Dems blast U.S. officials for wasting billions in Iraqi money

In a partisan session that likened pre-invasion Iraq to the regimes of Adolf Hitler, the Khmer Rouge and Josef Stalin, and prompted comparisons between an embattled President Bush and wartime setbacks that Abraham Lincoln and George Washington experienced, the House Oversight and Government Reform Committee on Tuesday launched a weeklong look into government waste, fraud and abuse.

Chairman Henry Waxman, D-Calif., and ranking member Tom Davis, R-Va., presided over a session that delved into allegations of waste under the Coalition Provisional Authority, the U.S.-led group that served as a government for Iraq following the fall of Saddam Hussein.

A hearing memorandum prepared by committee Democrats described a "wild west" atmosphere in Iraq between May 2003 and June 2004, during which CPA spent $19.6 billion before handing over control to an interim Iraqi government.

During that time, the Federal Reserve shipped massive pallets of money to Baghdad from Iraqi accounts, eventually sending almost $12 billion in cash, according to committee documents. This cash was distributed in duffel bags to local officials, contractors and others, because in the absence of a local banking system, CPA operated largely on a cash basis.

Testimony and questioning focused primarily on whether CPA had an obligation to improve oversight of those funds, which were tracked in principle to the agency's doorstep but in practice not even always that far, according to a study by the Special Inspector General for Iraq Reconstruction, which looked at $8.8 billion of that money.

"As a preliminary matter, our audit report did not say that the CPA lost taxpayer money," Bowen said. "The audit did conclude, however, that the CPA's internal controls for approximately $8.8 billion in [Development Fund for Iraq] funds disbursed to Iraqi ministries through the national budget process failed to provide sufficient accountability for the use of those funds. The CPA did not establish or implement sufficient managerial, financial and contractual controls to ensure DFI funds were used in a transparent manner."

Witnesses and lawmakers debated the extent to which CPA, keenly aware of poor capacity within the ministries, had an obligation to record how the money was handled after disbursement. Bowen argued that CPA's obligation to manage those funds transparently, as set out under the United Nations law that provided access to them, would have required that coalition officials seek some level of reporting from the ministries as to how funds were actually spent.

But L. Paul Bremer, who headed CPA during its short tenure, and several Republican lawmakers said it would have been unreasonable to expect the desperately understaffed CPA to take on this level of oversight responsibility. Several Republicans also stressed that the funds were from Iraqi, not U.S., accounts, and officials' inability to trace them likely did not directly harm U.S. taxpayers.

Bremer also said the urgent need to disperse salaries to Iraqis expecting government pay overrode the need to go slower and be more cautious. He said the measures CPA officials took were adequate.

Other aspects of CPA management attacked by Democratic lawmakers included a decision by officials to back away from plans to hire a top auditing firm to oversee spending. Instead, officials awarded a $1.4 million audit contract to a firm that took a role closer to accounting support. The firm that provided those services, North Star, operates out of a small, two-story residential building in San Diego, according to committee research.

Bremer said he did not know the business capabilities offered by North Star.

Rep. John Mica, R-Fla., noted that the Iraqi government lost billions to fraud even before the U.S. invasion, and said it would be ludicrous to think that waste could be eliminated by CPA.