by James Risen
The biggest thieves have been far more elusive.
Throughout the summer and fall of 2003, the Treasury team scrambled to launch Iraq’s new currency. In Washington, the Bureau of Engraving and Printing, the arm of the Treasury Department that actually prints U.S. dollars, awarded a contract to a British firm, De La Rue, to print Iraq’s new dinars at seven printing plants around the world. Billions of dollars’ worth of new Iraqi dinars were flown to Iraq—enough to fill twenty-seven 747 cargo planes—and the new currency was introduced on October 15, 2003.
The Treasury team believed that they had finally accomplished all that was needed to provide Iraq with financial stability. They had shipped $1.7 billion in U.S. dollars from New York. Although another $900 million in cash that Treasury officials believed belonged to the Iraqi Central Bank had been taken by the United States and doled out to the U.S. military, billions of dollars in new dinars were now in circulation. The new Iraqi currency proved so popular that it quickly began to appreciate against the dollar. Treasury officials saw no reason for any further cash infusion of U.S. dollars flown in from New York.
But the Treasury team did not realize that the Coalition Provisional Authority had other plans. The CPA was about to make the money delivered in Treasury’s early cash flights look like spare change.
Paul Bremer, the leader of the Coalition Provisional Authority and the de facto viceroy of Iraq, made a series of sweeping decisions soon after he took over from Jay Garner. Bremer issued orders that effectively purged the Iraqi government of Baath Party members and then disbanded the Iraqi Army, virtually guaranteeing an anti-American insurgency. CPA operatives floated ideas like changing Iraq over to the flat tax—a proposal that had been a right-wing Republican Party talking point in the United States for decades. CPA officials were so busy installing their political agenda that they did not take time to actually manage anything.
Ged Smith’s Treasury team saw that there was no oversight, that money was disappearing without a trace, and that nothing was really getting done. And so his entire Treasury team quit in disgust. “All of a sudden the wheels started to come off,” recalled Smith. “It got wildly out of control. I had guys who said they had been in government long enough to know that they didn’t want to be around there, and didn’t want to be part of what was happening.”
Ominously, no one seemed to notice or care. “Once our guys quit, it bothered me that no one in Washington or Baghdad seemed concerned that everybody from Treasury was gone, and that the CPA ideologues were now running the show,” added Smith. “No one was really concerned that Treasury wasn’t there.”
It also meant that the Treasury team wasn’t there to stop one of the biggest acts of thievery in history.
After 9/11, Basel—an Arab-American financial analyst in Fairfax, Virginia, who asked that his last name not be used—was determined to somehow put his hobby of intensive weapons training to use in the war on terror. It took some time, but by May 2003, he finally arrived in Iraq as a contractor with vaguely defined duties for army intelligence. In the chaos of postinvasion Baghdad, he was still trying to figure out what he was supposed to be doing when he ran into David Nummy, a senior member of Ged Smith’s Treasury team. Late one night, Nummy walked through an American-occupied building in the Green Zone and loudly asked if there were any Arab speakers who could help him with an urgent problem. Basel replied that he spoke Arabic, and Nummy quickly led him across the street to a convoy of four cars. The cars were filled with cash that Nummy had just picked up from Baghdad International Airport—the currency from Treasury’s first cash flight from the Federal Reserve Bank of New York. Nummy had decided not to take the cash to the central bank, because its main vault was still under water. He was planning to turn the money over to Iraq’s two main state-owned banks in the morning. But he needed someone who could speak Arabic to convince his Iraqi drivers to stay with the cash-filled cars overnight. Using a bit of charm and guile, Basel convinced the drivers to stay and then helped Nummy safely distribute the cash to the state-owned banks the following morning. Impressed, Nummy hired Basel on the spot to take charge of security and logistics for the Treasury team.
After Treasury ended its cash flights, Basel kept on working, this time for the CPA, which continued to fly cash in from New York after the Treasury had completed its initial infusion to the Central Bank of Iraq. The Treasury team did not realize it, but their idea of tapping into Iraq’s overseas accounts to help the Iraqi financial system had resonated with the CPA and the Bush White House. The CPA quietly arranged to double down on the Treasury plan and started flying in far more cash from New York to Baghdad than the Treasury team had ever considered.
Soon, the CPA gained access to cash held in the Development Fund of Iraq (DFI), a new account created at the Federal Reserve Bank of New York by a United Nations resolution in May 2003. The account held billions of dollars from the Iraqi government’s revenues from oil sales. The UN resolution gave the CPA control over the DFI for use in Iraq’s reconstruction, but also called for the creation of a monitoring board to make sure that the CPA properly used the money for the benefit of the Iraqi people.
The DFI account was a tempting target for the Americans, and so the CPA, established as the sovereign authority over the government of Iraq, issued orders for the release of the money with no real debate, no real controls, and no real supervision. The monitoring board was largely ignored. Before long, more air force cargo planes filled with more billions of dollars were on their way to Baghdad.
These new cash flights were conducted in a way that kept the Treasury Department in the dark. The senior Treasury officials who had been in charge of the earliest cash flights were never told what the CPA was doing. Both John Taylor and Ged Smith said that they were not involved in the CPA’s cash flights, and Smith said he still cannot understand their purpose. Once Iraq had a new currency, there was no need to keep shipping more American dollars, he believed. “We did not know that Bremer was flying in all that cash,” said Smith. “I can’t see a reason for it. Why was the CPA flying in more money after there was a new currency?”
Between May 2003 and June 2004, the CPA arranged for about $20 billion to be sent from New York to Baghdad, including between $12 and $14 billion in cash flown on cargo planes. The cash continued to be flown into Iraq even as Congress was separately voting to spend tens of billions in U.S. taxpayer money for Iraqi reconstruction each year. Overall, the United States spent $63 billion of its own money on Iraq’s reconstruction throughout the war.
For the CPA, one of the big advantages of using the cash from the Development Fund of Iraq instead of money appropriated by Congress was the absence of rules governing how they could use it and the lack of federal regulations or congressional oversight. It was Iraqi money, not American taxpayer funds, and as a result, few people in Washington really cared what the CPA did with it. In effect, it was free cash with no strings attached. And the only Iraqi government leader that the CPA’s chief, Paul Bremer, really had to answer to was, well, Paul Bremer.
In an interview, Bremer defended his handling of the cash flights, saying that the money was badly needed to keep Iraqi government ministries in operation. “[The Iraqi government] was broke at that point,” Bremer said. “Civil servants had not been paid for about three months. We had to get funds there right away.”
“We also needed to get the government started on long-term funding for its regular needs,” Bremer continued. He insisted that there was a budget process in Baghdad which determined how much cash was requested from the Federal Reserve, beginning with proposals from each Iraqi government ministry.
“All those proposals were reviewed by the minister of finance and the minister of planning. Once those two steps were complete, proposals went before the CPA Program Review Board, and if approved they would submit it to me for final sign-off. Then the chief financial officer would propose it to the Fed.” Bremer further explained that the CPA Program Review Board also had Iraqi represen
tatives on it, so they were “involved in the budget process from the beginning.”
But the truth is that much of the cash flown from the United States to Iraq was never used to fund Iraqi ministries or to meet Iraqi payrolls or to keep the lights on in Baghdad. Instead, it simply disappeared.
In the changeover from Treasury to the CPA, the one constant was Basel, the man in charge of making certain that the cash safely made it from the Baghdad airport to downtown Baghdad. Once the CPA took over, the flights to Baghdad from New York became so routine, Basel says, that pilots gave them their own nickname—“jingle flights.”
Basel became the indispensable figure in the midst of the supply chain, the one man who knew the routine, who knew how to move pallets of cash from the airport down Baghdad’s Route Irish and to the CPA in the Green Zone, or to the Iraqi Central Bank, through the teeth of the Iraqi insurgency. In the process, he stored up a headful of weird trivia. He learned, for instance, that a Chevrolet Suburban with a driver and one heavily armed passenger riding shotgun could hold about $96 million in $100 bills—if you flattened the back seats.
Basel took to the cash transport business with relish, planning every trip between the airport and downtown with military precision. He would lead his security and transportation teams to the airport at least twelve hours before each jingle flight was due to arrive, so that he would have the flexibility to alter his schedule or route if there were signs of trouble. After the flight landed, Basel and his detail would drive right up to the cargo plane and meet the U.S. military officer, usually a colonel or lieutenant colonel, who had escorted the cash. Along with Iraqi officials, an American from the CPA’s comptroller’s office would meet the plane with Basel and witness the delivery. The cash would be counted as it came out of the airplane’s cargo hold, and counted again when it arrived downtown.
Basel used sleight of hand to confuse insurgents or criminal gangs trying to ambush his convoys once they left the airport. He would leave the airport at dawn, when there was little traffic, and constantly change the convoy’s routes and types of vehicles used to carry the cash. He would rotate from SUVs to garbage or produce trucks; he would often send out a decoy truck first to see if it was attacked. To guard against betrayal by insiders, he would sometimes tell his Iraqi security and transport staff that the convoy was due to leave the airport at a certain time only to change or cancel the delivery at the last moment. “We wanted to be unpredictable,” Basel said.
Two platoons of U.S. soldiers escorted each convoy while Basel rode with an ex–Iraqi Special Forces soldier who was his most trusted shooter. One of their most frequent destinations was the Iraqi Central Bank, which was not in the Green Zone, and so Basel would arrange to have Iraqis positioned on the streets nearby to warn him in advance of any signs of an ambush waiting at the bank.
Between May 2003 and June 2004, while the CPA was in operation, Basel was in charge of all the cash flights and said he never lost a single dollar. All of the cash that arrived at the Baghdad airport got to its destination downtown, he insisted. “Absolutely, all the money I guarded got to where it was supposed to go,” Basel said, emphatically.
But what happened to it after Basel delivered the cash was another question.
Today, at least $11.7 billion of the approximately $20 billion the CPA ordered sent to Iraq from New York is either unaccounted for or has simply disappeared.
During the post-Saddam era, allegations of massive corruption and money laundering have plagued the Iraqi Central Bank, one of the most frequent destinations of the money from the cash flights. Ged Smith, despite his disgust in 2003, got involved in Iraq policy again in 2007 when he went to Baghdad as the Treasury attaché at the U.S. embassy.
In early 2008, fire struck the central bank, the building that had been looted and flooded in the days after the 2003 invasion. Smith rushed down to the bank and quickly realized that it was an inside job. The worst damage from the fire was to the bank’s computers and financial records. Although the computer system was fried, the bank was still able to function the next day. The bank’s security guard force was present when the fire occurred, but the bank’s video cameras did not show who set the blaze. Many of the bank’s records, dating back to the postinvasion period under the CPA, were lost. The fire was part of a cover-up of massive thievery and money laundering, Smith concluded.
In October 2012, Dr. Sinan al-Shabibi, the governor of the Iraqi Central Bank, went to Tokyo to attend the annual meeting of the World Bank and International Monetary Fund. On his way back to Baghdad, during a layover in Frankfurt, al-Shabibi called a colleague to see if he had missed anything important in Iraq while he was away. He was quickly told that Prime Minister Maliki was planning to have him arrested when he landed in Baghdad. So al-Shabibi caught a flight to Geneva instead, and has been in exile in Switzerland ever since. Maliki’s government issued an arrest warrant for al-Shabibi as part of a wider investigation of corruption and money laundering at the central bank. In a series of interviews from exile in Geneva, al-Shabibi denies the Maliki government’s allegations of corruption against him, and instead says that Maliki moved against him because Maliki wanted to consolidate his own control over the central bank and its massive foreign currency reserves.
Al-Shabibi also said that while he knows that questions have been raised about the missing money from the cash flights from the United States, he does not know whether it was all properly accounted for or not. “There were questions raised by Iraqis [about how the Americans had handled the money], and the answer from the Americans was always an answer that this money has been spent for the benefit of the Iraqi people,” al-Shabibi said. But he added that management of the central bank was weak in the first year or so following the U.S. invasion. “The central bank was not very well organized in the beginning,” he noted. “The early period was a very difficult period.”
Stuart Bowen, a lawyer with a patrician ancestry and deep roots in George W. Bush’s Texas circles, came to Washington with the bona fides of a true loyalist. He had worked for Bush when Bush was Texas governor, had gone to Florida to help the Bush campaign in the legal fight during the 2000 recount, and then joined Bush’s White House staff as associate counsel. He later served as deputy staff secretary in the White House, a position that placed him in the inner ring of trust. And so Bowen seemed to be a safe choice when the White House needed someone who could be counted on to pull his punches and protect the president from the political fallout from the war in Iraq.
Once the war started going badly, and the White House had to continually go back to Congress for more and more money to fund it, frustrated congressional leaders finally demanded that a watchdog post be created to keep track of the tens of billions of dollars they were sending, blindly, to Iraq. The Bush administration reluctantly agreed to the creation of a special inspector general (IG) who would have wide-ranging investigative powers to scrutinize what was happening in the war zone.
But the last thing the administration really wanted was an independent and aggressive inspector general sleuthing around Baghdad. And so White House officials turned to someone they knew was on their side, someone who would say all the right things to Congress but who knew the Washington game of burying problems under a blizzard of rhetoric and paperwork.
Or so they may have thought. Once Bowen was appointed in 2004, it didn’t take the White House long to realize their mistake. Stuart Bowen was, indeed, a Bush loyalist, but he wasn’t a Bush lackey. Once he was named to the post of special inspector general, he did the unthinkable—he took the job seriously. He became the only American official who cared about the disappearance of the billions of dollars flown from the Federal Reserve Bank of New York to Baghdad—and he launched an investigation to try to find out what happened. When he started getting at the truth, however, he faced powerful resistance in Baghdad and Washington.
Bowen got an early clue of what he was confronting during his first trip to Baghdad after being named inspector general. Wal
king through the CPA’s offices in one of Saddam’s former palaces in the Green Zone, Bowen overheard part of a conversation between two CPA officials walking just in front of him. “We can’t keep doing this,” one CPA official said to the other. “There’s an IG here now.”
Soon, Bowen and his investigators began to hear bizarre stories about the way the Coalition Provisional Authority was doing business. Bowen’s people heard about boxes of cash being carried out of the CPA’s offices, with no records of where it went. They heard of contractors being paid millions of dollars for projects that were never built. There were whispers of massive kickbacks and bribes, of foreign workers brought to Iraq in slavelike conditions, of U.S. Army officers slipping cash meant for reconstruction projects into their footlockers to take home. With huge amounts of cash being poured into the war zone, there were signs that the American enterprise in Iraq was being transformed into a vast kleptocracy.
Bowen was stunned to realize that the CPA was a dream world, a bizarre mix of Republican ideologues and freebooters out to strike it rich. As the insurgency intensified and Americans were forced to withdraw behind blast walls in the Green Zone, the CPA’s frenzied spending grew worse, not better. In June 2004, in the last two weeks before the CPA went out of business and handed the country over to a new interim Iraqi government under Prime Minister Ayad Allawi, the CPA ordered between $4 and $5 billion in cash to be flown to Baghdad from New York in a rapid-fire series of last-minute jingle flights. More than one thousand contracts were awarded by the CPA that month, according to the Los Angeles Times. The CPA was shoveling money out as fast as it could be flown into the country, and there were no controls on where that money went.