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U.S. Returns Some Funds to Iraq
Probe Finds $13 Million Was Wrongly Held by Army Officials

By Ellen Nakashima
Washington Post Staff Writer
Tuesday, March 17, 2009

The United States has returned to the Iraqi government more than $13 million that had been "improperly held" for contingency purposes by the U.S. Army Corps of Engineers following an investigation by the top U.S. investigator for Iraq reconstruction, officials said yesterday.

Stuart W. Bowen Jr., the special inspector general for Iraq reconstruction (SIGIR), said the Army Corps had directed contractors to submit unjustified claims so the agency could hold onto the money.

The case is the latest example of the broader problem of waste, fraud and abuse plaguing Iraq reconstruction, Bowen told reporters at a news conference held to highlight recent efforts to strengthen oversight of the $51 billion rebuilding program. He estimated that 15 to 20 percent of the $21 billion in the Iraq Relief and Reconstruction Fund, financed by U.S. taxpayers and spent on reconstruction projects, has been lost to waste.

SIGIR also has oversight for the $19 billion in Iraqi funds that were managed by the Coalition Provisional Authority during its 14-month tenure, which ended in June 2004, officials said. The $13 million returned to the Iraqi government came from that source, they said.

The $13 million, Bowen said, had been "ferreted away into nameless accounts that had no purpose," he said. It was identified and returned by the Army Corps following an investigation by SIGIR and the Pentagon, officials said.

The Army Corps probe began with a tip to a SIGIR hotline, according to officials. The money, part of the Development Fund for Iraq, was supposed to go toward restoring electrical infrastructure under a $1.5 billion Army Corps project, and all unused portions were to be returned to the Iraqi government by the end of 2006, a SIGIR report said.

But instead of returning the money, "the Army Corps of Engineers held a portion and transferred the rest to three major U.S. contractors who were working in Iraq," SIGIR spokesman Danny Kopp wrote in an e-mail. The Corps directed the contractors to submit false claims, he said. "No work had actually been performed," he said.

Army Corps spokeswoman Jennifer A. Lynch said in an e-mail that the Corps was merely "the disbursing office" for the contracts and that the contracts were handled by the Joint Contracting Command in Iraq, which was responsible for communicating with the contractors.

She pointed the finger at the contractors, saying the SIGIR probe "identified that the contractors had improperly invoiced USACE for work not completed."

But SIGIR's Kopp said: "It was certainly not a misunderstanding on the contractors' part. . . . It was the Army Corps that came and told them what to do with those funds."

The Justice Department said no crime had been committed, Bowen said. "It was negligence probably, and potentially abuse, but not crimes," he said.

The probe "is a perfect case study of why oversight of government contracting is essential," said Danielle Brian, executive director of the Project on Government Oversight. "The system worked here."

Bowen said he expects that his teams will find "tens of millions of dollars" more in such "improperly held" funds.

"2009 is going to be the year of the investigation for SIGIR," Bowen said, "simply given the significant uptick that you've seen in alleged wrongdoing within the Iraq reconstruction enterprise."

Bowen, who has held the position for five years, recently returned from his 22nd trip to Iraq. He said improved security there has led more whistleblowers to come forward, and that his portfolio of open investigations has soared to 80 from 52 open cases. He has more than 30 investigators who often use what he called "gumshoe" techniques to follow the money trail because electronic auditing systems do not exist.

To date, he said, SIGIR has recovered more than $33 million in U.S. funds that had been lost to fraud by the U.S. government or U.S. contractors. He added that he expected that number to increase as a result of his investigations.

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