It did not take long for a newly installed team of American auditors in Baghdad to sense that something was rotten in Hillah.
In Iraq for just weeks in spring 2004, the crew was trying to track billions of dollars in cash handed out by the defunct Coalition Provisional Authority (CPA). They saw many documents showing huge sums disbursed by the reconstruction hub of Hillah, a town south of Baghdad. But they could find few pieces of paper that showed what had been purchased.
A fast-reaction force went to Hillah and saw enough to persuade their boss, Inspector General Stuart W. Bowen Jr., to order a full-bore criminal investigation. One of Hillah's paying agents, for example, turned in more hundred-dollar bills than he was ever issued. It was just one item of evidence that showed that greenbacks from the Development Fund for Iraq flowed all over Iraq with little oversight.
That early Hillah excursion translated this month into the U.S. Justice Department's first criminal charges in investigations into Iraq reconstruction contracts. And, the case is the first big trophy in Mr. Bowen's hunt for fraud in the handling of more than $60 billion for rebuilding, more than half of it belonging to the Iraqis themselves.
Charged with conspiracy to commit fraud and money laundering were Robert J. Stein Jr. of Fayetteville, N.C., and Philip H. Bloom of New Jersey.
Mr. Stein was the CPA's comptroller in the Hillah region, responsible for handing out cash contracts of up to $500,000 to get the area's economy moving again. Mr. Bloom heads Global Business Group in Romania and a number of construction service firms. The Justice Department says Mr. Bloom paid Mr. Stein more than $600,000 in bribes in return for more than $13 million in contracts.
Mr. Bowen is the special inspector general for Iraq reconstruction, a job Congress thrust on the Bush administration to watch $24 billion in U.S. taxpayer money earmarked for rebuilding. But he first zeroed in on another pot of money -- $37 billion owned by the Iraqi people, most of which was in oil proceeds watched over by the United Nations.
The United Nations released the money to the CPA in 2003. Subsequently, planeloads of plastic-wrapped hundred-dollar bills began arriving in Iraq via C-17 cargo jets. The Development Fund for Iraq had landed.
Very few strings were attached to the crisp new bills, Mr. Bowen's team discovered. The inspector general is investigating about 50 possible criminal fraud cases, but his staff sees special significance in the Hillah arrests.
"It sent a message that we are going to go after people who did this, people who committed crimes," said Jim Mitchell, Mr. Bowen's spokesman. "Whether they are Americans or Iraqis, we're going to go after them."
Mr. Bowen has a relatively small staff of 145 to follow the trail of tens of billions of dollars. But he does get help from other inspectors general. And the military provides satellite imagery of construction sites. It is dangerous to travel in Iraq; so, if a space image will do, why risk the trip, the office says.
There is also a government partnership called "Spitfire," which can follow money and persons, made up of Mr. Bowen's office, Immigration and Customs Enforcement and the Internal Revenue Service. One of its programs tracks persons of interest planning to visit the U.S. It was Spitfire that helped discover that Mr. Bloom, 65, planned to return to the U.S.
Authorities arrested him Nov. 13 as he disembarked at Newark Liberty International Airport in New Jersey. He never got wind that Mr. Bowen's staff had uncovered his purported bid-rigging and that it might not be wise to come home again.
"He traveled a lot. We expected him," Mr. Mitchell said.
FBI affidavits say Mr. Bloom paid money to Mr. Stein from bank accounts in Iraq, Switzerland, Romania and the Netherlands to snare contracts to renovate the Karbala public library and build a Hillah police academy and a regional tribal democracy center. Mr. Stein had authority to approve contracts of up to $500,000, and Mr. Bloom's companies won individual work orders up to $498,900.
- 174 War & Disaster Profiteers Campaign