by James Risen
Within weeks of the toppling of Saddam Hussein’s statue in Baghdad’s Firdos Square in April 2003, a televised event that came to symbolize the ouster of Saddam’s regime in Iraq by the U.S.-led military coalition, unmarked trucks started backing up to the loading docks at the East Rutherford Operations Center. There, they were filled end to end with dozens of pallets of shrink-wrapped $100 bills. The trucks then moved out, down the New Jersey Turnpike, carrying billions of dollars in cash. They hauled their cargo of riches past Newark, where nearly one third of the people live below the poverty level.
The trucks stopped at Andrews Air Force Base outside Washington, D.C., where the palletized cash was transferred to the cargo holds of air force C-17 transport planes. The aircraft taxied down the runway and took off for Iraq, making intermediate stops in Germany and Kuwait. Finally, the planes landed at Baghdad International Airport, where the cash was unloaded and counted in the presence of both American and Iraqi personnel.
What happened next is still one of the great unsolved mysteries of the Iraq war.
Between $12 and $14 billion, mostly in $100 bills, was taken from East Rutherford and flown into the war zone of Iraq in 2003 and 2004, with virtually no supervision or safeguards. Another $5.8 billion was sent from the New York Federal Reserve to Baghdad by electronic funds transfers. All told, approximately $20 billion was sent to Iraq without any clear orders or direction on how the money was to be used. The controls on the money were so lax that few credible records exist of exactly how much cash there was or where the cash went once it arrived in Baghdad.
Almost certainly, a portion of it ended up in the hands of some of the most powerful Iraqi leaders of the post-Saddam era. Billions of dollars in cash were wasted. And billions more simply disappeared.
Now, there is explosive new evidence that for the first time may help to solve the mystery of the missing cash. Approximately $2 billion of the money that was flown from the United States to Baghdad was stolen and secretly transported out of Iraq in what may be one of the largest robberies in modern history.
American investigators have traced the missing cash to Lebanon. It is believed to have been stolen after it arrived in Baghdad, and then secretly transported to Lebanon, where it has been hidden away ever since. Between $1.2 and $1.6 billion is believed to be hidden in a bunker in a rural village in Lebanon, according to current and former U.S. officials. These officials have received reports that the cash was stolen and stored in the bunker with the knowledge of several of Iraq’s most prominent leaders.
At least several hundred million dollars in additional cash is also being hidden in several other locations in Lebanon, according to former U.S. officials, bringing the total amount stolen from Iraq and moved to Lebanon to approximately $2 billion. The figures of how much money was stolen and transported out of Iraq are inexact, but the reality is indisputable. One former American official even reported seeing the cash for himself, stored in the bunker in Lebanon.
In addition to cash, hundreds of millions of dollars’ worth of gold was stolen from the Iraqi government and is also being hidden in Lebanon, current and former U.S. officials have said.
The CIA and FBI, along with the Pentagon and State Department, have all been told about the theft of the cash, and have received evidence about the bunker in Lebanon and other locations where the cash is believed to be hidden. But the agencies have not tried to retrieve the money. Nobody went after it during the Bush administration, nor has the Obama administration tried. Instead, the U.S. government has kept the entire matter secret.
The Iraqi government of Prime Minister Nouri al-Maliki has also been given information about the money’s whereabouts. But the Iraqi government has not taken any action to retrieve it either. Instead, the Iraqi government has kept the information about the Lebanese bunker secret. Officials in both Washington and the Middle East seem content to let the truth lie hidden.
Like so many things about the Iraq war, the cash flights from New York started with good intentions. But ideology, chaos, and finally greed all got in the way.
Ged Smith was a veteran of the Treasury Department’s tiny band of international firemen who make their living rebuilding lost and broken economies. In the 1990s, he worked in the Balkans following the breakup of Yugoslavia and the ethnic cleansing of Bosnia. In the early weeks of 2003, as the Bush administration geared up for war with Iraq, Smith, the director of the Treasury’s Office of Technical Assistance, was assigned to figure out how to get Iraq’s financial system restarted after the toppling of Saddam Hussein.
He quickly realized that he was facing much different problems than he had ever seen in Sarajevo. He was going to have to deal with a government of true believers who did not want to hear bad news. And that was just in Washington.
Smith’s team of Treasury officials was part of a larger postwar reconstruction organization led by retired army general Jay Garner, who had been appointed by President Bush to get Iraq up and running again after the invasion. Garner had been named because he had been in charge of providing food and shelter to the Kurds following the first Gulf War, and the Bush administration believed that it would only face short-term problems, like feeding refugees, before Iraq was back on its feet. The White House and Pentagon thought that Garner’s group, the Office of Reconstruction and Humanitarian Assistance (ORHA), would only be needed in Iraq for a few weeks—a few months at most. Bush and Defense Secretary Donald Rumsfeld were convinced that, after a short time, U.S. troops could come home. They neither wanted nor expected an extended occupation; as a result, any plans that assumed a long-term commitment from the United States were dismissed or ignored.
During one of the few interagency meetings on postwar planning held before the March 2003 invasion, Smith briefed a crowd of senior officials in an auditorium at Fort McNair in Washington on Treasury’s plans for Baghdad. He warned that because the Iraqi economy was so centralized under Saddam Hussein, taking down the Iraqi government would likely mean the forced closure of hundreds of Iraqi companies and state-owned enterprises. Factory managers would not know what to do without orders from the regime. That meant that tens of thousands of Iraqis would almost certainly be thrown out of work immediately after Saddam lost power.
Smith looked up after he issued this dire prediction. No one in the crowd said a word. No one asked a single question.
At a follow-up meeting at Fort McNair, Smith mentioned that one of the lessons he had learned in the Balkans was the importance of maintaining a government’s ability to collect tariffs and customs duties, so it could meet its payroll. This time, someone did challenge Smith. A Republican political appointee stood up in the audience and forcefully argued that the Bush administration was for free trade and that the United States was going to sweep away the remnants of protectionism along with Saddam’s regime. “We are free traders in America, and we will be free traders in Iraq.” Treasury’s actions in the Balkans, the Republican operative said, were not going to be repeated in Iraq. “That’s when you started to hear these ideological things coming out, how they were going to remake Iraq,” recalls Smith.
His team waited in Kuwait during the initial stages of the invasion, and then raced for Baghdad, becoming one of the first civilian missions to make it into the capital after Saddam’s regime fell. While Smith ran things from Washington, his team made its way through a broken Baghdad to the Iraqi Central Bank.
Smith had asked the U.S. military to protect the bank’s compound. But when his people arrived, there were no U.S. troops in sight, and looters had already stripped the bank’s buildings bare—except in the vault room. Looters and criminals had tried to get into the main vaults, which held both U.S. dollars and Iraqi dinars, but they were unable to break through. The looters stole some bags of cash held in less secure cage areas outside the main vaults but were never able to get to the bank’s main deposits.
Still, the looters did set fires in the building. Pipes burst, water cascaded down into the vaults belowground, and
before long the vaults were under 5 feet of water. It took weeks of digging out before the central bank could resume normal operations in its own facilities. Planning went out the window.
The Treasury team had to improvise. They had assumed that once Saddam Hussein was ousted, the Iraqi currency used by his toppled regime would be considered worthless. But to Smith’s surprise, Iraqis continued to use the so-called Saddam dinar. Treasury officials couldn’t find the printing plates used by Saddam’s regime to print the currency, however, and didn’t even know where the printing presses for the currency had been hidden.
Eventually, Iraq was going to need new currency. But it would take months to develop, print, and distribute billions of new dinars in a newly designed, post-Saddam currency. In the meantime, Iraq had to have an immediate infusion of cash to get the economy back up and running.
The Treasury officials knew where they could get cash fast: the Federal Reserve Bank of New York.
About $1.7 billion in Iraqi government funds that had been frozen since the first Gulf War were held in the United States. John Taylor, the undersecretary of the Treasury for international affairs, arranged for President Bush to sign an executive order authorizing American banks to release those Iraqi government funds to the Treasury Department. The money would be sent to an account set up by Treasury at the Federal Reserve Bank of New York, and then cash from that account would be taken from the East Rutherford Operations Center and trucked to Andrews Air Force Base outside Washington. It would then be flown to Iraq. The cash was to be “used to assist the Iraqi people, and to assist in the reconstruction of Iraq,” Bush’s March 20, 2003, executive order stated.
The Treasury team decided to start with an initial shipment of $250 million. Smith wanted the currency sent in small denominations, to help get the cash moving quickly through the paralyzed Iraqi economy. But when his team called the Federal Reserve in New York and asked about the logistics of sending $250 million in ones and fives, they were told that it would require six air force transport planes. So they decided to ship most of it in $100 bills, which required just one flight. (Some currency in small denominations was sent on the first flight, but the Iraqi Central Bank refused to accept it, and the Americans had nowhere to put it. Pallets filled with several million dollars in $1 and $5 bills are believed to have sat, untouched, in a U.S.-occupied building in the Green Zone, for months, perhaps years, afterward.)
After that first flight, it took eight more planeloads for the Treasury team to transport the entire $1.7 billion in cash during the first months after the invasion. Once the Treasury team had turned that cash over to the Iraqi Central Bank, Ged Smith believed they had given Iraq all of the dollars it would need to jump-start the country’s moribund monetary system.
But that was just the beginning of the cash flights, much to Ged Smith’s dismay. What Smith did not realize was that the post-Saddam order being established in Iraq was already becoming deeply corrupt. Worse, the United States was willing and able to keep feeding into that corruption.
Within weeks of the invasion, American troops scouring one of Saddam’s palaces discovered aluminum boxes filled with cash. Each box was stuffed with about $4 million in $100 bills. There were many, many boxes.
The cashboxes were collected and secretly flown to a U.S. base in Kuwait, where the bills were counted by military personnel. In order to prevent them from skimming some of the money for themselves, the soldiers were not allowed to wear anything more than gym shorts and T-shirts while in the counting room.
Not long after that, the Treasury team learned from senior officials of the Iraqi Central Bank that just before the fall of Baghdad, Saddam Hussein had issued orders to withdraw $1 billion in cash from the central bank, and that the money had been handed over to Qusay Hussein, one of Saddam’s sons, who had arranged to have the cash trucked away. The Treasury officials soon realized that the cash discovered by American troops and flown to Kuwait was the same money Qusay Hussein had taken from the central bank.
Undersecretary John Taylor and his aides at Treasury said that the money belonged to the Central Bank of Iraq. He argued that the U.S. military should send it back to allow the central bank to maintain steady foreign currency reserves to help stabilize Iraq’s shaky economy. Taylor even went to the Situation Room in the White House to argue with top administration officials that the money legally belonged to the central bank and that it should be shipped back immediately. But the White House, the Pentagon, and the newly created Coalition Provisional Authority (CPA), the U.S.-led organization that had just taken over the occupation of Iraq from Jay Garner’s ORHA team, did not agree. The U.S. officials decided that they were simply going to keep the money.
“We made the case that the money should go back to the Iraqi Central Bank,” said Taylor. “That recommendation was rejected.”
The Coalition Provisional Authority decided to dole it out to American military commanders as cash that they could use as they saw fit. The money became the original basis for what was known in the U.S. military as the Commander’s Emergency Response Program, or CERP funds, used by American officers to pay for local reconstruction projects—or to pay off local officials to keep them from siding with the insurgency.
The Bush administration never publicly admitted that they simply had taken money that some top U.S. officials argued belonged to the Iraqi Central Bank, nor did the administration reveal that there was an internal high-level argument about whether to give the money back to the central bank. Instead, American officials came up with alternative explanations for the money’s origins in order to justify taking it. A lengthy article in the U.S. military’s Joint Forces Quarterly by Lt. Col. Mark Martins, a senior military lawyer, described the funds as “ill-gotten Baathist Party cash discovered by U.S. forces.” In the article, he said that the American seizure of the cash complied with international law because it could be defined as “safeguarding movable Iraqi government property.” Somehow, that movable property became the coalition’s, to be used as military commanders saw fit.
The CPA and the U.S. military soon began to spread the cash around Iraq promiscuously, doling out bricks of $100 bills to military commanders with scant recordkeeping, receipts, or controls. CERP quickly became the most popular program among U.S. officers in Iraq. But it also placed unimaginable temptation right in front of American soldiers in the field. The money quickly began to disappear into the rucksacks and footlockers of the officers and enlisted personnel who had access to it; some was mailed home to wives and girlfriends. The stealing in Iraq reached epic proportions.
Maj. Mark Richard Fuller—a Marine, pilot, and family man—was assigned to Fallujah, Iraq, in 2005. Rather than fighting insurgents, the reserve officer from Arizona spent his days counting cash. Assigned as the contracting officer for the Marines in Fallujah, Fuller was in charge of doling out stacks of crisp, newly printed $100 bills to American and Iraqi contractors for reconstruction projects in the blasted city.
There was so much cash that Fuller likely realized that there was no one looking over his shoulder, no one checking where the money was really going. In fact, no one seemed to care. The money was disappearing into a dark hole anyway, and the Iraqis he was paying were simply pocketing the cash. They were not rebuilding their country.
There was no conclusive evidence that Fuller stole any of the money he was managing during his opportunistic time in Fallujah, but when he got back to Arizona, Fuller began depositing cash in banks all over Yuma. The FBI later determined that he had made ninety-one separate deposits, carefully seeking to stay below $10,000 each time, the level at which banks are supposed to report cash transactions. He sometimes made large cash deposits at two or three banks in a single day. All told, he deposited more than $440,000 in fresh $100 bills.
Fuller was a pilot, not a money laundering genius. He didn’t realize that repeatedly depositing large amounts of cash in amounts just below the $10,000 limit is considered suspicious by banks, especially when the money i
s all in uncirculated, large-denomination bills. Fuller was arrested. Yet there was not enough evidence for federal prosecutors to prove that Fuller had obtained his money illegally through his work in Iraq. He agreed only to plead to purposefully seeking to structure deposits in federally insured financial institutions to avoid the $10,000 limit. He agreed to pay a $300,000 fine and to spend about one year in jail.
Army Capt. Michael Nguyen served as a civil affairs officer in Iraq in 2007 and 2008. He was in charge of $11 million in cash, which was supposed to be used for payoffs to Iraqi Sunni militias in Anbar Province. The U.S. Army was willing to pay Sunnis who decided to switch sides and fight the extremist group al Qaeda in Iraq instead of the Americans.
A West Point graduate, Nguyen later admitted that, each day, he would skim cash from the piles of dollars he was handing out for reconstruction projects. He would hide his cash in a box at the end of each shift; later, he sent the cash home to Oregon. No one in the army even noticed that nearly $700,000 had simply disappeared.
But when he got home to Oregon, Nguyen repeated Fuller’s mistakes. He started making deposits of just under $10,000 apiece in banks all over Portland. He also began spending extravagantly. He couldn’t resist. He spent $200,000 in cash for a BMW, a Hummer, and other fancy toys before he was finally arrested.
During the darkest years of the Iraq war, between 2004 and 2008, there were at least thirty-five convictions in the United States and more than $17 million in fines, forfeitures, and restitution payments made in fraud cases in connection with the American reconstruction of Iraq. But the midlevel officers, enlisted personnel, contractors, and others who have been caught account for only a tiny slice of the billions that have gone missing in Iraq.
