"Largest Robbery In The World"

It certainly is interesting what happened to all that U.S. taxpayer money:

A former Iraqi defence minister whose 10 months in office coincided with the disappearance of more than $800m (£400m) from the ministry’s coffers is living openly in Amman and London despite a warrant for his arrest.

Hazem Shaalan, a small businessman in London until Saddam Hussein was ousted in 2003, rose in a year to one of the most important jobs in the interim government that ran Iraq from 2004 to 2005.

He left Baghdad before the next government discovered that a fortune had been looted from his ministry’s account in what one senior investigator has called “one of the largest thefts in history”.

The missing money was part of $8.8 billion of shrink-wrapped American cash that was flown into Iraq after Saddam fell but which is now unaccounted for. It is the subject of a congressional inquiry in Washington amid growing demands by Democrats to identify those responsible.

...An investigators’ audit of the ministry during Shaalan’s tenure found that $1.7 billion went into its account at the Rafidain Bank in Baghdad before vanishing into a Jordanian account.

Two cheques drawn on the Ministry of Defence account, one for $149m and the other for $348m — were among transfers totalling $1.126 billion to al-Warka, a small private bank in Baghdad. The money was then deposited at the Housing Bank in Amman.

There it went into the account of Naer Jumaili, a little-known Iraqi businessman who held no official position but acted as a middle man for Iraq’s defence contracts while Shaalan was in charge. Jumaili also lives openly in Amman despite an Iraqi arrest warrant on charges of theft but was unavailable for comment last week.

“What Shaalan and his ministry were responsible for was possibly the largest robbery in the world,” said Judge Radhi al-Radhi, the head of Iraq’s Commission on Public Integrity which investigates official fraud.

The scandal has raised a series of perplexing questions. The nature of Shaalan’s role, the impact on the faltering development of Iraq’s nascent army as the insurgency took hold and the failure of US officials to keep track of billions of dollars are all coming under growing scrutiny in Baghdad and Washington.

Not least is the question: where did all the money go? Iraqi investigators have been denied access to Jordanian bank details and have yet to establish how much may have simply been stolen.

But they believe that most of it went on weapons deals in which the ministry was supposed to acquire expensive, modern equipment but bought cheap, substandard items instead, with the difference in price being pocketed along the way.

In one example, the latest MP5 American machineguns were ordered at a cost of $3,500 each. But what was delivered were Egyptian copies worth $200 per gun.

Other purchases included outdated Pakistani armoured personnel carriers that could hardly stop a Kalashnikov bullet and had steering wheels on the wrong side; and bullets so old that when soldiers opened the ammunition cases they feared the ammunition would explode.

“Huge amounts of money simply disappeared,” said Ali Allawi, a former finance minister who uncovered the problems after he came into office in 2005.

“We got scrap metal in return. This is not just about fraud. The substandard equipment that the army received meant soldiers died as a result.”

One Iraqi official claimed last week that the missing money would have paid for 11,000 schools or 500 hospitals. But the immediate impact was that the Iraqi army was woefully unprepared to tackle an increasingly savage and well armed insurgency, just at the time when the Americans were pressing for the national force to start replacing their own troops. Iraqi soldiers found that they were ambushed by insurgents with far better weapons than their own.

...Shaalan became defence minister without any experience in security or managing a large organisation. Soon after his appointment he wrote to the prime minister, Iyad Allawi, asking for an increase in his ministry’s budget, which had been set at $450m, on top of $8-$10 billion the Americans spent separately that year on training and equipping the Iraqi army.

Shaalan decided to create new mechanised divisions and a rapid deployment force to counter the insurgency, and for that he needed more money. Such an increase would normally have been submitted first to the cabinet and, if approved, to the National Assembly.

Instead, Shaalan sent a memo to the office of the prime minister, requesting an emergency exemption from the procedures.

In a memo signed by Shaalan he said there were “a number of secret contracts the amounts of which cannot be made public”, and other contracts “which require immediate expenditure”. In the same memo he demands “tax exemption for secret contracts”. The finance ministry was instructed to allocate the $1.7 billion for the creation of the rapid deployment divisions and to place it at the disposal of Shaalan’s ministry.

Shaalan’s memo was dated August 29. Two days later Jumaili incorporated the Flowing Spring company with assets of $2,000. Within months the company was doing deals for the ministry and hundreds of millions of dollars were flowing into his personal account.

Jumaili forged an alliance with Ziad Cattan, an Iraqi with dual Polish citizenship. Cattan was appointed head of military procurement at the ministry, even though he appears to have had no credentials for the job. He had run a pizza parlour in Poland while Saddam was in power, and had a small used car business in Germany.

He later admitted to an American newspaper: “Before, I sold water, flowers, shoes, cars – but not weapons. We didn’t know anything about weapons.”

...There was little or no competitive tendering. The contracts, some of which the Ministry of Defence never saw, even allowed Jumaili to determine what was delivered at his own discretion.

Documents show that in one transaction Jumaili transferred about $480m in ministry funds to the account of a colleague in Baghdad. The colleague then transferred the entire sum to Jumaili’s account in Amman.

Jumaili also took $100m of ministry cash from a bank in Baghdad in a single withdrawal and flew it out of the city.

A large quantity of substandard equipment was bought by Jumaili from a Polish company through a connection established by Cattan.

Twenty-four Soviet-era helicopters were acquired for $100m, ostensibly paid in advance. They were more than 30 years old and so outdated that Iraqi army inspectors refused to take delivery of them. Another purchase of 16 Polish-made Sokol helicopters is still being disputed.

...Last week Shaalan said he had sold a spacious villa in Amman and now lived in a small flat. But among the countless Iraqi refugees in Amman, many of them destitute, Shaalan cuts a suave figure, travelling in a luxury car and accompanied by solicitous bodyguards.

He also seems to have ready access to cash. When he travelled from Amman to London with a Sunday Times journalist in 2005, he stopped before customs to divide up bundles of US dollars from his briefcase between himself, his wife and his travelling companions.

...On visits to his family in London, Shaalan stays in some of the capital’s most expensive hotels and has been known to take a suite at the Dorchester.

...By the time Shaalan’s successor came to office in May 2005, the ministry’s resources had been plundered and an army that was supposed to be well equipped and trained was vulnerable and demoralised.

When Ali Allawi traced the missing money to Jordan, his request to officials in Amman for the records of Jumaili’s bank account was stonewalled..