Bye-Bye Billions

The bill for the Iraq war is accumulating at the rate of almost $5,000 every second. Where is this money going? Everywhere it's not suppose to go.

Recent reports from the inspector general of the Defense Department indicate that nearly $15 billion in Iraq funds have been lost or stolen. Now Pentagon auditors are trying to figure out where the money went and what the U.S. got in return. You can read their report here(pdf).

In recent congressional testimony, Arthur Brennan, a former State Department official, reported how Iraq's ministry of health had steered as much as $1 billion in medical supplies onto the black market and then pocketed the profits, and it's likely some of that money is financing insurgent groups such as the Mahdi army, the militia loyal to Shiite cleric Muqtada al-Sadr.

Last month, 60 Minutes reported how Iraq's top anti-corruption official, Judge Radhi al Radhi, launched investigations against 20 current and former ministers, alienating the political establishment to the point that parliament tried to fire him.

Well-documented cases of war profiteering also account for lost dollars:

In October 2005, with federal agents tailing them, three war contractors slipped through London's posh Cumberland hotel before meeting in a quiet lounge. For the rest of that afternoon, the men sipped cognac and whiskey and discussed the bribes that had greased contracts to supply U.S. troops in Iraq.

Former KBR procurement manager Stephen Seamans, who was wearing a wire strapped on by a Rock Island agent, wondered aloud whether to return $65,000 in kickbacks he got from his two companions, executives from the Saudi conglomerate Tamimi Global Co.

One of the men, Tamimi operations director Shabbir Khan, urged him to hide the money by concocting phony business records.

"Just do the paperwork," Khan said.

Or don't do the paperwork. One of the major discoveries in the department of defense investigation is that paper trails are not complete.

Here is the lesson of reconstruction: a weak government, a thriving black market, and unscrupulous private contractors lead to fraud and corruption. Fraud and corruption lines the pockets of elite politicians and businessmen, but it also robs ordinary citizens of basic services like hospitals, roads, and clean water. It destroys any possible trust in government for both the Iraqis and the Americans.