U.S. Said to Pay Iraq Contractors in Cash

[R.A. Hettinga]

<http://news.yahoo.com/news?tmpl=story&cid=542&u=/ap/iraq_loose_cash&printer=1>

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U.S. Said to Pay Iraq Contractors in Cash



 1 hour, 4 minutes ago

By LARRY MARGASAK, Associated Press Writer

WASHINGTON -  U.S. officials in postwar Iraq (news - web sites) paid a
contractor by stuffing $2 million worth of crisp bills into his gunnysack
and routinely made cash payments around Baghdad from a pickup truck, a
former official with the U.S. occupation government says.


 Because the country lacked a functioning banking system, contractors and
Iraqi ministry officials were paid with bills taken from a basement vault
in one of Saddam Hussein (news - web sites)'s palaces that served as
headquarters for the Coalition Provisional Authority, former CPA official
Frank Willis said.

 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 he prepared to give Monday before a panel of Democratic senators
who want to spotlight the waste of U.S. funds in Iraq.

 A senior official in the 1980s at the State and Transportation departments
under then-President Ronald Reagan (news - web sites), Willis provided The
Associated Press with a copy of his testimony and answered questions in an
interview.

 James Mitchell, spokesman for the special inspector general for Iraq
reconstruction, told the AP 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 (news - web sites), which had oversight of the CPA, did not
immediately comment in response to requests Friday and over the weekend.
But the administrator of the former U.S. occupation agency, L. Paul Bremer
III, 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 served as a senior adviser on aviation and communications matters
for the CPA during the last half of 2003 and said he was responsible for
the operation of 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 said a coalition driver would go around the Iraqi capital and
disburse money from the a pickup truck formerly belonging to the grounded
Iraqi Airways airline. The reason is because officials "wanted to meld into
the environment," he said.

 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.

 Sen. Byron Dorgan (news, bio, voting record), head of the Democratic group
that is holding Monday's hearing, said he arranged for Willis' testimony
because majority Republicans have declined to investigate the suspected
misuse of funds in Iraq.

 "This isn't penny ante. Millions, perhaps billions of dollars have been
wasted and pilfered," Dorgan, D-N.D., said in an interview ahead of the
Senate Democratic Policy Committee's session.

 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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