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IRAQ: Huge fraud exposed in Iraq contracts


by Ewen MacaskillThe Age
May 2nd, 2006

A US Congressional inspection team set up to monitor reconstruction in Iraq has published a scathing report on failures by contractors to carry out projects worth hundreds of millions of dollars.

In one case, the inspectors found that three years after the invasion only six of 150 health centres proposed for Iraq have been completed by a US contractor, in spite of 75 per cent of the $US186 million ($A245 million) allocated having been spent.

The report says: "Fourteen more will be completed by the contractor, and the remaining facilities, which are partially constructed, will have to be completed by other means." The inspectors blame the failure in this instance on management problems and security concerns.

The report on work projects in Iraq is by Stuart Bowen, the special inspector-general for Iraq reconstruction (Sigir). Mr Bowen's office was set up after Congress expressed concern about the slow rate of reconstruction and the misuse of funds on a massive scale.

The US allocated $US21 billion for reconstruction, of which 67 per cent has been spent. The report says Mr Bowen's inspection team is investigating 72 cases of alleged fraud and corruption, and is pursuing leads not only in the US but in Europe and the Middle East.

In March, investigators conducted a successful sting operation that led to the arrest of a contractor who offered a bribe to one of its undercover agents.

The report says "there exists a gap between US project outputs and the delivery of essential services to Iraqis".

While progress has been made in the construction of schools and police stations, many Iraqis still have no access to clean water, and electricity supplies in Baghdad are still below pre-invasion levels.

The inspectors say that economic recovery is being hampered by the failure to restore Iraq's oil production to levels before 2003.

The inspectors audited Task Force Shield, established in September 2003 to build Iraq's capacity to protect its oil, gas and electrical infrastructure, and found significant shortcomings.

The report concludes the project "failed to meet its goals because it was burdened by a lack of clear management structure and poor accountability. There were also indications of potential fraud, which are now under review by Sigir investigators."

Until last month, Washington had invested more than $US265 million to improve the protection of energy infrastructure across Iraq.

In a separate section, the report notes a former contractor and former senior staff member of the now defunct US-led coalition government are facing jail sentences of 30 to 40 years on corruption charges. The contractor will have to pay $US3.6 million in restitution and forfeit $US3.6 million in assets.

Apart from mismanagement and corruption, the report identifies attacks by Iraqi insurgents as one of the main reasons for the delays and failures.

"Insurgent activity continues to impede ongoing reconstruction projects and interrupt their transition to Iraqi control," it says. "But the attacks remain concentrated in a few areas, leaving daily life in much of the rest of Iraq, particularly the Kurdish north and some areas of the south, in a state of gradual recovery."

The report adds: "Corruption is another form of insurgency in Iraq. This second insurgency can be defeated only through the development of democratic values and systems, especially the evolution of effective anti-corruption institutions in Iraq."





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