Iraq: The UN entrusted $23bn of Iraqi money to the coalition to redevelop Iraq. Where has all that money gone, ask Callum Macrae and Ali Fadhil
In a hospital in Diwaniyah, 160km (99 miles) south of Baghdad, Zahara and Abbas, premature twins just two days old lie desperately ill. The hospital has neither the equipment nor the drugs that could save their lives.
On the other side of the world, in a federal courthouse in Virginia in the US, two men - one a former CIA agent and Republican candidate for Congress, the other a former army ranger - are found guilty of fraudulently obtaining $3 million (€2.5 million) intended for the reconstruction of Iraq.
These two events have no direct link, but they are products nonetheless of the same thing: a financial scandal that in terms of sheer scale must rank as one of the greatest in history.
At the start of the Iraq war, about $23 billion worth of Iraqi money was placed in the trusteeship of the US-led coalition by the UN. The money, known as the Development Fund for Iraq and consisting of the proceeds of oil sales, frozen Iraqi bank accounts and seized Iraqi assets, was to be used in a "transparent manner", specified the UN, for "purposes benefiting the people of Iraq".
For the past few months Guardian Films has been working on a film investigating what happened to that money. We discovered that a great deal of it has been wasted, stolen or frittered away. For the coalition, it has been a catastrophe of its own making. For the Iraqi people, it has been a tragedy.
Diwaniyah has just one small state paediatric and maternity hospital to serve its one million people. Years of war, corruption under Saddam and western sanctions have reduced the hospital to penury, so when last year the Americans promised total refurbishment, the staff were elated. But the renovation has been partial and the work often shoddy, and there appears to have been little change on funding frontline healthcare.
In the corridor, an anxious father who has been told his son may have meningitis is berating the staff. "I want a good hospital, not a terrible hospital that makes my child worse," he says. But then he calms down. "I'm not blaming you, we are the same class. I'm talking about important people. Those controlling all those millions and the oil. They didn't come here to save us from Saddam, they came here for the oil, and so now the oil is stolen and we got nothing from it."
Because the Iraqi banking system was in tatters, the funds were placed in an account with the Federal Reserve in New York. From there, most of the money was flown in cash to Baghdad. Over the first 14 months of the occupation, 363 tonnes of new $100 bills were shipped in - $12 billion, in cash.
"Iraq was awash in cash - in dollar bills, piles and piles of money," says Frank Willis, a former senior official with the governing Coalition Provisional Authority. "We played football with some of the bricks of $100 bills before delivery. It was a wild-west crazy atmosphere, the likes of which none of us had ever experienced." The environment created by the coalition encouraged corruption. "American law was suspended, Iraqi law was suspended, and Iraq basically became a free fraud zone," says Alan Grayson, a Florida-based attorney who represents whistleblowers now trying to expose the corruption.
A good example was the Iraqi currency exchange programme. An early priority was to replace every single Iraqi dinar showing Saddam's face with new ones that didn't.
The contract to help distribute the new currency was won by Custer Battles, a small American security company set up by Scott Custer and former Republican Congressional candidate Mike Battles. Under the contract, they would invoice the coalition for their costs and charge 25 per cent on top as profit. However Custer Battles also set up fake companies to produce inflated invoices, which were then passed on to the Americans. It might have got away with it had it not left a copy of an internal spreadsheet behind after a meeting with coalition officials.
It showed the company's actual costs in one column and their invoiced costs in another. In one instance it revealed that it had charged $176,000 to build a helipad that cost $96,000. In total, in return for $3 million of actual expenditure, Custer Battles invoiced for $10 million.
Perhaps more remarkable is that the US government took no legal action to recover the money. It has been left to private individuals to pursue the case, the first stage of which concluded two weeks ago when Custer Battles was ordered to pay more than $10 million in damages and penalties.
Perhaps most puzzling of all is what happened as the day approached for the handover of power (and the remaining funds) to the incoming Iraqi interim government.
Instead of carefully conserving the Iraqi money for the new government, the Coalition Provisional Authority went on a spending spree. Some $5 billion was committed or spent in the last month alone, very little of it adequately accounted for. One CPA official was given almost $7 million and told to spend it in seven days.
Dispatches: Iraq's Missing Billions is produced by Guardian Films. - (Guardian service)