No Bid And No Problem
by Charlie Cray
July 07, 2004
There may have been a transfer of sovereignty in Iraq last week, but on the ground things look much the same: most Iraqis without reliable utility service and no-bid contractors scooping up billions of Iraq's oil money without producing any measurable improvements. Here, Center for Corporate Policy Director Charlie Cray traces the connections between the Bush administration and corporate interests and explains how no-bid contracts are undermining democracy in Iraq—and at home.
Charlie Cray is the director of the Center for Corporate Policy and a collaborator on Halliburton Watch. His book, The People’s Business: Controlling Corporations and Restoring Democracy, (co-authored with Lee Drutman) will be published by Berrett-Koehler in November.
The U.S. occupation of Iraq may be entering a new phase with the nominal transference of sovereignty, but reports issued from and about Iraq in recent days suggest that the promised reconstruction is far from done. And while many well-connected cronies rush home to reinforce their friends’ re-election efforts, it’s not clear that those left behind will ever finish the job—a circumstance that is bound to aggravate existing tensions in the country.
According to the Government Accounting Office (GAO) and The New York Times , more than a year after the first infamous no-bid contracts were given out Halliburton and Bechtel, only a fraction of the projected construction projects have been carried out. Supplies of electricity and water are no better for most Iraqis, and in some cases utilities are much worse than they were before the invasion in the spring of 2003.
A report put out by Christian Aid last week suggests that the mess left behind by the CPA may be much worse than the well-known abuses associated with the reconstruction money allocated by Congress. The UK-based group—which has closely monitored the CPA’s handling of Iraq’s oil-related revenues—reports that CPA officials left the country after spending nearly $20 billion out of the Development Fund of Iraq (derived from oil revenues) with virtually no accountability or transparency.
“For the entire year that the CPA has been in power in Iraq, it has been impossible to tell with any accuracy what the CPA has been doing with Iraq’s money,” said Helen Collinson, a policy analyst with Christian Aid.
The CPA’s hasty exit strategy will remind some observers of the stampede of greedy executives who cashed out their options a few years ago before leaving others to deal with the mess they left behind. In the run up to the handover, Christian Aid reports, CPA officials spent nearly $2 billion of the “Iraqi people’s” money. The transitional government will be in place just two weeks before an initial KPMG audit of the CPA’s handling of the development fund is due.
Meanwhile, although U.S.-funded reconstruction work will continue, festering resentments over unfulfilled promises of a Marshall Plan-scale reconstruction and refurbishment of the country’s infrastructure will likely continue to fuel support for the resistance. The resistance itself all but guarantees that a significant portion of the money earmarked for reconstruction will have to be spent on private security protection for reconstruction personnel (GAO estimates the current fraction is 18 percent), while the projects themselves will be prime targets for sabotage.
It’s also unclear if the private military firms providing the security could be held accountable in the event of human-rights violations or whether the contractors themselves can be held to account for shoddy work. A new contract to coordinate contractor security was awarded in May to the British firm Aegis, whose founder Tom Spicer’s resumé includes a history of arms smuggling in countries like Sierra Leone. As the result of a parting gift to the contractors, CPA chief Paul Bremer signed a final order on June 28 which guarantees that U.S. contractors will be exempted from prosecution by the country's new interim government for anything that happens while they are performing official duties.
Despite the transference of sovereignty, the CPA’s other various orders (including those that open up certain state-owned businesses to foreign investors, which critics say violate international norms restricting an occupying power’s right to restructure the occupied country’s economy) will also remain in effect during the coming transition.
Meanwhile, more than 100,000 U.S. troops will be forced to stay and occupy the country through the hot summer and for the foreseeable future, while many of the Bush administration’s war-profiteering cronies will be coming home—as reinforcements for the Bush/Cheney re-election campaign. In fact, a few are Bush/Cheney “Pioneers” and “Rangers.” (They could just as well have called them “rocketeers” for taking fundraising to new levels, but someone must have noticed how close to “racketeer” that sounded).
To name a few of the war profiteers wired into the Bush/Cheney patronage system:
The kingpin of corporate cronies, of course, is Vice President Cheney’s old firm, Halliburton. Recent revelations that a political appointee working under Douglas Feith made the decision to override objections from career Pentagon contract experts to award Halliburton a key oil-related contract which provided the company an inside track for no-bid billion-dollar contracts has given partisan critics plenty of ammunition to criticize the administration’s bending of contract rules to benefit their friends. The fact that Cheney’s chief of staff was notified of the decision contradicts the vice president’s claim that he has had no involvement in the decision and, along with his televised assertion that he has no “ongoing financial interest” in the company (while continuing to receive more than $150,000 in deferred compensation payments) has made his connection to the king of corporate cronies a significant potential liability for the administration’s credibility and the upcoming election.
“The entire Halliburton affair represents the worst in government contracts with private companies: influence peddling, kickbacks, overcharging and no-bid deals," charged Sen. Frank Lautenberg, D-N.J. in a March 2004 Associated Press article. But the vice president’s old firm is by no means the only war profiteer that has close ties to top administration officials. In fact, just as the U.S. media failed to objectively cover the war after being em-bedded with the troops, they have mostly failed to map out how thoroughly inbedded this network of contractors is with the Bush family, friends and campaign cronies.
For example, last year, the Financial Times reported that Neil Bush has been involved in the Iraq contract gravy train through his association with John Howland and Jamal Daniel of New Bridge Strategies. The president's brother wrote letters to push businesses established by Howland and Daniel, including Crest Investment Corporation, which in turn employs Bush as co-chairman. The FinancialTimes reported that Bush receives the equivalent of $60,000 a year from Crest for working an average of three or four hours a week. The failure of the U.S. media to report this story is amazing. Imagine if the story involved Roger Clinton.
The blame also falls on Congress for not passing many proposed amendments to the Iraq appropriations that would have brought a higher standard of oversight and accountability to the contracts. As Sen. Dorgan and other members have suggested, the outsourcing of the oversight process itself is another way that the Bush administration has insulated the contractors from any real level of accountability.
In January 2004, Rep. Jim Leach, R-Iowa, introduced a resolution calling for the creation of a bipartisan committee to “investigate the awarding and carrying out of contracts” in Iraq, Afghanistan and elsewhere. Leach’s proposal is modeled after Harry Truman’s World War II committee—which saved taxpayers billions by rooting out corruption. It’s worth noting that Truman’s commission was created by a Congress controlled by the same party as the president.
Just as it was then, oversight should not be considered partisan,” Leach asserted. “It should be viewed solely in the context of protecting and preserving public resources and bolstering people’s confidence in their government.”