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Corruption Hurts Iraqis, US Mission: Hearing
Front Companies Bilk Ministry for Millions of Reconstruction Dollars, Iraqis Say
09/23/2008 4:40 PM ET
Salam Adhoob (L), speaking through a translator (R) on Capitol Hill yesterday.
Video: Senate Democratic Policy Committee; Image:
Salam Adhoob (L), speaking through a translator (R) on Capitol Hill yesterday.

Corruption in official Iraqi agencies has led to the loss of billions of dollars and hampered the reconstruction efforts in that country, three Iraqi expatriates told a Democratic Senate Policy Committee yesterday in a hearing on Capitol Hill.

As reported earlier, Democratic senators heard allegations from former anti-corruption officials in Iraq, including the description of several alleged schemes by high-level officials at the Iraqi Defense Ministry to bilk the Iraqi security forces of Other alleged schemes range from organized kidnapping and ransom rings within Iraqi ministries, to Oil Ministry officials’ theft of Iraqi oil to fund militant activity, to personal interference in the Iraqi justice system, to Iraqi officials taking direct payments from foreign governments including Iran and Saudi Arabia.

Video and documents available from the record of the hearings give further detail to the allegations. The following paragraphs, submitted in testimony by Salam Adhoob, the former head Chief Investigator in Baghdad for the Iraqi Committee on Public Integrity, allege deep corruption in the Iraqi Defense Ministry to divert millions of dollars from public to private ends through the use of front companies:

The scheme at the Ministry of Defense involved the establishment of two front companies, Al-Aian Al-Jareya and Safin. Al-Aian Al-Jareya was jointly owned by Nair Mohammed Ahmed Jummaily, the brother-in-law of the current Minister of Defense; Abdul Hamid Aziz Merza, an advisor for the then-Deputy of the President of Iraq; and Rosh Nouri Shawees, who was the brother of the Defense Secretary General. The company was formed and registered with the government at the end of August 2004, with the backing of only $2,000 in capital to cover the billions of dollars in contracts the company would receive. At the same time, these individuals helped form and register a second company, Safin, which was owned by Aza Kafaf, who was the Chief of Staff for the then-Deputy President of Iraq.

In the summer of 2004, the Minister of Defense, Hazim Al-Shalan; the Defense Secretary General, Bruskah Nouri Shawees; and the Deputy Secretary of Contracts, Ziad Al-Qattan, requested $1.7 billion from the then-Iraqi Prime Minister, Ayad Allawi, to form two divisions of Iraqi Special Forces. Once the $1.7 billion in American funds were received by the Ministry, a significant amount of the money was given to the two front companies to acquire airplanes, helicopters, armored vehicles, new weapons and bulletproof vests. The two companies received this money without the benefit of any of the bonds or guarantors usually required for government contractors.

The first front company, Al-Ain Al-Jarrea, was given several contracts totaling $850 million dollars. Three of these contracts were for M-18 military helicopters. The front company charged $4.5 million for helicopters that cost only $1.5 million dollars during Saddam Hussein’s regime. Not only did Al-Ain Al-Jarrea overcharge the Iraqi government, the company never delivered the M-18 helicopters. A team of Iraqi army officers traveled to Poland and Russia to inspect helicopters that were scheduled for delivery to Iraq. When the team arrived to inspect the equipment, they did not find the 64 M-18 helicopters, instead they found four re-painted, defective helicopters that were more than 25 years old. The team rejected the helicopters and the Iraqi Army refused to accept them, but instead of demanding repayment from Al-Aian Al-Jareya for the useless helicopters, the Ministry of Defense renegotiated with the companies for a series of mobile toilets and kitchens -- which have never been delivered.

Helicopters were not the only military equipment that was not delivered by these front companies. Despite having been paid in full, the two companies delivered only a small percentage of the other weapons and military equipment that had been ordered by the Ministry of Defense. Major items like airplanes and vehicles either never arrived in Iraq or were unusable. Rusted, decades-old weapons were painted over to look new, but many of them did not work. Bullet-proof vests were defective and could not be used. All of this left the Iraqi army without the helicopters, airplanes, armored vehicles, functioning weapons and bullet-proof vests that the army needed to stand up and shoulder the burden of this war. Even as the Iraqi army could not fight for lack of equipment, corrupt Ministry of Defense officials used these front companies to enrich themselves by diverting hundreds of millions of dollars, which should have gone to military equipment and weapons. Iraqi and U.S. soldiers have died as a result of these criminal acts, yet not one of these criminals has been held accountable by the Iraqi or U.S. governments.

In questioning, Adhoub explains that in one instance the Iraqi military received a shipment of unusable rusty rifles dating to 1975.

The former Iraqi official’s submitted testimony continues to allege that the corruption schemes included diverting funding to armed groups in the country:

American financial assistance meant to strengthen the Iraqi military and stabilize Iraq not only made it into the pockets of corrupt officials. These same funds actually helped finance Al-Qaeda terrorists who have been killing American soldiers and Iraqi citizens. CPI investigators uncovered the transfer of funds from these front companies, Al-Aian Al-Jareya and Safin, to terrorists. The CPI discovered that one of the owners of Al-Aian Al-Jareya, Nair Mohammed Ahmed Jummaily, the brother-in-law of the current Minister of Defense, diverted a portion of these funds to Al-Qaeda in Iraq. Informers have told me that Mr. Jummaily traveled to Amman, Jordan to deposit money into the accounts of Al-Qaeda operatives. On his way back from Jordan, he was given safe passage through the city of Ramadi, Iraq, which was controlled by Al-Qaeda at the time. Mr. Jummaily was a well-known Al-Qaeda supporter and he and his attorney also worked with the Minister of Defense to release imprisoned Al-Qaeda terrorists.

The use of Iraqi front companies acting as go-betweens between Western firms and Iraqi agencies also allowed corrupt officials to enrich themselves at Iraqi expense, Adhoob alleges:

Mr. Jummaily also enriched himself -- and through kick-backs, Ministry of Defense officials -- as a middleman for contracts between the Iraqi government and American companies. As a middleman for the American company AM General, Mr. Jummaily's front company received $59.7 million on a contract to deliver Humvees to the Iraqi Army. In a letter dated June 8, 2005, AM General authorized Mr. Jummaily's company to “conduct all financial transactions” relating to its contract with the Ministry of Defense. Under this contract, AM General submitted $18.4 million worth of invoices to the Iraqi government for work that was not performed. In its contract, AM General was to deliver 520 humvees; it delivered no more than 167. I have copies of these invoices and documentation from Iraq's independent auditing agency, the Bureau of Supreme Audit, that support this finding.

Another middleman, Raymond Rahma Zayna, served as a go-between for contracts between the Ministry of Defense and the American company Wye Oak Technology. Like Mr. Jummailly, Mr. Zayna illegally skimmed money off the top of contracts and paid kick-backs to Minitsry of Defense officials. Bruskah Nuri Shawees, the Ministry of Defense’s Secretary General, gave Wye Oak Technology a contract to “inventory, assess, recover, and sell all of the Iraqi Ministry of Defense material described as scrap military equipment in the territory of Iraq.” Mr. Shawees also gave Wye Oak Technology a $24 million contract to repair tanks. Although Wye Oak Technology submitted millions of dollars worth of invoices to the Ministry of Defense, the work was never performed. I have copies of these invoices and documentation from the Bureau of Supreme Audit that the contracts were not properly executed. Mr. Zayna’s front company, the General Investment Group, received $24.7 million from the Iraqi government for this contract, despite the fact that the work was never completed.

Submitted testimony of the three witnesses can be viewed here in PDF format:

Salam Adhoob, Former Chief Investigator (Baghdad), Commission on Public Integrity Government of Iraq: adhoob.pdf

Abbas S. Mehdi, Ph.D., Professor of Sociology and Organization, St. Cloud State University, Minnesota and Former Chairman of Iraqi National Investment Commission, Iraq: mehdi.pdf

Anonymous Witness, Former Senior Advisor to the U.S. Government in Iraq anon.pdf

The whole hearing can be viewed below. The first 1:25 of the video consists of the three witnesses reading their submitted testimony (available above in PDF format) into the record, after which members begin questioning the witnesses.

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