Morning Report 2/8/05The Oil-for-Slush Scandal


Hundreds of millions in cash given to U.S. military commanders to hand out.

While U.S. soldiers in Iraq are so plagued by shortages of equipment that their parents are shipping armored vests to them, their commanders are riding around the desert handing out hundreds of millions of dollars from a slush fund that appears to be totally unregulated.

For now, the media are consumed with the oil-for-food scandal. And of course there are the familiar tales of war profiteering by various companies.

The slush fund scandal, revolving around something called the Commanders Emergency Response Program, is not exactly new, but more and more information is coming to light.

The program was designed to let military commanders on the ground launch local development projects and use cash to spread goodwill. Doug Struck of the Washington Post wrote about it last July, saying that “cash has become the U.S. military’s first line of defense in some parts of Iraq.” Struck’s story noted:

Even patrol leaders now carry envelopes of cash to spend in their areas. The money comes from brigade commanders, who get as much as $50,000 to $100,000 a month to distribute for local rehabilitation and emergency welfare projects through the Commanders Emergency Response Program.

There are few restrictions on the expenditures, and officers acknowledge they consider the money another weapon. The targets at which it is aimed are the restless legions of unemployed Iraqi men, many of them former soldiers, policemen and low-level members of the Baath Party of the ousted president, Saddam Hussein. They were put out of work when the U.S. administrator, L. Paul Bremer, ordered a de-Baathification of Iraq. U.S. soldiers say those men are vulnerable to entreaties to carry out an attack on the Americans for pay.

“I have met two guys now who say, ‘I don’t love you and I don’t hate you. But somebody’s offered me $200 to set up a mortar or a [roadside bomb], and there’s a bonus if we kill you,’ ” said Lieutenant Colonel Randall Potterf, the civil affairs officer for the Army’s 1st Infantry Division.

We’re talking about huge amounts of money overall that Jerry Bremer’s Coalition Provisional Authority (humorously acronymed “CPA”) didn’t account for. The Defense Department has authorized $300 million for the program for this fiscal year. Who keeps track of all this cash? No one. Struck’s story also noted:

Local commanders have the go-ahead to dish out tens, hundreds and thousands of dollars with little more paperwork than a signed receipt. Often, the cash is paid in return for a promise to perform a small community project, but it is also given to Iraqis to buy items they say are necessary.

Meanwhile, while this haphazard cash is being strewn around, Iraqi children are dying for want of medical care, as Christopher Bollyn points out in an American Free Press article. Bollyn notes that there are several unregulated slush funds containing billions of dollars:

A simple spread sheet of 35 rows lists how more than $11.3 billion of the fund had been disbursed by the CPA. The sheet reveals that the “Commanders Emergency Response Program” received $391 million of Iraqi money, the U.S. Army Corps of Engineers got another $367 million, and the CPA Front Office got $2.8 million etc. Details, dates and specifics are not provided.

There has been no monitoring or independent auditing of the fund until April 2004. Until that time disagreements between the CPA and the International Advisory and Monitoring Board (IAMB), an oversight body set up by the UN Security Council, prevented any outside audit of the DFI [Development Fund for Iraq].

Yeah, well, as I say, more and more of these shenanigans are coming to light as the probes go deeper.

The latest report, issued January 30, by Stuart Bowen, the inspector general who’s probing the former CPA, hammers at Bremer and other officials for not setting up controls to account for the billions of dollars they had their hands on.

The group that first glommed onto the scandal of how Bremer’s CPA was handling—or not handling—Iraq’s oil funds and other monies was Christian Aid. The hard-hitting British NGO not only comforts the afflicted but afflicts the comfortable. Reacting to Bowen’s latest report, Christian Aid writes:

An official U.S. audit has unearthed evidence of widespread corruption in postwar Iraq, finding that the occupying authorities failed to keep track of nearly $9 billion of Iraq’s oil and other revenues.

In October 2003, a Christian Aid report, Iraq: the missing billions, warned that at least $4 billion of Iraqi money earmarked for reconstruction had gone missing. At the time, this accusation was vigorously denied by the Coalition Provisional Authority.

Why this story has generated so little steam in the U.S. is beyond me. Here’s some more from Christian Aid:

The new Bowen report blamed the CPA for failing to keep track of the disbursement of development funds from Iraq’s oil revenues, the Oil for Food Program and seized assets. The report said “there was no assurance the funds were used for the purposes mandated.

It cited an Iraqi ministry that claimed to employ 8,206 guards, when there were in fact barely 600. At another Iraqi ministry, financial controls of a $435 million budget were left open to “fraud, kickbacks and misappropriation of funds,” the Bowen report said.

“It is clear that the monitoring and accounting systems were dysfunctional, and set a precedent for corruption that continues to this day,” said David Phillips, a former State Department adviser on Iraq. “The number is staggering but the pattern of cutting corners has been well known from the beginning, and there has been an awful lot of cash floating around.”

Bremer, of course, has strongly denied the allegations in the Bowen report. As probers like Bowen peer deeper into the Iraq misadventure, look for more on the various slush funds. At least $391 million has been given to U.S. military commanders in the “emergency response” program. Is there an accounting of the money? Not so far. Will there be? You may have to look very hard for stories about it in the U.S. press.

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