Reader 1SK sent me a story which I felt I had to call to the attention of Naked Capitalism readers. It strikes me as devious public relations ploy, in which an episode that sounds at best poorly executed and at worst a scandal is reframed by focusing on an account of alleged exceptional individual performance that also provides an unverifiable answer to a key question in an ongoing investigation.

The incident in question is the air shipping of a claimed $40 billion in cold hard cash airlifted from the New York Fed to Iraq from 2003 to 2008. This operation took place largely if not entirely on Tim Geithner’s watch, since he was president of the New York Fed from October 2003 to November 2008. So while the US has never had a Helicopter Ben, Iraq had a Helicopter Geithner.

As you will read in due course, CNBC has found a supposedly knowledgable individual who says the amount transported, but we don’t have and are pretty much guaranteed never to get an official tally. The New York Fed has made excuses for its failure to cooperate with the inspector general for Iraq reconstruction. From a June CNBC report:

The New York Fed will not reveal details, the inspector general said, because the money initially came from an account at the Fed that was held on behalf of the people of Iraq and financed by cash from the Oil-for-Food program. Without authorization from the account holder, the Iraqi government itself, the inspector general’s office was told it can’t receive information about the account. The problem is that critics of the Iraqi government believe highly placed officials there are among the people who may have made off with the money in the first place. And some think that will make it highly unlikely the Iraqis will sign off on revealing the total dollar amount. “My frustration is not with the New York Fed, it is with the Iraqis,” said Stuart Bowen Jr., the Special Inspector General for Iraq reconstruction (SIGIR). “They haven’t been sufficiently responsive.”… Determining the total amount of money that has gone missing — and who was responsible for losing it — is much more than an academic question. Some Iraqi government officials have threatened to sue the United States over the missing money, arguing that the government had a fiduciary obligation to apply appropriate financial controls, and is therefore liable for any losses.

The reason I have trouble swaLLowing this story is it would not be hard for the right signals to be sent from the US officialdom to the Iraqi government to ignore this request, giving the New York Fed a badly needed out. Let’s face it, if some Iraqi government officials are upset and want an accounting of the funds, why has there been no authorization to release the information to the inspector general? Clearly, the requests are being sent to parties guaranteed to put them in the circular file.

And this would not be the first time the NY Fed has pinned its desire to maintain secrecy on cooperative scapegoats. For instance, some parties have asked for the contracts between the New York Fed and Blackrock for Blackrock’s services as asset manager for the Maiden Lane bailout vehicles (one for Bear Stearns, two for AIG) be disclosed. The NY Fed has refused, saying Blackrock has insisted they remain secret. A colleague who spoke to Blackrock’s CEO Larry Fink says Fink says that’s untrue, Blackrock has in fact pushed the NY Fed to publicize them. But the Blackrock does a lot of business with the Fed and presumably is not willing to cross an important client by calling them a liar.

Since the Fed isn’t lifting a finger to help, the inspector general has focused on the chain of custody, basically what happened after the money left the Fed, since much of it appears to have gone missing. The latest CNBC report says that one source claimed that the money drops totaled $40 billion. The article also states the funds were used “to pay for the reopening of the government and restoration of basic services.” I have a strong suspicion they defrayed the costs of the war and occupation, rather than the just the rebuilding of the government. (One other rationale would be simply to send cash to replace the old Iraq currency, to create a dollarized or semi-dollarized economy. But you’d need to look to see if local banks offered dollar based accounts to ordinary Iraqis to see if that took place, because you’d expect the authorities to have followed through on the local end if that were the case).

The notion that the mysterious NY Fed money drops were supporting more than just the narrow restoration of government services open up other nasty possibilities. Remember the many complaints about the impact of the big budget deficits run during the war. They were two-fold. One was that the deficits were the worst of all possible worlds, since the war spending was going heavily to contractors in the Middle East and hence not simulating the US economy. Second was that the contractors were extraordinarily inefficient, with multiple layers and huge markups at each level.

Now it is in fact quite possible that the NY Fed more than $40 billion, and more important, more than was held in the Iraqi custody accounts. Who would know if the decision was made to “print” to provide a stash for either extra operations related to the Iraq war that the officialdom wanted to keep below the radar or to send some (a lot?) of extra dough along with this massive money airlift to fund all sorts of black operations?

Implausibly, we are told only one man was on the receiving end of all these shipments:

And although the money was handled by a variety of trained American officials and military officers in the first legs of its trip halfway around the world, CNBC has learned that something unusual happened on the Baghdad side of the transaction: Each of the money flights to Baghdad was met at the airport in Iraq by the same man. The previously unknown Coalition Provisional Authority (CPA) official was tasked with picking up the bales of billions as they were unloaded from C-17s and arranging for them to get to the Central Bank of Iraq in downtown Baghdad. It was a perilous journey of about seven miles over a road the U.S. military called “Route Irish” through territory often controlled by insurgents. Travelers faced the threat of rocket propelled grenades, mortars, car bombs and IEDs…. The CPA official was a stocky, middle-aged naturalized American citizen of Lebanese descent who was born in Saudi Arabia. His first name is Basel. At his request, CNBC has agreed to withhold his last name from this story. Basel ferried cash in Baghdad for the CPA and the American embassy from 2003 until 2008—all told handling, he said, about $40 billion in cash. His job made him the very last American to see that money before it disappeared into the vaults at the Central Bank of Iraq. And it may have made him the only person in the history of the world to oversee the movement of $40 billion in a combat zone. It doesn’t seem that anyone in the US government planned ahead of time to put so much responsibility—and temptation—into the hands of just one man. Former Republican Connecticut Congressman Christopher Shays co-chaired the Commission on Wartime Contracting, digging into waste, fraud and abuse in Iraq. He has traveled to Iraq scores of times to oversee US efforts there. Shays did a double take when CNBC told him how much money Basel said he handled in Iraq. “Wait, one person?” Shays asked. “One person received $40 billion?”

Look at how convenient this is. We have one man surface who allegedly managed all the money sent. That allows him to present a dollar amount to be bandied about in the media and throw the inspector general a bone. The $40 billion total is likely big enough to represent a substantial portion of what the Iraqis might guesstimate was in the account held in the NY Fed. In addition, the presence of single actor greatly tidies up the story. The official account its thus that all the money got to the Iraqi central bank. Anything that went amiss was further downstream.

And the documentation to support the claim that Basel made the deliveries is garbage:

One document Basel showed CNBC was a one-page receipt of shipment for a billion-dollar delivery in April of 2006. Basel typed it up himself. It read, in part: “This is to testify that we, the undersigned, have received in our custody from [Basel’s full name] … the total amount of USD 1,000,000,000.00 (United States Dollars One Billion Only).” At the bottom were the hastily scrawled signatures of two officials of the Central Bank of Iraq.

What this “documentation” proves is no one gave a damn as to whether the money was properly handled. Do you honestly think that anyone on the receiving end counted the money when he delivered it? $1 billion in $100 bills is for all practical purposes NOT countable unless you have lots of super high speed counting machines. Basel was evidently doing what he could to protect himself against accusations of pilferage through these made-up receipts.

Now that Basel is the official face of how the funds got to the Iraqi central bank, it is a certainty no one else will come forward. It may be true that the total was $40 billion and it may be that Basel was the only person to handle the logistics of getting the pallets from the airfield to the central bank. But this is all a tad too tidy, and serves to divert attention from the unanswered question of how much money really left the New York Fed, which is essential to determine how much went missing.