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IRAQ: Oil-for-food UN mess Pales in Comparison to Recent Contractor Fraud

Those throwing conniption fits over the United Nations' failure of oversight on Iraqi oil revenues might want to meditate a bit on the role of the U.S. government in all this before they further embarrass themselves denouncing perfidious foreigners.

by Molly IvinsWorking for Change
March 31st, 2005

 AUSTIN, Texas -- Some days, it's hard to pick the outrage du jour, but hypocrisy is always an inviting target, and the United Nations oil-for-food scandal provides a two-fer. We have been hearing much right-wing huffing over the dreadful, terrible, awful, unprecedented, worst-ever scandal in all history. One indignant winger was livid because The New York Times devoted more coverage to the collapse of Enron than to the earth-shaking U.N. scandal.

Those throwing conniption fits over the United Nations' misdeeds (failure of oversight, according to the Volcker Report) might want to meditate a bit on the role of the U.S. government in all this before they further embarrass themselves denouncing perfidious foreigners.

For one thing, part of the oversight responsibility was on the United States, as a member of the 661 Committee, which monitored Iraq's compliance with the sanctions. The United States had the power to veto all sales of Iraqi oil and all purchases of goods bought with money from the program. Further, The Washington Post reports, "Diplomats and oil brokers have recently said that the U.S. had long turned a blind eye to illicit shipments of Iraqi oil by its allies Jordan and Turkey. The United States acknowledged this week that it had acquiesced in the trade to ensure that crucial allies would not suffer economic hardships."

In fact, in March 2003, the Treasury Department provided assurances that the United States would not obstruct a plan by two companies to import millions of barrels of oil from Iraq in violation of U.N. sanctions.

Smuggling oil was actually Saddam Hussein's biggest source of income, not the kickbacks he got from oil-for-food. Ahed Okhon, a spokesman for one of the companies, claims Jordan had "blanket cover" from the U.N. sanctions.

Now, for the other end of the hypocrisy-fest. Newsweek, in an extensive report on corruption in Iraq, says: "More than U.S. money is at stake. The administration has harshly criticized the United Nations over hundreds of millions stolen from the oil-for-food program under Saddam. But the successor to oil-for-food created under the occupation, called the Development Fund for Iraq, could involve billions of potentially misused dollars. On Jan. 30, the CPA's (Coalition Provisional Authority) own inspector general, Stuart Bowen, concluded that occupation authorities accounted poorly for $8.8 billion in these Iraqi funds."

Franklin Willis, a former CPA senior adviser, told Newsweek that the administration's reluctance to prosecute outright fraud in Iraq has turned the place into a "free-fraud zone."

The poster child for corruption in the occupation of Iraq is Custer Battles, which overcharged the CPA by millions of dollars, according to military authorities. The administration has refused to join efforts to prosecute the company. Custer Battles denies the charges.

Why the party that used to harp on government "waste, fraud and abuse" is letting this stinking mess of corruption develop may be explained by an executive order Bush issued on May 22, 2003. International Oil Daily reported a few months later: "Lawyers with watchdog and advocacy groups say the president's ruling on indemnity goes well beyond the legal protection for Iraqi oil agreed on at the U.N. Other lawyers and government officials argue that the legal protection is limited to Iraqi oil and that the order was not trying to sneak in a legal shield for corporate America in its dealings with Iraq.

"In the EO, Bush is handing U.S. firms 'a blank check for corporate anarchy' in an 'outlandish cancellation of the rule of law,' said legal director Tom Devine with the Government Accountability Project."

According to Newsweek, the administration argues privately that the CPA was a multinational institution, not an arm of the U.S. government, so the government was not technically defrauded.

"If urgent steps are not taken, Iraq ... will become the biggest corruption scandal in history," said Transparency International, an anti-corruption group.

The EO itself reads: "I hereby order ... any attachment, judgment, decree, lien, execution, garnishment or other judicial process is prohibited, and shall be deemed null and void, with respect to the following: a) the Development Fund for Iraq and b) all Iraqi petroleum and petroleum products." That would pretty much cover Halliburton.

Of course, I'm not arguing that any of this excuses the oil-for-food mess at the United Nations, but I am saying we need to get our priorities straight. The U.N. scandal did not cost the taxpayers any money, but this one is coming right out of our pockets. And if we can't even sue the bastards to get it back, we are in big trouble.





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