The Mother Of All Heists

Steve Kroft Reports On Disappearance Of More Than $500 Million To Equip Iraqi Army

CBS All Access
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This segment was originally broadcast on Oct. 22, 2006. It was updated on June 14, 2007.

President Bush says the United States can't leave Iraq until the country can govern and defend itself. Right now a number of inconvenient facts suggest it can do neither. Everyone knows about the chaotic security situation, but less has been reported about the rampant corruption that has infected a succession of Iraqi governments. In a story that first aired in Oct. 2006, Iraqi investigators told 60 Minutes that at least half a billion dollars that was supposed to equip the new Iraqi military was stolen by the very people the U.S. had entrusted to run it.

As correspondent Steve Kroft reports, it has been called one of the biggest thefts in history, the mother of all heists, and it happened right under the noses of U.S. advisors. But neither the United States nor its allies have shown much of an appetite for pursuing it.

"People have died. Monies have gone missing. Culprits are running around the world hiding and scurrying around. I have to ask myself, why has this happened? It is not every day that you get billion dollar scandals of this kind," says Ali Allawi, a Harvard-educated international banker who took over as Iraq's Minister of Finance in 2005.

When he entered office, was confronted with a gaping hole in the treasury. $1.2 billion had been withdrawn by the new Ministry of Defense to supply the Iraqi army with desperately needed equipment to fight the growing insurgency. Millions had been misspent on old and antiquated equipment, and Allawi says most of the money simply disappeared.

Allawi thinks that probably 750 to 800 million dollars were stolen. "It is a huge amount of money by any standard," he tells Kroft. "Even by your standards. It's one of the biggest thefts in history, I think."

The story begins in June 2004 when presidential envoy L. Paul Bremer turned over authority to the interim Iraqi government, which would run the country until elections could be held.

The insurgency was already gaining momentum, and with the newly-constituted Iraqi army riding into battle in unarmored pick-up trucks, and scrounging for guns and ammunition, the Iraqi Defense Ministry went on a billion-dollar buying spree with almost no oversight.

The contracts were paid in advance, with no guarantees, and most of them involved a single company.

"They were awarded, without any bidding, to a company that was established a few months prior with a total capital of $2,000," says Allawi. "So you had nearly a billion dollars worth of contracts awarded to a company that was just a paper company, whose directors had nothing to do with the Ministry of Defense or the government of Iraq."

The name of that company was Alain al Jaria, which in Arabic means "the ever-flowing spring." Its address in Amman, Jordan was a post office box, its telephone number a mobile phone. The principal was a mysterious Iraqi by the name of Naer Jumaili, and a half a billion dollars in Iraqi defense funds would eventually find their way into his private account at the Housing Bank of Jordan. The exact whereabouts of that money and the whereabouts of Mr. Jumaili are presently unknown.

The person who knows the most about the case, and in fact the only person who seems to be investigating it, is Judge Radhi al Radhi, Iraq's Commissioner of Public Integrity. It's his job to prosecute official corruption in Iraq, and it may be the most dangerous job in the country.

Twice tortured and imprisoned under Saddam Hussein, he now receives death threats from both the insurgents and from corrupt officials. Seven of his people have been killed.

Through an interpreter, Radhi tells Kroft he has 30 bodyguards. When he was told that lots of people would like to see him dead, Radhi replied, "I don't care. That's their problem."

Andy Court and Keith Sharman are the producers.