The Mother Of All Heists

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.

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 $1.2 billion had been withdrawn by the new Ministry of Defense to supply the Iraqi army with desperately needed equipment to fight the growing insurgency.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.

"Instead of aircraft, we received mobile hospitals. What would an army without aircraft do with mobile hospitals?" Radhi asks. "Instead, of getting planes and tanks and vehicles, and weapons that we needed, we got materials that there really was not a big need for."

In October 2005, Judge Radhi obtained arrest warrants for some of the top officials in the Ministry of Defense, and almost all of them fled the country, including former Defense Minister Hazem Shaalan, who is believed to be in Europe or the Middle East.

60 Minutes did manage to locate one of Shaalan's top deputies, Ziad Cattan, who was in charge of military procurement. 60 Minutes found him in Paris, happy to be there and not terribly concerned.

Cattan says he's aware there's a warrant out for his arrest.

"If you went to Baghdad, you'd be arrested," Kroft says.

"No, nobody arrest me...they will kill me," he replies, laughing.

The son of a retired Iraqi general, Cattan had been living in Poland until a few days before the U.S. invasion, running a pizza parlor in Germany and importing and exporting used cars. But his can-do attitude and ability to speak English impressed the Americans, including Ambassador Bremer, who praised Cattan in his memoirs. After a few months working with the coalition on neighborhood councils, Cattan was given a position in the new Ministry of Defense.

Cattan says he was recruited for this job by the Coalition Provisional Authority (CPA). He admits he did not have any experience in military procurement.

To make up for this obvious deficiency, Cattan was sent off to the National Defense University in Washington D.C. for a few weeks of training, and eventually placed in charge of buying $1.2 billion worth of equipment for the Iraqi military.

Cattan tells Kroft that "it isn't true" that $800 million was stolen. He says the charges are politically motivated and that he can account for every single dinar.

"All equipment with this $1,200,000,000 it is now a day in Iraq," Cattan tells Kroft.

"I have documentation. I give it to you in your hands," he says, insisting that the equipment was delivered.

"Well, this is a big misunderstanding. I mean, we're talking about $800 million," Kroft says.

"Yes, it is here. I can show you," he says, holding up photos of military vehicles and equipment. "This is BTR, BTR 80 from Hungarian. This is ambulances, 2005 production, also in Iraq nowaday. This is mobile kitchen, also in Iraq nowadays," Cattan replies.

"This is just pictures of equipment," Kroft states.

"Yeah. But, you can prove it, if you wanted to do. Nobody want to prove it. That's the problem," Cattan replies.

60 Minutes took all of Cattan's documentation, had it translated into English, and gave it to Jane's, one of the world's leading authorities on military hardware. At the time, John Kenkel was the senior director of consulting, advises countries on military purchases.

Asked if he would have bought the same equipment for the Iraqi army if he had $1.2 billion to spend, Kenkel says, "That's the big question, nobody really knows what they bought."

Kenkel told Kroft the documents Cattan provided were so vague that he couldn't tell what had been ordered or whether it had ever been delivered.

"I think the biggest thing was that you couldn't identify what the equipment was that was actually being delivered. To say that you were being delivered a gun doesn't necessarily mean anything in terms of what you're getting," Kenkel says.

"Can you think of another government in the world that would have spent $1.2 billion this way on military equipment?" Kroft asks.

"Nobody that you would consider on the up and up," Kenkel says, laughing.

But the thing that really suggests this wasn't on the up-and-up are audio recordings, which 60 Minutes obtained from a former associate of Ziad Cattan and the mysterious middleman Naer Jumaili.

When Kroft played the tape, Cattan acknowledged that it was his voice.

The recordings were made by the associate as he drove Cattan around Amman in 2004. According to two independent translations, they are talking about payoffs to Iraqi officials. At one point, Cattan talked about a top political adviser to the defense minister - a man who is also identified on the recordings as a representative of the president and the prime minister of the interim government.

"He wants to know...," Cattan says on the audio recordings.

"He wants to know how much they are going to place in his account ...?" the associate asks.

"Yes, of course," Cattan says.

"How much?" the associate asks.

"45 million," Cattan says on the recording.

"He wants to know how much money is gonna be placed in his account and you say ...'45 million,'" Kroft tells Cattan.

"Yes. But not dollar. I don't say dollar," Cattan replies. (Three Arabic translators say Cattan does say, "dollars.")

Asked what currency or units he was talking about, Cattan tells Kroft "I don't remember."

"Well, you're gonna give him 45 some of something," Kroft replies.

"Yes," Cattan acknowledges. "But, I don't remember what the matter was."

Cattan told 60 Minutes that U.S. and coalition advisors at the Ministry of Defense approved everything that he did, and he now believes that the recordings have been doctored. The audio experts that 60 Minutes consulted could find no evidence of it. Judge Radhi told Kroft that he too has a copy of the recordings and that one former Ministry of Defense employee confessed after hearing them.

Asked how the American advisors could have missed all of this, Rahdi says, "I think this question should be directed to the Americans."

60 Minutes certainly tried to, but no one in the U.S. government would talk on camera about the missing $800 million. Off-camera, 60 Minutes was told that this was Iraqi money, spent by a sovereign Iraqi government, and therefore the Iraqis' business.

So where did all of the money go to? It is impossible to tell. The money trail disappears inside a number of Middle Eastern banks. 60 Minutes can report that Ziad Cattan, who was convicted in absentia in Iraq and sentenced to 60 years for squandering public funds, is building a villa for himself in Poland. And Naer Jumaili, who is wanted by Interpol, is said to be snapping up real estate in Amman and building himself a villa.

"A lot of these suspects are living outside of Iraq in comfort, and don't seem to be too concerned about the charges against them," Kroft tells Judge Rahdi.

"As you know, those people, they have a lot of money right now. So they use it to bribe anybody in the world," the judge replies.

Asked how much help he has gotten from countries like Poland and Jordan in either apprehending suspects or recovering money, Radhi says, "No help at all."

"We have not been given any serious official support from either the United States or the U.K. Or any of the surrounding Arab countries," Ali Allawi says.

Asked why he thinks this has received so little attention, Allawi says, "The only explanation I can come up with is that too many people in positions of power and authority in the new Iraq have been in one way or another found with their hands inside the cookie jar. And if they are brought to trial it will cast a very disparaging light on those people who had supported them and brought them to this position of power and authority."

Allawi left his post in early 2006 when the new government was formed, but Judge Radhi is still there. Along with having one of the most dangerous jobs in Iraq, he also has one of the heaviest workloads.

His investigators have opened 2,000 corruption cases involving 21 different ministries and $7.5 billion. Oil-smuggling is costing the Iraqi government billions of dollars a year, and according to one estimate, 40 to 50 percent of the profits are going to the insurgents.
Produced by Andy Court and Keith Sharman
Produced by Andy Court and Keith Sharman