news.bbc.co.uk/nol/shared/bsp/hi/pdfs/08_02_05_fileonfouriraq.pdf
NORTHAM: Why did the Coalition not insist that there should be proper metering and accounting for the oil?
LEENDERS: Well that’s everybody’s guess, and on top of that they have resisted for a very long time for the auditing agency …
NORTHAM: Under the UN?
LEENDERS: Under the UN, to start monitoring and auditing the funds. This is only very recent. And the conclusions they are coming up with are devastatingly critical of the CPA’s behaviour in Iraq.
NORTHAM: What are they saying?
LEENDERS: Well they are saying that not only is there no oil metering equipment in place, on top of that some oil revenues are not going into the development fund for Iraq, in violation of the UN resolutions. I really fear that, given all the factors in Iraq, which constitute a fertile ground for corruption, and the lax attitude by US officials in Iraq, that corruption will be huge and Iraq reconstruction will turn into one of the biggest corruption scandals in history…
NORTHAM: One of the areas of greatest concern is the awarding of contracts, together worth billions of dollars, supposedly for reconstruction and humanitarian needs. If oil revenues are to be spent properly, then the business of contracting needs to be tightly monitored. But Iraqis complain of weak controls, leaving scope for negligence, waste and fraud. Dr Isam al Khafaji, who worked with the US State Department before the war, has been dismayed to see millions after millions of dollars disappear into a web of profligate, sometimes corrupt, businesses.
KHAFAJI: The contracts were given according to, first, who knows whom; second, the Commissions. We have compiled tens of cases whereby the contract is given to companies. But none of these companies implemented the work on the ground. So when you investigate it, you discover that the first contractor subcontracts it to a second, the second to a third, who happens to be a Kuwaiti or a Lebanese, so we have not reached the Iraqi layer, to a fourth, to a fifth. Normally those who implement the project are the sixth.
NORTHAM: And the middlemen are all taking their cut. KHAFAJI: Imagine you are paying six times subcontracting, and to the sixth, who implements the job, does it and feels happy because they are still making profits out of that sixth of the amount that was taken. Now none of these cases that I have heard of was taken through proper tenders.
ACTUALITY AT TYSONS CORNER, VIRGINIA NORTHAM: One of the contractors under suspicion has an office on this busy commuter street at Tysons Corner, a few miles to the west of Washington DC. On the second floor of this block, number 8201 is the office suite of Custer Battles, advertising a ‘very skilled breed of security professionals’. When they opened an office in Baghdad just after the war, one of the founders, Mike Battles, said, “In all my years of experience, I’ve rarely seen such opportunities.” And it appears the company took them.
NORTHAM: Alan Grayson is a lawyer representing two whistleblowers against the company. In court documents, they allege a number of scams which they claim Custer Battles used to milk millions from both US and Iraqi funds.
GRAYSON: Custer Battles established fraudulent sham companies in the Cayman Islands. They manufactured fake invoices that were purportedly issued by these controlled sham companies, which they then turned around and billed to the government.
NORTHAM: And the Coalition paid these invoices that were actually fake, did they?
GRAYSON: Yes. One example is the fact that there were forklifts that Custer Battle found in the course of performing the Baghdad International Airport contract. These were Iraqi Airways forklifts, and Custer Battles found them simply because they were on site and occupying that site and there was nobody else there. What they did was they painted them over so that no one could see anymore that these were Iraqi Airways forklifts, and then they turned around and leased them to a shell entity of their own making and then in turn billed that to the US Government.
NORTHAM: They charged for forklift trucks which they had actually found at the airport?
GRAYSON: That’s right. They charged for equipment that they never owned.
NORTHAM: Altogether, how much fraud do you think Custer Battles committed in Iraq?
GRAYSON: Our best estimate at this point is approximately $50 million.