Bush extends US legal immunity in Iraq

The Development Fund for Iraq (DFI) was under official US control from May 2003 through June 2004, and is under tacit US control today. According to a recent LA Times story, accounting for these funds is anything but transparent.


These were just the OIL-FOR-FOOD PROGRAM deposits into the DFI, $8.1 billion out of $20 billion. Why isn't Senator Norm Coleman concerned about where this money is now?

In an almost unnoticed move, President Bush on Thursday May 19 extended for one year the blanket immunity from legal action conferred on US corporations doing business in Iraq. Munir at The Diplomatic Times Review caught this story. Thank you Munir!

According to the extension order, its purpose is

to deal with the unusual and extraordinary threat to the national security and foreign policy of the United States posed by the obstacles to the orderly reconstruction of Iraq, the restoration and maintenance of peace and security in the country, and the development of political, administrative, and economic institutions in Iraq constituted by the threat of attachment or other judicial process against the Development Fund for Iraq, Iraqi petroleum and petroleum products, and interests therein, and proceeds, obligations, or any financial instruments of any nature whatsoever arising from or related to the sale or marketing thereof.

Executive Order 13303, first entered by the president on May 22,2003, is one mechanism the US has used to insure financial impunity for private US interests in Iraq. Please see some contemporaneous analysis of this policy of corporate anarchy and its effects here and here.

According to one of the references from these sources -- the Government Accountability Project,

Activities exempt from accountability The scope of the EO's mandate for lawlessness is limited only by the imagination. Section 1(b) shields value ``of any nature whatsoever'' if it ``aris[es] from'' or is ``related to'' the ``sale or marketing of all Iraqi petroleum and petroleum products" or ``interests.'' That means all corporate activities with roots or any connection to Iraqi oil. It covers everything from extraction through transportation, advertising, manufacture, customer service, corporate records and payment of taxes. It covers compliance with contractual obligations involving Iraqi oil that industry enters with the U.S. government in post-war Iraq. The scope can be further expanded to virtually all oil-related commerce, by blending Iraqi oil with domestic supplies for any given commercial transaction. Since the EO also covers petroleum ``products,'' It includes commerce such as plastics in the petrochemical industry or anything else for which Iraqi oil becomes relevant.

Custer Battles: criminal stories from the wild west
The environment created by both blanket immunity along with a general attitude of administration disinterest toward blatant theft has resulted in a ``wild west'' mentality amongst the corporations that have seen Iraq as a gold rush. Go here to read stunning stories like this one told to a Democratic Policy Committee hearing about outlaw US-Iraq contractor Custer Battles, a company that was paid with DFI funds. I am going to reproduce quite a few lines of the outrageous testimony here:

ALAN GRAYSON (Grayson, Kubli and Hoffman): Thank you very much, Senator. My name is Alan Grayson. I’m an attorney. I represent whistleblowers in the first case involving fraud by a government contractor in Iraq to be unsealed by the court. My testimony is based on what the whistleblowers have told me and told to the court. I wish I could tell you that the Bush administration has done everything it could to detect and punish fraud in Iraq, but if I said that to you, I would be lying.

In our case, the Bush administration has not lifted a finger to recover tens of millions of dollars that our whistleblowers allege was stolen from the government. The defendant in our case is Custer Battles. This company was organized by an individual named Mike Battles. In 2002, with the invasion of Iraq eminent, Battles set himself up as a security contractor. He and his colleague, Scott Custer, were featured repeatedly on Fox News and other forums as so-called security experts.

Following the invasion of Iraq, Custer and Battles sought contracts from the U.S. government. Battles later told the Wall Street Journal that the ``fear and disorder in Iraq offered real promise'' to him. Up to this point, their security company had garnered less than $1 million in total revenue. Indeed, when one of them traveled to Baghdad, according to my sources, he had to borrow the cab fare. Yet in the next 13 months, the Bush administration lavished over $100 million in contracts on Custer Battles. In a matter of weeks, Custer Battles received two government contracts worth around $15 million a piece.

One was to provide security inspection for civilian flights at Baghdad International Airport. Of course, there were no civilian flights at Baghdad International Airport. The Bush administration paid Custer Battles anyway. While at the airport, Custer Battles found some abandoned Iraqi Airways forklifts. They painted these over to hide the Iraqi Airways markings and then billed them to the government as materials under a different contract.

The other contract that Custer Battles quickly received was to provide security and logistical support for the distribution of new Iraqi dinars. Reports indicate that after the contract was awarded one Custer Battles staffer hopped on a Custer Battles chartered flight to Beirut with over $10 million in new Iraq dinars inexplicably in his luggage. Lebanese customs officials confiscated the money. The currency exchange contract was a time and materials contract. This meant that Custer Battles could bill the government dollar for dollar for its non-labor expenses.

Sensing great entrepreneurial possibilities in that arrangement, Custer Battles set up some Cayman Island subsidiaries. The Air Force has referred to these subsidiaries as the ``sham companies.''

Custer Battles backdated and forged signatures on invoices from these sham companies. Custer Battles then directed employees to sign the fabricated invoices without even looking at them and then turn those invoices in for payment to the government. One of our whistleblowers, a Custer Battles subcontractor and former FBI agent, was recruited to participate in this scheme. He refused twice and said, ``You all are going to prison.''

The second time, he was held at gunpoint in Baghdad, stripped of his weapons and security identification, and then he was released defenseless on the streets of Baghdad. I’m talking about Americans holding guns on Americans. He made his way from Baghdad through Fallujah to the Jordanian border. It is worth noting that the contracts awarded to Custer Battles were signed by U.S. contracting officers on behalf of ``the United States of America.''

Custer has testified that he reported to U.S. military supervisors every single day. Custer Battles was paid $4 million in brand new U.S. $100 bills, fresh from government printing presses and still wrapped in plastic, as well as with U.S. Treasury checks imprinted with the Statue of Liberty and wire transfers from U.S. Treasury accounts at the Federal Reserve Bank in New York.

On October 18, 2003, Custer and Battles attended a meeting with the U.S. military staff responsible for the currency exchange program. One of them accidentally left the Custer Battles spreadsheet on the table. One column of this spreadsheet listed what Custer Battles had spent for materials on this contract: $3.5 million. Another column listed what Custer Battles had billed to the government for these materials: almost $10 million. This spreadsheet was documentary evidence of over $6 million in fraud against the government.

Not long after another whistleblower, this one a Custer Battles employee, complained to Custer Battles that it was submitting fraudulent invoices to the government. Custer Battles asked its so-called corporate integrity officer to report.

And this is what he found: ``Indicated in this report are enormous areas of discrepancies and irregularities that lend themselves to elements of criminal fraud.

``A broader issue of criminal intent has become evident. The documents are prima facie evidence of the course of conduct consistent with criminal activity and content.

``The concerns and issues raised by the whistleblower, Mr. Baldwin, in his response to my e-mail significantly reinforces my concern that criminal activity transpired here on the money exchange project.

``These leases were the cornerstone of identifying a clear and definite pattern of deception and misrepresentation while the M.X. program was in operation. Further discussions and decisions concerning the M.X. project should be coordinated through the corporate criminal defense attorney.''

Despite this, the Bush administration continued to award new contracts and approve new subcontracts to Custer Battles for almost a year after the spreadsheet fell in its hands, all the way through to the end of September of 2004. Our whistleblowers filed a lawsuit under seal under the Civil False Claims Act at the beginning of 2004. We immediately provided a copy to the attorney general. We know that both the FBI and the Defense Criminal Investigative Service investigated these allegations.

The Air Force has said in a formal finding that there is adequate evidence that Custer Battles has defrauded the government and that this evidence justifies shutting off the flow of government contracts to Custer Battles. We estimate that the government’s total losses are tens of millions of dollars. Yet for more than a year, the Bush administration has done nothing to recover these ill-gotten gains from Custer Battles, much less bring the wrongdoers to justice.

In fact, in October of 2004, in our False Claims Act case, the very purpose of which is to recover this money on behalf of the U.S. government, the Bush administration declined to participate in the case. When we asked why, the assistant U.S. attorney indicated the Bush administration had decided, as a matter of policy, that cheating the Coalition Provisional Authority is not the same as cheating the United States.

And there is more:

SENATOR BYRON DORGAN (D-ND): But I wanted to start — Mr. Willis, in your testimony that I had read, you talked about the issue of people being paid cash in bags and a substantial amount of that kind of thing going on.

We understand this is a very difficult circumstance in Iraq. And it’s not like normal times. You’ve got major security problems and so on. But I think you described it as, kind of, a Wild West approach where somebody is to bring a bag and they get money in the bag, cash in the bag. You also indicated that, although you didn’t have personal knowledge, you were advised that upwards of $3 billion cash was in a bank vault at the CPA. Is that correct? Can you respond to some of that?

FRANK WILLIS (former senior official with the Coalition Provisional Authority): Yes, that was a rumor. I don’t have personal knowledge. There had to be a lot of money there, whatever the sum was, because when we had to pay the second payment to Custer Battles of $2 million, an Air Force captain went down, got the money and brought it up. I’ve submitted to the committee a picture of that payment, in fact. Let me give you...

SEN. DORGAN: The captain went and got $2 million in cash?

MR. WILLIS: Yes. $100 bills in plastic wrap. We played football with the plastic wrapped bricks for a little while. There is picture evidence of that particular transaction. Let me give you an example of what would happen, because we were responsible at transportation for 14 state-owned enterprises: bus companies, limousine operators, truck operators.

The executive office, say of Land Transport, a trucking company, when it was time to pay salaries would, through a voucher system, get cash. There was no way to wire money in -- they had no banking system and then a very, very primitive banking system later in the summer. No way to wire cash, no tracking of transfers of that kind. So he would get a bag of cash -- it might be dollars, it might be dinars -- and travel to Baqouba, say, where one of our regional Land Transport operations was. The regional president believed that not all the money in the bag got to him by the time the money got to Baqouba.

Then the regional manager had that bag of cash and that was used for distribution to the truck drivers. And the truck drivers felt that not all of the money that the regional president had got to them. That was the kind of way, if you looked at the payment in the voucher system for the Iraqis, 14 state-owned enterprises, the ministry itself, 2,400 people at Iraqi Airways, that was how the process worked. And it worked on I think on a trust system that we did have a mindset that this was Iraqi money. The DFI is Iraqi money.

And we said, ``Well, it may not be traced very well, and we got a lot of trust and we know there’s a lot of abuses, but at least it's the Iraqis handling their own money and it’s getting to Iraqis in one form or fashion.''

I would distinguish that from the Custer Battles case where Iraqi money went to Americans.

There is a whole lot more in the 40-page document from which this testimony is sourced. The story that emerges is one of unmitigated theft on the part of the CPA and its contractors from both Iraq and from the US taxpayer on a massive scale. There are plenty of hints in the stories where the missing DFI funds went. And the real shame is on the Bush government that refuses to look into the abuses, even actually encouraging them through immunity confered by its executive orders. Meanwhile, the smokescreen of the Oil-for-Food probe diverts attention backwards in time, before the current theives took Iraq for themselves.

Additional history: Look at the stories of CPA misappropriation from June and July of 2004. The DFI was ``suspiciously tapped before handover'' of the Iraqi government to its US puppet regime, while contracts were given ``to corrupt and wasteful American firms that do very little reconstruction and very little hiring of Iraqis.''