Spoils of War

Documenting the hidden cost to taxpayers of corruption in Iraq

Americans are spending $22 billion for the reconstruction of Iraq, the largest postwar reconstruction effort ever undertaken. But the lack of independent investigators -- both in the United States and in Baghdad -- has fueled corruption and inflated the cost to taxpayers. In a four-part series, the Minnesota Public Radio business program Marketplace and the Center for Investigative Reporting highlight the bribes, thefts and price gouging that have marred the reconstruction project and threaten the future of Iraq. Reporting from Baghdad, Marketplace's Middle East Correspondent Adam Davidson tells the story through interviews with Iraqis who witness the corruption every day -- businessmen, accountants, shopkeepers, health officials and others. Reporting from Washington, Mark Schapiro of the Center for Investigative Reporting documents the failure of the U.S. government to effectively oversee expenditures in a reconstruction effort that is costing 10 times more per capita than the Marshall Plan.

Among the disturbing revelations featured in the series:

  • Iraqi private companies routinely pay bribes to get reconstruction contracts - often to Iraqi officials but sometimes to employees of U.S. contractors. Accountant Hekmet Ali-Khalil tells Marketplace that every ledger book he signs is a fiction, designed to hide bribes. At least 20 percent of U.S. spending in Iraq is lost to corruption, says Charles Adwan of the Lebanon of Transparency International.
  • With little or no oversight, senior Iraqi ministry officials regularly pocket reconstruction money from the Central Bank, according to a bank official.
  • Iraqi Ministry of Health officials sell hospital supplies on the black market, depriving sick people of vital equipment. Dr. Ali Rajeb, a young Iraqi cardiologist, takes Davidson to Sa'adoun Street in Baghdad, where a row of medical supply shops offer stolen goods. A version of this is happening in virtually all the ministries: Electricity Ministry officials sell equipment, too. Justice Ministry judges demand bribes for favorable rulings and the Housing Ministry workers take money to assign homes.
  • Translators who work for Iraq's Coalition Provisional Authority or U.S. contractors have become among the most powerful and corrupt figures in the rebuilding of Iraq. At least a dozen Iraqi businessmen told Davidson that translators had visited them at their homes or offices and promised to provide contracts for a sizable cut. Some ask for as much as 50 percent of the deal.
  • In Washington, congressional initiatives that would have sent a strong anti-corruption signal to contractors in Iraq were derailed by the House Republican leadership and the White House. These included amendments to the Iraq appropriations bill last fall that would have criminalized war profiteering and required ongoing audits by the General Accounting Office of contracts over $25 million. "The fact [those measures] were made and defeated signaled, 'We don't agree [this] oversight is necessary,'" says Jeffrey Jones, former head of the Defense Energy Support Center, in charge of purchasing fuel for the Pentagon. Jones watched as gasoline bills doubled when part of his job was outsourced to Halliburton. "So, it's laissez faire. That's the message that was sent."
  • Over the last three months, Congressional and Defense Department investigators have disputed at least $1 billion worth of Iraqi contracts for inflated charges, incompetence, lack of documentation to support invoices and kickbacks related to subcontract awards.
  • The Pentagon's solution to the "oversight crisis" has been to outsource: private firms have just been awarded $120 million to oversee other contractors -- raising serious questions of potential conflict of interest. “You could easily imagine one private contractor having other business dealings with the company over which they're supposed to be conducting oversight," Congressman Henry Waxman tells Schapiro.

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