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Iraq Gets Poor Marks in Corruption Survey    [

    Cost of Taking Fuel to Iraq Is Questioned
    By James Glanz
    The New York Times

    Tuesday 07 November 2006

    A Halliburton subsidiary charged the Iraqi government as much as $25,000 per month for each of as many as 1,800 fuel trucks that were to deliver gasoline to Iraq after the 2003 invasion, but the trucks often spent days or weeks sitting idle on the border, says a report released yesterday by an auditing agency sponsored by the United Nations.

    The agency said in a statement that the auditing firm it hired had found that some of the contract costs that had been questioned earlier seemed to be justified. But the agency said the findings raised new questions about hundreds of millions of dollars billed by the company under a $2.4 billion contract that the Army awarded on the eve of the conflict to KBR, the Halliburton subsidiary formerly known as Kellogg Brown & Root.

    The new audit gives the first detailed picture of how the company incurred many of those costs.

    The audit said the Kuwaiti government had set the price of its gasoline at $1.13 a gallon. But with the delivery charges, the effective cost of the gas was calculated to be much higher, about $8 a gallon, according to a participant in a meeting in Paris last week at which the audits were presented to the auditing agency and the Iraqi government.

    Questions have been raised about the contract since 2003, when it first became public that the contract had been awarded without competitive bidding.

    Pentagon auditors challenged more than $200 million of KBR's charges under the contract as potentially excessive or unjustified, and the agency designated by the United Nations to oversee Iraq's vast oil revenues later recommended that the United States might have to repay some or all of that money to Iraq.

    The Army later decided that most of those costs were justified by the peculiar nature of the contract and the wartime conditions in which the company was operating and decided to reimburse KBR for them.

    The new audit, commissioned by the oversight agency, the International Advisory and Monitoring Board of the Development Fund for Iraq, contains a mixed message for KBR and the American officials who administered its contracts in Iraq.

    The audit firm, Crowe Chizek, based in Chicago, agreed that in the wartime conditions of Iraq, the Army was justified in reimbursing KBR for the original $200 million in disputed costs.

    But the monitoring board said Crowe's detailed findings on how KBR came up with $1.4 billion in charges on the contract between May 2003 and March 2004 raised new questions on hundreds of millions of dollars more.

    In the chaos after the invasion, the contract was divided into various work orders that called for services like fuel deliveries and the repair of Iraqi oil infrastructure. The audit found, for example, that in an $871 million work order for delivering fuel to Iraq, just $112 million was actually spent on the fuel itself - gasoline, kerosene and liquid petroleum gas.

    But $694 million was paid to a Kuwaiti subcontractor, "primarily for fuel transportation," the audit says. The audit lays out a prime reason for those costs. KBR leased a fleet of tanker trucks from a well-connected Kuwaiti company, Altanmia, at a cost of up to $25,575 a month for each truck "irrespective of the number of deliveries" to Iraq, the audit says.

    Because of deteriorating security in Iraq - and apparently because of severe limits on the number of armed escorts the Army could provide - KBR was able to run only two fuel convoy runs per month from Kuwait to Iraq and back, the audit says. That meant that from 200 to 1,800 trucks racked up charges as they sat idle for long stretches on the border.

    The audits were posted Monday on the agency's Web site with no formal announcement.

    KBR and the agency seem to come to diametrically opposite conclusions on the significance of the audit.

    Melissa Norcross, a Halliburton spokeswoman, said in a statement that the findings showed that KBR "faced the challenge and fulfilled this mission at a fair and reasonable cost," since Crowe concluded that the Army's decision to reimburse much of the originally disputed $200 million was justified under the circumstances.

    "These latest findings by an independent auditing firm provide additional validation of what KBR has said all along," Ms. Norcross said. Ms. Norcross declined to respond to questions about whether the company agreed with Crowe's detailed findings on the contract for leasing the tanker trucks. But those sections of the reports were clearly front and center for the monitoring agency, which pointed out in its own statement that transportation costs "were very high, in some cases as much as 86 percent of the total contract costs."

    The monitoring board said those findings caused it "to question the reasonableness of these costs and the adequacy of the administration of contracts."

    The monitoring board said it was also raising questions about whether $22 million in charges on other no-bid, or noncompetitive, contracts by other companies were unjustified and might have to be repaid to Iraq.

    Early in the conflict, billions of dollars worth of contracts awarded to Western companies, including these, were paid for with Iraqi oil money and assets seized from Saddam Hussein's government. Money from both those sources was placed in a set of accounts called the Development Fund for Iraq, and it was to oversee the fund that the United Nations created the monitoring agency.

    When contacted about the new audit, Representative Henry A. Waxman, a California Democrat who is the ranking minority member of the House Committee on Government Reform and who was among the first to raise questions about the fuel charges in 2003, said he believed that the American and Iraqi governments should now hold the company to account.

    "We now know Halliburton paid $25,000 per month per truck to haul fuel into Iraq and got paid even when those trucks sat idle in Kuwait," he said.

    Messages left late Monday for staff members of Representative Thomas M. Davis III, a Virginia Republican who is chairman of the Government Reform Committee, were not returned.

    But Frederick D. Barton, a director of the Postconflict Reconstruction Project at the Center for Strategic and International Studies, said the transportation charges appeared to reflect "grotesque mismanagement."

    Mr. Barton said the plan for trucking fuel into Iraq should have been revisited once security began to crumble. "It's just infuriating, because the first level of competence would be, 'Is this working?' "

    "For this cost you probably could have flown the fuel in," he said.

    In a reflection of the danger of the operation, the audit says that 85 contract employees were injured and 21 died in the KBR operation. The company "lost more contractors than any other noncombatant organization in Iraq," the audit said.

    About 5,000 tankers were bringing fuel down from Turkey under the same contract, and because of the danger, Turkish drivers would sometime refuse to deliver fuel to Baghdad, according to a slide presentation on the findings that was presented in Paris. It was unclear whether these trucks were similarly idled at the border.

    Iraq Rated Among Most Corrupt

    Paris - Iraq is one of the world's most corruption-ridden countries, according to a survey of 163 nations released Monday.

    The survey, the Corruption Perceptions Index, was conducted by Transparency International in Berlin. The rankings were done by business people and country experts.

    The United States ranked below 19 other countries, including Finland, Iceland and New Zealand, which tied as the least corrupt nations.

    Only Haiti ranked lower than Iraq in the survey, which considered how much bribery, kickbacks and embezzlement occurred in countries studied. Iraq tied with Guinea and Myanmar for their corruption level.

 

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    Iraq Gets Poor Marks in Corruption Survey
    By James Kanter
    International Herald Tribune

    Monday 06 November 2006

    Iraq has emerged at the bottom of a survey that measures corruption around the globe, giving the lowest scores to the most corrupt countries.

    The Corruption Perceptions Index, conducted by Transparency International in Berlin and issued Monday, also showed that the United States, the occupying power in Iraq, had slipped three notches to 20th place in the survey of 163 countries.

    Iraq dropped 23 places to 160th and now ranks alongside Guinea and Myanmar. Haiti earned the lowest score, 1.8 on a scale of 1 to 10, making it the nation where bribery, kickbacks and embezzlement are regarded as most widespread.

    Finland, Iceland and New Zealand were all in first place with scores of 9.6, making them the nations regarded as the world's cleanest.

    The index measures perceptions of corruption by public officials and politicians for private gain. The data for 2006 were amassed from 12 surveys of business people and country experts over the past two years. That was a change from the methodology used by Transparency International in 2005, when the survey ranked 159 countries on the basis of data gathered over three years.

    Since the survey began in 1995, North European countries regularly have ranked at the top of the list.

    Among the top 10 this year were Denmark, Sweden, Norway and the Netherlands. Regularly appearing at the bottom of the list are poor African countries, like Sudan, Congo and Chad this year.

    Huguette Labelle, chairwoman of Transparency International, said the data suggested a direct link between misdeeds by public officials and economic stagnation. She said misappropriated government money "feeds a vicious circle, where those with access to funds or bribes take what they can, because they can, locking the poor in poverty."

    But Transparency International also lambasted the role played by intermediaries from rich economies who help political elites launder, store and profit from unjustly acquired wealth, like looted state assets.

    Kenya, which slipped two places to 142, was a prime example of a country beset by scandals linked to the theft of public funds, and where shell companies and bank accounts in European and off-shore jurisdictions had greased the wheels of wrongdoing.

    The chief executive of Transparency International, David Nussbaum, warned that "firms and professional associations of lawyers, accountants and bankers have a special responsibility to take stronger action against corruption."

    The survey said that bribery in Kenya cost citizens about $1 billion each year.

    The results were not just a disappointment for the world's poorest countries, all of which, with the exception of two African nations, Botswana and Mauritius, scored below 5. The survey identified a number of developed and middle-income countries with a significant worsening in perceived levels of corruption, including Brazil, Israel and Jordan.

    The results also are a blow for the United States, the world's biggest economy, at a time when its global leadership is suffering because of the unpopularity of the war in Iraq.

    The United States scored 7.3 - the same as Chile and Belgium - and ranked two notches behind France. In 2005, the United States scored 7.6 and ranked 17th, a notch above France.

    Analysts said that the failure by the U.S. authorities to detect the wrongdoing at companies like WorldCom and Enron had damaged perceptions among the world's business leaders.

    In another damaging corruption scandal, a former air force official admitted giving Boeing special treatment on a contract for airborne refueling tankers before being hired by the company.

    More recently, the Democrats have portrayed President George W. Bush's Republican Party as awash in a "culture of corruption" - tainted by scandals over congressional pages, links to the convicted lobbyist Jack Abramoff and claims of financial wrongdoing.

    Nancy Zucker Boswell, the president of Transparency International in the United States, said it was no surprise that the country was suffering an image problem at home and abroad.

    "The American public is concerned about the influence of special interests and by the lack of strong measures by Congress to police itself," she said.

    There also "are serious concerns about corruption in Iraq, particularly about contracting," Boswell said, citing an independent report concluding that the U.S. agency in charge of $1.4 billion in reconstruction money in Iraq had hid ballooning cost overruns.

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