Treasury's War Read online

  Based on the information that was emerging from documents and detainee interviews, we were soon able to send our financial jump teams into countries like Jordan and Syria to recover assets. The IRS had assembled an all-star collection of adventurous gray-beard investigators who were willing to grab their duffle bags and laptops and go overseas on a moment’s notice. Two of them, Alan Schick and Larry Kaiser, were veterans of financial investigations throughout the country but had their greatest takedowns in Southern California, where they had posed as money launderers for cartels and entered the inner sanctums of these organizations. Schick was a burly man with a neat beard and a deep, raspy voice. Kaiser was a slim, lanky Wisconsin native with thin white hair who liked to talk. Both could look deeply into the eyes of a suspect and judge truthfulness just as easily as they could decipher the spreadsheets and accounts of illicit financial dealings.

  Schick made his way to the Central Bank of Jordan and Jordan’s Ministry of Finance. We knew that the Jordanian banks had handled upward of $600 million in Iraqi trade per year, if not more. Jordanian merchants were trading openly with Iraq, and Iraqi fuel tankers crossed the border daily to deliver Iraqi oil.

  In the early days of his investigation in Amman, Schick was at the US embassy when Secretary of State Colin Powell visited and met with the ambassador and the embassy team. The secretary was there to be updated on all that was happening in Jordan related to the Iraq War and other matters. When he met Schick, Powell asked him how the investigation was going. In Schick’s usual gruff yet jovial manner, he said simply, “This is the ‘mother of all financial investigations.’ It’s just like any other tax case, but with just a lot more zeroes at the back of the numbers.” Powell smiled, seemingly assured by the quick assessment.

  Eventually, Schick and the investigators and analysts identified more than 1,600 Iraqi-controlled accounts in eight Jordanian banks.8 The agents obtained and reviewed bank files and statements relating to these accounts and identified front companies with accounts in Jordan. Finding enough copiers and scanners to capture the information was a challenge. The investigators learned that money managers in some Jordanian banks, including a banker in Jordan who was considered “Saddam’s money launderer,” had handled the deals and helped to move the money into accounts around the world—especially into Beirut. Schick also learned that the day the war started, two senior Iraqi generals had attempted to withdraw $50 million in Iraqi assets from Jordanian accounts. Though they had signature authority over the accounts, a Jordanian central bank official refused to allow the withdrawal and ordered the accounts frozen. These same Iraqi generals then traveled to Beirut to withdraw assets. There, they were successful, withdrawing $33 million from Iraqi bank accounts. The generals then sent the millions in cash via courier to Damascus for safekeeping.

  The Jordanians did not hesitate to freeze Iraqi assets. They provided the US agents with access to relevant files and accounts. Overall, there was almost $300 million left in Iraq’s trading accounts in Jordan. But although the Jordanians were cooperative, they were concerned that Jordanian merchants and the Jordanian government would be left holding the bag with Iraqi debt still outstanding. According to their estimates, the amount of this debt reached approximately $1.3 billion. They wanted the accounts reviewed to determine the validity of the claims filed against these monies. I would later visit Amman to negotiate for the return of the frozen Iraqi assets, which would eventually find their way back to Iraq.

  We also needed access to Iraqi accounts in Syria. We knew the Iraqis had used Syria as a major commercial hub. In 1999, an oil pipeline repair there proved to be a major income generator for Saddam. The Iraqi oil trade was worth billions of dollars, and much of that money flowed through Syrian and Lebanese banks. In particular, the Commercial Bank of Syria (CBS), a major Syrian bank, and its Lebanese subsidiary were used to help maintain the accounts necessary for the trade between Iraq and Syria during the Oil for Food years. We also knew the Iraqi embassy in Syria had been used by the former regime to move money in and out of the country. Syria remained a safe haven for Saddam’s retreating Baathist allies. Finding Iraqi money in Syria was critical.

  But Syria and the United States were on unfriendly terms, and the Assad regime in Damascus was not going to open the door to Syria’s banks simply because we asked. There was growing tension between Washington and Damascus, with talk of pulling the American ambassador in Damascus, Margaret Scobey, given the increasing divide between the countries. Nevertheless, the Syrians did not like the idea of their banking sector being targeted.

  We met with Syrian government and banking officials in Washington and in Bahrain. The Syrians were willing to talk about the concerns we had raised about the lack of money-laundering controls in Syria. Though tensions were mounting, they were willing to allow our investigators into Syria to look at the Iraqi bank accounts and records.

  So we walked into Syria with our financial jump team. Larry Kaiser, along with Mike Bridgeman, another seasoned financial investigator, visited Damascus. The agents knew they would be carefully watched. At the hotel, Kaiser had noticed that his bags and computers were being searched every day while he was out. On the third day, he decided to leave a note on his computer for the Syrian agents searching his room. It simply said, “Meet at the bar at 5 pm.” The note was intended to let the Syrians know that he knew he was being watched. It would also put the Syrians a bit on the defensive—they would wonder if this might be an attempt to recruit them as intelligence sources. That evening, Kaiser strolled through the lobby looking at the men seated in the lounge of the bar. He recognized a couple of them as men he had seen several times around the hotel and their rooms. He had already surmised that they were likely following him and his colleague. He decided not to approach them, but he walked through the bar to let them know he was now watching them.

  Kaiser wanted to get to the Iraqi embassy, since we knew how important the embassy had been in controlling the flow of money in and out of Iraq. Kaiser, Bridgeman, and an Iraqi audit official decided to pay a visit and simply ring the entrance bell to see if they would be admitted. An armed Iraqi guard answered the door. Kaiser, through his interpreter, explained who he was and what he was doing. He showed the guard his credentials, and the guard brought them in. Kaiser and the team talked to the chargé d’affaires and inquired about the embassy’s cash stores, knowing that the Syrians had frozen the embassy’s bank accounts. After forty-five minutes, the chargé admitted that the embassy was using cash to pay the embassy’s expenses. He then gave them a ledger, where all the payments were recorded by hand. The ledger showed a cash balance of approximately $13 million to $16 million on hand. The investigators were then led to a small room with a standing safe and eight AK-47s leaning against the wall. The chargé d’affaires opened the safe and showed them piles of cash neatly stacked—mostly hundred-dollar bills, most of them newly printed and wrapped in shrink wrap. The agents were somewhat incredulous but methodically took samplings of the serial numbers of the bills and sent the numbers back to the Federal Reserve. American officials, in concert with the Iraqis, later took possession of the cash and transported it to the Central Bank of Iraq in Baghdad. They seized approximately $13 million in total. The new bills found in the safe were later traced to a shipment of dollars from the multinational banking and financial services company HSBC in London to a bank in Beirut.

  The Syrians gave Kaiser and the team access to Iraq’s trade and cash accounts, along with some accounts from the CBS. They were not trying to hide much, since so much of the trade with Iraq had been well known to the world. It was no secret that the Iraqi oil pipeline had been flowing for years before the war began in 2003. The investigators had access to piles of records. The files and transfers revealed about $3 billion in trade over the course of three years, with $1 billion kept in the trade and cash accounts at any one time. In March 2003, just before the war, the accounts contained almost $1 billion. As the war started, the accounts began to be emptied, and
only about $200 million was left.

  The Syrians claimed that the withdrawals had been legitimate payments to Syrian businesses and vendors owed by the Iraqis. They provided the investigators with invoices and paperwork to validate their claims, but the vast bulk of the assets seemed to have been simply withdrawn by the Syrian government. Despite our best efforts, we were never able to determine what happened to most of that money. We suspected that the Syrians used it to help pay for Saddam’s generals and allies who settled in Syria—and perhaps later to fuel the insurgency. We would continue to find evidence of Syrian complicity in evading sanctions.

  We also had plenty of new information about the schemes that Saddam and his sons had used to maximize their profits. For instance, Uday and Qusay controlled the tourist industry in Iraq. Although Iraq was not a place that Western tourists went, it was a leading destination for Shiite pilgrims visiting Muslim holy sites and mosques. The tourist industry was worth at least half a billion dollars a year. Following the leads they had gathered about this source of income, Treasury officials used its designation authorities under Executive Order 13315 to name a tourist company serving as a front for the former regime, submitting its name to the United Nations 1518 Committee to ensure that its assets were frozen worldwide.

  We also saw that the regime used an international commercial and procurement system to gain access to weapons and equipment prohibited under the international sanctions. IRS agents and intelligence analysts focused their attention on Iraqi front companies operating in Dubai. The banking and commercial facilities of Dubai made it one of the most vibrant commercial and cultural crossroads in the world. Unfortunately, the same facilities that allowed for legitimate business also provided an infrastructure for illicit financial networks.

  The Iraqis used a front company called Al Wasel & Babel to procure weapons for the Iraqi regime, primarily from Russia. On April 15, 2004, we made what we knew about Al Wasel & Babel public and designated it as a front company for Saddam’s regime, thus ensuring that its assets anywhere in the world would be captured, and that those doing business with the company would be forewarned to stop. With the war and the investigations of Iraqi business underway, Russian transactions and other weapons procurement programs with the Iraqis stopped. When informed of the success of the financial investigations by the Treasury teams, one CIA officer in the region said, “Wouldn’t you know, the IRS comes to the Middle East and finds all the espionage.”

  The investigations began to reveal more information about the role of Iraq’s diplomatic corps in profiteering. The IRS agents determined that the former Iraqi ambassador to Russia had stolen $4 million in Iraqi assets that had been entrusted to him. The money was in Russian banks. The agents thoroughly documented the witness accounts and helped the Iraqis present the information to an Iraqi court. The court then ordered that the money be seized and transferred to Iraq. The Russian government moved to freeze the assets, and on August 2, 2004, the Treasury designated this ambassador and submitted his name to the UN 1518 Committee.

  The Iraqi ambassador to Switzerland in the 1990s, Barzan al-Tikriti, who was one of Saddam’s half-brothers, had served as the principal money manager for the Saddam regime in Switzerland and Europe. He had also served as head of the Iraqi Intelligence Service from 1968 to 1983 and had spent nearly a decade living in Geneva representing Iraq’s interests at UN bodies and with the Swiss. He had facilitated the movement of assets for the regime, and he had used front companies and nominee accounts to shelter money while siphoning payments to Saddam’s family members and cronies. Investigators found a letter from Barzan to Saddam that listed the main Iraqi accounts held in Europe, with key beneficiary information. Companies such as Logarcheo in Switzerland and Montana Management, headquartered in Panama, were used as fronts to move money and make purchases and investments. The Treasury designated him and moved with the Swiss government to freeze his assets and the properties and equity he controlled. Switzerland was able to act quickly, using an administrative, executive power to freeze assets, especially once the United Nations acted. In January 2007, Barzan was hanged for committing crimes against humanity for his participation in the Dujail Massacre of 1982.

  We worked closely with the countries in the region to recover and return assets. One case in particular captured our attention. It provided an important opportunity to return a signature Saddam asset to Iraq. We had found one of Saddam’s private jets, a Falcon 50, sitting in Jordan. The Iraqis had used a front company called Aviatrans Anstalt, registered in Liechtenstein, to purchase the jet. When we found it, it was not in good shape. It needed some repairs and refitting. Its value had been diminished, but it carried great symbolic value for the new Iraqi government. We worked closely with the Liechtenstein government, and its newly formed financial intelligence unit, run by René Bruelhart, along with the Swiss and Jordanian governments to seize the jet and related assets, and they were returned to the Iraqis. In 2005, the Falcon 50 flew back into Baghdad’s international airport accompanied by Romania’s ambassador to the United Nations, who was head of the Iraqi sanctions committee. It was an important symbolic moment.

  Overall, the jump teams conducted hundreds of interviews all over the world and reviewed tens of thousands of documents. Along with analysts and diplomats, they helped to identify thousands of bank accounts and other assets held in more than twenty countries located in Europe, the Middle East, Southeast Asia, and elsewhere.

  Finding and freezing assets was not enough. Asset recovery is only partially completed once the accounts and assets are found and frozen. The real work often begins when the assets need to be repatriated to the host government. There are legal questions of proof that the assets—liquid, hard, or real—should be returned to the ownership and control of the state. Claimants may challenge the ownership, or creditors may attempt to attach the assets for claimed debts. There are diplomatic and political considerations, with countries often not wanting to return the assets, or opting to use them as leverage to gain concessions. And there are always questions of financial integrity. To whom will the assets be returned, and will they simply be stolen or pilfered again by new officials who now control a government? For what purposes will those returned assets be used?

  The Iraqi asset recovery effort was helped enormously by UN Resolution 1483. It was intentionally crafted to mandate the freezing of Iraqi assets and included a provision requiring the automatic repatriation of those funds. This meant that all UN member states were obligated to return any assets they froze and needed to find a way within their respective domestic legal systems to make this happen. Importantly, the resolution also indicated that all the funds were to be returned to a single, transparent account, the Development Fund for Iraq (DFI). The DFI would be opened and held at the Federal Reserve Bank of New York.

  We had identified almost half a billion dollars of Iraqi assets in Lebanese banks, and we suspected there were more assets in Beirut. We had been in discussions for weeks with the Lebanese government to negotiate the return of the assets.

  As I left for the hotel after long meetings in Amman in late 2003, I received a call from Gary Edson, the deputy national security adviser for economic affairs. By then, the National Security Council, under the leadership of Condoleezza Rice, had taken over coordination of US activities in Iraq, and Edson was coordinating all the economic issues. I enjoyed working with Edson, but others found his aggressive, rough style difficult to handle. He suffered no fools, but he was ruthlessly effective at his job.

  Edson told me that an Iraqi delegation had just left Beirut, confusing the question of the return of frozen Iraqi assets. Getting the Lebanese banks to return the assets would not only be a significant repatriation, but would have a positive demonstration effect in the region for other banking centers. Edson promised that a delegation from the White House would come to Beirut to discuss the matter. Little did they know it would be a delegation of one. I was now traveling alone and would need to be ready when I landed to put
the repatriation of assets from Beirut back on track. I did not know who I would be meeting with to discuss asset recovery in Lebanon.

  When I landed, in the evening, a young US embassy officer, Jen Sublett Gavito, met me at the airport. We jumped into two bulletproof black Suburbans and made our way out of the airport to go to downtown Beirut and await word of our meetings. On the highway, we passed by the Hezbollah-controlled neighborhoods, with our security detail noting that we would stay clear of those streets. In the Maronite Christian neighborhoods, colorful Christmas lights adorned buildings and homes.

  Gavito told me that I would be meeting with Prime Minister Rafik Hariri, who had heard that I was coming at the direction of the White House and requested to host the meeting at his palatial home in the heart of Beirut. I grew quite nervous about meeting him. Hariri had been a transformational figure in Lebanon and a major political force, having served as prime minister from 1992 to 1998 and then again starting in 2000. He was a business tycoon whose fortune gave him enormous power and influence inside and outside of Lebanon. It also gave him the ability to reshape the face of Beirut after years of war. His construction projects and other investments had fueled a renaissance in Beirut, with rebuilt neighborhoods; new, fashionable shopping districts; and hip cafés full of young couples. He had begun to resurrect Beirut again as the Paris of the Mediterranean.