Ex-Iraq civilian chief defends doling out of cash

updated 3:26 p.m. ET Feb. 6, 2007

WASHINGTON - The former U.S. occupation chief in Iraq on Tuesday defended the way he haphazardly doled out billions of dollars in Iraqi funds after the U.S. invasion as Democrats began a two-year effort to scrutinize fraud, waste and abuse under the Bush administration.

L. Paul Bremer III, who ran Iraq after the U.S. invasion, said in prepared testimony that he did the best he could to kick-start the Iraqi economy, “which was flat on its back.”

Rep. Henry Waxman, D-Calif., chairman of the House Oversight and Government Reform Committee, disagreed, telling a House hearing that Bremer failed to establish any control over the money after 363 tons of cash was loaded onto airplanes and sent into the war zone in 2003. Waxman, one of the chief investigators for Democrats who took control of Congress this year, said U.S. officials had “no way of knowing whether the cash would wind up in enemy hands.”

Republicans countered that the Democrats were reviewing stale news to embarrass the administration.

“It’s old news,” said Rep. Tom Davis, R-Va., ranking Republican and former chairman of the committee. He accused Democrats of making a “rush to judgment.”

Bremer, who was head of the Coalition Provisional Authority, said, “I arrived in Baghdad at a time when much of the city was burning. Looting was still widespread. My responsibilities were to kick-start the economy.”

He emphasized that the money belonged to Iraqis and came from the U.N.-run oil-for-food program and from seized Iraqi assets.

The special inspector general for Iraq, Stuart Bowen, reported in January 2005 that $8.8 billion in the Iraqi funds could not be accounted for. Waxman said the total amount shipped to Iraq was $12 billion.

The majority of the Iraqi funds were in U.S. dollars and kept in the Federal Reserve Bank of New York before they were transferred in pallets to Iraq.

“The banking system was in shambles,” Bremer said. “We had to find a way to distribute these funds all over the country, despite the lousy roads and a war.”

“Within weeks, “ Bremer said, “my advisers were predicting the complete collapse of the dinar. This would have had disastrous political consequences.”

Bremer said the ideal solution would have been to install modern financial systems for control of the Iraq funds.

“But this ideal conflicted with the realities on the ground and the urgent need to get salaries and pensions to millions of Iraqi families,” he said.

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