Friday, November 11, 2005

Business as usual?

He has a PhD in Economics. He was an experienced businessman in his adopted country of Poland. His business ventures included selling used cars and a pizza parlor. "Before, I sold water, flowers, shoes, cars — but not weapons." His name is Ziad Cattan. He went to Iraq to try to convince his elderly father to return with him to Poland before the invasion of the Coalition of the Willing. He went to do good, and did very well, as seen in the following from The Los Angeles Times report :
"Cattan's ascent began two days before the March 2003 invasion of Iraq, when he returned from Poland after 26 years in an attempt to bring his elderly father out of Iraq to safety. His father refused to leave, however, so Cattan decided to stay as the war raged on. A broad, garrulous man with boundless confidence, Cattan figured he could help rebuild the country, drawing on a past that included an economics doctorate and business ventures including used cars and a pizza parlor.

Cattan was elected to one of the local advisory councils the U.S. set up after the initial combat phase of the war. He soon became close with the U.S. troops that occupied his neighborhood, filled with military officers who served under President Saddam Hussein, who had just been toppled. By early 2004, as the U.S. moved toward handing sovereignty to the Iraqis, Cattan had caught the eye of American officials who were scrambling to build a new Defense Ministry. The U.S. was starting from scratch. Coalition advisors decided that civilians should lead the new ministry, but under Hussein, the Defense Ministry was run by military officers, meaning there was no pool of experienced Iraqis from which to draw.

In desperation, Americans cast a wide net, sending interested Iraqis to the United States for a three-week crash course on Defense Ministry management. Cattan was one of the first to go. Upon his return, he rose quickly through the new ministry's ranks, becoming the director of military procurement after the first director's assassination. Cattan was chosen partly because he had done a good job obtaining furniture for the ministry building, one source said.

He impressed U.S. officials in the coalition with his ability to get things done, a trait lacking in many Iraqi government prospects, who had learned to avoid taking the initiative under the Hussein dictatorship. "He was somebody we recruited, and we were taking a chance on him just like on everybody else," said Frederick Smith, a former Defense Department official who was one of a handful of coalition officials charged with building the ministry. "Ziad is not a choirboy. But he was willing to serve."

As the U.S.-led Coalition Provisional Authority handed over sovereignty in June 2004, the American mission in Iraq shifted its focus to training and equipping Iraqi forces. Cattan said U.S. officials pressured the Iraqis to begin spending Iraqi funds, which would supplement American spending on arms contracts that had gotten bogged down in the U.S. contracting process. Gen. David Petraeus, head of the training mission, and Nick Beadle, a British Defense Ministry official who was chief advisor to the Iraqi Defense Ministry, declined to comment.

All of sudden, Cattan had $600 million to spend, with a mandate to spend it by the end of December under Iraqi budgeting rules.

Besides the quality of the material, U.S. and Iraqi officials have raised questions in audits and financial reviews about the possibility of fraud in the payment mechanism. The Polish contracts, like others signed by Cattan, were paid in cash, up front — both violations of Iraqi contracting regulations, according to a confidential audit by the Iraqi Supreme Board of Audit obtained by The Times.

Many of the contracts signed by Cattan passed through companies run by Iraqi businessman Naer Mohammed Jumaili, whom Cattan had gotten to know while on the advisory council, according to Cattan and the audit. Cattan said he worked closely with Jumaili and other businessmen who owned cash-transfer companies, which exchange currency and move it outside the country. Cattan said he awarded them reconstruction contracts as they provided information on insurgent money flowing into Iraq. "They supported me to become a big man in Iraq," Cattan said of Jumaili and the other businessmen, whom he referred to as "my friends."

All told, nearly $1 billion worth of contracts were signed with Jumaili's companies, according to the audit. Cattan said Jumaili charged 1% for his services. If true, Jumaili could have earned up to $10 million in fees. Jumaili could not be reached for comment.

U.S., Iraqi and coalition officials said they didn't know about the enormous cash transfers until after one especially large shipment of $300 million became public last winter, when ministry officials were spotted loading bags stuffed with $100 bills onto a flight to Jordan. U.S.-appointed military advisors conducted a high-level financial review of the ministry's books, resulting in a determination in February of a "high risk of fraud," according to two sources with knowledge of the review. That review, in turn, sparked a more thorough examination by the Supreme Board of Audit, one of three anti-fraud Iraqi agencies supported by the U.S. government to crack down on corruption.

The May report, which reviewed 89 contracts worth $1.3 billion signed between June 28, 2004, and Feb. 28, was sharply critical. Auditors could not find contract copies, payment receipts or verify that equipment had been received. The audit criticized Cattan's cash payments as a "flagrant violation of the state monetary policy."

Iyad Allawi, the U.S.-appointed interim Iraqi prime minister at the time of the deals, said he wasn't aware that Cattan was using private intermediaries to transfer cash. He charged that the accusations of corruption within his Cabinet were politically motivated.

"I don't think it is fair at all that we shift focus from Saddam and the corruption during Saddam's time … to a period of six to seven months when I was prime minister," said Allawi, who noted that he initiated three investigations. "That is not to say that there is no corruption — there is, of course, corruption."

Another contract called into question by the auditors and U.S. officials involved Wye Oak Technology, a Pennsylvania firm run by Dale Stoffel, an American arms broker. Stoffel, who was killed in a roadside attack after reporting his concerns about corruption at the Defense Ministry, was the subject of previous Times stories. Stoffel had an agreement worth up to $283 million to refurbish Iraqi tanks and sell scrap metal abroad, according to interviews and documents. When Cattan was slow to pay invoices, Stoffel complained to the Pentagon that the Iraqis were demanding kickbacks by insisting that only certain contractors be hired, according to letters obtained by The Times.

Cattan's improbable rise and fall raises troubling questions about American oversight of the Iraqi army's development, considered the most important mission in reducing the number of U.S. troops in harm's way. The portrait that emerges from interviews and documents is a Defense Ministry whose members were picked with the care of choosing a pickup basketball team. U.S.-appointed military advisors often selected inexperienced Iraqis and watched as they cut pell-mell weapons deals that eventually totaled one-third of the entire procurement budget."

You just have to wonder how well planned that Iraq crusade was. The invasion seemed well planned, but where was the plan to win the war? Where was the plan to seal the peace? And if there was none, how is that any different from the pillage and plunder of the barbarians? The Coalition Forces cannot be blamed for everything that went wrong in the post-invasion rebuilding process, but they can be scrutinized for that which went according to plan. LIke FEMA after the hurricanes.

Related post: http://guambatstew.blogspot.com/2005/10/building-wealth.html

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