Iraq War’s ’Missing’ $6.6 Billion Is Discovered in Central Bank

A new Pentagon audit resolves a lingering Iraq-war mystery, concluding that $6.6 billion of U.S.-controlled reconstruction money was transferred to the Central Bank of Iraq, not lost or stolen.

The Coalition Provisional Authority, created by the U.S. to run Iraq after the invasion, controlled more than $20.7 billion during its 14-month life, including $6.6 billion held when it was dissolved on June 28, 2004.

“That money is not missing,” said Inspector General Stuart Bowen in a telephone interview.

A 2010 Bowen audit couldn’t account for the money. Today’s report says “sufficient evidence exists showing almost all” the $6.6 billion was transferred to the central bank.

The inability to account for the money led to suspicion in Iraq that the funds had been stolen. The Iraqi parliament’s Integrity Committee wrote the United Nations in June that “all indications are that the institutions of the United States of America committed financial corruption by stealing money.”

“That’s not true,” Bowen said. “This report answers the question about the $6.6 billion. We conclude it properly was accounted for by the Federal Reserve Board Bank of New York and Central Bank of Iraq.”

Any doubts about how the money was handled after it left U.S. control is an Iraqi -- not U.S. government -- question, Bowen said.

The Los Angeles Times in June fueled concern about the money when it quoted Bowen as calling the then-unaccounted-for $6.6 billion “the largest theft of funds in national history,” a phrase Bowen later said was taken out of context.

U.S. Controls Questioned

Still, the audit raised questions about the CPA’s financial management. It identified three instances when about $4.3 billion of U.S. currency was deposited in the Iraqi bank “in a manner that varied” from that interim government’s written policies and procedures.

The inspector general was unable to locate all required documents needed to show how and when the money was transferred -- a problem that Bowen found to be “of concern, given the massive amounts of money involved,” the report said.

Bowen’s report also questions what authority the U.S. Defense Department had when it took control over $217.7 million stashed at a presidential palace vault.

A pending audit scheduled for release in January will account for that money and about $2.8 billion used by Defense Department agencies, including the U.S. Army Corps of Engineers, for reconstruction projects.

Pentagon Comptroller Robert Hale accepted Bowen’s report while raising several technical questions.

“I am hopeful that the results of this independent validation will support a more productive dialogue that will preclude any misunderstandings by the government of Iraq related to the control” of reconstruction money, Hale wrote in an Oct. 21 letter to Bowen.

To contact the reporter on this story: David Lerman in Washington at dlerman1@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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