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StateSide:Policy
Archive: September 2008
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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: IraqSlogger.com.
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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Departing General Thanks Soldiers, Cues Odierno
09/22/2008 12:52 PM ET

Linked below is a PDF file with full text of the farewell letter, reported earlier, that was penned by outgoing Iraqi commander Gen. David Petraeus to American forces in Iraq.

Read the full letter here: Gen_Petraeus_Final_Letter_to_Troops.pdf

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Watchdog Criticizes State's Plan to Resettle 17,000 in 2009
09/12/2008 6:35 PM ET
Below is full text of a statement released today by the refugee advocacy organization Refugees International, commenting on the State Department's 2009 goals for resettling Iraqi refugees.

U.S. Goals for Iraqi Refugees are Inadequate

New Resettlement Numbers Fall Far Short of Needs

Washington, D.C. - Refugees International expressed disappointment today at the State Department's goal of resettling only 17,000 Iraqi refugees for the 2009 fiscal year, which begins October 1. While the United States achieved its target of resettling over 12,000 Iraqi refugees in 2008, the needs are far greater. The Office of the UN High Commissioner for Refugees (UNHCR) estimates that in 2009, 90,000 Iraqi refugees in the region will be in urgent need of resettlement. This number does not include vulnerable Iraqis who remain inside their country, or Palestinian refugees from Iraq, who live in desperate conditions at the Syria-Iraqi border.

"The U.S. certainly met its goal for this year, but next year's target of resettling 17,000 Iraqi refugees falls far short of what is needed," said Senior Advocate Kristele Younes. "Ultimately there can be no stability in Iraq and the wider region without resolving the situation for the nearly five million Iraqis forced from their homes. The next administration must increase the number of Iraqi refugees it resettles, as well as increase assistance to countries that will continue to host Iraqi refugees."

More than 2.7 million people are now displaced inside Iraq, and over 2 million have fled to neighboring countries since the war begin in 2003. These refugees were forced to flee targeted persecution based on religion, ethnicity, or political affiliation, especially individuals who chose to cooperate with the United States. Refugees International is concerned that without the legal right to work in their countries of asylum, many refugees are struggling to survive on limited savings and their status in neighboring countries remains extremely precarious.

"The State Department and the Department of Homeland Security must work together to remove the bureaucratic bottlenecks and resettle far larger numbers of Iraqis who are most vulnerable, including many who are still in Iraq," added Younes. "We also must ensure that host countries like Jordan and Syria have the means to provide assistance to the millions of refugees in their countries. Regardless of the America's future course in Iraq, providing for the well-being of Iraqi refugees is essential for establishing stability in the Middle East."

Refugees International is a Washington, D.C.-based organization that advocates to end refugee crises. Since November 2006, the organization has conducted five missions to the Middle East to assess the needs of Iraqi refugees and work with international leaders to develop effective solutions to this crisis. A new mission to assess the situation for Iraqi refugees in Lebanon and Syria will take place between September 21 and October 9. For more information, go to http://www.refugeesinternational.org/iraq.

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Agency Surveys Logistical Challenges of a DoD Drawdown in Iraq
09/11/2008 2:13 PM ET
Select Installations in Iraq and Key Logistics Activities in Kuwait, from newly released GAO report.
"Select Installations in Iraq and Key Logistics Activities in Kuwait," from newly released GAO report.

Below is are text from key paragraphs of the summary of findings from a newly released report issued by the Government Accountability Office (GAO), which probes the readiness of the US military to "reposture" in Iraq, including the potential drawdown of American forces. A link to the full document appears below.

While efforts have been made to synchronize planning for reposturing, DOD, U.S. Central Command (CENTCOM), and the military services have not yet clearly established all of the roles and responsibilities for managing and executing the retrograde of materiel and equipment from Iraq. Although CENTCOM has designated U.S. Army Central (ARCENT) as executive agent for synchronizing retrograde of materiel and equipment from the Iraqi theater of operations, no unified or coordinated structure exists to account for the roles of the variety of teams and units engaged in retrograde operations. Until recently ARCENT did not have operational control over the two units responsible for retrograding the bulk of equipment in Iraq.

We identified the following nine issues that DOD should consider as it develops a comprehensive plan for reposturing U.S. forces from Iraq: (1) agreed-upon guidance for environmental cleanup and the disposition of property, which could affect the time and cost of closing bases in Iraq; (2) guidance and plans for the reposturing of contractors from Iraq; (3) accountability and disposition of contractor-managed government-owned property; (4) the possibility of restrictive conditions on the use of facilities in Kuwait and other neighboring countries; (5) availability of power-washing equipment and stands, called wash racks, and the number of customs inspectors in Kuwait; (6) capacity of military transports and convoy security assets, including limits on the main supply route; (7) increased demand for access to mental health care providers; (8) infrastructure requirements of returning units; and (9) requirements for training and equipment reset to restore readiness. DOD has begun to address these issues.

While the National Defense Authorization Act for fiscal year 2008 directs DOD to brief the congressional defense committees on certain issues related to reposturing, DOD is not required to provide the specific information identified in our report. We believe that without more specific reporting from DOD, Congress may not be able to effectively exercise its oversight responsibilities.

Read the full 85-page PDF document here: GAO_d08930.pdf.

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Jarrar: Agreement Shows Weakness of Iraqi Negotiating Position
09/02/2008 1:20 PM ET

An Iraqi blogger has translated and published what appears to be a leaked draft of the US-Iraqi Status of Forces Agreement (SOFA), the pact currently under negotiation between the two governments that would regulate the legal presence of American forces in Iraq after the expiration of the United Nations mandate.

Raed Jarrar, who runs the well-known Raed in the Middle blog, posted full text of his translation via his website Monday.

Jarrar writes that he obtained the draft via an unidentified Arabic-language website linked to an Iraqi resistance group, and made his own translation.

The Iraqi blogger, who opposes the presence of foreign forces in Iraq, appends a few brief comments on the draft, writing, "What has draw my attention the most (so far) are three major points." Jarrar goes on to add:

1- the agreement does not discuss anything about a complete US withdrawal from Iraq. Instead, it talks about withdrawing "combat troops" without defining what is the difference between combat troops and other troops. It is very clear that the US is planning to stay indefinitely in permanent bases in Iraq (or as the agreement calls them: "installations and areas agreed upon") where the U.S. will continue training and supporting Iraqis armed forces for the foreseeable future.

2- the agreement goes into effect when the two executive branches exchange "memos", instead of waiting for Iraqi parliament's ratification. This is really dangerous, and it is shocking because both the Iraqi and U.S. executive branches have been assuring the Iraqi parliament that no agreement will go into effect without being ratified by Iraq's MPs.

3- this agreement is the blueprint for keeping other occupation armies (aka Multi-national forces) in Iraq on the long run. This explains the silence regarding what will happed (sic) to other occupiers (like the U.K. forces) after the expiration of the UN mandate at the end of this year.

Read a PDF of Jarrar's 15-page translation here: Jarrar_US_Iraqi_SOFA_draft_of_080608.pdf

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