IRAQ: Breaking the Silence

A prominent former insider is criticizing the administration’s handling of Iraq’s reconstruction. And there’s more to come.

by Michael Hirsh, Newsweek
March 22nd, 2006

Andrew Natsios has taken a lot of flak over his role in Iraq. The longtime director of America's foreign-aid program has been pilloried for his April 2003 remark, in an ABC News interview, that the U.S. government would spend no more than $1.7 billion to rebuild Iraq. In the ensuing three years, Natsios, a lifelong Republican, has played the loyal soldier for the administration. He regularly defended the U.S. reconstruction effort in Iraq even as he was lumped with other errant prognosticators like Paul Wolfowitz (That's “wildly off the mark") and Dick Cheney ("We will be greeted as liberators"). After Natsios resigned in January to take a teaching post at Georgetown University, he maintained his silence about Iraq.

But this week, for the first time, Natsios publicly gave vent to his long-suppressed frustrations over the Bush administration's handling of the Iraq occupation. In an interview with NEWSWEEK on Tuesday, he harshly criticized the Coalition Provisional Authority led by L. Paul Bremer III for botching the reconstruction effort and allowing ill-qualified or corrupt contractors to dominate it. "They didn't have [monitoring] systems set up. They were very dismissive of these processes," he said. His U.S. Agency for International Development (USAID) was marginalized despite its expertise, and the CPA "didn't hire the best people," he said. "We were just watching it unfold. They [the CPA] were constantly hitting at our people, screaming at them. They were abusive."

Natsios's low-cost estimate from April 2003, he made clear, was not based on the kind of chaotic, top-heavy occupation that he says Bremer eventually installed in Iraq but on the more traditional, streamlined U.S. aid effort that Natsios had urged.

NATSIOSDan Senor, former spokesman for Bremer’s CPA, dismissed Natsios’s criticisms, saying the insurgency in Iraq made ordinary contracting procedures impossible. "I'm not familiar with the traditional USAID program that was recommended,” Senor told NEWSWEEK. “If it was traditional and conventional, it may have made sense for the reconstruction of Switzerland. But it sounds like it was completely irrelevant to the facts and conditions on the ground that we found in Iraq.” Senor added that the CPA had "recruited some of the top career Foreign Service officers from the State Department to serve in the CPA's management roles. We would have welcomed suggestions—from Andrew or anyone else—of who would have been better experienced.”

Natsios, who served as USAID director for nearly five years and was considered one of the top development and aid experts in Washington, says that his advice was largely ignored. Other administration officials, usually speaking anonymously, have backed Natsios's dim view of the CPA's competence level. The conventional wisdom today is that while most CPA officials were enthusiastic and brave, too many were inexperienced and second-rate.

Natsios’s criticisms mark another significant milestone in the great Republican crackup over Iraq—especially since they came on the same day that President Bush reiterated, at a news conference, that he would not ask any senior staff to resign in connection with the mess in Mesopotamia. The president’s refusal to consider replacing senior officials, especially Defense Secretary Donald Rumsfeld, has angered many Republicans, as well as Democrats, who say the administration needs to show a sense of accountability for its many mistakes in Iraq. At the very least, Natsios’s criticisms represent the latest effort by a Bush supporter to distance himself from America's new quagmire. Bremer himself, in his new book, "My Year in Iraq" (Simon and Schuster), blames Rumsfeld for many of his problems as viceroy, while other notable GOP stalwarts such as William F. Buckley have emerged as critics of the war.

And there is much more to come, especially on the little-noticed issue of contracting in Iraq, which the watchdog group Transparency International last year warned could become “the biggest corruption scandal in history." The Special Inspector General for Iraq Reconstruction is expected to issue a harshly critical report in May concluding that the CPA did not have disciplined contracting procedures in place, according to several people involved in drafting the report. If the Democrats manage to get control of the House later this year, it's all going to come in an avalanche of subpoenas and new investigations. Not that the Republicans have been entirely sitting on their hands. When Rep. Christopher Shays, a Connecticut Republican, agreed to subpoena records of funds transmitted to Iraq, his House Government Reform Subcommittee learned that nearly $12 billion in U.S. currency was shipped to Iraq from the Federal Reserve Bank in New York, much of it with little accountability.

Shays is also conducting hearings on the administration's efforts to silence whistle-blowers who ferret out corruption and other problems. "The administration seems to have a deaf ear to this issue," Shays told NEWSWEEK. "I would like to hear a little outrage on the part of the administration. I don't hear that outrage. Because you don't hear that outrage you then feel the administration doesn't care about these issues … It needs to come from the secretary [of Defense]. When you have men and women dying on the battlefield and you have corruption, then you've got a problem."

But the Defense Department has avoided conceding this point, just as Rumsfeld himself has testily rejected responsibility for such critical errors as misreading the number of troops needed for the occupation and downplaying the insurgency.

The Pentagon has consistently declined to send a permanent auditing team to Iraq despite prodding from Congress. “We do not have auditors on the ground in Iraq,” acting Pentagon Inspector General Thomas Gimble admitted in testimony late last year before Shays’s subcommittee. (“I don't understand why,” retorted Shays.) The Defense Department argued that its IG team was not needed because Congress had set up its own auditing arm for Iraq called the Special Inspector General for Iraqi Reconstruction. But that congressionally authorized IG was only supposed to be looking at reconstruction contracts, not security, fuel or other Pentagon contracts. In his testimony last fall, Gimble said his office was acting in a support role from Washington to help the special inspector general, Stuart Bowen. But Special Inspector General spokesman Jim Mitchell told NEWSWEEK. “That wasn’t the case.”

In response to the criticism from such Republicans as Shays, Sen. Charles Grassley and others, the Pentagon IG finally opened an office in Qatar—earlier this month. IG spokesman Gary Comerford says Gimble made the move after he went to the region and talked with CENTCOM commander Gen. John Abizaid, among others. “They said primarily what we need down there are auditors, not only for Iraq, but Afghanistan and for DoD assets in Kuwait,” Comerford said. For many critics, the move came far too late. “Their answer to the criticism is to open an office within a thousand miles of Baghdad,” cracked one U.S. official involved in the auditing process who spoke on condition of anonymity.

At the same time critics of the contracting morass in Iraq—which former CPA advisor Franklin Willis once called a “free-fraud zone”—have raised serious issues about conflicts of interest in Iraq. These questions also have gone largely unanswered. Late last year, the Defense Department’s IG, Joseph Schmitz, resigned and took a senior position with Blackwater USA, one of the private companies contracted to handle security in Iraq. Because the CPA in Iraq fell under the Pentagon’s authority, a company like Blackwater would nominally be under the IG’s purview. In a series of articles last year, the Los Angeles Times suggested that Schmitz, a conservative Republican, had gone out of his way to protect John A. (Jack) Shaw, a deputy undersecretary of Defense involved in Iraq contracting who was later fired by the Pentagon. Another government department is conducting a separate investigation of Schmitz’s tenure as IG as well.

Asked to respond, IG spokesman Comerford noted that Schmitz had signed a letter recusing himself from Blackwater-related business while still at the Pentagon. Comerford also said the IG had done 33 audits during Schmitz’s tenure, and he noted that each of the military services has its own Inspector General’s office. Comerford told NEWSWEEK there were presently audits under way of two Iraq contractors connected with public relations in the global war on terror, the Lincoln Group and the Rendon Group.

Both were also requested by Congress, the former by Sen. Ted Kennedy and the latter by yet another skeptical Republican, Rep. Walter Jones of North Carolina. Despite those ongoing audits, the Pentagon has determined that the Lincoln Group did not violate policy in planting propaganda in Iraqi newspapers, The New York Times reported Wednesday. A Rendon Group official told NEWSWEEK: "As we understand it, the IG investigation was requested by Congress in response to media reports that wrongly characterized the Rendon Group as having a role in public-relations work in the leadup to the war in Iraq. We expect the IG report will clear up the confusion." Lincoln Group president Paige Craig initially told NEWSWEEK that he believed there was no audit, only a “special review.” Craig later called back to confirm that his firm was being audited.

On yet another front, the Justice Department continues to decline to join a whistle-blower case against a security contractor called Custer Battles, despite a March 9 jury verdict that found the company had defrauded the U.S. government out of millions of dollars in Iraq. In a statement issued after the verdict, Senator Grassley noted that “war profiteering is what led President Lincoln to support the original False Claims Act,” under which the Custer Battles case was pursued. Typically, the U.S. government will back the efforts of whistle-blowers—in this case two former executives of Custer Battles who were appalled by the fraud—but the Bush administration has maintained its silence. “I remain concerned as to why the Justice Department chose not to join this case,” Grassley said. Justice Department spokeswoman Cynthia Magnuson, asked to respond, said, “I don’t have anything immediately for you.”

It will take a long time for the contracting mess in Iraq to be sorted out, if it ever is. Natsios says he warned about what might happen if standard procedures, known as Federal Acquisition Regulations, were ignored. "I told Bremer and the CPA that we were following federal law and we were going to implement according to federal statutes so there weren't any scandals. And there weren't any with USAID. But we were criticized for following federal law." Regarding firms like Custer Battles, Natsios added: "The contractors they chose weren't the best people. I heard lots of stories. The staff would come in and say a group of retired officers has set up a business and they got this contract, and they didn't have any qualifications for it."

Jim Mitchell, the spokesman for the special Iraqi inspector general, says his office is currently looking at 57 possible cases of corruption and fraud, and he expects more arrests in coming days. But only four contractors and officials have been arrested so far. That's not a lot, considering the potential size of the Iraq corruption problem. Maybe it really is a free-fraud zone.