Charlie Cray is the director of The Center for Corporate Policy in Washington, D.C., and co-author of The People's Business: Controlling Corporations and Restoring Democracy (Berrett-Koehler, 2004).
President Bush just sent Congress a request for another $72.4 billion for the Iraq war and occupation. Instead of writing another blank check, Congress should commit itself to a thorough investigation of the incompetence and corruption that has undermined the reconstruction mission. At the same time that it demands that the administration provide a clearer overall strategy in Iraq, Congress should establish a permanent committee on war profiteering and corruption modeled after the one Harry Truman chaired during World War II.
The president’s own administration officials report that the reconstruction of Iraq has been botched. In early February, the Special Inspector General for Iraq Reconstruction, Stuart Bowen, released a report to the Senate Armed Services Committee that describes a significant gulf between the aims of U.S. reconstruction officials and what they will be able to accomplish. What Bowen called a “reconstruction gap” mostly affects three sectors essential to the success of Iraq’s reconstruction: water, electricity and oil.
After an investment of billions, Bowen reports that slightly more than a third of all water projects planned will ever actually be completed. Currently, two of three Iraqis are left with no potable water; only one in five has sewerage. Furthermore, recent figures suggest that at 4,000 megawatts, nation-wide electrical generating capacity is below pre-war levels and far below the goal of 6,000 MW. Instead of rebuilding several steam-turbine power stations— as Iraqi engineers and managers recommended—the CPA’s crony contractors chose to build new natural gas and diesel-powered combustion-turbine stations, despite the fact that Iraq doesn’t have adequate supplies of either. As a result of this arrogance and neglect, billions were wasted while the electricity in Baghdad is on for just a few hours each day.
Meanwhile, at 2.6 million barrels per day, crude oil production is significantly short of the goal of 3 MBPD. Liquefied petroleum gas has fared worse, with the CPA adding just 500 tons per day to existing production capacity, when the goal was to add 1,800 tons daily.
Given these and other shortfalls, it should be alarming that very little of the $72 billion that Bush is requesting would go to finish these jobs. Worse, Bowen warns that “the Iraqi government is not yet prepared to take over the near or long-term management and funding of infrastructure.”
The problems are not simply technical and bureaucratic: there are also signs of massive corruption. In its 2005 report, Transparency International, which tracks governmental corruption around the globe, warned that post-war Iraq could be “the biggest corruption scandal in history.”
To be sure, much of the corruption plaguing the reconstruction of Iraq involves Iraqis rather than U.S. companies or officials. Last September, Iraq’s finance minister Ali Allawi warned that between $1.3 and $2.3 billion of government funds had disappeared. But the U.K.-based Independent also reported that “government officials in Baghdad even suggest that the skill with which the robbery was organized suggests that the Iraqis involved were only front men, and ‘rogue elements’ within the U.S. military or intelligence services may have played a decisive role behind the scenes.”
Although Bowen claims corruption “is not a pervasive problem on the U.S. side of the reconstruction,” his own investigators uncovered a brazen case involving four Americans (including two CPA employees) operating in southern Iraq. The bribery and kickback scheme involved millions and seized assets including vehicles, real estate, and weapons. An operation that corrupt could only occur because, according to Frank Willis, a top CPA official, the CPA’s accounting system was “nonexistent.” CPA employees were too busy tossing around football-sized $100,000 bricks of 100 bills inside the Green Zone to worry about what was going on outside where the money was eventually distributed.
“With so much cash arriving in Iraq, you might think that extensive precautions would be taken,” says Rep. Henry Waxman, D-Calif. “But exactly the opposite happened: U.S. officials used virtually no financial controls … payments were made from the back of a pickup truck … and cash was stored in unguarded sacks in Iraqi ministry offices…”
So far, the only effort to hold contractors accountable for illegal or incompetent actions has been in the courts. On February 13th, arguments began in the first high-profile civil fraud case filed against an Iraq war contractor. Two whistleblowers are charging Custer Battles LLC with using sham invoices and offshore shell companies to defraud taxpayers of $50 million while performing security work.
Bowen, whose office is busy with another 57 ongoing investigations, says the CPA lost track of about $9 billion dollars worth of contracts. So clearly the Custer Battles case is not an isolated example. From this case and from reports by the inspector general for Iraq reconstruction, it is clear that past appropriations came with little oversight.
Yet the Republican-controlled Congress has shown little interest in contrast to its interest in the U.N. oil-for-food scandal. In November, Sen. Byron Dorgan, D-N.D., offered an amendment to the 2006 Defense Appropriations bill which would have established a special investigative committee like Truman’s famous WW II committee. But the proposal went down 53 to 44, almost purely along partisan lines.
With Halliburton receiving over half the value of the Iraq reconstruction contracts, all calls for accountability have automatically been dismissed as a partisan attack on the vice president or an element of the anti-war agenda that threatens to undermine troop morale.
During Dorgan’s speech, Sen. John Ensign, R-Nev., intervened with a surprise announcement on the floor: "…As the chairman of the Readiness Subcommittee, I plan on holding hearings on exactly this. I plan on pulling that curtain back… If it happens to be it is embarrassing to the administration, we are going to find out the truth on this — just like Harry Truman went after those cost-plus contracts in those days."
When Ensign finally held his hearing earlier this month, no other Republicans were present. A cynic might say that he is merely going through the motions to try to take the issue off the table before the fall elections. Yet if Ensign were to drill deeper than his investigation has gone so far, he would probably find that the contractors like Halliburton have not only bilked taxpayers, but some of their actions have undermined the military’s overall mission.
This lack of oversight isn't only a fiscal concern; it also has dangerous implications for U.S. troops. Two ex-employees of Kellogg, Brown & Root—a subsidiary of Halliburton—for example, have charged the Army’s number one contractor with exposing U.S. troops to contaminated water from the Euphrates .
"I don't know how many [troops] might have gotten sick as a result," says Ben Carter, one of the two KBR whistleblowers, who has 20 years of experience working as a water purification expert. "I can't know, because Halliburton apparently has no records and refuses to acknowledge there might be a problem."
Numerous leads remain unexplored, and Bowen cannot be expected to investigate them all. The current Congress’s token efforts should be measured against that of Truman’s committee, which held hundreds of hearings and issued 51 separate reports.
Because the issue has as much to do with fiscal responsibility as it does with protecting American troops, Congress should provide for much greater oversight before giving Bush and Rumsfeld another $72 billion check. The incompetence, cronyism, and corruption witnessed in Katrina-related contracts underscores the need for much greater oversight.
Legislation requiring contractor accountability should apply the lessons of Iraq to all federal contracts. Not only do we need to crack down on the kind of cronyism that puts incompetent people in the wrong places, and no-bid contracts like those given to Halliburton, but clear criminal sanctions are needed for war profiteering as well as new protections for those brave enough to blow the whistle. All of this and a vigilant Congress willing to investigate is needed to create a shift in contracting culture.