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Congress Wants Pentagon Documents on Iraq Development Funds

U.S. lawmakers have sharply criticized U.S. handling of the Development Fund for Iraq that was to be used for the reconstruction of Iraq after the invasion. Congressmen are seeking documents from the Pentagon that would help them with investigations of mismanagement of the funds and overcharging by a major U.S. contractor.

The Development Fund for Iraq held about $8 billion from the former UN Oil for Food Program, as well as revenues from new oil sales and money seized from the regime of former Iraqi President Saddam Hussein.

The U.S.-run Coalition Provisional Authority (CPA) was given control over these assets under UN Security Council Resolution 14-83, which also required that the money must be spent in a "transparent" manner for the benefit of the Iraqi people.

In a report issued a year ago, a UN-mandated oversight panel accused the CPA of mismanaging the fund, and since then lawmakers have attempted to put the issue in the spotlight. But there had been no congressional hearings until Tuesday.

At a House subcommittee hearing, angry lawmakers decried what they called waste, fraud and mismanagement in how the fund was handled.

Congressman Henry Waxman is a California Democrat.

"U.S. officials used virtually no financial controls to safeguard the Iraqi funds, no certified public accounting firm was hired to monitor disbursements, and auditors found that U.S. officials could not account for billions of dollars. One former CPA official told us that Iraq was awash in $100 bills," said Mr. Waxman.

Stuart Bowen, the Defense Department's Special Inspector General for Iraq Reconstruction, told the subcommittee what his office found about how the Development Fund was managed.

"[It] did not say that the money was lost,” said Mr. Bowen. “It did not say that the money was stolen. It did not say that it was fraudulently disbursed. What we did say was this: the CPA provided less than adequate controls over DFI funds, provided to Iraqi ministries, through the national budget process [and] the CPA failed to establish or implement sufficient managerial, financial and contractual controls to ensure that DFI funds were used in a transparent manner.

House Democrats took aim at Halliburton, the oil services company and main recipient of reconstruction contracts in Iraq, alleging it benefited from mismanagement of development funds through cost overcharges.

Auditing reports released by the Pentagon in response to requests from the special UN panel had large portions deleted, prompting congressional critics to say the documents did not shed enough light on some $177 million they claim Halliburton has overcharged.

Republican congressman Christopher Shays, who chairs the House Subcommittee on National Security, Emerging Threats and International Relations, says the last deadline for a satisfactory Pentagon response was May 27.

"We continue to request this information since that date verbally,” said Mr. Shays. “I would even say we begged for the information. I would say that we not only begged for it, we said just give us some [information] so that when we had this hearing we could say there was a good faith effort [by the Pentagon] to cooperate."

Congressman Shays has set a new deadline of next Monday before he requests, through the House Government Reform Committee, a subpoena for the information lawmakers seek.

As the hearing on Iraq development funds was taking place, another panel brought renewed focus on the former Iraq Oil for Food Program.

"[As] we dig deeper and deeper into this scandal we find it fraught with fraud and abuse and it is much more widespread than we thought," said Congressman Cliff Stearns who serves on the Investigations Subcommittee of the House Energy and Commerce Committee.

The subcommittee released a number of documents during the hearing involving unauthorized surcharges for oil shipments, and what was being done about it in a special UN committee responsible for overseeing the Oil for Food Program.