Pay Any Price (2 page)

Obama's speech, filled with soaring rhetoric about the dangers of endless war, offered little evidence that he planned to follow through with any significant actions to rein in his own policies. It seemed designed to quell a growing restlessness within his liberal Democratic base without actually implementing significant change. The address was inevitably met with skepticism from national security legal experts. “If there was a unifying theme of President Obama's speech,” wrote Benjamin Wittes on the influential national security blog Lawfare, “it was an effort to align himself as publicly as possible with the critics of the positions his administration is taking without undermining his administration's operational flexibility in actual fact. To put it crassly, the president sought to rebuke his own administration for taking the positions it has—but also to make sure that it could continue to do so.” Similarly, Obama's January 2014 speech, in which he said he wanted to reform the NSA, appeared designed to placate Americans alarmed by former NSA contractor Edward Snowden's disclosures of mass surveillance, while actually doing little to limit the NSA's powers. And Obama's subsequent proposal to scale back domestic phone data collection was considered little more than a half measure by privacy advocates.

 

Washington's global war on terror is now in its second decade, thanks to the bipartisan veneer it has gained under Bush and Obama. It shows no signs of slowing down; hustlers and freebooters continue to take full advantage, and the war's unintended consequences continue to pile up. All too often, things are not what they seem.

Two years after Paul Wolfowitz visited Section 60 at Arlington to attend the Iraq Liberation Day ceremony, Viola Drath, the event's organizer, was found dead in her Georgetown townhouse at the age of ninety-one. Her much younger German-born husband, Albrecht Muth, was arrested for her murder. Muth had claimed to be a general in the Iraqi Army and often wore an Iraqi military uniform to public events in Washington. But after his arrest, the certificate of his supposed appointment by Prime Minister Nouri al-Maliki was found to be a forgery. A receipt from a Washington printing shop for the certificate was discovered in the couple's Georgetown home.

In January 2014, Muth was convicted of first-degree murder in the death of Viola Drath.

 

 

 

 

PART I

1

Sometimes the federal government gives very important buildings very dull names. The East Rutherford Operations Center of the Federal Reserve Bank of New York is one such place. The three-story building, nondescript and surrounded by a 13-acre compound, fenced off from the outside world, sits in New Jersey's Meadowlands, literally in the shadows of a far more recognizable landmark, MetLife Stadium, the home of the New York Giants and New York Jets football teams—and the 2014 Super Bowl. Nearby is the Izod Center, which hosts huge live entertainment acts, from Bruce Springsteen to Ultimate Fighting. People driving down the New Jersey Turnpike through the flat, gray wetlands just south of New York City would never notice the unmarked semi-tractor trailers pulling onto the turnpike at exit 16W, coming from the operations center just down the street.

But the East Rutherford Operations Center is hiding riches beyond imagining. Deep inside the complex sits a gargantuan vault, measuring 1 million cubic feet. It is filled with U.S. currency, capable of holding as much as $60 billion. And those trucks driving onto the turnpike are loaded with secret cargo—cash. The East Rutherford Operations Center is to paper currency what Fort Knox is to gold.

The New York Federal Reserve Bank has long served as a key operational hub of the Federal Reserve system. It is the hardwired connection between Washington and Wall Street, between the White House and the financial system. And its storehouse of currency in East Rutherford is there to make sure that banks have the cash they need to refill ATMs across the country. But in 2003, East Rutherford's routine was secretly twisted by the White House. It was placed in the middle of one of the most bizarre operations of the entire Iraq war. The scheme was so weird that it seems hard to believe anyone thought it might be a good idea at the time. It was also symbolic of the profligacy that has been the hallmark of America's endless war on terror—the waste, in both lives and treasure, that two successive presidencies have produced. And it was the moment when thievery in the global war on terror achieved industrial scale.

 

Within weeks of the toppling of Saddam Hussein's statue in Baghdad's Firdos Square in April 2003, a televised event that came to symbolize the ouster of Saddam's regime in Iraq by the U.S.-led military coalition, unmarked trucks started backing up to the loading docks at the East Rutherford Operations Center. There, they were filled end to end with dozens of pallets of shrink-wrapped $100 bills. The trucks then moved out, down the New Jersey Turnpike, carrying billions of dollars in cash. They hauled their cargo of riches past Newark, where nearly one third of the people live below the poverty level.

The trucks stopped at Andrews Air Force Base outside Washington, D.C., where the palletized cash was transferred to the cargo holds of air force C-17 transport planes. The aircraft taxied down the runway and took off for Iraq, making intermediate stops in Germany and Kuwait. Finally, the planes landed at Baghdad International Airport, where the cash was unloaded and counted in the presence of both American and Iraqi personnel.

What happened next is still one of the great unsolved mysteries of the Iraq war.

Between $12 and $14 billion, mostly in $100 bills, was taken from East Rutherford and flown into the war zone of Iraq in 2003 and 2004, with virtually no supervision or safeguards. Another $5.8 billion was sent from the New York Federal Reserve to Baghdad by electronic funds transfers. All told, approximately
$20 billion
was sent to Iraq without any clear orders or direction on how the money was to be used. The controls on the money were so lax that few credible records exist of exactly how much cash there was or where the cash went once it arrived in Baghdad.

Almost certainly, a portion of it ended up in the hands of some of the most powerful Iraqi leaders of the post-Saddam era. Billions of dollars in cash were wasted. And billions more simply disappeared.

 

Now, there is explosive new evidence that for the first time may help to solve the mystery of the missing cash. Approximately $2 billion of the money that was flown from the United States to Baghdad was stolen and secretly transported out of Iraq in what may be one of the largest robberies in modern history.

American investigators have traced the missing cash to Lebanon. It is believed to have been stolen after it arrived in Baghdad, and then secretly transported to Lebanon, where it has been hidden away ever since. Between $1.2 and $1.6 billion is believed to be hidden in a bunker in a rural village in Lebanon, according to current and former U.S. officials. These officials have received reports that the cash was stolen and stored in the bunker with the knowledge of several of Iraq's most prominent leaders.

At least several hundred million dollars in additional cash is also being hidden in several other locations in Lebanon, according to former U.S. officials, bringing the total amount stolen from Iraq and moved to Lebanon to approximately $2 billion. The figures of how much money was stolen and transported out of Iraq are inexact, but the reality is indisputable. One former American official even reported seeing the cash for himself, stored in the bunker in Lebanon.

In addition to cash, hundreds of millions of dollars' worth of gold was stolen from the Iraqi government and is also being hidden in Lebanon, current and former U.S. officials have said.

The CIA and FBI, along with the Pentagon and State Department, have all been told about the theft of the cash, and have received evidence about the bunker in Lebanon and other locations where the cash is believed to be hidden. But the agencies have not tried to retrieve the money. Nobody went after it during the Bush administration, nor has the Obama administration tried. Instead, the U.S. government has kept the entire matter secret.

The Iraqi government of Prime Minister Nouri al-Maliki has also been given information about the money's whereabouts. But the Iraqi government has not taken any action to retrieve it either. Instead, the Iraqi government has kept the information about the Lebanese bunker secret. Officials in both Washington and the Middle East seem content to let the truth lie hidden.

 

Like so many things about the Iraq war, the cash flights from New York started with good intentions. But ideology, chaos, and finally greed all got in the way.

Ged Smith was a veteran of the Treasury Department's tiny band of international firemen who make their living rebuilding lost and broken economies. In the 1990s, he worked in the Balkans following the breakup of Yugoslavia and the ethnic cleansing of Bosnia. In the early weeks of 2003, as the Bush administration geared up for war with Iraq, Smith, the director of the Treasury's Office of Technical Assistance, was assigned to figure out how to get Iraq's financial system restarted after the toppling of Saddam Hussein.

He quickly realized that he was facing much different problems than he had ever seen in Sarajevo. He was going to have to deal with a government of true believers who did not want to hear bad news. And that was just in Washington.

Smith's team of Treasury officials was part of a larger postwar reconstruction organization led by retired army general Jay Garner, who had been appointed by President Bush to get Iraq up and running again after the invasion. Garner had been named because he had been in charge of providing food and shelter to the Kurds following the first Gulf War, and the Bush administration believed that it would only face short-term problems, like feeding refugees, before Iraq was back on its feet. The White House and Pentagon thought that Garner's group, the Office of Reconstruction and Humanitarian Assistance (ORHA), would only be needed in Iraq for a few weeks—a few months at most. Bush and Defense Secretary Donald Rumsfeld were convinced that, after a short time, U.S. troops could come home. They neither wanted nor expected an extended occupation; as a result, any plans that assumed a long-term commitment from the United States were dismissed or ignored.

During one of the few interagency meetings on postwar planning held before the March 2003 invasion, Smith briefed a crowd of senior officials in an auditorium at Fort McNair in Washington on Treasury's plans for Baghdad. He warned that because the Iraqi economy was so centralized under Saddam Hussein, taking down the Iraqi government would likely mean the forced closure of hundreds of Iraqi companies and state-owned enterprises. Factory managers would not know what to do without orders from the regime. That meant that tens of thousands of Iraqis would almost certainly be thrown out of work immediately after Saddam lost power.

Smith looked up after he issued this dire prediction. No one in the crowd said a word. No one asked a single question.

At a follow-up meeting at Fort McNair, Smith mentioned that one of the lessons he had learned in the Balkans was the importance of maintaining a government's ability to collect tariffs and customs duties, so it could meet its payroll. This time, someone did challenge Smith. A Republican political appointee stood up in the audience and forcefully argued that the Bush administration was for free trade and that the United States was going to sweep away the remnants of protectionism along with Saddam's regime. “We are free traders in America, and we will be free traders in Iraq.” Treasury's actions in the Balkans, the Republican operative said, were not going to be repeated in Iraq. “That's when you started to hear these ideological things coming out, how they were going to remake Iraq,” recalls Smith.

His team waited in Kuwait during the initial stages of the invasion, and then raced for Baghdad, becoming one of the first civilian missions to make it into the capital after Saddam's regime fell. While Smith ran things from Washington, his team made its way through a broken Baghdad to the Iraqi Central Bank.

Smith had asked the U.S. military to protect the bank's compound. But when his people arrived, there were no U.S. troops in sight, and looters had already stripped the bank's buildings bare—except in the vault room. Looters and criminals had tried to get into the main vaults, which held both U.S. dollars and Iraqi dinars, but they were unable to break through. The looters stole some bags of cash held in less secure cage areas outside the main vaults but were never able to get to the bank's main deposits.

Still, the looters did set fires in the building. Pipes burst, water cascaded down into the vaults belowground, and before long the vaults were under 5 feet of water. It took weeks of digging out before the central bank could resume normal operations in its own facilities. Planning went out the window.

The Treasury team had to improvise. They had assumed that once Saddam Hussein was ousted, the Iraqi currency used by his toppled regime would be considered worthless. But to Smith's surprise, Iraqis continued to use the so-called Saddam dinar. Treasury officials couldn't find the printing plates used by Saddam's regime to print the currency, however, and didn't even know where the printing presses for the currency had been hidden.

Eventually, Iraq was going to need new currency. But it would take months to develop, print, and distribute billions of new dinars in a newly designed, post-Saddam currency. In the meantime, Iraq had to have an immediate infusion of cash to get the economy back up and running.

The Treasury officials knew where they could get cash fast: the Federal Reserve Bank of New York.

 

About $1.7 billion in Iraqi government funds that had been frozen since the first Gulf War were held in the United States. John Taylor, the undersecretary of the Treasury for international affairs, arranged for President Bush to sign an executive order authorizing American banks to release those Iraqi government funds to the Treasury Department. The money would be sent to an account set up by Treasury at the Federal Reserve Bank of New York, and then cash from that account would be taken from the East Rutherford Operations Center and trucked to Andrews Air Force Base outside Washington. It would then be flown to Iraq. The cash was to be “used to assist the Iraqi people, and to assist in the reconstruction of Iraq,” Bush's March 20, 2003, executive order stated.