Buck Naked Politics: "Billions over Baghdad": Poor Accounting Enabled Contractor Waste & Fraud

Bustcrux52 Posted by The Crux | Some BN-Politics authors enjoy blogging about government- contractor waste and fraud. Healthcare providers, defense contractors, and even office-equipment suppliers have slurped more than their fair share from the taxpayers' trough. (See Govt. Contractors & Waste section.)

We've heard a lot about contractor waste and fraud in Iraq, perhaps because heavy privatization has created loads of opportunities for contractors to bloat their retirement accounts at the taxpayers' expense.

Vanity Fair recently published an article titled "Billions over Baghdad" that describes transfers of literally tons of U.S. cash to Iraq, much of which disappeared because some U.S. officials (e.g., former Coalition Provisional Authority administrator Paul Bremer) failed to set up effective systems to track the taxpayers' cash.

It's a recurring theme. Accounting failures also enabled 190,000 U.S. weapons to disappear in Iraq, though the Bush Administration had many months to plan the Iraq invasion and set up weapons-accounting procedures (Washington Post and BN-Politics).

VF's story includes seedy details about questionable companies like Custer Battles, Halliburton and Northstar. Below are six paragraphs from that article (available at Information Clearing House):

"On Tuesday, June 22, 2004, a tractor-trailer truck turned off Route 17 onto Orchard Street, stopped at a guard station for clearance, and then entered the EROC [East Rutherford Operations Center of the Federal Reserve Bank of New York] compound....

"Inside an immense three-story cavern known as the currency vault, the truck's next cargo was made ready for shipment. With storage space to rival a Wal-Mart's, the currency vault can reportedly hold upwards of $60 billion in cash. Human beings don't perform many functions inside the vault, and few are allowed in; a robotic system, immune to human temptation, handles everything. On that Tuesday in June the machines were especially busy. Though accustomed to receiving and shipping large quantities of cash, the vault had never before processed a single order of this magnitude: $2.4 billion in $100 bills.

"Under the watchful eye of bank employees in a glass-enclosed control room, and under the even steadier gaze of a video surveillance system, pallets of shrink-wrapped bills were lifted out of currency bays by unmanned 'storage and retrieval vehicles' and loaded onto conveyors that transported the 24 million bills, sorted into 'bricks,' to the waiting trailer. No human being would have touched this cargo, which is how the Fed wants it: the bank aims to 'minimize the handling of currency by eroc employees and create an audit trail of all currency movement from initial receipt through final disposition.'

"Forty pallets of cash, weighing 30 tons, were loaded that day. The tractor-trailer turned back onto Route 17 and after three miles merged onto a southbound lane of the New Jersey Turnpike, looking like any other big rig on a busy highway. Hours later the truck arrived at Andrews Air Force Base, near Washington, D.C. There the seals on the truck were broken, and the cash was off-loaded and counted by Treasury Department personnel. The money was transferred to a C-130 transport plane. The next day, it arrived in Baghdad....

"What Washington did not do was mobilize to keep track of it. By all accounts, the New York Fed and the Treasury Department exercised strict surveillance and control over all of this money while it was on American soil. But after the money was delivered to Iraq, oversight and control evaporated. Of the $12 billion in U.S. banknotes delivered to Iraq in 2003 and 2004, at least $9 billion cannot be accounted for. A portion of that money may have been spent wisely and honestly; much of it probably wasn't. Some of it was stolen.

"Once the money arrived in Iraq it entered a free-for-all environment where virtually anyone with fingers could take some of it. Moreover, the company [Northstar] that was hired to keep tabs on the outflow of money existed mainly on paper. Based in a private home in San Diego, it was a shell corporation with no certified public accountants. Its address of record is a post-office box in the Bahamas, where it is legally incorporated. That post-office box has been associated with shadowy offshore activities...."