>> IRAQ

Bigfooted in Baghdad
Why won't Paul Bremer let Iraqis investigate the Oil for Food scam?
Saturday, May 22, 2004 12:01 a.m. EDT
Most Iraqis remain grateful to America and its coalition partners for liberating them from Saddam. But anyone wondering why they so eagerly await the June 30 handover of sovereignty should consider the flap over how to investigate the U.N.'s corrupt Oil for Food Program.
Saddam's bureaucrats, it turns out, kept meticulous records of this epic bribery scheme. And the Iraqi Governing Council, understandably eager to expose those guilty of defrauding their country, launched an investigation some months ago. Yet in the middle of this probe, coalition regent L. Paul Bremer muscled in to wrest control of it from the Iraqis. Alas, this has been all too typical of Mr. Bremer's reluctance to let Iraqis take more responsibility for their own governance.
The IGC probe is without question a serious effort. Claude Hankes-Drielsma, a former PriceWaterhouse executive of impeccable credentials, has been working as an adviser to the Council, which hired KPMG auditors and the law firm of Freshfields Bruckhaus Deringer to pore over program-related documents. The KPMG team has made a number of trips to Iraq, and Mr. Hankes-Drielsma has testified before Congress on the matter. There's a lot more to find out, as Claudia Rosett's latest dispatch suggests.
But somewhere along the line Mr. Bremer decided to redo the audit tender, and last week the Coalition Provisional Authority announced it had hired Ernst & Young to do the investigation. No offense to the skills of Ernst & Young, but we can find no rationale for this move to scrap months of work other than delaying the Oil for Food investigation at a politically sensitive time when Mr. Bremer and other members of the Bush Administration are trying to enlist U.N. help in Iraq.
That's certainly how Mr. Hankes-Drielsma sees it: "This new investigation (which is being paid for by the Iraqi people) is a smokescreen--it is clearly politically motivated and has the purpose of creating confusion and further delay." We should add that when we called the CPA about this a while back, a spokesman gave us false information about the nature of the audit tender the CPA had requested, saying the IGC would remain in control.
Such controlling behavior has been sadly typical of Mr. Bremer's tenure, even when there aren't upcoming Security Council votes at stake. Sources tell us he asked the IGC to delay word of its deal on the interim constitution, and sure enough he himself later made the main announcement. The absence of an Iraqi face at the daily Baghdad press briefings held by Brigadier-General Mark Kimmitt and CPA spokesman Dan Senor has also been notable, and has contributed to the image that this is just an "occupation."
The issue of an Iraqi "face" is key. Mr. Bremer appointed the Governing Council but then gave it far too little tangible or even symbolic power. Had its members been given more de facto control over day-to-day affairs for the past year, we're guessing there would have been less pressure for the de jure sovereignty handover that will now have to precede any legitimizing Iraqi elections.
On Monday Izzadine Saleem, who held the rotating Presidency of the IGC, became its second member to be assassinated. The leaders who've been working with the U.S. to build a new Iraq have taken real risks, and they have shown wisdom and competence in drafting the Middle East's most liberal constitution and economic laws. They also assembled the one unit of the new Iraqi Army--the 36th Battalion--that can currently be counted on to fight. They deserve more respect than both Mr. Bremer and the antiwar press have so far accorded them.


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Saudis win old Russian contract for oil in southern Iraq

SPECIAL TO WORLD TRIBUNE.COM
Thursday, May 20, 2004
BAGHDAD - Iraq has granted a contract to Saudi Arabia to search for oil in southern Iraq.
The contract had been made previously with a Russian firm by the regime of Saddam Hussein, Middle East Newsline reported.
The Iraqi Oil Ministry has signed an agreement with Saudi Arabia for the exploration of energy near their joint border. Officials said that under the agreement Saudi Arabia would dig 46 oil wells in southern Iraq.
The exploration would take place in existing oil fields. They included Al Qurna, Bazrgan, Majnoon, Omar River and southern Rumaila.
Russia's LukOil has sought to develop the Qurna field. Several months before the U.S.-led war against Iraq, the Saddam Hussein regime canceled the contract with LukOil.

Copyright ? 2004 East West Services, Inc.

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Views Differ on How Iraq Power Transfer
May 20, 4:56 PM (ET)
By The Associated Press
Bush administration officials gave somewhat conflicting accounts Thursday of what they expect to happen in the remaining few weeks before the handover of political power to an Iraqi interim government on June 30:
- Secretary of State Colin Powell said he believes U.N. envoy Lakhdar Brahimi is getting closer to picking people who will serve in the new government. Brahimi has been working closely with Iraqis and with Robert Blackwill, an aide to National Security Adviser Condoleezza Rice, to come up with acceptable names.
Powell said that once Brahimi brings forward his slate of officers, the Bush administration will take it to U.N. Security Council and to Secretary-General Kofi Annan, "for all of us to take a look at and examine the quality of these individuals."
Powell said he is confident that the United States can - at that point - win approval of a U.N. resolution that will endorse the new Iraqi interim government.
- White House spokesman Scott McClellan offered a streamlined version of events, saying simply of the people Brahimi picks: "I expect they will be the caretaker government."
McClellan repeatedly sidestepped questions about President Bush's own role in the selection process, saying only that Bush was "well aware" of conversations between Brahimi and the U.S. occupation authority in Iraq.
The White House spokesman also declined to say whether Bush already knows who Brahimi's picks will be.
- A senior administration official, speaking on condition of anonymity, said Brahimi will consult with Security Council members, Arab countries and others before disclosing his selections.
As a result, it is considered unlikely that the selections will encounter significant opposition, said the official.

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New evidence: Saddam's WMD in Lebanon
Weapons transferred to Syria before war, then to Bekaa Valley
Posted: May 20, 2004
5:00 p.m. Eastern

? 2004 WorldNetDaily.com
Over the last few months, the U.S. intelligence community has received new evidence a sizable amount of Iraqi WMD systems, components and platforms were transferred to Syria in the weeks leading up to the U.S.-led war in Iraq, reports Geostrategy-Direct, the global intelligence news service.
But chances are the Bush administration won't be releasing this information for a while.
The convoys were spotted by U.S. satellites in early 2003, but the contents of the WMD convoys from Iraq to Syria were not confirmed.
Confirmation later came from Iraqi scientists and technicians questioned by a U.S. team that was searching for Saddam's conventional weapons. But all they knew was the convoys were heading west to Syria.
But over the last few months, U.S. intelligence managed to track the Iraqi WMD convoy to Lebanon's Bekaa Valley.
Through the use of satellites, electronic monitoring and human intelligence, the intelligence community has determined that much, if not all, of Iraq's biological and chemical weapons assets are being protected by Syria, with Iranian help, in the Bekaa Valley.
The Syrians received word from Saddam Hussein in late 2002 that the Iraqi WMD would be arriving and Syrian army engineering units began digging huge trenches in the Bekaa Valley.
Saddam paid more than $30 million in cash for Syria to build the pits, acquire the Iraqi WMD and conceal them.
At first, U.S. intelligence thought Iraqi WMD was stored in northern Syria. But in February 2003 a Syrian defector told U.S. intelligence the WMD was buried in or around three Syrian Air Force installations.
But intelligence sources said the Syrians kept dual-use nuclear components for themselves while transferring the more incriminating material to Lebanon.

Editor's note: WorldNetDaily brings readers exclusive, up-to-the-minute global intelligence news and analysis from Geostrategy-Direct, a new online newsletter edited by veteran journalist Robert Morton and featuring the "Backgrounder" column compiled by Bill Gertz. Geostrategy-Direct is a subscription-based service produced by the publishers of WorldTribune.com, a free news service frequently linked by the editors of WorldNetDaily.
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About Those Iraqi Weapons . . .
From the May 31, 2004 issue: The inspectors never were able to account for all of Saddam's weapons. So the question is, what happened to them?
by William Kristol
05/31/2004, Volume 009, Issue 36

"A year after the war began, Americans are questioning why the administration went to war in Iraq when Iraq was not an imminent threat, when it had no nuclear weapons, no persuasive links to al Qaeda, no connection to the terrorist attacks of September 11, and no stockpiles of chemical or biological weapons."

--Edward M. Kennedy, April 5, 2004

"There were no weapons of mass destruction."

--Howard Dean, April 4, 2004

SENATOR KENNEDY and Governor Dean speak as Democrats. They speak as opponents of the war in Iraq. But on the issue of Saddam Hussein's weapons capabilities--the tyrant's development, possession, and threatened use of chemical, biological, and nuclear arms--they also speak as standard-bearers of the conventional wisdom. Over the last several months, ever since David Kay stepped down as head of the Iraq Survey Group and told us that "we were almost all wrong" about Saddam's arsenal, what was once a universally accepted truth (Saddam had weapons of mass destruction) became an apparently self-evident fiction (Saddam had no such weapons). It seems the whole world now agrees that Saddam rid his country of weapons stockpiles shortly after the first Gulf War ended in 1991. With respect to weapons of mass destruction (WMD), at least, there was really nothing to worry about.
But what if that judgment, too, is wrong? Just as wrong, in fact, as was the assumption that Iraqi WMD would be found quickly and easily? Senator John Kerry, interestingly, has been cautious. As recently as April 27 he commented, "Who knows if a month from now, three months from now, you find some weapons? You may."
The truth is Kennedy is right, at least in one regard: There are many questions that deserve answers. Here are a few we would like to pose--both to those who, like Kennedy and Dean, are so certain Saddam was weaponless in March 2003, and also to the Bush administration, which has been virtually mute, and has not explained what it has found and what it now believes to have been the truth about Iraqi WMD.

* Where did the sarin come from? Last week the Pentagon reported that two U.S. servicemen were hospitalized in Baghdad for exposure to nerve agents. The soldiers were part of an American convoy that came across an unmarked 155 millimeter shell lying on the side of a Baghdad street. When the soldiers attempted to disarm the makeshift bomb, it exploded, spilling out part of its poisonous contents. The shell later tested positive for sarin, the poison developed by the Nazis and used by Saddam against the Kurds in Halabjah in 1988.

The shell in question appears to have been made prior to the first Gulf War. The terrorists who planted the bomb may not have known it contained the deadly poison. But the claim always was that Saddam had not fully relinquished or done away with his pre-Gulf War arsenal. And if the terrorists didn't know the bomb contained sarin, because the casing had no distinctive markings, doesn't that suggest an effort at deception? Doesn't it also suggest that there could have been--and could be--many more of these shells around?

The New York Times wasn't worried: "No one can be certain" whether the bomb "did really contain sarin," it editorialized. Besides, "finding some residual weapons that had escaped a large-scale destruction program would be no great surprise--and if the chemicals had degraded, no major threat." But it now seems the bomb did contain sarin. And we do not know that there are only a few such "residual" weapons. Do we?

* How did Jordanian terrorists apparently obtain chemical weapons? Last month the Jordanians thwarted a terrorist attack in Amman. A terrorist cell linked to Abu Musab al Zarqawi--previously connected to Saddam--planned to explode trucks carrying 20 tons of poison chemicals outside the headquarters of the Jordanian intelligence service. The Jordanian authorities said the blast could have killed up to 80,000 people and wounded around 160,000. Where did the chemicals come from?

* Who is killing Iraqi weapons scientists? In closed testimony to members of Congress earlier this year, David Kay reported that Saddam Hussein's top scientists have been targeted for assassination. Terrorists and Baathists have killed nine prominent scientists since April 9, 2003. All those killed had worked in one way or another on Baathist weapons programs. All had been questioned by the Iraq Survey Group.

* What has Charles Duelfer discovered? Until January 2004 David Kay led the Iraq Survey Group, the 1,400-member team of scientists charged with discovering easily hidden weapons in a country of 27 million people that's roughly the size of California. In his testimony before Congress, Kay said he believed Saddam had destroyed his weapons stockpiles prior to the American invasion in March 2003. Hans Blix, the former head of the U.N. inspection team, agrees. This helped establish the conventional wisdom that Iraqi weapon stocks would never be found because they never existed.
But the Iraq Survey Group did not end with David Kay's departure. In fact it is still plugging along, now under the leadership of Charles Duelfer, who told Congress in March that "the picture is much more complicated than I anticipated going in." And that it's too soon to reach "full judgments with confidence." Because "we have yet to identify the most critical people in any programmatic effort." What's more, "Many people have yet to be found or questioned, and many of those we have found are not giving us complete answers."
Duelfer has other problems. His team has "recovered millions of documents," but millions were also destroyed in the chaos that engulfed Baghdad following liberation. Also, the documents are "often mixed up." Which means research is "extremely difficult." And Duelfer is understaffed. He especially lacks Arabic speakers. Hence only a "tiny fraction" of the recovered files have been translated. Duelfer is reported to be much less confident than Kay that Saddam had done away with his WMD.
The Bush administration can answer, or can begin to answer, all these questions. But having professed such certainty about Saddam's weapons of mass destruction before the war, the administration now seems intimidated by the new conventional wisdom that Saddam had done away with his WMD. Yet we do know that Saddam had weapons after the Gulf War in 1991, and of course United Nations inspectors spent much of the next six years destroying some of them, despite repeated efforts at concealment and deception by Saddam. The inspectors never were able to account for all of Saddam's weapons. So the question is, what happened to them? No one has adequately answered that question. Not Kay. Not Blix. Not Howard Dean or Ted Kennedy. Not the Bush administration. Maybe we just got one answer: Some of those weapons are still there in Iraq, and they're being used against our troops.


--William Kristol
? Copyright 2004, News Corporation, Weekly Standard, All Rights Reserved.
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What Went Wrong
The flaw in Seymour Hersh's theory.
By Christopher Hitchens
Posted Tuesday, May 18, 2004, at 9:52 AM PT
The most surprising thing about Seymour Hersh's latest New Yorker essay on the Abu Ghraib depravities is surely its title. It is headed "The Gray Zone." Can that be right? It seems to be generally assumed that the work of the sniggering video-morons is black and white: one of the very few moral absolutes of which we have a firm and decided grasp.
But Hersh's article wants to argue that the fish rots from the head, as indeed it very often does (even though, metaphorically speaking, one might think that the fish's guts would be the first to decay). And in order to argue this top-down process, he decides to propose that it began with Sept. 11. "In a sense," as he himself cautiously phrases it, this could arguably be true. As he reports:
Almost from the start, the Administration's search for Al Qaeda members in the war zone, and its worldwide search for terrorists, came up against major command-and-control problems. For example, combat forces that had Al Qaeda forces in sight had to obtain legal clearance before firing on them. On October 7th,the night the bombing began, an unmanned Predator aircraft tracked an automobile convoy that, American intelligence believed, contained Mullah Muhammed Omar, the Taliban leader. A lawyer on duty at the United States Central Command headquarters in Tampa, Florida, refused to authorize a strike. By the time an attack was approved, the target was out of reach.
Hersh has reported this tale before, along with the furious reaction that Donald Rumsfeld displayed when he heard the news. And, as he further reminds us, the Washington Post "reported that, as many as ten times since early October [2001], Air Force pilots believed they'd had senior Al Qaeda and Taliban members in their sights but had been unable to act in time because of legalistic hurdles."
These, and many other bureaucratic and butt-covering obstacles, according to Hersh and others, engendered such frustration at the top of the Pentagon that ruthless methods were discreetly ordered and discreetly applied. Thus, from the abysmal failure to erase Mullah Omar comes the howling success in trailer-porn tactics at Abu Ghraib.
More than one kind of non sequitur is involved in this "scenario." And very obviously, the conclusion can exist quite apart from the premises. (There would have been sadistic dolts in the American occupation forces in Iraq, even if there had not been wavering lawyerly fools in the Tampa center that was monitoring Afghanistan.) One needs to stipulate, once again, that the filthy images from Abu Ghraib are not bad because they look bad, but bad because they are bad. Yet is it as obvious as it seems that only the supporters of the war have any questions to answer here?
I ask this because, in the news cycle that preceded the Iraq atrocities, the administration was being arraigned from dawn until dusk for the offense of failing to take timely measures against the Taliban and al-Qaida. I hardly need to recapitulate the indictment here. We had our chance to see it coming, and to see where it was coming from, and the administration comprehensively blew all these chances, from the first warnings of suicide-hijacking to the cosseting of Saudi visa applicants. I might add that I completely agree with all these condemnations and wrote about many of them (including the spiriting of the Bin Laden relatives out of the country during a "no-fly" period imposed upon the rest of us) at the time.
But there is no serious way of having this cake and scarfing it. I remember a debate I had with Michael Moore--the newly crowned king of the Cannes Film Festival--at the more modest location of the Telluride Film Festival in 2002. Ridiculing the Bush administration's policy, he shouted that it had gone into Afghanistan to get Osama Bin Laden and Mullah Omar. "Mission NOT accomplished!" he added, to roars of easy applause. I asked myself then, and I repeat the question now: Would the antiwar camp have approved the measures necessary to ensure those goals? If they will the end, will they will the means? Would they taunt that lawyer in Tampa, as they taunt the supporters of regime change, with living a quiet life at home while others die in the field? Isn't the refusal to take out the leaders of al-Qaida a bit of a distraction from the struggle against al-Qaida?
As it happens, dear reader, I know the answers to those questions as well as you do. And that is partly why the Abu Ghraib nightmare is such a source of demoralization and despair. Thugs and torturers, who are always on tap in limitless supply, do their work in the dark and, when caught, plead exceptional circumstances. It's as if they are on an urgent self-appointed mission. But the battle against Islamic jihad will be going on for a very long time, against a foe that is both ruthless and irrational. This means that infinite patience and scruple and intelligence are required, as well as decisiveness and bravery. Given this necessary assumption, all short-cut artists, let alone rec-room sadists, are to be treated, not as bad apples alone, but as traitors and enemies. If Rumsfeld could bring himself to say that, he could perhaps undo some of the shame, and some of the harm as well.

******

So a Sarin-infected device is exploded in Iraq, and across the border in Jordan the authorities say that nerve and gas weapons have been discovered for use against them by the followers of Zarqawi, who was in Baghdad well before the invasion. Where, one idly inquires, did these toys come from? No, it couldn't be. ...


Christopher Hitchens is a columnist for Vanity Fair. His most recent book is Blood, Class and Empire: The Enduring Anglo-American Relationship.

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>> FENCE WATCH

In the Middle East, Its Good Fences for Bad Neighbors
May 18, 2004, 10:49 PM (GMT+02:00)


Marking the invisible Iraq-Syrian Desert border with a manmade barrier.

Manmade barriers are springing up around the Middle East at points where manmade conflicts are most intractable. Be they security fences, earthworks, moated ramparts, steel walls, razor wire - or combinations thereof, their purpose is to apply division and separation to breaking up difficulties into manageable elements. Will this device work? Some think it's worth a try.
Israeli forces who drove into the southern Gaza Strip town of the terrorist hotbed of Rafah's Tel Sultan early Tuesday, May 18, came with giant engineering corps bulldozers. Earth banks were speedily thrown up to isolate from their environment the spaces in which Israeli armored and infantry units are hunting for wanted terrorists, cut off their escape routes and provide perches for Israeli snipers lying in wait for escapees.
Last Tuesday, May 11, after an Israeli armored personnel carrier was blown up, banks were raised to protect and conceal the units looking for the remains of the six-man crew killed in the blast. Two days later, after a second APC blew up, earthworks helped protect units who were scouring sections of the Philadelphi Route for the remains of their five dead comrades against Palestinian harassment. Another two Israeli soldiers were nonetheless shot dead.
These earth barriers - and the large-scale wall under construction down the West Bank-Israeli border - are not only found separating Israelis from Palestinians. In Iraq, US forces are finding them useful for besieging guerrillas and al Qaeda terrorists in Fallujah and for blockading Moqtada Sadr's militiamen at flashpoints in Najef and Karbala.
The largest American military barrier project of all is now underway to seal Iraq against the incursions al Qaeda and Arab fighters from Syria, especially the truck convoys carrying ammunition. The American barrier strategy resembles the new Israeli tactic for sealing off the Egyptian-Israeli-Gaza border against Palestinian smugglers. Both are aim at plugging cross-border leaks with one important difference: in the great Syrian Desert, terrorists find their way across the border overland, while in Rafah, Palestinian smugglers tunnel their way through underground.
According to DEBKAfile and DEBKA-Net-Weekly 's military sources, the American barrier was well advanced before the Rafah operation began.
DEBKA-Net-Weekly's military sources report that the earthwork barrier American engineering units together with US and Jordanian engineering firms are throwing up will stretch 500 miles from the conjunction of the Syrian-Jordanian-Iraqi borders in the south to the Syrian-Turkish-Iraqi border junction in the north.
The first segment is going up in the al Qaim province through which most of the illicit traffic passes from Syria to Iraq at a point opposite the Syrian Jabal al Tanf mountain, at the foot of which Wadi Shal runs from Syria into western Iran. The first project is a bulwark to block this dry river wadi. Next, a barrier will be raised opposite the Syrian town of Abu Kamal where the Euphrates flows from Syria into Iraq. The section from the Jordanian border to the Euphrates will be 200 miles long.
From the Euphrates, the barrier will turn north, traversing regions roamed for thousands of years without hindrance by nomadic Arabs. It will circle round the towns of Mosul and Sinjar from the west and wind up at the point where southern Turkey meets the Iraqi Kurdish town of Zako.
According to our sources, the "wall" will be composed of five elements: A. An earthwork raised at its highest point to 3 meters, tall enough to block the path of four-wheeled drive vehicles. B. Deep trenches to prevent the crossing of light and heavy vehicles, to be dug in places where the earthwork cannot be raised to a sufficient height because of the lie of the land. C. Reinforced concrete cubes to block the many gulches and crevasses riddling the area. D. Water obstacles to obstruct river traffic. E. Electronic sensors scattered along the barrier's length that will serve the same function as an electronic fence. F. The unit in charge of the barrier's operation will have the use of a fleet of light spy and surveillance aircraft, helicopter gunships and drones. Its command center and air fleet will be linked to the spy satellites continually orbiting over Syria and Iraq.
US Ground Commander Gen. Ricardo Sanchez, who fought hard for the wall, has admitted the structure cannot be completely impermeable. But by obstructing vehicular movement, it can substantially cut down the volume of illicit traffic entering from Syria.
DEBKA-Net-Weekly 's military experts note that the project shares the same shortcoming as every other American endeavor in Iraq, a chronic shortage of military personnel to man and maintain it against sabotage. The itinerant Syrian-Saudi tribes, who subsist on smuggling and who have been helping Syrian intelligence infiltrate anti-US fighters and weapons into Iraq, have roamed the region unrestricted by boundaries from time immemorial. In just a few weeks, they will suddenly find themselves on either side of a dividing wall. Their first instinct will be to knock it down by one means or another, such as a powerful water cannon that can force a breach in the structure. They will not be deterred by ground or air patrols, any more than the Palestinian weapons smugglers will be halted permanently by any Israeli barrier.


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>> CHALABI?

...CIA?
http://www.moretothepoint.com/
Making News: US Troops Raid Chalabi's House
In Baghdad today, US soldiers raided the home of the man who was the Pentagon's choice to run post-war Iraq. A member of Iraq's Governing Council, Ahmad Chalabi was also a favorite of Vice-President Cheney. Chalabi says today's raid stemmed from his criticism of UN envoy Lakhdar Brahimi and calls for greater Iraqi sovereignty. Rod Nordland, Baghdad Bureau chief for Newsweek, reports on American motives and methods.


The Chalabi Mystery
http://www.opinionjournal.com/best/?id=110005113

What's behind the raid earlier this week on the home of Ahmed Chalabi of the Iraqi National Congress? CBS News claims that "senior U.S. officials have told 60 Minutes Correspondent Lesley Stahl that they have evidence Iraqi politician Ahmad Chalabi has been passing highly-classified U.S. intelligence to Iran":
The evidence shows that Chalabi--who was once seen as the man likely to lead Iraq by White House and Pentagon officials--personally gave Iranian intelligence officers information so sensitive that if revealed it could, quote, "get Americans killed." The evidence is said to be "rock solid."
If this is true, however, one wonders why Chalabi hasn't been arrested. Several reports, including CBS's, suggest that a big problem is the people who surround Chalabi. CBS: "Sources told Stahl that one of Chalabi's closest confidantes--a senior member of his organization, the Iraqi national congress--is believed to have been recruited by Iran's intelligence agency, the Ministry of Information and Security (MOIS)--and is on their payroll."
The Washington Post doesn't mention spying, but it does say some INC members have been arrested on corruption charges. "One of them is Sabah Nouri, whom Chalabi picked to become the top anti-corruption official in the new Iraqi Ministry of Finance":
For several months, U.S. officials have been investigating people affiliated with Chalabi's INC and possible ties to a scheme to defraud the Iraqi government during the currency exchange that took place from Oct. 15 to Jan. 15, according to three U.S. officials who asked not to be identified because of the sensitivity of the matter.
When auditors early this year began counting the old Iraqi dinars brought in and the new Iraqi dinars given out, they discovered that there was a difference of more than $22 million.
Nouri accused bank cashiers of stealing the money. In February, he organized mass arrests of these cashiers, prompting protests from worker rights groups. The cashiers, mostly women, said they did nothing wrong and accused Nouri of trying to cover up a different conspiracy, the sources said.
London's Daily Telegraph has yet another angle:
Ahmad Chalabi is in possession of "miles" of documents with the potential to expose politicians, corporations and the United Nations as having connived in a system of kickbacks and false pricing worth billions of pounds.
That may have been enough to provoke yesterday's American raid. So explosive are the contents of the files that their publication would cause serious problems for US allies and friendly states around the globe.
And "a U.S. defense official in Washington told The Washington Times on the condition of anonymity that the raid resulted from suspicions that Mr. Chalabi was blackmailing people involved in the disbanded U.N. oil-for-food program, the subject of several graft investigations."
It's also true that Chalabi has enemies in the U.S. government, most notably the State Department. It's hard to know what to make of all this, but perhaps it will become clearer in the weeks ahead.
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Agency: Chalabi group was front for Iran
BY KNUT ROYCE
WASHINGTON BUREAU

May 21, 2004, 7:29 PM EDT
WASHINGTON -- The Defense Intelligence Agency has concluded that a U.S.-funded arm of Ahmed Chalabi's Iraqi National Congress has been used for years by Iranian intelligence to pass disinformation to the United States and to collect highly sensitive American secrets, according to intelligence sources.
"Iranian intelligence has been manipulating the United States through Chalabi by furnishing through his Information Collection Program information to provoke the United States into getting rid of Saddam Hussein," said an intelligence source Friday who was briefed on the Defense Intelligence Agency's conclusions, which were based on a review of thousands of internal documents.
The Information Collection Program also "kept the Iranians informed about what we were doing" by passing classified U.S. documents and other sensitive information, he said. The program has received millions of dollars from the U.S. government over several years.
An administration official confirmed that "highly classified information had been provided [to the Iranians] through that channel."
The Defense Department this week halted payment of $340,000 a month to Chalabi's program. Chalabi had long been the favorite of the Pentagon's civilian leadership. Intelligence sources say Chalabi himself has passed on sensitive U.S. intelligence to the Iranians.
Patrick Lang, former director of the intelligence agency's Middle East branch, said he had been told by colleagues in the intelligence community that Chalabi's U.S.-funded program to provide information about weapons of mass destruction and insurgents was effectively an Iranian intelligence operation. "They [the Iranians] knew exactly what we were up to," he said.
He described it as "one of the most sophisticated and successful intelligence operations in history."
"I'm a spook. I appreciate good work. This was good work," he said.
An intelligence agency spokesman would not discuss questions about his agency's internal conclusions about the alleged Iranian operation. But he said some of its information had been helpful to the U.S. "Some of the information was great, especially as it pertained to arresting high value targets and on force protection issues," he said. "And some of the information wasn't so great."
At the center of the alleged Iranian intelligence operation, according to administration officials and intelligence sources, is Aras Karim Habib, a 47-year-old Shia Kurd who was named in an arrest warrant issued during a raid on Chalabi's home and offices in Baghdad Thursday. He eluded arrest.
Karim, who sometimes goes by the last name of Habib, is in charge of the information collection program.
The intelligence source briefed on the Defense Intelligence Agency's conclusions said that Karim's "fingerprints are all over it."
"There was an ongoing intelligence relationship between Karim and the Iranian Intelligence Ministry, all funded by the U.S. government, inadvertently," he said.
The Iraqi National Congress has received about $40 million in U.S. funds over the past four years, including $33 million from the State Department and $6 million from the Defense Intelligence Agency.
In Baghdad after the war, Karim's operation was run out of the fourth floor of a secure intelligence headquarters building, while the intelligence agency was on the floor above, according to an Iraqi source who knows Karim well.
The links between the INC and U.S. intelligence go back to at least 1992, when Karim was picked by Chalabi to run his security and military operations.
Indications that Iran, which fought a bloody war against Iraq during the 1980s, was trying to lure the U.S. into action against Saddam Hussein appeared many years before the Bush administration decided in 2001 that ousting Hussein was a national priority.
In 1995, for instance, Khidhir Hamza, who had once worked in Iraq's nuclear program and whose claims that Iraq had continued a massive bomb program in the 1990s are now largely discredited, gave UN nuclear inspectors what appeared to be explosive documents about Iraq's program. Hamza, who fled Iraq in 1994, teamed up with Chalabi after his escape.
The documents, which referred to results of experiments on enriched uranium in the bomb's core, were almost flawless, according to Andrew Cockburn's recent account of the event in the political newsletter CounterPunch.
But the inspectors were troubled by one minor matter: Some of the techinical descriptions used terms that would only be used by an Iranian. They determined that the original copy had been written in Farsi by an Iranian scientist and then translated into Arabic.
And the International Atomic Energy Agency concluded the documents were fraudulent.
Copyright ? 2004, Newsday, Inc. |


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WASHINGTON, 21 mai (AFP)
Chalabi, ancien prot?g? du Pentagone, aurait livr? des informations ? l'Iran

Les Etats-Unis enqu?tent sur Ahmad Chalabi, le dirigeant du Congr?s national irakien, pour d?terminer s'il aurait fait passer des informations sensibles ? l'Iran, a indiqu? vendredi un responsable am?ricain, au lendemain de perquisitions dans ses locaux ? Bagdad.
"Il existe des ?l?ments montrant que Ahmad Chalabi a fait passer des renseignements sensibles ? l'Iran et une enqu?te est en cours", a indiqu? ce responsable sous couvert de l'anonymat, qui n'a pas pu pr?ciser la nature des informations qui auraient pu ?tre transmises ni la p?riode concern?e.
M. Chalabi aurait personnellement pass? ? des agents iraniens des informations tellement sensibles qu'elles auraient pu "mettre la vie d'Am?ricains en danger", avait affirm? la cha?ne CBS jeudi. Les preuves contre Chalabi, toujours selon la cha?ne, sont "en b?ton".
L'entourage de M. Chalabi a qualifi? ces accusations "d'absurdes", et d?nonc? une manoeuvre de la CIA pour le discr?diter.
Ces r?v?lations ont co?ncid? avec des perquisitions men?es jeudi ? Bagdad au domicile et dans les bureaux de M. Chalabi, actuellement membre du Conseil de gouvernement transitoire irakien, par la police irakienne.
Les responsables am?ricains insistent sur le fait qu'il ne s'agit pas d'une op?ration am?ricaine, bien que des soldats am?ricains aient ?tabli un cordon de s?curit? autour des locaux ? fouiller.
Le porte-parole de la coalition Dan Senor avait notamment martel? jeudi qu'il s'agissait "d'une enqu?te irakienne, de perquisitions men?es par des Irakiens et c'est le r?sultat de mandats d'arr?t irakiens".
En revanche, pour le Conseil de gouvernement transitoire irakien, c'est la coalition qui est clairement responsable des perquisitions, a affirm? vendredi ? l'AFP un des participants ? une r?union extraordinaire de l'ex?cutif.
Et le conseil a d?nonc? ces op?rations "injustifi?es" et apport? son "soutien total" ? Ahmad Chalabi.
Consid?r? jusqu'? r?cemment comme l'homme du Pentagone en Irak, M. Chalabi, un chiite la?que, avait r?cemment appel? le pr?sident George W. Bush ? transf?rer sans d?lai la souverainet? au peuple irakien.
Il s'est f?licit? vendredi des perquisitions chez lui, qui devraient lui ?tre b?n?fiques, en termes d'image, aupr?s de l'opinion publique irakienne. Il a estim? que ces op?rations demand?es par les Etats-Unis, montraient son engagement envers l'ind?pendance de l'Irak.
"Ce que les Am?ricains ont fait revient ? me faire d?cerner une m?daille par les Irakiens", a d?clar? M. Chalabi dans un entretien diffus? par la cha?ne de t?l?vision Al-Arabiya de Duba?. Ces perquisitions ont "effac? tout ce qui a ?t? dit sur mes relations avec les Am?ricains, cela a d?montr? que j'?tais avec les Irakiens", a-t-il assur?.
La Maison Blanche, comme le Pentagone, se sont d?marqu?s ces derniers jours de leur ancien prot?g?. Le secr?taire adjoint am?ricain ? la D?fense Paul Wolfowitz avait d?j? annonc? mardi que les Etats-Unis allaient cesser de financer son parti.

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Raid on Chalabi Puts 'NYT' Even More on the Spot
Still waiting for that corrective editor's note.

By William E. Jackson Jr.
(May 21, 2004) -- In a front page New York Times article this morning, David E. Sanger quotes a senior U.S. intelligence official's assessment of Ahmad Chalabi's information on weapons of mass destruction, which was distributed so avidly by the Times itself in the run-up to the Iraq war: "useless at best, and misleading at worst."
Yesterday, American and Iraqi forces raided and ransacked the Iraqi National Congress leader's office in Baghdad, completing his fall from grace as what the Times terms a "favorite" of the Bush administration. Today, two front-page articles in the paper, and an editorial titled "Friends Like This," take a harsh view of Chalabi. One would never know that the Times itself once relied on him heavily for its "scoops" on Saddam's WMD stockpiles.
In fact, one must painfully recall the now famous May 1, 2003, e-mail to the paper's Baghdad Bureau Chief John Burns from star Times reporter in Iraq, Judith Miller, who wrote: "I've been covering Chalabi for about 10 years, and have done most of the stories about him for our paper. ... He has provided most of the front page exclusives on WMD to our paper."
Oh, how quickly the Times forgets its friends, Chalabi must be thinking today.
Describing Chalabi, Sanger wrote today: "He became a master of the art of the leak, giving new currency to the suspicions about Mr. Hussein's weapons." Leaks? Who was his favored drop? Miller of the Times, although there were many others.
And in today's Times editorial: "Before the war, Ahmad Chalabi told Washington hawks exactly what they wanted to hear about Saddam Hussein's weapons of mass destruction ... Much of the information Mr. Chalabi had produced was dead wrong. He was one of the chief cheerleaders for the theory that Iraq had vast quantities of weapons of mass destruction. ... But he can't be made a scapegoat.
"The Bush administration should have known what it was doing when it gave enormous credence to a questionable character whose own self-interest was totally invested in getting the Americans to invade Iraq. ..."
Left unsaid is that the Times should have known better, as well. Yet, incredibly, the paper of record has never run a corrective editor's note to clean up the mess that Miller made for the Times' integrity.

William E. Jackson Jr. has been covering this subject for E&P since last spring. He was executive director of President Jimmy Carter's General Advisory Committee on Arms Control, 1978-80. After affiliations with the Brookings Institution and the Fulbright Institute of International Relations, Jackson writes on national security issues from Davidson, N.C.
--------------------------------------------------------------------------------
>> NKOREA


COR?E DU NORD Le premier voyage de Koizumi remonte ? septembre 2002
Visite controvers?e du premier ministre japonais ? Pyongyang
Tokyo : R?gis Arnaud
[22 mai 2004]
Junichiro Koizumi se rend ? Pyongyang aujourd'hui pour la seconde fois afin de rencontrer le leader nord-cor?en Kim Jong-Il. Mais ce voyage promet d'?tre nettement plus controvers? que sa premi?re visite au ?royaume ermite? en septembre 2002.
A l'?poque, le premier ministre nippon avait saisi une occasion historique de rapprochement entre les deux pays. Il avait r?ussi ? ramener au pays natal cinq des ressortissants japonais kidnapp?s par les services secrets nord-cor?ens pendant la guerre froide, et avait esquiss?, ? coups de promesses d'aide humanitaire, un d?but de r?chauffement diplomatique. Des bonnes paroles qui s'?taient envol?es avec la sortie de la Cor?e du Nord du Trait? de non-prolif?ration nucl?aire, et la menace d'un programme de r?armement visant notamment le Japon. C?t? nord-cor?en, Pyongyang n'avait pas dig?r? de voir les cinq Japonais ?lib?r?s? ne jamais rentrer en Cor?e du Nord, contrairement ? l'engagement pris par Tokyo que leur s?jour au Japon ne serait que temporaire.
Cette fois, apr?s des mois de n?gociations, Junichiro Koizumi est parti ? Pyongyang r?cup?rer le plus grand nombre possible de membres des familles de ces kidnapp?s rest?s en Cor?e du Nord, soit huit personnes. ?D?but mai, des diplomates nord-cor?ens ont rencontr? leurs homologues japonais ? P?kin. Les Japonais ont expliqu? que Junichiro Koizumi ?tait pr?t ? se rendre ? Pyongyang pour r?gler la question des otages?, explique l'?ditorialiste Takao Toshikawa. Ce volontarisme a ?norm?ment surpris le gouvernement de Pyongyang, qui a estim? qu'un tel geste ?tait suffisant pour que Kim Jong-Il rel?che les familles des kidnapp?s sans perdre la face?, ajoute-t-il.
Une initiative tr?s critiqu?e jusque dans le propre camp de Junichiro Koizumi. Le premier ministre n'a-t-il pas plus ? perdre qu'? gagner en se rendant ? Pyongyang ?
La lib?ration de quelques Japonais ne fera pas la lumi?re sur le cas des dizaines d'autres Japonais kidnapp?s et disparus sans laisser de traces, estiment certains. Par ailleurs, le geste de Junichiro Koizumi n'aura aucun effet sur le programme d'armement nucl?aire nord-cor?en, estime le quotidien Nihon Keizai.
Enfin et surtout, nombre de Japonais estiment que ce voyage, pr?par? dans la h?te ? quelques semaines des ?lections s?natoriales, est avant tout un ?coup m?diatique? destin? ? faire appara?tre le premier ministre sous un jour favorable. Et ? faire oublier le scandale de retraites impay?es qui vient de toucher plusieurs hommes politiques dont Junichiro Koizumi lui-m?me, coupable de n'avoir pas r?gl? ses cotisations pendant sept ans.
Le sort de Charles Robert Jenkins suscite particuli?rement l'int?r?t de Tokyo, Washington et Pyongyang. En 1965, cet officier am?ricain a d?sert? son camp et ralli? les troupes communistes. Plus tard il a ?pous? Hitomi Soga, une des kidnapp?es japonaises, avec qui il a eu deux enfants. Hitomi Soga est revenue ? Tokyo avec Junichiro Koizumi en 2002, et aimerait que sa famille la rejoigne. Mais si son mari est autoris? ? entrer au Japon, il devra sans doute ?tre remis ? la justice militaire am?ricaine et ?tre jug? devant une cour martiale. Au moment o? les inculpations se succ?dent apr?s le scandale des s?vices inflig?s aux prisonniers de la prison d'Abu Ghra?b, en Irak, Washington n'est pas dispos? ? faire preuve de cl?mence. ?Le minist?re des Affaires ?trang?res japonais ne parle absolument pas du cas Jenkins. ?a veut dire qu'il ne sera pas du voyage de retour?, parie l'?ditorialiste Takao Toshikawa.

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>> KCNA

DPRK FM Spokesman Refutes U.S. "Report on Human Rights and Democracy"
Pyongyang, May 21 (KCNA) -- A spokesman for the Foreign Ministry of the DPRK gave an answer to a question put by KCNA Friday as regards the U.S. recent release of a "report on human rights and democracy" in which it again slandered the DPRK. He said:
The U.S. Department of State in its "report on human rights and democracy" issued on May 17 absurdly asserted that the human rights issue in the DPRK has become an object of international debate and it is being taken up by the six-party talks, assessing as it pleased the human rights situation in at least 100 countries and regions.
It admits of no argument that the U.S. far-fetched assertion was prompted by a sinister political aim to force the DPRK to change its inviolable socialist system.
The U.S. is pressurizing the DPRK to accept the CVID as regards the nuclear issue and taking pains to egg its allies on to lay a siege to the DPRK under the pretexts of "human rights" and "democracy."
GIs' maltreatment of Iraqi prisoners that shocked and infuriated the international community brought to light the hypocritical nature of the U.S. as the world's biggest violator of human rights and a graveyard of human rights.
It is the view of the fair public opinion that the U.S. has neither qualification nor moral right to talk about "human rights" or "democracy."
Yet, the U.S. is impudent enough to pull up not a few countries over their human rights performance or democracy, unaware of how other countries paint it. This only glaringly reveals the shameless nature of the Bush group.
No smear campaign on the part of the U.S. can ever shake Korean-style socialism centered on the popular masses under which the leader, the Party and the people are single-heartedly united.
The situation in Iraq where confusion, disorder, bloodshed and violence are rampant due to the U.S. aggression and wanton interference and tragic happenings in various other countries prove with added clarity that human rights precisely mean sovereignty and the loss of sovereignty leads to contempt, disgrace and humiliation.
The DPRK will as ever protect as the apple of the eye the inviolable Korean-style socialism, the Korean people's choice and life and soul, and never allow anyone to vilify it.
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>> TERROR

AP: Database Measured 'Terrorism Quotient'

May 20, 7:25 AM (ET)

By BRIAN BERGSTEIN
NEW YORK (AP) - Before helping to launch the criminal information project known as Matrix, a database contractor gave U.S. and Florida authorities the names of 120,000 people who showed a statistical likelihood of being terrorists - sparking some investigations and arrests.
The "high terrorism factor" scoring system also became a key selling point for the involvement of the database company, Seisint Inc., in the Matrix project.
Public records obtained by The Associated Press from several states show that Justice Department officials cited the scoring technology in appointing Seisint sole contractor on the federally funded, $12 million project.
Seisint and the law enforcement officials who oversee Matrix insist that the terrorism scoring system ultimately was kept out of the project, largely because of privacy concerns.
However, new details about Seisint's development of the "terrorism quotient," including the revelation that authorities apparently acted on the list of 120,000, are renewing privacy activists' suspicions about Matrix's potential power.
"Assuming they have in fact abandoned the terrorist quotient, there's nothing that stops them from bringing it back," said Barry Steinhardt, director of the technology and liberty program at the American Civil Liberties Union, which learned about the list of 120,000 through its own records request in Utah.
Matrix - short for Multistate Anti-Terrorism Information Exchange - combines state records and data culled by Seisint to give investigators fast access to information on crime and terrorism suspects. It was launched in 2002.
Because the system includes information on people with no criminal record as well as known criminals, Matrix has drawn objections from liberal and conservative privacy groups. Utah and at least eight other states have pulled out, leaving Florida, Connecticut, Ohio, Michigan and Pennsylvania.
The AP has received thousands of pages of Matrix documents in records requests this year, including meeting minutes and presentation materials that discuss the project in detail.
Not one indicates that Matrix planners decided against using the statistical method of determining an individual's propensity for terrorism.
When the AP specifically requested documents indicating the scoring system was scrapped, the general counsel's office for Florida state police said it could not uncover any.
Even so, people involved with Matrix pledge that the statistical method was removed from the final product.
"I'll put my 26 years of law enforcement experience on the line. It is not in there," said Mark Zadra, chief investigator for the Florida Department of Law Enforcement.
He said Matrix, which has 4 billion records, merely speeds access to material that police have always been able to get from disparate sources, and does not automatically or proactively finger suspects.
Bill Shrewsbury, a Seisint executive and former federal drug agent, said the terrorism scoring algorithm that produced the list of 120,000 names was "put on the shelf" after it was demonstrated immediately following Sept. 11, 2001.
He said the scoring system requires intelligence data that was fed into the software for the initial demonstration but is not commonly available. "Nor are we interested in pursuing that," he said.
The Utah documents included a Seisint presentation saying the scoring system was developed by the company and law enforcement officials by reverse engineering an unnamed "Terrorist Handbook" that reveals how terrorists "penetrate and in live our society."
The scoring incorporated such factors as age, gender, ethnicity, credit history, "investigational data," information about pilot and driver licenses, and connections to "dirty" addresses known to have been used by other suspects.
According to Seisint's presentation, dated January 2003 and marked confidential, the 120,000 names with the highest scores were given to the Immigration and Naturalization Service, FBI, Secret Service and Florida state police. (Later, those agencies would help craft the software that queries Matrix.)
Of the people with the 80 highest scores, five were among the Sept. 11 hijackers, Seisint's presentation said. Forty-five were identified as being or possibly being under existing investigations, while 30 others "were unknown to FBI."
"Investigations were triggered and arrests were made by INS and other agencies," the presentation added. Two bullet points stated: "Several arrests within one week" and "Scores of other arrests." It does not provide details of when and where the investigations and arrests took place.
Phil Ramer, who heads Florida state police's intelligence division, said his agency found the list a useful starting point for some investigations, though he said he could not recall how many. He stressed that the list was not used as the sole evidence to make arrests.
"What we did with the list is we went back and found out how they got on the list," Ramer said.
Dean Boyd, a spokesman for U.S. Immigration and Customs Enforcement, a descendant of INS in the Department of Homeland Security, said he could not confirm that INS used or was given the list.
Although Seisint says it shelved the scoring system - known as high terrorist factor, or HTF - after the original demonstrations in the wake of Sept. 11, 2001, the algorithm was touted well into 2003.
A records request by the AP in Florida turned up "briefing points," dated January 2003, for a presentation on Matrix to Vice President Dick Cheney and other top federal officials delivered jointly by Seisint, Florida Gov. Jeb Bush and Florida's top police official.
One of the items on Seisint's agenda: "Demonstrate HTF with mapping." Matrix meeting minutes from February 2003 say Cheney was briefed along with Homeland Security Director Tom Ridge and FBI Director Robert Mueller.
In May 2003, the Justice Department approved Seisint as sole data contractor on the project, citing the company's "technical qualifications," including software "applying the 'terrorism quotient' in all cases."
"The quotient identifies a set of criteria which accurately singled out characteristics related to the perpetrators of the 9-11 attacks and other terrorist events," said a memo from an Office of Justice Programs policy adviser, Bruce Edwards. "This process produced a scoring mechanism (that), when applied to the general criminal population, yields other people that may have similar motives."
A spokeswoman for the Office of Justice Programs declined to comment.
Ramer, the Florida agent, said the scoring system was scrapped because it was "really specific to 9/11," and not applicable for everyday use. Also, he said, "we didn't want anybody abusing it."
Seisint Inc., is a Boca Raton, Fla., company founded by a millionaire, Hank Asher, who stepped down from its board of directors last year after revelations of past ties to drug smugglers.
---
AP Investigative Researcher Randy Herschaft contributed to this report.
On the Net:
http://www.matrix-at.org
http://www.aclu.org/privacy
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Lying into the Mirror
Misunderstaning the war on terror.

We have adopted our enemies' view of the world

Shortly after moving to Washington from Rome -- we're talking late Seventies -- I did a long interview with Senator Daniel Patrick Moynihan about the Carter administration's foreign policy. At a certain point, Moynihan elegantly summarized what had happened to us: "being unable to distinguish between our friends and our enemies," he said, "Carter has adopted our enemies' view of the world." So, it seems have many of our policymakers in their panicky and incoherent decisions regarding Iraq.
First, the matter of the "abuses" of the prisoners. Maybe the temperature of the rhetoric has cooled enough for us to address the most important aspect of the debacle: Torture and abuse are not only wrong and disgusting. They are stupid and counterproductive. A person under torture will provide whatever statements he believes will end the pain. Therefore, the "information" he provides is fundamentally unreliable. He is not responding to questions; 99 percent of the time, he's just trying to figure out what he has to say in order to end his suffering. All those who approved these methods should be fired, above all because they are incompetent to collect intelligence.
Torture, and the belief in its efficacy, are the way our enemies think. And remember that our enemies, the tyrants of the 20th century, and the jihadis we are fighting now, are the representatives of failed cultures. Our greatness derives from the superiority of our culture, and we should, as the sports metaphor goes, stick with what got us here.
Second, our defeat in Fallujah. I had hoped that the tactic of enlisting Sunni leaders to assist in the defeat of the jihadis would accelerate the terrorists' defeat and enable us to round them up and clean out the city. But it turns out that it wasn't a tactic at all; it was a strategic retreat. Today, throughout the region, everybody knows that the bad guys outlasted us. We were forced out. The Sunni generals (the first of which, unforgivably, was one of Saddam's henchmen) just told everyone to cool it for a while, and the bad guys are now reorganizing for the next assault. Instead of smashing the terrorists, we set ourselves up for more casualties.
Worse yet, some of the crackpot realists in our military and their exhausted civilian commanders in State and Defense, have convinced themselves that this is the way to go, and they are now whispering to one another that we should adopt "the Fallujah model" in future engagements.
If that holds, then we have lost. Because it means that we have surrendered the initiative to the terrorists and will not destroy them in future engagements. That adds up to actively encouraging the enemy to attack us.
Third, is the decision to launch a preemptive strike against Ahmed Chalabi and the Iraqi National Congress. Our enemies -- religious fanatics and other advocates of tyranny -- have long dreaded the emergence of an Iraqi leader with unquestioned democratic convictions, someone at once deeply religious and yet committed to the separation of mosque and state. Yet the State Department's and the CIA's Middle East gangs have hated him and fought him for more than a decade, because he is independent and while he is happy to work with them, he will not work for them. Moreover, he has often proved more knowledgeable, as when, in the mid-Nineties, he informed CIA that one of their fatuous little coup plots had been infiltrated by Saddam's agents. They laughed at him, but not for long. Soon thereafter an Iraqi intelligence officer called the CIA man in charge of the operation on his "secret" cell-phone number to say "listen carefully and you'll hear the final screams of your coup leader."
I am not sure if CPA -- including State and CIA officials -- has spent more man hours fighting Chalabi than fighting Moqtada al Sadr, but it's probably pretty close, and in any event somebody should ask Viceroy Bremer why he massed so much firepower to break into Chalabi's house and Kanan Makiya's house, and the offices of the INC, instead of doing the same to Moqtada, who at last account was still free to mobilize the masses of his faithful to kill us. Is this not proof positive of the total inversion of sound judgment of which Moynihan spoke so elegantly a quarter-century ago?
Now the usual unnamed intelligence sources are whispering to their favorite journalists that they have a "rock-solid case" showing that Chalabi was in cahoots with the Iranians. This, coming the same crowd that told President Bush they had a "slam-dunk case" on Iraqi WMDs, should arouse skepticism from any experienced journalist, but it doesn't (another grim sign that confusion reigns supreme in Washington these days). It's a truly paradoxically accusation, since the refusal of the American government to provide Chalabi with support and protection for the past decade is what drove him to find a modus vivendi with Tehran in the first place. And Chalabi is not alone in dealing with the Iranians and their representatives in Iraq; it is hard to find any serious organization or any serious leader of any stripe -- Kurdish, Shiite or Sunni, imam, mullah, or Ayatollah -- who doesn't work with the Iranians. How could it be otherwise? We have shown no capacity to defend them against Iranian-supported terrorists. And terror works. Finally, it's hilarious to see this crowd of diplomats and intelligence officers attacking an Iraqi for talking too much to Iranians, when Powell's State Department and Tenet's CIA has been meeting with Iranians for years.
As I once wrote, the war against Saddam is nothing compared to the war against Ahmed Chalabi.
All of this is the inevitable result of the fundamental misunderstanding of the war against the terror masters. It is a regional war, not a war limited to a single country. Since we refuse to admit this, we are unable to design an effective strategy to win. Deceiving ourselves, we lie to the mirror, saying that defeats are really victories, that Baathists are our friends and independent minded Shiites are our enemies, and that appeasement of the mullahs will end their long war against the United States.

Has anyone told the president?
http://www.nationalreview.com/ledeen/ledeen200405211643.asp
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Suri State of Affairs
Another "dynamic" duo.

By Lorenzo Vidino

In the eyes of many terrorism experts, Nicholas Berg's tragic beheading has elevated Abu Musab al-Zarqawi to a level approaching that of Osama bin Laden. The comparison seems appropriate, as Zarqawi, like bin Laden, has surrounded himself with other powerful extremists and several valuable contacts in the jihad underworld.
Bin Laden chose a well-connected Egyptian, Ayman al-Zawahiri, as his deputy in order to take advantage of Zawahiri's widespread network of terrorists and political knowledge. By the same token, Zarqawi appears to be teaming up with Mustafa Setmariam Nasar, a man who, so far, has not attracted much attention, but whose influence on Zarqawi cannot be overlooked. According to Italian military intelligence, both Zarqawi and Nasar are currently in Iraq, masterminding attacks there and throughout the world.
Nasar, better known by his nome de guerre, Abu Musab al-Suri, is well known to Spanish authorities, who wrote extensively about him in the September 2003 indictment of the Madrid al Qaeda cell. A Syrian veteran of the Afghan war against the Soviets, he spent several years in Madrid in the mid-1990s and acquired Spanish citizenship by marrying a Spanish convert. While in Spain, he befriended a fellow Syrian, Imad Eddin Yarkas, the leader of the Madrid cell. Both had fled Syria in the beginning of the 1980s after the Syrian regime violently cracked down on the Muslim Brotherhood.
But while Yarkas immediately went to Spain, Suri went to Afghanistan, where he met bin Laden and Abdullah Azzam, bin Laden's mentor and one of the founders of al Qaeda. According to the Spanish indictment of the Madrid cell, when al Qaeda moved to Sudan in 1991, Suri remained in Afghanistan, traveling sporadically to Khartoum to meet with bin Laden. In 1995 he moved to Europe and lived between Madrid and London, where he was one of the leading minds of the local Islamist scene now referred to as "Londonistan."
But upon realizing that British authorities suspected his involvement in the 1995 Paris Metro bombings, Suri decided to move back to Afghanistan, where he ran a terrorist training camp. According to Spanish authorities, while in Afghanistan Suri maintained contacts with both Osama bin Laden and former Taliban leader Mullah Omar. Suri also became Emir of the Syrians associated with al Qaeda, a title that proves his importance in the organization. The man who facilitated Suri's move to Afghanistan was another Syrian national, Mohamed Bahaiah, whom Spanish authorities have described as "bin Laden's courier in Europe" and who used to travel in Spain extensively.
Bahaiah is just one of Suri's contacts in Spain. Suri maintained a network of operatives there and he is now believed to have masterminded the March 11 train bombings in Madrid. Information provided by some of the individuals detained in relation with the attacks has shown that an intermediary of Suri traveled to Spain at the end of 2003. According to police inquiries, after arriving in Spain, the intermediary made contact with one of the bombers and passed on to him instructions from Suri. After staying in Spain for a few days, the messenger left for London, where Suri had instructed him to activate sleeper cells. Interpol has issued an arrest warrant for Suri in relation with the Madrid bombings. If this information is confirmed, it would be definitive proof that the Zarqawi network was behind the Madrid attacks.
But aside from his terrorist contacts throughout the world, Suri's importance lies in the profound political and religious influence he wields over Zarqawi. While Zarqawi is a high school dropout with scant knowledge of world affairs, Suri has a long history of writing about politics and is a Koranic expert who boasts a large following in the radical Islamic underworld. During his stay in London, Suri was one of the editors of the ultra-radical Al Ansar magazine, which for years published propaganda from dozens of Islamic terrorist groups. On one instance, Al Ansar published a fatwah that justified the killing of children and women in Algeria by the Algerian terrorist group GIA. The fatwah was issued by the Palestinian cleric Abu Qatada, a man that Spanish authorities have described as "Bin Laden's ambassador to Europe" and who also served as editor-in-chief of Al Ansar.
A further glance at Suri's extremist ideology is provided by tapes of his sermons that were seized in the apartment of a member of an Algerian terrorist cell dismantled by Italian authorities in Naples in 2000. The tapes reveal Suri's deep hatred for Shiites, whom he considers deviators from pure Islam. While other al Qaeda leaders have expressed their contempt for Shiites but nonetheless cooperated with Shiite groups, Suri categorically rejects any form of cooperation between Sunnis and Shiites. In fact, he points at the "negative influence" that Shiite groups have had on the Palestinian struggle, as some groups like Hamas have decided to work with Shiite groups like Hezbollah. This same contempt for Shiites can be seen in a letter written by Zarqawi last February, in which he openly incited a sectarian war in Iraq between Sunnis and Shiites. Zarqawi urged his followers to carry out attacks against Shiites because they "have declared a subtle war against Islam."
The letter reveals the influence that the older and better-educated Suri has on Zarqawi, who did not express any anti-Shiite sentiment while working closely with the Iranian government (as revealed by the confessions of Shadi Abdallah, a terrorist linked to Zarqawi who was arrested in Germany). Just as Zawahiri's ideas influenced bin Laden's actions and worldview, then, it appears that Zarqawi is acting in accordance with Suri's views. It is too early to say whether -- with bin Laden and Zawahiri reportedly relegated to Waziristan -- Zarqawi and Suri have become the world's most dangerous terrorist duo. It's also too early to say whether Iraq will represent for them what Afghanistan represented for the other duo. But it is clear that the two have managed to operate undetected for almost a decade and are now reaping the fruits of their work. It is now extremely important to understand Suri's ideas in order to penetrate Zarqawi's violent mindset.

-- Lorenzo Vidino is a senior terrorism analyst at the Investigative Project, a Washington-based counterterrorism institute.

http://www.nationalreview.com/comment/vidino200405210939.asp
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>> ECONOMY

Grading Bush's Economic Team
From the Spring 2004 issue of the International Economy: What they've done and what they might do in a second term.
by Fred Barnes
05/18/2004 12:00:00 AM
ON PRESIDENT BUSH'S initial economic team, Larry Lindsey, the head of the White House's National Economic Council, famously didn't get along with Treasury Secretary Paul O'Neill. They needed a referee on policy disputes--deputy White House Chief of Staff Josh Bolten. The budget chief, Mitch Daniels, delighted in twitting Congress for its excessive spending. Glenn Hubbard knew his way around Washington and was the most assertive chairman of the Council of Economic Advisers since Alan Greenspan held the job in the mid-1970s. As Commerce Secretary and Bush's best friend, Don Evans played a quiet role. More than anything else, the first economic team produced ideas and proposals, all promoted aggressively.
Now consider Bush's current economic team. Treasury Secretary John Snow and Stephen Friedman, the White House economic coordinator, are allies. Unlike O'Neill, Snow is an effective salesman of Bush's policies. Bolten is now budget chief and concentrates on good relations with Congress. Gregory Mankiw, the new chairman of the Council of Economic Advisers, is publicity-shy after sparking a flap over the loss of American jobs overseas. Evans remains as Commerce secretary and plays a more prominent role as a public voice in Bush's reelection campaign. More than anything, this team produces consensus. Bold new ideas? Hardly a one.
If Bush is reelected in November, this team--followers, not playmakers--is expected to remain in place. They are ready to push Bush's radical but old ideas for reforming Social Security with private investment accounts and increasing savings through a new type of retirement account. They are committed to not raising taxes. Except for Evans, they are full-blown free traders. But not one of them has a favorite idea he is pushing aggressively, as Lindsey did with tax rate cuts in 2001 and Hubbard with cutting the tax on dividends in 2003.
But watch Josh Bolten. There are murmurings inside the Bush administration about a push next year for budget austerity to shrink the deficit. Bush has chafed at criticism from conservatives over his Medicare prescription drug benefit for the elderly and his signing of a bloated farm subsidy bill. Even Bush's Democratic opponent, Senator John Kerry, claims to be a fiscal conservative by comparison. So Bush is considering a course reversal. Both Snow and Mankiw, known as budget hawks before joining the Bush administration, can be helpful here. But Bolten is the key figure.
He has spent a year mastering the budget and shunning a major role on other economic issues. He is, an associate says, "still transitioning from behind-the-scenes staffer to a principal." Bolten is a trusted adviser to Bush, having left Goldman Sachs in 1999 to become policy director of Bush's first presidential campaign. And now he is coming out of his shell. Earlier, as a White House aide, Bolten rarely talked to reporters, though he knew many from the campaign. Now he's available to the press. In a second Bush term, Bolten is positioned to become a top economic spokesman for the administration, especially as champion of spending restraint. He, perhaps alone among Bush's economic advisers, will have an issue.
Congress is a problem. The economic team has little clout on Capitol Hill. And the Bush White House has a poor record of standing up to Republicans. When the House and Senate passed separate tax bills last year, the President and his aides preferred the Senate version, which called for a three-year phase-out of the tax on dividends. Chairman Bill Thomas (CA) of the House Ways and Means Committee, however, wanted to trim the tax rate on dividends and capital gains to 15 percent. When Thomas met with Snow and Friedman, he dominated the negotiations and blew their objections away. Persuading congressional Republicans, much less Democrats, to ratify deep spending cuts will require smart, disciplined leadership. That means Bolten.
Fiscal austerity is an old idea. Why are there no new ideas? There are two reasons, one understandable, the other worrisome. "It's a less creative period," says a senior administration official. "I'd rack that up to where we are in the cycle." That's the election cycle. Bush is running for reelection on a single economic issue: tax cuts that have successfully spurred economic growth and, finally, job creation. The president is playing up his plan for Social Security reform less than he did in 2000. He's distracted from domestic issues by his focus on the war on terrorism and the struggle for democracy in Iraq. Fine.
The other reason is that Bush economic officials are wary of being fired or slapped down. A Republican consultant in Washington refers to the "Lindsey factor." Former NEC head Lindsey was fired along with O'Neill in 2002. O'Neill was a contrarian, ill-suited for the Treasury post. But Lindsey was simply a scapegoat. His only sin was having put a public price tag on the intervention in Iraq, a figure higher than the White House was willing to concede. The effect of his firing was to discourage individualism among Bush advisers and stifle fresh ideas.
Then came the Mankiw affair last February, which had the same effect. Gregory Mankiw, once the youngest Harvard professor with tenure, had already learned it wasn't safe to talk about the dollar. When asked about it, he simply declines any comment. But he hadn't realized that "outsourcing" of jobs was an explosive subject. When he treated outsourcing as benign, the White House pointedly failed to support him. Later, a friendly economist spoke to Mankiw by phone. "I had the distinct impression he was reading from talking points," the economist said. "He didn't want to say anything that wasn't pre-approved."
What Mankiw had said was hardly incendiary. It merely reflected mainstream economic thinking. The Economic Report of the President, which Mankiw authored, contained this sentence: "When a good or service is produced more cheaply abroad, it makes more sense to import it than to make or provide it domestically." Asked about this during a White House briefing, Mankiw reported to have labeled outsourcing "a good thing."
His answer was actually more elaborate than that. "Outsourcing is just a new way of doing international trade," he said. "We're very used to goods being produced abroad and being shipped here on ships and planes. What we're not used to is services being produced abroad and being shipped here over the Internet or telephone wires. But does it matter from an economic standpoint whether values of items produced abroad come on planes and ships or over fiber optic cables? Well, no, the economics is basically the same. More things are tradable than were tradable in the past and that's a good thing."
The White House felt differently. Scott McClellan, the press secretary, argued that the economic report, despite its name, wasn't really the president's. Nor did Bush himself defend Mankiw. "The way they treated Mankiw, it was like blood in the water," said Bruce Bartlett, an economist who worked in the Reagan administration. It was left to Snow, more experienced in Washington than Mankiw, to come up with a way to discuss outsourcing. It's a four-step approach, first empathy for those who lost jobs, then economic growth as the source of new jobs, then job training, and finally a denunciation of "economic isolation" as harmful to American producers. The word "outsourcing" is never mentioned.
The economic team meets over lunch each Wednesday. The sessions are collegial. Vice President Cheney often sits in. Cheney, by the way, is a close friend of Federal Reserve Board Chairman Alan Greenspan. They normally agree, but Cheney is less worried than Greenspan about the potential impact of deficits. The economic policymaking process is well run with Friedman in charge. Let's examine the five players:

Josh Bolten. He is building a powerful base at the Office of Management and Budget and could emerge as the most influential budget director since Richard Darman in the elder Bush's administration. He has hired two hard-core free market conservatives for his staff--economist J.D. Foster and Steve McMillan, a former aide to Senator Phil Gramm, an advocate of smaller government. Bolten is getting more acquainted with outside economic advisers. One ally is John Cogan of Stanford, who was twice offered the budget post and turned it down.

Gregory Mankiw. He may not speak out in public much these days, but he has influence internally. The biggest single fight was between Mankiw and Evans on protectionism. Mankiw, a tenacious free trader, is the major counterweight to Evans, who represents his constituency, the business community. On both rolling back the steel tariff and trying to force China to make currency changes, he prevailed over Evans. Mankiw believes China is better left alone on currency matters for the time being.

John Snow. He is a pleasant surprise, a perfect antidote to O'Neill. He's proved adept at dealing with finance ministers from G7 countries, notably Britain's Gordon Brown. He's done well in touting the economic recovery. He's adroitly taken the lead on issues such as tort reform, pension reform, and regulation of Fannie Mae and Freddie Mac. And he's developed a close relationship with the White House--and not just Friedman. He regularly invites Bush aides to private lunches at Treasury. Among others to come: political director Karl Rove, domestic policy adviser Harriet Miers, and lobbyist David Hobbs. But a fount of new ideas Snow is not.

Stephen Friedman. He is known in Washington as the Invisible Man. He neither gives speeches nor appears on TV interview shows. He differs sharply from Lindsey in being well organized and running crisp meetings--and also in being no ideologue. "He takes his role as honest broker to an extreme and rarely promotes his own agenda," says a former White House policy official. He is popular with other officials. His role has been enhanced by Rove's attention to political matters. The absence of new ideas to vet has also allowed Rove to be less of a factor on economic issues.

Donald Evans. He has emerged as the Outside Man, along with Snow a spokesman for the administration on the economy. He rebuts and criticizes Kerry. His speech texts are distributed by the White House, which wasn't the case until recently. He shows up frequently on TV. His public role "has evolved because he's good at it," says a White House official. "I'm not surprised at how well he's done. He's a smooth talker." His economic views are conventional. He's a corporate conservative with protectionist tendencies. On substance, he's still not a heavyweight.
THERE'S A MYSTERY at the core of what happens in economic policy in a second Bush term. Greenspan must be replaced as Fed chief by 2007 and the fact of his impending retirement is well known to Bush and his aides. Yet the White House isn't close to thinking about a replacement. "We like to plan for the future, but that's a little far out even for us," says Rove. Bush announced his reappointment of Greenspan as Fed Chairman out of the blue in April 2003, if only to quash speculation about his intentions. Now, on the eve of a possible second Bush term, there's nothing but speculation. It's a mystery that won't be solved until after election day.
Fred Barnes is executive editor of The Weekly Standard.

? Copyright 2004, News Corporation, Weekly Standard, All Rights Reserved.
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>> TRADE

Why trade matters in a time of war: Promising steps by U.S. and EU against protectionism

http://www.NewsAndOpinion.com | Finally, a breakthrough. A bold European commissioner backs the U.S. on an important policy matter even though he will be slammed as "unilateralist" by leaders of his own country, France. Then another commissioner joins him and the U.S., also turning his back on the status quo types at home. Suddenly it looks as though a joint European-American effort stands a chance of paying off. And suddenly it also appears that the world's nations may march forward together to vanquish a common enemy.
This is the sort of story line that forms the dreams of members of the National Security Council. It is the reality of the past week. The European commissioner who made the move was Pascal Lamy, the trade commissioner. The man joining him was Franz Fischler, his agricultural counterpart.
The proposal came after a sustained push by Robert Zoellick, the U.S. trade representative. The struggle is on the field of trade. And the common enemy is protectionism.
In the media, the trade story runs parallel to the foreign policy story -- two lines that never touch. But the two are, of course, related. A review of U.S. trade diplomacy in recent years reminds us that even the smallest trade agreements can mean much at a time of war and terror.
Start with last week's news on agriculture. Lamy offered to eliminate farm export subsidies, a significant share of the subsidies available to European farmers. The step may mean nothing. It may just be one of the zigs in the tedious zigzag of trade politics. Still, the Lamy offer contains enormous potential for good, both on the diplomatic and the political fronts.
When the Doha talks collapsed so resoundingly last summer at Cancun, the damage went beyond trade. Hostility on the part of developing countries toward Europe, Japan and the U.S. seemed to reinforce whatever hostility many were already feeling. There has been, especially, the feeling that it is "the West versus the rest" -- the rest often being Muslim.
U.S. farm protectionism is not as extensive as some developing countries imagine. The average U.S. tariff on farm imports is 12 percent, compared with a global average of more than 60 percent. But what protectionism there is as in Europe is significant, and has strengthened the West's reputation as an agriculture hypocrite.
Western agriculture subsidy reduction is one of the main demands of developing countries. So this new offer represents a significant concession. It also demonstrates that the Europe-U.S. rift is not as large as advertised; it certainly shows that the U.S. is not quite the unilateralist it is made out to be.
Then there is the obvious economic and political potential of subsidy reduction. Farmers in developing nations can sell more. Their economic success generates forms of wealth that can compete with petro-wealth, always a good thing. Overall, the nations become more stable and friendlier.
Another positive U.S. step was Congress' post-Sept. 11, 2001, passage of a new version of the African Growth and Opportunity Act, allowing African countries to bypass tariffs. The AGOA contributed to a dramatic increase in exports to the U.S. from Lesotho, triple in two years. A free-trade agreement with Jordan resulted in 30,000 new trade-related jobs there. Egypt, Tunisia, Yemen, Kuwait, the United Arab Emirates and Qatar all have worked recently with the U.S. to improve trade relations.
Yet another bit of trade progress, though of a different kind, may come if Saudi Arabia joins the World Trade Organization. As Brink Lindsey, author of a study on trade and war, points out, pulling Saudi Arabia into the WTO club means that suddenly the Organization of Petroleum Exporting Countries will find it has a competitor for Saudi affections, itself a change that bodes well for global stability ("The Trade Front: Combating Terrorism with Open Markets," Cato Institute. www.freetrade.org).
In the same way that freer trade helps, protectionism continues to hurt. The WTO recently issued a preliminary finding that the U.S. was violating international law with its outrageous cotton subsidies. The U.S. is appealing, although reduced cotton subsidies at home would benefit cotton farmers in countries the U.S. wants to see stable: Mali (population 90 percent Muslim), Chad (51 percent Muslim) or Burkina Faso (50 percent Muslim).
The reason for the appeal is obvious: The ideal of free trade remains one of the hardest policies to sell domestically in any country. It is especially hard to sell to farmers, who, whether in deepest France or deepest Iowa, tend to perceive the notion as mind-bendingly elitist. When Brazil went to the WTO on cotton, for example, Alan Guebert, of the Bloomington, Ill., Pantagraph offered a farmer's description of the move: "Brazil just kicked major U.S. farm butt." To some, freer trade is not a force for peace; it is cause for (trade) war.
Nonetheless, there are signs that U.S. farmers are increasingly ready to concede ground -- more good news.
Freer trade and prosperity cannot do everything. They certainly cannot, all by themselves, stop terrorists. Indeed, trade has to be linked to a push for democracy; otherwise it can merely fund terror. Still, limited as trade diplomacy may be, it has value.
Every weekday JewishWorldReview.com publishes what many in Washington and in the media consider "must reading." Sign up for the daily JWR update. It's free. Just click here.

JWR contributor Amity Shlaes is a columnist for Financial Times . Her latest book is The Greedy Hand: How Taxes Drive Americans Crazy and What to Do About It.

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>> THE U.N.

Kofi's cover up

Despite U.N. Secretary-General Kofi Annan's promises to fully investigate the scandal in the Oil for Food program, United Nations officials have been doing their level best to conceal information from investigators and the public. The office of Benon Sevan, the outgoing boss of the program, has sent at least three letters to companies who participated in it urging them not to hand over documents to investigators without first clearing their release with the United Nations. Unfortunately, while Mr. Sevan has continued to stonewall, Ambassador Paul Bremer, head of the Coalition Provisional Authority (CPA), is undercutting efforts by the Iraq Governing Council to conduct its own audit of the program.
One of Mr. Sevan's letters was sent to a firm called Cotecna Inspection SA, which for five years had responsibility for verifying that relief shipments provided through the Oil for Food program actually reached Iraqis in need. Cotecna once employed Mr. Annan's son, Kojo, according to scholar-journalist Claudia Rosett, who has played a major role in exposing the scandal. Mr. Sevan's letter to Cotecna warns that all information "shall be treated as confidential and shall be delivered only to United Nations authorized officials."
Coming from Mr. Sevan, this should raise red flags. A veteran U.N. bureaucrat, he has been at the very heart of the scandal ever since his name turned up in records found in former dictator Saddam Hussein's Oil Ministry in Baghdad. The records suggest that Mr. Sevan was given a voucher enabling him to receive 11.5 million barrels of oil as a result of Saddam's manipulation of the program -- enough to earn him a profit of up to $3.5 million. Mr. Sevan, who is retiring at the end of the month, has refused to respond to press questions about his management of the program.
In his own defense, Secretary-General Annan has repeatedly asserted that he didn't know about the myriad problems in the program. He may want to take a look at some of the more than 50 reports put together by the United Nations' own Office of Internal Oversight Services -- reports that he refuses to release to Congress. Just one of these reports (which was published earlier this week on the Web site www. mineweb.com), produced in 2002, goes on for close to 20 pages about U.N. malfeasance in the handling of the Cotecna contract. According to Mr. Annan, all of these problems will be fixed thanks to the work of the United Nations' own investigative team headed by former Federal Reserve Chairman Paul Volcker. Don't believe it. Given the fact that Mr. Volcker lacks subpoena power, his investigation will likely go nowhere.
Meanwhile, Claude Hankes-Drielsma, who is heading the IGC's investigation, told this newspaper yesterday that he continues to face interference from the CPA's Mr. Bremer. Mr. Hankes-Drielsma suggests that Mr. Bremer is motivated by concern that public attention to the scandal will undermine support for transferring responsibility for Iraq to the United Nations on June 30. Whatever the motivation, his refusal to release funds to pay for continuing the IGC's audit of the Oil for Food program is delaying this critical investigation. Mr. Bremer should reverse course and permit the IGC's investigation to proceed.

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Very U.N.-Attractive
A leaked audit gives hints of the Oil-for-Food corruption.

BY CLAUDIA ROSETT
Wednesday, May 19, 2004 12:01 a.m. EDT
In the scandal over the U.N. Oil-for-Food program in Iraq, Kofi Annan's main line of defense has been that he didn't know. Perhaps he should take a closer look at internal U.N. Oil-for-Food audit reports, more than 50 in all, produced by his own Office of Internal Oversight Services--the same reports he's declined to share with the Security Council, or release to Congress.
One of these reports has now leaked. It concerns the U.N. Secretariat's mishandling of the hiring of inspectors to authenticate the contents of relief shipments into sanctions-bound Iraq. (Obtained by a journalist specializing in the mining industry, Timothy Wood, a copy of this report can be found at www.mineweb.com.)
Reflecting the findings of a U.N. internal audit conducted during the sixth year of the seven-year Oil-for-Food program, the report focuses on one contractor hired directly by the U.N. Secretariat: Swiss-based Cotecna Inspection SA. This is the same company that, while bidding against several rivals for its initial Oil-for-Food contract in 1998, had Mr. Annan's son, Kojo, on its payroll as a consultant. Both Mr. Annan and Cotecna's CEO, Robert Massey, have insisted that the contract was strictly in accordance with U.N. rules.
Although this report doesn't mention Kojo, it does go on for 20 pages about inadequacies and violations in the U.N.'s handling of the Cotecna contract. The report explains that "the Contract had been amended prior to its commencement, which was inappropriate" and recounts that within four days of Cotecna signing its initial lowball contract for $4.87 million, both Oil-for-Food and the U.N. Procurement Division had authorized "additional costs" totaling $356,000 worth of equipment.
The U.N. auditors say this "contravened the provisions of the Contract," and that Cotecna (not the U.N., which was using the Iraqi people's money) should have paid the extra costs. Within a year of the start of Cotecna's services, its contract was further amended to add charges above those initially agreed to, including a hike in the "per man day fee" to $600 from an initial $499. This higher fee "was exactly equal to the offer of the second lowest bidder," say the auditors, adding that the Procurement Division and Oil-for-Food "should have gone for a fresh bid."
The report also describes understaffing of inspection agents at entry points and a lack of procedures to verify actual attendance by inspectors. Protesting that lax staffing "violates not only the Contract, but also affects the performance of the services," the auditors note that the Oil-for-Food office had "been aware" of this problem for some years, but hadn't fixed it. Despite the $1.4 billion in commissions collected by the U.N. to run Oil-for-Food, there was no one from the U.N. to keep an eye on Cotecna agents in Iraq. The report warns that "in absence of a contract manager, there can be no assurance that the services provided were in consonance with the spirit and letter of the Contract." The report adds that in north Iraq, where at some hours there were no inspectors on the job, the result was "huge differences between the figures for goods reported to have arrived by the U.N. agencies and the Contractor."
There are further critiques, such as "Inadequate understanding" and "Unprofessional conduct" by Cotecna, and "Inadequate coordination" by the U.N. Yet after the report's April 2003 submission--and three months before handing over the reins of Oil-for-Food to the Coalition Provisional Authority--the U.N. Secretariat signed a new $9.79 million contract for Cotecna.
A U.N. spokesman says all the internal audit reports on Oil-for-Food have now been turned over to the U.N.-authorized inquiry headed by former Fed Chairman Paul Volcker. But under terms drawn up by Mr. Annan, Mr. Volcker not only lacks the power of subpoena, but must submit his own report directly to Mr. Annan. And guess who has the final say over what we get to see--or not see. Why, Mr. Annan, of course.
Ms. Rosett is a fellow at the Foundation for the Defense of Democracies and the Hudson Institute. Her column appears here and in The Wall Street Journal Europe on alternate Wednesdays.

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U.N. Investigates Oil-For-Food Corruption

May 20, 8:24 PM (ET)
By EDITH M. LEDERER
UNITED NATIONS (AP) - The independent panel investigating alleged corruption in the multibillion-dollar U.N. oil-for-food program in Iraq said Thursday it was pursuing claims of misconduct by U.N. staff and seeking access to Iraqi records.
Former U.S. Federal Reserve Chairman Paul Volcker, appointed last month by U.N. Secretary-General Kofi Annan to lead the inquiry, said he expected to compile his first interim report on allegations of misconduct by U.N. staff within three months.
A "broader examination" of the U.N.'s administration of the program will be completed within eight months, he said.
But Volcker cautioned that a full investigation likely will require at least a year.
(AP) Paul Volcker, chairman of the independent panel on oil-for-food program speaks at a news ...
Full Image
"The part that we expect will take the longest ... is what went on in Iraq with the contractors, with the overcharging, the undercharging, kickbacks, smuggling ...," Volcker said.
The inquiry's initial activities included a visit to Baghdad last week by a three-man team trying to establish contact "at appropriate levels" in the Iraqi government and the U.S.-led coalition, he said.
While Volcker said the inquiry's priority was to investigate allegations of misconduct by U.N. staff, he said discussions about accessing Iraqi records "as needed" were under way with the board of the Supreme Audit Authority of Iraq, its accounting firm and the coalition.
"Those records are particularly important for identifying the conduct of outside contractors and the flow of funds," Volcker said.
Earlier Thursday, U.S. soldiers and Iraqi police raided the residence of Iraqi politician Ahmad Chalabi, a member of the U.S.-appointed Governing Council. Police seized computers, documents related to the oil-for-food program, a report by the Oil Ministry to the Governing Council and letters from the council, Chalabi said in Baghdad.
(AP) Paul Volcker, chairman of the independent panel on the U.N. oil-for-food program in Iraq, speaks at...
Full Image
Volcker said he would like to see any relevant oil-for-food documents taken from Chalabi's home.
U.S. and coalition officials recently accused Chalabi of undermining their investigation into the oil-for-food program. The U.S.-backed investigation has collected more than 20,000 files from Saddam Hussein's old regime and hired the American accounting firm Ernst & Young to review them.
But Chalabi launched his own investigation, saying an independent probe will have more credibility, and has appointed his own accounting firm. Chalabi took an early lead in exposing alleged abuses of the oil-for-food program.
Volcker, however, said he believes the U.N. probe "is the central, authoritative investigation ... If not, we will have failed."
The oil-for-food program, which began in December 1996 and ended in November, was launched to help Iraqis cope with U.N. sanctions.
The former Iraqi regime could sell unlimited quantities of oil provided the money went primarily to buy humanitarian goods and pay reparations to victims of the 1991 Gulf War. Saddam's government decided on the goods it wanted, who should provide them and who could buy Iraqi oil - but the U.N. committee overseeing sanctions monitored the contracts.
During the seven-year program, Iraq exported $65 billion worth of oil, and $46 billion of that went to the oil-for-food program.
Allegations of corruption in the program surfaced in January in the Iraqi newspaper Al-Mada, which published a list of about 270 former government officials, activists, journalists and U.N. officials from more than 46 countries suspected of profiting from Iraqi oil sales that were part of the U.N. program.
The General Accounting Office, the U.S. Congress' investigative arm, estimated in March that Saddam's government pocketed $5.7 billion by smuggling oil to its neighbors and another $4.4 billion by extracting kickbacks on otherwise legitimate contracts.
Annan launched an internal inquiry in February but canceled it in March to allow a broader, independent examination as allegations of massive corruption in the U.N. program grew, calling the world body's credibility into question.
Annan has said any U.N. staff members failing to cooperate with the inquiry will be fired.
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>> THE FED

Fed Official Sees Gradual Rate-Hike Cycle

Thursday May 20, 7:50 PM EDT
By Chris Stetkiewicz
SEATTLE (Reuters) - The U.S. Federal Reserve should be able to push short-term interest rates up at a gradual pace unless economic events catch it by surprise, a top official at the central bank said on Thursday.
"Economic developments over the next year are reasonably likely to be consistent with a gradual adjustment of policy," Federal Reserve Board Governor Ben Bernanke told a luncheon sponsored by the San Francisco Federal Reserve Bank and the University of Washington.
"As we look ahead, core inflation appears likely to remain in the zone of price stability during the remainder of 2004 and into 2005," he added.
Bernanke's comforting comments on inflation, which helped boost prices for U.S. Treasury bonds, were echoed by Dallas Federal Reserve Bank President Robert McTeer.
McTeer, who is not among the voters this year on the Fed's policy-setting panel, told the Houston World Affairs Council he was not "overly concerned" on inflation, although a recent pickup in price increases had gotten his notice.
Fed Chairman Alan Greenspan also spoke on Thursday as he accepted an award in Philadelphia, but he did not touch on the outlook for the U.S. economy or interests rates.
The Fed has held overnight borrowing costs at a 1958 low of 1 percent since last June, but a strong pickup in hiring and a quickening in the underlying rate of inflation has financial markets bracing for higher rates.
Many economists think the Fed will bump up the key federal funds rate as soon as its next meeting at the end of June.
"The target fed funds rate has been at 1 percent for quite a while. Certainly, it has to make you wonder whether it's inflationary; and until inflation started being hinted at in the numbers I wasn't particularly concerned," McTeer said.
"I'm not overly concerned now, but it is something central bankers are paid to watch," he added.
EASY DOES IT
After their last interest-rate meeting on May 4, Fed officials said they thought they would be able to move rates up "at a pace that is likely to be measured."
Bernanke said that language represented "a forecast about the future evolution of policy, not an unconditional commitment."
"Although I expect policy to follow the usual gradualist pattern, the pace of tightening will of necessity respond to evolving economic conditions, particularly the strength of the ongoing recovery in the labor market and developments on the inflation front," he said.
Bernanke pointed to a number of factors he said should help restrain inflation -- slack in the labor market, rapid gains in productivity, intense business competition, a recent strengthening of the dollar, and strong profits that could allow firms to absorb some rise in production costs.
In addition, he said that while expectations for near-term inflation had risen, perhaps in response to rising energy costs, longer-term expectations appeared well contained.
However, like McTeer, he said the speed-up in inflation over the first few months of the year had caught his notice -- calling it "a matter for concern" -- and said inflation data should be monitored closely.
Over the past 12 months, the so-called core consumer price index, which excludes volatile food and energy costs, rose 1.8 percent, a big acceleration from the 38-year-low 1.1 percent rate that prevailed as recently as January.
Bernanke tried to tackle the concerns of some economists who have said the Fed has waited too long to begin raising interest rates and has already stoked inflationary pressures.
He argued that the central bank had not fallen behind the curve because market-set rates had already moved higher in anticipation of Fed action as strong economic data rolled in.
Bernanke said the market moves should help curb inflation risks, although the Fed would have to validate market expectations by increasing short rates "at some point."
"A significant portion of the financial adjustment associated with the tightening cycle may already be behind us," he said, referring to the rise in market interest rates.


?2004 Reuters Limited.

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>>9-11

"Fahrenheit 9/11" : un film de guerre pour chasser George W. Bush
LE MONDE | 18.05.04 | 14h03
Les archives du "Monde" : plus de 800 000 articles ? consulter. Abonnez-vous au Monde.fr, 5? par mois
L'auteur de "Bowling for Columbine", Michael Moore, signe un pamphlet efficace qui vire parfois ? la propagande.
Documentaire am?ricain de Michael Moore (1 h 55.)
Apr?s le dessin anim? (Shrek) et le documentaire (Mondovino), un nouveau format a fait son entr?e dans la comp?tition : le mat?riel de propagande ?lectorale. La raison d'?tre de Fahrenheit 9/11 est unique et omnipr?sente tout au long du film : emp?cher la r??lection de George Walker Bush en novembre.
Pour arriver ? cette fin, Michael Moore a produit un film de pr?s de deux heures, dont il n'a tourn? qu'un tiers environ. Le reste provient de bandes d'actualit? que le r?alisateur a remont?es, comment?es et illustr?es musicalement, transformant les traces de l'histoire des Etats-Unis de novembre 2000 ? avril 2004 en mat?riau cin?matographique. L'id?e ?tant d'?voquer une soci?t? qui glisse vers le totalitarisme, d'o? le titre, inspir? du roman d'anticipation de Ray Bradbury, Fahrenheit 451 (mais, ? la fin du film, Michael Moore cite 1984, de George Orwell).
Il arrive que l'alchimie op?re par le simple jeu du montage et du commentaire. La s?quence pr?g?n?rique rappelle le grand tour de montagnes russes que fut la nuit du 7 novembre 2000. On y voit Ben Affleck et Stevie Wonder entourer le candidat d?mocrate, Al Gore, c?l?brant sa victoire. Suivent rapidement les cartes de Floride virant au bleu (la couleur des d?mocrates) sur toutes les cha?nes, avant que Fox News n'inverse la tendance. Et l?, Michael Moore glisse une incise : saviez-vous que le responsable de l'information sur Fox News ?tait le beau-fr?re de George Bush ? L'efficacit? dramatique est incontestable. Mais de la r?ponse ? cette question d?pend aussi une part non n?gligeable de l'int?r?t que l'on porte au film.
Les liens entre le clan Bush et l'empire de Rupert Murdoch sont de notori?t? publique, tout comme le r?le de Fox News dans le contentieux post-?lectoral am?ricain en novembre 2000. L'information ?tait ? la disposition de qui voulait en prendre connaissance. Mais Moore ne s'adresse pas aux lecteurs du New Yorker ou du New York Times, il aspire ? convaincre les petites gens, ses concitoyens de Flint (Michigan) qui n'en finissent pas de survivre, les familles qui ne peuvent voir leurs enfants partir pour l'universit? qu'apr?s les avoir vus partir pour l'arm?e.
Avec sa structure strictement chronologique, sa p?dagogie brutale et explicite, Fahrenheit 9/11 fait d'abord ?uvre de propagande. Les chapitres, divis?s avec une r?gularit? scolaire, se succ?dent : la premi?re ann?e du mandat de George W. Bush, le 11 Septembre, l'intervention en Afghanistan, le vote du Patriot Act, la guerre en Irak.
COMMENTAIRES SUBLIMINAUX
Lorsque Moore dresse un tableau impressionnant des accointances entre la famille Bush et l'industrie p?troli?re texane d'une part et les familles Saoud et Ben Laden d'autre part, il se rapproche du journalisme d'investigation t?l?vis?, avec ses documents dactylographi?s en gros plan, ses experts qui prof?rent leur opinion avec une assurance que le reste de l'humanit? leur envie. Parfois, Moore glisse des commentaires quasi subliminaux : il explique que George W. Bush et un camarade ont ?t? suspendus de la garde nationale du Texas parce qu'ils avaient omis de passer leur visite m?dicale... avant de faire entendre l'introduction de Cocaine, par Eric Clapton. Mais l? encore, pas d'informations nouvelles, juste la mise en relation de faits connus et, pour les plus anciens d'entre eux, souvent oubli?s.
La s?quence consacr?e au 11 septembre 2001 rel?ve plus du cin?ma. La catastrophe n'est montr?e qu'en contrechamp - les visages des passants en larmes, les millions de feuilles de papier qui volent dans le vent de l'incendie - avant que l'on passe ? une s?quence en temps r?el : M. Bush sur l'estrade d'une classe d'?cole primaire, en Floride, o? il vient promouvoir la lecture, avec sur les genoux l'ouvrage My Pet Goat ("Ma Biquette"). Lorsqu'il arrive dans la classe, il sait d?j? qu'un avion a percut? l'une des tours du World Trade Center. En pleine lecture, un collaborateur lui annonce - selon Moore - que "le pays est attaqu?".
Le pr?sident des Etats-Unis reste muet pendant plus de cinq minutes, son album illustr? sur les genoux, pendant que l'entourage t?moigne d'une agitation croissante. Mais pendant tout ce temps, Michael Moore ne peut se taire et tente de reconstruire le monologue int?rieur de George W. Bush, monologue dont l'expression du pr?sident des Etats-Unis ne laisse pas deviner l'existence.
Un v?ritable am?ricano-centrisme triomphe dans la derni?re partie, tout enti?re consacr?e aux souffrances des soldats am?ricains en Irak et de leurs familles. L?, Moore renoue avec les techniques de ses premiers films. On le voit ? l'?cran, il intervient. Il se poste sur le trottoir devant le Capitole et propose aux parlementaires d'inciter leurs enfants ? s'engager dans l'arm?e. Mais ces provocations ont chang? de nature. Moore est devenu une c?l?brit?, les gens l'appellent par son nom avant m?me qu'il se soit pr?sent?, et il ne fait plus syst?matiquement preuve de l'humilit? ostentatoire qu'il exhibait nagu?re. C'est que Michael Moore n'est plus seulement cin?aste, il a trouv? le r?le de sa vie : l'homme qui chassa George W. Bush de la Maison Blanche.

Thomas Sotinel

* ARTICLE PARU DANS L'EDITION DU 19.05.04


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RAZZIA BEI TSCHALABI
Amerika verst??t seinen Lieblingsiraker
Von Dominik Baur
Einst war er der Liebling des Pentagon: Die US-Regierung hatte dem Exilpolitiker Ahmed Tschalabi bei der Gestaltung des Nachkriegsirak eine gewichtige Rolle zugedacht. Doch mittlerweile ist das Mitglied des Regierungsrates in der Gunst der Amerikaner tief gesunken. Jetzt haben US-Soldaten sogar sein Haus auf den Kopf gestellt.
ANZEIGE
AFP
Metapher f?r den tiefen Fall Tschalabis: Bei der Razzia ging ein Bild des Politikers zu Bruch
Hamburg - Die Soldaten kamen am Morgen. Rund hundert Angeh?rige der US-Streitkr?fte z?hlten Augenzeugen vor dem Anwesen des Irakischen Nationalkongresses (INC) in Bagdad. Gemeinsam mit irakischen Polizisten sowie einigen FBI- und CIA-Agenten st?rmten sie das Haus von Ahmed Tschalabi und die B?ror?ume des INC, des Parteienb?ndnisses, das einst im Londoner Exil gegen Diktator Saddam Hussein gek?mpft hatte. Tschalabi war damals der Favorit der US-Regierung, wenn es darum ging, wer den Nachkriegsirak f?hren sollte. Was Hamid Karzai in Afghanistan war, sollte Tschalabi im Irak werden.
Drei von Tschalabis M?nnern nahm das US-Milit?r fest. Computer, Akten und Gewehre schleppten die Soldaten aus den B?ros. Als sie abgezogen waren, zeigte sich Reportern, so berichtet die "New York Times", nur noch ein Bild der Verw?stung: eingetretene T?ren, auf den Kopf gestellte M?bel und - wie bezeichnend - zerbrochene Bilder des INC-Chefs Tschalabi. Die Razzia zeigte wohl so deutlich wie kein anderes Ereignis, wie tief der fr?here Liebling der US-Regierung im Laufe des ersten Nachkriegsjahres im Irak gefallen ist.
Sprecher der amerikanischen Streitkr?fte lehnten jeglichen Kommentar zu der Aktion ab. Das sei eine interne Angelegenheit der Iraker. Ein irakischer Richter hatte zuvor mehrere Haftbefehle gegen Tschalabi erlassen. Der Vorwurf: Der Politiker soll eine Untersuchung ?ber Korruption unter dem "Oil for Food"-Programm der Vereinten Nationen behindert haben. Schon 1992 war der ?u?erst reiche Gesch?ftsmann in Abwesenheit von einem jordanischen Milit?rgericht wegen Betrugs verurteilt worden, nachdem eine von ihm gegr?ndete Bank pleite gegangen war.
Tschalabi lieferte die gew?nschten Beweise
Tschalabi freilich sieht das anders: Die US-Zivilverwaltung wolle Druck auf ihn aus?ben, behauptet er, weil er vollst?ndige Souver?nit?t f?r das irakische Volk eingefordert habe. Auch dass die US-Zivilverwaltung j?ngst Aufgaben an ehemalige Mitglieder von Saddams Baath-Partei vergeben hat, war auf seine scharfe Kritik gesto?en. "Wenn jemand aufsteht und seine Standpunkte unabh?ngig und nachdr?cklich vertritt, scheinen die Amerikaner das nicht zu m?gen", sagte heute ein Sprecher nach der Razzia.
AP
"Rein irakische Angelegenheit": US-Soldaten vor dem Tschalabi-Anwesen
In der Tat distanzieren sich die USA schon l?nger von dem Mitglied des irakischen Regierungsrates. Erst vor kurzem hatten sie monatliche Zahlungen von 340.000 Dollar an den INC-eigenen Geheimdienst eingestellt - jene Einrichtung, von der sich die Bush-Regierung vor dem Krieg mit vermeintlichen Beweisen ?ber Massenvernichtungswaffen im Besitze von Saddam Hussein hat versorgen lassen.
Solange der INC das gew?nschte Material lieferte, stand Tschalabi bei US-Verteidigungsminister Donald Rumsfeld und seinem Vize Paul Wolfowitz hoch in der Gunst. Die Zusammenarbeit lief gut. Auch noch im April 2003, als US-Soldaten in Bagdad die Saddam-Statue st?rzten: Das Pentagon flog Tschalabi und seine 600 Mann starke Miliz damals in den Irak ein - und konnte auf deren verl?ssliche Unterst?tzung z?hlen. Tschalabis Leute sp?rten beispielsweise etliche Mitglieder des gest?rzten Saddam-Regimes auf. Er selbst wurde mit einem Sitz im Regierungsrat belohnt.
"Die Leute wollen einen S?ndenbock"
Doch schon mit der Ankunft im Irak begann Tschalabis Abstieg. 46 Jahre hatte der 59-J?hrige im Exil gelebt, in Bagdad fehlte ihm jede Hausmacht. Der Stand des in den USA ausgebildeten Mathematikers in der Heimat ist schlecht. Ihm h?ngen verschiedene Korruptions- und Betrugsvorw?rfe an, Versuche, sich mit wichtigen Personen wie Gro?ajatollah Ali Husseini al-Sistani gut zu stellen, scheinen bisher wenig gefruchtet zu haben. Umfragen zeigen: Kaum einem Politiker misstrauen die Iraker so sehr wie Tschalabi.
REUTERS
"Let my people go": Tschalabi bei der Pressekonferenz nach der Razzia
Aber auch in Washington begann Tschalabis Stern schnell zu sinken. Sp?testens als sich die "Beweise" ?ber Saddams Arsenal an Massenvernichtungswaffen nicht mehr halten lie?en, machte sich im Pentagon gro?e Ver?rgerung ?ber den Verb?ndeten breit. Ihm so viel Macht zu unterstellen, dass er die gesamten amerikanische Regierung h?tte t?uschen k?nnen, sei "unfair und verbl?ffend" zugleich, verteidigte sich Tschalabi vor ein paar Wochen im Gespr?ch mit dem "Time"-Magazin. Seine Erkl?rung ist sehr einfach: "Es ist Wahlkampf, und die Leute wollen einen S?ndenbock."
Der s?kulare Schiit reagierte auf den Liebesentzug aus Washington seinerseits damit, dass er nach neuen Freunden Ausschau hielt. Zunehmend suchte er Kontakt zu den anderen Schiiten des Regierungsrates. Gemeinsam mit ihnen weigerte er sich Anfang M?rz, die ?bergangsverfassung zu unterzeichnen, da diese noch nicht den Segen der beiden Gro?ajatollahs von Nadschaf bekommen hatte. F?r seine weiteren politischen Ambitionen setzt Tschalabi offensichtlich auf das schiitische Ticket - auch wenn er selbst behauptet, er strebe ?berhaupt kein Amt in einer k?nftigen Regierung an.
Nach der Razzia heute gab sich der schillernde Politiker wieder ganz als Opfer: Bei einer Pressekonferenz hielt er den Reportern das Foto von sich selbst hin, dessen Glasrahmen zu Bruch gegangen war. Die Soldaten und Polizisten h?tten ihn aus dem Bett gerissen, klagte Tschalabi, in seinen B?ros h?tten sie sich aufgef?hrt wie die Vandalen und dann auch noch eine wertvolle Koran-Ausgabe mitgehen lassen. Der US-Verwalter im Iral, Paul Bremer, habe wohl den verstand verloren schimpfte er.
Zum Schluss machte sich Tschalabi noch einmal daf?r stark, dass die USA den Irakern die vollst?ndige Herrschaft ?ber ihr Land ?bergeben sollten. Und als ob er ausgerechnet ein amerikanisches Gospel anstimmen wollte, rief er: "Let my people go. Let my people be free."

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>> NEW YORK

Ground Zero Funds Often Drifted Uptown
Money Also Went to Luxury Apartments
By Michael Powell and Michelle Garcia
Washington Post Staff Writers
Saturday, May 22, 2004; Page A01
NEW YORK -- Six months after the Sept. 11, 2001, terrorist attacks, Congress approved an $8 billion program to repair this city's damaged office towers, build apartment buildings and finance the rebirth of the financial district.
But two years later, city records show that much of the money, dubbed Liberty Bonds, has gone to developers of prime real estate in midtown Manhattan and Brooklyn and to builders of luxury housing.
Local and state officials -- over the objections of their own downtown development chief -- gave one developer $650 million from the Liberty Bonds to erect an office tower for the Bank of America near Times Square, miles from the shattered precincts of Ground Zero. According to city records, another developer got $113 million to build a tower for Bank of New York in Brooklyn. One of the few projects downtown has gone to actor and sometime developer Robert De Niro, who picked up nearly $39 million from the bonds in November to build a boutique hotel in Tribeca, directly north of Ground Zero.
Congress designated $1.6 billion of the Liberty Bonds for rental housing. Nearly all the money from those bonds has gone to prominent developers to build luxury apartment towers in the neighborhoods around Ground Zero, accelerating its transformation into one of New York's richest neighborhoods, the city records show.
Local political leaders, urban planners and neighborhood residents have sharply criticized these spending choices, saying that wealthy developers shouldn't need subsidies to build office towers in midtown -- where private construction is booming -- or luxury housing downtown. The new luxury towers will contain just a small percentage of apartments for the tens of thousands of moderate-income residents who live in Lower Manhattan.
"Explain to me why helping Bank of America build a tower on one of the most expensive pieces of property in the world is a good use of these moneys?" said state Sen. Liz Krueger, whose district encompasses 42nd Street at Sixth Avenue, where that tower is to rise. "We've gotten free federal money and, instead of building affordable housing, it's become a race between the most powerful groups in the city to claim it."
In the frenetic months that followed the terrorist attacks, Congress worked fast to assemble financing to rebuild the area around Ground Zero. In a rare move, Congress allowed private developers to receive proceeds for commercial projects from interest-free, tax-exempt bonds sold on the municipal bond market. While the Liberty Bonds were backed by the federal government, state and local officials selected the projects that would receive the money.
Congress put few conditions on the Liberty Bond program, but the program's advocates said the intention was clear -- and it was not for luxury apartments and commercial projects far from the site of the World Trade Center. In fact, the program stipulated that New York's governor and the city's mayor had to deem a downtown project "not feasible" before diverting money for use elsewhere in the city.
"We didn't put a lot of strings on the Liberty Bonds, but more should have gone for jobs and affordable housing," said U.S. Rep. Carolyn B. Maloney, (D-N.Y.). "A lot of this money has been spent on projects that fit the letter of the law but not the spirit."
The city's Industrial Development Corp. was designated to hand out the commercial Liberty Bonds. The corporation's executive director, Barbara Basser-Bigio, said that city and state officials wanted to jump-start the broader city economy and that some of the projects would not have been built without the assistance. "Our top priority is to create office space," she said. "We are looking to stimulate the economy through the creation of jobs and enhance business districts throughout the city."
New York officials also say that critics are missing the urgency felt in the weeks after the attacks to retain businesses in the city, especially Lower Manhattan, which remains the nation's third-largest central business district.
"Downtown was hemorrhaging in those days," said Carl Weisbrod, a former top city development official and now president of the Alliance for Downtown New York. "It was critical to stabilize the residential and commercial communities."
'Rebuild, Renew, Enrich'
The first recovery aid began to flow to New York in the weeks immediately after the terrorist attacks. The Bush administration tapped $3.5 billion in community development block grants, a federal program usually reserved for economic development in poor communities. Of this money, $300 million was quickly directed to a program to retain companies tempted to flee from downtown Manhattan. Auditing firm Deloitte & Touche got $17 million, Bank of Nova Scotia got $3 million, and Bank of New York received $40 million. American Express got $25 million even without threatening to leave its 3 World Financial Center home. Other federal money intended for small businesses ending up going to investment-house brokers and traders.
In March 2002, Congress started to move beyond this initial emergency patchwork and created the Liberty Bond program. (This week the Senate approved an extension of the Liberty Bond program, and the legislation is now headed to the House.)
City officials applauded, saying the bonds would spark the redevelopment of downtown. "The Liberty Bonds will rebuild, renew and enrich Lower Manhattan," Gov. George E. Pataki (R) said at the time.
Myriad agencies are involved in the effort. The Lower Manhattan Development Corp., a joint state-city agency, has taken the lead in the rebuilding but was given no power over the Liberty Bonds. Separate city and state development agencies -- including the city's Liberty Development Corp. and the New York City Industrial Development Agency -- sell the bonds and provide the proceeds to developers.
The corporations' records show the agencies gave $400 million from Liberty Bonds to World Trade Center leaseholder Larry A. Silverstein to rebuild an office tower near Ground Zero, which he is doing even though he has no prospective tenants. The state set aside money for a downtown convention center and gave funding to De Niro and his partners for their six-story, 83-room boutique hotel 10 blocks north of Ground Zero.
But the commercial market downtown continues to sputter. The vacancy rate today hovers at 15 percent, more than twice what it was four years ago.
By the middle of 2003, no other developers had stepped forward to build downtown, city officials said. Officials at the Lower Manhattan Development Corp. argued for holding the Liberty Bonds in reserve and waiting for the downtown market to pick up.
But city and state development officials who controlled the Liberty Bonds turned their eyes elsewhere and provided funding for the Bank of America building and the Bank of New York office tower.
Developer Bruce C. Ratner, who is constructing the bank building, has also received $243 million from Liberty Bonds for the construction of a tower for Pace University and New York University Downtown Hospital. Media tycoon Barry Diller received preliminary approval for $80 million to build the corporate headquarters for his company, IAC/InterActiveCorp., which includes Ticketmaster, in the Chelsea neighborhood.
John C. Whitehead, the chairman of the Lower Manhattan Development Corp., criticized those awards, saying that Congress did not intend the Liberty Bonds for the more prosperous precincts of midtown. He told the corporation board last year that the bonds eventually "will be needed for the World Trade Center site itself and the surrounding area."
Rental Market Subsidies
The parceling out of $1.6 billion in Liberty Bonds to finance luxury housing has proved no less contentious. The downtown housing market slumped briefly after Sept. 11 but then swiftly rebounded. Today three-bedroom apartments near Ground Zero rent for $6,500 a month -- and sell for more than $1 million. Manhattan residential occupancy rates -- more than 95 percent -- are higher than before the terrorist attacks, according to real estate statistics.
Yet the state and city agencies that award the bonds -- the New York State Housing Finance Agency and New York City Housing Development Corp. -- awarded nearly all the residential Liberty Bonds to subsidize the rental market.
Common Cause New York reported that 30 percent of the state's residential share of Liberty Bond proceeds went to Leonard Litwin, who is a major campaign contributor to Pataki.
State housing officials said that political favoritism played no part in their decisions and that loans were handed out "on a first-come, first-served basis." Litwin, they say, had projects in the works and simply got in line when the Liberty Bonds came available.
"Market rents had gone down, and it was a market necessity," said Gary Jacob, a vice president of Glenwood Management Corp., Litwin's real estate firm.
Many urban planners doubt the economics of this argument, noting that Litwin put up a huge equity share in these projects, an indicator of his good financial health. But these planners save their most furious criticism for the state's Housing Finance Agency, which decided to waive its own guidelines requiring that developers who get public bonds set aside 20 percent of the apartments for families with low or moderate incomes.
Instead they required that Liberty Bond developers designate just 5 percent of the apartments for families of moderate income, which is defined there as $80,000 a year for a family of three.
A year ago, Mayor Michael R. Bloomberg laid out his master plan for rebuilding Lower Manhattan, saying he wanted to preserve its economic and residential diversity. But Deputy Mayor Daniel L. Doctoroff, who has overseen much of the development, now says that goal is difficult to achieve.
"It's an admirable goal to have a mixed-income community, but maybe over time it's shifting," he said in an interview, adding that affordable housing in downtown Manhattan requires a deep subsidy. "Maybe this isn't the best use of scarce dollars," he continued. "We have to look at the trade-offs."
Surveys have shown that many residents want the federal recovery money used not just for affordable housing but also for economic development, schools and parks in downtown Manhattan.
"I constantly wonder what Congress will make of our lavish subsidies for some of the wealthiest neighborhoods in the country," said David Dyssegaard Kallick, an economist and senior analyst with the Fiscal Policy Institute, a think tank funded by foundations and labor. "It just seems shocking."

? 2004 The Washington Post Company
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HHS Wants to Shift Bioterror Funds
$55 Million Would Be Taken From State Projects to Help Prepare 21 Cities
By Ceci Connolly
Washington Post Staff Writer
Friday, May 21, 2004; Page A23
The Bush administration is finalizing an agreement with U.S. postal workers to help deliver antibiotics or antidotes within 48 hours of a biological attack to 21 major cities, including the District.
Health and Human Services Secretary Tommy G. Thompson informed key lawmakers yesterday that he intends to take $55 million from state bioterrorism projects to pay for the new program, dubbed the "Cities Readiness Initiative." In addition to paying for the training of letter carriers, the money would be spent installing sophisticated disease surveillance equipment, purchasing vaccines and building new quarantine stations at U.S. airports, according to documents prepared by Thompson's staff.
Sen. Arlen Specter (R-Pa.), chairman of the Senate Appropriations subcommittee on labor, health and human services, praised the move, saying that in a time of tight federal budgets it makes sense to shift money to "high-risk cities" most likely to be targeted by terrorists.
But several governors, lawmakers and public health leaders immediately protested what Shelley A. Hearne, head of the Trust for America's Health, a nonpartisan public health advocacy group, called a "shell game" with potentially dangerous consequences.
"We should not be in a situation of robbing Peter to pay Paul," she said. Tapping letter carriers to deliver emergency supplies is an "innovative idea with great possibilities," she said, but it should not be paid for with money promised to states.
Under Thompson's plan, Washington, Oregon, Idaho and Alaska would lose more than $4 million, said Mary C. Selecky, health secretary of Washington state and president of the Association of State and Territorial Health Officials. In that region, only Seattle is deemed a priority city; it would receive $830,000.
"The redirection has consequences," she said, complaining that federal officials have repeatedly changed priorities and the instructions they have given states.
"First, we were asked to prepare for an all-hazards approach," but then got sidetracked by the last year's push for an extensive smallpox immunization program, she said. "Now we're being told we're getting less next year so the national priority of these 21 cities can be funded."
Relations between the states and HHS have grown increasingly tense in recent weeks with the two sides squabbling over bioterrorism money. Thompson has accused states of being slow to spend the money Congress has allocated, but Selecky and other state officials noted that the Bush administration has not yet issued grant-writing guidance for money that is due to go out on Sept. 1.
Part of the reason for the dispute centers on how government accounting works. State health departments do not "draw down" federal dollars until they have received a bill -- for a new piece of lab equipment, for example. In many instances, Selecky said, the money is pledged but states have not yet requested reimbursement.
"They still haven't defined what preparedness is," said one frustrated public health leader who asked not to be named for fear of exacerbating the situation. "If we had all agreed on what we were going to do, there could be some rational deployment of resources."
Within hours of sending his request to lawmakers on the appropriations committees, Thompson received letters of protest from a bipartisan group of senators and the National Governors Association.
"We shouldn't have to choose between filling the national vaccine stockpile or having a warning system at the state and local level," said Sen. Evan Bayh, the Indiana Democrat who drafted the senators' protest letter to Thompson. "That's a false choice and a manifestation of the budget problems we have."
At least one Senate Appropriations Committee member, Sen. Tom Harkin (D-Iowa), "strongly objects to taking money away from states," according to a spokeswoman. He will urge Specter to deny Thompson's request, she said.
The Cities Readiness grants would be spread over 16 states, ranging from $5.1 million for New York to $690,000 for Pittsburgh and St. Louis. The District would receive $830,000; no community in Maryland or Virginia is on the list.
George Gould of the National Association of Letter Carriers said his union supports the voluntary plan for letter carriers to deliver emergency medical supplies. Postal workers will be trained in handling the materials and in security, he said.

? 2004 The Washington Post Company