Wednesday, August 04, 2004 - Page updated at 12:00 A.M.
$1.9 billion in Iraqi money going to U.S. contractors
By Ariana Eunjung Cha
The Washington Post
WASHINGTON — Halliburton and other U.S. contractors are being paid at least $1.9 billion from Iraqi funds under an arrangement set by the U.S.-led occupation authority, according to a review of documents and interviews with government agencies, companies and auditors.
Most of the money is for two controversial deals that originally had been financed with money approved by the U.S. Congress but later shifted to Iraqi funds governed by fewer restrictions and less rigorous oversight.
Officials of the former Coalition Provisional Authority (CPA) have said most of the contracts paid from Iraqi money — obtained from sales of Iraqi oil and frozen foreign accounts from Saddam Hussein's regime — went to Iraqi companies, for the benefit of the Iraqi people.
Through the first 14 months of the occupation, the CPA provided little detail about specific contracts and the identities of companies that won them, citing security concerns, so it has been impossible to know whether these promises were kept.
The CPA ran Iraq from May 2003 until the U.S. handed over power to an interim Iraqi government June 28.
The CPA has said it awarded about 2,000 contracts with Iraqi money. Its inspector general compiled records for the major contracts, which it defined as those worth $5 million or more each. Analysis of those and other records shows 19 of 37 major contracts paid for with Iraqi money went to U.S. companies and at least 85 percent of the total $2.26 billion was obligated to U.S. companies.
That analysis and several audit reports released in recent weeks shed new light on how the occupation authority handled the Iraqi money it controlled. They show the CPA at times violated its own rules, authorizing Iraqi money when it didn't have a quorum or proper Iraqi representation at meetings and kept such sloppy records that the paperwork for several major contracts could not be found.
During the first half of the occupation, the CPA depended heavily on no-bid contracts that were questioned by auditors. And the shifting of projects that were publicly announced to be financed by U.S. money to Iraqi money prompted the Iraqi finance minister to complain that the "ad hoc" process put the CPA in danger of losing the trust of the people.
Kellogg Brown & Root, a subsidiary of Halliburton, was paid $1.66 billion from the Iraqi money, primarily to cover the cost of importing fuel from Kuwait. The job was tacked on to a no-bid contract that was the subject of several investigations after allegations that a subcontractor for Houston-based KBR overcharged by up to $61 million for the fuel.
Harris, a Melbourne, Fla., company, got $48 million from the Iraqi oil funds to manage and update the formerly state-owned media network, taking over from Science Applications International Corp. of San Diego.
The new television-and-radio services and newspaper have been criticized as mouthpieces for the occupation and symbols of the failures of reconstruction.
When it was being financed with U.S.-appropriated funds, the contract drew scrutiny because of questionable expenses, including chartering a jet to fly in a Hummer H2 and a Ford pickup for the program manager's use.
Fareed Yaseen, one of 43 ambassadors recently appointed by Iraq's government, said he was troubled that the Iraqi money was managed almost exclusively by foreigners and that contracts went predominantly to foreign companies.
"There was practically no Iraqi voice in the disbursements of these funds," Yaseen said in a phone interview from Baghdad, where he is awaiting his diplomatic assignment.
Even Iraqi officials who served in the government during the occupation complained they had little say in the use of their country's money.
Mohammed Aboush, a director general in the oil ministry during the occupation, said he and other Iraqi officials were not consulted about expanding the KBR contract. But he said he told his U.S. "advisers" at the CPA that the Iraqis found KBR's performance had been inadequate and that he'd prefer another company take over its work.
Aboush said he was ignored and believes the decision to go with KBR was political.
U.S. officials contend the CPA was faithful to the terms of a United Nations resolution that gave the United States authority to manage the Iraq oil money during the occupation.
"We believe that contracts awarded with Iraqi funds were for the sole benefit of the Iraqi people, without exception," Brig. Gen. Stephen Seay, head of contracting for the successor to the CPA, wrote in a response to a critical CPA inspector-general report released last week.
Army Lt. Col. Joseph Yoswa, a Defense Department spokesman, said shortcomings in the contract-award process should be looked at in the context of the volatile work environment in Iraq, where the need for speed and security were critical.
Critics of the CPA accused the occupation authority of using Iraqi money to bypass U.S. contracting rules on competition, oversight and monitoring for controversial projects.
"With American firms charging 10 times as much as Iraqi firms for construction work, with sole-source contracts being awarded, with allegations of money-wasting ... is it likely that the CPA was doing its best to ensure Iraqi money was spent in Iraqi interests? It doesn't look like it," said Anthea Lawson, an analyst for Christian Aid, a nonprofit group that has been investigating the spending of Iraqi oil money.
While it ran Iraq, the CPA had at its disposal at least $45 billion, the biggest reconstruction fund since the Marshall Plan rebuilt Europe after World War II. The money included $22 billion that Congress appropriated in two supplemental spending bills, and $23 billion in two Iraqi accounts.
In most cases, to spend congressionally appropriated funds, CPA officials had to coordinate with officials in Washington, keep detailed records, advertise contracts widely and conform to waiting periods for bids to come in. It was simpler to use the Iraqi money. The main restriction on spending the money was that it be used for the benefit of the Iraqi people.
CPA officials have acknowledged contracts were sometimes shown to a just a few bidders and winners were picked within days. Several large contracts that went to U.S. companies, for example, were awarded with no competition.
Iraqi-company executives have complained since the first days of the occupation that the process favored U.S. firms. They said they could not get through the heavily guarded gates of the occupation headquarters in the Green Zone to meet with contracting officers. They also said the process was so secretive that they had to bribe CPA translators to get information about what requests for bids were coming up.
Special correspondent Omar Fekeiki in Baghdad contributed to this report. |
