Audit finds millions in waste, fraud in Iraq's reconstruction

Comprehensive report suggests some officials, contractors broke laws

July 30, 2004|By T. Christian Miller | T. Christian Miller,LOS ANGELES TIMES

WASHINGTON - A comprehensive examination of the U.S.-led agency that oversaw the rebuilding of Iraq has triggered at least 27 criminal investigations and produced evidence of millions of dollars' worth of fraud, waste and abuse, according to a report by the Coalition Provisional Authority's inspector general.

The report is the most sweeping indication yet that some U.S. officials and private contractors repeatedly violated the law in the free-wheeling atmosphere that pervaded the multibillion-dollar effort to rebuild the war-torn country.

More than $600 million in cash from Iraqi oil money was spent with insufficient controls. Senior U.S. officials manipulated or misspent contract money. Millions of dollars' worth of equipment could not be located, the report said.

"We found problems in the CPA's financial management, procurement practices and operational controls," Stuart W. Bowen Jr., the inspector general, wrote in the report. "These results are not surprising: The CPA faced a variety of daunting challenges, including extremely hazardous working conditions."

The report raises anew questions surrounding the occupation government under L. Paul Bremer III, who turned over control in June to an interim government led by Iraqis. The coalition's failures continue to haunt the country today as Iraqis struggle with security issues and infrastructure problems with electricity, transportation and water.

The Los Angeles Times has reported on several cases in which a small circle of former Republican administration officials had drawn scrutiny for their actions in Iraq.

Former CPA officials and contracting experts said they were surprised at the number of criminal investigations described in Bowen's report. They noted that criminal corruption charges in the United States involving federal contracting are rare.

The CPA has disbanded, and Pentagon officials did not return calls for comment.

The report noted several criminal cases under investigation, though it provided no names and few details.

In one case, a U.S. senior adviser "manipulated" the contracting system to award a $7.2 million security contract. The contract was later voided and the money returned.

In another incident, a contractor billed $3.3 million for nonexistent personnel working on an oil-pipeline repair contract.

Many of the report's findings concerned the handling of Iraqi oil revenue, which was placed into a special account called the Development Fund for Iraq. All told, more than $20 billion passed through the account, which was not subject to the same stringent contracting and accounting rules as U.S. government money.

Several former CPA officials interviewed in the past have said that the development fund was seen as a way to get quick approval for reconstruction projects without the hassle of burdensome contracting regulations.

CPA officials have vigorously defended their handling of the Iraqi money, saying that all actions were done transparently. A recent United Nations audit backed up that assessment, though U.N. officials raised concerns that not all of the money that entered the fund could be adequately tracked.

Several of the CPA departments criticized by the report objected to the findings. In one case, inspectors questioned the location of $18.6 million worth of property owned by CPA. Most of the material, including electric generators and cars, was later found.

Other CPA officials acknowledged the problems, but said that improvements were made as time passed.

The Los Angeles Times is a Tribune Publishing newspaper.

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