U.S. officials in postwar Iraq paid a contractor by stuffing $2 million worth of crisp bills into his gunnysack and routinely made cash payments around Baghdad from a pickup truck, according to a former official with the U.S. occupation government.
Because the country lacked a functioning banking system, contractors and Iraqi ministry officials were paid with bills taken from a basement vault in one of Saddam Hussein's palaces that served as headquarters for the Coalition Provisional Authority, former CPA official Frank Willis said.
Officials from the CPA, which ruled Iraq from June 2003 to June 2004, would count the money when it left the vault, but no one kept track of the cash after that, Willis said.
"In sum: inexperienced officials, fear of decision-making, lack of communications, minimal security, no banks, and lots of money to spread around. This chaos I have referred to as a 'Wild West,' " Willis said in testimony he prepared to give today before the Senate Democratic Policy Committee, whose members want to spotlight the waste of U.S. funds in Iraq.
Willis, a senior official in the 1980s at the State and Transportation departments under President Ronald Reagan, provided a copy of his testimony and answered questions in an interview.
James Mitchell, spokesman for the special inspector general for Iraq reconstruction, said cash payments in Iraq were a problem when the occupation authority ran the country and that they continue during the U.S.-funded reconstruction.
"There are no capabilities to electronically transfer funds," Mitchell said. "This complicates the financial management of reconstruction projects and complicates our ability to follow the money."
The Pentagon, which had oversight of the CPA, did not immediately comment in response to requests Friday and over the weekend. But in response to a recent federal audit criticizing the CPA, L. Paul Bremer, the administrator of the former U.S. occupation agency, strongly defended the agency's financial practices. Bremer said auditors mistakenly assumed that "Western-style budgeting and accounting procedures could be immediately and fully implemented in the midst of a war."
Describing the transfer of $2 million to one contractor's gunnysack, Willis said: "It was time for payment. We told them to come in and bring a bag." He said the money went to Custer Battles LLC of Middletown, R.I., for providing airport security in Baghdad for civilians.
"This isn't penny ante. Millions, perhaps billions of dollars have been wasted and pilfered," said Sen. Byron L. Dorgan (D-N.D.), head of the panel that is holding the hearing.