By Nicole Colson | September 30, 2005 | Page 12

ONE OF the biggest thefts in history has happened in Iraq, under the nose--and very likely with the connivance--of the U.S. "liberators." Iraqi officials say that between $1.3 billion and $2.3 billion in government funds was funneled out of the country during the rule of interim Prime Minister Iyad Allawi, between June 2004 and February 2005.

Independent journalist Patrick Cockburn revealed that much of the missing money was supposed to have been spent on training and equipping a new Iraqi Army. Nearly all of these funds went to contracts--awarded without bidding--for useless pieces of military hardware.

Purchases included a fleet of 28-year-old Soviet-made helicopters--bought for $238 million--that should have been scrapped after 25 years of service, according to the manufacturers. Some armored cars purchased by the regime were in such poor condition that bullets from outmoded AK-47 machine-guns can penetrate their armor. Others were leaking so much oil that they had to be scrapped. A shipment of supposed MP5 American machine-guns, bought at a cost of $3,500 each, turned out to be cheap knock-offs worth only $200 per gun.

"Huge amounts of money have disappeared," Ali Allawi, Iraq's finance minister, told Cockburn. "In return, we got nothing but scraps of metal." In all, Allawi estimated, less than $200 million out of more than $1.3 billion was spent on usable equipment.

The massive theft goes far beyond governmental incompetence. According to Cockburn, a May report by the Iraqi Board of Supreme Audit concluded that U.S.-appointed Iraqi officials in the Iraqi defense ministry presided over the bogus transactions--and that there's little chance that such massive looting could have gone unnoticed by U.S. military and civilian advisors.

"Government officials in Baghdad even suggest that the skill with which the robbery was organized suggests that the Iraqis involved were only front men, and 'rogue elements' within the U.S. military or intelligence services may have played a decisive role behind the scenes," wrote Cockburn.

Former Defense Minister Hazem Shaalan, who is accused of being a key player in the theft, told the Independent that everything that he and other Iraqi officials did was with the knowledge of U.S. military and civilian advisers.

The military procurement chief during this period was Ziad Cattan, a businessman who hadn't set foot in Iraq for 27 years until the U.S. invasion in 2003. According to Shaalan, Cattan's appointment was directly approved by Iraq's U.S overseer, Paul Bremer.

But Iraq's Defense Ministry is just one of several government agencies where massive amounts of money have vanished. According to Ali Allawi, some $600-800 million is also missing from the ministries of transportation, electricity, interior and others.

In the case of the Electricity Ministry--which to this day has been unable to effectively restore power to pre-war levels in much of the country--several contracts for power stations were cancelled in favor of building natural gas and diesel-powered stations, despite the fact that Iraq doesn't have adequate supplies of natural gas or diesel fuel.

When a special committee on contracts at the Electricity Ministry refused to sign off on the power station contract, the committee was promptly dissolved--and replaced by one that was more willing to agree to the deal.

Also, according to resources expert Michael Klare, pervasive corruption in the Oil Ministry has meant a siphoning off of substantial amounts of Iraqi oil revenue. "Administrative corruption takes on so many forms," Muhammad al-Abudi, the Oil Ministry's director-general of drilling, said in March. "The robberies and thefts that are taking place on a daily basis and on all levels...are committed by low-level government employees and also by high officials in leadership positions in the Iraqi state."

In all, Cockburn notes, the amount of reconstruction money siphoned off during the eight months of Iyad Allawi's rule is at least as much as Saddam Hussein allegedly received in kickbacks under the United Nations' oil-for-food program between 1997 and 2003.

As the group Transparency International (TI), which tracks governmental corruption around the globe, reported earlier this year, post-war Iraq could be "the biggest corruption scandal in history." "I can see all sorts of levels of corruption in Iraq," TI's Reinoud Leenders told the Christian Science Monitor, "starting from petty officials asking for bribes to process a passport, way up to contractors delivering shoddy work, and the kind of high-level corruption involving ministers and high officials handing out contracts to their friends and clients."

With the continued chaos of the U.S. occupation, there's no telling how much more will be stolen from the Iraqi people.

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