washingtonpost.com  > Business > Special Reports > Reconstructing Iraq

$1.9 Billion of Iraq's Money Goes to U.S. Contractors

By Ariana Eunjung Cha
Washington Post Staff Writer
Wednesday, August 4, 2004; Page A01

Halliburton Co. and other U.S. contractors are being paid at least $1.9 billion from Iraqi funds under an arrangement set by the U.S.-led occupation authority, according to a review of documents and interviews with government agencies, companies and auditors.

Most of the money is for two controversial deals that originally had been financed with money approved by the U.S. Congress, but later shifted to Iraqi funds that were governed by fewer restrictions and less rigorous oversight.

Iraqi-Funded Contracts U.S. companies are being paid at least $1.9 billion in Iraqi money for reconstruction work.
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Halliburton to Pay $7.5 Million to Settle Probe (The Washington Post, Aug 4, 2004)

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For the first 14 months of the occupation, officials of the Coalition Provisional Authority provided little detailed information about the Iraqi money, from oil sales and other sources, that it spent on reconstruction contracts. They have said that it was used for the benefit of the Iraqi people and that most of the contracts paid from Iraqi money went to Iraqi companies. But the CPA never released information about specific contracts and the identities of companies that won them, citing security concerns, so it has been impossible to know whether these promises were kept.

The CPA has said it has awarded about 2,000 contracts with Iraqi money. Its inspector general compiled records for the major contracts, which it defined as those worth $5 million or more each. Analysis of those and other records shows that 19 of 37 major contracts funded by Iraqi money went to U.S. companies and at least 85 percent of the total $2.26 billion was obligated to U.S. companies. The contracts that went to U.S. firms may be worth several hundred million more once the work is completed.

That analysis and several audit reports released in recent weeks shed new light on how the occupation authority handled the Iraqi money it controlled. They show that the CPA at times violated its own rules, authorizing Iraqi money when it didn't have a quorum or proper Iraqi representation at meetings, and kept such sloppy records that the paperwork for several major contracts could not be found. During the first half of the occupation, the CPA depended heavily on no-bid contracts that were questioned by auditors. And the occupation's shifting of projects that were publicly announced to be financed by U.S. money to Iraqi money prompted the Iraqi finance minister to complain that the "ad hoc" process put the CPA in danger of losing the trust of the people.

Kellogg Brown & Root Inc., a subsidiary of Halliburton, was paid $1.66 billion from the Iraqi money, primarily to cover the cost of importing fuel from Kuwait. The job was tacked on to a no-bid contract that was the subject of several investigations after allegations surfaced that a subcontractor for Houston-based KBR overcharged by as much as $61 million for the fuel.

Harris Corp., a Melbourne, Fla., company, got $48 million from the Iraqi oil funds to manage and update the formerly state-owned media network, taking over from Science Applications International Corp. of San Diego. The new television and radio services and newspaper have been widely criticized as mouthpieces for the occupation and symbols of the failures of the reconstruction effort. When it was being financed with U.S.-appropriated funds, the contract drew scrutiny because of questionable expenses, including chartering a jet to fly in a Hummer H2 and a Ford pickup truck for the program manager's use.

Fareed Yaseen, one of 43 ambassadors recently appointed by Iraq's government, said he was troubled that the Iraqi money was managed almost exclusively by foreigners and that contracts went predominantly to foreign companies.

"There was practically no Iraqi voice in the disbursements of these funds," Yaseen said in a phone interview from Baghdad, where he is awaiting his diplomatic assignment.

Even Iraqi officials who served in the government while the CPA was in charge complained they had little say in the use of their own country's money. Mohammed Aboush, who was a director general in the oil ministry during the occupation, said he and other Iraqi officials were not consulted about expanding the KBR contract. But he said he informed his American "advisers" at the CPA that the Iraqis felt KBR's performance had been inadequate and that he'd prefer that another company take over its work.

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