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Iraq Auditor Warns of Waste, Fraud In Afghanistan

By Karen DeYoung and Walter Pincus
Washington Post Staff Writers
Monday, February 2, 2009

After five years of investigations and 250,000 pages of audits, Stuart W. Bowen Jr. wishes he could say that the $50 billion cost of the U.S. reconstruction effort in Iraq was money accounted for and well spent.

"But that's just not happened," Bowen said.

Instead, the largest single-country relief and reconstruction project in U.S. history -- most of it done by private U.S. contractors -- was full of wasted funds, fraud and a lack of accountability under what Bowen, the congressionally mandated special inspector general for Iraq reconstruction, calls an "ad hoc-racy" of lax or nonexistent government planning and supervision.

And despite the Iraq experience, he said, the United States is making many of the same mistakes again in Afghanistan, where U.S. reconstruction expenditures stand at more than $30 billion and counting.

"It's too late to do the structural part and make it quickly applicable to Afghanistan," Bowen said in an interview last week. None of the substantive changes in oversight, contracting and reconstruction planning or personnel assignments that Congress, auditors and outside experts proposed as the Iraq debacle unfolded has been implemented in Afghanistan.

But President Obama could take several steps to mitigate future damage, Bowen said. They include devoting more attention to military and civilian personnel and to reconstruction and relief assignments, and taking advantage of the expertise developed through hard-won experience in Iraq. Instead of the "multiple versions" of the federal acquisition regulations adopted and amended by "multiple agencies" operating in Iraq, Obama "could just issue a FAR regulation applicable to Afghanistan that everyone will follow" in issuing and supervising contracts, he said.

"To bring this all together," Bowen said, "the president should order a Red Cell," a high-level group drawing from the departments of State and Defense and the U.S. Agency for International Development that would turn Obama's orders into action.

Bowen's office, known as SIGIR, is releasing a book today that recounts the Iraq experience and suggests how to avoid future mistakes. "Hard Lessons" is being published as the bipartisan Commission on Wartime Contracting holds its first public hearing. Created by Congress last year, the commission will examine expenditures in Iraq and Afghanistan and propose solutions for "systemic" problems that waste taxpayer dollars.

Legislation to create the commission was introduced by Democratic Sens. James Webb (Va.) and Claire McCaskill (Mo.) and was inspired by the "Truman Committee," which conducted hundreds of hearings and investigations into government waste during and after World War II.

"Hard Lessons," a draft of which was leaked to the news media in December, concludes that the U.S. reconstruction effort in Iraq was a failure, largely because there was no overall strategy behind it. Goals shifted from "liberation" and an early military exit to massive, ill-conceived and expensive building projects under the Coalition Provisional Authority of 2003 and 2004. Many of those projects -- over budget, poorly executed or, often, barely begun -- were abandoned as security worsened.

In a preface to the 456-page book, Bowen writes that he knew the reconstruction was in trouble when he first visited Iraq in January 2004 and saw duffel bags full of cash being carried out of the Republican Palace, which housed the U.S. occupation government.

Security was a constant problem, not only for military and civilian officials serving in Iraq but also for SIGIR. Auditor Paul Converse was killed in March during a rocket attack in Baghdad, following a year in which five other SIGIR employees were wounded.

The book recounts, in colorful detail based on SIGIR interviews with nearly all the principals, the deep divisions during the same period between the Pentagon, under Donald H. Rumsfeld; the State Department under Colin L. Powell; and the White House office of national security adviser Condoleezza Rice. Former deputy secretary of state Richard L. Armitage recounts an argument between Rumsfeld and Rice in the fall of 2003 during which each said the other was in charge of supervising the Coalition Provisional Authority.

The book also includes numerous demonstrations of the Bush administration's lack of preparation to run Iraq after the March 2003 invasion. In one previously publicized case recounted in "Hard Lessons," Bowen's auditors discovered a cash disbursement of $57.8 million by the CPA to the U.S. comptroller for south-central Iraq. "Pallet upon pallet of hundred-dollar bills" were removed from the CPA vault in Baghdad and driven to the regional office in two unarmored SUVs. There, the local acting comptroller, Robert J. Stein Jr., who later was convicted for money laundering and fraud, had himself photographed with mountains of cash.

Overall, SIGIR and other law enforcement agencies have obtained 35 convictions, including two major bribery schemes involving $14 million solicited by U.S. military officers who ran Kuwait-based units contracting for the billions of dollars in supplies sent to Iraq.

SIGIR also reported on the inability of Iraqi firms to compete with U.S. contractors, due in part to the complicated U.S. bidding system: "Online contracting, which frequently entailed bids of more than a hundred pages, bewildered Iraqi contractors who were used to sealing a business deal with just a handshake."

When he took the job five years ago, Bowen said, "I didn't know that we didn't have a system to protect our interests abroad in post-conflict or contingency operations. . . . It would have been a much funner job to issue 250 reports on how well our rebuilding program went . . . and that the money was well accounted for and that we're leaving Iraq a peaceful and democratic place and nonviolent country."

Given that $4 billion in appropriated U.S. reconstruction funds remain unspent in Iraq, Bowen's work is not likely to end anytime soon.

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