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Today's Topics:

   1. Confirmed: UK sexed up WMDs  (2 stories and transcript) (bluepilgrim)
   2. Pentagon freezes Iraq funds amid corruption probes (bluepilgrim)

--__--__--

Message: 1
Date: Wed, 31 Dec 2003 01:23:58 -0600
To: newsclippings@casi.org.uk
From: bluepilgrim <bluepilgrim@DELETETHISgrics.net>
Subject: Confirmed: UK sexed up WMDs  (2 stories and transcript)



http://timesofindia.indiatimes.com/cms.dll/html/uncomp/articleshow/387882.c=
ms

Confirmed: UK sexed up WMDs

[ SUNDAY, DECEMBER 28, 2003 10:55:57 PM ]

LONDON: The British government has confirmed that MI6 had organised
Operation Mass Appeal, a campaign to plant stories in the media about
<http://timesofindia.indiatimes.com/articleshow/358510.cms>Saddam Hussein's
weapons of mass destruction.

[photo of Tony Blair]

The revelation will create embarrassing questions for
<http://timesofindia.indiatimes.com/articleshow/201971.cms>Tony Blair in
the run-up to the publication of the report by Lord Hutton into the
circumstances surrounding the death of
<http://timesofindia.indiatimes.com/articleshow/134837.cms>Dr David Kelly ,
the government weapons expert.

A senior official admitted that MI6 had been at the heart of a campaign
launched in the late 1990s to spread information about Saddam's development
of nerve agents and other weapons, but denied that it had planted
misinformation.

"There were things about Saddam's regime and his weapons that the public
needed to know," said the official.

The admission followed claims by Scott Ritter, a former US marine who led
14 inspection missions in Iraq, who said that MI6 had recruited him in 1997
to help with the propaganda effort.

He described meetings where the senior officer and at least two other MI6
staff had discussed ways to manipulate intelligence material.

"The aim was to convince the public that Iraq was a far greater threat than
it actually was," Ritter said last week.

He said there was evidence that
<http://timesofindia.indiatimes.com/articleshow/183341.cms>MI6 continued to
use similar propaganda tactics up to the invasion of Iraq earlier this year=
.

"Stories ran in the media about secret underground facilities in Iraq and
ongoing programmes to produce weapons of mass destruction," said Ritter.

"They were sourced to western intelligence and all of them were garbage."
Kelly, himself a former United Nations weapons inspector and colleague of
Ritter, might also have been used by MI6 to pass information to journalists=
.

"Kelly was a known and government-approved conduit with the media," said
Ritter.

Sunday Times, London

=3D*=3D*=3D*=3D*=3D*=3D*=3D*=3D*=3D*=3D*

http://www.theaustralian.news.com.au/common/story_page/0,5744,8274062%255E2=
703,00.html

British spies 'misled' media on Iraq
By Nicholas Rufford, The Sunday Times, and Bernard Lane
December 29, 2003

Britain's intelligence services ran a publicity campaign to gain support
for sanctions and the use of military force in Iraq, it has emerged.

The Government confirmed at the weekend that MI6 had organised Operation
Mass Appeal, a campaign to plant stories in the media about Saddam
Hussein's weapons of mass destruction.

The revelation will create embarrassing questions for Tony Blair in the
run-up to the publication of the report by Lord Hutton into the
circumstances surrounding the death of government weapons expert David Kell=
y.

A senior official admitted that MI6 had been at the heart of a campaign
launched in the late 1990s to spread information about Saddam's development
of nerve agents and other weapons, but denied that it had planted
misinformation. "There were things about Saddam's regime and his weapons
that the public needed to know," the official said.

The admission followed claims by Scott Ritter, a former US Marine who led
14 inspection missions in Iraq, that MI6 had recruited him in 1997 to help
with the propaganda effort. He described meetings where the senior officer
and at least two other MI6 staff had discussed ways to manipulate
intelligence material.

"The aim was to convince the public that Iraq was a far greater threat than
it actually was," Mr Ritter said last week.

Mr Ritter said he obtained approval to co-operate from Richard Butler, then
executive chairman of the UN Special Commission on Iraq Disarmament.

Mr Butler, now Governor of Tasmania, said yesterday that he had no
recollection of this. He said he would not have approved any operations
falling outside his disarmament mandate.

"We have a choice with respect to Scott Ritter," Mr Butler said. "Either he
was misleading me when he worked for me . . . or he's chosen to mislead the
public subsequently.

"He robustly advised me that Iraq retained unaccounted-for WMDs. I think
his advice then was correct."

Mr Ritter resigned as a weapons inspector in 1998, protesting that neither
US president Bill Clinton nor the UN Security Council was taking the WMD
threat seriously enough. By 1999, however, he was claiming that Iraq had no
"meaningful WMD capability" and constituted no threat.

Mr Butler said: "Scott has been all over the place, really. I've given up
trying to fathom why Scott has been behaving as he has."

Mr Ritter said last week that there was evidence MI6 continued to use
propaganda tactics up to the invasion of Iraq earlier this year. "Stories
ran in the media about secret underground facilities in Iraq and ongoing
programs (to produce weapons of mass destruction)," he said. "They were
sourced to Western intelligence and all of them were garbage."

Kelly, himself a former UN weapons inspector and colleague of Mr Ritter,
might also have been used by MI6 to pass information to journalists.

"Kelly was a known and government-approved conduit with the media," Mr
Ritter said.

Mr Hutton's report is expected to deliver a verdict next month on whether
intelligence was misused in order to promote the case for going to war. Mr
Hutton heard evidence that Kelly was authorised by the Foreign Office to
speak to journalists on Iraq. Kelly was in close touch with the "Rockingham
cell", a group of weapons experts that received MI6 intelligence.

Mr Blair justified his backing for sanctions, and for the invasion of Iraq,
on the grounds that intelligence reports showed Saddam was working to
acquire chemical, biological and nuclear weapons. The use of MI6 as a "back
channel" for promoting the Government's policies on Iraq was never
discovered during the Hutton inquiry, and was likely to cause considerable
disquiet among MPs.

The campaign was judged to be having a successful effect on public opinion.
MI6 officers passed on intelligence that Iraq was hiding weapons of mass
destruction and secretly rebuilding its arsenal.

Poland, India and South Africa were initially chosen as targets for the
campaign because they were non-aligned UN countries not supporting the
British and US position on sanctions. At the time, in 1997, Poland was also
a member of the UN Security Council.

=3D*=3D*=3D*=3D*=3D*=3D*=3D*=3D*=3D*=3D*=3D*=3D*=3D
http://www.democracynow.org/article.pl?sid=3D03/12/30/1441259

Tuesday, December 30th, 2003
Scott Ritter: How the British Spy Agency MI6 Secretly Misled A Nation Into
War With Iraq

Listen to:
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----------
Former U.N. Iraqi Weapons Inspector Scott Ritter discusses how he was
personally involved in the MI6=92s "Operation Mass Appeal" in the late 1990=
s
to "shake up public opinion" by passing dubious intelligence on Iraq to the
media. [includes transcript]

----------
President George W Bush and British Prime Minister Tony Blairs=92
justification for the invasion of Iraq has run up against what appears to
be unintended scrutiny from an unlikely source=ADPaul Bremer, head of the
occupation forces in Baghdad.

In an interview with London=92s ITV-1, Bremer dismissed Blair=92s allegatio=
n
that British and American weapons hunters had unearthed "massive evidence
of a huge system of clandestine laboratories" in Iraq. The supposed danger
from Saddam Hussein's alleged WMD was central to the case for war in Iraq,
but despite months of work, the Iraq Survey Group, headed by David Kay, has
all but given up hope of finding them. Blair has remained undaunted,
insisting that the evidence would eventually turn up, and told British
troops in his Christmas message that the information on laboratories showed
Saddam had attempted to "conceal weapons".

But when the claim was put to Bremer, he said it was not true. Unaware that
it had been made by Mr Blair, the American proconsul said it sounded like a
"red herring" put about by someone opposed to military action to undermine
the coalition. He said "I don't know where those words come from, but that
is not what David Kay has said. I have read his report, so I don't know who
said that ... It sounds like someone who doesn't agree with the policy sets
up a red herring, then knocks it down."

But when the interviewer told Bremer the statement was actually made by
Tony Blair, he changed his tune, saying "There is actually a lot of
evidence that had been made public,", adding that the group had found
"clear evidence of biological and chemical programs ongoing ... and clear
evidence of violation of UN Security Council resolutions relating to rocket=
s".

This comes amid allegations from a former chief UN weapons inspector, Scott
Ritter, that MI6=ADthe British intelligence agency=ADran a campaign designe=
d to
exaggerate Iraq's weapons of mass destruction.

Ritter told reporters in the British House of Commons that he was involved
personally with Operation Mass Appeal between the summer of 1997 until
August 1998 when he resigned from the UN. Ritter said the MI6 operation was
designed to "shake up public opinion" by passing dubious intelligence on
Iraq to the media. A spokesman for MI6 said the allegations were "unfounded=
".

    * Scott Ritter, former U.N. weapons inspector

----------
TRANSCRIPT

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more...

AMY GOODMAN: Scott Ritter joins us now, the former UN weapons inspector.

SCOTT RITTER: Thank you. It=92s a pleasure to be here.

AMY GOODMAN: First of all, can you talk about what you were doing with the
British spy agency?

SCOTT RITTER: First of all, let's clarify a couple of things. It's not an
allegation. The British Government did say it was unfounded when I first
came forward with the specifics of Operation Mass Appeal, but according to
the Sunday Times this past weekend, the British Government has now changed
its tune and acknowledged that indeed there was Operation Mass Appeal, and
that it was an MI-6 operation, and that it was designed to help shape
public opinion. So, you know, let's just understand from the start that
what we're talking about is not a mere allegation. It's a statement of fact=
.

Why was I involved with the British intelligence service? Look, I ran
intelligence operations for the United Nations in regards to the
disarmament of Iraq. That was my job. Part of this job in 1997 and 1998
took on a propaganda aspect, given the fact that we had launched a series
of controversial and confrontational inspections in Iraq, which although
successful from a disarmament standpoint in exposing aspects of the Iraqi
account which were not accurate, were causing problems for the United
Nations in the Security Council. The Security Council as a whole was not
backing these tactics that we were using. They were becoming more and more
sympathetic to the Iraqi angle, which was that the inspectors were simply
coming into Iraq and deliberately causing trouble, were serving the
purposes of the unilateral objectives -- policy objectives of the United
States and Great Britain to target Saddam Hussein, not to target weapons of
mass destruction, et cetera.

We made a decision. We, being Richard Butler, the Executive Chairman who
ran UNSCOM, and his senior staff members, of which I was one, that we
needed to clean up our public image, and we did a number of things. For
instance, in the fall and winter of 1997, we worked with CNN to put
together a very high profile one-hour special on CNN about the weapons
inspectors, about the Iraqi concealment program, et cetera. This is
something that caused the Iraqis and their Security Council allies great
consternation. They condemned UNSCOM for getting involved in this kind of
media game. Of course, it was the same media game the Iraqis were playing,
in taking journalists on guided tours of areas in Iraq that weapons
inspectors were trying to gain access to, saying these are nothing to do
with weapons of mass destruction.

I was approached by the British intelligence service, which I had, again, a
long relationship with, of an official nature, to see if there was any
information in the archives of UNSCOM that could be handed to the British,
so that they could in turn work it over, determine its veracity, and then
seek to plant it in media outlets around the world, in an effort to try to
shape the public opinion of those countries, and then indirectly, through,
for instance, a report showing up in the Polish press, shape public opinion
in Great Britain and the United States.

I went to Richard Butler with the request from the British. He said that he
supported this, and we initiated a cooperation that was very short-lived.
The British came to me, not in the summer of 1997, but December 1997. The
first reports were passed to the British sometime in February of 1998.
There was a detailed planning meeting in June of 1998, and I resigned in
August of 1998. So it wasn't as though UNSCOM's participation in this was
significant. This is an operation =96 Operation Mass Appeal, that had been
going on prior to UNSCOM being asked to be the source of particular data,
and it's an operation that continued after my resignation.

AMY GOODMAN: We're talking to Scott Ritter, who is a former UN weapons
inspector in Iraq, who says that in 1997, 1998, he worked with the MI-6,
with Operation Mass Appeal. A spokesperson speaking on behalf of the
British spy agency told BBC News Online: =93The allegation that Ritter was
using MI-6 material is unfounded.=94 Your response to that?

SCOTT RITTER: Well, it's absurd in the extreme. The allegation that I was
using MI-6 material. First of all: what allegation that I was using MI-6?
In regards to Mass Appeal, the statement of fact that I put forward is that
UNSCOM provided data to MI-6, which then MI-6 used in the press. That's no
longer unfounded. The British Government has acknowledged this. They have
acknowledged the existence of Operation Mass Appeal and its role in, you
know, serving as a conduit of propaganda information to the media.

So, I believe that what we're talking about here is that the British
Government needs to be careful here, because, remember, there was an
inquiry by Lord Hutton into the death of David Kelly, the former British
scientist, who tragically took his own life after he was exposed by the
British Government as a source of information to the BBC. During this
inquiry, MI-6 was called to testify, and MI-6 stated on record that it
played no role in shaping public opinion, that all it did was provide, you
know, intelligence assessment to the British Government, and that was all
its job was: collecting intelligence data and then providing assessments on
this data and giving it to the British Government. Now, you know, after
being summoned to testify under oath for an official committee, the British
Government has to acknowledge that: =93No, wait a minute, there was an
intelligence operation run by MI-6, which did involve, you know, passing
intelligence to media outlets for propaganda purposes.=94 The revelation of
Mass Appeal has totally contradicted, you know, sworn testimony of British
intelligence services, and this should cause great consternation not only
for Lord Hutton and his inquiry, which it appears now they were misled or
lied to, but also the British Parliament, which needs to take a closer
look, in my opinion, at how public opinion was shaped by the British
Government in regards to, you know, alleged threats coming from Iraq in the
form of weapons of mass destruction. Let's keep this all in focus, by
noting that Tony Blair said that there were massive stockpiles of weapons
of mass destruction in Iraq. His government published a dossier which
backed up these unfounded allegations.

Now, we are almost ten months into an occupation of Iraq, and no such
weaponry has been found. That should be everyone's focus. Where are the
weapons? Why did the British Government say these weapons existed before
the war, and if the British Government didn't have the data necessary to
sustain these allegations, were they lying when they made their assessments
or were they simply manipulating the public? This is something that should
be looked into. The existence of operations like Mass Appeal run by British
intelligence services designed to manipulate public opinion should be
examined in great detail.

AMY GOODMAN: Scott Ritter, why didn't you say this before the invasion?

SCOTT RITTER: Well, before the invasion, I have said many things. I have
gone on record saying that the British Government has manipulated data. I
have gone on record challenging the assessments of the British Government
and the United States Government. I have said straight up that they don't
have this data to back up these allegations. I have said straight up they
are misinforming the public, misrepresenting data. I have said straight up
that their intelligence services cannot back up the claims being made. What
I didn't say, was Operation Mass Appeal. Should I have said that before?
Look, Amy -- I=92m sitting on a wealth of data. You could interview me for =
a
year, and I would come up with something new and dramatic every time you
talked to me. Why didn't I pick that particular piece of data? Which piece
of data do you want me to pick out of my seven-year experiences of weapons
inspector which was very detailed and involved, multifaceted operations
around world?

I did mention Mass Appeal to journalists in the spring of 2003, the summer
of 2003. And some journalists chose not to do anything with it. Other
journalists like Seymour Hersh ran major articles. Seymour Hersh ran an
article in the New Yorker, although he didn't mention Operation Mass Appeal
by name, he did talk about MI-6's information operations division and how
they passed information to the media. He talked about the similar operation
undertaken by the CIA, but nobody seemed to take notice. So, when I=92m at
the House of Commons in November of this year, in a meeting with British
parliamentarians, and it becomes clear that the British parliamentarians
are willing to rest on the laurels of the Hutton report that they were
comfortable with the statements made by MI-6 and British intelligence,
about their role with the media, I said, =93Oh, look, it's time you guys bi=
g
a little bit deeper. I=92m going to give you some assistance, by putting --
by sharing this data with you.=94 And I gave them the name of the operation=
,
I gave them the name of the intelligence service, and I gave them the name
of the people involved. I gave the name people involved off the record
because they are serving intelligence officers, and the publication of
their names would represent a threat to them and their families. So,
hopefully no one is ever going to mention those names, but by providing
those names to specific sources, they were able to pin down as the Sunday
Times did this past weekend, the British Government caught them in a lie
and compelled them to acknowledge Mass Appeal.

AMY GOODMAN: Can you give specific examples of disinformation that you gave
to the MI-6?

SCOTT RITTER: First of all, I didn't give disinformation to MI-6. I
provided, as I clearly stated, intelligence data that was unverifiable. I
provided intelligence data that was unactionable. UNSCOM had a number of
files of data pertaining to Iraq's weapons of mass destruction program that
lacked the specificity necessary for to us take action. So, these files
were sitting in our cabinet doing nothing, gathering dust. What the British
wanted were these files to be transferred to them, so that they could then
work these files over using their own information, seeing if they could
determine the veracity of this information, and then make an effort, if the
information was accurate, and this is according to the agreement that we
had, if this information was accurate, they would then seek to plant it in
the media abroad. So, it wasn't a disinformation campaign that I was
involved in. It was a propaganda campaign, one that we felt was politically
necessary, given the political events of 1997, 1998.

AMY GOODMAN: What specifically was planted?

SCOTT RITTER: Again, and this is what I have told the British, and I'll say
it right now. What needs to happen, isn=92t for Scott Ritter to pull out on=
e
or two examples and give it you to or anyone else. What needs to happen,
happened. The British Government acknowledged now that their intelligence
service, their secret intelligence service, was involved, contrary to the
public statements of the MI-6 Chief to Lord Hutton's inquiry involved in a
propaganda campaign designed to shape public opinion. So what needs to
happen is, rather than me continuing to snipe from the edge, now that the
government has acknowledged this, there must be an inquiry in which MI-6 is
required to put all of its files. Don't ask me what MI-6 was doing. Ask
MI-6. Demand that the files be put before the British Parliament. Demand
that the people understand the totality of this propaganda campaign. Was
this propaganda campaign disinformation? Did the British intelligence
service deliberately plant data which they knew was unsustainable,
unverifiable - data which they couldn't back up with anything else? This is
the key of the question. Not to come back to the man who's trying to do his
best to expose the truth by saying, =93Give us specific examples.=94 I can =
do
that, and I have told the British Parliament, that if you want to have an
inquiry and call me before you, I will testify under oath about this; but
right now, the pressure should be put on the British Government to provide
the data, not on other individuals.

AMY GOODMAN: Looking at the Sunday Times of London, it says that Mr. Ritter
said he obtained approval to cooperate with Richard Butler, then Executive
Chair of the UN Special Commission on Iraq Disarmament. Mr. Butler, now
Governor of Tasmania, said yesterday he had no recollection of this. He
said he would not have approved any operations falling outside of his
disarmament mandate. =93We have a choice with respect to Scott Ritter,=94
Butler said. =93Either he was misleading me when he worked for me, or he ha=
s
chosen to mislead the public subsequently. He goes on to say, =93He robustl=
y
advised me that Iraq retained unaccounted-for WMDs. I think his advice,
then, was correct.=94 Your response.

SCOTT RITTER: Well, Amy. If you compare my public statements with Richard
Butler=92s public statements in regards to Iraq weapons of mass destruction
programs, I think I have a very good track record. In fact, it's been 100%
in terms of being accurate. I don't make anything up. Every time I say
something, it's a statement of fact, and you can go to the bank with it.
Richard Butler, on the other hand, has been publicly contradicted on any
number of occasions about his assessments and about his statements. This is
a man who testified before the United States Congress and told them that
these weapons existed, that he knew they existed. I called him on this, on
television on CNN. I called him a liar in front of everybody. I said,
=93You're lying. You cannot make that statement of certainty.=94 I never on=
ce
told him that Iraq retained unaccounted-for weaponry. I told him, it's a
matter of record in the United Nations, that we cannot account for all of
Iraq's weapons of mass destruction programs and related weaponry.
Therefore, we must investigate them as if Iraq was retaining them, that we
cannot treat this as a light subject. Our job is complete disarmament. If
we have unaccounted for material, we must pursue it and pursue it
aggressively. This was my advice to Richard Butler.

In December of 1997, I approached Richard Butler about this issue of Mass
Appeal. The British Government through their station chief, the MI-6
station chief in New York, had requested that we do not put this in
writing. So I went to Richard Butler and sought verbal permission. Richard
Butler gave me this verbal permission. Richard Butler knows that this
meeting took place in December of 1998. Richard Butler knows that there are
minutes of meetings that we attended together in London in May -- excuse
me, the first meeting took place in December of 1997, in May of 1998, we
attended formal meetings in London in which this issue was raised by the
British Government in front of Richard Butler and myself, and Richard
Butler again concurred with UNSCOM's participation.

So, you know, I cannot say that Richard Butler is lying. He says he has no
recollection of this. Maybe what I just told you, once he hears it or reads
of it, will get his brain to dig deeper, and suddenly he will recall this,
in fact, is accurate. I have been very accurate about everything I have
said in regards to weapons of mass destruction. I stand by everything that
I have ever said. And, you know, I think it's Richard Butler that is the
one that the media should start looking at askance whenever he opens his
mouth about his investment in the disarmament effort. Because clearly, he
is part of the problem. He is somebody who, you know, didn't run a very
effective ship when he was the Executive Chairman. He is somebody who
stated with absolute certainty that these weapons existed. I have never
said that. I said we had a job to do, a disarmament task to do, and we
needed to finish that job. We needed to account for all of their weaponry.
He took it a step further saying that Iraq retained this, and he had
evidence of this retention. His statements clearly were cherry-picked by
British and American political authorities to help sustain their own
allegations of the existence of a massive stockpile of weapons of mass
destruction in Iraq. That helped shape congressional opinion and public
opinion here in the United States, and parliamentary opinion and public
opinion in Great Britain to support a war that we now know was fought under
false premises.

AMY GOODMAN: Scott Ritter, I want to thank you for joining us. Scott
Ritter, former weapons inspector in Iraq. Thank you.

SCOTT RITTER: Thank you.

To purchase an audio or video copy of this entire program,
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--__--__--

Message: 2
Date: Wed, 31 Dec 2003 03:01:26 -0600
To: newsclippings@casi.org.uk
From: bluepilgrim <bluepilgrim@DELETETHISgrics.net>
Subject: Pentagon freezes Iraq funds amid corruption probes

http://www.boston.com/business/globe/articles/2003/12/30/pentagon_freezes_i=
raq_funds_amid_corruption_probes/


Pentagon freezes Iraq funds amid corruption probes

By Stephen J. Glain, Globe Staff, 12/30/2003

WASHINGTON -- The Pentagon has frozen new funds approved for Iraqi
reconstruction amid growing allegations of corruption and cronyism
associated with the rebuilding process.

Companies eager for a stake in the $18.6 billion in fresh postwar funds
that Congress approved in November have been told not to expect requests
for proposals from the Defense Department, the first step in the kind of
ambitious redevelopment slated for the war-torn country. The freeze will
almost certainly mean the United States will not issue new contracts until
well after the initial Feb. 1 target date.

"We're on hold and we'll be on hold until we hear differently," Admiral
David Nash, the director of the Pentagon's Iraq Program Management Office,
yesterday told the Engineering News-Record, a construction trade journal.
He gave no further details.

The Pentagon also announced last week it would postpone until early January
a conference for companies interested in rebuilding Iraq, according to
Robyn Powell of the National Defense Industrial Association, which
coordinates meetings between industry and the military.

"I don't know why the conference has been canceled again," Powell told Reut=
ers.

The Pentagon's decision to delay Iraqi reconstruction is another setback
for a process already hobbled by political insecurity and, increasingly,
concerns over corruption and misconduct. The success of the US-led bid to
remake Iraq politically depends largely on efforts to reverse the country's
chronic unemployment by repairing it economically. But lawmakers in
Washington and businesspeople in Iraq say the bidding process lacks
transparency and favors a growing class of monopolists and oligarchs that
could overwhelm the country's infant regulatory framework.

"Everyone is focusing on the capture of Saddam Hussein," said Laith Kubba,
a former Iraqi dissident who divides his time between Washington, London,
and Iraq. "But with Saddam gone the most important thing is the country's
political and economic transformation, and that is being held hostage by
vested interests."

Bids for 26 contracts were to be submitted by Jan. 5. But that date has
been postponed indefinitely.

Meanwhile, the Pentagon announced Dec. 18 that it would investigate a
controversial contract for an Iraqi cellphone grid, the second such probe
into Iraq-related reconstruction.

For weeks, Iraqi businesspeople and officials had been calling for an
investigation into the three telephone contracts worth hundreds of millions
of dollars that the US-led coalition awarded in October to three Arab
consortia. Work on the networks, considered crucial to the rebuilding of
Iraq, should have been well underway by now and service set to be up and
running by spring. Construction has not yet begun.

The cellphone probe followed by one week a Pentagon investigation into
whether Brown & Root Services overcharged by $61 million for fuel it
brought into Iraq from Kuwait. Brown & Root, a subsidiary of Halliburton
Co., the oil giant Vice President Dick Cheney once chaired, is doing a
variety of petroleum-related work in Iraq under a no-bid contract the
government issued in March. The company has denied any wrongdoing.

The investigations highlight the need, according to lawmakers and
businesspeople, for a credible watchdog authority to keep an eye on how
money for reconstruction, dominated by Halliburton and engineering giant
Bechtel Group, is spent.

The Washington office of the Coalition Provisional Authority, the US-led
organization in charge of the Iraqi occupation, did not return calls for
comment.

Since it was ruled under the Ottoman Empire more than a century ago, the
Iraqi economy has been dominated by a dozen or so merchant families. These
clans, active in everything from farming to finance, survived the Hussein
regime with their fortunes more or less intact. With Iraqi business still
desperate for cash, the big merchant families are bankrolling smaller
companies bidding for rebuilding work in exchange for a share of profits.

"All of this is going on under the surface," attorney Timothy Mills, who
was active in the rehabilitation of former east bloc economies, said in
congressional testimony last month after returning from Iraq. "We don't see
it and the US government doesn't see it. All they see is the price."

The US government and the International Finance Corp., the lending arm of
the World Bank, say they have made available hundreds of millions of
dollars for small to mid-sized businesses in Iraq. In addition to new
sources of capital, Iraqi businesspeople say they want enhanced oversight
and regulation over the subcontracting process to prevent larger players
from tilting the awards in their favor.

"Otherwise, the next round of bidding is going to be more corrupt than the
first," said an Iraqi consultant to US telecommunications companies with
offices in Baghdad and Washington. "The clans have always done this, but
now it's a hundred times worse."

Stephen J. Glain can be reached at glain@globe.com.
=A9 Copyright 2003 Globe Newspaper Company.





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