Washington Report, March 2006, pages 14-15 United Nations Report Real Scandal Not Oil-for-Food, But CPA-Administered Development Fund for Iraq By Ian Williams President George W. Bush bestows the Presidential Medal of Freedom on Ambassador Paul Bremer, former head of the Coalition Provisional Authority in Iraq, at a Dec. 14, 2004 White House ceremony (AFP Photo/Luke Frazza). IN THE dogwatch of the U.N. year, between Christmas and New Year, the International Accounting and Monitoring Board (IAMB) charged with overseeing the spending of the Development Fund for Iraq held a press conference at United Nations headquarters in New York. It was hardly reported at all—calling to mind the Sherlock Holmes case of “The Dog that Did Not Bark.” If ever there were watchdogs that should have been howling to the moon, however, it is these worthy auditors. Instead they spent the best part of an hour acting as if the effective disappearance of billions of dollars was nothing terribly memorable. The IAMB bared its gums and refused to bark at the clear evidence of gross waste, mismanagement and corruption by the Coalition Provisional Authority (CPA). The press was puzzled but, sticking to the usual norms of American news reporting, had nothing to report since the inspectors themselves said virtually nothing. One can only speculate about the laid-back auditors, but the Briticism that came to my mind was they had been “nobbled”—that someone had made plain to them that barking was undesirable and would disturb the neighbors, especially those who live on Pennsylvania Avenue. When this reporter raised the fate of these funds at Secretary-General Kofi Annan’s press conference just before Christmas, I was promptly berated as an “apologist for the U.N.” by John Bolton’s press officer, who questioned my journalistic integrity and accused me of “blurring the line” between the Oil-for-Food kickbacks and what he characterized as the CPA’s accounting irregularities. I informed him that, far from blurring the line, I was drawing a straight line between them. Consider. During its blessedly short lifespan, the American-dominated CPA under Paul Bremer spent nearly $20 billion of the $23.34 billion of Iraqi funds it had under its control in the so-called Development Fund for Iraq (DFI). In the same period, it spent just $300 million of the U.S. taxpayer-funded pledges of $18.4 billion for Iraq’s reconstruction. By the time it was handed over to the Iraqis the DFI—characterized by no-bid and non-fulfilled contracts, unqualified contractors, and the handing over of bundles of $100 bills as walking round money to occupation officers—was pretty much cleaned out. Much of the money involved presumably came from the $10 billion surplus that the Security Council ordered the U.N. Oil-for-Food Fund to hand over to the CPA-controlled DFI. The rest came from oil sales and from former Saddam-era funds that had been confiscated by various countries and released by order of the Security Council to the Development Fund for Iraq. As Congressman Henry Waxman (D-CA) said back in June, “There has been a stark and telling contrast between Congress’ approach to the Oil-for-Food Program and the DFI. Five separate congressional committees have been investigating U.N. mismanagement of the Oil-for-Food Program, and more than a dozen hearings have been held. But before today there was not a single hearing in Congress on U.S. mismanagement of the Development Fund for Iraq”—which, as he pointed out, is the successor to the Oil-for-Food program. Waxman reported that the CPA withdrew no less than $12 billion in cash from the New York Federal Reserve Bank DFI account and flew it to Iraq. In a final feeding frenzy, in its last month the CPA took out $4 billion from the mother of all ATMs in New York, including the largest cash withdrawal in history, $2.4 billion. Who says the U.S. has no exports? No less than 363 tons of greenbacks were flown to Iraq—and seemingly blown to the winds. In a partial audit of $120 million of the $600 million handed out to U.S. military officials for local reconstruction, more than 80 percent could not be accounted for, and $7 million was simply missing. In December, the U.S. charged two colonels who had worked for the Coalition Provisional Authority with accepting bribes of $200,000 a month for steering contracts to companies that seemingly were just shells. They worked with someone whom the CPA hired as comptroller with a budget of $82 million—despite his previous felony conviction for fraud. During its press conference the IAMB did not refer to this case. Indeed, there was a lot it chose not to refer to. It emerged that the IAMB simply examined 24 sole-sourced contracts, worth more than $5 million dollars each, that the CPA had awarded. In fact, we discovered during the press conference, the IAMB watchdogs had paid KPMG to “audit” 23 of them, representing some $600 million, which mostly involved examining American government audits. The Pentagon had heavily censored what it originally—and reluctantly—provided to the IAMB until Congressman Waxman posted their devastating reports on his Web site. Then the IAMB got them. Nevertheless, one of its members now told the press conference, “No one questions the will of the Iraqi or U.S. government to cooperate.” The biggest sole-sourced contract was with Kellogg Brown Root, the Halliburton subsidiary which walked off with $1.6 billion. KPMG recused itself from this, so the IAMB relied on the work of the Special Inspector and the Pentagon auditors whose work the Pentagon was at such pains to hide. Think about that. The U.S. gave a sole-sourced contract, largely financed with Oil-for-Food money, to a subsidiary of the company that had had Vice President Dick Cheney as CEO and from which he is still rolling up deferred compensation. The audit was carried out by Stuart Bowen, the special inspector general, appointed by President George W. Bush, whose lawyer he had been in various forms way back to his time as governor of Texas. According to Bowen, a whopping $8.8 billion of DFI money could not be accounted for. And the IAMB, charged with looking after the interests of the world community and the Iraqi people, lolled its tongue and wagged its tail. Nor did it even attempt to examine the allegedly contested contracts, not even to check the openness and fairness of the bidding, let alone see if the money from the DFI was in fact spent on behalf of the Iraqi people as mandated. Two years of high-decibel media outrage at the U.N.’s handling of the Oil-for-Food funds resulted in one unproven allegation that the head of the program had reported $160,000 in income over four years, which the Volcker commission thought was fishy. Contrast that with the sound of silence from the media and the IAMB over the fate of these billions. If Kofi Annan had appointed his own lawyer to conduct the inquiry that Volcker actually headed, can you imagine the frothy indignation? It stinks to high heaven, and yet the media, most of the Congress and the IAMB itself seem to have clothespins on their noses and blinkers on their eyes. The other news of the year that seems never to get mentioned is that while the taxpayers and governments of the world are asked to forgive Iraqi debts and to pay toward Iraqi reconstruction, 5 percent of all Iraqi revenues are still being sequestrated and handed over to the Iraq compensation fund, which then promptly hands most of it over to Kuwait. There is no doubt that Saddam Hussain committed war crimes and an act of aggression against Kuwait. It is also true that this was quite popular among Iraqis at the time, even if one suspects that, 15 years of misery later, they may now regret it. But with the Iraqis, now that the Oil-for-Food program has gone, suffering worse conditions, and being shot at and bombed by both sides, it is hardly the thing for an Arab brother state like Kuwait to insist not only on the debts being repaid, but also on war reparations. And it is rarely mentioned, although in the interests of combating the pernicious amnesia of our age, I often do. More people should raise the issue, and see if somewhere between Capitol Hill and Kuwait City, not to mention the U.N., there might not be a crisis of conscience. Ian Williams is a free-lance journalist based at the United Nations.