Money as a Weapon

Dana Hedgpeth and Sarah Cohen
Washington Post Staff Writers
Monday, August 11, 2008 11:00 AM

Washington Post staff writers Dana Hedgpeth and Sarah Cohen were online with Army Col. John Charlton to discuss the Commander's Emergency Response Program today at 11 a.m. ET.

Charlton oversaw U.S. forces in Ramadi during the time that CERP funds rebuilt a ceramics factory and other projects in Iraq. These were among the 26,000 projects analyzed in The Washington Post's special report: Money as a Weapon.

A transcript follows.


Dana Hedgpeth: Hi, thanks for joining us. Col. Charlton welcome and thank you for your time and help and joining us. Here's why we did this project -- We wanted to look at where some of the money had been spent on reconstruction in Iraq and choose to look at CERP because it was one of the more comprehensive pots of money that's tracked in documents and in the often times spotty Iraq Reconstruction Management System - a database that the Pentagon uses to track projects in the field.

Also, the small projects caught our eye - soccer balls, dolls and we could picture more of what was going on, even from 7,000 miles away.


New York, N.Y.: When can we be expecting the Iraqi government to increase its expenditures on these projects?

Sarah Cohen: Hi -- Iraq has started picking up more, but there are members of Congress who would like the pace to pick up. In recent funding laws, there are some restrictions on how much U.S. money can go into various reconstruction programs. Right now, CERP -- the program we wrote about -- is exempt from that. But Iraq has started pitching in money for this program as well. A version of next year's funding law also addresses this.


Lyme, Conn.: How many of the physical construction projects become targets of terrorist attacks? Does there appear to be a problem that terrorists target American built projects, and does this mean they need more security?

Col. John Charlton: The key to any type of reconstruction or stabilization project is to establish a secure environment first. In Ramadi, we spent several weeks clearing terrorists out of the city. Once we cleared those areas, we then used Iraqi police to maintain security in those communities. Once we had established a secure environment, we were then able to work with the Iraqis to rebuild. All of our projects used local contractors and were planned with community leaders. This meant that the Iraqis were major stakeholders in these projects and had a vested interest in making sure they were completed. Because of this, none of our projects were attacked by terrorists.


San Clemente, Calif.: I was wondering: What sort of manufacturing can the Iraqis engage in that won't be almost immediately swamped with Chinese imports?

Col. John Charlton: I was operating in the Central portion of Al Anbar and one of the areas where I saw a tremendous amount of potential was in agriculture. In central Anbar, there are ample supplies of water (3 large lakes and the Euphrates River), good soil and a temperate climate. If properly developed, this region could become a major agricultural center. Not necessarily manufacturing, but great potential for agri-business.


Chevy Chase, Md.: The smaller CERP projects are interesting and seem to be in line with the original mandate and purpose of CERP. However, in recent years, there has been an increase in the number of projects over 500K and even $1 million. Do you find this trend disturbing?

Col. John Charlton: During my 15 month tour in Anbar, we spend over $80 million for CERP projects...literally thousands of projects. Most of them were projects that cost under $50K. Anything over $50K had to be approved by my higher HQ and I only had one project that went over $500K (generators for the ceramics factory). I felt that we were very much in line with the purpose of CERP and the results were clearly evident on the ground. Attacks in my area went from 30 - 35 per day down to essentially zero. We also worked closely with USAID and the Department of State on implementing other long-term development projects. Bottom line- I think we definitely followed the spirit and intent of CERP in our area and it was extremely effective.


Sarah Cohen: If you haven't seen it yet, we posted the list of 26,000 CERP projects here -- you can search for the projects that we mentioned in the stories or browse it to see the different kinds of things that the program's been used for.

On the map (be a little patient with it at first), you can see where different kinds of spending went and watched how it moved with the progress of the war.


Fairfax, Va.: Now that Iraq has stashed away billions in oil revenue is the U.S. going to continue paying for the projects including new hotels in Baghdad to be owned by the Iraqi government?

Dana Hedgpeth: Hi, you raise an interesting point -- yes Iraq does have sizeable oil revenue and U.S. government auditors have looked at how they will have quite a surplus of revenue that could be spent, they say, on reconstruction projects.

Col. John Charlton: I'll just answer with respect to my experience in Ramadi. When we arrived in JAN 07, the city of Ramadi was essentially destroyed and there was no effective local or provincial government because of the security situation. The provincial council had to operate from Baghdad because it was too dangerous in Ramadi. The governor's office had a hole in the ceiling where a mortar round had landed a few weeks earlier. We had to work hard with the Iraqi Army and Police to bring security to Ramadi and Anbar province. Once we established security, we then had to work with Iraqi leaders to rebuild their local and provincial government institutions. That took a long time. The Iraqis couldn't effectively manage their own resources until those government institutions were reestablished. Now that governance is back on track in Anbar, we are seeing more and more Iraqi money being spent in the province. The key to getting more Iraqi funds into reconstruction is to continue to work with them to improve those government institutions. This is something that takes time and both Iraqis and the U.S. are working hard on this issue every day.


Princeton, N.J.: There have been a series of articles in the press pointing out that the situation in Iraq is nowhere near as rosy as painted by the Republicans. Most recently, we have had an article reporting that the Iraqi government is not spending its oil bonanza, but squirreling it away probably for latter transport to Swiss banks where so much money to Iraq has been "lost." Today there is an article of how private enterprise is failing in Iraq.

We all know about the 5,000,000 refugees both in and out of Iraq. We can all see the walls dividing Baghdad into ethnically cleansed neighborhoods. With all this, how can anyone believe Iraq is getting better in any meaningful way?

Dana Hedgpeth: It is an interesting question you raise and the Government Accountability Office has looked at this in their "benchmarks" reports where they look at how far Iraq has come. Bottom line, I'm summarizing quickly here, progress is being made but there's a long way to go in a place where people don't have such basic services as reliable drinking water and electricity.

Col. John Charlton: There are still many challenges in Iraq but there are many, many success stories out there. When I arrived in Ramadi in early 2007, Al Qaeda still controlled much of the city. We experienced 30 - 35 attacks a day and the terrorists had declared Ramadi their "capital city." After 15 months of hard work, Ramadi is now a city reborn. The citizens of that city have held unity parades, 5k fun runs and live their lives in peace. The local and provincial governments are reestablished. The judical system is back in place and Iraqi judges are holding felony and terrorist trials in the provincial justice center. Again...there are still many, many challenges but I found myself inspired daily by the great work of our troops and the courage and dedication of the Iraqi people.


Rockville, Md.: When there was a Huck insurrection in the Philippines, they built hospitals knowing they would be blown up. But the people knew who was destructive and who was not and it was a form of propaganda. They would build the hospitals again and again and the insurrection lost. Of course a hospital in the tropics is not the multi million dollar structure we have.

Sarah Cohen: Hi, Rockville. It's funny you mention the Philippines. When we were researching the story, several military historians pointed to that insurrection as a precursor to the counterinsurgency methods in Iraq and to the program we wrote about today.

It's not just hospitals there - one colonel, I was told, rebuilt water systems, just like in Iraq. And it was apparently quite effective.


Bethany Beach, Del.: You mentioned that attacks in your AOR went from 30-35 per day to essentially zero. This seems like one of the major ways you measured CERP success. Did you use any other metrics to measure the success of CERP projects you employed?

Col. John Charlton: Great question. We would only start a project if the Iraqis thought it was critical to maintaining stability. Those project proposals would come from the local goverment or community leaders. We would also look at the overall benefit to the community that would come from the project such as number of people employed, how badly did the community need this project (things like basic essential service projects were very important)and would this project provide long-term benefits to the community. I would review all projects weekly with my commanders and they would give me feedback on how they were going. I also visited these sites every day and talked to Iraqis. This "on-the-ground" feedback was very important to me in determining the value of a particular project.


Rockville, Md.: In my Vietnam training I met a lot of people from the Philippines who had been in the national police force. They had some good ideas and tactics.

Sarah Cohen: Interesting. The same historians also told us that the U.S. used some of the same ideas in South Vietnam.


Wilmington, N.C.: Won't people - caring, thinking consumers of the world - buy MADE IN IRAQ even if products from China result in more diminutive price??? I'm still waiting for those somewhat flat wool stylish hats from Afghanistan. I was optimistic that Galliano or Dior or someone in the fashion world would have thought of it. It would have resulted in monies for the locals. I mean look at the the caps from Ralph Lauren our Olympians are sporting. Thank you for approaching my idea.

Dana Hedgpeth: Good point. Although, I talked to a U.S. soldier about this very thing and he said Iraqis tell him, "we don't want to buy things that say Made in Iraq. We want things that are made in China."


Gainesville, Va.: With this funding going through so many hands in theater (Coalition and Iraqi), how can we be assured that misuse of funds is being minimized? The picture in today's Post shows Soldiers in the street handling U.S. currency. Is U.S. currency widely used within Iraq? What controls exist to ensure misappropriation does not take place?

Dana Hedgpeth: There are controls in place to make sure that American cash is accounted for. The military -- as you know has pretty strict rules for who can and can't handle cash and it is not the same person handing out the cash, as it is selecting the project. There are typically officers who choose the project and then a different person, known as the "pay agent," who will come and pay the appropriate amount. As you can tell from the picture we ran, it is accounted for in the field by hand and then scanned into databases, usually at a forward operating base. I too wondered about misuse of funds with it changing to so many hands and asked auditors at the Special Inspector General for Iraq Reconstruction and the Government Accountability Office about this. Both agencies said in their work of looking at CERP, which includes spot checks on projects, they had not found cases of fraud or misuse and doubted there would be in this type of program. That being said, U.S. auditors said, they couldn't account for how much say an Iraqi contractor may skim off the top before he paid, say, his crew of men to fix a pipe for the day.

Col. John Charlton: There are good control measures in place for the use of CERP. It starts with the project proposal. It has to be approved by the Iraqi leadership so that we know it is something the community really needs. The proposal includes a detailed statement of work and cost estimate along with an estimated completion time, analysis of the benefits to the community, number employed, etc. As a brigade commander in Anbar, I had authority to approve projects up to $50K. Anything higher went to a reconstruction board at my higher HQ. Anything over $500K would go to Baghdad for even higher level review and approval. I would do internal audits every month of my CERP projects and received external audits periodically (you don't leave Iraq until you have balanced your checkbook!). To add to Dana's comments about disbursements...those are very controlled. We have pay agents appointed on orders and any dispursement must be carefully recorded.


Madison, Wis.: Funny you should mention the Philippines because in the recent emergency CERP supplemental, the Philippines was appropriated $2 million through the end of the fiscal year. What are your feelings about making CERP a permanent DOD authority and one that could be used in smaller, less public counter insurgencies that U.S. forces are embroiled in?

Col. John Charlton: I won't comment on policy questions but I do know that having money available to help with stabilization during a counterinsurgeny campaign is absolutely critical. CERP was a very effective resource in Anbar that helped separate the terrorists from the population.


Annapolis, Md: How is the money transferred from the US Treasury to a program in Iraq? Does a person (who owns a program) actually receive American dollars? Or, is the money deposited in a bank? Does Iraq have a functioning banking system?

Dana Hedgpeth: Good questions. Thanks. We found in our reporting that the money actually comes from a U.S-related financial institution in Germany. I am told that it then goes in C-130 cargo planes to Baghdad and is distributed from there to various locations throughout the country. The money, I'm told, is recounted in the shrink-wrapped and/or banded stacks at each stop and stored in safes at bases. On the banking system --- Iraq is not quite fully up to par on its banking system but they're working on it and it varies by communities. Some, and I say some, military leaders are trying to get CERP payments done in dinars but it is hard without a reliable banking system in place.


Princeton, New Jersey: It is interesting that whenever one talks about facts in Iraq like the refugees or the walls of Baghdad, the answer starts with a sentence about "challenges." I'm beginning to believe that "challenges" is just another word for "failure."

Dana Hedgpeth: Hmm. I guess it depends on your perspective. Thanks for sharing.


Helena, Mont.:"In central Anbar, there are ample supplies of water (3 large lakes and the Euphrates River), good soil and a temperate climate." A very wise agricultural engineer once commented that irrigated agriculture in this area ended because, without proper soil drainage, the land becomes either waterlogged or too salty to grow crops. Don't make the mistake that because there is "good soil" that it can be irrigated - too much depends on the conditions underground.

Col. John Charlton: Good points and I am definitely not an agriculture expert. However, there is some degree of irrigation in place now in Anbar and in my discussions with the Iraqis, this effort could be expanded greatly. There is an agricultural university in Ramadi which now has a partnership with Texas A&M and I'm sure they are working hard on this problem. By the way...I would have loved to have had more agriculture experts helping out when I was over there so if you are interested....


Reston, Va.: I guess my problem is that taxpayer dollars are being used.. the free market is more efficient.

Sarah Cohen: Hi, Reston.

When Sens. Warner and Levin wrote to Sec. Gates about a $33 million business center near the Baghdad Airport, that was partly their point -- it was the kind of thing that they thought ought to be an attractive opportunity for international investors, rather than funded by U.S. counterinsurgency funds.

That said, Iraq's economy still isn't really operating all that well, and the private sector is slow to get moving. A story in another paper today was about how the government is hiring a lot of people because the non-oil part of the economy has lagged.


Arlington, Va.: What's next? Should more of the same continue, should it be (and is there a possibility) to scale up further? What happens if the withdrawal timeline/horizon occurs?

Dana Hedgpeth: This is the very question I asked Army Gen. Pete Chiarelli, who is the Army's vice chief of staff and close to Gen. Petraeus. His answer was, basically, that as long as U.S. troops are there he felt CERP funds were needed. That being said, some members of Congres -- Sen. Carl Levin and John Warner -- both on the Senate Armed Services Committee say they want Secretary Gates to look at how the money is being spent.

Col. John Charlton: I can only say that as a commander conducting a counterinsurgency campaign in Iraq, CERP was a very effective tool. In a counterinsurgency, you need to have the means to apply lethal and non-lethal effects and CERP gave us the ability to stabilize Anbar and separate the terrorists from the population...all without the need for increased violence.


Wilmington, N.C.: I meant create a market for their items in Eastern Europe, U.S., UAE and other more affluent areas.

Dana Hedgpeth: Ah, sorry I think I misunderstood your question. My apologies. Not sure whether people here would buy made in Iraq stuff. On another story I did, U.S. companies who thought about buying stuff made in Iraq to sell here found that it didn't get a good result in testing so they never did it.


Dana Hedgpeth: We're going to sign off now. Thank you for your questions.


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