Out of the billions of dollars in cash that the US shipped to Iraq during the war, "hundreds of millions if not billions of dollars...was stolen by senior Iraqi officials for their own personal gain," the Special Inspector General for Iraq Reconstruction tells CNBC.
In a new audit report, the inspector tracked a subset of the total amount—$6.6 billion in funds that the New York Federal Reserve made available to the Iraqi government during the war.
That chunk of cash, a subset of the tens of billions the New York Fed has sent overall, became controversial over the summer because neither the New York Fed nor the Iraqi government would provide enough information to document what happened to it.
But the Inspector General, Stuart W. Bowen Jr., said in an interview that he was ultimately given the records and tracked the money. Bowen said he is satisfied that the bulk of money made it to the entities it was intended for.
"What I’ve learned is that hundreds of millions if not billions of dollars of development fund for Iraq money was stolen by senior Iraqi officials for their own personal gain."
But he still has questions about what happened to some of the money that was left over when the Coalition Provisional Authority was disbanded. “Two hundred and seventeen million was in the basement of the Republican palace in cash,” Bowen said. “That last tranche is what we continue to be concerned about.”
Meanwhile, the investigation into the vast bulk of the funds continues. Bowen said that he will continue to investigate the status of as much as $12 billion in Iraqi assets that was shipped to Baghdad between 2003 and 2004.
Bowen is now trying to determine what happened to $217 million in cash that was stored in the basement of the Republican Palace after it was seized and used by the Department of Defense. And he’s also investigating a $2.8 billion fund that the Iraqi government asked the US to spend on its behalf on reconstruction activity.
“We are carrying out an audit now that is looking at those two tranches of money to determine what happened,” said Bowen. He said he expects to have answers and wrap up his investigation by 2012.
Overall, Bowen said, he has found indications that huge amounts of money were stolen in Iraq. Asked how much, he said it is “impossible to say, but I know just from talking to Iraqis and just my travels to Iraq—I’ve been there 30 times. What I’ve learned is that hundreds of millions if not billions of dollars of development fund for Iraq money was stolen by senior Iraqi officials for their own personal gain.”
The Inspector General’s mandate does not include looking at the tens of billions that were sent from the New York Fed to the Baghdad government after the Coalition Provisional Authority went out of existence in 2004.
And he has limited ability to track whether the money was spent properly once it was transferred into Iraqi control. “Its not my job to track that,” Bowen said. “That applies to virtually all of the funds that went into the Central Bank of Iraq. That became the duty of the Iraqi Ministers themselves, which of course at the time were rife with corruption.”
In the latest audit, Bowen found at least three cases in which money was mishandled as it was unloaded from US military aircraft at Baghdad International Airport.
Those include, the report found:
On one occasion in which only “$1.35 billion out of $1.5 billion shipped to Baghdad in December 2003 was deposited into the DFI Baghdad account.” That was because, the audit found, “The records note that $150 million was improperly given directly to the Iraqi Minister of Finance at the airport.”
In a second instance, the inspector general “could not find any specific documentation on the arrival and deposit of a $400 million shipment into the CBI’s DFI Baghdad account. While we do not have conclusive evidence there is some indication that these funds were deposited into another CBI account under control of the Minister of Finance.”
And in a third case, “CPA accounting records show that the very last currency shipment totaled $2.4 billion but that only $766.4 million was deposited into the Baghdad account. The remaining $1.6 billion was earmarked for Kurdistan, and documents show it was transferred to a Central Bank of Kurdistan representative for flight to Erbil.”
Bowen said he hopes the United States has learned some basic financial lessons from its experience in Iraq. “Pouring cash—hundreds of millions in dollars of cash—across a war zone is a foolish thing to do,” he said. “And it will bring out the lesser parts of certain people and lead them to criminal conduct. I’ve had to go and pursue them, investigate their wrongdoing and ensure their prosecution.”