Iraq Contractors Paid With Cash

A former U.S. occupation official in Iraq thought he was in the Wild West in 2003 as he watched colleagues pull $2 million in fresh bills from a vault and stuff them in a contractor’s gunnysack.

Cash payments that weren’t stuffed in sacks were made from a pickup truck that bore the name of Iraq’s grounded airline. American authorities thought the vehicle would “meld into the environment,” the ex-official, Frank Willis, said.

Willis, who was a senior adviser in aviation and telecommunications, planned to describe his experience Monday to a panel of Democratic senators. The hearing is to spotlight the waste of money in Iraq by the former occupation agency, the Coalition Provisional Authority.

Because Iraq had no functioning banking system in 2003, money was kept in a basement vault in CPA headquarters, a former palace of Saddam Hussein.

Officials from the CPA, which ruled Iraq from June 2003 to June 2004, would count the money when it left the vault, but nobody kept track of the cash after that, Willis said.

“In sum: inexperienced officials, fear of decision-making, lack of communications, minimal security, no banks and lots of money to spread around. This chaos I have referred to as a ‘Wild West,'” Willis said in testimony submitted to the Democratic Policy Committee.

“This isn’t penny ante. Millions, perhaps billions of dollars have been wasted and pilfered,” said the chairman of the Democratic panel, Sen. Byron Dorgan of North Dakota. He said the hearing was arranged because the Republicans who run Congress have declined to investigate fraud, waste and abuse in Iraq.

James Mitchell, spokesman for the special inspector general for Iraq reconstruction, said in an interview that cash payments in Iraq were a problem when the occupation authority ran the country, and they continue during the massive U.S.-funded reconstruction.

“There are no capabilities to electronically transfer funds,” Mitchell said. “This complicates the financial management of reconstruction projects and complicates our ability to follow the money.”

The Pentagon, which had oversight of the CPA, did not comment in response to requests Friday and over the weekend. But the administrator of the former U.S. occupation agency, L. Paul Bremer, in response to a recent federal audit criticizing the CPA, strongly defended the agency’s financial practices.

Bremer said auditors mistakenly assumed that “Western-style budgeting and accounting procedures could be immediately and fully implemented in the midst of a war.”

When the authority took over the country in 2003, Bremer said, there was no functioning Iraqi government and services were primitive or nonexistent. He said the U.S. strategy was “to transfer to the Iraqis as much responsibility as possible as quickly as possible, including responsibility for the Iraqi budget.”

Iraq’s economy was “dead in the water” and the priority “was to get the economy going,” Bremer said.

Also in response to that audit, Pentagon spokesman Bryan Whitman had said, “We simply disagree with the audit’s conclusion that the CPA provided less than adequate controls.”

Willis, who served in the State and Transportation departments during the Reagan administration, worked in Iraq during the last half of 2003 and said he was responsible for civilian operations at Baghdad’s airport.

Describing the transfer of $2 million to one contractor’s gunnysack, Willis said: “It was time for payment. We told them to come in and bring a bag.” He said the money went to Custer Battles of Middletown, R.I., for providing airport security in Baghdad for civilian passengers.

Willis’ allegations follow by two weeks an inspector general’s report that concluded the occupying authority transferred nearly $9 billion to Iraqi government ministries without any financial controls.

The money was designated for financing humanitarian needs, economic reconstruction, repair of facilities, disarmament and civil administration, but the authority had no way to verify that it went for those purposes, the audit said.

Willis concluded that “decisions were made that shouldn’t have been, contracts were made that were mistakes, and were poorly, if at all, supervised, money was spent that could have been saved, if we simply had the right numbers of people. … I believe the 500 or so at CPA headquarters should have been 5,000.”

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© 2005 The Associated Press