Thursday, July 22, 2004


By John Hanchette
Niagara Falls Reporter 
OLEAN -- More disturbing news from Iraq: Now United Nations auditors are complaining the Bush administration is holding back information concerning more than $1 billion in reconstruction contracts awarded to several well-connected American firms without competitive bidding.
The complaints come from the International Advisory and Monitoring Board -- a bookkeeping creation of the UN Security Council that includes members from the International Monetary Fund and the World Bank. The board was set up to make sure Iraq's oil revenue would be handled in proper fashion throughout the American occupation.
The audit in question only covers the start of the war to the end of last year, and is being conducted by one of the global accounting giants, the firm KPMG, whose auditors bitched just before last weekend that repeated routine requests for internal files relating to more than $10 billion in Iraq's oil proceeds since the war began have been stiff-armed by the Pentagon and White House. One of these internal audits includes three no-bid contracts worth a total $1.4 billion awarded to the Texas oil services behemoth Halliburton, the company Vice President Dick Cheney ran before stepping down to join Bush the Younger's year 2000 presidential campaign ticket. (Cheney still receives almost $1 million annually as part of his severance contract.)
One of the Halliburton contracts provided for importing and distributing fuels to keep Iraq going during the occupation and rebuilding -- and is the subject of other fiscal probes after complaints the huge firm was gouging by over-pricing the gas and oil. That contract was paid for out of Iraqi oil revenues.
KPMG says the initial $10 billion in Iraqi oil proceeds seems to have been properly deposited in the American-run Development Fund for Iraq, but it can't tell how the money is being spent. No evidence of fraud is reported, but KPMG beefed about lax bookkeeping, little financial control over key Iraqi ministries, duplicate salary payments to some Iraqi government employees, the bartering of Iraqi crude oil for Syrian electricity, and the continued lack of oil-pumping meters on Iraqi export shipping platforms despite repeated UN requests for such devices -- a failure that may have led to "an unknown quantity of oil smuggled out of Iraq following the war."
The Pentagon refused to say much about all this except to insist the American-run Coalition Provisional Authority (CPA) was doing the best it could in a "very challenging environment." Pentagon spokesman Lt. Commander Flex Plexico (one of my all-time favorite government names) said the CPA had made "every effort to bring sound management transparency and oversight to the Development Fund for Iraq while at the same time improving the quality of life for the Iraqi people."
Another KPMG audit covering the start of this year up until June 28, when the CPA relinquished power to an interim and hand-picked Iraqi government, is being conducted. The interim government, in order to keep track of the spending of oil revenues in the future, has created a Board of Supreme Audit, but the head of it -- a man said to have ample fiscal skills -- was assassinated in recent weeks. The auditors said they will continue to ask for all the Bush administration's no-bid contracts paid for with Iraqi oil income.
While the KPMG auditors also complained about lack of access to other no-bid contracts for rebuilding Iraq, and while the American public seems only dimly aware such goodies were handed out, the identities of some of the favored firms are well-known.
Even some of the rebuild-Iraq contracts handed out by the Bush administration after competitive bidding are controversial.
Bechtel Corp. is a San Francisco-based company with solid connections to the Bush White House. President Ronald Reagan's former Secretary of State George Shultz is on the board and senior vice president Jack Sheehan is a member of the Defense Policy Board, which advises Defense Secretary Donald Rumsfeld. Bechtel was awarded a $680 million contract from the United States Agency for International Development to rehabilitate Iraq's power, water and sewage systems and rebuild its only port. The bidding process was somewhat secretive and open only to a select group of American corporations.
The Center for Responsive Politics in Washington reports that the six firms allowed to bid on the contract contributed $3.6 million to American politicians in the three previous years -- two-thirds of it to Republicans, and that Bechtel contributed $1.3 million of the total. Bechtel has been criticized by some Iraqis for failing to provide drinkable water that meets even the questionable potability standards of Saddam Hussein's regime.
All of which is to note there is now an iron-clad, unbreakable and ultimately unhealthy bond between the American military and private industry.
Even before the Iraqi war, the Pentagon was spending about 8 percent of its overall budget -- at least $30 billion -- on private military companies. Gone is the familiar World War II template of our self-sufficient Armed Forces defending our shores and beleaguered friends in distant lands without much outside help. With the downsizing of the American military came a quiet Pentagon reaction: outsourcing every thinkable job to the private sector.
KP duty and laundry detail in Afghanistan and Iraq? Private contractors.
Uniformed, ramrod-tall recruiter in full dress? Replaced in at least 60 American cities by casually clothed private sector headhunters.
Beetle Bailey mowing the lawn and throwing garbage bags on an Army base? Inaccurate portrayal. Now it's a private "landscaper" and civilian "sanitation engineer."
The Pentagon pays private companies as much as $4 billion a year for war fighting exercises. A publicly-traded firm called Cubic recently brought in Bosnian refugees from around the United States to Fort Polk so they could recreate their gruesome experiences for American soldiers participating in war games.
At the end of last year, there were about 10,000 private contractor workers on the ground in Iraq -- outnumbering the second-largest contingent of Coalition troops, the British with 9,900.
Even the Pentagon manual on dealing with private contractors was written by a private contractor.
The Pentagon (and Bush administration) excuses all this by contending the downsized military, already stretched unbelievably thin, has to be left to do the actual fighting -- so these ancillary jobs and programs are better handled by civilians. The numbers are surprising. Thirteen years ago in the Gulf War, when Bush the Elder sent Saddam scurrying back to Baghdad, active duty troops in the Army numbered 711,000. Today that number is about 485,000 -- a reduction of almost a third.
None of this civilian element in the military is new in concept. Private contractors hauled food wagons in the Civil War. In Vietnam, more than 3,000 DynCorps workers serviced Huey helicopters. As recently as five years ago, a Halliburton subsidiary was making almost $3 billion by providing water, meals, mail and laundry for 20,000 American troops in the Balkans.
Private companies pursuing military goals goes back at least four centuries. In the early 1600s, Holland established the Dutch East India Company to free up trade routes, fight the British fleet, and prosecute a protracted war of independence against powerful Spain and Portugal. It fought several wars on its own. At its peak, it boasted 40 ships of war and 10,000 professional soldiers.
Same for the famed British East India Company. The original Queen Elizabeth chartered it on the last day of 1600. Its focus was mainly on India, where the firm quickly acquired almost all auxiliary governmental and military functions. It established huge trade monopolies, once employed the pirate Captain Kidd, put Napoleon into exile, and its flag inspired our Stars and Stripes.
So while history may yawn at civilian help in military pursuits, what is currently astounding in the American experience is the scale of this privatization. Perhaps this is what President Dwight D. Eisenhower had in mind way back when I was a college freshman, watching his farewell address on TV in January of 1961. Although the speech drew little attention at the time, it was pretty surprising.
Here was Ike, a president who quadrupled defense spending, the World War II commander in the European theater and a military leader all his life -- sometimes lumped in accolade with Winston Churchill as a savior of the western world from Hitler -- warning sternly against the dangers of a vast military-industrial complex he could see in our near future.
It showed amazing prescience, but the address totally confused the American media, so they generally ignored the speech. In it, Eisenhower warned of "grave implications" to the "very structure of our society" if our military meshes inextricably with the private sector. "In the councils of government," Ike intoned, "we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist."
Somewhere, Ike is ruefully shaking his head. These concerns are drawing new voice.
Dan Briody is author of the book "The Iron Triangle: Inside the Secret World of the Carlyle Group" -- an investment entity that he calls "the model example of the nearly seamless connection between the Bush administration, self-enrichment and companies who receive big government defense contracts."
Bush the Elder, his former Secretary of State James Baker, and former Defense Secretary Frank Carlucci are longtime "consultants" to the Carlyle firm. The book, published last year, opens with a reference to the Eisenhower farewell speech. Briody, in a recent Internet interview on, termed Ike's warning "exactly what we're seeing today."
He claimed, "We're seeing a very tight-knit group of companies and private military contractors that are virtually indistinguishable from various administrations and the political infrastructure of Washington, D.C. -- so much so that it's not clear whose interests we're acting on when we go to war."
If the White House of Bush the Younger disagrees, it could do a lot to diminish such doubt by complying with the requests of UN auditors. 

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Published on  July 20 2004  in the Niagara Falls


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