Inside Iraqi Corruption

NewsMax ^ | 3/29/05 | Charles R. Smith

[Softwar]

Inside Iraqi Corruption Charles R. Smith Tuesday, March 29, 2005

John A. Shaw is a curious example of Washington politics gone mad. Shaw is a veteran government employee who served inside the White House under Presidents Ford, Nixon and Reagan and was an associate deputy secretary in the Department of Commerce.

In 2001, Shaw was appointed by Bush Defense Secretary Don Rumsfeld to head the newly formed Office of International Technology Security. In this post, Shaw began the difficult task of reforming government controls over the export of sensitive technology to foreign countries.

In 2003, Shaw began investigating allegations of missing money at the Iraqi Ministry of Communications. According to a Defense Department report, Iraqi, U.K. and U.S. officials abused reconstruction aid, moving millions of dollars into private accounts. Worse still, many of Saddam's former backers and foreign corporations accused of helping the dictator stay in power have now managed to win millions of dollars in contracts from the new Iraqi government.

Friend of Saddam

"The winners in the Iraqi cellular license tender were Saddam's most senior financiers, their Egyptian, Kuwaiti and Iraqi supporters, the bank BNP Paribas, European cellular corporations – particularly Alcatel and the European GSM technology it depends on – and Chinese telecom interests such as Huawei, which had been active in breaking the Iraqi embargo," states the May 2004 Defense Department report on Iraqi telecommunications.

"Corruption was the hallmark of the Saddam Hussein regime in Iraq. The award of telecommunications contracts should have been an early example of how things would be different in the new Iraq. However, there is ample evidence that the old ways have transferred to the new Iraq with the award of these cellular contracts, and that Americans in the CPA (Coalition Provisional Authority) were either duped in the process and should have exercised far greater diligence or may have been participants in the matter," noted the May 2004 report.

"One investor in all three regions, billionaire Nadhmi Auchi, is widely regarded as a corrupt supporter of Saddam Hussein's regime who got his money from doing deals, especially illegal arms transfers for Saddam," states the report.

Auchi is a central figure in the U.N. oil-for-food program where both U.S. Congress and a special U.N. investigation are looking into massive corruption and a missing $10 billion.

Auchi is no ordinary man but a member of Saddam Hussein's inner circle. Auchi was tried alongside Saddam Hussein for his involvement in a conspiracy to assassinate an Iraqi prime minister in the 1950s. Auchi used money from military contracts in Iraq to establish close political, business and banking contacts in Britain and Luxembourg.

"His first business coup was to broker a deal to sell Italian frigates to the Iraqi defense ministry, for which he received millions of dollars in commission. The deal to buy the ships and other military equipment from the Italian naval shipyards, Catiri Navali Riunit, sparked an Italian parliamentary investigation into alleged bribes. Investigators discovered that a Panamanian company owned by Auchi, the Dowal Corporation, was used to funnel alleged illegal payments," noted the May 2004 Defense Department report.

Auchi's relationship with the British government is already under fire, with the billionaire having collected several prominent politicians as directors of his vast European empire of holdings.

Before the War

However, it is very clear that Auchi had a special deal with Saddam Hussein before the war because the Iraqi dictator allowed the billionaire to set up business inside Baghdad. Despite the pre-war contracts with Saddam, Auchi remains in place today.

"Iraq's prewar [telephone] system was essentially a hard-wire and fiber-optic network that was said to serve 1.25 million customers, largely in Baghdad with a build-out to the largest cities. Cellular phone service had never been allowed to get a foothold in Iraq because of Saddam Hussein's security concerns," noted the Defense Department report.

"But in the year before the war, Saddam had his principal international finance man, Nadhmi Auchi, bring in a team from Luxembourg that formed part of the French-trained support structure that underlay his North African and Middle Eastern cellular phone empire. That team would remain in place in Baghdad and help to form the core competency of the CPA communications effort after the war," states the report.

U.S. and U.K.

According to the Defense Department report, U.S. and U.K. officials are also involved deeply in allegations of payoffs, kickbacks and bribes.

Two key U.S. players inside Iraq were Dr. Daniel Sudnick, the Coalition Provisional Authority (CPA) senior adviser for communications, and Terry Sullivan, who acted as the go-between for the CPA and the Iraqi governing council on Telecom issues.

Sullivan, for example, left his position with the U.S. government "to join the winning bidder in the southern [Iraq] region, Atheer, two weeks before the announcement of contract winners," noted the Defense Department report.

"There remain numerous allegations of payoffs and kickbacks from the winning consortia to a variety of decision makers, including [Iraqi] Minister of Communications Haider al-Abadi, Dr. Daniel Sudnick and Iraqi Governing Council member Ibrahim al-Jafferi," states the May 2004 Defense Department report.

"Three separate identified sources provided details of corruption for this report. One source reported a payment of $5 million was made to al-Abadi, a payment of $5 million was made to the two Brits, and a payment to Terry Sullivan of $1.5 million (with an undisclosed sum going to 'a second American and the CPA'). A second source reported a payment of $3 million made to al-Jafferi and a matching amount to al-Abadi. A third source, two Iraqi ministers, identified Sudnick as one of three people had been paid by Auchi's bagman," stated the Defense Department report.

By March 2004, Shaw wanted to get to the bottom of the corruption inside Iraq and ensure that U.S. firms got a fair shot at bidding on reconstruction contracts. Instead, Shaw was accused of steering contracts to U.S. firms and came under FBI investigation after a series of stories broke in the L.A. Times.

"When I surfaced the corruption in the Iraqi cellular phone tender in late March 2004, [Defense PR spokesman] Lawrence DiRita immediately had the Defense Department Inspector General shut down my MOU and started a smear campaign with [an] L.A. Times reporter alleging that I was trying to arrange a sweetheart deal of my own," stated Shaw.

"That tissue of lies was disproved at the outset and at least three times since, but it provided them with a diversion to cover up my report for many months," noted Shaw.

Winners and Losers

The real winners in the Iraqi conflict may be the same old gang of corrupt leaders before the effort to unseat Saddam Hussein. Auchi was reported to have full run of the palace in the Green Zone and met with "everyone important," including CPA top leader Paul Bremer.

Yet the deal for Iraqi cell phones may have a darker side. The losers may be the U.S. troops and Iraqi security forces in the field.

The features of the Euro-GSM cell phone system employed by the winning Auchi-backed companies are proving to be deadly. The Iraqi cell phone system seems to be very useful for terrorists inside Iraq to set off explosive devices and booby traps – something that would be much more difficult if the Iraqi system used the competing U.S. standard CDMA system.