Billions over Baghdad: How Cheney loots the USA


Richard Moore

Original source URL:


Illustration by John Blackford. By Peter van Agtmael/Polaris (desert), 
Konstantin Inozemtsev/Alamy (money).

Billions over Baghdad

Between April 2003 and June 2004, $12 billion in U.S. currency‹much of it 
belonging to the Iraqi people‹was shipped from the Federal Reserve to Baghdad, 
where it was dispensed by the Coalition Provisional Authority. Some of the cash 
went to pay for projects and keep ministries afloat, but, incredibly, at least 
$9 billion has gone missing, unaccounted for, in a frenzy of mismanagement and 
greed. Following a trail that leads from a safe in one of Saddam's palaces to a 
house near San Diego, to a P.O. box in the Bahamas, the authors discover just 
how little anyone cared about how the money was handled.

October 2007

Hidden in plain sight, 10 miles west of Manhattan, amid a suburban community of 
middle-class homes and small businesses, stands a fortress-like building 
shielded by big trees and lush plantings behind an iron fence. The steel-gray 
structure, in East Rutherford, New Jersey, is all but invisible to the thousands
of commuters who whiz by every day on Route 17. Even if they noticed it, they 
would scarcely guess that it is the largest repository of American currency in 
the world.

Officially, 100 Orchard Street is referred to by the acronym eroc, for the East 
Rutherford Operations Center of the Federal Reserve Bank of New York. The brains
of the New York Fed may lie in Manhattan, but xeroc is the beating heart of its 
operations‹a secretive, heavily guarded compound where the bank processes 
checks, makes wire transfers, and receives and ships out its most precious 
commodity: new and used paper money.

Pallets of American currency arriving in Baghdad.

On Tuesday, June 22, 2004, a tractor-trailer truck turned off Route 17 onto 
Orchard Street, stopped at a guard station for clearance, and then entered the 
eroc compound. What happened next would have been the stuff of 
routine‹procedures followed countless times. Inside an immense three-story 
cavern known as the currency vault, the truck's next cargo was made ready for 
shipment. With storage space to rival a Wal-Mart's, the currency vault can 
reportedly hold upwards of $60 billion in cash. Human beings don't perform many 
functions inside the vault, and few are allowed in; a robotic system, immune to 
human temptation, handles everything. On that Tuesday in June the machines were 
especially busy. Though accustomed to receiving and shipping large quantities of
cash, the vault had never before processed a single order of this magnitude: 
$2.4 billion in $100 bills.

Under the watchful eye of bank employees in a glass-enclosed control room, and 
under the even steadier gaze of a video surveillance system, pallets of 
shrink-wrapped bills were lifted out of currency bays by unmanned "storage and 
retrieval vehicles" and loaded onto conveyors that transported the 24 million 
bills, sorted into "bricks," to the waiting trailer. No human being would have 
touched this cargo, which is how the Fed wants it: the bank aims to "minimize 
the handling of currency by eroc employees and create an audit trail of all 
currency movement from initial receipt through final disposition."

Forty pallets of cash, weighing 30 tons, were loaded that day. The 
tractor-trailer turned back onto Route 17 and after three miles merged onto a 
southbound lane of the New Jersey Turnpike, looking like any other big rig on a 
busy highway. Hours later the truck arrived at Andrews Air Force Base, near 
Washington, D.C. There the seals on the truck were broken, and the cash was 
off-loaded and counted by Treasury Department personnel. The money was 
transferred to a C-130 transport plane. The next day, it arrived in Baghdad.

That transfer of cash to Iraq was the largest one-day shipment of currency in 
the history of the New York Fed. It was not, however, the first such shipment of
cash to Iraq. Beginning soon after the invasion and continuing for more than a 
year, $12 billion in U.S. currency was airlifted to Baghdad, ostensibly as a 
stopgap measure to help run the Iraqi government and pay for basic services 
until a new Iraqi currency could be put into people's hands. In effect, the 
entire nation of Iraq needed walking-around money, and Washington mobilized to 
provide it.

What Washington did not do was mobilize to keep track of it. By all accounts, 
the New York Fed and the Treasury Department exercised strict surveillance and 
control over all of this money while it was on American soil. But after the 
money was delivered to Iraq, oversight and control evaporated. Of the $12 
billion in U.S. banknotes delivered to Iraq in 2003 and 2004, at least $9 
billion cannot be accounted for. A portion of that money may have been spent 
wisely and honestly; much of it probably wasn't. Some of it was stolen.

Once the money arrived in Iraq it entered a free-for-all environment where 
virtually anyone with fingers could take some of it. Moreover, the company that 
was hired to keep tabs on the outflow of money existed mainly on paper. Based in
a private home in San Diego, it was a shell corporation with no certified public
accountants. Its address of record is a post-office box in the Bahamas, where it
is legally incorporated. That post-office box has been associated with shadowy 
offshore activities.

Coalition of the Billing

The first shipment of cash to Iraq took place on April 11, 2003‹it consisted of 
$20 million in $1, $5, and $10 bills. It was arranged in small bills on the 
theory that these could quickly be circulated into the Iraqi economy "to prevent
a monetary and financial collapse," as one former Treasury official put it. 
Those were the days when American officials worried that the gravest threat 
facing Iraq might be low-grade civilian unrest in Baghdad. They didn't have a 
clue as to the power of the insurgency that was to come. The initial $20 million
came exclusively from Iraqi assets that had been frozen in U.S. banks as long 
ago as the Gulf War, in 1990. Subsequent airlifts of cash also included billions
from Iraqi oil revenues controlled by the United Nations. After the creation of 
the Development Fund for Iraq (D.F.I.)‹a kind of holding pit of money to be 
spent for "purposes benefitting the people of Iraq"‹the U.N. turned over control
of Iraq's oil billions to the United States.

When the U.S. military delivered the cash to Baghdad, the money passed into the 
hands of an entirely new set of players‹the staff of the American-led Coalition 
Provisional Authority. To many Americans, the initials C.P.A. would soon be as 
familiar as those of long-established government agencies such as D.O.D. or hud.
But the C.P.A. was anything but a conventional agency. And, as events would 
show, its initials would have nothing in common with "certified public 
accountant." The C.P.A. had been hastily created to serve as the interim 
government of Iraq, but its legality and paternity were murky from the start. 
The Authority was in effect established by edict outside the traditional 
framework of American government. Not subject to the usual restrictions and 
oversight of most agencies, the C.P.A. during the 14 months of its existence 
would become a sump for American and Iraqi money as it disappeared into the 
hands of Iraqi ministries and American contractors. The Coalition of the 
Willing, as one commentator observed, had turned into the Coalition of the 

The first mention of the C.P.A. came on April 16, 2003, in a so-called freedom 
message to the Iraqi people by General Tommy R. Franks, commander of the 
coalition forces. A week after mobs ransacked Iraq's National Museum of its 
treasures, unchallenged by American troops, General Franks arrived in Baghdad 
for a six-hour whirlwind tour. He met with his commanders in one of Saddam 
Hussein's palaces, held a video conference with President Bush, and then quickly
flew off. "Our stay in Iraq will be temporary," General Franks wrote, "no longer
than it takes to eliminate the threat posed by Saddam Hussein's weapons of mass 
destruction, and to establish stability and help Iraqis form a functioning 
government that respects the rule of law." With that in mind, General Franks 
wrote that he created the Coalition Provisional Authority "to exercise powers of
government temporarily, and as necessary, especially to provide security, to 
allow the delivery of humanitarian aid and to eliminate weapons of mass 
destruction." Three weeks later, on May 8, 2003, the U.S. and British 
ambassadors to the United Nations sent a letter to the U.N. Security Council, 
effectively delivering the C.P.A. to the United Nations as a fait accompli.

The day before, President Bush had appointed L. Paul Bremer III, a retired 
diplomat, as presidential envoy to Iraq and the president's "personal 
representative," with the understanding that he would become the C.P.A. 
administrator. Bremer had held State Department posts in Afghanistan, Norway, 
and the Netherlands; had served as an assistant to Henry Kissinger and Alexander
Haig; and had closed out his diplomatic career in 1989 as ambassador-at-large 
for counterterrorism. More recently, he had been the chairman and chief 
executive officer of a crisis-management business called Marsh Crisis 
Consulting. Despite his State Department background, Bremer had been selected by
the Pentagon, which had elbowed aside all contenders for authority in 
post-invasion Iraq. The C.P.A. itself was a creature of the Pentagon, and it 
would be Pentagon personnel who did the C.P.A.'s hiring.

Over the next year, a compliant Congress gave $1.6 billion to Bremer to 
administer the C.P.A. This was over and above the $12 billion in cash that the 
C.P.A. had been given to disburse from Iraqi oil revenues and unfrozen Iraqi 
funds. Few in Congress actually had any idea about the true nature of the C.P.A.
as an institution. Lawmakers had never discussed the establishment of the 
C.P.A., much less authorized it‹odd, given that the agency would be receiving 
taxpayer dollars. Confused members of Congress believed that the C.P.A. was a 
U.S. government agency, which it was not, or that at the very least it had been 
authorized by the United Nations, which it had not. One congressional funding 
measure makes reference to the C.P.A. as "an entity of the United States 
Government"‹highly inaccurate. The same congressional measure states that the 
C.P.A. was "established pursuant to United Nations Security Council 
resolutions"‹just as inaccurate. The bizarre truth, as a U.S. District Court 
judge would point out in an opinion, is that "no formal document Š plainly 
establishes the C.P.A. or provides for its formation."

Accountable really to no one, its finances "off the books" for U.S. government 
purposes, the C.P.A. provided an unprecedented opportunity for fraud, waste, and
corruption involving American government officials, American contractors, 
renegade Iraqis, and many others. In its short life more than $23 billion would 
pass through its hands. And that didn't include potentially billions more in oil
shipments the C.P.A. neglected to meter. At stake was an ocean of cash that 
would evaporate whenever the C.P.A. did. All parties understood that there was a
sell-by date, and that it was everyone for himself. An Iraqi hospital 
administrator told The Guardian of England that, when he arrived to sign a 
contract, the army officer representing the C.P.A. had crossed out the original 
price and doubled it. "The American officer explained that the increase (more 
than $1 million) was his retirement package." Alan Grayson, a Washington, D.C., 
lawyer for whistle-blowers who have worked for American contractors in Iraq, 
says simply that during that first year under the C.P.A. the country was turned 
into "a free-fraud zone."

Bremer has expressed general satisfaction with the C.P.A.'s work while at the 
same time acknowledging that mistakes were made. "I believe the C.P.A. 
discharged its responsibilities to manage these Iraqi funds on behalf of the 
Iraqi people," he told a congressional committee. "With the benefit of 
hindsight, I would have made some decisions differently. But on the whole, I 
think we made great progress under some of the most difficult conditions 
imaginable, including putting Iraq on the path to democracy."

The Bottomless Vault

To be fair, the C.P.A. really did need money desperately, and it really did need
to start spreading it among the traumatized Iraqi population. It also needed to 
jump-start Iraq's basic services. As the C.P.A. demanded ever greater amounts of
cash, the pallets of $1, $5, and $10 bills were soon replaced by bundles of $100
bills. During the C.P.A.'s little more than a year of life, the New York Federal
Reserve Bank made 21 shipments of currency to Iraq totaling $11,981,531,000. All
told, the Fed would ship 281 million individual banknotes, in bricks weighing a 
total of 363 tons.

After arriving in Baghdad, some of the cash was shipped to outlying regions, but
most of it stayed in the capital, where it was delivered to Iraqi banks, to 
installations such as Camp Victory, the mammoth U.S. Army facility adjacent to 
the Baghdad airport, and to Saddam's former presidential palace, in the Green 
Zone, which had become the home of Bremer's C.P.A. and the makeshift Iraqi 
government. At the palace the cash disappeared into a vault in the basement. Few
people ever saw the vault, but the word was that during one short period it held
as much as $3 billion. Whatever the figure, it was a major repository of the 
banknotes from America during the brief time the cash was under the care of the 
C.P.A. The money flowed in and out rapidly. When someone needed cash, a unit 
called the Program Review Board, composed of senior C.P.A. officials, reviewed 
the request and decided whether to recommend a disbursement. A military officer 
would then present that authorization to personnel at the vault.

Even those who picked up large sums usually did not actually see the vault. Once
a disbursement had been made, the cash was brought to an adjoining room for 
pickup. This "secure room," as one military officer called it, looked a lot like
a vault itself: a thick metal door at the entrance, with the room beyond starkly
furnished with only a table and chairs. The table would be piled high with cash.
An authorized officer would sign papers for the money, then begin carting it 
upstairs‹sometimes in sacks or metal boxes‹to the Iraqi ministry or C.P.A. 
office that had requested it. Upon turning over the cash, the officer would be 
required to obtain a receipt‹nothing more.

C.P.A. officials tried to keep a rough running tab on the amount disbursed to 
individual Iraqi agencies such as the Ministry of Finance ($7.7 billion). But 
there was little detail, nothing specific, on how the money was actually used. 
The system basically operated on "trust and faith," as one former C.P.A. 
official put it. Once the cash passed into the hands of the Iraqis or any other 
party, no one knew where it went. The C.P.A. turned over $1.5 billion in cash to
Iraqi banks, for instance, but later auditors could account for less than $500 
million. The United Nations retained a team of auditors to look over American 
shoulders. They didn't see much, because they were largely cut off from access 
while the C.P.A. held power. As a report by the U.N.'s accounting consultant, 
KPMG, noted dryly, "We encountered difficulties in performing our duties and 
meeting with key C.P.A. personnel."

"There was corruption everywhere," said one former military officer who worked 
with the C.P.A. in Baghdad in the months after the invasion. Some of the Iraqis 
who were put in charge of ministries after Saddam's fall had never run a 
government agency before. Their inexperience aside, he said, they lived in 
constant fear of losing their jobs or their lives. All many cared about, he 
added, was taking care of themselves. "You could see that a lot of them were 
trying their best to get a quick retirement fund before they were ousted or 
killed," he added. "You just get what you can while you're in that position of 
power. Instead of trying to build the nation, you build yourself."

Did any withdrawals from the vault pay for secret activities by government 
personnel? It is an obvious possibility. Much of the cash was clearly destined 
for American contractors or Iraqi subcontractors. Sometimes the Iraqis came to 
the palace to collect their cash; other times, when they were reluctant to show 
up at the American compound, U.S. military personnel had to deliver it 
themselves. One of the riskier jobs for some U.S. military men was to fill up a 
car with bags of cash and drive the money to contractors in Baghdad 
neighborhoods, handing it over like a postal worker delivering mail.

ŒFraud" was simply another word for "business as usual." Of 8,206 "guards" 
drawing paychecks courtesy of the C.P.A., only 602 warm bodies could in fact be 
found; the other 7,604 were ghost employees. Halliburton, the government 
contractor once headed by Vice President Dick Cheney, charged the C.P.A. for 
42,000 daily meals for soldiers while in fact serving only 14,000 of them. Cash 
was handed out from the backs of pickup trucks. On one occasion a C.P.A. 
official received $6.75 million in cash with the expectation he would shell it 
out in one week. Another time, the C.P.A. decided to spend $500 million on 
"security." No specifics, just a half-billion dollars for security, with this 
cryptic explanation: "Composition TBD"‹that is, "to be determined."

The pervasiveness of this Why-should-I-care? attitude was driven home in an 
exchange with retired admiral David Oliver, the C.P.A.'s director of management 
and budget. Oliver was asked by a BBC reporter what had happened to all the cash
airlifted to Baghdad:

Oliver: "I have no idea‹I can't tell you whether or not the money went to the 
right things or didn't‹nor do I actually think it's important."

Q: "Not important?"

Oliver: "No. The coalition‹and I think it was between 300 and 600 people, 
civilians‹and you want to bring in 3,000 auditors to make sure money's being 

Q: "Yes, but the fact is that billions of dollars have disappeared without a 

Oliver: "Of their money. Billions of dollars of their money, yeah, I understand.
I'm saying what difference does it make?"

The difference it made was that some American contractors correctly believed 
they could walk off with as much money as they could carry. The circumstances 
that surround the handling of comparatively small sums help explain the billions
that ultimately vanished. In the south-central region of Iraq a contracting 
officer stored $2 million in a safe in his bathroom. One agent kept $678,000 in 
an unsecured footlocker. Another agent turned over some $23 million to his team 
of "paying agents" to deliver to contractors, but documentation could be found 
for only $6.3 million of it. One project officer received $350,000 to fund 
human-rights projects, but in the end could account for less than $200,000 of 
it. Two C.P.A. agents left Iraq without accounting for two payments of $715,000 
and $777,000. The money has never been found.

To Frank Willis, a senior adviser to the Iraqi transportation ministry, the 
presence of so much cash circulating so freely gave the Green Zone a "Wild West"
feel. A moderate Republican who worked for Reagan and voted for George W. Bush, 
Willis spent many years in executive roles in the State Department and the 
Department of Transportation before leaving government service in 1985. He was a
top executive of a health institute in Oklahoma when, in 2003, an old friend 
from Washington called and asked if he would come to Iraq to help the C.P.A. get
the various transportation systems running again.

"You've got to be crazy," Willis told him at first. He says he was talked into 
going for 30 days, but once in Baghdad became caught up in the work and stayed 
for six grueling months. Willis says he wasn't there a month before he felt the 
way things were being done was "terribly wrong." One afternoon he returned to 
his office to find piles and piles of shrink-wrapped $100 bills stacked on a 
table. "This just got wheelbarrowed in," one of his American colleagues 
explained. "What do you think of two million bucks?" The money had been "checked
out" of Saddam's old vault in the basement, two floors below, in order to pay a 
U.S. contractor hired by the C.P.A. to provide security.

The neat bundles of cash looked almost like play money, and the temptation to 
handle them was irresistible. "We were all in the room passing those things 
around and having fun," Willis remembers. He and his colleagues played a game of
football, tossing the bricks back and forth. "You could spin them but not throw 
a spiral," Willis says with a laugh. When he called the American contractor to 
come get his money, Willis advised him, "You better bring a gunnysack."

"Integrity Is a Core Principle"

The American contractor needing the gunnysack was a company called Custer 
Battles. The name was derived not from Little Big Horn but from the names of the
company's owners, Scott K. Custer and Michael J. Battles. Both were former army 
rangers in their mid-30s, and Battles also had once been a C.I.A. operative. The
pair showed up on the streets of Baghdad with the blessing of the White House at
invasion's end, looking for a way to do business. At the time, the only American
civilians who could gain access to the city were those approved by President 
Bush's staff.

The Battles half of the team brought the White House access, secured when 
Michael Battles became the G.O.P.-backed candidate in the 2002 Rhode Island 
congressional primary for the privilege of losing to the Democratic incumbent, 
Patrick Kennedy. Battles not only lost the primary but was fined by the Federal 
Election Commission for misrepresenting campaign contributions. Nevertheless, he
forged important political connections. His contributors included Haley Barbour,
the longtime Washington power broker and former chairman of the Republican 
National Committee, who is now governor of Mississippi, and Frederic V. Malek, a
former special assistant to President Nixon, who survived the Watergate scandal 
and went on to become an insider in the Reagan administration and both Bush 

The C.P.A. awarded Custer and Battles one of its first no-bid contracts‹$16.5 
million to protect civilian aircraft flights, of which at the time there were 
few, into Baghdad International Airport. The company faced immediate obstacles: 
Custer and Battles didn't have any money, they didn't have a viable business, 
and they didn't have any employees. Bremer's C.P.A. had overlooked these 
shortcomings and forked over $2 million anyway, in cash, to get them started, 
simply ignoring long-standing requirements that the government certify that a 
contractor has the capacity to fulfill a contract. That first $2 million cash 
infusion was followed shortly by a second. Over the next year Custer Battles 
would secure more than $100 million in Iraq contracts. The company even set up 
an internal Office of Corporate Integrity. "Integrity is a core principle of 
Custer Battles' corporate values," Scott Custer stated in a press release.

The U.S. business community was impressed by this upstart. In May 2004, Ernst & 
Young, the global accounting firm, announced the finalists for its New England 
Entrepreneur of the Year Awards, honoring an ability "to innovate, develop, and 
cultivate groundbreaking business models, products, and services." Among the 
honorees were Scott Custer and Michael Battles.

Four months later, in September 2004, the air force issued an order barring 
Custer Battles from receiving any new government contracts until 2009. The 
company had come to epitomize the way business was done in Baghdad. Custer 
Battles had billed the government $400,000 for electricity that cost $74,000. It
had billed $432,000 for a food order that cost $33,000. It had charged the 
C.P.A. for leased equipment that was stolen, and had submitted forged invoices 
for reimbursement‹all the while moving millions of dollars into offshore bank 
accounts. In one instance, the company claimed ownership of forklifts used to 
transport the C.P.A.'s cash (among other things) around the Baghdad airport. But
up until the war the forklifts had been the property of Iraqi Airways. They were
"liberated," along with the Iraqi people, following hostilities. Custer Battles 
seized them, painted over the old name, and transferred ownership to its 
offshore businesses. The forklifts were then leased back to Custer Battles for 
thousands of dollars a month, a cost that Custer Battles passed along to the 
C.P.A. In 2006, a federal-court jury in Virginia ordered the company to pay $10 
million in damages and penalties for defrauding the government. The jury found 
more than three dozen instances of fraud in which Custer Battles used shell 
companies in the Cayman Islands and elsewhere to manufacture phony invoices and 
pad its bills. During the same period Battles personally withdrew $3 million 
from the company coffers as a kind of bonus‹or, as he put it, "a draw." The jury
decision in the whistle-blower lawsuit was subsequently overturned when the 
trial judge set the verdict aside, pointing out that the C.P.A. was not in fact 
a U.S.-government entity and hence Custer Battles could not be tried under the 
federal fraud act. That decision is under appeal.

The NorthStar Contract

How can billions of dollars simply vanish? Wasn't there any accounting mechanism
in place to keep track of the money?

La Jolla, California, is about as far away from Iraq in both distance and 
mind-set as one can get. The house at 5468 Soledad Road is a two-story dwelling 
with six bedrooms and five and a half baths, a typical California home of beige 
stucco under a red tiled roof. The neighborhood is lush and well kept. But in 
one respect 5468 Soledad is not a typical suburban house at all.

On October 25, 2003, the C.P.A. awarded a $1.4 million contract "to provide 
accountant and audit services" to help "in the management and accounting of the 
Development Fund for Iraq." In other words, the purpose was to help Bremer and 
the C.P.A. keep tabs on the billions of dollars under their control, and to help
make sure that the money was properly spent. The one-year C.P.A. contract was 
awarded to a company called NorthStar Consultants.

When a request was made to the U.S. government for a copy of this contract, 
officials at the Pentagon, which has oversight, dragged their feet for weeks. 
The document they eventually supplied had been strategically redacted. Nearly 
all the information about the contractor had been blacked out, including the 
name and title of the company officer who had executed the contract, the name of
the person to call for information about the company, the last four digits of 
the company's phone number, and the name of the U.S.-government official who had
awarded the contract in the first place. But by cross-referencing public records
and other sources it was possible to fill in some of the missing data. One path 
led to 5468 Soledad Road.

The house is owned by Thomas A. and Konsuelo Howell, according to San Diego 
County records. The couple apparently bought it new in 1999. State records 
indicate that several companies operate from the house. One of them is called 
International Financial Consulting, Inc., though it isn't clear what this 
company actually does. Incorporated in 1998, I.F.C. was described as a venture 
in "business consulting," according to papers Howell filed with the state. The 
Howells are listed as the only directors.

Another company operating out of 5468 Soledad is called Kota Industries, Inc., 
whose stated business is the "sale of furniture, home furnishings, flooring," 
according to California records. Numerous business directories in the San Diego 
area ascribe similar activities to Kota, listing it as a remodeling, repairing, 
or restoration contractor. One directory describes its specialty as "kitchen, 
bathroom, basement remodeling." Again, the Howells are the only officers and 

In January 2004, in the business-names index of San Diego County, Thomas Howell 
indicated that a third company was now based at 5468 Soledad, noting that it was
owned by International Financial Consulting. This new company was NorthStar.

How did someone whose line of work includes home remodeling end up getting the 
contract to audit the billions being airlifted to Iraq? Thomas Howell is 60; he 
and his wife have lived in San Diego for at least two decades. Over the years, 
the couple has also maintained addresses in Fort Lauderdale, Florida, and 
Laredo, Texas. Neighbors describe the Howells as pleasant, but can add little 
else. "I know them, but I don't know what they do," said one. "That's all I can 
tell you." Two others could say only that they saw the Howells occasionally in 
the neighborhood. Were they aware that a company with an Iraqi contract had 
operated from the house? "Really?" said one. "No. I didn't know that."

Thomas Howell refuses to discuss the NorthStar contract in detail. A telephone 
exchange with him, reached at 5468 Soledad Road, went as follows.

A woman answered, "Kota Industries."
"Could I speak with Mr. Thomas Howell?"
"May I ask who is calling?" the woman asked.
"My name is Jim Steele."
"Wait just a second," the woman said.
A few moments later, a man came on the line. "Tom Howell," he said.

"My name is Jim Steele, and I am a writer with the magazine Vanity Fair. I would
like to talk to you about NorthStar Consultants."

Howell said, "Well, let me find a contact who can talk all this stuff with you. 
What is your phone number, Jim?"

Howell repeated the number and added, "O.K. Let me get somebody who can discuss 
all this stuff for you."

"I'd just like to make sure here. Aren't you president of the company?"

"That's right," said Howell.
"But you can't Š "

"Well, I'm not Š I can't Š You want to talk about the D.F.I. [Development Fund 
for Iraq] and that sort of stuff?" asked Howell.

"Well, yeah."

"O.K.," Howell replied, "I'll get someone who's authorized to talk about all 
that. I'll have them give you a call or I'll call you and give you their 

"Is this the military or your lawyer?"

"The military," said Howell, abruptly ending the conversation with "O.K. Thanks.

The next attempt was a visit to Howell's home the following day. A stylishly 
dressed woman emerged from behind a locked fence. "May I help you?" she asked. 
The woman confirmed that she was Konsuelo Howell, and explained that it would be
impossible to speak with her husband. "He is out of the country."

He never did call back with the name of a Pentagon official "authorized" to 
speak about NorthStar. Nor did anyone from the Pentagon call. When a Pentagon 
public-affairs officer was queried about who might be able to discuss the 
contract, the officer said she needed a name, which, as it turned out, only 
Howell could provide. The Pentagon also failed to respond to a request for the 
information deleted from the NorthStar contract and the name of the person who 
had ordered it deleted.

When Howell was contacted again, three months later, he stated that the 
Department of Defense had told him that "they didn't have anybody anymore 
specifically tasked with answering these questions." As far as D.O.D. was 
concerned, Howell added, the issue was "closed." Once again he refused to 
discuss the NorthStar contract in any detail: "The way I normally work with all 
my clients is: my work is confidential," he said. "If they want to let it out, 
that's fine. But I work for them. It's their business." Howell did say that 
NorthStar was his one and only U.S. government contract. How did he land it? "I 
saw it published on the Web, that it was out for bids," he said.

As for how much auditing NorthStar really did in Iraq, the missing billions 
provide the best answer. The company did have personnel in Baghdad, though how 
many, and for how long, and for what purpose, is not known‹another point Howell 
declines to discuss. Under the terms of C.P.A. Regulation No. 2, signed by 
Bremer on June 15, 2003, money coming into Iraq was supposed to be tracked by an
"independent certified public accounting firm." Howell was not a certified 
public accountant, nor were any of the people who worked for him. Bremer seems 
to have been unaware of this detail. When he was asked at a congressional 
hearing earlier this year about NorthStar, he answered, "I don't know what kind 
of firm it was, other than it was an accounting firm." Would it upset him, a 
congressman asked, if he found out there were no accountants on NorthStar's 
staff? "It would," Bremer answered, "if it were true."

It is true. And rather than reissue the contract to a certified public 
accountant, someone in the government contract office simply eliminated the 
requirement, thereby making Howell eligible for the work.

The Baghdad-Bahamas Connection

When an unknown official at the Pentagon meticulously went through the NorthStar
contract and used a thick-tipped marker to black out Thomas Howell's name, 
title, office address, and phone number, he or she neglected to conceal one of 
the most intriguing aspects of the contract: NorthStar's mailing address. It was
P.O. Box N-3813 in Nassau, in the Bahamas.

High on a hill in Nassau, the main post office commands panoramic views of the 
capital city‹the pink stuccoed Parliament building, bustling Bay Street with its
hordes of tourists, and, beyond it, the giant cruise ships that dock in Nassau's
harbor. Just as you enter the post office, on a sprawling plaza beneath an 
overhang offering protection from the tropical sun and rain, there stand row 
after row of metal boxes, each bearing the capital letter N followed by a series
of numbers. These are the private post-office boxes of Nassau. Because there is 
no home delivery in the city, it is the way people in the capital get their 

Box N-3813, four inches wide by five inches high, looks like all the other 
post-office boxes. It harbors many secrets that its users want to keep. No one 
knows whether anyone at the C.P.A. or the Pentagon questioned why one of its 
contractors used an offshore post-office box. It is undeniably true, however, 
that foreigners often use post-office boxes in the Bahamas and other tax havens 
for three purposes: to conceal assets, to avoid taxes, and to launder money. 
NorthStar would not be at all unusual among Iraq contractors in setting up its 
affairs this way. Post-office boxes in tax havens around the world have been 
flooded with contractor business based in Iraq.

Box N-3813, it turns out, has been the locus for all sorts of transactions by 
Americans and others looking to move money offshore. In addition to Howell's 
NorthStar, this particular box also served as the address of record for a man 
named Patrick Thomson and for his Bahamian business called Lions Gate 
Management. Both figured prominently in one of the more spectacular offshore 
frauds in recent years, the collapse of Evergreen Security. The Caribbean-based 
Evergreen enticed thousands of investors, many of them U.S. retirees, to pour 
money into its so-called tax-sheltered offshore funds, with the promise of 
handsome returns. Some of the money came from hundreds of Caribbean trusts for 
which Thomson acted as trustee. A Ponzi scheme masquerading as a mutual fund, 
Evergreen siphoned $200 million from investors in the United States and two 
dozen other countries. One of its ringleaders was William J. Zylka, a New Jersey
"con artist who falsified his background, credentials and wealth in order to 
perpetrate elaborate schemes," according to court documents. He pocketed $27.7 
million of Evergreen's money.

Throughout the looting of Evergreen, Thomson was one of the firm's three 
directors. During that time he also arranged for Howell to establish the same 
Nassau post-office box as NorthStar's legal home. Identified in Nassau as a 
member of one of Scotland's oldest publishing families, Thomson has operated out
of one or more office buildings in the heart of Nassau for many years. Like most
of those in the shadowy world of offshore deals, he has generally kept a low 
profile, the scandal over Evergreen Security being the one great exception. 
Thomson incorporated NorthStar for Howell in the Bahamas in January of 1998, as 
what is known as an "international business company," or I.B.C. Despite their 
impressive name, I.B.C.'s are little more than paper operations. As a rule, they
don't carry on any business; they are empty vessels that can be used for 
anything. They have no real chief executive officer or board of directors, and 
they don't publish financial statements. An I.B.C.'s books, if there are any, 
can be kept anywhere in the world, but no one can inspect them. I.B.C.'s aren't 
required to file annual reports or disclose the identity of their owners. 
They're shells, operating in total secrecy. In the last two decades, they have 
sprouted by the hundreds of thousands in tax havens worldwide.

In a telephone interview, Thomson discussed with great reluctance his role in 
creating NorthStar for Thomas Howell. How did they meet?

"I believe I was introduced to him through a friend with Citibank," Thomson 
replied. "I believe Howell used to work for Citibank." He said it was his 
recollection that Howell initially established NorthStar because of some 
consulting work he was doing in the Far East, not the Middle East. "This was 
before the Iraq war started," he noted. "All we did was supply a company name." 
Thomson said he had had no contact with Howell in years. He had heard that 
Howell was in Iraq, but declined to discuss the matter further.

Turning Off the Spigot

By the spring of 2004 the clock was winding down for L. Paul Bremer and the 
C.P.A. Within several months‹on June 30‹the Authority was scheduled to turn 
government operations over to the Iraqis, at least formally. There was palpable 
anxiety among officials and contractors about what would happen under the new 
Iraqi regime, and they launched an aggressive effort to get as much money into 
the pipeline as possible. On April 26, another shipment of cash-laden pallets, 
this one holding $750 million, arrived at Baghdad International Airport. On May 
18 the Fed made a $1 billion shipment, which was followed on June 22 by the 
biggest single shipment ever made by the Fed anywhere‹$2.4 billion. Another $1.6
billion arrived three days later, bringing the total of cash shipments to Iraq 
to $5 billion in the C.P.A.'s final three months.

The C.P.A. sought to make one more huge withdrawal. On Monday, June 28, as 
Bremer stole away from Baghdad unannounced‹two days ahead of the scheduled 
handover of authority‹another C.P.A. official put in hurried pleas to the 
Federal Reserve Bank for an additional $1 billion infusion, hoping to get the 
money before an Iraqi provisional government came to power. Internal e-mails 
from the Federal Reserve Bank show that the requests for money came from Don 
Davis, an air-force colonel serving as the C.P.A. comptroller and manager of the
Development Fund for Iraq. But the Fed would have no part of the plan. Because 
Bremer had already "transferred authority (which is being reported in the press 
as 10:26 a.m. in Baghdad)," a Fed official explained, "the C.P.A. no longer had 
control over Iraq's assets."

In one of his last official acts before leaving Baghdad, Bremer issued an 
order‹prepared by the Pentagon, he says‹declaring that all coalition-force 
members "shall be immune from any form of arrest or detention other than by 
persons acting on behalf of their Sending States." Contractors also got the same
get-out-of-jail-free card. According to Bremer's order, "contractors shall be 
immune from Iraqi legal process with respect to acts performed by them pursuant 
to the terms and conditions of a Contract or any sub-contract thereto." The 
Iraqi people, who had had no say over Saddam Hussein's illegal conduct during 
his dictatorship, would have no say over illegal conduct by Americans in their 
new democracy.

And the "Sending State" itself is not interested in pursuing misconduct. With 
the exception of a few low-level individuals, the Bush administration's Justice 
Department has resolutely avoided the prosecution of corporate fraud stemming 
from the occupation of Iraq.

"In our fifth year in the war in Iraq," according to Alan Grayson, the attorney 
for whistle-blowers, "the Bush administration has not litigated a single case 
against any war profiteer under the False Claims Act." This at a time, Grayson 
told a congressional committee, when "billions of dollars are missing and many 
billions more wasted." Grayson knows what he is talking about. He represented 
the whistle-blowers in the Custer Battles case brought under the False Claims 
Act‹a case in which the Justice Department refused to get involved, and the only
one that has gone to trial.

There is no true method of calculating the human cost of the war in Iraq. The 
monetary cost, grossly inflated by theft and corruption, is another matter. One 
simple piece of data puts this into perspective: to date, America has spent 
twice as much in inflation-adjusted dollars to rebuild Iraq as it did to rebuild
Japan‹an industrialized country three times Iraq's size, two of whose cities had
been incinerated by atomic bombs. Understanding how and why this happened will 
take many years‹if understanding comes at all. There has been no rush to explain
even this one small part of the story, that of the missing Iraqi billions. No 
one in the U.S. government wants to talk about NorthStar Consultants, much less 
about the money that disappeared. Bradford R. Higgins was the C.P.A.'s chief 
financial officer, on loan from the State Department, where he is assistant 
secretary for resource management and chief financial officer. Higgins says it 
was "a Department of Defense­managed operation"; he says that "I don't know 
anyone at NorthStar" and that he did not oversee its operations. The C.P.A.'s 
comptroller and D.F.I. fund manager during the NorthStar days in 2003 was 
air-force colonel Don Davis. Through the air-force public-affairs office in the 
Pentagon, Davis declined to comment. L. Paul Bremer III, who wrote a 400-page 
book on his experiences as the C.P.A.'s administrator, stated in an interview 
that he had no input in the decision to hire NorthStar. He explained that "all 
of the contracting was done, by order of the secretary of defense, by the 
department of the army. They were our contracting arm Š I don't think I ever 
heard of NorthStar until some questions came up after I left." Nor did he have 
any dealings with NorthStar's Howell, he said. "If I met him, I have no memory 
of it." Queries sent repeatedly to the army's public-affairs desk in Baghdad and
the Pentagon have gone unanswered, as have those to the office of the secretary 
of defense.

The simple truth about the missing money is the same one that applies to so much
else about the American occupation of Iraq. The U.S. government never did care 
about accounting for those Iraqi billions and it doesn't care now. It cares only
about ensuring that an accounting does not occur.

Also on a Q&A with Barlett and Steele.

Donald L. Barlett and James B. Steele are Vanity Fair contributing editors.

Posting archives: 

Escaping the Matrix website:
cyberjournal website:

How We the People can change the world:

Community Democracy Framework:

Moderator: •••@••.•••  (comments welcome)