Chasing $1 trillion black hole: Iraq spending

UNITED NATIONS – The Obama White House has shuttled through Congress an $800 billion stimulus plan laden with special interest projects as well as a budget proposal that spends hundreds of billions more, but the biggest black hole for U.S. taxpayer money appears to be Iraq.

The Government Accountability Office has estimated that the ongoing war and the U.S. support of the Iraqi government through institutions such as the Development Fund for Iraq already could have consumed in excess of $1 trillion, except no one really knows because there’s little or no accountability.

Just the launch of the DFI program took $6 billion in cash from the controversial United Nations Oil for Food fund, for which an accounting has yet to be revealed, according to former director Benan Sevan.

“I personally gave them (the U.S. Coalition Provisional Authority) $6 billion in unencumbered cash. Where has it gone?” Sevan said in an interview.

While Congress has conducted “inquiries” into money heading into Iraq, the results haven’t been made public.

Last month was the sixth anniversary of the invasion that toppled the government of Saddam Hussein. Shortly after the war began, Washington created the DFI to pay out cash for progress in the troubled nation.

But because President Bush in 2007 signed legislation that forgave most of Iraq’s past, current and future debt, U.S. taxpayers must face the fact that the transfer of money is a one-way street: There will be no possible return of money such as in 1991 when the U.S. rescued Kuwait.

In the center of that cash transfer process is the DFI, which is supposed to have been a depository for foreign aid and money from Iraqi oil sales.

Just how much money the organization accumulated – and disbursed – over the years has never been revealed either by Baghdad or by Washington. Some in Washington have called it a “black hole” that dwarfs the scandal-plagued U.N. Oil for Food program.

Former Ambassador Zalmay Khalilzad, who also served as the Bush White House’s Iraq ambassador, at one point “estimated” the fund had “more than $40 billion” in cash on hand. But that was two years ago, before the big run-up in oil prices.

And even though those prices now have cooled, diplomats at the United Nations still “estimate” the Iraqi fund may have as much as $100 billion in its coffers. White House sources “guess” the figure is “at least $90 billion.”

While U.S. and oil revenues have gone into the fund, the Iraqi government also has pulled cash from the United Nations.

The UNMOVIC, or U.N. Monitoring, Observation, Verification and Inspection Commission, had built up cash reserves exceeding $350 million from a U.N. tax on Iraqi oil sales that was earmarked for permanent monitoring of Iraq’s military.

But the monitoring ceased, and Washington was successful in pressuring the U.N. Security Council to begin releasing cash to Baghdad in increments. Forty million dollars was moved in November and December 2006 alone.

The money, according to the requests submitted, was to buy a new diplomatic office building on Manhattan’s East Side, renovate existing U.N. offices, renovate an ambassadorial townhouse and back-pay mission staffers salaries.

But of the $40 million, a later check revealed there was only superficial renovation of the Iraqi mission office, the purchase of a new Mercedes limousine for Ambassador Hamid al-Bayati and a new apartment for him at Donald Trump’s posh World Tower that rents for $22,000.

Al-Bayati told reporters that how Baghdad “spent its money” was “nobody’s business” after several members of Congress expressed concern about such extravagances.

At the time, Al-Bayati was asked if Baghdad will, like Kuwait, offer to repay its U.S. debt, but the ambassador walked away.

Now, 18 months later, there have been no changes: The congressional “inquiry” is pending, Iraq has yet to purchase its new office building and there are reports from staff members that salaries for workers at Iraq’s U.N. mission have gone unpaid.

The members of Congress who initially raised concerns, including U.S. Rep. Steny Hoyer, D-Md., and Rep. Ileana Ros-Lehtinen, R-Fla., are not returning queries about the situation, and the ambassador and State Department are offering no details.

In fact, a staffer for Khalilzad said he knows of no such “inquiry” and that he was unaware of any action undertaken by the ambassador at anyone’s request.

The Iraq Revenue Watch organization had identified the key issue in its 2003 report.

“The Development Fund for Iraq functions as the country’s budget,” the organization said.

“Yet, it is not subject to the same transparency and accountability requirements of good budgetary practices. Draft spending plans are not required to be published and there are no opportunities for public comment. Even after spending has been authorized, there is no requirement to disclose what amount was spent and on what. Only the administrator gets to decide how to spend the DFI.”

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