Billions Stolen From Iraq?
Some $8.8 billion dispersed for reconstruction efforts in Iraq
is unaccounted for, says the U.S. official in charge of tracing
02/09/06 "CBS" -- -- For a report to be broadcast this Sunday,
Feb. 12, at 7 p.m. ET/PT,
60 Minutes correspondent Steve Kroft investigates the billions
spent on reconstruction-related work, particularly money paid to
a contractor, Custer Battles, now being sued for fraud.
Stuart Bowen, special inspector general for Iraq reconstruction,
says $8.8 billion is
unaccounted for because oversight on the
part of the Coalition Provisional Authority, the entity
governing Iraq after the war, "was relatively nonexistent."
The former number two man at the Coalition's transportation
ministry, Frank Willis, concurs. "I would describe [the
accounting system] as nonexistent." Without a financial
infrastructure, checks and money transfers were not possible, so
the Coalition kept billions in cash to pay for its multitude of
projects. "Fresh, new, crisp, unspent, just-printed $100 bills.
It was the Wild West," says Willis.
Such an atmosphere made it possible for billions to go missing
and companies to defraud the Coalition. Custer Battles, a
company quickly formed after the war to get reconstruction
contracts, goes on trial next week, accused in a whistleblower
suit by an ex-employee of bilking the U.S. government out of $50
"[Custer Battles] wanted to open fraudulent companies overseas
and inflate their invoices to the U.S. government," says the
ex-employee, Robert Isakson. He says he refused to go along with
the scheme and "two weeks later, apparently I heard they began
exactly the fraud they described to me," he tells Kroft.
Willis remembers Custer Battles, which was formed by former Army
Ranger Scott Custer and a failed congressional candidate, Mike
Battles, who claimed to be active in the Republican party and
have connections to the White House. "They came in with a can-do
attitude, whether they could or not," he says. "They were not
experienced. They didn’t know what they were doing," says
They nevertheless got contracts and their work quickly drew
complaints. "They failed miserably," says Col. Richard Ballard
of a $16.8 million contract Custer Battles got to secure the
Baghdad Airport. Col. Ballard, the inspector general for the
Army in Iraq at the time, says the company failed to provide the
X-ray equipment required by the contract.
"These were multi-million-dollar devices for which they received
a considerable cash advance so that they could procure them, and
then they never procured this equipment," says Col. Ballard. On
a bomb-sniffing dog and trainer Custer Battles did procure, Col.
Ballard says, "I think it was a guy and his pet, to be honest
with you," he tells Kroft. The Colonel noted that the dog "would
refuse to sniff the vehicles."
In a memo obtained by 60 Minutes, the airport’s director of
security wrote to the Coalition: "Custer Battles has shown
themselves to be unresponsive, uncooperative, incompetent,
deceitful, manipulative and war profiteers. Other than that,
they are swell fellows."
Instead of removing Custer Battles, the Coalition praised them
and continued to give them contracts. One of those contracts
involved procuring trucks for moving cash around the country –
some of which were inoperative and had to be delivered via tow
truck. "I don’t really know [how they got away with it]," says
British Col. Philip Wilkinson, to whom the trucks were
delivered. "The assumption that we had was that they had to have
high political top cover...," Col. Wilkinson tells Kroft.
Custer and Battles are now under federal investigation and
declined to be interviewed. But in taped depositions, they
disavowed any knowledge of fraudulent invoices outlined in the
By Ira Rosen ©MMVI, CBS Broadcasting Inc. All Rights Reserved.
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