May 12, 2010
Courtesy Of "The Nation"
Last summer the United States Agency for International Development (USAID) closed one of its largest projects in Iraq, declaring that it had been a virtually unqualified success. The Community Stabilization Program (CSP), which cost $675 million over its three years of operation, has been lauded as one of the war's most effective counterinsurgency operations.
Launched in May 2006, it was USAID's chief contribution to the Bush plan of rescuing a tailspinning military adventure with a civilian surge and increased focus on economic development. "Bottom line: it worked," said Jeanne Pryor, USAID's deputy director for Iraq reconstruction, during a recent colloquy on the CSP at the United States Institute of Peace. An evaluator contracted by USAID recommended that the CSP be replicated elsewhere, and in Afghanistan recent cash-for-work projects have emerged that appear to be based on the model it pioneered.
According to several senior military and government personnel, however, this vaunted program was responsible for sending millions of taxpayer dollars to Iraqi insurgents via a complex web of contractors and subcontractors. These sources claim that although USAID was fully aware of the problem, it delayed acting for as long as possible, unwilling to pull the plug on a program that generated propitious statistics, even when it jeopardized American lives.
When George W. Bush unveiled his "National Strategy for Victory in Iraq" in November 2005, the approach—summarized as "clear, hold and build"—called for exactly the kind of work USAID had been doing for decades. The CSP was similar to past undertakings in that it sought to create jobs and engage youth; it was unique, however, in that it concentrated on fighting-age males vulnerable to recruitment by insurgents. Almost all USAID projects are administered through intermediaries—either private firms or nonprofits—and this one was no different. The cooperative agreement went to International Relief and Development (IRD), an American nonprofit run by a minister in the United Church of Christ.
As with most USAID "implementing partners" in Iraq and Afghanistan, IRD delegated much of its authority to local subcontractors; in the case of the CSP, this meant paying Iraqis to hire other Iraqis to clear streets of rubble and trash. The upshot was that money had to pass through several middlemen before reaching its intended target, flowing 
from USAID to IRD to IRD subcontractors—to sub-subcontractors sometimes, sub-sub-subcontractors other times—to young men at risk of joining the insurgency. On paper the scheme was successful. By the summer of 2007, 
IRD was not only meeting its employment goals; it was far exceeding them. The problem was that the reports belied rather than reflected reality.
"It was just a sham," says retired Lt. Col. Felix Boston, a member of a provincial reconstruction team deployed to Baghdad's Kadhimiya district, a Shiite stronghold ruled by various militias, including Muqtada al-Sadr's Mahdi Army. Civil conflict was uncommon in Kadhimiya—its Sunni population had been decimated, with many people fleeing or killed by Shiite death squads after the fall of Saddam. But the militias that found safe haven there were still active in the insurgency, and USAID hoped to lure potential recruits away by enlisting them in the trash campaigns. Time sheets submitted to IRD by Kadhimiya contractors listed thousands of Iraqis, each receiving wages from USAID. But according to several embedded provincial reconstruction team members, many of these workers were phantoms, never seen by the US Army's Dagger Brigade during its regular patrols of the area. "The numbers were so inflated," says Boston. "They'd say 5,000, and there might have been a hundred people."
That contractors were not employing anywhere near the number of men they claimed to be was less worrisome than where the money went. Col. Louis Fazekas, a senior governance adviser to Baghdad's beladiya, or city planners, attended many of the meetings where contract recipients were nominated by local Neighborhood Advisory Councils (NACs). "Basically, we looked at the local council leaders like contract brokers," he says. Intelligence reports made available to Colonel Fazekas indicated that the council in Kadhimiya was directing some contracts to militia members and that additional militia members were extorting "protection" bribes from legitimate contract winners. "We saw reports that a particular contractor was being blackmailed for a thousand dollars a day," Fazekas says. "It was feeding [the insurgents'] ability to continue to resupply and fight against us."
On September 1, 2007, the commander of the Dagger Brigade encouraged John Crihfield, a USAID representative, to send a letter to David Soroko, then head of the CSP. The letter described the fraud in Kadhimiya, adding this dark assessment: "The dire consequence is that American soldiers are killed attempting to secure areas being destabilized in part by misdirected American dollars." Shortly thereafter Fazekas met with Soroko to make the same argument in person. Soroko, he says, "basically said, 'Talk to our lawyers. We're not going to do anything about it.'" Fazekas added, "His reports looked good, and he got lots of numbers, and [IRD] was meeting his goals."
John Bennett, a former US ambassador who led the provincial reconstruction team in Kadhimiya in 2007, is blunt about what he sees as the price of Soroko's decision. "We were losing soldiers," he wrote in an e-mail. "He was managing a program that, I believe, contributed to this." Soroko is no longer with USAID. After returning from Iraq he worked at IRD, heading its economic growth and trade office. He has declined to comment.
About a week after Soroko sent out an e-mail notifying his staff of the letter from Kadhimiya and explaining that there was insufficient evidence to justify taking action, Jay Rollins, a USAID regional inspector general, began a routine audit of the CSP. Despite agency policy mandating employees to report promptly any complaint relating to waste, fraud, abuse or corruption, during Rollins's initial briefing in Baghdad no one from USAID mentioned the situation in Kadhimiya. Nonetheless, after interviewing Dagger Brigade intelligence officers, Rollins learned of the problems Fazekas had reported, and infantry soldiers responsible for security in Kadhimiya confirmed the allegations. "We can't say that no work got done. But we can say that some of these contracts recorded that they had, say, 300 employees working to clean up a neighborhood," Rollins says. "And when we talked to the American troops who patrol those neighborhoods on a daily basis, they would say there's no way that 300 people were out there collecting trash. They would know if a dozen people came into the neighborhood, let alone 300." Rollins's subsequent review of IRD documents determined that many of the trash-campaign time sheets were computer-generated, mass-produced and clearly forged.
While IRD maintains that it was unaware that the time sheets it received were bogus, Rollins says, "I can't say that they were [aware]. I can say that they should have been, because some of the contracts we looked at that were in IRD's possession were obviously fabricated."
Toward the end of November 2007, at Rollins's urging, Crihfield, the USAID representative previously rebuffed by Soroko, sent a second letter, this time to Christopher Crowley, USAID's mission director for Iraq. The letter—obtained by The Nation through the Freedom of Information Act—presented new "sensitive and disturbing information from a well-placed source" advising that as much as 40 to 50 percent of CSP funds in Kadhimiya had gone to insurgents and corrupt officials. "Our interlocutor," wrote Crihfield, "who is favorably known to us and who we believe is in a position to become aware of the information, told us that millions of dollars from IRD's cleaning campaigns in [Kadhimiya] are going to 'insurgents' and to corrupt NAC and IRD representatives."
Five days later, USAID halted all activities in the district. Rollins believes this would not have happened had his office not become involved. USAID has declined to explain why it didn't discontinue the campaigns until he became involved.
Rollins's final audit concluded that the CSP was highly vulnerable to fraud and exploitation, and proposed fourteen specific fixes. In what amounted to a wholesale repudiation of those findings, Crowley responded with a statement that questioned whether there had been any foul play at all. "While such fraud and exploitation may or may not have occurred," he wrote, "the audit report cites what is a series of unsubstantiated anecdotes." (In fact, the extensive intelligence reports Rollins and his team analyzed did substantiate the allegations, but they were classified and therefore prohibited from inclusion in an unclassified audit.) Perhaps the most critical of Rollins's recommendations was that USAID evaluate CSP activities elsewhere in Baghdad to determine whether they suffered from similar problems and should also be suspended. Crowley not only rejected this suggestion; he argued that it should be deleted from the public draft.
Congress was less dismissive. In its next supplemental appropriations bill, 50 percent of CSP funding was tied to the condition that USAID institute Rollins's recommendations. Such Congressional involvement is rare; during his twenty-year career Rollins has never seen anything like it. Speculating why USAID had been so resistant to improving the CSP, he says, "That would be an admission that the program had some serious flaws." Like USAID, IRD insists that the program was successful and refuses to acknowledge the possibility of fundamental systemic problems. Its incentives for doing so are considerable. About 90 percent of IRD's revenue comes from USAID, for which it currently manages three major programs in Afghanistan, one of which provides temporary employment for young Afghan men through short-term public works projects.
Precisely how much money went to the insurgency remains unknown. Occupation business has been conducted largely in cash. All told, $12 billion—some 240 tons of bills—has been shrink-wrapped and shipped to Baghdad from the Federal Reserve Bank in New York City. At its height the CSP was disbursing 
$1 million a day. "They would bring in money on pallets," says Colonel Boston. "Where does that money go?"
In Hard Lessons, an exhaustive government appraisal of Iraq War tactics, the funding of insurgents in Kadhimiya is described as "the worst fear of any development officer, and also an inevitable risk of pushing large sums of money into a warzone." But maybe pushing CSP money into Kadhimiya in the first place was not inevitable. Both Fazekas and Bennett, the leader of the provincial reconstruction team in Kadhimiya, advocated removing USAID from the equation altogether by transferring responsibility for the trash campaigns to Iraq's department of public works (a suggestion to which USAID was predictably opposed). As Bennett saw it, "If the department of public works picked up the trash, there would be nothing in it for the bad guys. But if they could keep the department of public works out and the private contractors in, they could squeeze the private contractors for a percentage of the income."
This points to a troubling overlap between the interests of the "bad guys" and those of USAID and its implementing partners. But Fazekas says that aside from potentially benefiting US adversaries, such reluctance to cede control of programs also undermines the governments the United States is supposedly working to legitimize. "What we were doing in Iraq was setting up parallel institutions," he says. "We were there to help existing institutions get back on their feet. The only way you do that is to buy into them from the very beginning. Don't create a new one."
During her glowing assessment of the CSP at the US Institute of Peace in November, Jeanne Pryor, the USAID deputy director for Iraq reconstruction, recited a litany of statistics and pointed out that the daily disbursement of CSP funds in Iraq often exceeded what entire countries receive from USAID in one year. The next speaker was Rend al-Rahim, a former Iraqi ambassador to the United States, who has also worked as a subcontractor for USAID. "I truly question the value of a project which insists so emphatically on numbers, on output," Rahim said. "In the end, what is left? What is the residual value of what is being done?" Rahim was incredulous over claims that the CSP had trained 207,000 Iraqi youths. "Really?" she asked. "What is the quality of that training—when you insist on numbers?"
In his final audit, Inspector General Rollins recounts being told by a CSP official that USAID and the military were "pushing" for job creation, and Fazekas suggests a resolve on IRD's part to satisfy that expectation, regardless of what was actually happening. "Their whole thing was numbers," Fazekas says. "'We've hired X number of males between this age and this age.'" While militia members and insurgents may have fed fraudulent time sheets to IRD, they were at least patently fraudulent and made no pretense of truth. But IRD then fed those numbers to USAID, USAID fed them to the American people and eventually, inevitably, Ambassador Ryan Crocker fed them to Congress. It was less than two weeks after Soroko chose to ignore the alarming letter from Kadhimiya that Crocker appeared before the House and Senate to warn against a troop withdrawal and point out, among other gains, that CSP funds provided tens of thousands of jobs. Somewhere along the way the forged signatures had become real signatures; the phantom workers had become flesh-and-blood workers, young Iraqi men persuaded by American generosity not to fight us—an indicator of progress in a winnable war.
This article appeared in the May 31, 2010 edition of The NationMedia
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