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U.S. was big spender in days before Iraq handover

Reuters | June 22, 2005
By Sue Pleming

The United States handed out nearly $20 billion of Iraq's funds, with a rush to spend billions in the final days before transferring power to the Iraqis nearly a year ago, a report said on Tuesday.

A report by Democratic Rep. Henry Waxman (news, bio, voting record) of California, said in the week before the hand-over on June 28, 2004, the U.S.-led Coalition Provisional Authority ordered the urgent delivery of more than $4 billion in Iraqi funds from the U.S. Federal Reserve in New York.

One single shipment amounted to $2.4 billion -- the largest movement of cash in the bank's history, said Waxman.

Most of these funds came from frozen and seized assets and from the Development Fund for Iraq, which succeeded the U.N.'s oil-for-food program. After the U.S. invasion, the U.N. directed this money should be used by the CPA for the benefit of the Iraqi people.

Cash was loaded onto giant pallets for shipment by plane to Iraq, and paid out to contractors who carried it away in duffel bags.

The report, released at a House of Representatives committee hearing, said despite the huge amount of money, there was little U.S. scrutiny in how these assets were managed.

"The disbursement of these funds was characterized by significant waste, fraud and abuse," said Waxman.

An audit by the U.S. Special Inspector General for Iraq Reconstruction said U.S. auditors could not account for nearly $8.8 billion in Iraqi funds and the United States had not provided adequate controls for this money.

"The CPA's management of Iraqi money was an important responsibility that, in my view, required more diligent accountability, pursuant to its assigned mandate, than we found," said chief inspector Stuart Bowen in testimony.

CASES OF ABUSE

Auditors found problems safeguarding funds including one instance where a CPA comptroller did not have access to a field safe as the key was located in an unsecured backpack.

Bowen's office has referred three criminal cases to the U.S. Attorney's Office in the past two weeks for misuse of funds. Bowen declined to provide details at the hearing.

In one e-mail released in Waxman's report with the subject line "Pocket Change," a CPA official stressed the need to get money flowing fast before the handover.

Rep. Stephen Lynch (news, bio, voting record) of Massachusetts, a Democrat, questioned why so much money had to be transferred so fast.

Senior defense official Joseph Benkert said an infusion of funds was needed to address a wide variety of needs before the new Iraqi government took over.

Part of the challenge in tracking how money was spent was the cash environment and lack of electronic transfers.

Contractors were told to turn up with big duffel bags to pick up their payments and some were paid from the back of pick-up trucks.

One picture shows grinning CPA officials standing in front of a pile of cash said to be worth $2 million to be paid to a security contractor.

Rep. Christopher Shays (news, bio, voting record) of Connecticut, a Republican, said the photograph disturbed him. "It looks a little loose to me," he said, of the smiling officials.

"I share your concern," said Bowen.

Citing documents from the U.S. Federal Reserve Bank in New York, Waxman said the United States flew in nearly $12 billion overall in U.S. currency to Iraq from the United States between May 2003 and June 2004.

This money was used to pay for Iraqi salaries, fund Iraqi ministries and also to pay some U.S. contractors.

In total, more than 281 million individual bills, including more than 107 million $100 bills, were shipped to Iraq on giant pallets loaded onto C-130 planes, the report said.

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