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The missing billions – the story that no one ever really cared to follow to its conclusion. Why? I could probably make a pretty fair case that it’s a function of racism – most of the money wasn’t American taxpayer cash; it was Iraqi money that was held in the Federal Reserve after the US decided that Saddam was a despot and garnisheed everything possible from the Iraqi government. When it is only money from the Iraqi people, who fuckin’ cares, eh?

Blood Money, Christian Miller’s book about this was published in August 2006, and everyone ignored it. The Vanity Fair article below made the airwaves in October 2007. And everyone ignored it. And it is clear that the rudiments of the blatant theft were already known as early as 2004 (if not earlier). What conceivable reason would anyone have for believing that this new investigation will somehow make a difference? Fools errands.

Richard Jehn / The Rag Blog

Dale C. Stoffel, an American contractor in Iraq, described cash delivered in pizza boxes and payoffs dropped in paper sacks. Photo: courtesy David Stoffel.
Inquiry on Graft in Iraq Focuses on U.S. Officers
By James Glanz, C.J. Chivers and William K. Rashbaum / February 14, 2009

Federal authorities examining the early, chaotic days of the $125 billion American-led effort to rebuild Iraq have significantly broadened their inquiry to include senior American military officers who oversaw the program, according to interviews with senior government officials and court documents.

Court records show that last month investigators subpoenaed the personal bank records of Col. Anthony B. Bell, who is now retired from the Army but who was in charge of reconstruction contracting in Iraq in 2003 and 2004 when the small operation grew into a frenzied attempt to remake the country’s broken infrastructure. In addition, investigators are examining the activities of Lt. Col. Ronald W. Hirtle of the Air Force, who was a senior contracting officer in Baghdad in 2004, according to two federal officials involved in the inquiry.

It is not clear what specific evidence exists against the two men, and both said they had nothing to hide from investigators. Yet officials say that several criminal cases over the past few years point to widespread corruption in the operation the men helped to run. As part of the inquiry, the authorities are taking a fresh look at information given to them by Dale C. Stoffel, an American arms dealer and contractor who was killed in Iraq in late 2004.

Before he was shot on a road north of Baghdad, Mr. Stoffel drew a portrait worthy of a pulp crime novel: tens of thousands of dollars stuffed into pizza boxes and delivered surreptitiously to the American contracting offices in Baghdad, and payoffs made in paper sacks that were scattered in “dead drops” around the Green Zone, the nerve center of the United States government’s presence in Iraq, two senior federal officials said.

Mr. Stoffel, who gave investigators information about the office where Colonel Bell and Colonel Hirtle worked, was deemed credible enough that he was granted limited immunity from prosecution in exchange for his information, according to government documents obtained by The New York Times and interviews with officials and Mr. Stoffel’s lawyer, John H. Quinn Jr. There is no evidence that his death was related to his allegations of corruption.

Prosecutors have won 35 convictions on cases related to reconstruction in Iraq, yet most of them involved private contractors or midlevel officials. The current inquiry is aiming at higher-level officials, according to investigators involved in the case, and is also trying to determine if there are connections between those officials and figures in the other cases. Although Colonel Bell and Colonel Hirtle were military officers, they worked in a civilian contracting office.

“These long-running investigations continue to mature and expand, embracing a wider array of potential suspects,” a federal investigator said.

The reconstruction effort, intended to improve services and convince Iraqis of American good will, largely managed to do neither. The wider investigation raises the question of whether American corruption was a primary factor in damaging an effort whose failures have been ascribed to poor planning and unforeseen violence.

The investigations, which are being conducted by the Special Inspector General for Iraq Reconstruction, the Justice Department, the Army’s Criminal Investigation Command and other federal agencies, cover a period when millions of dollars in cash, often in stacks of shrink-wrapped bricks of $100 bills, were dispensed from a loosely guarded safe in the basement of one of Saddam Hussein’s former palaces.

Former American officials describe payments to local contractors from huge sums of cash dumped onto tables and stuffed into sacks as if it were Halloween candy.

“You had no oversight, chaos and breathtaking sums of money,” said Senator Claire McCaskill, a Missouri Democrat who helped create the Wartime Contracting Commission, an oversight board. “And over all of that was the notion that failure was O.K. It doesn’t get any better for criminals than that set of circumstances.”

In one case of graft from that period, Maj. John L. Cockerham of the Army pleaded guilty to accepting nearly $10 million in bribes as a contracting officer for the Iraq war and other military efforts from 2004 to 2007, when he was arrested. Major Cockerham’s wife has also pleaded guilty, as have several other contracting officers.

In Major Cockerham’s private notebooks, Colonel Bell is identified as a possible recipient of an enormous bribe as recently as 2006, the two senior federal officials said. It is unclear whether the bribe was actually offered or paid.

When asked if Major Cockerham had ever offered him a bribe, Colonel Bell said in a telephone interview, “I think we’ll end the discussion,” but stayed on the line. Colonel Bell’s response was equally terse when asked if he thought that Colonel Hirtle had carried out his duties properly: “No discussion on that at this time.”

The current focus on Colonel Bell is revealed in federal court papers filed in Georgia, where he has a residence and is trying to quash a subpoena of his bank records by the Special Inspector General. The papers, dated Jan. 27, indicate that Colonel Bell’s records were sought in connection with an investigation of bribery, kickbacks and fraud.

Colonel Bell said that he sought to quash the subpoena not because he had anything to hide, but because the document contained inaccuracies. “If they clean it up, I won’t have a problem,” he said, suggesting that he would cooperate. He declined to detail the inaccuracies, although his handwritten notations on the court papers indicated that the home address and the bank account number on the subpoena were incorrect.

Asked whether he knew why the records had been subpoenaed, he said, “That is not for me to direct what they’re going to do.”

Another case that has raised investigators’ suspicions about top contracting officials involves a company, variously known as American Logistics Services and Lee Dynamics International, that repeatedly won construction contracts for millions of dollars despite a dismal track record.

One contracting official committed suicide in 2006 a day after admitting to investigators that she had taken $225,000 in bribes to rig bids in favor of the company. At least two other former contracting officials in Iraq have admitted to taking bribes in the case and are cooperating with investigators. It is unknown what information they may have provided on Colonel Hirtle, a high-ranking contracting official in Baghdad. But Colonel Hirtle signed the company’s first major contract in Iraq in May 2004, a roughly $10 million deal to build arms warehouses for the fledgling Iraqi security forces, according to a copy of the contract and federal officials. The warehouses went largely unbuilt. Investigators said the inquiry into the Lee case was continuing.

“I can’t talk to any media right now, because I don’t know anything about this and I’ve got to do some research on it,” Colonel Hirtle said when reached by phone in California, before abruptly hanging up.

The next day, Colonel Hirtle said he had been “taken aback” by questions about an investigation involving himself. “I try to keep things as transparent and aboveboard as I can,” he said, referring questions to an Air Force public affairs office.

The Air Force referred questions to the United States Army Criminal Investigation Command, where a spokesman, Christopher Grey, said the command “does not discuss or confirm the names of persons who may or may not be under investigation.”

An extraordinary element of the current investigation is a voice from beyond the grave: that of Mr. Stoffel, who died with a British associate, Joseph J. Wemple, in a burst of automatic gunfire on a dangerous highway north of Baghdad in December 2004 as he returned from a business meeting at a nearby military base.

A previously unknown Iraqi group claimed responsibility for the killings, which remain unsolved. The men may simply have been unlucky enough to be engulfed in the violence that was then just beginning to grip the country.

On May 20, 2004, a little more than a week after Colonel Hirtle signed the Lee company’s warehouse contract, Mr. Stoffel was granted limited immunity by the Special Inspector General for what amounted to a whistle-blower’s complaint. Copies of the immunity document were obtained from two former business associates of Mr. Stoffel.

The picture of corruption Mr. Stoffel painted, including the clandestine delivery of bribes, was “like a classic New York scenario,” said a former business associate.

“Fifty thousand dollars delivered in pizza boxes to secure contracts,” said the former associate, a consultant in the arms business with whom Mr. Stoffel sometimes worked in the former Eastern bloc. “Of course, it just looked like a pizza delivery.”

It was Mr. Stoffel’s experience with Eastern bloc weaponry that helped him win a contract to refurbish Iraq’s Soviet-era tanks as part of a program to rebuild Iraq’s armed forces. Mr. Stoffel’s company remains locked in a dispute over payments it says are owed by the Iraqi government.

His problems with American officials were what led him to make the accusations of corruption. Mr. Stoffel, the associate said, “was trying to do this as quietly as possible, to blow the whistle.”

“He knew enough about what was going on, and he was getting pretty frustrated.”

Source / New York Times

And lest we forget, this article from Vanity Fair, October 2007:

Illustration by John Blackford. By Peter van Agtmael/Polaris (desert), Konstantin Inozemtsev/Alamy (money).
Billions over Baghdad
By Donald L. Barlett and James B. Steele / October 2007

Between April 2003 and June 2004, $12 billion in U.S. currency — much of it belonging to the Iraqi people — was shipped from the Federal Reserve to Baghdad, where it was dispensed by the Coalition Provisional Authority. Some of the cash went to pay for projects and keep ministries afloat, but, incredibly, at least $9 billion has gone missing, unaccounted for, in a frenzy of mismanagement and greed. Following a trail that leads from a safe in one of Saddam’s palaces to a house near San Diego, to a P.O. box in the Bahamas, the authors discover just how little anyone cared about how the money was handled.

Hidden in plain sight, 10 miles west of Manhattan, amid a suburban community of middle-class homes and small businesses, stands a fortress-like building shielded by big trees and lush plantings behind an iron fence. The steel-gray structure, in East Rutherford, New Jersey, is all but invisible to the thousands of commuters who whiz by every day on Route 17. Even if they noticed it, they would scarcely guess that it is the largest repository of American currency in the world.

Officially, 100 Orchard Street is referred to by the acronym eroc, for the East Rutherford Operations Center of the Federal Reserve Bank of New York. The brains of the New York Fed may lie in Manhattan, but xeroc is the beating heart of its operations—a secretive, heavily guarded compound where the bank processes checks, makes wire transfers, and receives and ships out its most precious commodity: new and used paper money.

Pallets of American currency arriving in Baghdad.

On Tuesday, June 22, 2004, a tractor-trailer truck turned off Route 17 onto Orchard Street, stopped at a guard station for clearance, and then entered the eroc compound. What happened next would have been the stuff of routine—procedures followed countless times. Inside an immense three-story cavern known as the currency vault, the truck’s next cargo was made ready for shipment. With storage space to rival a Wal-Mart’s, the currency vault can reportedly hold upwards of $60 billion in cash. Human beings don’t perform many functions inside the vault, and few are allowed in; a robotic system, immune to human temptation, handles everything. On that Tuesday in June the machines were especially busy. Though accustomed to receiving and shipping large quantities of cash, the vault had never before processed a single order of this magnitude: $2.4 billion in $100 bills.

Under the watchful eye of bank employees in a glass-enclosed control room, and under the even steadier gaze of a video surveillance system, pallets of shrink-wrapped bills were lifted out of currency bays by unmanned “storage and retrieval vehicles” and loaded onto conveyors that transported the 24 million bills, sorted into “bricks,” to the waiting trailer. No human being would have touched this cargo, which is how the Fed wants it: the bank aims to “minimize the handling of currency by eroc employees and create an audit trail of all currency movement from initial receipt through final disposition.”

Forty pallets of cash, weighing 30 tons, were loaded that day. The tractor-trailer turned back onto Route 17 and after three miles merged onto a southbound lane of the New Jersey Turnpike, looking like any other big rig on a busy highway. Hours later the truck arrived at Andrews Air Force Base, near Washington, D.C. There the seals on the truck were broken, and the cash was off-loaded and counted by Treasury Department personnel. The money was transferred to a C-130 transport plane. The next day, it arrived in Baghdad.

That transfer of cash to Iraq was the largest one-day shipment of currency in the history of the New York Fed. It was not, however, the first such shipment of cash to Iraq. Beginning soon after the invasion and continuing for more than a year, $12 billion in U.S. currency was airlifted to Baghdad, ostensibly as a stopgap measure to help run the Iraqi government and pay for basic services until a new Iraqi currency could be put into people’s hands. In effect, the entire nation of Iraq needed walking-around money, and Washington mobilized to provide it.

What Washington did not do was mobilize to keep track of it. By all accounts, the New York Fed and the Treasury Department exercised strict surveillance and control over all of this money while it was on American soil. But after the money was delivered to Iraq, oversight and control evaporated. Of the $12 billion in U.S. banknotes delivered to Iraq in 2003 and 2004, at least $9 billion cannot be accounted for. A portion of that money may have been spent wisely and honestly; much of it probably wasn’t. Some of it was stolen.

Once the money arrived in Iraq it entered a free-for-all environment where virtually anyone with fingers could take some of it. Moreover, the company that was hired to keep tabs on the outflow of money existed mainly on paper. Based in a private home in San Diego, it was a shell corporation with no certified public accountants. Its address of record is a post-office box in the Bahamas, where it is legally incorporated. That post-office box has been associated with shadowy offshore activities.

Coalition of the Billing

The first shipment of cash to Iraq took place on April 11, 2003—it consisted of $20 million in $1, $5, and $10 bills. It was arranged in small bills on the theory that these could quickly be circulated into the Iraqi economy “to prevent a monetary and financial collapse,” as one former Treasury official put it. Those were the days when American officials worried that the gravest threat facing Iraq might be low-grade civilian unrest in Baghdad. They didn’t have a clue as to the power of the insurgency that was to come. The initial $20 million came exclusively from Iraqi assets that had been frozen in U.S. banks as long ago as the Gulf War, in 1990. Subsequent airlifts of cash also included billions from Iraqi oil revenues controlled by the United Nations. After the creation of the Development Fund for Iraq (D.F.I.)—a kind of holding pit of money to be spent for “purposes benefitting the people of Iraq”—the U.N. turned over control of Iraq’s oil billions to the United States.

When the U.S. military delivered the cash to Baghdad, the money passed into the hands of an entirely new set of players—the staff of the American-led Coalition Provisional Authority. To many Americans, the initials C.P.A. would soon be as familiar as those of long-established government agencies such as D.O.D. or hud. But the C.P.A. was anything but a conventional agency. And, as events would show, its initials would have nothing in common with “certified public accountant.” The C.P.A. had been hastily created to serve as the interim government of Iraq, but its legality and paternity were murky from the start. The Authority was in effect established by edict outside the traditional framework of American government. Not subject to the usual restrictions and oversight of most agencies, the C.P.A. during the 14 months of its existence would become a sump for American and Iraqi money as it disappeared into the hands of Iraqi ministries and American contractors. The Coalition of the Willing, as one commentator observed, had turned into the Coalition of the Billing.

The first mention of the C.P.A. came on April 16, 2003, in a so-called freedom message to the Iraqi people by General Tommy R. Franks, commander of the coalition forces. A week after mobs ransacked Iraq’s National Museum of its treasures, unchallenged by American troops, General Franks arrived in Baghdad for a six-hour whirlwind tour. He met with his commanders in one of Saddam Hussein’s palaces, held a video conference with President Bush, and then quickly flew off. “Our stay in Iraq will be temporary,” General Franks wrote, “no longer than it takes to eliminate the threat posed by Saddam Hussein’s weapons of mass destruction, and to establish stability and help Iraqis form a functioning government that respects the rule of law.” With that in mind, General Franks wrote that he created the Coalition Provisional Authority “to exercise powers of government temporarily, and as necessary, especially to provide security, to allow the delivery of humanitarian aid and to eliminate weapons of mass destruction.” Three weeks later, on May 8, 2003, the U.S. and British ambassadors to the United Nations sent a letter to the U.N. Security Council, effectively delivering the C.P.A. to the United Nations as a fait accompli.

Read the rest of this remarkably informative article here. / Vanity Fair

See also, A ‘fraud’ bigger than Madoff, Patrick Cockburn’s expose dated today of this issue of the missing billions.

Thanks to Mariann Wizard / The Rag Blog