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Iraq Kurds Shortchanged, They Say, by Massive U.S. Cash Drop

The $1.4 billion came from prewar oil sales. Officials contend that even more was missing.

November 21, 2005|Richard C. Paddock and T. Christian Miller | Times Staff Writers

IRBIL, Iraq — The $100 bills were all new. They came wrapped in plastic and loaded on wooden pallets. Altogether, the money weighed 15 tons, enough to fill three U.S. military helicopters. It totaled $1.4 billion.

In a little-known operation during the final days of the U.S.-run Coalition Provisional Authority, American military helicopters flew the shipment of cash to Irbil, Iraqi Kurdistan's largest city.

U.S. troops were waiting on the ground at the airport to unload the money and take it under heavy guard to the headquarters of the province's central bank in the city's core.

The cash payment, which was approved by outgoing U.S. administrator L. Paul Bremer III, was delivered on June 23, 2004, five days before he returned sovereignty to a new Iraqi government in Baghdad and left the country. The money, which came out of prewar oil revenue, was given to top officials with Iraq's two Kurdish provincial governments.

"For us it was so strange," said Rashid Taher, director of finance in Irbil province. "We received it as cash at the airport. Paul Bremer delivered it to us, and we still have the money."

Kurdistan officials say the secret, last-minute shipment highlighted the sometimes-questionable handling of billions of dollars by the United States during the 14 months Bremer ran Iraq.

They say the cash was only part of the $4 billion the region was owed under the United Nations oil-for-food program. And they contend that Bremer improperly used Kurdistan's remaining $2.6-billion share of the U.N. fund for other purposes during his administration of Iraq.

Mahmoud Othman, an Iraqi Kurd who served on the U.S.-appointed Governing Council during the Bremer era, charged that airlifting $1.4 billion in cash to Irbil was an attempt to win the silence of Kurdish leaders after Bremer had squandered the rest of the money. Othman has called for an investigation into the handling of the funds.

"He did this, which is not normal, because he himself had made a mess," said Othman, who serves in the transitional Iraqi National Assembly.

"He had spent part of the $4 billion, and he had to do this to keep their mouths shut about it."

Efforts to reach Bremer, who has said little in public since leaving Iraq, were unsuccessful.

A former top official of the CPA, who did not want to be identified because he was not authorized to speak on behalf of the defunct agency, confirmed that the transfer took place and put the amount at $1.6 billion.

He said the CPA considered the payment a fair distribution of Iraqi oil revenue received during the Bremer-led provisional government.

The Kurds' contention that they were owed a total of $4 billion, he said, was unfounded.

"I don't know anybody in the CPA or the Iraqi Ministry of Finance who thought that the higher figure was realistic," the official said. The payment "represented the CPA's view of what was equitable relative to the Kurds."

He said the money was not delivered to Irbil until late June because oil-for-food funds had not been released by the U.N. until that spring, when the CPA received $2.5 billion.

The International Advisory and Monitoring Board, which was responsible for overseeing the Development Fund for Iraq under the CPA, said its auditor, the private firm KPMG, looked at the transfer in advance and approved it.

"IAMB reviewed the transfer to the Kurds and found it properly accounted for," said Bill Murray, a spokesman for the board.

After the money arrived, the finance ministers of the two Kurdistan provinces, Irbil and Sulaymaniya, split it according to the size of their populations. Irbil kept $798 million and Sulaymaniya received $602 million, Kurdish officials say.

Sulaymaniya's share was trucked 3 1/2 hours over the mountains to its capital city, also called Sulaymaniya, in a convoy protected by a large detachment of Kurdistan's battle-hardened peshmerga soldiers.

In a region where corruption is endemic, the unpublicized delivery of such a large amount of cash might seem an invitation to embezzlement.

Late last year, some Kurdish officials and international bankers discussed the possibility of putting some of the money into a Swiss account, said a source in the international banking community who requested anonymity.

A Washington firm employed by Kurdish officials met with representatives of international banks to see if there was a way to transport the money safely out of the country, the source said. In the end, however, the Kurds apparently were unable to find an international bank willing to handle the transfer.

Officials in Kurdistan deny that any meeting took place with foreign bankers to discuss moving the cash. They insist that all the money remains in Kurdistan.

In Irbil, officials said their $798-million share remained untouched at their central bank and would be spent on projects such as dams and power stations.

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