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The $1.4 billion came from prewar oil sales.
Officials contend that even more was missing.
ERBIL, Kurdistan-Iraq - The $100 bills were
all new. They came wrapped in plastic and loaded on
wooden pallets. Altogether, the money weighed 15
tons, enough to fill three U.S. military
helicopters. It totaled $1.4 billion.
In a little-known operation during the final days of
the U.S.-run Coalition Provisional Authority,
American military helicopters flew the shipment of
cash to Irbil, Iraqi Kurdistan's largest city.
U.S. troops were waiting on the ground at the
airport to unload the money and take it under heavy
guard to the headquarters of the province's central
bank in the city's core.
The cash payment, which was approved by outgoing
U.S. administrator L. Paul Bremer III, was delivered
on June 23, 2004, five days before he returned
sovereignty to a new Iraqi government in Baghdad and
left the country. The money, which came out of
prewar oil revenue, was given to top officials with
Iraq's two Kurdish provincial governments.
"For us it was so strange," said Rashid Taher,
director of finance in Irbil province. "We received
it as cash at the airport. Paul Bremer delivered it
to us, and we still have the money."
Kurdistan officials say the secret, last-minute
shipment highlighted the sometimes-questionable
handling of billions of dollars by the United States
during the 14 months Bremer ran Iraq.
They say the cash was only part of the $4 billion
the region was owed under the United Nations
oil-for-food program. And they contend that Bremer
improperly used Kurdistan's remaining $2.6-billion
share of the U.N. fund for other purposes during his
administration of Iraq.
Mahmoud Othman, an Iraqi Kurd who served on the
U.S.-appointed Governing Council during the Bremer
era, charged that airlifting $1.4 billion in cash to
Irbil was an attempt to win the silence of Kurdish
leaders after Bremer had squandered the rest of the
money. Othman has called for an investigation into
the handling of the funds.
"He did this, which is not normal, because he
himself had made a mess," said Othman, who serves in
the transitional Iraqi National Assembly.
"He had spent part of the $4 billion, and he had to
do this to keep their mouths shut about it."
Efforts to reach Bremer, who has said little in
public since leaving Iraq, were unsuccessful.
A former top official of the CPA, who did not want
to be identified because he was not authorized to
speak on behalf of the defunct agency, confirmed
that the transfer took place and put the amount at
$1.6 billion.
He said the CPA considered the payment a fair
distribution of Iraqi oil revenue received during
the Bremer-led provisional government.
The Kurds' contention that they were owed a total of
$4 billion, he said, was unfounded.
"I don't know anybody in the CPA or the Iraqi
Ministry of Finance who thought that the higher
figure was realistic," the official said. The
payment "represented the CPA's view of what was
equitable relative to the Kurds."
He said the money was not delivered to Irbil until
late June because oil-for-food funds had not been
released by the U.N. until that spring, when the CPA
received $2.5 billion.
The International Advisory and Monitoring Board,
which was responsible for overseeing the Development
Fund for Iraq under the CPA, said its auditor, the
private firm KPMG, looked at the transfer in advance
and approved it.
"IAMB reviewed the transfer to the Kurds and found
it properly accounted for," said Bill Murray, a
spokesman for the board.
After the money arrived, the finance ministers of
the two Kurdistan provinces, Irbil and Sulaymaniya,
split it according to the size of their populations.
Irbil kept $798 million and Sulaymaniya received
$602 million, Kurdish officials say.
Sulaymaniya's share was trucked 3 1/2 hours over the
mountains to its capital city, also called
Sulaymaniya, in a convoy protected by a large
detachment of Kurdistan's battle-hardened peshmerga
soldiers.
In a region where corruption is endemic, the
unpublicized delivery of such a large amount of cash
might seem an invitation to embezzlement.
Late last year, some Kurdish officials and
international bankers discussed the possibility of
putting some of the money into a Swiss account, said
a source in the international banking community who
requested anonymity.
A Washington firm employed by Kurdish officials met
with representatives of international banks to see
if there was a way to transport the money safely out
of the country, the source said. In the end,
however, the Kurds apparently were unable to find an
international bank willing to handle the transfer.
Officials in Kurdistan deny that any meeting took
place with foreign bankers to discuss moving the
cash. They insist that all the money remains in
Kurdistan.
In Irbil, officials said their $798-million share
remained untouched at their central bank and would
be spent on projects such as dams and power
stations.
In Sulaymaniya, officials said they had begun
spending their money on similar public works
projects but would not discuss how much had been
disbursed or to whom. Deputy Finance Minister
Dilshad Othman said the province provides an
accounting of its expenditures only one day of the
year, Dec. 31.
"The money is in safe hands and will be spent
transparently," he said.
Finance officials in both provinces noted that an
audit by KPMG established that all of the cash
remained in the two capitals.
"An auditing team came from America," said the
deputy minister, who is from the same clan as
Mahmoud Othman but is not closely related. "They
reviewed our papers and they made sure that the
right procedures have been followed. They even took
photos of the money."
The oil-for-food program was set up under the
auspices of the United Nations in 1995 to ensure
that, despite international economic sanctions, Iraq
received sufficient food supplies from abroad in
exchange for limited sales of its oil.
Under Saddam Hussein, the revenue was spent in Arab
parts of Iraq but not in Kurdistan, which had
operated autonomously after the Persian Gulf War in
1991.
Kurdistan's share of the fund was set at 13%. At
least $4 billion accrued in Kurdistan's name,
Kurdish officials say, and some contend that the
amount could be as much as $5.5 billion.
After the U.S.-led invasion of Iraq in 2003 and
Bremer's appointment as the nation's administrator,
Bremer took over the handling of the fund.
In an audit of the CPA this year, the special
inspector general for Iraq reconstruction said
Bremer's agency had mishandled billions of dollars
earmarked for the country's development, including
$2.5 billion from the oil-for-food program.
The $2.5 billion was spent without being included in
a CPA budget, the audit concluded.
Mahmoud Othman, the former Governing Council member,
applauded efforts by U.S. Rep. Henry A. Waxman
(D-Los Angeles) to continue investigating the
handling of funds under the Coalition Provisional
Authority.
"There are some illegalities, some irregularities,"
he said. "I think Congress should investigate
because whenever the Governing Council talked to
Bremer about how much was spent, he would say, 'This
is not your business because this is American money,
and I am only accountable to the Congress.' "
For many in Kurdistan, which had struggled in
isolation for more than a decade before Hussein's
ouster, receiving any money from the oil-for-food
program was welcome.
"From our perspective, any amount that came to
Kurdistan is a victory for us," said Taher, the
Irbil finance director. The region will continue
trying to obtain more money from past oil revenue,
he said, but he fears it is a "hopeless effort."
"We don't know even where the money is," he said.
"There is a shadow over this subject."
The 2004 payment was delivered in cash, Kurdistan
officials said, because the banking system is so
primitive that it was not possible to make a bank
transfer of that magnitude. Banks in Kurdistan today
still cannot process credit card payments, and
businesses here deal in cash — American dollars or
Iraqi dinars.
"You know in Iraq there is no effective bank
network. The main problem of Iraq in the field of
finance is money transfer," Dilshad Othman said. "We
believe that when we are able to create a modern
banking network in Iraq, then we will be able to
rebuild our economy effectively."
Kurdistan officials said the money was transported
by helicopter because it was the safest method in
the war-torn country.
Even today, payments from the central government in
Baghdad are delivered in cash, but now the U.S.
military does not provide helicopters and the money
must be delivered by road from Baghdad two or three
times a month.
At times, convoys carrying the money have been
attacked by insurgents.
"In the beginning they were transferring money by
helicopters, but unfortunately right now they do not
help this way," said Sulaymaniya Finance Minister
Bayez Talabani. "For security reasons we have a big
problem transferring money. It is a big danger, but
no solution has been found."
For Mahmoud Othman, the U.S. administration's
handling of Iraqi funds has encouraged new levels of
corruption that in the long run pose as much of a
threat to Iraq's stability as the insurgent violence
that has swept the country.
"Iraq has been dealt with as a business, not as a
country or a people," he said. "Many people have
gotten very rich at the expense of the poor Iraqi
people and the American taxpayers."
www.latimes.com
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