Billions Wasted In Iraq?

(CBS)  This story originally aired on Feb. 12, 2006.

The United States has spent more than a quarter of a trillion dollars during its three years in Iraq, and more than $50 billion of it has gone to private contractors hired to guard bases, drive trucks, feed and shelter the troops and rebuild the country.

It is dangerous work, but much of the $50 billion, which is more than the annual budget of the Department of Homeland Security, has been handed out to companies in Iraq with little or no oversight.

Billions of dollars are unaccounted for, and there are widespread allegations of waste, fraud and war profiteering. As 60 Minutes correspondent Steve Kroft first reported in February, only one case, the subject of a civil lawsuit, has been unsealed. It involves a company called Custer Battles, and provides a window into the chaos of those early days in Iraq.

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When U.S. troops entered Baghdad in the spring of 2003, there was no electricity, widespread looting and little evidence of postwar planning. With the American military stretched to the limit, the Pentagon set up the Coalition Provisional Authority (CPA) to govern the country under Ambassador Paul Bremer, who began hiring private companies to secure and rebuild the country.

There were no banks or wire transfers to pay them, no bean counters to keep track of the money. Just vaults and footlockers stuffed with billions of dollars in cash.

"Fresh, new, crisp, unspent, just-printed $100 bills. It was the Wild West," recalls Frank Willis, who was the No. 2 man at the Coalition Provisional Authority's Ministry of Transportation.

The money was a mixture of Iraqi oil revenues, war booty and U.S. government funds earmarked for the coalition authority. Whenever cash was needed, someone went down to the vault with a wheelbarrow or gunny sacks.

"Those are $100,000 bricks of $100 bills and that's $2 million there," Willis explains, looking at a photo of brick-shaped stacks of money wrapped in plastic. "This, in fact, is a payment that we made on the 1st of August to a company called Custer Battles."

Willis says the bricks of money were also sometimes referred to as footballs, "… because we passed them around in little pickup games in our office," he says laughing.

Asked if he has any evidence that the accounting system was a little loose, Willis says, "I would describe it as nonexistent."

The $2 million given to Custer Battles was the first installment on a contract to provide security at Baghdad International Airport. The company had been started by Scott Custer, a former Army Ranger and Mike Battles, an unsuccessful congressional candidate from Rhode Island who claimed to be active in the Republican Party and have connections at the White House. They arrived in Baghdad with no money. Yet within a year they landed $100 million in contracts.

"They came in with a 'can do' attitude whether they could or not. They always said yes," Willis says.

Did they have any experience?

"They were not experienced. They did not know what they were doing," Willis says.

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