Armed Irs Special Agent Scours Baghdad For Hussein's Loot

[MORTARDUDE]

ARMED IRS SPECIAL AGENT SCOURS BAGHDAD FOR SADDAM HUSSEIN'S LOOT


AUGUST 26, 2003

AUTHOR: Hamilton, Amy
Tax Analysts

When Iraq invaded Kuwait in August 1990, one of Saddam Hussein's half brothers, Barzan Ibrihim al-Tikriti, called in tens of millions of dollars in investments from all over Europe. Believed to be under Barzan's control was a rumored $ 30 billion that Saddam Hussein had stashed overseas for any future contingencies. Barzan feared that an international embargo would quickly follow Iraq's invasion, and in one timely move ensured that international investigators would be unable to freeze the flow of tens of millions of dollars into Iraq through Jordan's Central Bank.

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One month later -- on September 11, 1990 -- President Bush told Congress that "a new world order" could emerge from the crisis in the Persian Gulf. In the new world order, global economic issues are elevated to the same level as more traditional security, military, and political concerns.

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Fast-forward to April 17 of this year. On that day, coalition forces in Iraq captured Barzan. This made headlines in the United States because, as news reports helpfully explained, Barzan al- Tikriti is the five of clubs in the coalition's deck of Most Wanted Iraqis playing cards.

Enter the IRS. By May 2003 the IRS Criminal Investigation Division had assigned special agents to an interagency effort led by Treasury to trace and recover Iraqi assets. This mission includes tracing and recovering both official assets of the former regime and illicit assets looted and held by, or on behalf of, Saddam Hussein, his associates, their families, front companies, and the like. Recovered money will be repatriated to the Iraqi people, according to Vicki Duane, the woman in charge of the operation as the Criminal Investigation Division's deputy director for operations and policy support.

To pursue Iraq's hidden financial assets, the IRS first had to secure interviews with high-level detainees and obtain relevant documents for review. The IRS sent one man into Baghdad to do that: Special Agent Scott Schneider, a financial expert who specialized in the Middle East and served as an Army Intelligence interrogation team leader before joining the IRS.

Duane said the Defense Department required Schneider to be armed with an M-4 assault rifle with a folding stock and dressed in desert camouflage, a Kevlar helmet, and body armor before the military would accompany him through the war zone. Schneider stayed with American troops in one of Hussein's former palaces during part of the month he was in Iraq and traveled roads constantly targeted for attack. Fluent in Arabic, Schneider uncovered and tagged for IRS inspection enough documents to fill a room.

Schneider also discovered a nine-page hand-written letter from Barzan to Saddam Hussein. In the letter Barzan advises his half brother on how to hide his financial assets. Schneider used the information in the letter to gauge how truthful Barzan was with him during his two interrogations of the Iraqi.

The IRS provided Tax Analysts with a portion of a page from the letter and said that for evidentiary purposes the agency cannot provide the letter in its entirety at this time. The IRS also provided a summary of what Barzan said in the letter to Hussein. According to the IRS, Barzan:

o discusses the feasibility of setting up companies abroad to
obscure an unidentified -- and presumably illicit -- project;

o decides not to pursue the plan to set up companies to obscure
the project, in part based on tax and interest issues and the
risk of discovery;

o discusses payments to spies;

o discusses the difficulty of not arousing the suspicion of
individuals presumably used for this project or other
intelligence functions;

o identifies specified possible intelligence officers;

o discusses an account in the name of a third party and informs
Hussein of the profitability of a gold transaction (buy
low/sell higher) under that account;

o discusses the internal movement of funds from one individual
to another; and

o discusses a proposal to avoid detection by authorities of a
transaction.

John Fawcett is the coauthor of the first compilation of available public knowledge detailing Hussein's sources of revenue. The nonprofit Coalition for International Justice released the report, "Sources of Revenue for Saddam & Sons: A Primer on the Financial Underpinnings of the Regime in Baghdad," in September 2002. (The full text of the report is available at http://www.cij.org.)

The report describes how, since 1997, Iraq earned an average of $ 6 billion in civilian goods through the country's only legitimate source of income -- the United Nations' Oil-for-Food program. The report traces how Hussein, aided by sons Uday and Qusay, managed to earn more than $ 2 billion a year in hard currency on top of this amount through illegal Oil-for-Food kickback schemes and extensive smuggling operations.

There are at least nine routes by which Iraq exported oil outside of the U.N.'s Oil-for-Food system, according to the report. They were by truck to Turkey, Jordan, Syria, and Iran; by barge through Iranian and Kuwaiti territorial waters; by topping up Oil- for-Food-authorized tankers at Mina al-Bakr; and by pipeline and railway to Syria. When using those routes, Iraq was paid directly, either in cash or barter. That way the proceeds from those sales did not pass through the U.N. account at Banque Nationale de Paris's New York branch, nor were they subject to the 41 percent of Oil-for-Food profits set aside for compensation for Kuwait, support for the Kurds, and U.N. expenses.

Further, the report documents how Kroll Associates -- the high- profile financial investigations firm that, under contract to the Kuwaiti government, attempted more than a decade ago to track Hussein's assets to have them seized or at least frozen -- estimated Hussein and his family to have amassed a personal fortune of up to $ 10 billion by 1992. Of that, Kroll suspected about $ 1 billion was invested in European companies.

According to Duane, the government's financial investigative process for this assignment is very similar to the routine duties her special agents are trained to address and includes unraveling tax schemes where layered transactions were conducted with artificial entities to hide and conceal money.

"Some of it is not as sophisticated as what we work here," Duane said. The real complexity comes in the number of countries through which the money the IRS is tracing flowed, she said.

Hussein's family and regime had to get the illegal money into the country without detection. The IRS is investigating the financial transactions of front companies that Iraq owns or has an interest in to discover "where the money came from and where it went," Duane said. "We're interviewing people to discover how the regime moved money and following up the leads," she said. "Some are dead leads, and some go to bankers in other countries."

Barzan suggests as much in his letter to Hussein when he discusses his proposal to avoid a transaction's detection by authorities -- the IRS has redacted the name of the nation Barzan mentions. "I would like to point out something which has caught my attention," Barzan wrote. "In case there is a notion to withdraw the amount, I believe it should be transferred under a different name, and I suggest there should be a time limit to do so. . . . The reasons are so the primary and secondary trustee will not be detected, as the transfer or withdrawal of the amount will attract the attention of the [IRS redaction] authorities, and disclose the subject matter. If there is enough suspicion the authorities can, according to law, seize the amount."

Fawcett laughed. "Sounds like the Swiss authorities," he quipped.

The author said that during his research he discovered Iraq engaged in many covert financial transactions throughout the world -- including in Panama and the Bahamas, but particularly in Europe, in Liechtenstein and Switzerland. And any sizable transaction would have attracted the attention of the European authorities or required the banks to inform, Fawcett said. "It sounds like they're trying to build in plausible denial," he said.

"My experience was the trustees did know about these transactions," Fawcett added. "In fact, they often made it their business to know. But there needed to be a paper trail they could point to to plausibly deny responsibility."

Fawcett pointed out that aside from Hussein himself, the IRS has all the key Iraqi finance authorities in custody -- including the former ministers of oil, trade, and finance. Schneider interrogated all of them. Barzan is only "the one that most people would know about," Fawcett said.

Fawcett's report contains a great deal of information about Barzan, who his report says was very close to Saddam in the regime's early days. Barzan helped create -- and then headed -- the Mukhabarat secret service but was stripped of his intelligence position in the mid-1980s, reportedly because he objected to the betrothal of Hussein's oldest daughter Raghad to a man other than Barzan's own son. "His compensation or punishment," the report says, was to have his daughter married off to Uday -- Hussein's oldest son, who was notorious for his brutality.

The marriage didn't last long, and the woman fled to her parents in Geneva, where Barzan was serving as ambassador to Switzerland and as Iraq's permanent representative to the United Nations. Fawcett says in his report that from this post Barzan is thought to have created a web of companies that held covert and widely diversified investments.

In 1998 Barzan fell out with Baghdad, in part, Fawcett's report says, because of his daughter's breakup with Uday. Barzan was recalled from Geneva but delayed his return for several months and was rumored to be considering defecting, with $ 10 billion of Iraqi assets under his control said to be unaccounted for, the report states. On his arrival in Baghdad, the report says, Barzan was watched closely and then interrogated by agents under Qusay's direction and by Uday himself. Iraq's chief diplomat for a decade, Barzan was accused of having met with American politicians and intelligence agents during his years in Europe and of embezzling the $ 10 billion.

Fawcett's report says that nearly a year later Barzan left Iraq and traveled to Switzerland and the United Arab Emirates amid rampant speculation that he had defected -- but all parties denied it. "In any case, two months later he returned to Baghdad, where he was once again investigated," the report says. From then until his capture, Barzan served as an adviser to Hussein, "a post that may have been intended more to keep Barzan under surveillance than for any investment tips he may have to offer," the report says.

Time magazine took interest in the IRS's mission in Iraq when Schneider returned to the United States and, according to the publication, reported that "Barzan proclaimed on several occasions, sometimes banging his fist on a folding table, 'I spoke out against the regime.' He demanded a search for documents that he said would prove his resistance to Saddam's dictatorship." According to the magazine, Barzan "repeatedly demanded to be set free to participate in the running of his occupied country." The magazine quotes Barzan as telling Schneider: "If you release me, if you let me go and then find a document implicating me in any crime, I will voluntarily come back (to detention)." (Time, June 29, 2003.)

Meanwhile, the IRS already has dispatched what it calls "jump teams" to nations in Europe and the Middle East to follow up on leads obtained by Schneider. Duane explained that jump teams consist of two or three special agents sent into a foreign country -- the State Department coordinates much of this work -- who in turn are assisted from the United States by another two or three IRS special agents. While the IRS has been asked to assist the U.S. government in conflict areas of the world in the past, jump teams and the IRS's presence in conflict areas have been stepped up since September 11, 2001. Duane said it is difficult to know how long it will take the IRS to trace leads in this mission; some of the financial schemes could be unraveled in six months while other leads will take years to track down.