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Millions of Iraq Reconstruction Aid Wasted, Inspector Says

January 31, 2007 at 6:15 PM EDT
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KWAME HOLMAN: The violence that plagues Iraq every day has taken a huge toll in lives, but it also has disrupted ongoing efforts to rebuild a shattered nation.

In the nearly four years since the U.S. invasion, Congress has appropriated $21 billion for reconstruction, 80 percent of which has been spent, and now the president wants a further $1.2 billion.

The man charged with auditing how that money is spent is Stuart Bowen, the special inspector general for Iraq reconstruction. His reports have been harsh indictments of the reconstruction efforts and a catalogue of the challenges it faces.

The inspector general’s reports so rankled some members of the then-Republican-controlled Congress last year that House legislation was drawn up that eliminated his office. That effort later was thwarted by Maine Republican Senator Susan Collins.

Last night, Bowen released his 12th quarterly report, and the results were much the same as before. The lack of security remains the major problem, interfering with rebuilding. Corruption continues to plague Iraq, limiting the Iraqi government’s own reconstruction efforts. Infrastructure still is vulnerable, and electricity and oil production remain below pre-war levels.

Bowen’s report gave a mixed review on projects that have been completed. The inspector general found some successes in important projects, such as this rehabilitation center in Kurdistan, a women’s clinic near Baghdad, and a water storage facility in Nineveh province.

But as reported since last summer and re-verified in November, the plumbing in the Baghdad police college was so ineptly installed that sewage flooded floors and leaked through ceilings.

State Department spokesman Sean McCormack reacted to the report and commented on the Iraqi’s policing of their own efforts.

SEAN MCCORMACK, State Department Spokesman: Where there have been instances of where the Iraqis have done investigations and found suspicions about fraud and abuse, those people have been held to account. They are just getting started; there are some hopeful indications there that the system is beginning to function.

KWAME HOLMAN: Bowen’s next report is due in mid-spring.

The types of corruption

Stuart Bowen
U.S. Special Inspector General
Really, the oil smuggling is the biggest form of corruption in Iraq, and part of the problem is the fact of the lack of infrastructure security has taken out all the northern pipe lines.

JIM LEHRER: And with us now is Stuart Bowen, the special inspector general for Iraq reconstruction.

Mr. Inspector General, welcome.

STUART BOWEN, U.S. Special Inspector General: Thank you. Good to be with you.

JIM LEHRER: The Associated Press story today about this said your report paints a, quote, "grim picture of waste, fraud, and frustration" in the reconstruction of Iraq. Is that a fair statement?

STUART BOWEN: I think fraud has been a small component, as our report points out, of the American experience in Iraq, the American reconstruction-led program. However, corruption on the Iraqi side of the ledger continues to be a significant issue. Barham Salih just pointed out last week that...

JIM LEHRER: Who did?

STUART BOWEN: Barham Salih, the deputy prime minister of Iraq, pointed out that corruption at the Beiji refinery resulted in a loss of perhaps up to $1 billion, and that money may have gone to the insurgents.

JIM LEHRER: Give us a feel for the kind of corruption we're talking about. Who's paying off who, and what are they getting for it? And give us some examples.

STUART BOWEN: Well, it afflicts virtually every ministry in Iraq. And the anti-corruption institutions that are there to fight it, the Commission on Public Integrity, the Board of Supreme Audit, and the Iraqi inspectors general are struggling on all fronts to overcome the corruption issue.

The commissioner on public integrity, Judge Radhi, who I visit with each trip, is himself under personal attack, despite the fact that he has been bold enough to pursue corruption allegations against the...

JIM LEHRER: But who's paying off whom?

STUART BOWEN: Well, it's really bribery and theft. Really, the oil smuggling is the biggest form of corruption in Iraq, and part of the problem is the fact of the lack of infrastructure security has taken out all the northern pipe lines. Thus, all oil transshipment in the north is by truck, which is subject to smuggling.

JIM LEHRER: So who's getting rich here? I mean, Iraqis are stealing from other Iraqis.

STUART BOWEN: That's right.

JIM LEHRER: And they're getting rich. And where is the money going?

STUART BOWEN: That we don't have information on. I mean, that's on the Iraqi side of the ledger; I don't have insight into that, but presumably abroad or criminally disposed of otherwise.

JIM LEHRER: But billions of dollars, at least $1 billion, and maybe more?

STUART BOWEN: Yes, that's right.

What the U.S. can do

Stuart Bowen
U.S. Special Inspector General
The Board of Supreme Audit, the government accountability analog in Iraq, has been around for a long time, is conducting audits, and is trying to turn the tide, but it's a very difficult task.

JIM LEHRER: Are you saying then you and the United States have nothing that they can do about this?

STUART BOWEN: No, we are pursuing a vigorous bolstering of the anti-corruption institutions in Iraq. The Iraqi inspectors general are a new element created by CPA. And some of them are doing well, others not so well.

The Commission on Public Integrity, also created by CPA, essentially a new FBI for Iraq, has thousands of cases ongoing, but it's overwhelmed by the task. The Board of Supreme Audit, the government accountability analog in Iraq, has been around for a long time, is conducting audits, and is trying to turn the tide, but it's a very difficult task.

JIM LEHRER: But to be specific and parochial about it, it's Iraqis stealing from Iraqis? It isn't Iraqis stealing from the United States?

STUART BOWEN: That's right: This is not about our investment of taxpayer dollars in Iraq. We have uncovered cases of corruption. They're, as I said, a relatively small component of the overall investment.

But where my office has found it, we vigorously pursued it. And this week, Robert Stein, the former controller of the south central region in CPA, was sentenced to nine years in prison as a result of our investigations.

JIM LEHRER: CPA, that was the...

STUART BOWEN: The Coalition Provisional Authority.

JIM LEHRER: The Coalition Provisional Authority, Americans, Americans involved in that.

STUART BOWEN: That's right. He was involved in a scheme with a contractor, Philip Bloom, who also will be sentenced soon, and there are others that are involved in that conspiracy for whom justice is forthcoming.

JIM LEHRER: Your quarterly -- this report today, every report that you have given -- and we've reported on every one of them since you began -- you always say security is the problem. You've got all this money, you have all these plans you want to do, but security doesn't make it possible. Give us a feel for what the situation is now, why it's so bad.

STUART BOWEN: Well, it varies across the country. In Baghdad, it's the product of sectarian violence. In al-Anbar province to the west, it's the problem of al-Qaida in Iraq. In the south, in Basra, it's the result of intra-sectarian, intra-Shia conflict.

But more specifically, it's dangerous across the country to varying degrees, except in Kurdistan, and that makes it very difficult for travel. My inspectors that need to get out and visit sites so that we can bring back reports of what exactly the U.S. taxpayers received frequently have their trips canceled because of security threats.

Infrastructure woes

Stuart Bowen
U.S. Special Inspector General
The insurgents have identified the Baghdad ring as a target, apparently, and they have hit it repeatedly, and that has reduced power to the capital to about six hours a day.

JIM LEHRER: All right. Bottom line here, like, for instance, electricity. Electricity has been a problem since even before the war. What's the state of the electricity situation now in Iraq?

STUART BOWEN: It continues to be very grim. The electricity minister told me last quarter that he has an extremely difficult time repairing the power lines that get taken out by the insurgents, because his repair crews continually get shot at.

The insurgents have identified the Baghdad ring as a target, apparently, and they have hit it repeatedly, and that has reduced power to the capital to about six hours a day.

JIM LEHRER: And we've spent over $4 billion of U.S. money trying to get the electrical system working?

STUART BOWEN: The electricity sector was the largest infrastructure sector that has been funded by the Iraq Relief and Reconstruction Fund, and it's still struggling.

JIM LEHRER: Where did the money go?

STUART BOWEN: It went into the...

JIM LEHRER: Real things?

STUART BOWEN: Yes, transmission stations. I mean, there are a number of new transmission stations that are still being built. There are substations being built. And there are generation plants that have been constructed.

But the state of the infrastructure after the 2003 war was much worse than had been anticipated. And particularly in the electrical sector, much needs to be done to bring it up to operating condition.

JIM LEHRER: In general terms, what's the condition of the oil system now, the entire oil system?

STUART BOWEN: It needs enormous investment. There is very little refining capability. There is one major offshore terminal, al-Basra offshore terminal, that is essentially responsible for most of the exports from Iraq.

Significant work is being done there, but apart from that, there is limited capability. Just 9 percent of the Iraq Relief and Reconstruction Fund was invested in the oil sector. Much more needs to be invested by Iraq itself.

And 95 percent of Iraq's income is derived from the sale of oil and gas, so it's essential that this critical sector become fully operational.

JIM LEHRER: Do you have any figures? Could you sell -- 95 percent of the money should come from the oil supply. How much of it is actually coming? In other words, of the potential, how much is actually being -- how much of it is out there and being produced?

STUART BOWEN: I don't know how much is in the ground and not being pulled out because of lack of capability, but significantly more could be. I've been told that by all experts, and I've been told that, as Iraq invests more and is able to execute its investment -- and that's the biggest problem, really, confronting the Iraqi program today, the lack of the capability of the Iraqi ministries to execute their capital budgets.

The end of last year, about $10 billion was left in the Iraqi treasury unspent, because of the failure of the ministries to execute. And, as the Iraq Relief and Reconstruction Program comes to an end -- which it is now, it's 100 percent under contract, it's 80 percent spent -- the burden must shift to the Iraqi government to carry out the recovery of that nation. And that means that the oil ministry has to be able to carry out its capital program.

Continuing oversight

Stuart Bowen
U.S. Special Inspector General
Well, I think that one of the lessons learned from the Iraq experience is a careful review of the cost-plus contract system that the U.S. government uses. It can be subject to abuse, and I think has been occasionally in Iraq.

JIM LEHRER: Now, what about the programs where Americans, where U.S. contracting firms have been found guilty of shoddy work? You mentioned -- it's been mentioned many times about this police academy. What else? Give us a feel for that.

STUART BOWEN: Well, the Baghdad police college is perhaps the most frustrating project that I visited. I was there -- it's right on the edge of Sadr City in Baghdad. And I was there in September. We made six visits there.

To his credit, a whistleblower brought it to our attention the problems there. And we found, indeed, the plumbing was disastrous and that the construction was shoddy. Many buildings were only half built. And, overall, this essential project was not meeting standards.

And as a result of shining the light of oversight on it, repairs were begun, and we made some progress there. But just yesterday, I heard from my chief inspector that the Iraqis have refused to accept it.

JIM LEHRER: Has anybody gone to jail for doing any of this stuff?

STUART BOWEN: No, they haven't.

JIM LEHRER: Why not?

STUART BOWEN: Well, I think that one of the lessons learned from the Iraq experience is a careful review of the cost-plus contract system that the U.S. government uses. It can be subject to abuse, and I think has been occasionally in Iraq.

JIM LEHRER: Let me repeat to you a quotation from Lee Hamilton, co-chair of the Iraq Study Group, that we ran on our news summary a moment ago about this very thing. He said, "There are very, very few things that hurt our effort more in trying to succeed in Iraq than that kind of performance, because it turns all people off to know that there are people performing shoddy work, getting huge government contracts. There are very few things that undercut our efforts in Iraq any more than that."

Is he right?

STUART BOWEN: He is right, and that's why I think another lesson learned from the Iraq experience is to have robust, forward-leaning oversight present on the ground in a contingency operation. In a relief and reconstruction program that can be subject to chaos, as is the case in Iraq, the possibility of bad actors taking advantage of the situation is always there. And deterrence is essential to limit the situations that Chairman Hamilton refers to.

JIM LEHRER: We also reported in the setup that some members, Republican members, of the earlier Congress wanted to get rid of your job. You're still there; what happened?

STUART BOWEN: The Congress passed and the president signed the Iraq Reconstruction Accountability Act of 2006 in December, and that expanded my office's oversight to cover fiscal year 2006 reconstruction money, and effectively means that we will continue to carry out the oversight that we've been assigned through 2008.

JIM LEHRER: Do you feel at any time -- do you feel like you're swimming upstream? Do you feel like you're making progress?

STUART BOWEN: Yes, I do. I think the fact that we're present on the ground in Baghdad with 55 people acts as a deterrent effect against those who would take advantage of the situation. Moreover, it promotes efficiency, and it lets people know that there's going to be some oversight.

More to the point, I tell all my auditors that when they're carrying out their audits to work with management, to be transparent, to let them know what problems they find, and to fix them as they find them, rather than to wait for a report to come out. That's essential.

JIM LEHRER: And keep blowing the whistle every time you see something that you think is wrong or could be put right or better?

STUART BOWEN: Absolutely. I think you shine the light on problems, and they can be fixed. If you ignore them, they may not.

JIM LEHRER: All right, we'll see you next quarter. Thank you, sir.

STUART BOWEN: Great. Thank you. Good to be with you.