount disclosed.
2) Had lost 12 pre-fabricated bases worth over $75 million which could have housed as many as 6,600 soldiers.
3) Had billed $152,000 to provide a movie library for 2,500 soldiers
4) Had billed inconsistently across the board. Eg, Video cassette players cost $300 in some instances, and $1000 in others; the company charged $2.31 for towels on one day and $5 for the same towels on another.
Rory Maryberry, a former Halliburton contractor, who worked at the dining facilities at the largest military base in Iraq, also testified at the hearing. Mayberry said the company charged the government for serving 20,000 meals a day when it was only serving 10,000 and that he was sent to a more dangerous post as punishment for speaking to auditors.
In a video-taped deposition testimony played at the hearing, Mayberry told how Halliburton would sometimes supply food that was more than a year past the expiration date or that had spoiled due to poor refrigeration. The few times the military refused to accept the spoiled food, Maryberry said truckers were told to deliver it to the next base in the hope that they would escape scrutiny.
He said that Halliburton was also supposed to serve 600 meals to Turkish and Filipino workers in Iraq, and "although KBR charged for this service, it didn't prepare the meals. Instead, these workers were given leftover food in boxes and garbage bags after the troops ate. Sometimes there were not leftovers to give them," he said.
According to Mayberry, "Iraqi drivers of food convoys that arrived on the base were not fed. They were given Meals Ready to Eat, with pork, which they couldn't eat for religious reasons."
"As a result, the drivers would raid the trucks for food," he said.
The star witness at the hearing was Bunnatine Greenhouse, a former math teacher, who moved up the latter to become the highest ranked civilian employee in the Army Corps of Engineers, responsible for signing off on Iraq contracts. She testified that her superiors forced her to sign no-bid contracts for Halliburton on the eve of the invasion of Iraq.
She filed a complaint against her superiors for harassment but the harassment has not ceased. She said Pentagon attorneys had to tried to talk her out of testifying at the hearing three days before the hearing date.
"I have agreed to voluntarily appear at this hearing in my personal capacity because I have exhausted all internal avenues to correct contracting abuse I observed while serving this great nation as the United States Army Corps of Engineers senior procurement executive," Greenhouse said. "In order to remain true to my oath of office, I must disclose to appropriate members of Congress serious and ongoing contract abuse I cannot address internally," she said.
"I can unequivocally state that the abuse related to contracts awarded to KBR represents the most blatant and improper contract abuse I have witnessed during the course of my professional career," she said in her testimony.
Members of Congress at the hearing reacted strongly to Greenhouse's revelations. "This testimony doesn't just call for Congressional oversight -- it screams for it," Senator Dorgan said.
Hover, I have not heard of any oversight hearings in response to Greenhouse's testimony. Instead, about a short time after the hearing I read the August 29, 2005 New York Times which said: "A top Army contracting official who criticized a large, noncompetitive contract with the Halliburton Company for work in Iraq was demoted Saturday for what the Army called poor job performance."
"The official, Bunnatine H. Greenhouse," the Times wrote, "has worked in military procurement for 20 years and for the past several years had been the chief overseer of contracts at the Army Corps of Engineers, the agency that has managed much of the reconstruction work in Iraq."
In fact, none of testimony by any witness phased the top brass at the Pentagon one bit. On May 1, 2005, the Army quietly awarded the company a new contract worth nearly $5 billion to continue on with its wonderful logistical support of the soldiers in Iraq, and last I knew, the contract is as good as money in the bank for KBR.
But then what the hell. People have been nagging Halliburton of war profiteering for over 40 years. In 1966, a Republican member of the House of Representatives from Illinois, demanded to know about the 30-year association between Halliburton Chairman George R. Brown and Lyndon B. Johnson. Brown had contributed $23,000 to the President’s Club while the Congress was considering whether to continue another multimillion-dollar Brown & Root Services project, according a report by the Center for Public Integrity, on August 2, 2001. “Why this huge contract has not been and is not now being adequately audited is beyond me. The potential for waste and profiteering under such a contract is substantial,” the indignant Republican Congressman, Donald Rumsfeld said.
In 1982, the GAO reported that the company lost accounting control of $120 million and that its security was so poor that millions of dollars worth of equipment had been stolen.
For those readers who may hoping that the millions of tax dollar spent on all the investigations and hearings discussed in this report might result in a turn-around by contractors in Iraq, here is a discomforting tidbit. According to the July 15, 2005 Boston Globe, "The federal government's chief investigator yesterday blasted the Pentagon for its 'atrocious financial management,'" saying the Defense Department was not able to give federal oversight officials a full accounting of the $1 billion being spent each week on the war in Iraq."
I'm not sure whether the Americans or the Iraqis are picking up the tab for the billion a week, but I think it must the Iraqis in light of the latest announcement by officials in Iraq. On September 9, 2005, the Guardian reported that, "Key rebuilding projects in Iraq are grinding to a halt because American money is running out and security has diverted funds intended for electricity, water and sanitation, according to US officials."
There are an estimated 20,000 foreign security contractors currently in Iraq, with some being paid more than $1,000 a day. According to IG, Stuart Bowen, $5 billion of the $18.4 billion appropriated by Congress for reconstruction, has been diverted to security.
A GAO report said that "attacks, threats and intimidation against project contractors and subcontractors" were to blame.
For those wondering what kind of bang the Iraqis got for their big bucks, some areas of Iraq still only get less than four hours of electricity a day. The estimated cost of providing enough electricity for the country by 2010 is $20 billion, according to the Guardian.
Water and sanitation projects have been hit hard. According to a report published early this month by the GAO, so far, $2.6 billion has been spent on water projects, but that amount equals only half the sum allocated for the work, because the remainder was spent for security and other uses.
A quarter of the $200 million worth of completed water projects handed over to the Iraqi authorities no longer work properly because of "looting, unreliable electricity or inadequate Iraqi staff and supplies," the GAO report said. There has be a surge in cases of dehydration and diarrhea among children and the elderly.
Shortages of fuel have produced lines a mile long at gas stations. Crude oil production is averaging around 2.2 million barrels a day, still below its pre-war peaks, according to the Brookings Institution in Washington.
As for Halliburton, it is currently facing a number of investigations for overcharging in Iraq, according to a report released in March 2005, by Rep Henry Waxman (D-CA).
But hey, what better choice could Bush have made than for Halliburton to get the $700 million reconstruction contract to repair the damage caused by Katrina? I mean, look what the firm has done for the Iraqis.
And just think how thankful the Iraqis must feel toward Bush, especially the ones who have managed to stay alive.