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Democrats probe alleged mismanagement in Iraq

Senate minority leader: 'This is a scandal'

From Paul Courson

• Interactive: Who's who in Iraq
• Interactive: Sectarian divide
United States

WASHINGTON (CNN) -- Democrats held a hearing Monday to probe concerns raised by whistleblowers, saying Republican leaders refuse to act on calls to investigate alleged U.S. mismanagement of resources in Iraq.

"I think there was a massive waste of taxpayer money," said Sen. Byron Dorgan of North Dakota, who said the Senate Democratic Policy Committee is trying to establish accountability in the wake of "stories about money being delivered in paper bags -- cash -- millions of dollars of cash being delivered in bags."

Dorgan said his panel "would not hold oversight hearings if, in fact, the committees of jurisdiction would be holding the oversight hearings themselves," referring to the Senate Government Affairs Committee.

A Defense Department spokesman said the Coalition Provisional Authority -- the U.S.-led administration that ran Iraq until June 2004 -- spent money in a process monitored by the United Nations, and did not do any contracting involving U.S. funds.

Regarding Iraqi funds, which included a mix of oil revenue and money recovered from Saddam Hussein's regime, the Pentagon official said such money was handed over to various post-Saddam Iraqi ministries, who in turn were responsible for spending it properly.

The military official said his expertise was limited to the CPA's affairs, and he would not comment on Monday's criticism of the overall spending process.

Dorgan, along with Senate Minority Leader Harry Reid of Nevada, compared the handling of money in Iraq to that of passing around an ice cube that melts a bit in each hand until there's not much left.

Dorgan and Reid both made reference to a January inspector general's report, which found that nearly $9 billion of money spent on Iraqi reconstruction is unaccounted for because of inefficiencies and bad management. (Full story)

Former Iraq civil administrator Paul Bremer and the Defense Department, which was in charge of the reconstruction effort, disputed those findings. The audit dealt with Iraqi money and did not examine the use of U.S. funds appropriated for reconstruction.

"It's not too late to have adequate controls on that which is spent on the reconstruction and on the contracting in Iraq," Dorgan said, adding that "very little" of about $19 billion in reconstruction funds approved by Congress in October 2003 has been spent.

The men displayed a large photograph of a stack of money that a witness said totaled $2 million, bundled in plastic-wrapped packages of $100,000 apiece. The testimony cited a primitive banking system in Iraq that requires hand-carried delivery of large payrolls.

Some of the testimony Monday was secondhand knowledge that included allegations of discrepancies between the amounts contractors billed the government and the actual cash spent.

Alan Grayson, an attorney who represents people hoping to get a share of reward money as they file under the U.S. False Claims Act, testified that a former FBI agent was recruited by an American subcontractor in Iraq, but walked out when he was asked to inflate charges for time and materials.

Grayson said the man "refused twice and said, 'You all are going to prison.'

"The second time he was held at gunpoint in Baghdad, stripped of his weapons and security identification and then was released, defenseless, on the streets of Baghdad," Grayson said. "I'm talking about Americans holding guns on Americans."

There was also some firsthand criticism from a man the United States hired to establish the "Iraqi Media Network" in the weeks that followed the end of Saddam Hussein's regime.

Don North, a veteran U.S. radio and television correspondent, told the panel his project hoped to inherit Saddam's well-equipped studios, only to find that "they had been bombed" by U.S. forces and then looted by locals as security broke down.

Once his group had cobbled together some basic television newsgathering and production gear, he was told the point of the mission had changed.

Instead of looking for news and information of interest to the Iraqis, "we were running a public diplomacy operation" covering briefings and photo opportunities of the Coalition Provisional Authority, then headed by Bremer.

North left after only four months, and he told lawmakers that independent media outlets that followed his efforts in Iraq did not enjoy U.S. support.

"Our know-how to establish free and open media should have been a priority in Iraq," he said. "As one of the foundations of a budding democracy. These ideals were seriously derailed in Iraq."

Dorgan said he had invited Republican senators, top Pentagon officials and Bremer to the hearing, but none appeared.

"This is a scandal," Reid said. "This is only the tip of the iceberg. ... We're talking about billions of dollars."

Reid, who left the hearing early, said the questionable practices are "wrong and in some cases possibly criminal."

"It also contributes to the poor security position we find ourselves in today," he said.

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