Gone Missing in Iraq – $1.3bn

Ibrahim Jaafari’s government in Baghdad has issued arrest warrants for 27 senior officials, members of the preceding interim government headed by Iyad Allawi.
They are suspected of embezzling $ 1.3bn dollars of military procurement funds. Among the suspects are the former defense minister General Hazem Shaalan, who denies the charge, as well as the labor, transport, electricity and housing ministers. The Iraqi Board of Supreme Audit in a report reviewed by Knight Ridder accuses these officials of using their eight months in office (June 28, 2004 to February, 2005) to set up three intermediary companies to hide the kickbacks they received from contracts involving unnecessary, overpriced or outdated equipment.
Altogether 89 arms deals with the United States, companies in Europe, Poland and some Arab states were found to have been awarded to favored weapons suppliers without a bidding process and without the required approval from the prime minister’s office. Instead of buying directly from a foreign company or government, Iraqi arms procurers hired third-party companies to negotiate the contracts. When Iraqi officials complained about unfulfilled contracts, they discovered they had no recourse to demand a refund because the Iraqi middlemen had vanished with cash running into millions.
As to questions of where were the American officials in the Coalition Provisional Authority who oversaw the Iraqi interim government’s operations, spokesmen for Lt. Gen David H. Petraeus, who heads US training of Iraqi troops, and US embassy officials said they did raise concerns about corruption rumors, but were constrained form doing more to prevent wrongdoing because a sovereign Iraqi government was in place.
The retired Iraqi officer Lt. Gen Abdul Aziz al-Yaseri, who worked for the defense ministry’s budget at the time of the alleged corruption, said: “There’s no rebuilding, no weapons, nothing. There are no real contracts even. They just signed papers and took the money.”
debkafile‘s Baghdad sources believe that the missing sum is larger than $1.3 bn. They also refer to rumors that the charges leveled by the Jaafari government may be politically-motivated. They note that the prime minister, who heads the religious Shiite Dawa party, may be seeking to discredit his predecessor, Allawi, who is a secular Shiite and General Shaalan, who plan to run at the head of an independent list in the December 2005 general election. The two are closer to leading Sunni Muslim and Kurdish dissident circles opposed to the new constitution – which goes to a national referendum Saturday – than to the religious Shiite establishment.
The scandal also breaks eight days before Saddam Hussein goes on trial for crimes against humanity and corruption. An astute defense team will not miss the chance of using it as fodder.