Waste in War: Where Did All the Iraq Reconstruction Money Go?

Sparks flew on Capitol Hill Tuesday as a Democrat-led Congressional committee investigated the Bush administration's handling of billions of reconstruction money in Iraq.

Ambassador L. Paul Bremer, the former Coalition Provisional Authority administrator responsible for rebuilding post-war Iraq, appeared for the first time before Congress to defend his record -- and pointed a finger at a lack of pre-war planning .

Panel Investigates 'Waste, Fraud and Abuse'

Rep. Henry Waxman, D-Calif, chairman of the House Government Reform & Oversight Committee summoned Bremer, citing a January 2005 audit report from Stuart W. Bowen, the government's special inspector general for Iraq reconstruction, which concluded that Bremer's CPA failed to account for $8.8 billion given to Iraqi ministries.

Democrats on the committee painted a picture of disorganization within the Bush administration after the fall of Saddam Hussein. In his opening statement, Rep. Waxman claimed $12 billion dollars were sent to Iraq between May 2003 and June 2004 and is unaccounted for by the U.S. government.

Rep. Waxman said that 'bags of money' were taken from the Federal Reserve in New York, loaded onto wooden palettes and put on cargo planes that were flown into Baghdad.

"Who in their right minds would send 360 tons of cash into a war zone?" asked Rep. Waxman. "But that's exactly what our government did," he said.

"They were handing out tons of cash from the back of pick up trucks," said Rep. Peter Welch, D-Vermont, arguing the Bush administration lacked a plan for the post-Saddam effort.

Bremer's Defense

Ambassador Bremer countered that the money he managed actually came from the Development Fund for Iraq, which was set up by the United Nations Security Council in May 2003 so that Iraq's oil revenue could be spent on rebuilding Iraq.

"We're talking about Iraqi money, not American money," said Bremer, the top civilian in charge of post-Saddam Iraq from May 2003 to June 2004 and a former U.S. ambassador to the Netherlands.

Bremer also described the overwhelming conditions in Iraq when he arrived in 2003.

"The country was in chaos socially, economically and politically," Bremer said. "We were in the middle of a war, working in very difficult conditions, and we had to move quickly to get this Iraqi money working for the Iraqi people," Bremer contended.

The Ambassador said that he fulfilled the CPA's mandate of dispersing money to the Iraqi people by giving the money to the Iraqi ministries themselves and argued that monitoring where the money went after that would have been impossible.

"We were chronically under-staffed," said Bremer. "Pre-war planning had not anticipated the difficulty of the job we faced," he said, pointing out that the country lacked a banking system necessary to deal with the influx of money.

"I think pre-war planning was inadequate," Bremer repeated.

Stuart Bowen, the government official who is auditing where reconstruction money went in Iraq, contradicted Bremer, later testifying that Bremer should have done more to account for the funds.

"More should have been done to find out what was done with the $8.8 billion," said Bowen.

Under fire from Democrats, Bremer was asked about the qualifications of personnel hired for the CPA.

Rep. Paul Hodes, D-N.H., claimed that recent college graduates with Republican ties were sent to Iraq instead of experienced government personnel.

Rodes challenged, "I want to know why half the U.S. staff had never been outside of the country before and had to get a passport for the first time?"

Rep. Waxman also suggestsed that staff members for the Coalition Provisional Authority were too often picked on the basis of Republican political affiliation, rather than experience or competence -- with the result that people in their twenties were handed control over matters such as the Iraqi government budget.

Bremer called such claims "nonsense", asserting, "I want to dispel one of the more pernicious myths, that the CPA was dominated by young, inexperienced ideologues," although he did acknowledge that he had very little control over who was sent to work under the CPA, reporting that most of the jobs were filled within the Pentagon.

20/20 Hindsight or Useful Debate?

Contrary to their firey Democratic counterparts, many Republicans labeled the hearing counterproductive to the ongoing war in Iraq.

Rep. Darrell Issa, R-Calif., accused the Democrats on the committee of merely trying to embarrass President Bush.

But many non-partisan Iraq experts also question the Bush administration's handling of the Iraqi money.

Rick Barton, co-Director of the Post-Conflict Reconstruction Project at the Center for Strategic and International Studies, told ABC News, "There's a feeling among Iraqis that we wasted that money."

Barton believes the administration failed to assess the unstable nature of the Iraqi ministries' infrastructure.

"The ministries barely existed, so to try to come in a give them all this money was really flawed thinking," he said.

Compounding the problem, Barton said, was the small window of time Bremer had to re-build Iraq.

"The administration had an artificial timeline that they imposed on themselves, of getting in and out as soon as possible," Barton said. On Wednesday, the oversight panel is set to focus on private contractors hired to provide supplies for the U.S. military effort in Iraq, especially subcontractors working for Halliburton, the corporate giant once led by Vice President Dick Cheney.

This is the first congressional inquiry into Bush administration spending in Iraq since the Democrats took control of congress in January.

Iraq's Reconstruction Stalled By Bloody Violence

The oversight hearing also comes on the heels of several grim reports describing a stalled reconstruction efforts amidsts a country besieged by bloody sectarian violence.

In his latest quarterly report released last week, Bowen's office painted a dismal picture of Iraq reconstruction indicating that the government of Iraq has been unable to boost the production of oil or electricity despite U.S. aid.

Baghdad gets an average of only 6.5 hours of electric power a day, Bowen's report said, in part because transmission lines are sabotaged but also because of political squabbles about which power plants in regions outside of Baghdad should share electricity with the capital.

Bowen's latest report also indicated that the State Department paid $43.8 million for a temporary police training camp that has never been used and may have spent an additional $36.4 million for armored vehicles, body armor and weapons "that cannot be accounted for," according to the report released last month by the U.S. Special Inspector General for Iraq Reconstruction.

A recent Government Accountability Office report said the Pentagon and the U.S. military command in Baghdad "may not be able to account" for about 90,000 rifles and 80,000 pistols issued to Iraqi security forces in 2004.

The reconstruction efforts have been further hampered by problems within the fledging Iraqi ministries. According to that same GAO report, the Iraqi government has about $6 billion in unspent reconstruction funds because many Iraqi ministries lack the capacity to actually award contracts to get work done.

The GAO also found that Iraq's oil ministry, with its dilapidated refineries and export facilities, has been able to spend only $4 million of the $3.6 billion it has budgeted for repairs.

Reports, But No Action

With so many reports of mismanagement, some in Washington welcome Congressional oversight hearings.

"Sitting those reports on a nice shelf won't solve the problem," said Danielle Brian, executive director of the Project on Government Oversight, a private Washington-based watchdog group.

"Congress has to confront the problems and create solutions," she said, noting that Rep. Waxman was picking up the ball.

Bush Administration Requests More Iraq Money

The hearing into Iraq reconstruction money comes as President Bush presents Congress with his request for more spending in Iraq.

This week, President Bush rolled out his request for a Pentagon budget of $624.6 billion for 2008, more than one-fifth of the nearly three trillion dollar budget, up from $600.3 billion in 2007. At the same time as Bremer's testimony, Secretary of Defense Robert Gates and General Peter Pace, chairman of the Joint Chiefs of Staff, defended that budget request before the Senate Armed Services Committee.

Since 2003, Congress has given $21 billion to the Iraqi Relief and Reconstruction Fund, spending money on contracts to reconstruct Iraq. Another $11 billion has gone to other initiatives, such as training Iraqi's security forces.

If Congress approves the President's current funding requests, the total cost of the Iraq war is expected to exceed $600 billion and counting.

Bremer Pushed Back Into the Public Light

In 2003, former U.S. ambassador to the Netherlands, L. Paul Bremer was appointed by President Bush to be the top-civilian in Iraq, tasked with rebuilding the country from the ground up.

In his book "My Year in Iraq: The Struggle to Build a Future of Hope," Bremer wrote that he had voiced concerns about needing more U.S. troops to secure Iraq in the year following the toppling of the Saddam Hussein regime.

Bremer wrote that he personally stated that position to President Bush and other administration officials, even writing a formal message in May 2004 to Defense Secretary Donald H. Rumsfeld.

According to Bremer's account, the private note stated that ''the deterioration of the security situation'' made it clear that ''we were trying to cover too many fronts with too few resources."

The President announced in January of 2007 his intention to add 21,500 U.S. troops in Iraq, a subject also under debate before the Senate this week.