Waxman to Bremer: Show Me the Money

The CPA handed out planeloads of cash but no one knows where it went.

| Tue Feb. 6, 2007 4:00 AM EST

Depending on who you ask, today's hearing by Henry Waxman's Committee on Government Reform, convened to examine the Coalition Provisional Authority's handling of reconstruction funding in Iraq, was either a demonstration of aggressive oversight or a shameless exercise in political grandstanding. The minority side of the committee, whose ranks were thinly represented, seemed to regard the proceedings as the latter, characterizing the hearing, variously, as a "blame meeting" (Dan Burton), "Monday morning quarterbacking" (Mark Souder), and an attempt to "discredit the president" (John Mica). "Self-righteous finger wagging and political scapegoating won't make Iraq any more secure," cautioned Tom Davis, the Virginia Republican who previously chaired the committee. While the impetus for the hearing was a point of contention, there was one thing everyone could agree on regardless of their political persuasion: No one — not the committee members or the distinguished panel assembled to testify — had any idea how billions of dollars in reconstruction funds were ultimately spent.

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Shipped to Iraq by the ton on C-130 cargo planes laden with bricks of U.S. tender, the funding in question, held in the Development Fund for Iraq and totaling some $8.8 billion, was doled out by the CPA to Iraq’s fledgling government ministries between October 2003 and June 2004. Ostensibly, the cash went to pay for such things as salaries and overhead. Where it actually wound up is another story entirely. A 2005 audit by the Inspector General for Iraq Reconstruction found that the "CPA did not exercise adequate responsibility over DFI funds provided to Iraqi ministries through the national budget process" and sought no "assurance the monies were properly used or accounted for." The report raised the possibility that portions of the funding went to so-called ghost employees (whose only job responsibility would appear to be collecting a paycheck). It noted that though one Iraqi ministry had 8,206 on the payroll, CPA officials could confirm that only 602 of them actually worked there. Today, Waxman raised another, more ominous possibility — that reconstruction funding may have wound up in the hands of insurgents and other militant factions.

The man ultimately responsible for overseeing the disbursement of the funds (money belonging to Iraqi citizens, not U.S. taxpayers) was L. Paul Bremer III, the U.S. envoy dispatched to head the CPA in May 2003. Testifying before Congress today for the first time since he left that post in June 2004, Bremer acknowledged mistakes while also describing a dire situation in Iraq where sound financial management was next to impossible. When he arrived, Bremer said, Baghdad was literally "burning." "The country was in chaos — socially, politically, and economically. The deep crisis had been brought about not by war, not by sanctions, but by the decades'-long corruption and incompetence of Saddam's regime." Unemployment, he said, was over 50 percent and the country's already primitive banking system had effectively shut down. The imperative, as he saw it, was to "get money into the hands of the Iraqi people as quickly as possible." Under the circumstances, he said, "we met our obligations."

Seated directly to Bremer's left was Stuart Bowen Jr., a former White House official who, during his more than two-year tenure as the inspector general for reconstruction, has earned a reputation as a hard-nosed investigator. Since 2004, when he was appointed to the post, Bowen's office has issued a series of withering reports exposing the fraud and abuse of reconstruction funds. (Most recently, Bowen's office was responsible for the successful prosecution of former CPA comptroller Robert Stein, who was sentenced to nine years in prison in January for his role in a massive fraud scheme.) "There was a lack of accountability," Bowen told the committee, "and that's the ultimate conclusion here." Asked by Davis how he would have administered the reconstruction funding had he been in Bremer's shoes, he responded, "I would have required some reporting from each ministry about how the money was being used." The chaotic situation in Baghdad, Bowen added, called for "for more oversight... not less."

Though Bremer was supposedly the one in the hot seat, it was Bowen who frequently found himself on the receiving end of pointed questioning, as Republican committee members sought to hammer home the point, which Bowen readily acknowledged, that his audit had not uncovered outright fraud. This reached a crescendo when Dan Burton, the Indiana Republican, angrily accused Bowen's office of "relying on second and third hand information" and of failing to investigate how the reconstruction funds had actually been spent by the ministries. To this criticism Bowen calmly explained that the point of the audit was to investigate the CPA's financial and managerial controls, not those of the Iraqi ministries. An exasperated Burton shot back: "You ought to be a politician!"

While Republicans hammered Bowen, Democrats set their sights on Bremer and David Oliver, once the CPA's director of management and budget. At one point, Diane Watson, the California Democrat, replayed comments Oliver made to the BBC in November, in which he expresses indifference over how the reconstruction funds were spent. "I have no idea, I can't tell you whether or not the money went to the right things or didn't — nor do I actually think it is important," he says on the recording. "Billions of dollars of their money disappeared, yes I understand, I'm saying what difference does it make?"

"Do you stand by these statements today?" Watson asked.

Apparently measuring his words more carefully this time, Oliver replied, "…We decided the best way to make sure we could withdraw as quickly as possible and for the safety of the troops was to rely upon the Iraqi system to distribute that money. Therefore, we made sure that it was transparent what we were doing with the money to the ministries and then relied upon the ministries’ system, the entire financial system they had, to do that."

During what seemed to be a particularly uncomfortable moment for Bremer, he was asked about NorthStar Consultants, the firm that received a $1.4 million CPA contract to evaluate the management of the Development Fund for Iraq. The firm’s consultants, Bowen’s office later reported, "were not certified public accountants and did not perform a review of internal controls as required by the contract. Consequently, internal controls over DFI disbursements to and from Iraqi ministries were not evaluated." To emphasize the company’s shoddy operations and the CPA’s negligence in relying on them, Elijah Cummings, the Maryland Democrat, displayed a photograph of NorthStar’s California headquarters, a ramshackle looking home outside of San Diego. Fortunately for Bremer, Darrell Issa, the California Republican, soon came to his rescue. Asking that the picture remain up on a screen, he remarked that Congress "has encouraged telecommuting" and small businesses "run out of homes very similar to that."

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