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Abuses in U.S. Aid to Iraqis Ignored : Mideast: The Bush Administration pushed through $1 billion more in assistance despite reports of kickbacks and evidence that food may have been traded for arms.

March 22, 1992|MURRAY WAAS and DOUGLAS FRANTZ | SPECIAL TO THE TIMES; Waas is a special correspondent and Frantz is a Times staff writer

WASHINGTON — The Bush Administration ignored evidence that a $5-billion American aid program for Iraq was riddled with bribery and that food intended for hungry Iraqis may have been traded for weapons, according to classified government documents and interviews.

Beginning in 1989, Administration officials learned that Saddam Hussein's regime had demanded millions of dollars in bribes from American exporters of commodities, the documents indicate. The commodities had been sent to Iraq as part of a food aid program underwritten by the U.S. government.

Senior Administration officials, including Secretary of State James A. Baker III, were warned of such abuses in the fall of 1989, but still pushed through $1 billion in new government loan guarantees to allow Iraq to buy more agricultural products, classified documents show.

Two Administration officials said the warnings culminated in a highly classified intelligence report in July, 1990--a month before Hussein's troops overran Kuwait. The report said a Jordanian entrepreneur heavily involved in the U.S. aid program also was assisting Iraq's covert arms-procurement network, according to the officials who read the report.

At the same time, Iraq threatened to stop making payments on $2 billion it owed on previous loans guaranteed by the United States unless new aid was approved, according to classified records.

While the intelligence report did not directly link arms deals to food aid, an Administration official said the Jordanian businessman's dual role as arms trafficker and food middleman should have been "sufficient evidence" that aid was being traded for weapons.

Despite the intelligence findings and the Iraqi threat, documents show that the State Department and the White House National Security Council continued to seek the release of a final $500 million in aid for Baghdad.

The disclosures represent the first suggestion that American food aid may have been bartered by Iraq to buy weapons, and they provide new details on the extent of the warnings about widespread irregularities in the aid program. They also illustrate the determination within the Administration to continue assistance to Iraq in the face of evidence of abuses.

That determination continued even after an Agriculture Department investigation completed in April, 1990, was unable to conclude that millions of dollars of commodities shipped through the Jordanian port of Aqaba were ever delivered to Iraq. The department's Commodity Credit Corp. had financed the food purchases for Baghdad.

The Administration maintains publicly and privately that it has no evidence that U.S. food aid was diverted for arms by Iraq.

In an interview, however, another Jordanian businessman, who was involved in the CCC program, said he has firsthand knowledge that aid had been diverted by Iraq as early as 1988.

The businessman, who asked that his name be withheld, said Iraqi officials had bartered U.S. food aid to the Soviet Union in exchange for a shipment of Soviet tanks in 1988. The food was shipped first to Aqaba and then to the Soviet Union instead of being taken overland to Iraq, he said.

Until Iraq invaded Kuwait on Aug. 2, 1990, the CCC program remained an integral part of President Bush's policy of assisting Saddam Hussein in hopes of softening the Iraqi dictator's threats to his neighbors.

The first allegations that Iraq was demanding bribes surfaced in November, 1988, according to a report detailing an Agriculture Department investigation of the charges in 1990.

"USDA had been informed that at least one Iraqi state trading enterprise had been routinely requesting that exporters provide either cash rebates or goods, either in the form of additional commodities or non-agricultural items, as so-called 'after-sales' service in the form of trucks and truck parts," said the report.

Despite an Iraqi pledge to end such practices in 1988, Iraq continued to demand kickbacks. U.S. exporters complained repeatedly to the Agriculture Department that they were forced to give Iraq spare parts with military uses, such as armored trucks, and other bribes in order to sell goods to the Gulf state under the CCC program.

For instance, in a Sept. 7, 1989, letter to the department, a lumber exporter complained of increasing pressure by Iraq to provide free trucks, trailers and tires as the price of continued business.

"The recent telex requests (from Baghdad) have exhibited extraordinarily threatening language, where the future business relations are being judged by our response to requests for free goods," said the letter.

Later court records show that Iraq also was demanding cash from U.S. exporters. Six U.S. tobacco companies pleaded guilty in 1990 to paying more than $1.5 million in kickbacks to Iraq. The funds were transferred to foreign bank accounts, some of which were in countries that had supplied Iraq with arms, such as Bulgaria, France, Germany and Italy.

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