Race Is On to Locate Hussein's Billions By Michael Dobbs and John Mintz Washington Post Staff Writers Saturday, April 12, 2003; Page A01
The hunt is on for billions of dollars in ill-gotten assets accumulated by the family of Saddam Hussein, now believed to be scattered in a labyrinthine network of front companies and secret bank accounts from Panama to Switzerland to Jordan.
As U.S. forces moved into Baghdad and other Iraqi cities, investigators reported signs of large sums of money moving from Iraqi government-controlled accounts to private accounts in the Middle East. "People with connections are trying to loot what they can," said one private investigator with access to information about money flows around the region.
A senior U.S. Treasury official said the Bush administration has located about $1.2 billion in illicit Iraqi assets around the world since the war began that have not yet been legally blocked. These funds are in addition to the $1.7 billion in Iraqi government funds frozen after Iraq's invasion of Kuwait in August 1990, and are in the process of being repatriated to Iraq.
Nobody, including the U.S. government, knows the true extent of the Hussein family wealth, but independent estimates range anywhere from $2 billion to $10 billion. The best chance of clearing up the mystery, according to investigators, is likely to lie in captured Iraqi documents about the financial holdings of Hussein and his inner circle, particularly his sons Uday and Qusay.
Investigators cautioned that it is practically impossible to separate the private wealth of senior members of the Hussein government from quasi-official slush funds used to hide income from the smuggling of oil and other commodities in violation of U.N. sanctions. Treasury officials fear that the people who control these funds will exchange them for diamonds, gold and other untraceable commodities before financial authorities can move in.
"Since 1990, virtually all commerce with Iraq was barred, so money banked overseas by Hussein and his cronies was all illegal money," said David Aufhauser, the Treasury's general counsel. "We need to show kleptocrats around the world that they can't use the international banking system to rape their nations."
The race to find the Hussein family assets and Iraqi government slush funds resembles the hunt for the ill-gotten fortunes of other dictators, such as Ferdinand Marcos of the Philippines, Jean-Claude "Baby Doc" Duvalier of Haiti and Nicolae Ceausescu of Romania. But investigators say it bears the most resemblance to the case of Yugoslavia's Slobodan Milosevic, who was toppled from power in October 2000 in the wake of a U.S. bombing campaign.
Like Yugoslavia under Milosevic, Iraq under Hussein was the target of international sanctions, which had the perverse effect of encouraging a shadow, smuggling-based economy under the control of senior government figures. Some of the funds generated by this huge smuggling operation were used for state purposes, such as buying weapons or paying the salaries of security service personnel, but other funds were used for purely private purposes.
A General Accounting Office report estimated that the Iraqi government raised more than $6 billion between 1997 and 2001 from kickbacks and smuggling operations that circumvented an oil-for-food program approved by the United Nations, under which the proceeds of Iraqi oil sales were used to pay for the delivery of food, medicine and other humanitarian supplies to Iraqi civilians. Much of the illicit money was generated through illegal oil exports to Turkey, Jordan and Syria. Other money-raising schemes included control of the lucrative cigarette-import business and the fleecing of pilgrims to the holy Shiite sites of Najaf and Karbala.
The Iraqi practice of using foreign front companies to keep billions of dollars of funds outside the country goes back to the 1980-1988 Iran-Iraq war and the early days of Hussein's rule, investigators said. In order to evade an international arms embargo on the belligerents, the Hussein government established a network of foreign front companies to finance secret arms purchases. Some of these companies are still in business today.
A huge cast of investigators is now involved in trying to track down the missing Hussein billions, including the Treasury Department, foreign governments and lawyers representing the victims of the Sept. 11, 2001, terrorist attacks. The United States has called on foreign governments to freeze suspected Iraqi assets or lose access to the U.S. financial system.
"We are directing a worldwide hunt for the blood money that Hussein and his cronies have stolen from the Iraqi people," Treasury Secretary John W. Snow announced on March 21, the day after the opening of the war.
Finding the Iraqi slush funds, let alone sending the money back to Iraq, will not be easy, investigators cautioned. Attempts to locate and close down Iraqi front companies after the 1991 Persian Gulf War petered out because of the secrecy of the international banking system and the complexity of the worldwide financial network established by Hussein and his aides.
"There is a Catch-22 in operation," said Nick Peck, a former managing director of Kroll Associates, who led an investigation into Iraqi front companies on behalf of Kuwait. "You don't get the cooperation you need from [foreign] banking authorities unless you can provide evidence of proven links to the Iraqi regime. But it is very difficult to prove those links without full access to the banking records."
The best way of resolving the dilemma, Peck said, is finding "a lucky treasure trove of documentation coming out of Baghdad."
Acquiring such documentation could be difficult, as much of it may have been destroyed in the last days of Hussein's rule. Some Iraqi government buildings were devastated by U.S. bombs. Others have been ransacked since the government collapsed. Senior Iraqi officials with firsthand knowledge of the transactions, including Hussein's two sons, are dead or in hiding.
The collapse of the Iraqi government has already led to attempts to move money out of Iraqi government-controlled accounts into private accounts. An investigator with access to Middle East banking records cited several recent transfers each in excess of $100,000 from Iraqi government-controlled accounts into private accounts with the Palestine International Bank.
One of the Iraqi assets that the Kroll firm managed to track down in 1991 was a front company named Montana Management, which appeared to be typical of the operations of Saddam Inc. Although it was registered in Panama, the company operated out of Switzerland. Montana owned an 8.4 percent share in the French publishing company Hachette Filipacchi Media, whose publications include Elle, Car & Driver and Premiere. It also owned a 2.5 percent holding in Matra, the French missile and defense electronics manufacturer.
The Iraqi holdings in Hachette and Matra, which were subsequently frozen by the French government, are worth about $90 million. A spokesman for Hachette said the company will cooperate in transferring Montana's shares back to a new Iraqi government once approval is obtained from the United Nations.
According to Jules Kroll, the founder of the firm specializing in financial investigations, most of Hussein's investments were in Panama, Switzerland, France, Germany, Cyprus, Britain and Italy. "He operated through a network of offshore companies," Kroll said. The funds "would go through three destinations before arriving in an anonymous account."
The key figure in establishing many of the Iraqi front companies was Hussein's half-brother, Barzan Ibrahim Tikriti, who for many years held the Iraqi positions of ambassador to Switzerland and permanent representative to the United Nations. Although Ibrahim fell into disfavor with Hussein after the breakup of the marriage between his daughter and Uday Hussein in 1998, he continued to travel freely between Baghdad and Geneva. He is believed to have been killed in a U.S. bombing attack on his home in Tikrit, north of Baghdad, earlier this week.
"If you look at the core members of the family, Barzan was the most financially literate," said Charles Forrest of the U.S.-funded International Campaign to Indict Iraqi War Criminals. "He was the brains of the operation, the person they had to rely on to deal with the money people."
John Fawcett, an investigator with the New York law firm of Kreindler and Kreindler, which is tracking down Iraqi assets on behalf of Sept. 11 victims, said Ibrahim used money generated from smuggling operations to fund Iraqi intelligence transactions around the world. Fawcett said his firm has identified about 100 bank accounts controlled by Ibrahim and other members of Hussein's inner circle.
Extrapolating the Iraqi foreign currency earnings from the smuggling operations, Fawcett made a "conservative estimate" of the funds available to the Hussein family, which he said amount to between $5 billion and $10 billion. He said his investigations have shown that some financial middlemen used by Iraq for its oil, banking and money management operations have also been used by the terrorist organization al Qaeda.
A September 2002 report, prepared by Fawcett for the Coalition for International Justice, described a vicious struggle for financial supremacy between Uday and Qusay Hussein. As Qusay supplanted Uday as their father's favorite and heir apparent, he was also able to muscle his older brother out of many lucrative oil-smuggling operations. He is believed to have supervised the oil trade with neighboring Syria, which generated an estimated $1.1 billion in revenue in 2002.