IRAQ: Contractors Received Millions of Dollars in 'Wild West" Cash Payments

U.S. officials in postwar Iraq paid a contractor by stuffing $2 million worth of crisp bills into his gunnysack and routinely made cash payments around Baghdad from a pickup truck, a former official with the U.S. occupation government says.

Because the country lacked a functioning banking system, contractors and Iraqi ministry officials were paid with bills taken from a basement vault in one of Saddam Hussein's palaces that served as headquarters for the Coalition Provisional Authority, former CPA official Frank Willis said.

Officials from the CPA, which ruled Iraq from June 2003 to June 2004, would count the money when it left the vault, but nobody kept track of the cash after that, Willis said.

"In sum: inexperienced officials, fear of decision-making, lack of communications, minimal security, no banks, and lots of money to spread around. This chaos I have referred to as a 'Wild West,'" Willis said in testimony he prepared to give Monday before a panel of Democratic senators who want to spotlight the waste of U.S. funds in Iraq.

A senior official in the 1980s at the State and Transportation departments under then-President Ronald Reagan, Willis provided The Associated Press with a copy of his testimony and answered questions in an interview.

James Mitchell, spokesman for the special inspector general for Iraq reconstruction, told the AP that cash payments in Iraq were a problem when the occupation authority ran the country and they continue during the massive U.S.-funded reconstruction.

"There are no capabilities to electronically transfer funds," Mitchell said. "This complicates the financial management of reconstruction projects and complicates our ability to follow the money."

The Pentagon, which had oversight of the CPA, did not immediately comment in response to requests Friday and over the weekend. But the administrator of the former U.S. occupation agency, L. Paul Bremer III, in response to a recent federal audit criticizing the CPA, strongly defended the agency's financial practices.

Bremer said auditors mistakenly assumed that "Western-style budgeting and accounting procedures could be immediately and fully implemented in the midst of a war."

When the authority took over the country in 2003, Bremer said, there was no functioning Iraqi government and services were primitive or nonexistent. He said the U.S. strategy was "to transfer to the Iraqis as much responsibility as possible as quickly as possible, including responsibility for the Iraqi budget."

Iraq's economy was "dead in the water" and the priority "was to get the economy going," Bremer said.

Also in response to that audit, Pentagon spokesman Bryan Whitman had said, "We simply disagree with the audit's conclusion that the CPA provided less than adequate controls."

Willis served as a senior adviser on aviation and communications matters for the CPA during the last half of 2003 and said he was responsible for the operation of Baghdad's airport.

Describing the transfer of $2 million to one contractor's gunnysack, Willis said: "It was time for payment. We told them to come in and bring a bag." He said the money went to Custer Battles of Middletown, R.I., for providing airport security in Baghdad for civilian passengers.

Willis said a coalition driver would go around the Iraqi capital and disburse money from the a pickup truck formerly belonging to the grounded Iraqi Airways airline. The reason is because officials "wanted to meld into the environment," he said.

Willis' allegations follow by two weeks an inspector general's report that concluded the occupying authority transferred nearly $9 billion to Iraqi government ministries without any financial controls.

The money was designated for financing humanitarian needs, economic reconstruction, repair of facilities, disarmament and civil administration, but the authority had no way to verify that it went for those purposes, the audit said.

Sen. Byron Dorgan, head of the Democratic group that is holding Monday's hearing, said he arranged for Willis' testimony because majority Republicans have declined to investigate the suspected misuse of funds in Iraq.

"This isn't penny ante. Millions, perhaps billions of dollars have been wasted and pilfered," Dorgan, D-N.D., said in an interview ahead of the Senate Democratic Policy Committee's session.

Willis concluded that "decisions were made that shouldn't have been, contracts were made that were mistakes, and were poorly, if at all, supervised, money was spent that could have been saved, if we simply had the right numbers of people. ... I believe the 500 or so at CPA headquarters should have been 5,000."

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