What the New York Times/AP report calls a "grim picture" is emerging from the latest quarterly audit of money spent for relief and reconstruction in Iraq.
Major U.S. companies with multimillion-dollar contracts for Iraq reconstruction are being forced to devote 12.5 percent of their expenses for security due to spiraling violence in the region, investigators said Wednesday.
Meanwhile, tens of millions of U.S. dollars have been wasted elsewhere in Iraq reconstruction aid, some of it on an Olympic-size swimming pool ordered up by Iraqi officials for a police academy that has yet to be used. The quarterly audit by Stuart Bowen Jr., the special inspector general for Iraq reconstruction, is the latest to paint a grim picture of waste, fraud and frustration in an Iraq war and reconstruction effort that has cost U.S. taxpayers more than $300 billion and left the region near civil war.
The amount lost to fraud and corruption is bad enough. But what had to be paid out for security is what leaps out from the latest report. It doesn't bode well for the future of relief work in Iraq.
''The security situation in Iraq continues to deteriorate, hindering progress in all reconstruction sectors and threatening the overall reconstruction effort,'' according to the 579-page report.
Calling Iraq's sectarian violence the greatest challenge, Bowen said in a telephone interview with The Associated Press that billions in U.S. aid spent on strengthening security has had limited effect. He said reconstruction now will fall largely on Iraqis to manage -- and they're nowhere ready for the task. Former Rep. Lee Hamilton, co-chairman of the Iraq Study Group, said Wednesday that the report shows the uphill battle for the United States and the international community in their efforts to bring stability in Iraq.
Apart from the security costs, however, is the money lost to fraud. An example:
The State Department paid $43.8 million to contractor DynCorp International for the residential camp for police training personnel outside of Baghdad's Adnan Palace grounds that has stood empty for months. About $4.2 million of the money was improperly spent on 20 VIP trailers and an Olympic-size pool, all ordered by the Iraqi Ministry of Interior but never authorized by the U.S. U.S. officials spent another $36.4 million for weapons such as armored vehicles, body armor and communications equipment that can't be accounted for. DynCorp also may have prematurely billed $18 million in other potentially unjustified costs, the report said.
Note: Since starting this post, the New York Times has edited/revised its AP-source article and has removed further examples before this posting.
Stuart Bowen was interviewed today on NPR's "Fresh Air." As "Fresh Air" notes in its introduction to the discussion:
Next week Bowen will appear before a House Committee beginning hearings into waste and fraud in reconstruction. Formerly, Bowen served in the White House under George W. Bush, and was a partner at the Washington, D.C., law firm of Patton Boggs LLP. Bowen's ties to Bush go back to the early 1990s, when he worked in the Texas Governor's office. Bowen was also an intelligence officer in the U.S. Air Force, where he achieved the rank of Captain.
The interview:
Fresh Air: As Special Inspector General for Iraq Reconstruction, Stuart Bowen's office has been uncovering waste, fraud, and corruption. His office audits how private contracts in Iraq are using money from America's Iraq Relief and Reconstruction Fund (IRRF). Bowen has just released his 12th quarterly report. IRRF initial $21billion budget is all under contract and the funds-phase of reconstruction is coming to an end. But as part of President Bush's plan to stabilize Iraq, he is asking Congress to approve $1.2 billion in new reconstruction aid. We asked Bowen to talk with us about his latest findings.... Stuart Bowen... what would you say the headline of the new report is?
Stuart Bowen: The headline of this, our 12th quarterly report, is the end of the IRRF and the beginning of the next phase. The IRRF, as it's called, was appropriated by Congress in 2003 for the recovery of postwar Iraq. Amounting to $21 billion, it is now all under contract and over 80% is spent.
FA: So what does that mean? Why is that the headline?
SB: What that means is the largely US-supported phase of the recovery of Iraq is coming to a close. The next phase must include a larger multilateral component. Ultimately, it must transition rapidly to Iraq control and Iraqi funding.
FA: So our money is basically spent on reconstruction projects.
SB: That's right. The money that Congress appropriated for this program is basically spent.
FA: Now the ambassador from Iran to Baghdad recently said that Iran is prepared to offer Iraq training for its security forces as well as equipment and advisers. Iran is also ready to help with reconstruction. What can you tell us about the role that Iran plans to play in Iraq's reconstruction now that American money is coming to and end?
SB: We don't -- obviously -- have a role in reviewing issues like that. But what I can say is that support for Iraq must be multilateralized. An international compact for Iraq, which includes the Gulf states, the EU, and other nations will, we expect, realize the hope of Madrid. In 2003 known US pledges amounted to over $13 billion, but just over 3 have come in to date. That must change this year for Iraq to move into the next phase of its recovery.
FA: I don't it's not in your position to decide what's paradoxical, but do you find it a little paradoxical that as the US's relationship with Iran continues to deterioriate, Iran seems to be forging an alliance with Iraq.
SB: Iraq is now a sovereign nation. Its government can make or pursue whatever relationships it chooses. But what's more important is that the world community move off the sidelines and into the reconstruction and recovery game in Iraq to bring this country forward, so it can prosper.
FA: One of the things I certainly take away from your report is that it's very difficult to do reconstruction work when there's fighting and sabotage. For example, electricity. Your report says that Baghdad is getting an average of 6 1/2 hours a day of electric power because of attacks on power lines that feed the capital and other political issues that inhibit the transfer of power from large plants in different regions of Iraq. Can you talk a little bit about how sectarian division and the insurgency is affecting power and other projects like that in Iraq now?
SB: Infrastructure security is a serious issue and has been for over a year now. It's an item we identified in our spring 2006 report as requiring attention and later last year $325 million was appropriated to bolster the strategic infrastructure battalions that are needed to protect those power lines. But they have a long way to go -- obviously. The attacks by insurgents continue to hinder everything in Iraq but especially the provision of basic services, electricity most notably in Baghdad. Indeed, the Minister of Electricity told us last quarter that he has a difficult time getting his repair teams out address the interdictions by insurgents because those repair teams themselves come under fire.
FA: Your report says that more than 5100 schools have been rehabilitated or reconstructed and 6800 secondary school teachers have been trained since 2006. But there have been problems with violence there, too. What are some of the problems with violence that have been undermining the accomplishments of the schools that have been built, and the teachers that have been trained?
SB: It's very difficult in Baghdad to do anything, including going to school. In fact one of my interpreters was attending Baghdad University and she told me that the Sunni students, when they come to school, have to come with body guards because of the danger. Moreover, school had been reduced to two days a week because of the number of attacks and uprisings that had occurred around the university.
FA: Can you give us an overview of amount of money spent on projects that have been destroyed by sabotage or by the insurgency?
SB: It's a very small percentage of projects that have we've constructed that have been lost. Certainly many have been descoped or curtailed because of it. There have been instances where... certainly there was a police station... that we constructed that got blown up and then we rebuilt it. But that's the exception rather than the rule with respect to US projects. Indeed, my inspectors had visited over 90 projects in Iraq over the last two years and have found about 3/4 of them met contract specifications.
FA: The issue of accountability comes up here. I'm going to give you an example of what I mean. There were two whistleblowers who worked for Custer Battles -- a contractor in Iraq. The whistleblowers sued the company for fraud under the false claims act. Custer Battles had provided security at the Baghdad Airport and other US installations. A jury found that Custer Battles had committed 37 acts of fraud and submitted $3 million in false claims for security arrangements in Iraq. The jury decided that there should be a $10 million penalty against Custer Battles. But then the ruling was overturned by a US District Court judge who ruled that the Coalition Provisional Authority wasn't really a US entity and therefore the false claims act didn't apply to it. Would you explain that ruling a little bit?
SB: I think it's an unfortunate ruling because it has grave implications. That is, those who are out there who may have committed fraud in connection with CPA will likely raise the same argument if they are prosecuted civilly or criminally under US law. I don't agree with that decision and it could present problems down the road.
FA: So according to this judge, any contractor hired by the CPA would not be subject to US laws because the CPA isn't a US entity?
SB: According to this judge. However, the CPA was constituted by order of the CentCom commander. The administrator of the CPA was appointed pursuant to an order of the President of the United States. It has all the indicia of a US entity. It was governed by US law internally and CPA developed its own laws which largely mirror US law with respect to managing the interim Iraqi government.
FA: I think this case is being appealed. Do you think it stands a chance of winning on appeal?
SB: I do think it does. The facts belie the decision of the judge.
FA: So although a judge overturned the jury's verdict in the Custer Battles case, there is a case of corruption that has come to the court in which the person was found guilty. And this was a case in which the decision came down this week. The person in question is Robert Stein. I want you to describe who Robert Stein is and what he was convicted of.
SB: Robert Stein was the comptroller for the south-central region of the CPA. He was in charge of $120 million of reconstruction funds -- Iraqi money -- that was allocate by CPA to that region for rapid reconstruction programs. He entered into a conspiracy, engaged in a conspiracy with Phil Bloom -- Philip Bloom a contractor who has also been convicted who also will be going to prison -- to essentially steal, rob the government of millions of dollars. Also in concert in this scheme... were several military officers, including Lt. Col. Bruce Hopfengardner who's also been convicted and will be going to prison. Several other individuals' cases are still pending so I don't want to talk about those details. But it evolved from a... complaint -- a citizen anonymously reporter potential wrong-doing in Hilla, south central Iraq and I deployed two monitors down there to investigate it and they returned with grim stories about potential wrong-doing. So I sent two investigators down. And thus began a long and detailed investigation in concert with other investigative agencies that flushed out the facts of this fraud. It's the largest case we have uncovered to date but we have 80 other cases ongoing, 23 of them are at the Department of Justice under prosecution and we should see progress in a number of those over the next quarter.
FA: This is a really interesting case. You've got a private contractor, a lieutenant colonel in the Army Reserves, and a member of the CPA working together in this fraud and corruption scheme. What were their interactions?
SB: Robert Stein had the duty to approve payments on the contracts to Philip Bloom and Hopfengardner worked with Stein in the contracting office. Essentially, they agreed to pay Bloom for work that he never performed, or just transfer money to him on contracts that really didn't exist. As a result, Bloom recovered millions of dollars and paid them off in bribes.
FA: What was the contractor supposed to be doing?
SB: There was a whole series of projects. The repair and reconstruction of the Babylon Police Academy. The repair, reconstruction, and equipping of the Karbala library as well as other barracks facilities down there. There was almost no work done on the Karbala library nor was any decent work done on the Babylon Police Academy. It was all deficient.
FA: So we have two separate precedents here. We have this trial where one of the people is found guilty. And then we have the Custer Battles trial where the charges don't stick because they're overturned by a judge who says the CPA isn't a US entity and is therefore not accountable to US law. What's the difference between these two trials and the perceptions of the CPA?
SB: The difference between Custer Battles and the Bloom-Stein case is that Custer Battles is a civil action whereas the Bloom-Stein case were criminal actions. Indeed, we accumulated so much evidence against Bloom and Stein that they agreed to plead guilty. They never had to go to trial. That was true also for Hopfengardner. Other cases are, however, pending prosecution and we'll have to see how they turn out.
FA: You say in your paper that you think there needs to be a single authority coordinating all this and there isn't right now.
SB: The president just appointed a new reconstruction coordinator for Iraq, and I think that really addresses the problem we identify. The issue is, when you have multiple agencies operating in a war zone trying to carry out relief and reconstruction operations, you have jurisdictional lines bumping into one another. Someone who can cross those lines and coordinate those agencies with authority would make a huge difference in promoting efficiency in the program.
FA: Do you have an estimate of how much money the US has spent on projects that were never completed and money that we've lost to fraud and corruption?
SB: We don't have a number on those two issues yet. We've been directed by the Congress to conduct a forensic audit on IRRF over the next year and a half. And that's a very detailed, thorough review of every contract looking at where every dollar went and upon completion of that audit, we will be able to -- with confidence -- give you a number on it.
FA: Do you have a guess on whether we're saving or losing money by investing so much in private contracts as opposed to having the military do the work?
SB: Well, the military is doing a significant amount of work through overseeing the Commander's Emergency Response Program. $2.5 billion has been spent in that program to date. It involved military contracting officers, engaging direct contracts with local contractors. It has the salutary effect of quick-turnaround, rapid effect that addresses local problems and puts local citizens to work. The shift has also moved from design-build to direct contracting in Iraq. That is, we've moved away from using the very large contractors and are now fully engaged in employing Iraqis and Iraqi firms in the reconstruction program.
FA: When did we do that?
SB: That evolution began about 18 months ago, and virtually 90% of all new contracts have been going to Iraqi firms for the last 9 months. 9-12 months.
FA: Would you sum up for us what President Bush's latest plans for reconstruction are in Iraq?
SB: Yes. They emphasize building capacity through the provincial reconstruction teams both at the government's level and through reconstruction, executing rapid reconstruction programs that employ as many Iraqis as possible. Unemployment is a serious problem, especially in Baghdad. Baghdad is the target of these economic initiatives. Along with the PRT program is the Commander's Emergency Response Program. That's also aimed at employing Iraqis, engaging Iraqi firms in trying kick-start the Iraqi economy to attract some capital investment.
FA: Do you think we should have done more of that early on?
SB: I think it's wise to do it now. The CERP was something that began in the summer of 2003 and it grew sort of on its own as commanders recognized the need for rapid reconstruction projects in the villages and towns they encountered. Because of the successes experienced in 2003, it expanded greatly and continues to prove a good vehicle for investing US dollars in Iraq.
FA: You have a whole list of lessons learned. What's the most important one as far as you're concerned?
SB: To ensure aggressive oversight from the beginning of any relief and reconstruction program after a contingency operation. I think the lack of any effective oversight in Iraq from June 2003 till March of 2004 permitted people like Bloom and Stein to take advantage of what was an increasingly chaotic situation.
FA: I spoke with Paul Bremer when his book was published. Bremer had been the head of the Coalition Provisional Authority. And he said in terms of paperwork -- paper trails for the money he was spending -- he said he gave out a lot of money without paperwork because you had to work in a real hurry. There was a war going on. In order to get people to respond, you had to deliver quickly. In war -- in a chaotic situation like that -- accounting isn't going to be as careful as it's going to be in an office in New York or Chicago.
SB: Well, I agree it's not going to be as careful... However, it needed to be more than the standards met by the CPA. There needed to be some accountability mechanism in place, some reporting of how the money that was being tranferred to the interim Iraqis ministries was being used. And there wasn't. There was just as ledger that showed how much had been budgeted and how much had been delivered. There was no meaningful feedback on what happened to that money after it was delivered to the Iraqi ministries. And it was delivered in cash.
