[House Hearing, 110 Congress]
[From the U.S. Government Printing Office]



 
        THE IMPACT OF CPA DECISIONMAKING ON IRAQ RECONSTRUCTION

=======================================================================



                                HEARING

                               before the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                            FEBRUARY 6, 2007

                               __________

                           Serial No. 110-10

                               __________

Printed for the use of the Committee on Oversight and Government Reform


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             COMMITTEE ON OVERSISGHT AND GOVERNMENT REFORM

                 HENRY A. WAXMAN, California, Chairman
TOM LANTOS, California               TOM DAVIS, Virginia
EDOLPHUS TOWNS, New York             DAN BURTON, Indiana
PAUL E. KANJORSKI, Pennsylvania      CHRISTOPHER SHAYS, Connecticut
CAROLYN B. MALONEY, New York         JOHN M. McHUGH, New York
ELIJAH E. CUMMINGS, Maryland         JOHN L. MICA, Florida
DENNIS J. KUCINICH, Ohio             MARK E. SOUDER, Indiana
DANNY K. DAVIS, Illinois             TODD RUSSELL PLATTS, Pennsylvania
JOHN F. TIERNEY, Massachusetts       CHRIS CANNON, Utah
WM. LACY CLAY, Missouri              JOHN J. DUNCAN, Jr., Tennessee
DIANE E. WATSON, California          MICHAEL R. TURNER, Ohio
STEPHEN F. LYNCH, Massachusetts      DARRELL E. ISSA, California
BRIAN HIGGINS, New York              KENNY MARCHANT, Texas
JOHN A. YARMUTH, Kentucky            LYNN A. WESTMORELAND, Georgia
BRUCE L. BRALEY, Iowa                PATRICK T. McHENRY, North Carolina
ELEANOR HOLMES NORTON, District of   VIRGINIA FOXX, North Carolina
    Columbia                         BRIAN P. BILBRAY, California
BETTY McCOLLUM, Minnesota            BILL SALI, Idaho
JIM COOPER, Tennessee                ------ ------
CHRIS VAN HOLLEN, Maryland
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
JOHN P. SARBANES, Maryland
PETER WELCH, Vermont

                     Phil Schiliro, Chief of Staff
                      Phil Barnett, Staff Director
                       Earley Green, Chief Clerk
                  David Marin, Minority Staff Director
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on February 6, 2007.................................     1
Statement of:
    Bremer, Ambassador L. Paul, former administrator, Coalition 
      Provisional Authority; Stuart W. Bowen, Jr., special 
      inspector general for iraq reconstruction; and David R. 
      Oliver, Jr., former advisor, Iraq Ministry of Finance and 
      former director of management and budget, Coalition 
      Provisional Authority......................................    45
        Bowen, Stuart W., Jr.,...................................    71
        Bremer, Ambassador L. Paul...............................    45
        Oliver, David R., Jr.,...................................   127
Letters, statements, etc., submitted for the record by:
    Bowen, Stuart W., Jr., special inspector general for iraq 
      reconstruction, prepared statement of......................    74
    Braley, Hon. Bruce L., a Representative in Congress from the 
      State of Iowa, prepared statement of.......................    41
    Bremer, Ambassador L. Paul, former administrator, Coalition 
      Provisional Authority, prepared statement of...............    50
    Davis, Hon. Tom, a Representative in Congress from the State 
      of Virginia, prepared statement of.........................    14
    Higgins, Hon. Brian, a Representative in Congress from the 
      State of New York, prepared statement of...................    25
    Oliver, David R., Jr., former advisor, Iraq Ministry of 
      Finance and former director of management and budget, 
      Coalition Provisional Authority, prepared statement of.....   128
    Sali, Hon. Bill, a Representative in Congress from the State 
      of Idaho, prepared statement of............................    28
    Sarbanes, Hon. John P., a Representative in Congress from the 
      State of Maryland, prepared statement of...................    38
    Waxman, Chairman Henry A., a Representative in Congress from 
      the State of California, prepared statement of.............     5
    Yarmuth, Hon. John A., a Representative in Congress from the 
      State of Kentucky, prepared statement of...................    31


        THE IMPACT OF CPA DECISIONMAKING ON IRAQ RECONSTRUCTION

                              ----------                              


                       TUESDAY, FEBRUARY 6, 2007

                          House of Representatives,
                            Committee on Government Reform,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10 a.m., in room 
2157, Rayburn House Office Building, Hon. Henry A. Waxman 
(chairman of the committee) presiding.
    Present: Representatives Waxman, Davis of Virginia, Lantos, 
Kanjorski, Maloney, Cummings, Kucinich, Davis of Illinois, 
Tierney, Clay, Watson, Lynch, Higgins, Yarmuth, Braley, Norton, 
McCollum, Cooper, Van Hollen, Hodes, Murphy, Sarbanes, Welch, 
Burton, Shays, McHugh, Mica, Souder, Platts, Duncan, Turner, 
Issa, Marchant, Westmoreland, Foxx, Bilbray, and Sali.
    Also present: Representative Delahunt.
    Staff present: Phil Schiliro, chief of staff; Phil Barnett, 
staff director and chief counsel; Kristin Amerling, general 
counsel; Karen Lightfoot, communications director and senior 
policy advisor; David Rapallo, chief investigative counsel; 
Theodore Chuang, deputy chief investigative counsel; Jeff Baran 
and Suzanne Renaud, counsels; Earley Green, chief clerk; Teresa 
Coufal, deputy clerk; Caren Auchman, press assistant; Kerry 
Gutknecht; Davis Hake; Sam Buffone; Lauren Belive; Will 
Ragland; David Marin, minority staff director; Larry Halloran, 
minority deputy staff director; Jennifer Safavian, minority 
chief counsel for oversight and investigations; Keith Ausbrook, 
minority general counsel; Ellen Brown, minority legislative 
director and senior policy counsel; A. Brooke Bennett, John 
Callender, and Howie Denis, minority counsels; Grace 
Washbourne, minority senior professional staff member; 
Christopher Bright, minority professional staff member; Nick 
Palarino, minority senior investigator and policy advisor; 
Patrick Lyden, minority parliamentarian and member services 
coordinator; Brian McNicoll, minority communications director; 
and Benjamin Chance, minority clerk.
    Chairman Waxman. The meeting of the committee will please 
come to order.
    Today's hearing launches our committee's investigation of 
waste, fraud and abuse in Federal spending. We will have the 
hearing today and a number of other hearings the rest of the 
week, and it will be the beginning of a 2-year effort to make 
sure that we can watch to protect taxpayers' money from being 
wasted through inefficiency or corruption or incompetence.
    This effort isn't about policy differences, and it is not 
about partisanship. It is about making sure that Government, 
which has an important responsibility, is effective and as 
efficient as possible. Our effort is aimed at making sure 
taxpayer's dollars aren't wasted. To do this job right, 
everything must be on the table and subject to potential 
scrutiny.
    We will need the help of anyone and everyone who has 
specific knowledge of waste, fraud and abuse in Government 
programs. The committee's Web site will now have a fraud, waste 
and abuse tip line to make it easier for our constituents to 
give us information we need. The Web site is 
www.oversight.house.gov. We will pursue all credible 
allegations that are shared with us.
    Today's hearing provides us with $12 billion reasons to be 
concerned about fraud, waste and abuse. In a 13 month period 
from May 2003 to June 2004, the Federal Reserve sent nearly $12 
billion in cash, mainly in hundred dollar bills, from the 
United States to Iraq. To do that, the Federal Reserve Bank in 
New York had to pack 281 million individual bills including 
more than 107 hundred dollar bills onto wooden pallets to be 
shipped to Iraq. The cash weighed more than 363 tons and was 
loaded onto C-130 cargo planes to be flown into Baghdad. The 
numbers are so large that it doesn't seem possible that they 
are true.
    Who in their right mind would send 360 tons of cash into a 
war zone? But that is exactly what our Government did.
    Stuart Bowen, the Special Inspector General for Iraq 
Reconstruction analyzed the cash transfer and concluded that 
when the money arrived in Iraq, the Coalition Provisional 
Authority which was run by our Government had not established 
sufficient managerial financial and contractual controls to 
ensure that the cash was used in a transparent manner. Even 
worse, Mr. Bowen concluded that the Coalition Provisional 
Authority handed over the money to the Iraqi ministries 
``without assurance the money was properly used or accounted 
for.''
    I am releasing a memorandum this morning that describes 
this mind-boggling situation in more detail, and I am pleased 
that Mr. Bowen and Ambassador Paul Bremer who led the Coalition 
Provisional Authority are with us today to shed more light on 
what happened to the $12 billion.
    I know Ambassador Bremer has indicated in the past that it 
is unrealistic to expect the Government to keep close track of 
money sent into war zone, and I know the Inspector General 
believes the opposite is true and that strong standards are 
especially important if our Government is sending billions of 
dollars of cash into a chaotic and violent environment.
    My concern is that without strong standards, we have no way 
of knowing whether the cash that was shipped into the Green 
Zone ended up in enemy hands.
    Our goal is to assess the Coalition Provisional Authority's 
actions, not by some arbitrary international guidelines imposed 
by outsiders but by the Authority's own standards written into 
their own regulations. If the Coalition Provisional Authority 
didn't follow its own directives, we want to know why not, and 
we owe it to the American people to do everything we can to 
find out where the $12 billion went.
    We also need to ask questions today about who was hired by 
the administration to manage the $12 billion in cash sent to 
Iraq and carry out the other responsibilities of the Coalition 
Provisional Authority. There were extraordinary, disturbing 
reports last fall that the CPA was filled with inexperienced 
and unqualified political cronies. This hearing will give us a 
chance to probe those allegations and find out what role 
incompetence and political cronyism played in the debacle that 
Iraq has now become.
    Finally, before I turn to Mr. Davis for his opening 
statement, I would like to say a word about the empty witness 
chair. Our original goal for this hearing was to be 
retrospective and prospective, looking both backward and 
forward.
    On January 10th, the President announced his new strategy 
for Iraq. This included an escalation of 21,000 troops, but it 
also included a request for another $1.2 billion in taxpayer 
funds for Iraq reconstruction.
    The next day, Secretary of State Condoleezza Rice held a 
press conference and announced with fanfare that the 
administration's new point person for Iraq reconstruction would 
be Ambassador Tim Carney. This is what she said about his new 
role: ``He will coordinate all relevant elements of the 
Embassy, USAID mission and IRMO to bring about a smooth 
transition from U.S. Government and other external assistance 
to full Iraqi self-reliance. He will work closely with MNF-1 to 
ensure Iraq's economic transition plans complement the joint 
security strategy.''
    Well, when the President asked for another billion dollars 
in taxpayer funds to be spent in Iraq, Congress has a right, in 
fact an obligation, to talk to the official in charge. After 
all the money we have seen wasted, we want to know what 
Ambassador Carney plans and find out what he has learned from 
past mistakes. So I invited Ambassador Carney to testify today. 
When my staff talked to Ambassador Carney directly, he was 
cooperative and said he was willing to come, but the State 
Department refused.
    Their first excuse was that he had not yet filled out his 
paperwork. Even though Secretary Rice publicly announced his 
critical new position, he apparently could not talk to Congress 
because he had not been officially hired. Next the State 
Department said Ambassador Carney could not come because he did 
not yet know what he was going to do in Iraq. This seemed odd 
especially since the Secretary had already announced that he 
was her new point person on Iraq reconstruction.
    Then just last week, we were informed that the Department 
suddenly decided that Ambassador Carney was needed in Baghdad 
right away. Even though he was not officially hired and 
according to the State Department had no idea what he was going 
to do in Iraq, he was put on a plane to Baghdad this past 
Friday. The State Department has now told us that they may make 
him available to Congress in 6 months. After all the billions 
wasted in Iraq, 6 months just isn't good enough.
    So we have an empty chair for Ambassador Carney today, but 
I can assure the Secretary of State that the chair won't be 
empty for too long.
    We are going to have opening statements from the members of 
the committee in 2 minutes length with the exception of Mr. 
Davis whom I want to recognize at this time.
    [The prepared statement of Chairman Henry A. Waxman 
follows:]
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    Mr. Davis of Virginia. Thank you very much, Mr. Waxman.
    This committee has always been about saving taxpayers' 
money. If you look over the record of the last cycle, the GAO 
reported that because of the oversight this committee conducted 
in the last two Congresses, we saved the taxpayers over $6.5 
billion. Saving taxpayers' money is what this is all about.
    Of course, today's hearing is really focusing on DFI 
dollars. These are Development Fund for Iraq dollars which were 
not taxpayer dollars. These were Iraqi oil revenues.
    Most of what we will do today, I think, and tomorrow were 
first brought to light in the course of over 19 hearings on 
Iraq, conducted under this committee's Republican leadership 
and reviewed by other committees, by the Inspector General, by 
GAO and others.
    On the processes leading up to this morning, the majority 
has sent mixed signals about the subject of what the hearing 
was going to be today. Only late last night at 10:30 were we 
given the lengthy memo on CPA cash management. It is old news, 
but again at the last minute it is just changing the focus of 
the hearing. The rules require that Members receive memorandum 
3 calendar days before the hearing.
    Although technically we are correct, Mr. Waxman, we hope 
that in the future on these kinds of issues, we can work 
together and have a heads-up and be more collaborative as we 
approach these issues instead of getting a memo late the 
evening before.
    On the substance, this is a classic example of ready, fire 
aim oversight. In the past 10 days, we have received over 
80,000 pages of documents from contractors in response to the 
committee's request. Some of those documents undoubtedly would 
shed light on the matters that are going to be addressed by our 
witnesses in today's hearing, but in rushing to take testimony 
before anyone has the opportunity to carefully analyze all of 
that material, the committee starts with broad conclusions 
about the effectiveness of current reconstruction programs and 
supports those judgments only with a hastily culled and 
selective body of evidence. Reconstruction spending in Iraq and 
Afghanistan merits serious oversight, not a slap-dash rush to 
judgment.
    The majority continues to equate a lack of exquisite 
accounting in Iraq with massive waste. Clearly, there was a 
leakage in the early all cash days of occupation and 
reconstruction. In the early days, there was no banking system 
in Iraq. There were no electronic transfers. There was no other 
way, except cash, to pay. But limited visibility over payments 
to Iraqi ministries by itself doesn't establish the majority's 
alleged $8 billion flood of fraud.
    Concerns about Coalition Provisional Authority hiring 
practices are based on anecdotes and hearsay, not evidence. The 
Special Inspector General for Iraq looked at CPA employment 
practices and did not find undue political influence.
    Real oversight gathers evidence, and then it follows those 
facts to conclusions. To help us do just that, beginning today 
our Republican committee Web site invites whistleblowers and 
anyone else with information about waste, abuse or fraud or 
needed reform to provide information anonymously or to e-mail 
us at [email protected] Whether the subject is Iraq 
reconstruction or why Sandy Berger was never given a polygraph, 
we want to help gather the facts that drive constructive 
oversight.
    To be sure, many of us have been justifiably critical of 
the way Iraq reconstruction has been handled. Naive assumptions 
about post-invasion Iraq were slow to give way to harsh but 
obvious realities. It turns out we brought neither the plans 
nor the personnel for long term occupation and nation-building 
from the ground up. Dissolution of Iraq's army and security 
forces and rapid de-Ba'athification created a vacuum we were 
not prepared to fill.
    But we should not let any discussion of failed means 
paralyze our will to achieve honorable ends. The main value in 
revisiting past mistakes is to make sure that the right lessons 
have been learned and corrective action is put in place. Self-
righteous finger-wagging and political scape-goating won't make 
Iraq any more secure. It won't rebuild that ravaged Nation, and 
it won't bring the U.S. troops home any sooner.
    Today there are more than 300,000 trained and equipped 
Iraqi security forces taking control in the provinces. There is 
a new emphasis on getting Iraqi businesses up and running and 
putting Iraqis back to work. Despite a prohibitive security 
environment, infrastructure projects are being completed. The 
administration has brought back a critique of previous Iraqi 
reconstruction policy. Ambassador Carney has agreed to 
coordinate these efforts. We wish him success and look forward 
to his coming before our committee.
    Ambassador Bremer and the Special Inspector General, Mr. 
Bowen, bring extensive experience and expertise to this 
discussion, and we are grateful they could be here today.
    I want to thank you, Chairman Waxman, for agreeing to our 
request to invite retired Admiral David Oliver. He worked as 
the Coalition Provisional Authority's Management and Budget 
Officer, and he brings a unique perspective to these important 
issues.
    Welcome, gentlemen. Thank you.
    [The prepared statement of Hon. Tom Davis follows:]
    [GRAPHIC] [TIFF OMITTED] 36545.008
    
    [GRAPHIC] [TIFF OMITTED] 36545.009
    
    Chairman Waxman. Thank you, Mr. Davis.
    I want to point out there may have been some 
misunderstanding about the supplemental briefing memo. We did 
send out a briefing memo within the required amount of time. 
This was supplemental information which we feel we have a right 
to do. We will try to iron out these differences for the 
future.
    I do want to report that we seem to have rival tipline Web 
sites. Ours for the committee is www.oversight.house.gov. The 
Republicans, as Mr. Davis announced, have a different one. Feel 
free to contact whichever tipline would be of interest to 
anybody who has information about waste, fraud and abuse. We 
will be sharing the information, I expect.
    Mr. Davis of Virginia. Absolutely.
    Chairman Waxman. If you want to reach the committee 
directly, it is www.oversight.house.gov.
    Without objection, I am now going to recognize the members 
of the committee for an opening statement of no more than 2 
minutes and without objection, Representative Delahunt will be 
permitted to join us and participate in today's hearing.
    Mr. Lantos.
    Mr. Lantos. Thank you, Mr. Chairman, for arranging this 
series of hearings.
    As you know, I was in Iraq just over a week ago with 
Speaker Pelosi and other Members of the congressional national 
security leadership. What we found was bleak. Progress in 
reconstruction has been badly set back by inefficiency, fraud, 
and neglect.
    Each quarter, the Special Inspector General files a report 
to Congress detailing the revolting revelations of waste and 
abuse of U.S. taxpayer funds. While the details still have the 
power to shock, I must say that this process is starting to 
feel like Groundhog Day. We keep waking up to the same nasty 
reality. Our efforts at creating a stable, sustainable Iraq 
were botched from the start through bad financial management 
and outright fraud, and we are still paying the price.
    Mr. Chairman, I am also deeply troubled by the fact that 
Iraq's neighbors are failing to step up to the plate. Saudi 
Arabia, Kuwait and others, whose interest in seeing a stable 
Iraq is in fact greater than ours, have kept their wallets in 
their pockets. They have made some pledges, but as the Special 
Inspector General points out in his latest report, they have 
delivered virtually nothing. This is outrageous, as I pointed 
out to the Kuwaiti leadership last week in person, especially 
given the record windfall oil revenues the countries have 
enjoyed in recent years.
    Mr. Chairman, you cannot unwind history nor can you 
unscramble this omelet, but it is some consolation to have one 
of its chefs, Mr. Bremer, testifying before us today. Perhaps 
he can shed some light on CPA's deeply flawed handling of the 
reconstruction which appears to have begun on day one.
    I look forward to questioning our witnesses, and I want to 
thank you again for holding these hearings.
    Chairman Waxman. Thank you, Mr. Lantos.
    Mr. Shays.
    Mr. Shays. Thank you, Mr. Chairman, for conducting this 
hearing. This is the 20th hearing. We have had 14 in my 
National Security Subcommittee and 5 in the full committee.
    I have had many trips to Iraq, four outside the umbrella of 
the military, and they have taught me many things about this 
amazing country, this fertile crescent with two magnificent 
rivers, well educated people and frankly, oil that rivals Saudi 
Arabia. There are some things in our job that transcend 
politics, and my God, this has to be one of them.
    On a bipartisan basis, we went into Iraq, and I believe on 
a bipartisan basis, we need to leave Iraq, leaving that country 
with the capability to defend itself as an independent nation.
    When I ask a Shi'a, are they a Shi'a they say, I am a Shi'a 
but I am married to a Sunni. I ask a Sunni, are you a Sunni? 
They say, I am a Sunni, sir, but my daughter is a Shi'a.
    I ask a Kurd, are you a Kurd? They say, I am a Kurd. But do 
you know we are Sunnis? They are Iraqis before they are Shi'as, 
Sunnis, and Kurds. They didn't attack us. We attacked them.
    As we perform this open heart surgery, we have people now 
that say we must leave before we finish the surgery.
    I know this is controversial, but so was the Revolutionary 
War. One-third of the American people supported it, one-third 
opposed it, and historians tell us one-third didn't know there 
was a war or didn't give a damn.
    In the Civil War, we lost 10,372 individuals every month 
for 4 years, and for 3 years, President Abraham Lincoln was 
considered an imbecile by politicians, businessmen and military 
personnel, and it only turned when the war turned better.
    Let me just conclude by saying that we have a resolution 
before Congress. Critics said we want a new Secretary of State, 
we want new leadership in Iraq, and we want a new plan. They 
have all three, and critics now are saying basically they are 
against the new plan and the status quo. The status quo isn't 
the way to proceed.
    I look forward to this hearing, and I look forward to many 
more to come.
    Chairman Waxman. Thank you, Mr. Shays.
    Mr. Cummings.
    Mr. Cummings. Thank you very much, Mr. Chairman, and thank 
you for holding this vitally important hearing to examine the 
Coalition Provisional Authority management and control of funds 
for reconstruction in Iraq.
    The House Armed Services Committee on which I am a member 
has been tasked with entertaining President Bush's latest 
budget request for $481 billion in defense spending. This 
request represents an 11 percent boost over last year, 
increasing spending to levels not seen since the Reagan era. 
Additionally, the President is requesting $93.4 billion in 
emergency supplemental funding for fiscal year 2007 and $141.7 
billion for fiscal year 2008. This would bring the total amount 
spent in Iraq and Afghanistan since 2001 to $661 billion, 
eclipsing in real terms the cost of the Vietnam War.
    Now I have said time and time again that I was against this 
war from the start. I voted against it. But I have also 
repeatedly said that now that we are in Iraq, we cannot leave 
its people worse off than when we found them. Furthermore, we 
have an obligation to provide our troops on the ground with the 
support that they need.
    However, before we can in good faith allocate historic 
amounts of taxpayer dollars to this President's war, I have one 
question that remains unanswered. What has the return on our 
investments been?
    We have already dedicated more than 3,000 American lives 
and hundreds of billions of dollars of taxpayer dollars to this 
venture, and our investments have yielded nothing more than a 
bloody civil war. As good stewards of taxpayer dollars, 
Congress has an obligation to ensure that moneys spent are 
spent as effectively and efficiently as possible.
    To the contrary, reports of waste, fraud, and abuse in Iraq 
are plentiful. Reports reveal that the U.S. Government cannot 
account for billions of dollars already distributed to the 
Coalition Provisional Authority for the purposes of 
reconstruction in Iraq. Furthermore and finally, nearly $20 
billion in Iraqi funds, the money this President promised would 
help to pay for the war, cannot be tracked. This is simply 
unconscionable. Before we can justify tapping the American 
treasury for hundreds of billions more, we must find out what 
happened to the money that has already been allocated.
    With that, I yield back.
    Chairman Waxman. Thank you, Mr. Cummings.
    Mr. Issa.
    Mr. Issa. Thank you, Mr. Chairman, and thank you for 
calling this hearing today.
    I might point out that administration did offer Ambassador 
Satterfield who presently is the Deputy Chief of Mission in 
Baghdad. During the covered period, he was in fact the Deputy 
Assistant Secretary for Near East Affairs, and before that he 
has been in Lebanon, Damascus, Jeddah and Tunis. In fact, there 
is no person that would have been more qualified from the 
administration to speak on behalf of the ground forward. I 
truly regret the fact that he was not allowed to make his 
presentation and answer questions.
    Of course, I am sorry that Ambassador Carney chose to be in 
a combat zone rather than be with us here today. What a 
surprise.
    What is the difference, yes.
    I might also, for the committee, put into perspective what 
$12 billion is. It certainly seems like a lot of money when you 
put it in hundred dollar bills and put it on forklifts and put 
into C-130's, but I think when you look at a country of more 
than 15 million people and a period of 15 months, you are 
really talking about $600 per person per year. I think when the 
American people look at the volume of human beings that were 
without an economy as a result of the toppling of Saddam, I 
think they will more accurately look at less than $1,000 per 
man, woman and child in that region would certainly be 
considered to be a measured amount to be spent.
    No doubt there is fraud, abuse and waste. No doubt money 
ended up in somebody's pocket. But I might note for all of us 
that as we looked over Katrina, done in our own country within 
our own boundaries under a system that we all see used time and 
time again, we were giving $2,000 debit cards that ended up 
buying color TVs at K-Mart.
    Although I certainly look forward to the testimony and I 
have no doubt that there has been some waste, I also hope that 
we put this in perspective. Again, I am sorry Ambassador 
Satterfield was not acceptable to the committee.
    I yield back.
    Chairman Waxman. Thank you, Mr. Issa.
    Mr. Satterfield did testify before this committee last 
fall. We asked for Mr. Carney because we wanted Mr. Carney. He 
is the one who is now going to be in charge. We wanted to know 
what his vision was, what he has learned from the past, what 
his plans are to be the person in charge of reconstruction in 
Iraq. We requested the State Department to reconsider their 
decision and allow him to be with us, and we hear from other 
sources, I think news sources, that he was put on a plane to 
Iraq. I think it is unfortunate that they are now saying we 
can't have him for 6 months. We ought to have him here, and I 
hope the State Department will reconsider their 
reconsideration.
    Mr. Kucinich is next.
    Mr. Kucinich. Thank you very much, Mr. Waxman.
    I have been circulating among my colleagues, a 12 point 
plan to end the war in Iraq, one element of which is to make 
sure that there is a viable reconstruction program because we 
realize that reconstruction is inevitably linked to 
reconciliation. The United Nations Security Council in 
addressing the issue of reconstruction understood that 
reconstruction was related to the humanitarian needs of the 
people of Iraq, and it wasn't only economic reconstruction. 
They also knew that reconstruction related to continued 
disarmament and the restoration of a civilian administration in 
Iraq. Now we see that this program has frustrated any attempts 
to end the war, and we see that billions of dollars have not 
been accounted for.
    At some point, the record of this hearing needs to be 
brought to the deliberation of Congress whether individuals who 
hold high office in this country have committed high crimes and 
misdemeanors with respect to their misconduct in the 
administration of billions of dollars of American people's tax 
moneys or of the money that was raised from the people of Iraq 
because either way, whoever was in charge, it was still money 
that we had control over. Whatever happened to those billions 
of dollars, whether they got to the insurgency, whether they 
were stolen, whether they ended up on the other side of the 
world, we don't know, but because we don't know, there has to 
be accountability. You cannot let billions of dollars be stolen 
from a Coalition Provisional Authority that was established by 
this administration without accountability, and it is up to 
Congress to enforce that accountability.
    So I am glad we are holding these hearings. Thank you.
    Chairman Waxman. Thank you, Mr. Kucinich.
    Mr. Mica.
    Mr. Mica. Well, thank you, Mr. Chairman.
    I guess I should thank you for holding this hearing, but I 
do have some concerns about the hearing, about first of all a 
pattern of attempting to discredit the President of the United 
States, a very effective means of making him out to be someone 
who is untruthful when in fact the Congress by a very wide 
margin authorized the action in Iraq.
    I guess this is let the games begin as far as a series of 
hearings to try to further embarrass an effort that brought to 
halt, as the Prime Minister of Iraq when he came and testified 
to us said, more than a million Iraqis perished. We have 
uncovered over 300,000 mass graves. Here is a picture of some 
of those that we have uncovered. We brought to halt a regime 
that committed atrocities far and beyond anything we have known 
since probably Adolf Hitler or Khmer Rouge. But now we have to 
discredit those who risk their lives and serve their country to 
try to reconstruct that Nation and did so, I think, in very 
difficult circumstances.
    I was asked a little bit about the money and why we paid in 
cash, and then I remembered I had tucked in the top of my desk 
drawer some of this cash. I just remembered that. But this is 
all Iraqi money. It was given to me by soldiers who came back 
from Iraq and they said it was worthless. So I got quite a bit 
of it. I just brought a few samples here. We basically 
destroyed the country in our effort to take over this sadistic 
regime, and they had no system of finances, no money, no banks, 
no ATMs, no one to administer it. That is why this was no good, 
and we did what we had to do using cash.
    We couldn't send in Ernst and Young and other CPAs. We did 
send in some folks, who I read about, who stayed mostly in the 
Green Zone, but it wouldn't have mattered where they stayed.
    Chairman Waxman. The gentleman's time has expired.
    Mr. Mica. Again, this money was useless, and our folks that 
we sent tried to do the best they could, and we will hear about 
that today.
    I yield back the balance of my time.
    Chairman Waxman. Thank you, Mr. Mica.
    Mr. Tierney.
    Mr. Tierney. Thank you, Mr. Chairman.
    Mr. Chairman, oversight is an obligation of this Congress. 
I think that all of us understand that besides legislating, our 
other largest responsibility is the obligation for oversight. 
People making assertions that when we exercise that obligation, 
we are somehow harming the President or calling into question 
U.S. actions actually conflict with our constitutional 
responsibilities and they go against the grain of the standard 
that the American people set for this Congress to meet.
    The purpose of oversight is to inform better policy going 
forward. In order to do that, sometimes we have to look back. 
We have to look back and see what problems existed to make sure 
that they are not repeated. We have to find out what went right 
so that we can replicate that in the future, that we can try to 
ensure that we have in place the systems and the processes to 
effectively and efficiently carry out the policies of this 
country.
    In looking in back in this instance, I am concerned with 
the apparent lack of planning that went into what one witness 
here today, Mr. Bremer, said was the second most significant 
goal of this country in Iraq and that was the reconstruction, 
the putting in place of an economy and an infrastructure for 
Iraqis so that they in fact would be able to support an 
eventual government and support what the United States was 
doing there. Unfortunately, what we are going to find out today 
was that there was too little planning that went into that 
effect, that we had people operating and spending money in this 
very important process that were unqualified, that were not 
vetted, and in the end it caused great damage to our policy and 
to the situation in which we find ourselves.
    There is a huge difference between having no accountability 
and having accountability in the extreme. It is no excuse that 
we couldn't have an accountability process akin to that in the 
United States, to say that all we could was nothing. I think 
today we should explore what could have been done to make sure 
that going forward we can hope that Ambassador Carney is going 
to put in place those policies, and we will have to wait for 
another day to make sure that in fact that is the case.
    Now, Mr. Chairman, I thank you for having these hearings, 
and I would hope they become bipartisan in nature. I look 
forward to the information that we will glean from today's 
witnesses. Thank you.
    Chairman Waxman. Thank you very much.
    The Chair now recognizes Mr. Duncan.
    Mr. Duncan. Well, thank you, Mr. Chairman.
    Our former majority leader, Dick Armey said in an interview 
with the McClatchy newspapers just yesterday, he said he deeply 
regretted the decision to go to war in Iraq. He said, ``Had I 
been more true to myself and the principles I believed in at 
the time, I would have openly opposed the whole adventure 
vocally and aggressively.''
    Chris Matthews, on election night, said, ``The decision to 
go to war in Iraq was not a conservative decision historically. 
It asked Republicans 'to behave like a different people than 
they intrinsically are.' ''
    The reason I mention those quotes, conservative Republicans 
have traditionally been the biggest opponents, the biggest 
critics of Federal waste, fraud and abuse. Conservative 
Republicans should certainly feel no obligation to defend waste 
just because it has occurred in Iraq.
    Ivan Nealon in the January 15th American Conservative 
Magazine said, ``Many conservatives who regularly gripe about 
the Federal Government's ineffective and inefficient use of 
taxpayer dollars give the Pentagon a free ride on its 
profligate spending habits and when troops are engaged in 
combat overseas, the general public is wary of questioning even 
massive military expenditures.'' He says this free ride should 
end.
    Conservatives have traditionally been the biggest opponents 
to interventionist foreign policies and nation-building. We 
need a return to the more humble foreign policy that President 
Bush advocated in his campaign in 2000.
    Thank you, Mr. Chairman.
    Chairman Waxman. Thank you very much, Mr. Duncan.
    Mr. Clay.
    Mr. Clay. Thank you, Mr. Chairman and Ranking Member Davis 
for holding today's hearing.
    After President Bush reneged on his pledge to spend Iraqis' 
money wisely, it is vital that our committee investigate the 
massive failure to properly manage the Development Fund for 
Iraq. Iraqi citizens should have reaped the full benefit of 
billions of dollars provided by their nation's resources. 
Instead, they had to watch from the sidelines as lax oversight 
from the CPA allowed funds meant for their humanitarian needs 
to be improperly used.
    It is inexcusable that nearly $9 billion Iraqi dollars have 
not been accounted for, yet yesterday the President had the 
audacity to send Congress a budget plan that requests an extra 
$245 billion for the wars in Iraq and Afghanistan, including 
more than $1.8 billion for programs to strengthen democracy in 
Iraq. If this administration could not accomplish these goals 
with Iraqi money, how can they be trusted to be good stewards 
over American taxpayer dollars?
    Where will all this money go? Will it go toward overpaying 
more American contractors?
    While I commend Ambassador Bremer for his service to our 
country through his work in Iraq, it is obvious that the work 
of the CPA made a solid foundation for waste and fraud with its 
lack of transparency and inability to combat corruption. 
Billions have been wasted with no real progress. The CPA's 
failure to provide the necessary security to protect Iraq 
assets undermined all future efforts to reconstruct Iraq.
    I welcome our witnesses and commend Mr. Bowen for 
identifying these inefficiencies.
    I yield back and ask that my statement be included in the 
record.
    Chairman Waxman. Without objection, that will be the order. 
Thank you very much.
    Chairman Waxman. Mr. Souder.
    Mr. Souder. Good morning, it is still required to be a 
Monday morning quarterback, but it is not comparable in any way 
to being an actual Super Bowl quarterback.
    Those who were in top decisionmaking positions in Iraq in 
those early days when there was no government, no currency, no 
police forces, no functioning anything had to make rapid-fire 
constant decisions with minimal information. Many of those 
decisions were wrong. I hope these hearings will carefully and 
calmly study the good and bad decisions to learn for the 
future.
    I hope these hearings will not become a self-righteous and 
arrogant display of comfortable Monday morning Bush-bashing. 
Unproven, politically charged words like political cronyism and 
implied impeachment for high crimes, both already used this 
morning, are not helpful.
    I hope this is real oversight and not just political 
grandstanding.
    Chairman Waxman. The gentleman yields back the balance of 
his time.
    The Chair now recognizes Ms. Watson.
    Ms. Watson. Thank you, Mr. Chairman, for holding this 
oversight hearing. You are never wrong to seek the truth.
    As we are deeply engaged in a National effort to bring 
democracy to Iraq, I and many of my colleagues continue to 
question the methods and presumptions that took us to Iraq and 
now there for over 3 years of occupation. But all of us here 
are united in our desire to see democracy take hold in Iraq and 
to see Iraqis finally control their own destiny. Unfortunately, 
Mr. Chairman, our own actions have hobbled this effort. The 
foundations of democracy are transparency and accountability, 
yet in Iraq we have only shown the Iraqis how not to build 
their foundations. Our contracts and our reconstruction plans 
for Iraq are opaque with no-bids and cost-plus contracts being 
the norm.
    The CPA, while you were Ambassador, Mr. Bremer, managed to 
misplace $9 billion. That is $9 billion that could be used for 
homeland security and to address Katrina. The U.S. Government 
officials in charge have never been held accountable.
    Mr. Chairman, these are terrible examples for the fledgling 
Iraqi Government and to a people only now learning to be 
citizens instead of subjects. I don't believe there is a 
military solution in Iraq. There is only a diplomatic and 
political solution, and it starts with rectifying our failures 
and setting the right example of transparency and 
accountability to a people who have known too little of either. 
This committee can help fix this damage, and I look forward to 
working with my colleagues to fix it.
    Thank you, Mr. Chairman.
    Chairman Waxman. Thank you very much.
    Mr. Westmoreland.
    Mr. Westmoreland. Thank you, Mr. Chairman.
    This week, this committee will hold a series of hearings 
with the ultimate goal of uncovering waste, fraud and abuse. 
However, if the majority is so concerned with Government waste, 
fraud and abuse, it may want to look at its own calendar. I 
believe this is our second hearing in this first month of 
Congress, yet several of the only 8 bills passed in the first 
32 days of the 110th Congress were assigned to this committee 
yet no subcommittee or full committee hearing, no markup, no 
regular order, no 5 day work week.
    The hearing that will be held here today and tomorrow have 
issues that have been discussed at length by this committee. 
Under Republican leadership, issues such as defense contracting 
and reconstruction spending were brought to the forefront 19 
times in this committee alone without political motives.
    The Coalition Provisional Authority's mission evolved 
rapidly in a very hostile environment. We all recognize that 
the CPA's initial system for distributing funds was not 
perfect. However, it is impractical to expect a Wall Street 
approach to a war zone problem.
    Today, the systems in place are working in a much more 
acceptable manner. The Iraqi security forces are growing in 
size and strength and are taking on a greater role in securing 
their own land. The private sector of Iraq is becoming more 
stable with the help of local businesses and much needed 
infrastructure being completed.
    I want to welcome this very distinguished panel, and I want 
to thank you for your willingness to serve this country in a 
very hostile environment, and I look forward to your testimony.
    Thank you, Mr. Chairman. I yield back the balance of my 
time.
    Chairman Waxman. Thank you very much.
    The Chair now recognizes Mr. Higgins for 2 minutes.
    Mr. Higgins. Thank you, Mr. Chairman.
    I will submit my opening statement for the record and yield 
back the remainder of my time. Thank you.
    [The prepared statement of Hon. Brian Higgins follows:]
    [GRAPHIC] [TIFF OMITTED] 36545.010
    
    Chairman Waxman. Thank you, Mr. Higgins.
    Mr. Lynch.
    Mr. Lynch. Thank you, Mr. Chairman, and I want to thank the 
ranking member for his help as well. I want to thank the 
panelists for your willingness to come before this committee 
and to help us with our work.
    Paragraph 14 of the U.N. Security Council resolution 
directed that the Development Fund for Iraq be used in a 
transparent manner for the benefit of the Iraqi people. 
Unfortunately, our claims, at least my colleagues' claims that 
we did the best we could, those claims are not borne out by the 
facts.
    The truth of the matter is, and a lot of this has been 
presented by the Special Inspector General Bowen in his report, 
demonstrates that the most basic safeguards for the 19 billion 
that we were asked to be custodians of on behalf of the Iraqi 
people--this is Iraqi money--we did not handle this in a manner 
that was transparent. We did not handle this money in a manner 
that was responsible or the way we would hope that our own 
money and our own taxpayer money would be handled.
    When we talk to the contractors on the ground there when 
they were getting paid at the end of CPA's existence when the 
interim Iraqi Government was about to be sworn in and taking 
control, the only instructions they were given with respect to 
this money was to ``bring a big bag.'' A lot of this money was 
handed out in cash out of the back of pickup trucks under the 
direction of the U.N. Security Council, we were supposed to 
hire certain accountants and to put safeguards in place. That 
was never done. As a result, it appears that $12 billion was 
handed out in cash, and there was no one until this year put in 
charge of the Iraq reconstruction efforts.
    This is greatly distressing. I am getting questions from 
the Iraqi leadership now on my several visits to Iraq about how 
this could possibly happen. We have been hurt. Our credibility 
as a country has been hurt. The fact that the American people 
had to step up and replace this money with their own taxpayer 
money is also a disaster.
    Just to rebut my colleagues on the other side of the aisle, 
we did not do the best we could. We did not do the best we 
could under difficult circumstances. We failed in this process 
greatly, and it is the effort of this committee to find out 
why.
    Thank you, Mr. Chairman.
    Chairman Waxman. Thank you, Mr. Lynch.
    Mr. Sali.
    Mr. Sali. Thank you, Mr. Chairman.
    Our Nation has devoted billions of dollars to our efforts 
in Iraq, both for expenses of the war and also the 
reconstruction of the Iraqi economy. While much progress has 
been made, progress can be no excuse for fraud or waste. 
Congress must fulfil its constitutional duty of oversight to 
ensure that taxpayers' money is not squandered and more 
importantly that our service men and women get the resources 
that they need.
    I note that cost overruns during a time of war are as old 
as the Republic. This does not justify financial mismanagement. 
However, it does underscore the fact that the issues before 
this committee are not unique. For example, Abraham Lincoln's 
Secretary of War, Simon Cameron, was notoriously corrupt. As 
one historian has written, ``Cameron's corruption was so 
notorious that Congressman Thaddeus Stevens, when discussing 
Cameron's honesty with Lincoln, told Lincoln, I don't think 
that he would steal a red hot stove. When Cameron demanded 
Stevens retract his statement, Stevens told Lincoln, I believe 
I told you he would not steal a red hot stove. I will now take 
that back.''
    Sixty years ago, the Truman Commission found huge 
quantities of money going to waste or worse in FDR's 
administration of World War II. By these examples, we are 
compelled that even if troubling and disgraceful things come to 
light this week, we cannot let our work devolve into partisan 
finger-pointing.
    Finally, let us remember that Congress' own record on 
matters of financial management should keep us from pounding 
the ethical pulpit too stridently. One survey shows that the 
majority of Americans believe that more than half of all 
Federal spending is wasteful. For this distinguished committee 
and indeed all of Congress, that speaks directly and shamefully 
to the stewardship of the Nation's budget.
    Our constituents and all Americans deserve an honest 
accounting of spending surrounding the conflict in Iraq. That 
is not in dispute. Where there has been incompetence or 
malfeasance, it needs to be revealed and more appropriately 
prosecuted. So let us proceed not with an agenda of retribution 
but rather the commitment to public integrity, honest inquiry 
and that often elusive but always needed quality of the truth, 
and let us apply only the same standard to this 
administration's stewardship of Iraq's reconstruction as we do 
to our own work here on Capitol Hill.
    Thank you, Mr. Chairman. I yield back.
    [The prepared statement of Hon. Bill Sali follows:]
    [GRAPHIC] [TIFF OMITTED] 36545.011
    
    [GRAPHIC] [TIFF OMITTED] 36545.012
    
    Chairman Waxman. Thank you, Mr. Sali.
    Mr. Yarmuth.
    Mr. Yarmuth. Thank you, Mr. Chairman. I want to thank you 
for demonstrating the leadership to hold this hearing and to 
schedule it promptly.
    I also want to thank Ambassador Bremer, Mr. Bowen, and Mr. 
Oliver to joining us today as we examine the impact of the 
Coalition Provisional Authority's management and/or 
mismanagement of the Iraqi reconstruction.
    Getting to the bottom of what appears to be egregious and 
consistent negligence as quickly as possible is, without 
question, in the best interest of this country. I say that, Mr. 
Chairman, not because I am anxious to point fingers or place 
blame but because I do believe the American people have a right 
to know, to demand a high level of competence from their 
Government and I think our troops deserve to know what happens 
to funding that could have been used to create more stable 
conditions. The young men and women in Iraq courageously 
fighting in the name of America must be assured that their 
Government is working with them. The Iraqi people who were told 
they were liberated should not have to watch their future 
squandered. While our President escalates this war against the 
will of the country, we need to at least show our constituents 
that we know what we are doing.
    This hearing, Mr. Chairman, confronts the most pressing 
issue of our time. I am proud to be a part of this work, and I 
look forward to shedding some light on past mistakes to prevent 
future calamity. Thank you for holding the hearings.
    I yield back.
    [The prepared statement of Hon. John A. Yarmuth follows:]
    [GRAPHIC] [TIFF OMITTED] 36545.013
    
    Chairman Waxman. Thank you very much.
    Mr. Marchant. He is not here.
    Mr. Turner.
    Mr. Turner. Thank you, Mr. Chairman.
    I think it is important that this hearing is being held, 
and I think it is also important that people have noted that 
this committee under Chairman Davis' leadership had held 20 
previous hearings on the issue of Iraqi reconstruction and 
oversight.
    One thing that is clear in looking at all of the written 
testimony and the issue that we have before us is that this 
does not meet our American standards of what we expect for the 
conduct of an American-led operation.
    Now I was not here when this Congress voted to provide 
authority to go into Iraq. In fact, over 70 members of the 
Republican conference were not here. I have, however, been here 
to support this effort and to support the men and women in 
uniform who are there, as have many people. I have traveled to 
Iraq twice, and I have traveled to Afghanistan twice. What 
troubles me is not our efforts to undertake review of where 
things have been done inappropriately or improperly as that it 
is always expanded into areas that I think undermine our 
ongoing effort and the morale of our men and women who are 
there.
    Now it is clear from the report that we have in front of us 
that this does not meet our standards. It says the Coalition 
Provisional Authority approach to managing development funds 
for Iraq may have been sufficient if the Coalition Provisional 
Authority had some assurance that the Iraqi ministries had 
controls in place to effectively manage the disbursement of 
funds. Clearly, it has resulted in an impact on our being able 
to achieve our goals, on our reputation and on the Iraqi 
people. That does not meet the American standards. However, 
that is not an issue where we should go all the way to the 
extent of making statements that go to weaken America or to 
weaken our efforts and to support our men and women in an 
ongoing conflict.
    It is important that we have this oversight. It is 
important that we find out what occurred and how we should 
improve it and the sources of those problems, some of which 
appear to be the qualifications of those who were in charge and 
some of those appear to be the processes that were in place. 
But this is not the place to continue to try to undermine what 
is an ongoing conflict with our men and women in uniform today 
whose families are watching and who are concerned for their 
safety. We should be committed to the ongoing processes that 
they meet American standards. We should not undermine our own 
country.
    Chairman Waxman. Thank you. The gentleman's time has 
expired.
    Ms. McCollum.
    Ms. McCollum. Mr. Chairman, in March of this year, American 
troops and Iraqi citizens will start year five of this deadly 
war of choice. Iraq has devolved far beyond invasion, 
occupation and even civil war. It is now a horrific cauldron of 
death perpetrated by insurgents, militias, death squads and 
terrorists. America's troops and innocent Iraqis are trapped in 
the middle.
    Today, we will examine the CPA's contribution to the 
incompetence, deception and negligence that are the hallmark of 
President Bush's Iraq policy. In the Iraqi war zone, some $38 
billion U.S. taxpayer dollars has been appropriated, and much 
of it was spent on so-called reconstruction. The very concept 
of reconstruction in a war zone itself is an oxymoron. In 
addition to the funds Congress approved, over $20 billion of 
Iraqi funds were spent by the CPA, including $8 billion that 
cannot be accounted for.
    What have been the consequences for U.S. troops of dumping 
$8 billion into Iraq's deadly stew of insurgents, terrorists 
and militias?
    Did anyone, our intelligence agencies, State and Defense 
Departments, consider this a risky or dangerous idea?
    To me, it is beyond comprehension, but it now appears 
possible that some of the CPA's unaccounted for cash eventually 
found its way into the hands of insurgents, militias or 
terrorists, possibly funding future attacks against our own 
troops.
    Mr. Chairman, this Congress will not step aside. We will 
not abdicate our responsibilities for oversight. There will be 
no more rubber-stamp appeasement of a President in the name of 
political loyalty. Nearly 3,100 Americans have sacrificed their 
lives in Iraq. Over 20,000 more have sacrificed their bodies. 
Last year, 34,000 innocent Iraqis died violent deaths. Nearly 
100 civilians are killed every single day of the year.
    Mr. Chairman, thank you for providing this committee, the 
opportunity to ask the tough questions because the American 
people and our troops deserve the answers.
    Thank you, Mr. Chairman.
    Chairman Waxman. The gentlelady's time has expired.
    Mr. McHugh.
    Mr. McHugh. Thank you, Mr. Chairman.
    The previous speaker mentioned trying to appease President 
Bush. We have to be very careful when we have these types of 
hearings, that we won't appear to be appeasing those who would 
do us in, and that is why I think these hearings are important 
so that it is very clear that the American people stand 
squarely behind our troops and what their goals are.
    I have had an opportunity to visit Baghdad. I met with Mr. 
Bremer when I was over there. You know he had an extremely 
difficult job. In that kind of a climate that he was in, it is 
inconceivable to me that the things that he got accomplished 
could have been accomplished with perfection. Mistakes were 
made. There is no question about that. But I think under the 
circumstances, the job that he did and his compatriots did over 
there was good. Now if we find shortcomings in these hearings 
that can make sure that these things don't happen in the 
future, great, but mistakes are always made when you are in a 
conflict.
    I would like to remind my colleagues that George 
Washington, his contemporary generals wanted him removed from 
power because he hadn't won any battles. It wasn't until he 
crossed the Delaware and attacked the Hessians at Trenton on 
Christmas morning that the thing started turning around and he 
became the father of our country. People don't remember that.
    Abraham Lincoln's first general was George McClellan. 
McClellan wouldn't fight, and so Lincoln replaced him. 
McClellan was running against him for reelection and because 
the war was going so badly and everybody said it was terrible, 
it was a sure thing Lincoln was going to be defeated until 
things turned around. Grant took Richmond, and other things 
took place. Then Lincoln was popular, and he went back up, and 
he was reelected President.
    Every single war that you have that goes on for any period 
of time, the President, the administration in power is going to 
be criticized because people tire of war, but we must remember 
history and that war is hell. The people that are conducting it 
are really going to be the ones that bear the brunt of that, 
either good or bad. Sometimes when you are going through this, 
you just have to live it out. You have to stick it out.
    We are in a war against terrorists, a worldwide war, and in 
my opinion it is one that we must win.
    Finding fault and finding things we should correct is fine, 
but to just have a blame meeting isn't, in my opinion, 
constructive.
    Chairman Waxman. The gentleman's time has expired.
    Mr. Van Hollen.
    Mr. Van Hollen. Thank you, Mr. Chairman, and thank you for 
holding these hearings and conducting this oversight which I 
think is absolutely essential in order to both assure greater 
accountability but also to learn the lessons of the past we 
move forward in Iraq. I do believe that if this Congress as a 
whole had done a better job of oversight over the past many 
years, we might have avoided some of the problems and mistakes 
that we have encountered.
    The situation, as we know, is not getting better. We just 
had a national intelligence estimate that represents the 
consensus of the intelligence agencies that the situation is 
dire and deteriorating. Therefore, I think it is particularly 
of concern the Bush administration appears to continue to 
resist the notion of allowing this Congress to do its oversight 
job by not allowing Tim Carney to testify before this 
committee.
    I just want to say, Mr. Chairman, I think if you look at 
the record, we can understand why they didn't want him here 
today. He went to Baghdad in April 2003. He left 2 months 
later, disgusted and disillusioned, according to a Washington 
Post story of January 14, 2007. He believed that the U.S. 
occupation administration in Iraq, the CPA, placed ideology 
over pragmatism. He was particularly concerned with the 
proposals for de-Ba'athification and issues regarding what he 
believed inadequate attention to repairing Iraqi 
infrastructure.
    As we know, he was recently tapped to be sent back to Iraq, 
an admission, I think, by the administration that many of the 
earlier decisions taken were wrong. So it seems to me it would 
have been very beneficial for the committee to have him here 
today to understand his original concerns back in 2003 and 
learn from him what he expects to do differently going forward.
    Again, it is a sign that this administration is not taking 
this Congress seriously with respect to our job in oversight. 
They are thumbing their nose at the Congress. They got used to 
a blank check, and they still want a blank check.
    I hope, Mr. Chairman, that we will persist in ensuring that 
we receive his testimony. Thank you.
    Chairman Waxman. Thank you, Mr. Van Hollen.
    Mr. Bilbray.
    Mr. Bilbray. Yes, Mr. Chairman. Mr. Chairman, I would like 
to thank my California colleague, the chairman, for holding 
this hearing.
    I think it is quite appropriate we investigate in depth the 
use of the funds from the Development Fund for Iraq, and it is 
quite appropriate because this is the successor to the 
notorious U.N. Oil for Food program, one of the most corrupt 
programs that I can remember and I think any of us would admit 
not only didn't do the job and not only wasted funds but 
actually financed to a large degree exactly the opposite of 
what was intended. So I think it is appropriate we hold this 
and see it in the perspective of where we have been, what was 
being done back in the nineties when I was previously serving 
in the House and how it evolved into where we are today.
    I would like to just remind my colleagues the great problem 
with this program and its failure is not in the waste of money 
and is not in the expenditure and not even in the corruption if 
the corruption is there. The greatest damage done here, ladies 
and gentlemen, is to the perception to the world and the people 
in this part of the world that maybe Americans can't do 
everything that they set their heart out to do.
    I don't know how many of you spend very much time outside 
of this country, but one of the perceptions that helped us win 
the cold war was the Soviet Bloc really did come to the 
conclusion that Americans do whatever they set their mind to 
do. So why call their bluff and try to fight them. Let us work 
with them.
    That perception has been destroyed in the Middle East 
because we did not get the electricity on, the water on, the 
sewer running. We did not get the infrastructure in, and we did 
not have the ability either for fault or by reality to do what 
they thought we could always do because Americans can do 
anything.
    I would just ask to remind us that we do have a very high 
standard and perception around the world. That standard might 
have been hurt severely by this war, but I think we also have 
to remember that we will never be able to raise that standard 
back up unless we stop being quick to judge and tear down and 
look at the fact that the rest of the world doesn't see you as 
Democrats, us as Republicans. They see all of us as Americans, 
and we will be judged on our success.
    So let us use this hearing to try to build on that success 
and get back the feeling in America and send it to the rest of 
the world that Americans can do anything we want to do if we 
pull together.
    I yield back, Mr. Chairman.
    Chairman Waxman. Thank you, Mr. Bilbray.
    Mr. Hodes.
    Mr. Hodes. Thank you, Mr. Chairman, for holding this 
hearing on the impact of CPA decisionmaking on Iraq 
reconstruction. I also thank the ranking member.
    I look forward to hearing from Mr. Bremer and the rest of 
the witnesses.
    From the reading I have done and the course of events we 
have experienced, we have a situation in Iraq that is devolved 
into chaos and bloodshed which is a cancer on the body politic. 
It seems reasonable to conclude that the failure of the 
administration to conduct appropriate post-conflict 
reconstruction and management contributed significantly to the 
chaos and disaster we are experiencing.
    There was a short window following the bombing and invasion 
in which we had to demonstrate that we could restore basic 
services, preserve existing institutions, create new ones and 
set the proper course for success in Iraq. It was up to 
American officials in charge to plan and execute a 
reconstruction strategy. At the very least, the American and 
Iraqi people deserved people experienced in post-conflict 
reconstruction and management, people with good knowledge about 
Iraq, its diverse people, its history and its culture. Instead, 
it appears that arrogance and incompetence were the hallmarks 
of attitudes and standards.
    I am curious about what it was that Mr. Bremer, a man who 
had never been to Iraq, never led reconstruction efforts, could 
have been put in charge of the most important civil 
reconstruction program since the Marshall Plan. I want to know 
why half of the CPA staff had never worked outside the United 
States and had to get their first passport in order to travel 
to Iraq. I am curious to know why senior civil servants from 
agencies such as the Treasury, Energy and Commerce Departments 
were passed over in favor of recent college graduates with no 
experience in financial management, and they were put in charge 
of Iraq's $13 billion budget. It is critical that we get 
answers to these questions and those surrounding the disbursal 
of Iraqi money.
    The President has just asked us for another $3.5 billion 
for Iraq reconstruction. How much more do the American people 
and the Iraqi people have to pay in dollars and in lives before 
the cycle of incompetence, corruption and cronyism ends?
    If we are to achieve security and stability in Iraq, we 
need to finally learn from past mistakes and engage in an 
honest, transparent and efficient reconstruction program.
    I appreciate the opportunity to have this hearing. I look 
forward to hearing from the witnesses so we can get some 
answers that may help us bring some stability to Iraq.
    Thank you, Mr. Chairman.
    Chairman Waxman. Thank you, Mr. Hodes.
    Mr. Murphy.
    Mr. Murphy. Thank you, Mr. Chairman.
    Occasionally, you hear from Members of this Congress and 
members of this administration that those that might question 
or investigate the premises and conduct of this war somehow 
don't support the brave men and women that are over there. Let 
me just share a story from my district that I think can be told 
1,000 times over throughout this country.
    I knocked on the door of a woman, during the campaign, 
whose son is going back for his second tour of duty in Iraq. He 
has two young kids. Though he personally opposes the war as 
does his family, he feels that it is his duty to not only his 
country but his fellow soldiers to be there and to support 
those efforts. What bothers her the most and in fact bothers 
the family the most is not just that we went into this war upon 
false premises but that once there, our military and our 
occupational infrastructure so badly mismanaged the mission of 
occupation and reconstruction, that this country, Iraq, plunged 
into an unnecessary chaos that frankly is going to put her son 
in even graver jeopardy than he otherwise would have been.
    I don't know if there is any answer to that woman or the 
thousands who ask those same questions around this country. 
With billions in unaccounted for cash-flowing through the CPA, 
it is hard to imagine that there is a satisfactory answer. But 
it is our duty to those families and to those brave men and 
women that are there to ask the questions that we are asking 
today, and I thank the chairman for holding this hearing.
    Mr. Bremer, I remember reading your comments to the press 
when you said that we never had enough troops on the ground 
from the start, and I was frankly impressed by your courage to 
speak so candidly about an administration that too often treats 
its critics like its enemies. I hope you display the same type 
of candor today, and I look forward to your testimony and to 
the testimony of this panel.
    I yield back, Mr. Chairman.
    Chairman Waxman. Thank you, Mr. Murphy.
    Mr. Sarbanes.
    Mr. Sarbanes. Thank you, Mr. Chairman, for holding this 
hearing today.
    I am pleased that we are asking the tough questions about 
the administration's planning and prosecution of the war and 
the concurrent effort to rebuild Iraq. The climate created when 
ideological arrogance substitutes for sound and careful 
analysis is one that nurtures incompetence and usually leads to 
disastrous results.
    The evidence is overwhelming that the administration's plan 
to reconstruct and establish governance in post-Saddam Iraq was 
rife with faulty logic and bad assumptions. Execution of the 
plan exposed our soldiers to increased risk and has resulted in 
the most tragic consequence, unnecessary loss of human life. 
The financial toll and impact on America's reputation abroad 
has also been enormous.
    This administration's decisionmaking process in Iraq and as 
a general matter has all too often relied on the smallest group 
of insular advisors, ignoring military and foreign policy 
experts if their advice runs contrary to a prejudiced political 
ideology. Excluding dissent may result in a unified message but 
very often leads to poor decisions based on flawed information. 
The consequences of this can be seen every day in the continued 
instability and violence in Iraq.
    Mr. Chairman, as America's civilian liberators descended 
upon Baghdad, something went terribly wrong. There was a vacuum 
of order and careful planning and sound judgment. The hearing 
today is to understand where the failures occurred, to demand 
accountability and to ensure that going forward these same 
mistakes are not repeated.
    I thank you for holding today's hearing. I look forward to 
hearing from the panel.
    [The prepared statement of Hon. John P. Sarbanes follows:]
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    Chairman Waxman. Thank you, Mr. Sarbanes.
    Mr. Welch.
    Mr. Welch. Thank you, Mr. Chairman.
    This hearing is really focusing responsibility where it 
belongs, and that is on civilian leadership. The fact of the 
matter is that our military has done its job. When they were 
sent to war by the President, the President wanted them to 
topple Saddam, they did; search for weapons of mass 
destruction, they reported back honestly, they didn't exist; 
and to allow Iraq to have Democratic elections and they have 
had three.
    What has never been done is for the civilian leadership to 
do what it is the responsibility of that civilian leadership to 
do, and that is to have a plan, a realistic mission, one that 
is appropriate for a military and requires the people of 
America to engage in the effort that is defined. The President 
now is talking about political stability in Iraq. What we know 
is that there never, ever was a plan.
    We have Mr. Bremer and others who are here. The questions 
will have to do with waste, fraud and abuse, decisions to 
disband the Baathist Army and so on. But the reality is, and we 
all know this, the people that were sent to Iraq went without a 
plan. They had to wing it. They made decisions on the fly, so 
much so that they literally were handing out tons of cash from 
the backs of pickup trucks.
    The accountability that the American people deserve should 
focus where it belongs, and that is on the civilian leadership 
that from the moment that the invasion began never had a plan 
for the post-fall of Saddam efforts that would be required to 
stabilize Iraq.
    Mr. Chairman, I thank you for convening these hearings to 
allow us to have a long overdue inquiry into the civilian 
mismanagement of this war.
    Chairman Waxman. Thank you, Mr. Welch.
    Mr. Braley.
    Mr. Braley. Thank you, Mr. Chairman and Ranking Member 
Davis.
    As we begin these important hearings, it is important to 
remember that in 2005, Congress expressed in clear terms in the 
National Defense Authorization Act for fiscal year 2006 that 
calendar year 2006 should be a period of significant transition 
to full Iraqi sovereignty with Iraqi security forces taking the 
lead for the security of a free and sovereign Iraq, thereby 
creating the conditions for the phased redeployment of U.S. 
forces in Iraq.
    2006 has come and gone. The Iraqi security forces are not 
taking the lead for the security of a free and sovereign Iraq, 
and instead of progressing toward a phased redeployment, the 
President has escalated our troop levels in Iraq.
    Like Congress, the Special Inspector General for Iraq 
Reconstruction [SIGIR] considered 2006 to be a ``Year of 
Transition.'' Yet, the SIGIR recently released review of that 
``Year of Transition'' highlights grave areas of concern for 
the Reconstruction of Iraq: In 2006, Iraq crude oil production 
continued to lag significantly below targets. In 2006, demands 
for electricity greatly exceeded capacity. The capacity of 
Iraq's ministries to execute their budget remains weak. By 
August 2006, the Government of Iraq had executed only 43 
percent of its budget. Despite billions of dollars in 
investments funded by U.S. taxpayers, the Government of Iraq 
has been unable to protect its infrastructure, particularly in 
the areas of electricity and oil pipelines. Finally, the 
security situation continues to deteriorate, and the 
effectiveness of the Iraqi Security Forces remains ``a 
significant concern.''
    We are here today to examine how we got to this point and 
discuss lessons learned from our past mistakes and successes. A 
senior Department of Defense official has stated: The U.S. 
Government was not systemically structured to execute overseas 
reconstruction and stabilization programs when planning for 
managing post-war Iraq.
    We are here to find out why and make sure that our future 
planning for Iraq does not suffer from similar limitations.
    Thank you, Mr. Chairman.
    [The prepared statement of Hon. Bruce L. Braley follows:]
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    Chairman Waxman. Thank you, Mr. Braley.
    Mr. Davis.
    Mr. Davis of Illinois. Thank you very much, Mr. Chairman.
    I want to thank you for holding this hearing, and I am 
certain that the American people will thank you also because 
there is much too little known about what the needs are, what 
has happened in Iraq and have we spent our money and used our 
resources as wisely, as broadly, as prudently as possible. I am 
sure that this hearing will shed some light on these questions, 
and I want to thank you for the opportunity to raise them, and 
I look forward to the testimony of the witnesses.
    I yield back.
    Chairman Waxman. Thank you very much, Mr. Davis.
    Mrs. Maloney.
    Mrs. Maloney. Thank you, Mr. Chairman and ranking member 
for having this hearing.
    In January 2005, the Special Inspector General for Iraq 
Reconstruction issued a report stating that more than $8.8 
billion was unaccounted for. This will be the first hearing 
that will go into depth to try to find some answers as to what 
happened to $8.8 billion. It is Iraqi money, but I would say 
that if we had been better stewards of the Iraqi money, then we 
would have earned their trust and support and we would not be 
spending so much of the American taxpayers' money. It is 
astonishing the reports that we have read, the total lack of 
standards for the handling of billions and billions of dollars.
    My question today to the Special Inspector General Bowen 
is: Was there any accountability for the $20 billion in funds 
used by the CPA? There are allegations of last minute CPA 
spending sprees, allegations that there was no physical 
security for the cash, allegations that there was a total 
indifference to any accountability and transparency. To me, it 
is astonishing that we could have $8.8 billion that is not 
accounted for.
    I hope that Chairman Waxman lives up to his reputation of 
not stopping until you get the answers as to what happened.
    I would just like to conclude that as we speak and hold 
this meeting, the President is now asking the country and the 
Congress to support his request for an additional 21,000 troops 
and billions and billions more in new funds for the war. I 
would like to hear if the administration has learned any 
lessons from the last 4 years, and I would like to know what 
accountability, oversight and management has been put in place 
to manage the dollars of America. We should manage the dollars 
of Iraq just as prudently as we would our own, and I would 
venture that if we had done a better job, we would be in a 
better position today.
    I look forward to all of your testimonies, and I would like 
to learn as to what happened to these billions of dollars that 
were intended to help Iraq rebuild.
    Thank you. I yield back.
    Chairman Waxman. Thank you, Mrs. Maloney.
    Mr. Delahunt.
    Mr. Delahunt. No questions.
    Chairman Waxman. We now come to the testimony of our 
witnesses, and I would like to introduce our distinguished 
panel.
    We are pleased to have Ambassador Paul Bremer who was the 
Administrator of the Coalition Provisional Authority in Iraq 
from May 2003 to June 2004. He previously served as Ambassador 
to the Netherlands and Ambassador at Large on Counterterrorism. 
He has not testified before Congress since he left Baghdad in 
2004, and the committee appreciates his willingness to be here 
today and to shed some light on some of the questions that we 
have for him.
    Mr. Stuart Bowen is the Special Inspector General for Iraq 
Reconstruction. He has served in that position since January 
2004. His office oversees obligations and expenditures for 
reconstruction and rehabilitation activities in Iraq. Mr. Bowen 
has issued more than 80 audits and other reports, and his 
office has more than 70 open investigations including two dozen 
under investigation by the Department of Justice.
    David Oliver was the Budget Director for the Coalition 
Provisional Authority in Iraq for 6 months in 2003. Previously, 
Mr. Oliver served as a Rear Admiral in the U.S. Navy and as 
Under Secretary of Defense for Acquisition, Technology and 
Logistics. Mr. Oliver is currently the Chief Executive Officer 
of EADS, North America Defense.
    It is our privilege to have all of you here. It is 
customary in this committee to swear in all witnesses, and I 
would like to ask you to stand and take an oath.
    [Witnesses sworn.]
    Chairman Waxman. The record will reflect that each of the 
witnesses answered in the affirmative.
    Your prepared statements will be in the record in their 
entirety.
    I want to begin with Ambassador Bremer.

STATEMENTS OF AMBASSADOR L. PAUL BREMER, FORMER ADMINISTRATOR, 
COALITION PROVISIONAL AUTHORITY; STUART W. BOWEN, JR., SPECIAL 
INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION; AND DAVID R. OLIVER, 
   JR., FORMER ADVISOR, IRAQ MINISTRY OF FINANCE AND FORMER 
   DIRECTOR OF MANAGEMENT AND BUDGET, COALITION PROVISIONAL 
                           AUTHORITY

             STATEMENT OF AMBASSADOR L. PAUL BREMER

    Mr. Bremer. Thank you, Mr. Chairman, for this opportunity 
to meet with the committee.
    I appear on my behalf but also on behalf of the thousands 
and men and women who served with the CPA. They were all 
volunteers who left their families and risked their lives to 
work in Iraq under difficult and dangerous conditions.
    I also want to pay tribute to the courage of the men and 
women in our Armed Forces, more than 3,000 of whom, as we have 
heard this morning, have given their lives in Iraq. We 
Americans and the Iraqi people are in their debt.
    Mr. Chairman, let me say at the outset that I understand 
and share the frustration Americans and members of this 
committee feel about the violence we see every day in Iraq. It 
has certainly proven to be a much more difficult task than we 
anticipated.
    Let me begin by noting that the subject of today's hearing 
is the CPA's use and accounting for funds which belong to the 
Iraqi people held in the so-called Development Fund of Iraq 
[DFI]. These are not appropriated American funds available for 
use in the United States. They were Iraqi funds. Despite the 
chaotic situation we found on the ground in Iraq, Mr. Chairman, 
I believe the CPA discharged its responsibilities to manage 
these Iraqi funds on behalf of the Iraqi people.
    Now I acknowledge that I made mistakes and that with the 
benefit of hindsight I would have made some decisions 
differently, but on the whole I think we made great progress 
under some of the most difficult conditions imaginable 
including putting Iraq on the path to democracy. As you 
consider the actions of the CPA, I respectfully request that 
you keep this in mind. I am proud of what we achieved, and I 
hope that after today's hearing, Members will understand what 
we faced and what we accomplished.
    It is difficult, Mr. Chairman, to give a full picture of 
the desperate situation in Iraq in May 2003. The country was in 
chaos socially, politically and economically. The deep crisis 
had been brought about not by war, not by sanctions but by 
decades long corruption and incompetence of the Saddam regime. 
Among many shocking data, for example, during the 1990's, 
Saddam Hussein cut health care spending by 90 percent, 9-0 
percent. No new hospitals had been built for 20 years. Half of 
the country's public health clinics were closed.
    Even before the war, unemployment was running at 50 
percent. Iraq's primitive banking system was shut down. The 
banks had no system for electronic transfer of funds. This was 
a cash-based economy. At the end of 2002, inflation was running 
at 115,000 percent.
    In mid-2003, two reports, one by the GAO and the other by 
President Clinton's former Deputy of Defense, Dr. John Hamre, 
each compared the CPA's task to those faced by the allies at 
the end of the Second World War. The Special Inspector General 
for Iraq added, ``There is no known precedent for an effort to 
manage the reconstruction of a nation on such a vast scale in 
the midst of danger and violence.''
    To deal with this crisis, Mr. Chairman, the CPA had the 
services of over 3,000 volunteers from 25 countries. Contrary 
to some reports, this was a remarkable and experienced group of 
men and women as I show in an attachment to my full statement. 
It was an honor to serve with them. Our top priority was to get 
the economy moving again. The reconstruction proved to be 
harder than anticipated because, as some members pointed out, 
pre-war planning had not anticipated the difficulty of the 
tasks we faced.
    The first step was to get money into the hands of the Iraqi 
people as quickly as possible. Under Saddam Hussein, the Iraqi 
Government had been by far the country's largest employer, 
providing about four out of five of all jobs. But for several 
months since before the war, millions of Iraqi families had not 
received money owed them for civil services salaries or 
pensions. We used the Iraqi funds that are the subject of 
today's hearing to pay the Iraqis quickly.
    This was exceptionally difficult at first because the Iraqi 
ministries lacked good payroll records. Ideally, we would have 
liked to put those records straight before paying the salaries 
and pensions, but as often in Iraq, the ideal collided with the 
harsh realities on the ground. We simply could not delay paying 
salaries and pensions, delays would have been demoralizing and 
unfair to the millions of Iraqi families, and it might well 
have exacerbated danger to the American soldiers on the ground.
    Using the Iraqi funds to pay the Iraqi families was further 
complicated by the lack of an effective banking system. As I 
mentioned, the banks were closed and in any event were unable 
to transfer funds electronically. So we had to pay Iraqis in 
cash wherever in Iraq they lived.
    We also immediately put these Iraqi funds to work on large 
public works programs to create jobs, and we continued to pay 
the Iraqis who had been employed in the state-owned enterprises 
even after those enterprises were closed down. Due to a 
shortage of Iraqi currency, many of these expenses were paid in 
American dollars drawn from the Iraqi fund account.
    Let me turn to the question of the CPA's management of 
these Iraqi Government funds. My colleagues and I, Mr. 
Chairman, fully understood and accepted our responsibility for 
the temporary stewardship of these Iraqi moneys. We took 
seriously our charge to operate in an open and transparent 
fashion and to use these Iraqi funds in the best interests of 
the Iraqi people. We always strived to meet those objectives, 
and where we may have fallen short, I accept responsibility.
    I understand the committee's concern about the manner in 
which contracts were awarded using Iraqi funds, but it is 
important to remember that although as Administrator, I accept 
full responsibility for the missions assigned to the CPA, I did 
not have the authority over the awarding of contracts. This 
rested with the Department of Army.
    Let us be clear about what we are talking about today 
before we start. Some press stories and some of the statements 
by the Members imply that the Special Inspector General's 
January 2005 report found that the CPA wasted or stole Iraqi 
funds. Yet, when he appeared before this very committee in June 
2005 to discuss his audit report, the Special Inspector General 
stated, ``There have been some misinterpretations about exactly 
what we said, so let me be clear about what the audit did not 
say. It did not say the money was lost. It did not say the 
money was stolen. It did not say the money was fraudulently 
disbursed by U.S. authorities.''
    Indeed, the Special Inspector General and the United 
States, United Nations each concluded the CPA had properly 
disbursed Iraqi funds from the Development Fund to the Iraqi 
ministries. The core difference between the Special Inspector 
General and the CPA turns largely on how the Iraqis handled the 
money, their money, after we disbursed it to those ministries, 
for the Special Inspector General's report implies that we 
should have gone much further, seeking to impose modern or in 
some cases, some Members have suggested American financial 
control systems on the disbursement of these Iraqi funds by 
Iraqi ministers themselves--this, in less than a year on a 
failed state in the middle of a war.
    Mr. Chairman, I know of no person who spent meaningful time 
in Baghdad working with the Iraqi ministers, ministries who 
thought this was possible in the conditions under which we 
worked. Hereto, as so often in Iraq, the ideal clashed with the 
reality we faced. We had to find a way to get the Iraqi 
people's money working quickly for them rebuilding their 
country. As was the case with salaries and pensions, we could 
not wait to install modern financial systems in the ministries.
    A team of experts from the International Monetary Fund came 
and found that the existing Iraqi systems were adequate and 
recommended we use them while beginning the longer term process 
of modernizing those systems. We agreed, and so disbursements 
from the Iraqi Development Fund were made to the Iraqi 
ministries according to the procedures and controls spelled out 
in CPA regulations. The ministries used the existing Iraqi 
systems to carry out their responsibilities for the proper use 
of those funds.
    It was not a perfect solution, but Mr. Chairman, there are 
no perfect solutions in Iraq.
    Let me say in addition, Mr. Chairman, that during my time 
in Baghdad, I regularly visited these ministries, the Ministry 
of Finance, Ministry of Planning, the Central Bank. I saw first 
hand the primitive systems which Iraqi civil servants were 
struggling with. Most ministries did not even have computers 
but kept their records on handwritten spreadsheets. While I am 
not, certainly not a financial expert, my personal observations 
convinced me that the experts from the International Monetary 
Fund were correct that we could not expect rapidly to modernize 
those systems in the middle of a war.
    But there was also a political dimension to our decision to 
use these existing Iraqi financial systems for the control of 
Iraqi funds once they were disbursed. The Coalition's strategy 
and indeed the intent of the international community expressed 
in several U.N. resolutions was to give the Iraqis 
responsibility quickly. This was, after all, their money to be 
used for the benefit of the Iraqi people. When Iraqi ministers 
were appointed by the Iraqi on September 3, 2003, I made clear 
to the ministers that it was their responsibility to develop 
and execute their ministry budgets.
    My colleagues and I were, of course, acutely aware of the 
risks of corruption. Corruption had been encouraged, one could 
say even institutionalized under Saddam Hussein, particularly 
in the Oil for Food program which has already been touched on. 
So we took efforts to combat corruption. We established the 
independence of the Iraqi judiciary. We appointed inspectors 
general in every Iraqi ministry, revitalized an old respected 
Iraqi audit agency and set up a national commission to which 
any Iraqi can bring charges of fraud or waste. Of course, these 
institutions alone in a short time cannot abolish corruption, 
but a start has been made.
    Mr. Chairman, I commend the committee's intention to see 
what lessons can be learned from this experience, and I would 
offer several briefly for your consideration before we turn to 
questions.
    First, there is no substitute for good planning. We heard 
how the planning before the war was inadequate. I agree. The 
executive branch has taken steps in the last couple of years to 
improve its ability to cope with post-conflict situations, and 
I hope Congress will support these where appropriate.
    Second, as I explained in my longer statement, a business 
as usual approach to both contracting and personnel severely 
hampered our ability to begin the massive job of 
reconstruction. The Special Inspector General has developed 
useful ideas for processes in both these areas, contracting and 
personnel, which I commend to the attention of the committee.
    Thank you.
    [The prepared statement of Ambassador Bremer follows:]
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    Chairman Waxman. Thank you very much, Ambassador Bremer.
    Mr. Bowen.

               STATEMENT OF STUART W. BOWEN, JR.

    Mr. Bowen. Thank you, Mr. Chairman and Ranking Member Davis 
and members of the committee, and thank you for the opportunity 
to address the committee on the topic that you identified, Mr. 
Chairman, at the outset and that is waste, fraud and abuse in 
Federal spending in Iraq.
    I depart next week on my 15th trip to Iraq to join the 55 
auditors, investigators and inspectors that are currently 
deployed there, carrying out exactly that mission. Congress has 
assigned my office the duty and responsibility to oversee and 
deter fraud, waste, and abuse with respect to the Iraq relief 
and reconstruction fund, and we continue to carry out that 
mission in Baghdad and across Iraq.
    Indeed, we have 80 open investigations with respect to 
allegations of fraud arising from the U.S. program. Just last 
week, a contractor was sentenced to prison for crimes uncovered 
through a sting operation run by my office, and the week before 
that the former Comptroller of the South Central Region of the 
CPA was sentenced to 9 years in prison for a fraudulent scheme 
that he engaged in with a contractor. That contractor will be 
sentenced next week.
    So we are making progress, aggressively pursuing fraud 
where we find it. But as I have said before to this committee, 
fraud, as a component of the U.S. effort in Iraq is a 
relatively minor component, as a percentage of the total 
investment. Waste is a different story, and we continue to look 
into that. Indeed, when Congress extended my organization in 
December, you assigned me the duty to do a forensic audit which 
is a stem to stern review of the Iraq relief and reconstruction 
fund that will completely and thoroughly answer that second 
matter.
    Also before the committee this morning is the review, as 
you have talked about, of an audit that my office released 
almost exactly 2 years ago at the end of January in 2005, 
looking at how the CPA managed and oversaw the disbursements of 
Development Fund for Iraq moneys distributed to the Iraqi 
ministries.
    Three years ago today, I arrived in Iraq on my first trip, 
and it so turned out that my office that I was assigned in the 
Republican Palace was next to the comptroller's office. In the 
course of those first 2 weeks, I conducted interviews with the 
comptroller and personnel in that office, and over the course 
of my first month there began to uncover concerns that persons 
working in that office brought anonymously to me. Out of that 
came my directive to my auditors to pursue this audit, 
specifically looking at what was happening to the Iraqi money, 
Development Fund for Iraq funds that had been transferred to 
the interim Iraqi ministries that were under CPA's guidance.
    Now the regulatory and legal structure for this transfer of 
money was defined by the United Nations in U.N. Security 
Council Resolution 1483 which has been referred to. It imposed 
upon the CPA, the duty to disburse these oil revenues for the 
benefit of the Iraqi people in a transparent manner, and indeed 
this discussion today hinges on what transparency means.
    There is a disagreement between what my office found and 
what CPA believed that word meant. In our review, in our review 
of CPA's Regulations 1, 2, and 3 and CPA Memo 4 which governed 
and defined CPA's financial oversight, and those were good 
regulations. The issue was implementation. We concluded that 
more should have been done to find out what the Iraqi 
ministries were doing with the $8 billion, $8.8 billion that 
had been disbursed to them for use to pay salaries, 
administrative expenses and other expenses, operational 
expenses.
    Indeed, our review broke down the analysis into finding 
fault in managerial controls. There weren't enough personnel 
frankly as Mr. Oliver noted at the time when we interviewed 
him, not enough personnel in CPA's support office to the 
Ministry of Finance to be able to provide insight into how that 
ministry was operating, disbursing those dollars.
    Financial controls, there was a CPA firm that was hired 
that was supposed to provide some internal auditing for how 
that money was moving, and indeed their mission evolved in the 
course of their assignment. As a result, they became more of an 
accounting support to the comptroller rather than an auditor of 
how that money was being used.
    Third, contractual, there was a duty to ensure that Iraqi 
ministries had some contractual capacity and by its own 
regulations, CPA said hey, Iraqi ministries, you cannot engage 
in contracting unless we certify you. But that happened anyway. 
Only two ministries were certified, the Ministry of Electricity 
and the Ministry of Finance, the Ministry of Finance 2 days 
before the conclusion of the CPA.
    However, it was because of the lack of personnel, the lack 
of insight into how the ministries were operating that there 
was a lack of accountability, and that is the ultimate 
conclusion here with respect to how those ministries used that 
money.
    Now in our discussions with CPA officials about our 
findings after we had drafted the audit, that the dispute 
hinged upon what the duty of transparency was. In our view, 
that duty extended to requiring the Iraqi ministries to provide 
something more than nothing about how they were using that 
money. The CPA interpreted the transparency duty as 
transparency within CPA, and we did not raise concerns about 
that, and KPMG's own review found that CPA internally had 
procedures that operated reasonably effectively in moving the 
money out.
    But what happened when it left? That is where the question 
mark is, and that was the concern raised and the ultimate 
conclusion found by our audit.
    The IMF in 2003, when they did an initial review of, in 
mid-2003, of what the status of the Iraqi ministries were after 
the invasion raised significant concerns about the capacity of 
those ministries to carry out simple accounting, simple 
financial tracking. KPMG and Ernst and Young and the Board of 
Supreme Audit, the Iraqis' own oversight entity, had since 
reviewed the Iraqi ministries and to varying degrees in each 
case found those ministries wanting. Last July, Ernst and Young 
issued a report and reiterated it in October that there were 
shortfalls and weaknesses.
    More to the point, our latest quarterly has an audit of 
ministry capacity development in Iraq, and it is still weak. As 
our report indicates, the facts speak for themselves. At the 
end of last year, the Iraqis left, still had in their treasury 
$12 billion unspent. That meant U.S. money was being spent to 
carry out programs that Iraqi money should have carried out, 
and indeed that is what this latest discussion about 
benchmarks, and indeed when I met with the Iraq Study Group, I 
emphasized benchmarks with teeth, with meaning need to be 
enforced to ensure that the Iraqi ministries executive their 
own money.
    Well, the truth be told, this latest quarterly report is a 
watershed report for this reason. The end of the Iraq Relief 
and Reconstruction Fund is here. A very generous appropriation 
by Congress $21 plus billion for the restoration and recovery 
of that nation has been put entirely under contract and over 80 
percent disbursed, spent. So 90 percent of the projects are 
done.
    The period where the United States bears the preponderant 
burden of moving forward the relief and recovery of Iraq is 
past, and that means that burden must shift to the Iraqis 
themselves, and that means those ministries must execute; that 
Iraqi firms, Iraqi private contractors that we have documented 
have had some challenges along the way, Baghdad Police College 
notably, must step up; and finally that there must be a 
coordinated strategic plan run by Iraq, run by the new Iraqi 
Government that takes on the burden to relieve and reconstruct 
and recover that nation.
    I go back next week. We will continue to provide quarterly 
reports to the Congress about the U.S. program. We will carry 
out a comprehensive audit of how we have spent that money, and 
we will continue to review how the Commander's Emergency 
Response Program, the economic support funds and other funds 
continue to be spent in Iraq to achieve these important goals.
    Finally, we do continue to operate an important lessons 
learned program. Ambassador Bremer referred to our personnel 
study and our contracting study in March. We will release our 
third report on program and project management which will lay 
out in depth. I just finished editing it again, and it is being 
vetted, and it will lay out in detail how reconstruction was 
managed at the sites and through the programs. Finally, at the 
end of the year, we will produce a capping report, the Story of 
Iraq Reconstruction, that will capture all of these issues that 
we have looked at plus the broad range of issues raised in our 
quarterly reports and present them in an accessible and 
informative manner.
    Mr. Chairman, thank you for your time to address the 
committee, and I look forward to questions.
    [The prepared statement of Mr. Bowen follows:]
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    Chairman Waxman. Thank you very much, Mr. Bowen.
    Mr. Oliver.
    You want to pull the mic in close, and there is a button.

               STATEMENT OF DAVID R. OLIVER, JR.

    Mr. Oliver. Mr. Chairman, I provided a paper I wrote in 
November 2003, when I came back.
    Sir?
    Chairman Waxman. Pull it in a little closer if you would, 
please.
    Mr. Oliver. I provided a report to the committee that I 
wrote in November 2003, when I came back because I wanted to 
show you what I said at that time.
    I think the Ambassador has addressed, fully addressed the 
reasons we relied upon the Iraqis, the Iraqi Government to 
dispense and account for their DFI money.
    [The prepared statement of Mr. Oliver follows:]
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    Chairman Waxman. Thank you very much.
    I thank you very much for your testimony. You pointed out 
that there are lessons we need to learn. Both Ambassador Bremer 
and Mr. Bowen emphasized that point, and I think that is very 
important. But for us to learn lessons, we also need to know 
what happened in the past.
    As I pointed out in a memo that I circulated, what we had 
was in a little more than a year, $12 billion in U.S. currency 
removed from the vaults of the Federal Reserve and flown into 
Iraq. This money, mainly hundred dollar bills, was packed into 
bricks, and each brick was worth $400,000 each. I think we have 
a picture of the bricks on the screen. They were assembled into 
large pallets containing over $60 million in cash and flown 
into Iraq.
    In December 2003, Ambassador Bremer and the Coalition 
Provisional Authority asked for a shipment of $1.5 billion to 
be flown into Iraq, and a Federal Reserve official described 
this in an e-mail as the largest payout of U.S. currency in 
U.S. history. But this didn't remain the largest for very long 
because in June, $2.4 billion was sent to Iraq, and this time a 
Federal Reserve official wrote, ``Just when you think you have 
seen it all, the CPA is ordering $2,401,600,000 in currency.''
    Well, the question this committee is trying to answer is: 
What happened to the money. Was it spent responsibly? Was it 
misspent? Was it wasted? Did it go to pay off corrupt 
officials? Or worst of all, did some of this money get into the 
hands of the insurgents and those who are fighting us today in 
Iraq?
    Mr. Bowen, in your January 2005 report, you issued an audit 
and you tried to track what happened to part of the cash 
shipped to Iraq. The major finding in your audit is that the 
CPA did not establish or implement sufficient managerial, 
financial and contractual controls to ensure DFI funds were 
used in a transparent manner. In that report, you examined $8.8 
billion in cash that was not properly accounted for.
    My first question is whether this is all the cash that is 
missing. As a memo indicates, $12 billion in cash was shipped 
into Iraq. Do we know how any of this money was spent?
    Mr. Bowen. Yes, a total, the total amount of Development 
Fund for Iraq money that was disbursed or shipped to Iraq for 
its use in the period of the CPA was about $19 billion, but it 
was used for different purposes. The $8.8 billion is the amount 
from October 2003 through the end of June 2004, that we looked 
at in the course of this audit that was disbursed for the 
ministries' operations themselves.
    There was also substantial funds, several billion executed 
through the Program Review Board, a program and contract review 
process managed by the CPA that approved Development Fund for 
Iraq money for use in the relief and reconstruction of Iraq.
    Chairman Waxman. They had a Program Review Board. Was that 
to assure the transparency of the money to audit and know where 
the money was going?
    Mr. Bowen. Yes, it was to ensure that proposed projects 
were adequately vetted before they were executed. CPA was the 
interim government for Iraq. It had, pursuant to Regulation 1 
of CPA and U.N. Security Council Resolution 1483, the 
responsibility for the management of the entire DFI and also 
the responsibility that money was used for the benefit of the 
Iraqi people.
    There are different ways that money was used. One way was 
to restart the operation of the ministries, and that required 
funding those ministries, and that is what the ministry budgets 
were for, and that is what the $8.8 billion was for.
    Chairman Waxman. How much of that money has not been 
accounted for of the money you describe?
    Mr. Bowen. Are you talking about the ministry budget?
    Chairman Waxman. Of the total amount of money that was 
shipped to Iraq in cash, how much is not accounted for?
    Mr. Bowen. Well, our audit did not look at the entire DFI. 
We just looked at the money appropriated for the ministries. 
When I say that we don't have good accounting, what I have 
really said is that it was the conclusion of our auditors and 
the finding of our audit that the CPA should have required more 
from the ministries with respect to how they executed that $8.8 
billion.
    Chairman Waxman. So this $8.8 billion was distributed to 
the ministries.
    Mr. Bowen. That is right.
    Chairman Waxman. Did you try to find out what happened with 
the money once it went to the ministries?
    Mr. Bowen. No, there are audits that are conducted by KPMG, 
Ernst and Young, and the Board of Supreme Audit which we 
continue to support in their review of that, of that money. I 
met with the President of the Board of Supreme Audit who is 
looking at that, and I have helped him get the documentation of 
how that money was used such as it is available.
    Chairman Waxman. How much of it went to ghost employees?
    That has been a widely circulated charge that it went to 
ministries. They had a certain number of employees, but then 
they had so much more for more employees. If they didn't really 
have those people as employees, they would be ghost employees. 
Do you have any idea?
    Mr. Bowen. I don't know how much, but we identified the 
problem of paying ghost employees in the course of performing 
this audit. With respect to Facilities Protection Service 
employees at two ministries, only a small percentage of those 
actually on the rolls existed, at least pursuant to our 
interviews with the senior advisors to those ministries. They 
raised concerns to us about it.
    But the problem of ghost employees has, I think, been an 
issue from the start. It is today in Iraq and was frankly 
before the invasion. It was a problem that endured since the 
age of Saddam.
    Chairman Waxman. Ambassador Bremer, you had your own order 
requiring transparency. You were responsible for this money. Do 
you believe you applied appropriate standards in spending the 
$12 billion in cash and how do you respond to Mr. Bowen's 
concern that you didn't live up those responsibilities of 
transparency, that so much of this money went to the ministries 
and a great part of it went to ghost employees?
    Mr. Bremer. Well, Mr. Chairman, first yes, as I said in my 
statement, I think under the circumstances that we faced in the 
middle of a war on the back of a basically bankrupt country, we 
met our obligations. Where the Inspector General's report went, 
I think, further than any of us believed was possible, and it 
is just a difference of opinion here, was in the implication of 
his report that we should have been able to impose modern 
accounting system on the Iraqi ministries themselves for the 
execution of their budget. You know, he said----
    Chairman Waxman. Is that what you are saying, Mr. Bowen, 
because that isn't what I understood you were saying? Mr. 
Bowen, is that the complaint of the Inspector General?
    Mr. Bowen. No. It was one level above that analysis. We 
weren't implying that. What our conclusion was, was that the 
duty of transparency required the CPA to obtain some reporting 
about how the ministries executed their budgets. In our 
discussions with the CPA during the course of this audit, the 
CPA's interpretation of transparency was that required 
transparency with respect to how the CPA managed the 
Development Fund for Iraq internally and not what happened to 
them after they were transferred to the ministries.
    Chairman Waxman. Mr. Bowen, by dumping $12 billion in cash 
into Iraq without proper safeguards, as you have determined, 
could we have undermined our efforts in Iraq by actually 
funding the enemy?
    Mr. Bowen. I don't want to speculate about that, but I will 
say that the security problems and the corruption problems that 
have dogged the effort in Iraq and have burdened the interim 
Iraqi Government--and I should point out we are on our fourth 
government since the invasion in Iraq--continue to be a problem 
today as our latest quarterly report points out.
    Chairman Waxman. Ambassador Bremer, are you concerned about 
the possibility that some of this money went to ghost 
employees, we don't know where it went, and it might be showing 
up in the hands of insurgents that are fighting U.S. troops?
    Mr. Bremer. If there were evidence of that, I would 
certainly be concerned.
    Chairman Waxman. We don't know whether there is evidence of 
it.
    Mr. Bremer. I don't know.
    Chairman Waxman. But we don't know whether the people who 
got the money were entitled to it or what they did with it.
    Mr. Bremer. As the Inspector General pointed out, the 
problem of ghost employees was certainly there, and it was 
there even before the invasion, but I have no knowledge of 
moneys being diverted. I would certainly be concerned if I 
thought they were.
    Chairman Waxman. Well, $12 billion is a lot of money. It 
could have been used for a lot of projects that American 
taxpayers ended up funding through our appropriations. It seems 
to me inconceivable that we can't explain what happened to it, 
but that seems to be the situation we are in. Is that an 
accurate statement, Mr. Bowen?
    Mr. Bowen. I think the weakness of Iraqi ministries to 
execute capital budgets has been a problem since the start, and 
our latest audit report on that matter clearly substantiates 
that fact. But the end of the Iraq Relief and Reconstruction 
Fund means that the Iraqis must sustain the burden to fund 
their relief and reconstruction moving forward.
    Chairman Waxman. Thank you very much.
    Mr. Davis.
    Mr. Davis of Virginia. Thank you very much.
    Mr. Bowen, let me start with you. We have heard about your 
January 2005 audit which determined that $8.8 billion from the 
DFI, the Development Fund for Iraq, was allocated ``without 
adequate controls.'' Of course, we are coming into a country 
with basically no government, is that correct?
    Mr. Bowen. Well, yes, with the mere structures of 
government in place and that had to be reconstituted.
    Mr. Davis of Virginia. And a lot of records were missing?
    Mr. Bowen. That is right.
    Mr. Davis of Virginia. Payroll records, Mr. Bremer, payroll 
records were missing. I mean they were starting literally from 
scratch in some cases, is that correct, Mr. Bremer?
    Mr. Bremer. Yes, that is right.
    Mr. Davis of Virginia. Two misconceptions are commonly 
made, one, that these were U.S. tax dollars. Were these U.S. 
tax dollars, Mr. Bowen?
    Mr. Bowen. They were not.
    Mr. Davis of Virginia. These were Iraqi dollars, correct?
    Mr. Bowen. That is right.
    Mr. Davis of Virginia. Second, that this money was stolen, 
was this money stolen?
    Mr. Bowen. No, it was not.
    Mr. Davis of Virginia. Thank you.
    Can you clarify some points for us? Is there any evidence 
this money was fraudulently appropriated?
    Mr. Bowen. No evidence of that.
    Mr. Davis of Virginia. Who had the ultimate control over 
these funds, the Iraqis or the CPA?
    Mr. Bowen. The CPA was the interim government of Iraq, so 
it had a fiduciary duty to manage the Development Fund for Iraq 
for the benefit of Iraqis. So until June 28, 2004, pursuant to 
the U.N. Security Council resolutions that were operative, the 
CPA had responsibility.
    The Iraqi ministries were being stood up, and it was CPA's 
policy to help them stand up by giving them responsibility, and 
one of those was budget execution. And my core point, as I have 
said, is that there should have been some mechanism in place to 
obtain information about how those ministries executed those 
budgets.
    Mr. Davis of Virginia. Let me ask Ambassador Bremer. You 
came in, and you have the money. The Iraqis haven't paid their 
people for sometimes months that was owed them at this point. 
What safeguards could you have put in place immediately, 
looking at this in retrospect?
    Mr. Bremer. Well, we were dealing in a cash economy with no 
banks, no funds transfers, no national telephone system.
    Mr. Davis of Virginia. Was there any alternative to putting 
the money on a plane and sending it?
    Mr. Bremer. I don't, I haven't heard anybody come up with 
an alternative in the circumstances we had.
    Mr. Davis of Virginia. You are just being ridiculed, but 
frankly if it is a cash economy, that is about the only option 
you have, isn't it?
    Mr. Bremer. Yes, sir.
    Mr. Davis of Virginia. All right. So what safeguards?
    They needed to get money out to people right away. You had 
to trust the ministries. There was nobody else on the ground at 
that point.
    Mr. Bremer. What we did was have our people from our 
offices check the payrolls that were being asked to be paid in 
each ministry against the pre-war payroll records of those 
ministries. Now, of course, we had very limited capability of 
knowing whether the pre-war payrolls were adequate, as the 
Inspector General pointed out, but we did that. Then the 
Ministry of Finance did a double check on all of the payrolls. 
That was the system.
    Mr. Davis of Virginia. That was really the only check that 
you had at least immediately.
    Mr. Bremer. Yes.
    Mr. Davis of Virginia. Let me ask both of you. How long 
would it have taken to get up some kind of system?
    Mr. Bowen, what would you have done under those 
circumstances where you needed to disburse money immediately 
and given the records that Ambassador Bremer is talking about. 
You are an accountant, and so you have to go by the book, but 
realistically on the ground, what would you have suggested?
    Mr. Bowen. I would have acquired some reporting from each 
ministry about how the money that they executed was used.
    Mr. Davis of Virginia. Did you have anybody report to you, 
Ambassador Bremer?
    Mr. Bremer. Well, the system as I understand it was that in 
the Iraqi system, which we agreed to use at the recommendation 
of the International Monetary Fund, every month a ministry 
would report back on its expenditures for the previous month 
and the Ministry of Finance would review those records before 
disbursing the next month. In other words, they were basically 
on a month to month basis.
    The Ministry of Finance had an entire department that 
conducted these reviews. They often turned down requests 
because they didn't find that the Ministry of, say, Irrigation 
had provided adequate information, so they would delay 
disbursing the next month until they were satisfied. It is a 
rather, by our standards, cumbersome way to do it, but that is 
how they did it.
    Mr. Davis of Virginia. Given the fact that you didn't have 
any systems up and operating and it was a cash economy.
    Let me ask Mr. Bowen. Is it that there were no receipts or 
documentation or that they were just not very good?
    Mr. Bowen. In our review, there were virtually no, there 
was virtually no documentation. What we found were balance 
sheets, and that is what the CPA published on its Web site, 
that showed allocations and disbursements.
    The Ministry of Finance was, as it is today, weak in its 
accounting capacities--as the IMF identified in June 2003, very 
weak in its internal controls--and as KPMG identified in 
December 2003 in its report, there were significant weaknesses 
there and among other ministries with respect to those 
ministries' internal controls.
    But really, the issue again is about the burden imposed by 
the duty of transparency that the U.N. required of the CPA with 
respect to how the DFI was used, and that, in our view, in the 
view of our audit, was that it required reporting to the CPA, 
which was the interim government of Iraq, more detail about how 
the money was transferred or used.
    Mr. Davis of Virginia. Ambassador Bremer has just told us 
what they reported back and forth, is that correct? So you 
didn't ask him for any accountability.
    Mr. Oliver, this is a good time to bring you in here. You 
were the advisor to the Iraqi Minister on Finance, so I hope 
you can shed some light on the process. Could you describe who 
made up the ministry and how it functioned?
    Mr. Oliver. The Ministry of Finance? The Ministry of 
Finance essentially was the senior ministry and was composed of 
significant people that knew how the distribution of the 
government was arranged. The key to it is you have to 
understand that there are no computers and there are no, there 
is no Internet connection. So, for example, the No. 3 person in 
finance is the man who distributes all the money, and in Iraq 
all the money over $26 required a written report from him to be 
expended. That person only had one thing on his desk which was 
not a telephone or a computer but was a pad of tracing paper on 
which he wrote these things out by long hand and they were 
transferred by car.
    Now, as the Ambassador says, by the middle of each month 
under normal circumstances, each ministry would report back to 
the Minister of Finance as to what they had spent and they 
would allocate it.
    I had only 4 to 10 people working for me. I had a quarter 
of them sitting with that person who was the Director of 
Finances, so they could oversee the reports that he was getting 
back over what was going on. Unfortunately, by the time the IG 
arrived, Jacob Noel [phonetically], who was the man who was in 
charge of that, had been injured in the attack on the Rashida 
[phonetically] Hotel and had gone back to the United Kingdom.
    Mr. Davis of Virginia. When you noticed the ministry wasn't 
functioning at a level of adequate accountability, who did you 
report this to and what did you say and what did they say back?
    Mr. Oliver. I am not sure. I don't agree. I think the 
minister of, Ministry of Finance was a very competent 
organization which was supervised by the Board of Audit and 
Supervision which you have to understand. The Ministry of 
Finance and the Board of Audit is 1,600 U.K.-trained 
accountants which were certainly more competent than anything 
we could provide at that time.
    Mr. Davis of Virginia. OK.
    Ambassador Bremer, did you, at any point, notice that the 
funds being disbursed by the IAMB to the Iraqi Finance Ministry 
were being misused?
    Mr. Bremer. Disbursed by whom, sir?
    Mr. Davis of Virginia. The IAMB.
    Mr. Bremer. I think the IAMB was the audit organization 
established by the U.N. Security Council Resolution 1483. I 
don't think they had any responsibility for disbursing funds. 
Did you mean from?
    Mr. Davis of Virginia. How about of your money that you 
were disbursing to them?
    Mr. Bremer. I am afraid I don't understand the question.
    Mr. Davis of Virginia. The CPA money.
    Mr. Bremer. The CPA money, and what? I am afraid I don't 
understand.
    Mr. Davis of Virginia. Let me ask Mr. Bowen this. What 
should you or what can the United States do to ensure that in 
the future standards of accountability cover reconstruction 
efforts past the point of disbursement because that is really 
the big problem here?
    You, obviously, made adequate disbursements. You asked for 
accountability. You had to do this retroactively because the 
money had to get out there.
    Mr. Bowen, do you agree with that?
    Mr. Bowen. Yes, well, and as Ambassador Bremer has pointed 
out, it was an extremely chaotic situation. When he arrived in 
Iraq, I think he has described the city was on fire.
    Mr. Davis of Virginia. Of course, you have to get the money 
out.
    Mr. Bowen. And as you identified, the government was non-
existent. To me, that situation screams for more oversight, 
more controls, more feedback than less.
    Mr. Davis of Virginia. But you can't not disburse money at 
that point. You can't say well, we are going to give you 3 
weeks to get this while people don't get money.
    Mr. Bowen. Yes. I am not going to compartmentalize the 
analysis just so you can't do this, you can't do that. If you 
are going to disburse the money, you ought to have some, and I 
don't mean Wall Street or whatever standard anyone wants, say 
Big 4, just something that provides feedback to the interim 
government about how that money was used. As our audit 
indicates, what that something was, was the Ministry said yes, 
we received this money; yes, we expended it. The level of 
detail beyond that, as the President of the Board of Supreme 
Audit has told me, is virtually non-existent.
    Mr. Davis of Virginia. Well, let me get to the nub of this. 
Ambassador Bremer, just from your written testimony, I have 
this question. You noted that the Special Inspector General's 
report implies that the Coalition Provisional Authority should 
have imposed modern accounting and financial control systems in 
less than a year on a failed state in the middle of a war, and 
you say, I know of no one who spent time in Baghdad working 
with Iraqi ministries who thought this was possible in the 
circumstances under which we worked. Isn't that the nub of the 
whole issue?
    Mr. Bremer. Yes, it is. Of course, I agree the ideal that 
the Inspector General lays out would be desirable, but we were 
in the middle of a war, working in very difficult conditions 
and we had to move quickly to get this Iraqi money working for 
the Iraqi people.
    Chairman Waxman. Thank you, Mr. Davis.
    Before I call on the next member, I just want to ask Mr. 
Bowen one question. What are the consequences today of the 
mistakes that we are discussing at the time that the Coalition 
Provisional Government was not handling the money in the way 
you thought it should have been handled?
    Mr. Bowen. As I said, we are three governments down the 
road from there, so we are encountering a whole different 
series of problems, some similar, some very different. The 
biggest issues today, as I point out in my latest quarterly, 
are corruption. Barham Salih said last week, when talking about 
misappropriation of funds, it is occurring on the Iraqi side of 
the ledger simply because of the lack of accounting controls 
internally, the lack of capacity there. He pointed out.
    Chairman Waxman. Just at the time of the Provisional 
Authority.
    Mr. Bowen. He pointed out that the Baiji Refinery lost to 
corruption about $1 billion in crude oil refined products, and 
his concern--this is the Deputy Prime Minister of Iraq 
speaking--was ``that money went to the insurgents.'' If that is 
his concern, it is our concern too, and given the situation, 
the lack of stabilization, it is probably a plausible analysis 
on his part.
    Chairman Waxman. Thank you.
    Mr. Cummings.
    Mr. Cummings. Mr. Bowen, you said a few minutes ago 
information flowing that should have been flowing back to the 
CPA, you used the phrase something more than nothing. Is that 
what you said?
    Mr. Bowen. That is right.
    Mr. Cummings. So, basically, we don't know where a lot of 
this money actually ended up, do we?
    Mr. Bowen. Again, it is about the interpretation of 
transparency. The CPA was transparent in how the CPA managed 
its internal use of the DFI, and that has been confirmed by an 
outside auditor. But how that money was used by the Iraqi 
ministries is a question that I can't answer, but it is a 
question that the President of the Board of Supreme Audit is 
vigorously proceeding, pursuing right now with our support.
    Mr. Cummings. We don't have evidence. We have no evidence. 
We can't confirm that it didn't end up in the hands of 
insurgents, is that right?
    Mr. Bowen. Well, we know that it was, we have anecdotal 
evidence that it was used to pay salaries. We know that. We 
know that it was used to pay administrative overhead, but the 
reporting mechanisms from the ministries to the Ministry of 
Finance were weak, as identified by the IMF and then KPMG in 
2003. But more to the point, CPA which was the interim 
government of Iraq did not get any sort of detailed insight 
into how that money was used by the ministries.
    Mr. Cummings. Thank you.
    Ambassador Bremmer, I want to ask you about Regulation No. 
2 which was issued on June 18, 2003. This regulation says that 
Iraqi funds administered by the CPA shall be managed ``in a 
transparent manner for and on behalf of the Iraqi people 
consistent with U.N. Resolution 1483.'' You are familiar with 
that, are you not?
    Mr. Bremer. Yes, sir.
    Mr. Cummings. Ambassador Bremer, this is your own 
regulation, isn't it?
    Mr. Bremer. Yes, sir.
    Mr. Cummings. Do you think you met the standard?
    Mr. Bremer. Yes, sir.
    Mr. Cummings. Mr. Bowen, you audited how these funds were 
spent. Do you think the CPA met the standard of Regulation No. 
2?
    Mr. Bowen. Again, the audit looks at the $8.8 billion 
disbursed to the ministries, and so just looking at that 
particular tranche of the DFI, it was our finding that the CPA 
should have done more to ensure transparency of how the 
ministries themselves executed their budgets.
    Mr. Cummings. Let me ask you this. Regulation No. 2 also 
says the CPA shall obtain the services of an independent 
certified public accounting firm. Mr. Bowen, what would be the 
purpose of an independent certified public accounting firm? 
What would be the purpose of that?
    Mr. Bowen. Its mission was to service functionally the 
internal auditor to the comptroller of how the DFI was being 
managed and to promote transparency.
    Mr. Cummings. Now, Mr. Bowen, during your audit, did you 
determine whether the Ambassador in fact hired such an 
accounting firm?
    Mr. Bowen. They did hire an accounting firm, but the 
accounting firm, as we identified in the audit, didn't meet the 
milestones that were expected of it.
    Mr. Cummings. So were the purposes fulfilled by that 
accounting firm?
    Mr. Bowen. No, they weren't.
    Mr. Cummings. Ambassador Bremer, why didn't you bring a 
certified public accounting firm on pursuant to your own 
regulation?
    Mr. Bremer. When I looked into this after I saw the 
Inspector General's report, it became clear that the CPA 
comptroller who was in charge of this project, and again I 
think it was reported by the Special Inspector General, once 
the accounting firm was hired, changed the task of that 
accounting firm to help him produce better track accounting for 
DFI funds.
    The regulation, as you pointed out, calls for what it 
should be, he should support the objective of ensuring the fund 
is administered and used in a transparent way.
    Mr. Cummings. What was the name of that firm, by the way, 
the firm you refer to, if you know?
    Mr. Bremer. That was hired?
    Mr. Cummings. Yes.
    Mr. Bremer. North Star, I understand.
    Mr. Cummings. Can you tell the committee what type of 
company North Star was and can you tell the committee whether 
North Star had any accountants on its staff, any?
    Mr. Bremer. I don't know what kind of firm it was other 
than it was an accounting firm. I have read the Special 
Inspector General's report that says that it had certified 
accountants on it.
    Mr. Cummings. Would you be concerned or upset if you found 
out that there were no accountants on North Star's staff? Would 
that concern you?
    Mr. Bremer. It would if it were true. I don't know. I don't 
know if it is true.
    Mr. Cummings. Can you tell us the value of that contract?
    Mr. Bremer. No, I don't know off the top. I would be happy 
to provide it.
    Mr. Cummings. Well, let me tell you. I can tell you it was 
$1.4 million.
    Let me show you this. I would like to show you a picture of 
a house. Can you see that up there?
    According to press accounts, this house in San Diego is 
listed to North Star as North Star's official business address. 
Did you know this company was run out of somebody's house, this 
company that got the $1.4 million?
    Mr. Bremer. No. At the, I didn't know until I read about it 
in, I think the hearings that were held here in June 2005.
    Mr. Cummings. I see my time is up. Thank you, Mr. Chairman.
    Chairman Waxman. Thank you, Mr. Cummings.
    Mr. Issa.
    Mr. Issa. While that picture is up, I might note that this 
committee has encouraged telecommuting, and much of the Federal 
Government is presently run out of homes very similar to that.
    Mr. Bowen, if I could followup on some things the chairman 
brought up earlier in his opening statement, as I understand, 
the Baathist Party was somewhere between a form of socialism 
and was a little between Stalin and Hitler if you wanted to 
look at how they ran business, and so they had a lot of 
communism in the sense that they had nationalized electricity, 
nationalized health care, nationalized everything, and that 
leads to a large Federal central budget.
    How large pre our invasion was the budget? How much was 
dispensed by Saddam in his currency every month?
    Mr. Bowen. I don't, we don't have any information, and we 
never looked at Saddam's operations in the course of our work.
    Mr. Issa. Ambassador Bremer, what was the annual budget 
that Saddam was writing checks even under Oil for Food? What 
was he spending?
    Mr. Bremer. I think I am going to have to defer to Admiral 
Oliver who may know the number. I don't know it off the top of 
my head.
    Mr. Issa. Third time is a charm, Admiral.
    Mr. Oliver. We decided that it was around $14.7 billion 
which is what we established for the first year's budget.
    Mr. Issa. OK, so we are talking about $15 billion. We are 
looking at a country that before we went in was spending of its 
own money, $15 billion, without any unusual war, disruption, 
etc., and it was handing bills with Saddam's picture on them. 
Is that right?
    Mr. Oliver. [Nodded affirmatively.]
    Mr. Issa. OK, I want to know what the there is. We are 
looking at a couple hundred dollars per capita in a socialist 
country where, as I understand it, the chairman as a 
representation of the party, they have been saying that the 
worst thing we could do, Ambassador Bremer, was dismiss the 
military, dismiss the government, dismiss these people and put 
the country into chaos. Didn't this money do exactly the 
opposite? Didn't it keep people on their job?
    Mr. Bremer. Well, we thought it was very important after we 
arrived to take into account this important fact. Millions and 
millions of Iraqi families depended on civil service salaries, 
and millions more depended on civil service pensions. It was 
their only source of income. They had not been paid since 
before the war. It was clear to us that we needed to get this 
Iraqi money into their hands quickly, and that was our top 
objective. In a cash economy, it is not obvious to me what the 
alternative was, frankly.
    Mr. Issa. Mr. Bowen, following up on the same line, are we 
dealing with hundreds of millions or billions of dollars that 
ended up in Swiss banks the way they did under the Oil for Food 
program before the United States went into Iraq? Do you have 
any evidence of money ending up in large amounts from this cash 
in foreign countries?
    Mr. Bowen. I deal regularly with Commissioner Radhi who is 
the head of the Commission on Public Integrity, the FBI for 
Iraq set up by the CPA, and he has over 2,000 ongoing as a 
result of corruption with respect to the Development Fund for 
Iraq moneys. So, while we don't have jurisdiction over those 
cases, the Iraqi entity that does has reported to me cases 
amounting to the billions of dollars with respect to 
misappropriation or misallocation.
    Mr. Issa. You used a B. So out of $15 billion, you are 
saying $2 billion or more in cash were taken and redirected by 
Iraqis.
    Mr. Bowen. I should say he has allegations, cases, 
allegations of fraud. Those are not convictions, but he has 
cases ongoing that, yes, in multiple billions. That is correct.
    Mr. Issa. There are allegations of multiple billions.
    Mr. Bowen. Correct.
    Mr. Issa. So far, the Iraqis looking at how to control the 
Iraqi money, what have they established in the way of funds 
seized in foreign accounts because they obviously have the 
authority as a country to seize funds of these people they are 
alleging against?
    How much money has been found overseas, locked up or in 
cash locked up?
    Mr. Bowen. They had a problem pursuing that. That is a good 
question, that they have weak internal procedures with respect 
to this, weak law enforcement. It is still developing 
government. It is a very fledgling democracy. But there are 
concerns that have been, that I have heard voiced to me by both 
Judge Radhi and Abdel Baset, President of the Board of Supreme 
Audit, about exactly this issue, their capacity to both convict 
those who have absconded with these funds, bring them to 
justice and recover the money.
    Mr. Issa. In the Oil for Food program over the years, how 
many billions of dollars did we assess were taken by Saddam, 
his family, friends and redirected?
    Mr. Bowen. I don't know how much we assessed, but I know 
that the VOCA report identified billions in potentially 
misappropriated funds.
    Mr. Issa. My time has run up.
    But Ambassador Bremer, it is fair to say that this is part 
of what was going on when you took over, and the idea that you 
were going to completely eliminate it if you used any Iraqis at 
all to disburse the funds would have been ludicrous, wouldn't 
it?
    Mr. Bremer. Yes.
    Mr. Issa. Thank you, Mr. Chairman.
    Chairman Waxman. Thank you, Mr. Issa.
    Mr. Tierney.
    Mr. Tierney. Thank you, Mr. Chairman.
    Last fall, the press reported that the CPA staff was filled 
with people who were not the best qualified candidates but who 
were hired because of their political connections. I would like 
to address that issue a little bit. There are two basic 
questions there essentially. One is whether or not unqualified 
people were given positions of responsibility and the other is 
whether the qualified people might have been rejected in favor 
of other people who were unqualified based on politics.
    Let me focus on the first one of those issues, the 
qualifications. A Washington Post article back in May 2004, 
notes that six young people received e-mails out of the blue, 
asking if they would like to work with the CPA in Iraq. None of 
them had expressed any interest. None of them had any 
experience. None knew anything about Federal procurement and 
budget rules. All were hired without interviews, and all did 
not have security clearances.
    Originally, the understanding was they were hired to take 
low level jobs in the CPA budget office, but because CPA had 
not recruited qualified senior people, they ended up 
responsible for spending the Iraq money in the budget.
    All of them apparently posted their resumes on the Heritage 
Foundationsite and were hired off of that site along with other 
people. They were just out of college, and they were paid 
$100,000.
    Ambassador Bremer, your fellow employee, Mr. Smith, who was 
the head of the CPA headquarters in Washington, DC, and worked 
for you said this about the qualifications of the staff: ``I 
just don't think we sent the A team. We just didn't tap the 
right people to do this job. It was a tough, tough job. Instead 
we got people who went out there because of their political 
leanings''--sort of a harsh assessment on that.
    I want to know who did the hiring. Was it you? Was it the 
Department of Defense and if it was the Department of Defense, 
who ordered it?
    Do you agree with that statement or do you think you had 
your A team?
    Mr. Bremer. Thank you. Excuse me. Thank you for that 
question.
    Let me first start by agreeing and underlining one point 
which was that we had a chronic shortage of personnel in all 
areas as Admiral Oliver pointed out. It was always a problem to 
get enough people there, and we never had enough.
    Second, I did not do the hiring of those people in that 
article. I don't think I even ever met any of those people. My 
role in hiring was very limited because of the amount of time I 
had to get ready to leave which was very short. I hired my 
personal staff, a couple of senior deputies to me and a couple 
of senior advisors.
    The hiring, to answer your----
    Mr. Tierney. Excuse me for interrupting you.
    Mr. Bremer. Sure.
    Mr. Tierney. Do you know who did hire these people?
    Mr. Bremer. Yes, I was coming to that. You asked where the 
hiring was done. In an office in the Pentagon, and I think if 
the committee has questions about those procedures, that is the 
appropriate place to ask those questions.
    Mr. Tierney. Do you know specifically which office and who 
was responsible for that?
    Mr. Bremer. Well, the name of the man who I think was in 
charge of the office--I am not sure what his title was--was a 
man named O'Beirne. I don't know what his title was.
    I have to say, Congressman, that I know this article made 
the allegation these people were rewarded for their political 
loyalty or something. It has never been entirely clear to me 
what kind of a reward it is to send somebody to Baghdad, but 
perhaps somebody can enlighten me on that. It wasn't obvious to 
the rest of us.
    Mr. Tierney. I think some of the article mentioned that 
they were paid up to or more than $100,000 which by most 
accounts for somebody just out of school is not a bad reward.
    You also had an interview with Frontline in which you 
stated: I might see a biography or one of my staff might and 
would say yes or no, but we really didn't have frankly very 
much time to vet all the people coming in.
    You said you never looked at these particular people. Did 
any of your staff have responsibility for looking at these 
people in the budget office?
    Mr. Bremer. The hiring was done in Washington by the 
Pentagon.
    Mr. Tierney. Nobody on your staff had a chance to look it 
over?
    Mr. Bremer. My, not in Baghdad, not that I, to my memory, I 
don't think anybody in Baghdad had time to look at those 
resumes, sir.
    Mr. Tierney. You mentioned two goals that you had, primary 
goals. One, of course, was security and the other was the 
reconstruction and the putting of Iraqi people back to work in 
their economy. In planning this whole situation, what I think 
you are telling me is that the Department of Defense would 
force upon you individuals whom they had apparently hired and 
then put them in a position of this kind of extreme importance 
without your having any control over them?
    Mr. Bremer. Let us, I have attached to my statement today 
the list of the top hundred or so people in the CPA.
    Mr. Tierney. These are apparently people that you thought 
were vitally important. The idea of spending this money for 
reconstruction and economic improvement there would be, by your 
own admission, the second highest priority you had set.
    My question really was: Once these people were put in 
place, you say without your input at all, did you then have the 
ability to exercise any control or assignment responsibilities 
for them?
    Mr. Bremer. Well, not the low level people who are the 
subject of that particular article. What I was trying to say is 
that if you look at the attachment to my statement where I have 
listed the qualifications of the top 100 or so people--they 
would be the people that I would normally interact with more 
than others--you will find a very competent, experienced group 
of people from many different countries who were, in my view, 
competent. I don't exclude the possibility that among the 3,000 
people who worked for the CPA, there were people who were not 
competent.
    Chairman Waxman. Thank you.
    Mr. Tierney, I want to inform you and the committee members 
of our efforts to try to get information. When these 
allegations of cronyism appeared in the paper, we contacted 
last September the Pentagon and Department of Defense and asked 
for a briefing by James O'Beirne, the political appointee at 
the Pentagon, alleged to have screened the applicants, and we 
got no response to that.
    Then when the election took place in January, Mr. Davis and 
I joined together in a request for a briefing and a meeting 
with Mr. O'Beirne, and we were told well, the reason they 
didn't answer our first request is that they have a policy of 
not giving information to those who are in the minority in 
Congress. We informed them that we are now in the majority, and 
this is a bipartisan request, and they indicated to us that 
they didn't know about it and they hadn't seen it even though 
we mailed it, we faxed it and we e-mailed that request to them.
    It just seems to me this is quite frankly an example of 
stonewalling on their part, and I would hope that we would get 
the cooperation of the Department of Defense to at least let us 
ask questions not in a hearing but at a briefing from the 
person who is allegedly responsible for giving a litmus test 
and hiring political cronies rather than the very best people 
for the CPA.
    I want to now recognize the gentleman from Florida, Mr. 
Mica.
    Mr. Mica. Well, thank you. Thank you, Mr. Chairman.
    Ambassador, again just to clarify a few things, you had 
control from April 21, 2003 to June 28, 2004, about 13\1/2\ 
months, correct, OK.
    When you got there, tell me each of these entities' 
condition. Basically, the government, was it abolished?
    Mr. Bremer. The situation in most of the ministries was 
that the top ministers and deputy ministers, the top two or in 
some cases three levels of officials had fled the country or 
were on the run.
    Mr. Mica. The government was taken down. The banking system 
was taken down, correct, yes?
    Mr. Bremer. That is right.
    Mr. Mica. The major parties that sort of controlled, the 
cronies, the Baathists, all the rest, they were not part of 
this. The army dissolved, right. So there were no institutional 
ways.
    I held up the money before. You know it is all about the 
money. There was no way to distribute funds. You said it was a 
cash economy, correct?
    Mr. Bremer. That is right.
    Mr. Mica. Yes, let us talk about the cash because this is 
about the money. This was money, Iraqi money. There was not a 
dollar of U.S. money in that, correct, or not?
    Mr. Bremer. That is correct if we are talking about the 
Development Fund.
    Mr. Mica. It was under U.N. Resolution 1483, the 
distribution of those funds basically. Bowen testified that IMF 
gave some little oversight in this with this money, was 
responsible for that under the United Nations, is that correct?
    Mr. Bremer. I think what the Inspector General was talking 
about is that we invited a team of IMF experts to come and 
examine the internal financial controls of the Iraq ministries.
    Mr. Mica. Now did you investigate, Mr. Bowen, corruption 
during this period of time for 14 months approximately that the 
Ambassador had charge over this?
    Mr. Bowen. Corruption within the Iraqi ministries?
    Mr. Mica. Yes, you talked about Iraq and a number of people 
going to jail and under investigation.
    Mr. Bowen. Right.
    Mr. Mica. That is contemporary?
    Mr. Bowen. That is contemporaneous, but we don't have 
jurisdiction over Iraqi ministries or Iraqis.
    Mr. Mica. Yes, but how many people did you say 
contemporarily under investigation?
    Mr. Bowen. We have 80 investigations going on now.
    Mr. Mica. For how many agencies and personnel for the 
government, several hundred, several thousand? I mean the span 
of them.
    Mr. Bowen. How many people are covered by these 80 
investigations?
    Mr. Mica. Yes, and the entity. Well, I will just tell you 
what I was getting at. Proportionately, we probably have more 
people in Congress under investigation right now. [Laughter.]
    [Off mic comment.] Or in jail.
    Mr. Mica. Or in jail.
    Now the ministries were outside, weren't they? Weren't your 
operations in the Green Zone?
    Mr. Bowen. I traveled outside the Green Zone regularly.
    Mr. Mica. Again, I am talking about from April 21st to May 
2003, when the provisional government took over.
    Mr. Bowen. Yes.
    Mr. Mica. Your guys went outside and went to the 
ministries?
    Mr. Bowen. No, no. This was a review.
    Mr. Mica. Did they go outside and go to the ministries and 
check the documentation of how this money was spent?
    Mr. Bowen. That was not the aim of the audit. So, no, they 
didn't.
    Mr. Mica. They didn't go outside the Green Zone and 
actually go to where the money was distributed.
    Mr. Bowen. No, because that is what the Board of Supreme 
Audit and the IAMB's auditors were doing.
    Mr. Mica. Do you have their report?
    Mr. Bowen. Yes, we do.
    Mr. Mica. You have their report, but your guys never did 
it, OK.
    How much was the gross domestic product or just the whole 
gross economy of Iraq in, say, 2001 or 2002 prior to the 
invasion? Do you know?
    Mr. Bowen. Well, I think that Admiral Oliver.
    Mr. Mica. Can you tell me?
    Mr. Oliver. $22 billion.
    Mr. Mica. Pardon?
    Mr. Oliver. $22 billion.
    Mr. Mica. $22, I have $25 billion. That is close.
    How much was the expenditure to run the government in 2000 
or 2001 before we got there?
    Mr. Bowen. Admiral Oliver identified it about $16 billion.
    Mr. Mica. How much?
    Mr. Bowen. $16 billion.
    Mr. Mica. So $16 billion to run the government; $8.8 
billion sounds like a lot of money. It was Iraqi money.
    Mr. Bowen. That is right.
    Mr. Mica. Actually, I would like to get those folks over 
here. If we could run the government on half the amount of 
money in a conflict, in war and distribute it in cash, maybe we 
ought to look at that system because that would cut our 
expenses by 50 percent. Just do the math. [Laughter.]
    Weren't you trying to make the government under war 
conditions work, Ambassador Bremer?
    Mr. Bremer. Yes, we had obviously very difficult 
circumstances.
    Mr. Mica. I think you did a good job. Thank you.
    Chairman Waxman. Thank you, Mr. Mica.
    We will go to Mr. Clay.
    Mr. Clay. Thank you, Mr. Chairman.
    Mr. Ambassador, there have been persistent reports that 
during your tenure as the head of the CPA in Baghdad, you 
repeatedly requested more U.S. troops but were rebuffed by the 
former Secretary of Defense, Mr. Rumsfeld. Is that accurate and 
if so, what difference would those extra troops have made at 
that time?
    Mr. Bremer. Congressman, I took the position that the 
fundamental role of any government is the security of the 
people it is responsible for. We were the acting government of 
Iraq. Our most fundamental responsibility was security.
    When I got to Baghdad, the city was on fire from looters. 
They were helping themselves to in and out of stores. You 
probably saw the pictures. Most of the ministries had been 
burned down including the Ministry of Finance. We had a real 
situation of chaos. I believed from the moment I arrived that 
we were not adequately fulfilling our duties as security, and I 
thought the solution to that, at least a solution, was to have 
more troops. As you pointed out, on several occasions during my 
entire 14 months there, I made this, I made my views clear.
    Mr. Clay. Thank you for that response.
    One of your first official acts was to disband the Iraqi 
military. Do you regret making that decision? Will you now 
admit that your de-Ba'athification program helped to set the 
stage for the takeover of Iraqi politics by Shiite politicians 
with close ties to Iran?
    Mr. Bremer. Those are two separate questions, and I will 
try to answer them both. On the question of the army, the fact 
of the matter is there was not a single unit of the Iraqi Army 
standing in place anywhere in the country at the fall of 
Baghdad. So there really was no army to disband. It certainly 
was a mistake to use the word, disband. That, I will grant you.
    The question was? Should we recall the army?
    Mr. Clay. My oversight, I am sorry.
    Mr. Bremer. Excuse me.
    Mr. Clay. That is my oversight. I am sorry.
    Mr. Bremer. No, no, no. I used the word, disband. It was my 
mistake to put it in. You used the correct word. I should have 
not used the word, disband.
    The question was: Should we recall the army. Now, committee 
members will remember that the army was Saddam's primary 
instrument of repression of the Iraqi people. They conducted a 
decade long war of genocide against the Kurds for which Iraqi 
officials are still standing trial now in the special tribunal. 
The Iraqi Army was the army that suppressed the Shi'a uprising 
in 1991 in the south and killed hundreds of thousands of Shi'a.
    The Kurds and the Shi'a make up about 80 percent of Iraq's 
population. They were both cooperating with the occupation. To 
have recalled the army would have risked the continued 
cooperation of 80 percent of the Iraqi people and I think led 
to the secession of the Kurds from Iraq. It would have been a 
disastrous decision. So I stand by the decision not to recall 
the army and to rebuild the army from the bottom up.
    The mistake I made, and I admit it, is when we announced 
that we were going to build the new army, we should have 
immediately said we are also going to pay the officers from the 
old army. It took us a month to do that. Once military 
commanders came to me and said, look, we really need to pay 
these guys, I immediately agreed. As soon as we announced we 
were going to start paying those pensions which we did, the 
demonstrations of the old army officers stopped. By the way, 
those pensions continued all the way through our time there. 
They were always paid.
    Now de-Ba'athification, I am sorry to take so much of your 
time, but you asked two questions that are important. The Baath 
Party was modeled by Saddam Hussein, validly and publicly, on 
the Nazi Party because he admired the way in which Hitler used 
the Nazi Party to control the German people. So, for example, 
in the Baath Party, you had neighborhood committees. You had 
children who were paid to spy and report on their parents. It 
was all right out of Hitler's playbook. The Baath Party was the 
primary instrument of political repression.
    We decided to take a very modest cut at saying the top 1 
percent only of the Baath Party should no longer be allowed to 
have a public job. That is all it said. It was a very modestly 
drawn policy. The mistake I made was letting the Iraqi 
politicians implement it, and they broadened it way out. It was 
the right policy poorly implemented.
    Mr. Clay. I see. Thank you for your responses and thank you 
for your service to this country.
    I will yield back the balance of my time.
    Chairman Waxman. Thank you, Mr. Clay.
    Mr. Burton.
    Mr. Burton. Thank you, Mr. Chairman.
    Mr. Bremer, I hope all of my colleagues on both sides of 
the aisle are aware that you were there under a very, very 
difficult situation. You had to get through elections. You had 
to get a constitution drafted and approved while a war was 
going on. You had to disburse all these funds. You had to make 
sure you had personnel doing the job adequately. People need to 
take all of that into consideration when they directly or 
indirectly start criticizing what you were doing, and I hope 
that they will do that.
    A lot of these members who are asking some very difficult 
questions, which they are entitled to do, did not go to Iraq. 
They did not see firsthand what you were going through. When we 
were there, you even had a difficult time meeting with six or 
seven Members of the Congress because you were so busy working 
on that constitution and the elections. So I just hope my 
colleagues are aware of that.
    Do you think, Mr. Bremer, that better preparation stateside 
including identifying key agency personnel would have helped 
with the stand-up or the efficiency of the CPA?
    Mr. Bremer. Yes, I do. I think the pre-war planning was 
inadequate.
    Mr. Burton. Mr. Bowen, you have been very critical of the 
CPA's accounting procedures, but did you actually find that any 
funds were fraudulently spent or stolen?
    Mr. Bowen. We looked at 10 disbursements made by the CPA 
comptroller's office between October 2003 and 2004, and we 
found that none of the 10 disbursements which ranged from $120 
to $900 million included documentation such as the required 
budget spending plans or supporting documentation from Iraqi 
ministries. Six of those disbursements were made without CPA 
OMB approving memoranda. Two disbursements totaling $616 
million were not supported by any disbursement voucher.
    Mr. Burton. That is not my question. My question is: Did 
you find that any funds were fraudulently spent or stolen?
    Now you are talking about maybe inadequacy of records.
    Mr. Bowen. Yes.
    Mr. Burton. But did you find any funds were fraudulently 
spent or stolen?
    Mr. Bowen. No. As I said when I last appeared before the 
committee and earlier today here before this committee, we 
found no instances of fraud.
    Mr. Burton. That is the answer. All that verbiage is fine, 
but the answer is no, right?
    Mr. Bowen. That is right. There was no instance of fraud.
    Mr. Burton. In your professional opinion, do you truly 
believe that the CPA and the Iraqi ministries were capable of 
adopting or enforcing the recommendations that you made to 
improve accounting and financial oversight? Do you think they 
were capable of doing that?
    I mean you are in the middle of a war. You are bringing all 
these people in. You are trying to make sure the people are 
paid. You are trying to make sure that there is no waste of 
funds if it is at all possible. The question is: Do you think 
that they were capable of adopting or enforcing the 
recommendations you made to improve accounting and financial 
oversight in that kind of a climate?
    Mr. Bowen. Well, they did try to improve as our audit was 
going forward, so yes, there was some capacity to respond to 
it, but at the same time, our audit acknowledged that given the 
unstable environment, that it was simply difficult to carry out 
the mission the CPA had assigned.
    Mr. Burton. In describing the scope of your audit dated 
January 30, 2005, you say that your auditors interviewed CPA 
personnel, reviewed all available electronic and hard copy 
documents for the period May 2003 through July 2004 that were 
maintained by the CPA, Ministry of Finance and OMB and examined 
all available results performed by the Iraqi Inspector General 
and the Board of Supreme Audit.
    Did the SIGIR staff go to the Ministry of Finance or any of 
the other Iraqi ministries where the records on budget 
expenditures would be found and how can an effective audit be 
performed on the basis of third-hand interviews instead of 
examining the actual source documents?
    Mr. Bowen. Actually, the senior advisors whom we 
interviewed had responsibility for overseeing the ministries in 
question, and indeed the comptroller's office was in charge of 
disbursing all the DFI money. It came out of the CPA, and so--
--
    Mr. Burton. The question is, and once again you are giving 
me a nice speech, but did the SIGIR staff go to the Ministry of 
Finance or any of the other Iraqi ministries where the records 
on budget expenditures were found?
    Mr. Bowen. We didn't.
    Mr. Burton. OK, that is the answer. You didn't go. So you 
didn't see them firsthand, right?
    Mr. Bowen. That was not the point of the audit. The point 
of the audit was to look at the CPA.
    Mr. Burton. No. The point of the audit is you look at the 
figures and you look at the records and you decide whether or 
not there is accuracy or whether or not there is fraudulence, 
and if you don't look and look at the documents directly, you 
can't make an accurate assumption.
    Mr. Bowen. Except there were----
    Mr. Burton. You are taking second and third-hand 
information, aren't you?
    Mr. Bowen. We relied on other auditors who did do that.
    Mr. Burton. You are taking second and third-hand 
information, aren't you?
    Mr. Bowen. No, sir, not with respect to the object and the 
purpose of our audit.
    Mr. Burton. Did you see the documents and go out there 
firsthand?
    Mr. Bowen. That was not the object of our audit.
    Mr. Burton. Did you see the documents and go out there 
firsthand?
    Mr. Bowen. We didn't go to the ministries to visit how they 
spent.
    Mr. Burton. No, and so where did you get the information?
    Mr. Bowen. From those who were responsible for overseeing 
it.
    Mr. Burton. You got it secondhand, right?
    Mr. Bowen. No, because, Mr. Burton----
    Mr. Burton. Well, if you didn't go locate it and see it 
firsthand, well, how can you tell you didn't get it secondhand?
    Mr. Bowen. The CPA was the interim government of Iraq.
    Mr. Burton. The gentleman ought to be a politician. 
[Laughter.]
    Chairman Waxman. The gentleman's time has expired.
    Ms. Watson.
    Ms. Watson. Thank you so much.
    Admiral Oliver, you were head of the CPA's Office of 
Management and Budget, and you were Ambassador Bremer's deputy 
responsible for the reconstruction funding, correct?
    Mr. Oliver. Yes, ma'am.
    Ms. Watson. OK, last November, you were asked about the 
billions in cash that were unaccounted for, and I believe that 
there is an audio clip of your response. I wonder if we can get 
that played.
    [Audio clip: I have no idea. I can't tell you whether or 
not the money went to the right things or didn't nor do I 
actually think it is important.
    Billions of dollars of their money disappeared. Yeah, I 
understand. I am saying what difference does it make.]
    Ms. Watson. Admiral, these statements are hard for me to 
understand and they appear to reveal a total disregard for the 
requirements that Ambassador Bremer established in Regulation 
No. 2. Do you stand by these statements today?
    Mr. Oliver. That was a clip as I recall after a 30 or 40 
minute conversation, and it comes back to the essence of I hope 
that Stuart has pointed out several times in a question about 
transparency. He believes that the CPA should have audited the 
information.
    We decided that the only, the best way to make sure that we 
could withdraw as quickly as possible and for the safety of the 
troops was to rely upon the Iraqi system to distribute that 
money. Therefore, we made sure that it was transparent what we 
were doing with the money to the ministries and then relied 
upon the ministry system, the entire financial system they had 
to do that.
    We had about, I had 4 to 10 people. The country population 
is about the same size as California which I think has 800 
people in the same office. We thought this was the best way to 
make sure that the country's safety was performed.
    Ms. Watson. You said that you didn't think it was 
important.
    Ambassador Bremer, you have made similar comments. In 2005, 
you gave a speech at Clark University where you said this: I 
suggest you not worry as the $9 billion was Iraqi money, not 
U.S. money.
    Is that your attitude?
    Mr. Bremer. My attitude is that the question involved the 
question of whether we were wasting American money, and I tried 
to point out in that answer that we were talking about Iraqi 
money, not American money. It was a taxpayer asking about, as I 
remember, his taxpayer money, and it was not American money.
    Of course, we took seriously our responsibilities, as I 
have said right from the start, for these Iraqi funds.
    Ms. Watson. We were told by the President--this is the 
President's war--that the cost of the war was going to be paid 
for with the revenues from Iraqi oil, and we are trying to find 
out what happened to Iraqi revenues. Now we are being asked to 
back all of that up with U.S. dollars. I just think we need to 
hear from those of you involved, and there is such a callous 
attitude about well, it wasn't important, it was Iraqi money.
    You can't tell us whether you know or not where that money 
went. There was no accountability, as Mr. Bowen said, after the 
money was given to the agencies, where it went. We do not have 
a paper trail. I think that is absolutely unacceptable at a 
time we are asking for a surge of troops and we are asking for 
hundreds of billions of dollars to be sent down that gopher 
hole that apparently was not accounted for in the past.
    Why is it not important to us and to you what happened to 
the $12 billion in cash that had seemed to simply disappear?
    We know that we forced a government on the Iraqis and they 
were not ready, but how can we in good conscience say to our 
constituents let us send them more money? There was no 
accountability then and what guarantees do we have that it is 
going to be accounted for now?
    Mr. Bremer. Well, Congresswoman, again you are being asked 
now to appropriate more funds, and I am not here to comment 
about that. I don't represent the administration.
    Ms. Watson. Just tell me about what happened in the past.
    Mr. Bremer. What happened in the past was I believe we met 
our responsibilities under the U.N. Security Council and under 
my direction adequately to account for and disburse the Iraqi 
funds.
    Most of the funds, to answer your direct question, went to 
the running costs of the Iraqi Government, paying civil service 
salaries, paying pensions, starting irrigation projects and 
starting modest reconstruction products. That is where most of 
that money went.
    Chairman Waxman. The gentlelady's time has expired.
    Mr. Shays.
    Mr. Shays. Thank you all for being here and thank the 
chairman for a continuation. This is the 20th hearing we have 
had on Iraq, and many of us have done our due diligence in Iraq 
as well.
    Mr. Bremer, when you came, am I right in believing that you 
came when the looting had basically taken place?
    All the ministries' buildings had been looted, all the 
equipment taken out, all the files taken out. Even the doors 
had been taken out. It looked like a bombed-out, frankly what I 
thought Berlin looked like. Is that kind of the environment you 
found yourself in?
    Mr. Bremer. Yes, it was very chaotic, and the looting was 
still going on actually when I was there.
    Mr. Shays. Isn't it true that we formed a joint task force 
for Iraq that was to get volunteers from the various 
departments of our Government to volunteer to go into Iraq, and 
isn't it true a lot of departments could not deliver enough 
people?
    Mr. Bremer. During the entire 14 months we were in Iraq, we 
never had sufficient support for the personnel needs we had 
from various departments in the Government. That is right.
    Mr. Shays. This is kind of the impression I get from some. 
Want a cushy job? Come to Iraq. Work 12 to 14 hours a day, 7 
days a week, week in, week out, week in, week out. Come to 
Iraq. Work, eat, maybe exercise, sleep, work, eat and have a 
nice day and, by the way, dodge bullets, bombs and hope you 
don't get kidnaped and have your head chopped off.
    We are to look at some people who went there and make an 
assumption that somehow they were rewarded and given a cushy 
job? That is the one thing I could say to all of you. I never 
saw a cushy job in Iraq, and it is an outrage to make that 
assumption.
    Every one of the people who served in Iraq were risking 
their lives whether they were in military uniform or whether 
they worked in your office or were sent out. Isn't that true?
    Mr. Bremer. That is absolutely right.
    Mr. Shays. Mr. Bowen, I am a great supporter of the work 
you did, but I want to be fair, and I don't think we are being 
fair. I think in the process of trying to show that you are 
valid, you are giving an impression that I think is unfair. 
Isn't it true that the Defense Department today has hundreds of 
billions of dollars of transactions that are not auditable?
    Mr. Bowen. That is true.
    Mr. Shays. They are not auditable, so we can make any 
assumption. What happened to the money? We can't be certain of 
how the money was spent. We can suspect it was spent well, but 
it was not auditable, correct?
    Mr. Bowen. With respect to the overarching conclusion, yes.
    Mr. Shays. I am talking about in the United States.
    Mr. Bowen. Yes.
    Mr. Shays. If it is not auditable, you don't know what 
happened to the money.
    Mr. Bowen. That is right.
    Mr. Shays. You found money that wasn't auditable. Now this 
is where I try to put myself in Mr. Bremer's shoes, and Lord 
knows, he knows I have been critical of things, some of which 
is maybe valid and some which isn't. We had our disagreements, 
didn't we, Mr. Bremer?
    Mr. Bremer. I remember.
    Mr. Shays. But what I am wrestling with is this. It is 
their money. We could have been accused of holding their money 
and not giving their money, being accused of taking their oil 
money which we said we wouldn't do. We had to find a way to get 
their money to them.
    The first issue is in the transactions, can we account that 
we gave the money to Iraqis? Is that part auditable?
    Mr. Bowen. Yes.
    Mr. Shays. So you are not disputing with Mr. Bremer that he 
gave the money, and it is auditable. We know it went to the 
Iraqis.
    Mr. Bowen. And there were problems with following CPA's 
rules, yes, yes.
    Mr. Shays. We will get to that. We will get to that. But I 
want to get to the part. So we know the money went to the 
Iraqis.
    Mr. Bowen. Yes.
    Mr. Shays. The real issue is what the hell did they do with 
it.
    Mr. Bowen. Yes.
    Mr. Shays. I think it is fair to say that hundreds of 
millions, maybe even billions, were not spent the way it should 
have been spent. I make that assumption. I am not happy about 
it?
    What I wrestle with is, tell me logically, how he could 
have gotten the money out and could have satisfied your rules 
as an accountant?
    Mr. Bowen. Well, not my rules but CPA's rules are the way 
that we judged the process. CPA Regulation 2, 3 and CPA 
Memorandum 4, and I was beginning to go through that with Mr. 
Burton before I was interrupted, what we looked at.
    Mr. Shays. Give me the short version.
    Mr. Bowen. Well, we looked at a series of disbursements 
amounting to about over $1 billion in the course of carrying 
out the audit.
    Mr. Shays. The Iraqis spent money badly, right?
    Mr. Bowen. If I may finish, that we looked at how they were 
disbursed by CPA to the Iraqis and whether the regulations CPA 
required of that process were followed, and the answer was no. 
And then, but the issue that we are talking about is the, is at 
another level, and that is the requirement of transparency, and 
you are asking me should the CPA have required of the Iraqis 
some input about how they used that money.
    Mr. Shays. Let me just interrupt. Your answer is yes.
    Let me just conclude by saying there were no computers.
    Mr. Bowen. That is right.
    Mr. Shays. There were no desks. There was no paper. There 
was nothing. It was burned out, and this administrator made a 
decision that soldiers had to get paid, retirees had to be 
paid.
    At any rate, thank you for being here.
    Chairman Waxman. This administrator also decided that he 
would promulgate rules for transparency and, Mr. Bowen, he 
didn't follow his own rules. Is that what you are saying?
    Mr. Bowen. In the instances that we looked at in the course 
of this audit, there were, they were not complied with 
accordingly.
    Chairman Waxman. Thank you.
    Mr. Kucinich.
    Mr. Kucinich. Thank you, Mr. Chairman.
    Ambassador Bremer and Mr. Bowen, I want to ask you about a 
specific example of the kind of spending that concerns many of 
us in this committee.
    Ambassador Bremer, in your comments to the Inspector 
General's report, you say that an entity called the Program 
Review Board helped ensure transparency and accountability. Is 
that a correct characterization of what you said?
    Mr. Bremer. [Nodded affirmatively.]
    Mr. Kucinich. Staff has a chart that I would like to show 
you, Mr. Bowen, a summary of the minutes from a meeting of this 
board in May 2004. Can we put that up?
    What this chart represents is that the board, the Program 
Review Board, approved the transfer of $500 million in this 
meeting under the broad category of ``security.'' On the right 
of this chart, it also says composition TBD which means to be 
determined. Mr. Bowen, have any of your audits uncovered where 
this particular $500 million actually went?
    Mr. Bowen. No, we haven't.
    Mr. Kucinich. Ambassador Bremer, can you tell the committee 
where that half of a billion dollars went?
    Mr. Bremer. Mr. Chairman, I don't have a copy of the 
document the Congressman is referring to.
    Mr. Kucinich. Can staff provide him?
    Mr. Bremer. I wonder if I could get a copy of the document 
before I answer the question.
    Mr. Kucinich. Can staff provide the Ambassador with a copy 
of that document? Thank you.
    If you would just take a minute to look at it, Mr. 
Ambassador.
    Mr. Bremer. Can you explain again what this table is taken 
from?
    Mr. Kucinich. What this represents is that the Program 
Review Board approved a transfer of $500 million in a meeting 
that was taken in May 2004. It was under the broad category of 
security. If you look to the right of it, it says composition 
TBD which means to be determined.
    Mr. Bremer. Right.
    Mr. Kucinich. Mr. Bowen has just said that his audits have 
not been able to determine where the $500 million went. Mr. 
Bowen, you did say that?
    Mr. Bowen. That is right.
    Mr. Kucinich. OK, and I am asking you. Now that you have 
looked at the document, Ambassador Bremer, can you tell the 
committee where that half of a billion dollars went?
    Mr. Bremer. Congressman, I think I would have to answer 
that in writing later. I just am not familiar with this 
meeting. I don't know the answer.
    Mr. Kucinich. Maybe I can help refresh your memory, 
Ambassador Bremer. Let me refer to the minutes of that meeting. 
The minutes say that the Australian and British members of the 
Program Review Board raised questions about the insufficient 
detail and ``the lack of specificity with this proposal.'' To 
your knowledge, do you know, is that true?
    Mr. Bremer. Congressman, just a point of order here, I 
didn't attend Program Review Board meetings, so even if you 
read me all of the minutes, it would be the first I had a 
chance to look at the minutes, sir.
    Mr. Kucinich. You never reviewed the minutes of any 
meetings----
    Mr. Bremer. I did not.
    Mr. Kucinich [continuing]. That dealt with the spending of 
billions of dollars?
    Mr. Bremer. No, I did not attend Program Review Board 
meetings. I was not a member. I was not a member.
    Mr. Kucinich. Did you ever read the minutes of any of the 
meetings?
    You just established you didn't attend. Have you ever read 
the minutes of the meetings?
    Mr. Bremer. I don't remember ever reading any minutes, no.
    Mr. Kucinich. Mr. Chairman, I find it more than curious 
that in his capacity as head of the Coalition Provisional 
Authority, the disposition of billions of dollars which went 
through those committees has never been reviewed by the person 
who is responsible.
    Mr. Bremer. Excuse me, Congressman. That is not what I 
said. Your question was did I read the minutes, and I said I 
did not read the minutes.
    Mr. Kucinich. Did you read the minutes of any meetings?
    Mr. Bremer. I did approve. No, not of the PRB. My job in 
terms of the Program Review Board was to work with the Iraqis 
and other members of the Coalition to set broad priorities on 
how these funds should be spent. The staff of the Coalition 
Provisional Authority working with the Iraqi ministries would 
then produce proposals for how to spend the money. I assume, 
though I don't know that is what this represents, a proposal on 
how to spend the money. Those----
    Mr. Kucinich. Mr. Bowen just said that he doesn't know yet 
where that half a billion dollars went.
    Mr. Bremer. I am not sure he was asked to look into it.
    Mr. Kucinich. What did you say?
    Mr. Bowen. We have not reviewed that, but therefore, I 
don't know what happened to that money. That is right.
    Mr. Kucinich. You don't know either, is that right, Mr. 
Ambassador?
    Mr. Bremer. I said I don't know. I can provide an answer in 
writing. I don't know off the top of my head.
    Mr. Kucinich. Do you know, did the allies ever express to 
you any concerns they had about the lack of detail? Did they 
ever contact you personally?
    Mr. Bremer. Not to my memory.
    Chairman Waxman. The gentleman's time has expired.
    Mr. Kucinich. Thank you.
    Chairman Waxman. Mr. Souder.
    Mr. Souder. Well, this is about as much of a no win 
situation as you can get into. You are criticized for 
disbanding or not reorganizing the Iraqi Army because of ghost 
employees, but then when you keep the civilians, you are 
criticized for having ghost employees. It was just a mess. That 
is part of the clear difficulty here.
    I appreciate your comments about the lack of pre-war 
planning. If there is one thing we have absolutely established, 
that it isn't just Monday morning quarterbacking. Senator Lugar 
raised this over and over and over before we went in, that 
there wasn't adequate planning for what was going to happen if 
it all didn't just join up in democracy the first day.
    One of the fundamental questions, and let me clarify, Mr. 
Oliver, did you know anything about the $500 million?
    Mr. Oliver. I had been gone 5 months. I was safely in 
Arlington.
    Mr. Souder. Would that type of expenditure normally--it 
looks like it was for security forces--would have gone to the 
Iraqi ministries for security?
    Mr. Oliver. I don't know, Congressman.
    Mr. Souder. Did you have any other previous security 
allocations similar to that?
    Mr. Oliver. We had many security allocations for uniforms, 
for the Iraqi police forces, for the Iraqi Army, significant 
other entries with significant detail. It was placed on the Web 
during the period I was there.
    Mr. Souder. Did you say you had 4 to 10 people? Is that 
what you said?
    Mr. Oliver. Yes, sir.
    Mr. Souder. And that California would have 800?
    Mr. Oliver. Yes, sir, more.
    Mr. Souder. Mr. Bowen, how many people do you think they 
needed to do the auditing of the Iraqi ministries?
    Mr. Bowen. Well, we did not conclude that they needed to do 
the auditing of Iraq ministries. What we concluded was that in 
order to meet the transparency burden, there should have been 
some mechanism to provide feedback from the ministries after 
they had spent it other than the fact that they had spent it.
    Mr. Souder. So that wouldn't have taken any people.
    Mr. Bowen. Well, no. I think Mr. Oliver has pointed out 
here and to us emphatically that he was severely under-staffed, 
repeatedly asked for more staff and those requests weren't 
granted.
    Mr. Souder. As an auditor, you don't have a recommendation 
of how many staff they would have needed to do that?
    I mean this is to look for the future. You are in effect 
charging them with not implementing their own authority which 
is a disagreement of doing. There are 4 to 10 people. You have 
correctly said or you told us as Congress that from your 
perspective, they handled their side of the money. You just 
didn't feel they implemented tracking the Iraqi ministries. So 
the obvious question is: How many people would they have needed 
to track the Iraqi ministries?
    You are the auditor. If we are going to learn for the 
future, do they need hundreds? Were they going to go outside 
the Green Zone and trot around with these people? We needed 
computers. You are criticizing them for not doing something. 
What is your solution for the future not to have that happen 
again?
    Mr. Bowen. And we have made those recommendations in our 
Lessons Learned report on personnel, specifically both with 
expertise and training is what was missing in this process. 
Persons with, and Admiral Oliver pointed this out to us. He 
didn't have people with the right training, with the right 
expertise to support him in carrying out the mission that he 
had been assigned.
    And so, our recommendation in our Lessons Learned report on 
Human Capital Management is that there be a civilian reserve 
corps developed, and that recommendation is in process and 
under development both in this Congress and in the executive 
branch. I think that with respect to this issue, they will, 
that will ensure that you will have trained----
    Mr. Souder. We are doing hindsight here, and there should 
have been foresight planning for this because clearly 4 to 10 
people aren't going to do it.
    Mr. Bowen. That is right.
    Mr. Souder. Let me ask Admiral Oliver. Did you look at, 
before you took this job, what happened in the Balkans, what 
happened after World War II, what has happened in Afghanistan, 
and did you raise a concern that maybe 4 to 10 people couldn't 
track this amount of money?
    Mr. Oliver. One of the things we did was the expertise for 
this lies in many cases with the United Nations' activities 
with the World Bank and the IMF. The Ambassador got those 
people in to talk to us about that specifically during a 
period, and we coordinated with them closely until the 
explosion at U.N. headquarters when they left the country, 
which was too bad because they were a great help.
    Also, we coordinated with, the person who went on to become 
Prime Minister of Poland. One of the things that we determined 
was that you needed to keep sovereignty and you needed to watch 
this for many years because all the countries, Communist 
countries that had gotten freedom after the fall of the Soviet 
Union, had gone through periods and the minimum period in which 
they even started to recover was 3 years.
    Mr. Souder. If I may, Mr. Chairman, just ask do you believe 
had you had 800 people, you could have followed through the way 
the auditor is suggesting and been able to track the Iraqi 
ministries?
    Mr. Oliver. If we could have protected them, yes, sir.
    Mr. Souder. Excuse me?
    Mr. Oliver. If we could have protected them.
    Mr. Souder. If they would have had protection.
    Mr. Oliver. Thirty percent of the people who worked for me 
at that time were killed or injured by the time I left after 5 
months.
    Chairman Waxman. Thank you, Mr. Souder.
    Mr. Lynch.
    Mr. Lynch. Thank you, Mr. Chairman.
    Mr. Chairman, I am going to ask that a chart be displayed. 
This represents, for the witnesses, cash shipments to Iraq. As 
you can see, it demonstrates that in the final days of the CPA 
authority that massive amounts of cash were shipped to Iraq 
from the New York Federal Reserve Bank. In fact, I am told that 
more than $5 billion in cash was delivered in the last month of 
the CPA's existence alone.
    The last two shipments of cash were truly enormous. On June 
22, 2004, $2.4 billion, that is the tallest column there was 
June 22, $2.4 billion in cash to Iraq. This was the single 
largest cash shipment in Federal Reserve Bank history. Then 3 
days later, another $1.6 billion was shipped.
    Now together with the e-mails that the committee has, it 
demonstrates the urgency. They are actually trying to double 
and triple up shipments in advance of then it was a June 30th 
handoff from the CPA to the Iraqis. The Iraqis were going to 
take over their own government on the 30th. That was the plan 
according to your book, and I think it is generally 
acknowledged. So there is this huge rush to get cash into Iraq 
and have the CPA hand it out in the back of pickup trucks and 
in duffel bags full of cash, cash packs, before the Iraqis take 
over their government because once the Iraqis take over on the 
30th, the CPA no longer has authority to remove money from the 
Federal Reserve Bank. They take control of their own money.
    I am just wondering why. If your stated reason is that you 
wanted to get money to the Iraqis, if we left all the money 
there in the Federal Reserve Bank as of June 30th, the Iraqis 
would have had control of every single dollar in that account. 
It was their money. We are all agreed on that. It was money 
seized from Saddam. It was Oil for Food program money. It was 
oil revenues. There is no question; this is all Iraqi money. 
Yet, here we have the Coalition Provisional Authority breaking 
its back to fill enough planes, enough C-130's with cash to get 
it to Iraq and to hand it out before the Iraqis got control. 
That was the deadline.
    I just want to ask why. Why did you handle it this way?
    And, I want to ask you how long was the Finance Ministry, 
the Iraqi Finance Ministry, that you handed out all this cash 
to, how long were they in operation before the CPA handed out 
all this cash?
    Mr. Bremer. Thank you, Congressman. I welcome the chance 
because I think it is obviously a dramatic event, and I welcome 
the chance to explain it.
    The Iraqi Minister of Finance, to answer your second 
question first, the Ministry of Finance was operating from the 
day we got there on May 12th. That is the group that Admiral 
Oliver worked with most of the time. The Ministry of Finance 
was generally regarded as one of the most competent of the 
Iraqi bureaucracies.
    The Minister of Finance of Iraq asked us in early June for 
these shipments of his money, and the reason he gave is quite 
logical. He said, when we take over sovereignty on June 30th, 
it is going to be confusing. The new government is going to be 
trying to find their way around. They have to find their 
offices. There is going to be a lot of confusion. It is very 
difficult to follow the elaborate procedures established by the 
Federal Reserve Bank of New York on getting these moneys over 
here.
    He said, I am concerned that I will not have the money to 
support the Iraqi Government expenses for the first couple of 
months after we are sovereign. We won't have the mechanisms in 
place. I won't know how to get the money here. I want to, in 
effect, pull forward funding for the Iraqi Government 
operations so that I am sure I have it in hand in Iraq in the 
Central Bank of Iraq--that is where this money went--in order 
to cover our expenses that are coming up as soon as we achieve 
sovereignty.
    So these shipments were made at the explicit request of the 
Iraqi Ministry of Finance, to forward fund, in effect, 
government expenses, a perfectly, it seems to me, legitimate 
use of his money.
    Mr. Lynch. Let me just say that you knew full well that 
there were no mechanisms within those ministries to account for 
or to give us the assurances that those moneys, once disbursed, 
went to the purposes that we intended or that were for the 
transparent benefit of the Iraqi people.
    Mr. Bremer. No, I don't agree with that characterization. I 
said earlier that our conclusion based on the recommendation of 
the team at the International Monetary Fund was that the 
mechanisms in place in the Iraqi ministries were adequate. They 
were certainly not modern, and we spent a great deal of time 
trying to modernize those at the same time we were using them, 
but I don't accept that they were not sufficient.
    Chairman Waxman. The gentleman's time has expired.
    Mr. Westmoreland.
    Mr. Westmoreland. Thank you, Mr. Chairman, and I thank the 
panel for your willingness to not only be here today and 
testify but for your willingness to take on leadership jobs in 
a situation that was really, I think, unheard of for this 
country. So thank you for your willingness to do that.
    Ambassador Bremer, how long after the fall of Baghdad did 
you actually go?
    I know it was in May 2003. What was the time period there?
    Mr. Bremer. Baghdad fell on April 9th. I arrived on May 
12th.
    Mr. Westmoreland. So about 30 days. I am assuming that you 
did have more to do at the time than read the minutes of all 
the meetings that were taking place at that time?
    Mr. Bremer. That would be right.
    Mr. Westmoreland. Asking or at least some of the questions 
that I hear some of the members of this committee asking would 
be almost like asking a commanding general to give an 
accounting of all the bullets fired by his men and what targets 
they hit, what they were aimed at, how many counted and the 
cost of each bullet and how much we could have saved if we had 
had more target practice. I think we did have some very poor 
pre-planning when we went into this, but I can't imagine. Could 
you just briefly describe?
    I have read some of your opening statement. Could you just 
briefly describe, and I don't even know if it is even possible, 
what you encountered not only dealing with the economy? I know 
that Mr. Oliver from reading his testimony, only had a short 
period of time to come up with some of the economic decisions, 
and I am sure financial decisions that we were doing there.
    What did you find when you got there versus what you 
thought you were getting into?
    Mr. Bremer. I think the biggest surprise to me and my 
colleagues was how much damage Saddam Hussein had done to the 
economy of Iraq. We knew there would be some damage from the 
war, though it was actually very little.
    What we did not realize was how much he had done to the 
entire economy over a period of almost three decades. And that, 
as I said in my opening statement, greatly complicated the task 
of reconstruction and the fact that we were dealing with a very 
primitive economy with no banks, no telephone, no Internet 
connections, made jobs that seemed rather easy in retrospect 
really hard in the reality.
    Mr. Westmoreland. Mr. Bowen, what would you, in hindsight 
is always 20-20, but in the atmosphere that Ambassador Bremer 
and others found themselves in 30 days after the fall of 
Baghdad, what recommendations would you have made or could you 
make that should have taken place then that didn't, based on 
the circumstances that were there when we arrived with the CPA?
    Mr. Bowen. I think Ambassador Bremer was dealing with a 
situation wherein the assumptions that preceded him and shaped 
the planing up to that point were proving to be incorrect, and 
therefore he was in an untenable situation with the resources 
that he had at that time.
    Those assumptions, as we are documenting in our lessons 
learned program, were that as evidenced by the initial Iraq 
Relief and Reconstruction Fund appropriation, were that the 
U.S. presence would be relatively short, and that the 
transition to Iraqi control would be rather rapid, and that the 
level of funding and its allocation through the USAID indicated 
that we would move to a relief and development program rapidly. 
The assumption, primary assumption proof that proved incorrect 
was that stabilization would be achieved rapidly. It looked 
like with the fall of the statue, that might happen, but it 
didn't.
    Mr. Westmoreland. Basically, even though we had 
appropriated all these moneys with, I am assuming, intended 
purposes for them to be spent, it was actually what the CPA 
found itself in was a position of really not knowing what all 
the expenses were going to be. Just in my short period of time 
in Government, I think had Ambassador Bremer tried to get some 
of the expenditures that he made approved and gone through all 
the correct channels, put in a position where they could be 
audited and a paper trail for all of these expenditures, he 
still wouldn't have it today, and so, some of these decisions 
had to be made on the fly.
    I have been a small businessman all of my real adult life, 
and I have had to make decisions based on the fly that after I 
did them and looked at them, I may not have made them, but at 
the right time under those circumstances, they were the very 
best decision I could make for all people involved.
    Chairman Waxman. The gentleman's time has expired.
    Mr. Westmoreland. One last point, wouldn't you think that 
sometimes when you are in a situation like that, that you 
wouldn't do things that would always be the perfect auditable 
direction that you could go?
    Mr. Bowen. There is no doubt the circumstances were 
unprecedented in Iraq.
    The other point is that my office was created just 5 months 
before the dissolution of CPA, and I got on the ground. I was 
the first appointee. I had to stand up an organization rapidly 
and get a report out. I got on the ground in April. That is 3 
months before the dissolution, and so my review was narrowly 
targeted, but it fits within the larger context that you are 
describing and that is certainly the year before that review or 
10 months before, it was a chaotic situation that was the 
result of assumptions being adjusted significantly.
    Mr. Westmoreland. Thank you.
    Chairman Waxman. Thank you, Mr. Westmoreland.
    Mr. Higgins.
    Mr. Higgins. Thank you, Mr. Chairman.
    Mr. Oliver, Mr. Bowen and Ambassador Bremer, thank you very 
much for being here.
    In trying to get a sense of this situation that we are in 
Iraq, I try to look for historical context, and several books 
have been written including Vali Nasr's The Shi'a Revival, 
where he argues that at the core of this is vengeance. It dates 
back to a history dating back to 632, and who is the rightful 
successor of Muhammad and a history of not only succession but 
also of oppression and repression.
    I also looked to the early 20th century in the Ottoman 
provinces of Baghdad, of Mosul, of Basrah, and it was strong 
nationalist aspiration that enjoined the Shi'a and the Sunni to 
rise up against the British. They were also joined by Iraqi 
Christians and Jews. Now Shi'a and Sunni are fighting each 
other. At that time, Shi'a and Sunni prayed in each other's 
mosques. Now they blow up each other's mosques without 
contrition.
    In the 1980's, it was 90 percent of the Iraqi troops were 
Shi'a fighting against a Shi'a Iran. Today, at least segments 
of that population are now collaborating with Iran, I think to 
undermine the military presence, the American military presence 
there.
    Mr. Bremer, you had said in your opening statement that 
sovereignty was returned to the Iraqi people. We either 
returned it to them, and they really screwed it up or we never 
really gave it to them in the first place. I think the latter 
is true because you have also said the fundamental role, the 
elemental role of government is order, without which the 
government has no legitimacy in the eyes of the governed.
    I am trying to figure this thing out as not a partisan but 
as an American that wants my country to survive, that wants my 
Government to survive, to do the right thing, but I find it 
hard to accept that American military planners could have 
screwed this thing up as badly as they did.
    When I was in Iraq in August, I was very quiet. I listened 
to the Shi'a leaders, the Sunni leaders, the Kurd leaders, and 
my conclusion is this is not an inspiring bunch. This is not a 
group that feels a sense of urgency. This is not a group that 
has that burning national aspiration to somehow make this 
experiment, this very unique and important experiment for 
democracy in the Middle East work, and I am frustrated by that.
    But I think at the core it was our inability to provide a 
center from which a legitimate government could evolve, from 
which a political center could evolve and from which a 
legitimate economy could evolve, and I am just afraid that it 
may be too late, that there isn't a military solution in Iraq 
and perhaps the political solution, we will not know for a long 
time. Perhaps we will still be there which is likely or after 
we are long gone. I think the point is we have lost our grip. 
We have lost our grasp of the complexity of that situation, and 
we have lost the confidence of the Iraqi people in that regard 
as well.
    Mr. Bremer. Well, Congressman, thank you for that very 
thoughtful statement. I find much to agree with you in it. I 
certainly share your frustration. In fact, I think those of us 
who worked so hard the first year in Iraq, who have friends in 
Iraq, who have lost friends, Iraqi friends, are if anything 
even more, more deeply frustrated.
    It is interesting you point to a contradiction. It is 
correct that in Iraqi history, Sunnis and Shi'as intermarried 
for generations. Most of the Iraqi, the largest Iraqi tribes 
all have Sunni and Shi'a members. During the time of the CPA, 
sectarian violence was almost unknown. We confirmed fewer than 
100 sectarian killings in the 14 months we were there, fewer 
than 100.
    What has gone wrong? We never provided, and you said it, 
and I said it, adequate security for the Iraqi people. As the 
al Qaeda terrorists carried out their stated strategy which was 
to kill Shi'a men, women and children in order to provoke 
sectarian tension, as they carried out, many of the Shi'a 
decided to turn to their own militia to defend themselves 
because they concluded that we couldn't defend them. And is, 
there is a dynamic there which is in some ways unique in Iraqi 
history, and I, like you, hope it is not too late.
    Chairman Waxman. Thank you, Mr. Higgins.
    Mr. Yarmuth.
    Mr. Yarmuth. Thank you, Mr. Chairman.
    I will concede, I think we all concede that you were put 
into a position that was quite chaotic and that you may have 
been put into a spot which was a mission impossible, and we all 
know that stuff happens, right. I think part of our 
responsibility in trying to assess whether the CPA did its job 
properly is to assess whether the CPA was put into a position 
where it could do its job properly. While we talk a lot today 
about money being primarily the Iraqi's money that we were 
dealing with, there was a considerable amount of taxpayer money 
spent to fund the CPA, so we do have a considerable 
responsibility there to determine whether that money was spent 
properly.
    You mentioned and many people have mentioned that you 
didn't have the resources you needed to do the job. You had 
3,000 people there. That was inadequate. If you had 4,000 or 
5,000, or 6,000, what are some of the things you might have 
done that would have created more effective controls that we 
all seem to agree could be better?
    Mr. Bremer. Thank you. That is a helpful question.
    Well, I think some of the problems that the Special 
Inspector General has uncovered and some of the other audits of 
not adequately following our procedures, which I understand 
from his reports we did not do, would have been, I can't swear 
they would have been corrected, but they would have been 
correctable if we had more people.
    We had tremendous staff turnover. It wasn't just that we 
didn't have enough people. People came for 60 days or 90 days. 
So there was very little continuity in an extremely intense 
work environment of 16, 18 hours a day with people being shot 
at. It was very hard to acquire continuity. So I think if one 
had more people, we would have been able to better do the kinds 
of things which the Inspector General proposes that we should 
have done, and he does address some of these questions in his 
lessons learned on personnel which I commend to the Congress' 
attention.
    Mr. Yarmuth. You also mentioned in your prepared testimony, 
you had a laundry list of what I would call preexisting 
conditions, things that you found that made your job very 
difficult, made everyone's job difficult, and they were things 
that presumably you would have wanted to know. Again, what 
difference would that have made knowing, for instance, that the 
banking system was inadequate, the ministries weren't adequate? 
How much difference would that have made and what would you 
have done differently if you had known some of those things?
    Mr. Bremer. I think it would have changed the overall 
approach even before I got involved because when I had a chance 
to look back at the planning before the war, as the Inspector 
General pointed out, it was based on assumptions about what you 
have to always make assumptions on planning. What will the 
post-war situation look like? And the assumptions that they had 
in hand were, actually turned out to be not the same as the 
situation we faced. The situation was much worse.
    It is a fair question to ask why we didn't know more about 
how run-down the Iraqi economy was, and I guess the answer must 
be that the intelligence services, certainly in the period 
after the first Gulf war, were focused on the primary question 
which was WMD. Don't seem to have that right either.
    But they were not going out and looking at textile plants 
which is what I did when I got there. They weren't visiting 
refineries, going to see cement factories and shoe factories 
and finding out that these things were run on equipment that 
was 40 or 50 years old. We just didn't know the ground truth, 
and if we had known that, I think we would have mobilized more 
quickly. If I could have them, I would have brought more 
people, and we would have been working on the basis of a plan 
that would have been more in touch with reality.
    Mr. Yarmuth. Thank you.
    Chairman Waxman. Thank you, Mr. Yarmuth. You yield back 
your time.
    Ms. McCollum.
    Ms. McCollum. Thank you, Mr. Chair.
    I have two questions I would like to ask, but I think that 
they are very much interrelated. One is I am concerned, Mr. 
Bremer, that we didn't get an accurate description of what you 
thought the security in Iraq was like. You have in July in your 
book, you say you try to warn Condoleezza Rice who was then the 
National Security Advisor. In fact, it is page 106 of your 
book, that you had been in Iraq for a while and you thought we 
only had half the number, half the number of soldiers we needed 
there and that we were running a real risk of having this go 
south on us.
    Mr. Bremer. What page?
    Ms. McCollum. Page 106. But then on Meet the Press in July 
2003, when Mr. Russert asked you if we had enough, if we needed 
more American troops, if you had asked Secretary Rumsfeld for 
more American troops, you said no, I have not.
    Mr. Russert said, do we need more?
    You said, no, I believe we do not need more troops.
    Which is accurate, that we needed more troops which you 
were telling Ms. Rice on 106 in your book or what you said to 
Mr. Russert?
    Mr. Bremer. I said in my, and thank you for reading my 
book. I based my----
    Ms. McCollum. I read everybody's.
    Mr. Bremer. I based my assessment on a report that was 
given to me by the RAND Corp. which some members will be 
familiar with, a non-partisan, very highly respected think tank 
which, before the war, presented me with a draft report that 
suggested we needed about 480,000 troops in Iraq.
    Ms. McCollum. Well, my question is: Which statement is more 
accurate today.
    Mr. Bremer. Today, I don't think there is any question; we 
needed more troops.
    Ms. McCollum. In hindsight, you are saying we needed more 
troops.
    Mr. Bremer. Yes, ma'am.
    Ms. McCollum. I met you in Iraq.
    Mr. Bremer. Yes.
    Ms. McCollum. I do sincerely thank you for your service. 
You put life and limb, as well as all the civilians and troops 
there do.
    We have an ongoing war in Iraq, ongoing when you were 
there. A lot has been said about Marshall Plan reconstruction. 
There wasn't the type of war raging in Japan and Germany that 
you found embraced with in Iraq, correct?
    Mr. Bremer. That is right.
    Ms. McCollum. Another thing that you said today, and I 
realize I am jumping around but my time is limited, that you 
thought that the Finance Ministry was the most competent and 
that you really wanted to push that money from the Oil for Food 
program, the Iraqi funds so that they had money for doing 
payroll and for ongoing operations. Yet, I find this a bit 
troubling because on page 190 of a book called Blood Money, 
there was a debate that went on. Should the Coalition spend the 
cash or leave it for the new Iraqi Government to manage? The 
decision, and you were part of it, was well, let us get the 
money and let us get more work done.
    That led to contracts being radically moved forward, and so 
Mr. Bowen, I would like to ask you. Is it common sense on one 
single day that the review program approved $1.9 billion in new 
projects to be competitively bid out in 6 weeks and that in 
June, the United States, U.S. officials in June doubled the 
number of contracts that were issued without following any of 
the standing procedures using the money that was the Iraqi 
money?
    This does not make any sense to me at all.
    Mr. Bremer, the other thing you said, and your written 
statement is a little different from your public statement 
here. You said the International Monetary Fund found that the 
existing Iraqi systems were adequate and recommended that we 
use them.
    Mr. Bowen, do you think the International Monetary Fund 
thought it would be a good idea to approve in one single day to 
hand over to the Iraqi Finance Ministry $1.9 billion in new 
projects?
    Mr. Bowen. There was an enormous uptick in the Program 
Review Board's approvals in the last month of CPA's existence, 
and our lessons learned review of that raised some concerns 
about it. Our audits raised concerns about it. But Ambassador 
Bremer pointed out that he was told it was the request of the 
Iraqi ministries to have that done, and that was not something 
that we have elicited before.
    But the fact is that CPA contracting was beset with 
problems. They improved over time. They are much better now, 
but in three audits we did of CPA contracting, we found 
significant shortfalls.
    Chairman Waxman. The gentlelady's time has expired.
    Mr. Hodes, you have 5 minutes, and I think you can take it 
now before we break or we can break and come back.
    Mr. Hodes. I think it would be better if we broke.
    Chairman Waxman. OK, that is fine.
    We have two votes pending on the House floor. Let us break 
until 2. It will give you a chance to get something to eat.
    We will reconvene here at 2 to complete the questioning.
    [Recess.]
    Chairman Waxman. The hearing will return to order. Before 
we broke, we were just about to recognize Mr. Hodes. I want to 
recognize him at this time to proceed with questions.
    Mr. Hodes. Thank you, Mr. Chairman.
    I want to welcome back the witnesses. I trust you had a 
delightful respite from this hearing.
    Mr. Bremer, I want to talk for a moment with you about de-
Ba'athification. One of the first acts of yours was issuing 
Coalition Provisional Authority Order No. 1, banning people 
serving the top four levels of the Baath Party from holding 
government employment. Is that true?
    Mr. Bremer. That is right.
    Mr. Hodes. Some believe that the decision to purge 
thousands of Baathists from the Iraqi Government deprived the 
Iraqi Government of valuable talent and experience and also 
fueled the insurgency, and many Iraqis now advocate rolling 
back the process. Was the order on de-Ba'athification your idea 
or did you receive instructions on this from someone else?
    Mr. Bremer. I received the order from the Department of 
Defense.
    Mr. Hodes. In your book at page 12, you say I was neither 
Rumsfeld's nor Powell's man. I was the President's man. Do you 
recall that?
    Mr. Bremer. Yes.
    Mr. Hodes. You were given all executive, legislative and 
judicial functions in Iraq, correct?
    Mr. Bremer. That is right.
    Mr. Hodes. And you answered to the President.
    Mr. Bremer. Through the Secretary of Defense.
    Mr. Hodes. But you were the President's man.
    Mr. Bremer. Well, yes, that is a political statement. My 
chain of command was through the Secretary of Defense.
    Mr. Hodes. Did you discuss de-Ba'athification with 
President Bush?
    Mr. Bremer. No.
    Mr. Hodes. Let me refer you, sir, to a Newsweek 2004 
article, ``Paul Bremer: Inner Circle No More?'' You were quoted 
as saying, ``The President told me that de-Ba'athification 
comes before the immediate needs of the Iraqi people.'' Was 
that an accurate quote?
    Mr. Bremer. You know I don't remember saying that. I simply 
can't remember discussing de-Ba'athification at this point with 
the President. If I said it and it is an accurate quote, I must 
have, but I frankly don't remember discussing it with the 
President, not before the order was issued.
    Mr. Hodes. Did you have any discussions at any time with 
the President of the United States about de-Ba'athification?
    Mr. Bremer. Well, I probably had discussions with him about 
it after the order was issued in one of my meetings, but I 
don't remember a specific case. It wouldn't surprise me if I 
did.
    Mr. Hodes. Would you agree that in October 2004 when you 
were quoted making the statements about what the President told 
you, your memory was probably better than it is today?
    Mr. Bremer. I would think it is true of almost everybody, 
that their memory gets a little worse as you get older.
    Mr. Hodes. Now did you hear any counter-arguments about de-
Ba'athification before you signed the order?
    Mr. Bremer. What I describe in the book, as you know, the 
concerns that were raised by some of the political people who 
were advising me, that it would create people in Iraq who would 
not be happy about the Coalition. Now it is important to 
remember we are talking about only the top four layers of the 
Baath Party, about 1 percent of the party, a very small 
percentage.
    Mr. Hodes. In your previous testimony, you said that 
basically you thought de-Ba'athification was the right idea.
    Mr. Bremer. Yes.
    Mr. Hodes. But you left it to the Iraqis to implement.
    Mr. Bremer. Right.
    Mr. Hodes. And they implemented it too broadly. Is that a 
correct assessment of your testimony?
    Mr. Bremer. That is right.
    Mr. Hodes. Steve Browning, do you remember him?
    Mr. Bremer. I am sorry. What name?
    Mr. Hodes. Steve Browning, an Army engineer.
    Mr. Bremer. Yes, yes.
    Mr. Hodes. At one point, he was running five ministries at 
a time in Iraq, correct?
    Mr. Bremer. I don't know. I know he was busy.
    Mr. Hodes. He is quoted as saying to you that the Baathists 
were the brains of the government and if you sent them home, 
the CPA would have a major problem running most ministries. Do 
you remember that conversation with Mr. Browning?
    Mr. Bremer. I don't have any memory of it.
    Mr. Hodes. Now, ultimately, with respect to the Finance 
Ministry, how many Baathists ultimately were purged from the 
Finance Ministry as a result of your order?
    Mr. Bremer. I don't know, but let me make a general point, 
Congressman, about this. The Baath Party officials who were 
affected by this very narrowly drawn order generally occupied 
the top two, in some cases, the top three positions in the 
ministry, and what we found, as Admiral Oliver has already 
testified to, is that underneath them there were very competent 
people. So the premise that by deBaathifying we somehow made 
the government unable to deliver is not correct. It was not our 
experience.
    Our experience was that the career Iraqi civil servants who 
were not affected by this policy were on the whole effective 
and efficient, as Admiral Oliver has testified.
    Mr. Hodes. Let us focus on the Finance Ministry. You would 
agree with me that as a result of de-Ba'athification, the top 
level of management was removed, correct?
    Mr. Bremer. No. I would say that again I will probably 
defer to Admiral Oliver who was more on the ground at the 
ministry. In most cases, as I said earlier, the de-
Ba'athification decree had very little effect on the top levels 
of the ministries because the ministers and deputies had 
already left the country. They had already fled.
    I don't know what the case, precise case was at the 
Ministry of Finance, but in most cases, those people had in 
fact already left their posts.
    Mr. Hodes. With respect to the cash that went through the 
Finance Ministry and then was disbursed, what oversight did you 
personally exercise in terms of asking for reports, following 
up with people, visiting the Finance Ministry or otherwise 
making sure for yourself that the money was being properly 
disbursed?
    Mr. Bremer. As I have testified here all morning, our 
approach was somewhat different from that recommended and 
implied by the question recommended by the Special Inspector 
General. Our approach was to focus on the transparent 
disbursement of these funds from the Development Fund of Iraq 
into the ministries, in most cases, the Ministry of Finance in 
the first case and then subsequently on to the other 
ministries. And as I have testified and as the Special 
Inspector General himself found, that process was done 
appropriately and was done transparently, and I was satisfied 
that it was done that way.
    Chairman Waxman. The gentleman's time has expired.
    Mr. Hodes. Thank you.
    Chairman Waxman. Mr. Murphy.
    Mr. Murphy. Thank you, Mr. Chairman.
    I want to delve into the question of accountability here. 
Mr. Bowen, you came onto the scene, as you said, at the end of 
the CPA's time on the ground there.
    Mr. Bowen. That is right.
    Mr. Murphy. But during the entirety of the occupation or at 
least for a majority of it, there was a Department of Defense 
Inspector General on the ground in Iraq, is that true?
    Mr. Bowen. One person, that is right.
    Mr. Murphy. To your knowledge, were there other staff 
people under the Inspector General's charge through the 
Department of Defense?
    Mr. Bowen. I believe there was one other person assigned 
there for a short period, but I believe it was an office of 
one.
    Mr. Murphy. So overseeing the entire Inspector General's 
operation in Iraq through the Department of Defense, there were 
potentially only two people.
    Mr. Bowen. That is right, and I think this is one of the 
key lessons learned with respect to oversight. Next time that 
there is a contingency relief and reconstruction operation, 
there should be a robust oversight entity from the start and 
not just at the end.
    Mr. Murphy. Mr. Bremer, on the subject of accountability, 
we are talking now about $9 billion that go to agencies. Your 
testimony is essentially that it wasn't the CPA's 
responsibility once that money went to the agencies, to make 
sure that it was spent in accordance with the goals that at 
least your agency had set. Yet, your testimony also was that 
the Iraqi agencies simply weren't ready to be able to disburse 
that money in an effective means.
    How are we as a Congress supposed to provide for 
accountability if your testimony is that it was not the CPA's 
job to account for how that money was spent and those agencies 
weren't ready to spend that money? How do we decide who to hold 
accountable for that?
    Mr. Bremer. Well, just let me correct something, maybe a 
misunderstanding. I didn't say the Iraqi ministries couldn't 
account for it. I said that they had accounting procedures in 
place that the IMF considered adequate, obviously not perfect 
but adequate. And so, what we did was we worked to introduce a 
modern financial information system into those ministries--it 
is in my longer statement--to try to give them the capability 
to do the kind of onward accounting that you would want in a 
modern government.
    I found it interesting that the Inspector General mentioned 
earlier in this morning's session that even today the Iraqi 
ministries still have problems executing those budgets. So we 
seem to have been right that it wasn't going to happen quickly 
because we are now 3 years later and the Iraqi ministries are 
still struggling to put modern accounting procedures into 
place.
    Mr. Murphy. I would simply note, Mr. Bremer, that in Mr. 
Bowen's testimony, the International Advisory and Monitoring 
Board in Iraq found, in his words, that there inadequate 
controls in Iraqi spending at those ministries, and his 
testimony enunciates a list of those inadequate controls.
    Let me ask you about the ministerial advisors that were 
placed in these agencies. Were any of those ministers during 
your time there disciplined or fired for the lack of oversight 
and the lack of controls that are cited here in Mr. Bowen's 
testimony?
    Mr. Bremer. Any of the senior advisors?
    Mr. Murphy. Any of the senior advisors.
    Mr. Bremer. For lack of which kind of controls? I am sorry. 
I don't understand what controls you are talking about.
    Mr. Murphy. We have testimony here from Mr. Bowen that once 
the money ended up in the various ministries, that there was a 
lack of accounting and there was a lack of controls for that 
money that ended up in those ministries. We had advisors there. 
How are we not to hold those advisors accountable for our 
inability to account for the money once it went to those 
ministries?
    Mr. Bremer. Well, I can only repeat what I said just now in 
answer to the previous question which is that our concept to 
give the Iraqis responsibility as much as possible for this 
money as quickly as we could and following the recommendation 
of the International Monetary Fund, we put the responsibility 
into the Iraqi ministries for how those funds were spent once 
they were given to the ministries.
    Now we have a difference of view on transparency between 
the Inspector General and me about whether that is adequate 
transparency. I believe it was. He has a different view.
    Mr. Murphy. The advisors that you placed in the capacities 
that they had in those various ministries, none of those 
advisors were held accountable during the time that you were 
there for the decisions made in those ministries. You, in 
essence, were willing to turn over the control completely to 
the Iraqis with those ministries.
    Mr. Bremer. If you read the very first or second, I guess, 
regulation we signed, CPA Regulation 2, which established the 
Program Review Board, it says explicitly that it is our 
intention to give the Iraqis the responsibility for the 
execution of the budgets. When I met with the Iraqi ministers, 
they were not appointed until September 3, 2003. In the very 
first meeting, I said to them: You are responsible for the 
budgets, and you are responsible to execute those budgets.
    Mr. Murphy. Thank you, Mr. Chairman.
    Mr. Davis of Illinois [presiding]. Mr. Van Hollen.
    Mr. Van Hollen. Thank you, Mr. Chairman.
    Let me start by thanking all of you gentlemen for your 
testimony and service. Ambassador Bremer, thank you for your 
service both in the State Department and in Iraq. You did have 
a daunting job.
    Mr. Murphy's question actually is a good jumping-off point 
for my question because we have talked about the fact that this 
$9 billion that was given to the Iraqi ministries and was 
unaccounted for and had a discussion of who should have been 
better tracking that.
    My question really is the sort of juxtaposition of that 
decision along with the de-Ba'athification decision because, as 
you know, Mr. Carney, who is going to be here to testify, 
thought that was a big mistake as did others. The CIA station 
chief at the time is quoted in another book as saying: You are 
going to drive 50,000 Baathists underground before nightfall. 
Don't do this.
    I think it is fair to say--and I am quoting from a 
Washington Post article earlier this month--Carney and the 
other Americans tapped to run Iraqis' ministries knew that the 
senior managers in almost all government departments were 
Baathists, Hussein's government had forced them to join the 
party but that didn't mean that they all had blood on their 
hands or that they were all close associates to the former 
leader and without them, it would be much more challenging to 
get the government running again.
    On the one hand, we have this decision where the testimony 
has been we are relying on the Iraqi ministries. At the same 
time, we are essentially gutting the top levels or purging the 
top levels of those ministries of their most competent managers 
which it seems to me led inexorably, in many ways, to the 
problems that we have seen.
    I ask this question partly to look back so we can learn but 
partly because this remains an ongoing issue, as you know, in 
Iraq. Now I understood your earlier testimony to say that you 
didn't think the de-Ba'athification order was a mistake but the 
putting it in Iraqi hands was a mistake. Did you, at the time, 
appoint Chalabi to oversee that de-Ba'athification process?
    Mr. Bremer. No. What I said when I issued the order was 
that we recognized that figuring out who should be affected by 
this order, who was really a believer and who was not a 
believer was a job that the Coalition was not going to be able 
to do. We were not going to be able to make the kind of fine 
distinctions. Did Abdul become a teacher because he is a 
Baathist and wants to inculcate ideology or did he become a 
Baathist because he wants to be a teacher? Those are 
distinctions which we needed to leave to the Iraqi people, and 
I said that right at the outset.
    The mistake I made, and I have said it several times, is 
when the time came, and I said we will turn it over to Iraqis 
because we can't do it. The mistake I made was turning it over 
to the governing council, a group of politicians. They, in 
turn, turned it over to Mr. Chalabi. But it was a mistake 
because then what they did was interpret or implement it in a 
much broader fashion, and we had to basically correct that in 
the spring.
    Mr. Van Hollen. Right, and I guess according to that report 
in the Washington Post, it said after a few months, the CPA 
began to receive reports that 10,000 to 15,000 teachers had 
been fired because of the de-Ba'athification order.
    I think that the problems that we have talked about with 
respect to tracking the $9 billion and other problems can be at 
least partly laid at the fact that these ministries were 
essentially stripped of some of their better managers.
    Let me just ask you going forward because, as you know, Mr. 
Chalabi is now the chairman of the Supreme National Commission 
for de-Ba'athification which continues to have that ultimate 
authority and there is legislation that has been introduced on 
this very question to try and address the concerns of the 
Baathists which, as you know, are primarily Sunnis and which 
goes to the heart of the ongoing dispute between the Shi'a and 
the Sunnis.
    Do you think it is essential as part of political 
reconciliation, looking at the situation today, that they pass 
this piece of legislation that has been proposed by the Iraqi 
Parliament?
    Mr. Bremer. Well, Congressman, I am not familiar with the 
text of the legislation, so I wouldn't want to endorse one law 
or another. I think, to take your question broadly, it is 
essential for them to find some stasis that is more or less 
acceptable to everybody on the question of de-Ba'athification.
    It is not a straightforward question. The Shi'a who make up 
60 percent of the population and the Kurds who make up another 
20 percent were delighted with the de-Ba'athification and 
continue to support it. After all, three successive governments 
have not changed it there. So it is a sensitive problem, but I 
think it is a good idea to find a way to get back toward 
reconciliation, if you will.
    I just can't comment on the particular legislation, 
however.
    Mr. Van Hollen. Right, I understand that the Kurds and the 
Shi'a were pleased with order.
    Mr. Bremer. Right.
    Mr. Van Hollen. You have mentioned that in your earlier 
statements, and I can understand why too, I mean given the 
treatment they received from the Hussein Government.
    Mr. Bremer. Right.
    Mr. Van Hollen. On the other hand, our objective now is to 
try and achieve some kind of national reconciliation. Everyone 
agrees that some political solution is necessary, that the 
military solution is not adequate and it cannot be achieved by 
military means alone.
    Chalabi remains in this position. I guess my final question 
to you is: Do you think it is a good idea for him to be the guy 
in charge I mean of this commission because after all, as you 
know, he is still very much perceived to be a strong advocate 
for de-Ba'athification and that does make it more difficult, it 
seems to me, for others to perceive him as fair?
    Mr. Bremer. Well, Congressman, I know, I know him, and I am 
aware of the controversy that surrounds him, and I don't think. 
Now I have been away for 2\1/2\ years. I don't think it is 
prudent for me to start commenting on Iraqi political figures 
in a public forum.
    Mr. Van Hollen. Thank you. Thank you, Mr. Ambassador.
    Chairman Waxman [presiding]. Mr. Sarbanes.
    Mr. Sarbanes. Thank you, Mr. Chairman.
    It is not a surprise, I guess, when incompetent people make 
bad decisions. As unfortunate as it is, from the testimony and 
what I have read, I think there was a fair number of 
incompetent people that were inside the CPA and that were 
making bad decisions. What is more interesting is when 
competent people make bad decisions, and the explanations for 
that can be that they are put into situations that are beyond 
their particular competency, and in some cases they may be in 
situations that are beyond anyone's competency. I think bad 
decisions were made at the highest levels here, and I am not 
sure which explanation is the one that applies.
    I find I am incredulous at the descriptions of how the 
money was handed over. To be very honest without wanting to 
sound flippant about it, if the understanding was we will keep 
giving you money as long as you keep telling us that you are 
spending it, which is essentially the way Mr. Bowen has 
described it, that is not a standard I would use in giving my 
own children their lunch money, frankly, which is why I don't 
believe that is what was happening.
    I think there must have been another agenda, and I am 
drawing the conclusion that maybe it was to create some kind of 
plausible deniability with respect to how the funds were 
ultimately being used because if you could say well, it was the 
Iraqis' responsibility to take this money and spend it and to 
do the budgeting and have the controls, and we needed to hand 
it over as fast as we could, that appears to me to be driven by 
a desire for plausible deniability. I think it ends up, when 
you listen to Mr. Bowen, being a situation of implausible 
deniability.
    Here is my question. I watched a Frontline episode in which 
they talked about the fact that you, Ambassador Bremer, were in 
regular, daily contact with Secretary Rumsfeld with respect to 
what was happening on the ground. I believe you have indicated 
that you relayed concerns about whether the number of troops 
was enough at different points along the way. What I am curious 
about is the extent to which you relayed the fact that there 
wasn't enough support within the CPA, that you didn't have the 
competencies that you needed. Was that ever relayed to the 
Secretary and what was the response to that?
    Mr. Bremer. Yes, I raised it a number of times with him 
personally, but more importantly in a more practical way, my 
chief of staff who was trying to oversee the personnel 
situation in Iraq was basically pushing all the time, all 
Washington agencies to produce more people, and as both the 
Inspector General and the Government Accountability Office have 
reported, we never had sufficient staff.
    Mr. Sarbanes. What was the Secretary's response to you when 
you were conveying the need for this?
    Mr. Bremer. You know, I don't remember his specific 
response. I suppose he would say he would look into it. I don't 
know. Actually, we had less problems getting people from the 
Defense Department than we did from other parts of the U.S. 
Government.
    Mr. Sarbanes. Did you ever relay to the Secretary or his 
designees in any kind of detail this process by which the money 
was being handed over and any concerns that you might have had 
about accountability on the other side?
    Mr. Bremer. I don't recall talking to him about the money 
transfers in any detail. I mean as I said, we set in place 
procedures which were to help be sure that the money went for 
the needs of the Iraqi people, and the most important of those 
procedures was the budget, producing the government budget in 
Iraq, which the Iraqi people did on their own with our help 
starting in August 2003. It is not the kind of detailed 
discussion I would get into with the Secretary of Defense. I 
don't remember having any detailed discussions with him about 
that.
    Mr. Sarbanes. Thank you.
    Chairman Waxman. Thank you, Mr. Sarbanes.
    Mr. Welch.
    Mr. Welch. Thank you, Mr. Chairman.
    I thank the witnesses for their appearance here.
    Mr. Bowen, I wanted to ask you about Iraqi funds controlled 
by the CPA. They, as you know, were held at the Federal Reserve 
Bank, and shipments of cash were flown from the United States 
to Iraq. As the chairman alluded to or stated specifically in 
his opening remarks, there were 363 tons of cash shipped to 
Iraq on 484 pallets. I am new to Washington, but even by 
Washington standards, that is a fair amount of money. I think 
we have a photograph of the pallets of cash over there.
    My question is your auditors evaluated the physical 
security of the cash when it was stored at the CPA offices. In 
your view, was that physical security adequate?
    Mr. Bowen. No. We found shortfalls with respect to that, 
with respect to the storage of that, some of that money, that 
the keys to the safe were not properly secured in the 
comptroller's office. They were in a duffle bag by a desk when 
we went in to look at it, and it was just an example of, within 
the comptroller's office, the failure to follow their own 
security requirements in the maintenance of security with 
respect to those funds.
    That alludes to a point I want to clarify. Ambassador 
Bremer said that I had testified that the CPA met its standards 
in managing the DFI. What I said was that with respect to the 
transfer of the $8.8 billion to the ministries, we did not 
uncover fraud. However, the CPA did not follow its rules in the 
process for transferring that budget.
    There were two components to our finding. One was the lack 
of transparency, and the other was the failure to follow its 
own rules, and I was alluding to it earlier in my testimony 
that there were at least 10 disbursements that we reviewed, 
ranging from $200 to $900 million each that failed to satisfy 
the requirements of CPA's rules.
    Mr. Welch. And those requirements that they ignored were?
    Mr. Bowen. The requirements were that there had to be 
documentation before the transfer to the Ministry of Finance or 
a ministry of a budget spend plan on file, that there had to be 
supporting documentation for, to which ministry that would go, 
that there had to be allocation memoranda approved by CPA OMB 
officials that there would be disbursement vouchers signed off 
on. In the sample that we looked at, covering billions of 
dollars that was transferred, one or more of those requirements 
were not met.
    Mr. Welch. You mentioned that the comptroller didn't follow 
its own rules about the security of the cash. There have been a 
number of other episodes that have attributed to the fog of 
war. Was there any reason related to whatever may have been 
going on the street that would have interfered with the ability 
of the comptroller and CPA to follow its own rules about 
providing for the physical security of the cash that had been 
transferred to it by the Federal Reserve?
    Mr. Bowen. I don't think, if you are asking me did the 
chaotic situation cause the comptroller to fail to follow his 
rules, and the answer is no. I think it was just administrative 
oversight.
    Mr. Welch. Your report mentions some payments from the back 
of pickup trucks and cash stored in the gunny sacks in the 
ministry office. Can you tell us any more about the physical 
security of those funds once they got out there on pickup 
trucks?
    Mr. Bowen. Well, there was some exposure. We did not, in 
the course of our review, uncover loss as a result of that 
exposure, but we raised concerns about the vulnerability 
evident in that manner of handling.
    Mr. Welch. Ambassador Bremer, could you respond? Do you 
think that you took adequate precautions to safeguard literally 
the billions in cash that was shipped to the CPA when you were 
in charge?
    Mr. Bremer. I think we took the precautions that were 
possible under the circumstances, and I note that the Special 
Inspector General pointed out he didn't document losses of 
these funds. We were in a war zone, and when these moneys were 
put on a truck, they had to be guarded. There were restrictions 
on how it could happen.
    I guess I keep coming back to the point that I am not sure 
I understand what the alternative was. This was a cash economy, 
no bank transfers, no Internet, no computers, no telephone 
systems. I don't understand what people think the alternative 
was, frankly, to paying these people in cash. I don't think 
there was one.
    Mr. Welch. A followup on that, if there was no secure 
administrative structure to give you confidence that the money 
distributed would be used in constructive ways, why not raise 
that fundamental question and hold off on distributing the 
cash?
    Mr. Bremer. Well, let me answer that in two ways. Are you 
suggesting that I should not have paid the Iraqi civil 
servants? I should not have paid the pensions? I should not 
have paid the people running the government? I mean that is the 
implication of not paying it in cash. There was no alternative.
    There is no alternative today. There still is no bank 
transfer system, electronic transfer system in Iraq.
    Mr. Welch. I understand. My understanding is that there 
were many so-called ghost employees. Did you have a system in 
place that assured you that the cash or a paycheck went to 
people who were actually doing work as opposed to the pockets 
of people who were claiming they had employees working for 
them?
    Mr. Bremer. We knew there would be a problem with ghost 
employees. As Admiral Oliver testified this morning, this was 
the circumstance under Saddam Hussein. We knew there would be a 
problem. We tried our best to deal with by having our people 
review the payroll records that we could find in the ministries 
from the pre-war period, double-checking what we were paying 
against those lists and then having the Ministry of Finance 
itself also double-check that against its records. It was 
certainly not a perfect situation.
    Did we pay some ghost employees? I suppose we probably did.
    Chairman Waxman. The gentleman's time has expired.
    Mr. Welch. OK, thank you, Mr. Chairman.
    Chairman Waxman. Mr. Braley.
    Mr. Braley. Thank you, Mr. Chairman.
    Ambassador Bremer, Mr. Bowen, Admiral Oliver, I want to 
start by thanking you for the sacrifices you have made in both 
your personal and professional lives on behalf of the people of 
this country. I know your jobs were challenging.
    The purpose of my inquiry today is not to judge you but to 
learn. Ambassador Bremer, you gave us a template in your 
opening remarks by commending the committee's intention to see 
what lessons could be learned from these experiences and 
offering as the first lesson on your behalf that there is no 
substitute for good planning. Do you remember that?
    You also noted in the hearing today: I think the pre-war 
planning was inadequate and that we had a chronic shortage of 
personnel in all areas, and you recommended to us the Special 
Inspector's lessons learned on personnel which I believe is the 
Lessons Learned on Human Capital Management. Was that the 
report you were referring to?
    Mr. Bremer. Yes.
    Mr. Braley. One of the instructive guidelines on the very 
first page of this report deals with how you staffed to prepare 
for the enormous responsibility you faced when you went into 
Iraq. Do you remember having that sense of overwhelming 
challenge when you went there?
    Mr. Bremer. That is understating it, I think.
    Mr. Braley. This report says: Given the sheer complexity of 
post-conflict reconstruction efforts, developing a clear 
strategic plan of action at the outset is critical to success. 
Would you agree with that as a general statement?
    Mr. Bremer. Of course.
    Mr. Braley. It also goes on to talk about the initial 
planning phase before you even became involved with the CPA, 
and I assume that as part of your duties, you became generally 
aware of what some of those planning stages consisted of.
    Mr. Bremer. Well, I would say I didn't really have a chance 
to look too much in the rearview mirror until I got back 14 
months later. So I really, I wasn't deeply involved in looking 
at the planning until after I finally left Iraq, but I have 
looked back now and I do think the planning was inadequate.
    Mr. Braley. I assume when you took on this awesome 
challenge that you had at least some sense that people in the 
administration spent some level of involvement thinking about 
the challenges that you were going to face. Is that a fair 
statement?
    Mr. Bremer. Sure.
    Mr. Braley. One of the things that struck me from this 
report as incredibly surprising is that the Department of State 
during this initial planning phase had sponsored a Future of 
Iraq project which had generated a 1,200 page report on a 
variety of ambitious concepts for post-Saddam Iraq, and yet 
that report did not provide a comprehensive plan for management 
of post-war Iraq. Does that strike you as surprising?
    Mr. Bremer. Well, you know, the Future of Iraq has had sort 
of a mixed press. It never was intended, according to the State 
Department, it never was intended to be a comprehensive plan 
for post-war Iraq. So the answer to your question is yes, it 
didn't do that because that wasn't its intention.
    Mr. Braley. But if you are going to devote that much time 
to studying the conditions in a post-Saddam era, is it 
surprising to you that the report did not contain at least some 
analysis of the reconstruction challenges?
    Mr. Bremer. Well, it is surprising to me. Here is the 
problem as I understand, have come to understand it after I 
came back. The pre-war planning was based on assumptions about 
the kind of situation they would find on the ground in Iraq 
that turned out to be wrong. They thought there was going to be 
a large scale humanitarian problem. They thought there would be 
large scale refugee movements, both within Iraq and with the 
neighbors. They thought that Saddam would again set fire to the 
oil fields of his own country as he indeed had done in Kuwait.
    Now there was some limited sabotage on the oil fields, but 
basically when my predecessor, General Garner, arrived in 
Baghdad right after the fall of Baghdad, what he found was the 
situation that he had been staffed up for was not the situation 
that there was on the ground. So the lesson learned there is 
that first of all, as I said in my testimony, there is no 
substitute for good planning, but planing also requires 
assumptions. You have to make some assumptions about what kind 
of thing you are planning for.
    Where I think the Inspector General has been very helpful 
in that report and in the one on contracting is essentially 
saying, and I am putting words in his mouth, no matter how well 
you plan, what you have to do is have processes in place 
because the plan will always be wrong. It won't be exactly 
right. So what you have to focus on is getting the right 
processes, whether it is contracting or in this case, human 
resources.
    That is why I think and hope that this committee as part of 
its responsibility will look closely at those lessons learned 
because some of those processes, particularly in contracting, 
may require legislation. It will at least require help from 
this committee.
    Mr. Braley. One of the reasons that I am so concerned about 
this, if I may have a little bit of extra time to followup on 
that, is in President's Bush's January 10th speech about his 
surge proposal, he indicated that Secretary Rice will soon 
appoint a reconstruction coordinator in Baghdad to ensure 
better results for economic assistance being spent in Iraq. My 
question for you is: Have you ever been consulted about that 
coordinator and their responsibilities?
    Mr. Bremer. No.
    Mr. Braley. Thank you.
    Chairman Waxman. Thank you, Mr. Braley.
    Mr. Davis.
    Mr. Davis of Illinois. Thank you very much, Mr. Chairman, 
and I certainly want to thank the gentleman not only for being 
here but also for your patience.
    It seems to me that one of the fundamental questions that 
we are trying to get at is what happened to the money that was 
shipped to Iraq. We are trying to find out whether or not this 
money was spent responsibly, and we have talked about $12 
billion in cash. Well, that is a lot of money, $12 billion.
    Mr. Bowen, in your report, you discussed this and came up 
with some disturbing findings. Your report concludes that there 
was inadequate accountability for billions of dollars disbursed 
by the CPA. According to your report, a lot of these funds went 
to Iraqi ministries to pay salaries. You also learned of ghost 
payrollers. Just so that we all understand, could you tell us 
what a ghost payroller is?
    Mr. Bowen. A ghost employee, paying a ghost employee is 
paying someone who actually doesn't exist. It is an extra 
payment to a ministry based on its salary request, and we 
uncovered that in a couple of instances in interviews with the 
senior advisors' offices to two ministries wherein they had 
encountered a problem of the payment of ghost employees. They 
confirmed that, and my concern to them was what had they done 
about it. They said they had raised that concern, and the 
decision was not to take it on but to go ahead and continue to 
pay those according to those salary rolls because it was 
important to keep the peace by doing that.
    Mr. Davis of Illinois. Can you tell us what kind of numbers 
you are talking about? Were these a few? Were they many?
    Mr. Bowen. Yes, in the case of one ministry, there were 
8,206 guards on the payroll but 602 that were validated, and in 
the case of another there were over 1,400 guards, and just a 
fraction of those actually were validated.
    Mr. Davis of Illinois. To your knowledge, was any action 
taken to rectify or improve the situation?
    Mr. Bowen. No.
    Mr. Davis of Illinois. Ambassador Bremer, let me ask you, 
but first let me just say what one of your senior officials at 
the CPA said, a gentleman named Frank Willis. He said: I 
presume that some of them are ghost employees, but we paid 
them. There was a high level decision, I think, made that at 
least until January 1, 2004, salaries would continue to be paid 
to employees whether they worked or not because there was a 
fear if they were unemployed of riots and other complications.
    Mr. Ambassador, did you make that decision or were these 
Mr. Willis' assumptions?
    Mr. Bremer. I don't remember a specific decision. I gave 
general guidance that is consistent with that decision.
    Here was the problem. The ministries or the cases that the 
Special Inspector General is referring to involved something 
called the Facilities Protection Service. This was an idea that 
the U.S. Military came up with to hire Iraqis to protect 
ministry buildings so that our soldiers would no longer have to 
have that duty and could be used better for either guarding the 
borders or fighting the insurgents or finding terrorists. So we 
built up this Facilities Protection Service in the various 
ministries, and there was quite a lot of understandable 
confusion about the process bringing these people on board.
    When we, when I heard from some of my advisors--I don't 
remember him specifically mentioning it to me but he may have--
that they had concerns that some of these payrolls were padded 
or we couldn't be 100 percent sure that there were whatever it 
was, 1,400 people on the payroll, we had basically two choices. 
We could try to figure out exactly who was on the payroll and 
who wasn't which my advisors recommended against because they 
said, in effect, we will stop paying these people who were 
armed. By definition, they were armed because they defended 
these buildings. We are likely to have a couple of months while 
we try to scrub the numbers and figure out who is on the 
payroll and who is not.
    It seemed a lesser risk, to me anyway, in terms of overall 
security to continue paying while we tried also to get this 
payroll system in better shape.
    Mr. Davis of Illinois. It was kind of like on the streets 
in some of the big cities, they probably call that protection 
money. Do you think it is possible that some of that money 
could have gotten into the hands of the insurgents?
    Mr. Bremer. I don't know. I wouldn't. I am not enough of an 
expert on protection money, but this is a slightly different 
problem.
    The question was were they getting pay for people who 
either didn't come to work or people who weren't even on the 
payroll. My view was that there was a very substantial risk. We 
are talking here in terms of the Facilities Protection Service. 
I think something on the order of 70,000, if I remember 
correctly, around the end of the year. So it was a big number 
of people, and if we stopped paying them, my judgment was we 
were going to have real trouble.
    Chairman Waxman. Will the gentleman yield to me?
    Mr. Davis of Illinois. My time is up.
    Can I just ask Mr. Bowen if he would think if any of that 
money could have gotten to insurgents?
    Mr. Bowen. I don't know, but in the course of our interview 
with the offices that this affected, they reported that they 
had asked that the Iraqi Ministry of Finance require certified 
payrolls prior to salary payments, but it was decided that CPA 
would rather overpay than risk not paying these other employees 
and inciting violence.
    Mr. Davis of Illinois. I thank the gentleman very much and 
thank you, Mr. Chairman.
    Chairman Waxman. Just on this point before I recognize the 
next member, 70,000 employees, they weren't all in security. 
These were employees of the different ministries that run the 
government of Iraq. Isn't that what we are talking about?
    Mr. Bremer. It was called the Facilities Protection 
Service, and I think but I can't remember when we made. They 
worked----
    Chairman Waxman. There were 70,000?
    Mr. Bremer. Excuse me.
    Chairman Waxman. Did that amount to 70,000 employees?
    Mr. Bremer. Yes, something like that.
    Chairman Waxman. It did.
    I have an example of one ministry that had 8,206 employees 
they claim were on the payroll when in fact they only had 602, 
and another that CPA was paying the salaries of 1,471 but there 
were only 642 that could be validated. Now is the first time I 
have heard this figure of 70,000.
    Presumably, they were people who were carried over from the 
existing government, isn't that right?
    Mr. Bremer. No. These were, to a large degree, former 
members of the former army who were invited to become part of 
the security services, either the policy, the new army, the 
civil defense national guard or the Facilities Protection 
Service.
    Chairman Waxman. So they were part of the government when 
the Sunni Baathists were in charge of the government. You were 
worried about them the most.
    Mr. Bremer. Well, I would have to, you know. If you wish, 
Mr. Chairman, I can probably get a more precise number for you. 
I am taking the 70,000 off the top of my head. I think it is 
about right.
    But it was basically the idea here was to try to relieve 
the burden on American forces who were guarding most of these 
buildings most of the time until we got this new force 
organized, and it was to relieve the American forces from 
having to guard the Ministry of Transportation or the Ministry 
of Irrigation or some museum. That was the purpose of this 
Facilities Protection Service.
    Chairman Waxman. Mr. Bowen, did you understand that all the 
ministries that received cash to pay their employees were 
security for the ministries?
    Mr. Bowen. In this case, the 74,000 were Facility 
Protection Service employees, yes. It is in our audit.
    Chairman Waxman. But there were others as well, weren't 
there?
    Mr. Bowen. There are lots of other employees who were paid 
pursuant to salary rolls, and there was concern about ghost 
employees across the board, but in our audit, the focus and 
what was brought to our attention were the missing FPS guards.
    Chairman Waxman. So we don't really have the full extent of 
all the ghost employees that were paid.
    Mr. Bowen. No, and as the audit points out, it is just this 
particular group where it was brought to our attention that 
ghost employees were being paid.
    Chairman Waxman. That strikes me, Ambassador Bremer, as 
reckless. You knew the ghost employees were going to get this 
money. You took presumably the requests of the ministries for 
whatever numbers they gave, and you expected those were really 
off target, but you paid them anyway because you were worried 
about what would happen if you didn't pay.
    Mr. Bremer. Well, they were already on the payroll when the 
Inspector General found these anomalies, and as I said, the 
question was what do we do. Are we going to stop paying them in 
which case we have 74,000, I hear now, armed men out there who 
are angry at us, who are no longer guarding the buildings. If 
I, if the American military had to put 70,000 back on those 
buildings, we are talking about a significant augmentation of 
American forces.
    So what we did was try to continue to work to get modern 
payroll systems in place and scrub those lists as we went on. 
It seemed to me, and I would certainly do it again today, the 
right decision was to continue paying them and try to fix the 
payroll problem as we went along. It is not an ideal solution. 
I give you that.
    Chairman Waxman. Mr. Bowen, do you feel that you are 
incorrect in your charge that there wasn't transparency? It 
sounds like Mr. Bremer knew exactly what he was doing. He knew 
that he was paying a lot of people that were not entitled to be 
paid with the cash that was coming into Iraq.
    Mr. Bowen. The transparency issue has to do with feedback 
from how Iraqi ministries used their funds that was transferred 
to them. This was simply an anomaly that we uncovered. However, 
we highlighted it because of the concerns that were raised to 
us by CPA staff that they had attempted to ameliorate it but a 
decision was made to not address the issue because of the 
security matter that Ambassador Bremer has underscored.
    Chairman Waxman. But that seems again, the question I want 
to ask you, the tip of an iceberg. There were many, many other 
ghost employees in other ministries that were also paid, that 
didn't offer a threat to security, isn't that correct?
    Mr. Bowen. Well, that is not----
    Chairman Waxman. You didn't audit them, but wouldn't one 
expect that to be the case?
    Mr. Bowen. Well, our concern was that ensuring the Iraqi 
Ministry of Finance developed more reliable payrolls was 
essential to avoid the misapplication of funds, and that 
continues to be a problem today.
    Chairman Waxman. OK, thanks.
    Mr. Delahunt.
    Mr. Delahunt. Yes, thank you, Mr. Chairman, and thank you 
for inviting me to participate.
    You know we have heard a lot about the dollars from the DFI 
being their money, Iraqi money, and clearly the bulk of that 
money came from the Oil for Food program that was administered 
by the United Nations. It was their money. Clearly, we had a 
fiduciary duty to monitor and to audit the use of that money. 
How much of their money is left in the control of the current 
government in Baghdad, if you know, Mr. Bowen?
    Mr. Bowen. Well, the current government in Baghdad has 
complete control of the income from the oil and gas sales which 
is 95 percent of the national income.
    The question I think you are alluding to is what continuing 
control perhaps did the U.S. Government----
    Mr. Delahunt. No, I am not even asking that. I am asking, 
if you know, if you could quantify the amount of money 
currently in the account of the Iraqi Government which received 
the moneys from the Oil for Food program.
    Mr. Bowen. I don't know what the current account levels are 
in the Federal District Bank of the Seventh District of New 
York, the Federal Reserve Bank, but their budget is upwards of 
$30 billion for 2007 and the amount left in the treasury at the 
end of last year, unspent, was about $12 billion.
    Mr. Delahunt. That is the point that I wanted to make. Yet, 
I understand that in the proposal put forth by the 
administration that President Bush is requesting an additional 
$1.7 billion of American taxpayer dollars for reconstruction 
programs in Iraq. Is that your understanding too?
    Mr. Bowen. Yes, it is.
    Mr. Delahunt. So let me put it in very simple terms. There 
is a surplus of $12 billion sitting in Iraq, and simultaneously 
the American taxpayer is being requested to appropriate $1.7 
billion. Am I missing something or am I making a 
misrepresentation?
    Mr. Bowen. No. That is right, but I think the President 
also pointed out that the Iraqis must commit to spending $10 
billion of their money on relief and reconstruction in this 
phase.
    Mr. Delahunt. $10 billion out of the $12 billion?
    Mr. Bowen. That is probably where it must be drawn from.
    Mr. Delahunt. That leaves still a surplus of $2 billion.
    I yield to the chairman.
    Chairman Waxman. Perhaps that is to pay for ghost 
employees.
    Mr. Delahunt. Well, whatever it is to pay for, I am finding 
it difficult to reconcile requesting American taxpayers to come 
up with an additional $1.7 billion. My memory is it was a shade 
under or maybe a shade over $20 billion that is already been 
appropriated from American taxpayers to assist in the 
reconstruction of Iraq.
    Mr. Bowen. That is right, $21 billion in the Iraq Relief 
and Reconstruction Fund, another $10 billion in the Iraq 
Security Forces Fund and another $2.5 billion through the 
Commander's Emergency Response Program on top of that economic 
support fund. So the Congress has been very generous in 
supporting the relief and reconstruction and recovery of Iraq. 
That is why I think, as the administration has spoken, 
benchmarks with some bite is necessary to ensure that the Iraqi 
ministries participate, and it is their job to carry forward 
the recovery.
    Mr. Delahunt. Mr. Bowen, I don't know if it is the Congress 
that has been generous, but the Congress has been very generous 
with the American taxpayer dollars.
    At this point in time, given your testimony and presumably, 
Ambassador Bremer, you agree and, Mr. Oliver, you agree with 
what was just represented by the Special Inspector General, 
where there is $12 billion sitting somewhere in Iraq and the 
President has demanded--demanded that they spend $10 out of 
that $12 billion, my position is clearly I would hope that the 
executive would review, reconsider its request of the American 
taxpayer and insist that the Iraqi Government spend all of the 
$12 billion before we appropriate any additional moneys.
    With that, I yield back, Mr. Chairman.
    Chairman Waxman. Thank you, Mr. Delahunt.
    Mr. Shays.
    Mr. Shays. Thank you. I know we are closing up.
    I would just like to make reference to, first, Mr. 
Delahunt's comments, and I mean this respectfully. This is an 
area where the majority party can weigh in and may find support 
from the minority party. I am not sure I want them to spend all 
their reserves, but that is an area where they can in fact 
spend their dollars to rebuild. I just think that we made a 
conclusion that we would be more successful if the rebuilding 
worked and that we would ultimately save lives and any way we 
can get them to spend money on reconstruction would be to our 
advantage.
    I guess I would like to just make motion, whether we call 
these ghost employees or non-existing employees, isn't it a 
fact that one of the challenges we had as the general said, I 
had 900 people to pay, these are the names of these employees, 
and we had a sense that it may have been 800 and that this 
general could potentially pocket the money? I mean isn't that 
something that we basically said could potentially happen, Mr. 
Bowen?
    Mr. Bowen. Yes, it is.
    Mr. Shays. Ambassador Bremer.
    Mr. Bremer. Yes.
    Mr. Shays. But our challenge was to decide whether they got 
paid at all. I think, Mr. Bowen, you have made a valid point 
that said that Ambassador Bremer didn't follow the regulations 
as we sought to implement them. He made determinations that he 
couldn't. Would you not agree that this was a tough call?
    In other words, you can say I got you because your 
regulations said you needed to do this, but in actual fact, in 
the midst of a war where there was no machinery, no papers, no 
documents of any kind, Mr. Bremer had to make a decision 
whether Iraqi troops got paid, whether Iraqi security got paid 
or whether for 2 months or so they didn't and even no guarantee 
after 2 months that we could resolve the issue, isn't that 
true?
    Mr. Bowen. That is true, and my audit was not an ``I got 
you.'' It was the result. It was carried because of 
whistleblowers that came to my office, raising concerns, which 
made me duty-bound to address the issue and it unfolded as it 
did. But as a component of the overall review, the ghost 
employment issue is a minor part.
    Mr. Shays. Right, I hear you.
    Just basically in conclusion, it is good you are there. It 
is important that we deal with this issue. But as someone who 
led the whole congressional effort in our committee on the Oil 
for Food program, we know that Saddam undersold his oil and got 
kickbacks, overpaid for commodities and got kickbacks basically 
to the tune, we think, of $9 billion. We also recognize that 
there are hardly any meters in any of the Iraqi pipelines, no 
meters on their wells, no meters on their pipelines, no meters 
when it gets on board the ship. They just look at the 
difference in buoyancy of the ship. So we got a lot of work cut 
out for us.
    Mr. Bremer, there are so many things that we can second 
guess you on, but I know this. You worked 7 days a week. You 
gave your heart and soul to this issue. You made some very 
important and successful decisions that you would get no credit 
for because no bad thing came. Then when certain things 
happened that weren't all that good, you get blamed for it. But 
I appreciate your eagerness to see us transfer power to the 
Iraqis in June.
    People said we couldn't do that. I think we made success 
from June 2004 to all of 2005, and I think we saw huge problems 
in 2006 when Jafari just sat and took 4 months to decide what 
he was going to do before we had Mr. Maliki in. So I look at 
2006 as the bad year above anything else.
    Thank you, Mr. Chairman.
    Chairman Waxman. Thank you very much, Mr. Shays.
    I am going to recognize myself.
    We are not holding this hearing for an ``I got you,'' and 
this is not a way to criticize you, Ambassador Bremer. Others 
will have to evaluate that. We are trying to find out what 
happened. If we had 70,000 claimed and let us say there were 
only 10,000, where would that money have gone? Would it have 
been in the pocket of the minister or do you think he handed it 
out to other people?
    Do you have any sense of that, either Mr. Bowen or Mr. 
Bremer? Do we have any idea what happened to that money?
    Mr. Bowen. No, we don't have accounting for it, but as I 
said earlier, as a component of our overall review, the ghost 
employee issue was a small part. The larger issues were the 
requirements of the CPA to follow its rules, the comptroller's 
failure to do that and the necessity to ensure that there is 
some transparency on the Iraqi side.
    Chairman Waxman. Right, so that was your audit and that was 
your evaluation of the failures.
    Mr. Bowen. That is right.
    Chairman Waxman. But the reality is that maybe hundreds of 
thousands of people, we don't know, maybe less, were presumably 
paid but they didn't exist. So somebody had the money in hand. 
Who would have gotten that money, the minister?
    Mr. Bowen. You are right. Corruption is endemic within the 
government of Iraq. That is something that we identified 
repeatedly through the course of our quarterly reports in 2006, 
and it is something that is substantiated. It is not just a 
speculation but substantiated by the fact that Judge Radhi, the 
Commissioner of the Commission on Public Integrity has 
thousands of cases ongoing with respect to public corruption. 
The Minister of Oil was indicted the week before last.
    Chairman Waxman. Continuing on, it wasn't just at that 
moment. It preceded that period of time, during the CPA and it 
has continued on to the present time.
    Mr. Bowen. Corruption certainly characterized Saddam's 
regime, and I think that it is going to be a generational 
solution. It takes the building of institutions within the 
country. The Inspectors General are new. The Commissioners of 
Public Integrity are new, and they are having a difficult time 
standing up simply because there is a lot of internal 
resistance to their work.
    Chairman Waxman. A recent report by GAO examined what 
happened last year, 2006, and it found that the Iraqi 
Government budgeted about $6 billion for reconstruction 
projects for 2006, but it spent only $877 million of that 
amount. That is only 14 percent of what they promised. Mr. 
Bowen, last week, you said the Oil Ministry has to be able to 
carry out its capital program, but the GAO reported that the 
Oil Ministry spent less than 1 percent of its capital budget in 
2006. Do you know whether that is an accurate statement or not?
    Mr. Bowen. That is accurate, and that is the budget 
execution problem that we have been talking about today.
    Chairman Waxman. Well, I guess the question that Mr. 
Delahunt and others of us have is: Do you think the United 
States should continue to provide billions of dollars to Iraq 
with no conditions whatsoever or should Congress consider 
attaching some incentives for the Iraqis to use their own money 
and improve their own operation?
    Mr. Bowen. I think Congress is discussing benchmarks that 
have bite, and I think that is completely on target in light of 
these facts.
    Chairman Waxman. Mr. Shays said we shouldn't be critical of 
Mr. Bremer, but if you look, step back, aside from the false 
information that got us into the war, there was not sufficient 
planning. There weren't enough troops to provide for security. 
We never realized the damage that the economy suffered under 
Saddam Hussein, so when we got there, we didn't know how 
damaged it was. We expected that stabilization would happen 
rapidly, and we allowed the militias and the al Qaeda to stir 
up the rivalries as the people were looking to either the Sunni 
militia or the Shiite militia to give them security that we 
didn't provide. All of that has led to the situation we are in 
now which is a civil war.
    Now maybe you shouldn't have paid ghost employees, maybe 
you should have, but the fact of the matter is all these 
assumptions, wrong, wrong, wrong, wrong, wrong, and we're in 
the situation we are in today.
    Mr. Bremer, are you optimistic that we are going to be able 
to succeed in our objectives in Iraq?
    Mr. Bremer. Well, I am still hopeful, Mr. Chairman. During 
my time in Iraq, I came to have a lot of respect for the Iraqi 
people. They are tough-minded people who, as one of the other 
Congressmen pointed out, historically have had a sense of being 
Iraqi.
    Chairman Waxman. You are hopeful.
    Mr. Bremer. I am hopeful.
    Chairman Waxman. Would you invest in a company that made 
these many mistakes and then they might put out a little 
brochure saying past performance is no guide to the future, but 
would you think this is a good bet?
    Mr. Bremer. We are all, if we are a taxpayer, we are an 
investor unless Congress decides otherwise, Mr. Chairman.
    Chairman Waxman. We are indeed.
    Mr. Shays. Mr. Chairman, can I just interject one word?
    Chairman Waxman. Yes.
    Mr. Shays. Just to say I would be one hypocrite if I had 
said not to be critical of Mr. Bremer because Mr. Bremer knows 
I have been critical of him. I just wanted to say that we need 
to put everything in perspective but, Mr. Bremer, you know.
    Thank you.
    Chairman Waxman. When we put it in perspective, you are the 
least of our problems. You were a problem nevertheless 
according to Mr. Bowen's audits, but we are now getting the 
background on all that.
    Ms. Watson, do you want one last comment?
    Ms. Watson. Yes, I would like to just conclude my 
involvement here and thank these gentlemen for the time you 
have spent and your patience in addressing and responding to 
our questions.
    There certainly is a double standard. I was an ambassador. 
We had to account for every single glass, every fork, every 
knife and anything that I had the government take over, they 
wouldn't bring back. I am getting the impression that this was 
such an unusual situation that it is not important to account 
for the dollars.
    So I would like all of you to respond to this, and we will 
start with the Ambassador first. What gives you hope that the 
Iraqi people can do any better with their revenues than they 
have shown us in the past and Mr. Bowen, what gives you any 
optimism that we can never account----
    Chairman Waxman. Ms. Watson, I am going to interrupt you 
because this is not a second round. If you could just make a 
concluding comment because these people have been here all day.
    Ms. Watson. I am aware of that, but I wanted them to give 
me some way to say, yes, I will go along with voting. Can you 
comment what makes you think this Iraqi Government can do any 
better about their expenditure of their money and our money?
    Whatever your response is, that is the end of my remarks.
    Mr. Bowen. I think that the targets for U.S. money, I don't 
want to comment about Iraqi money. I have already said that 
there is a huge problem with ministry capacity. But with 
respect to U.S. money, I think the targets of the Commander's 
Emergency Response Program and the Provincial Reconstruction 
Team programs are the right places. CERP is about executing 
rapid turnaround, small scale reconstruction projects in an 
unstable environment, and that is what we have in Iraq.
    The Provincial Reconstruction Team Program is about 
building governance at the provincial level across the country. 
In order for democracy to take root, it has to take root 
locally to succeed nationally, and they are off to a 
challenging start. Supplementing their capacity is important 
right now.
    Chairman Waxman. Thank you very much.
    Ms. McCollum, any last word?
    Ms. McCollum. Well, yes, Mr. Chair, I am very glad we had 
the hearing today.
    We were functioning as, to put in lay people's terms, as 
guardian ad litem for the Iraqi Oil for Food program, and we 
had many, many hearings here about how the U.N. failed in its 
responsibility to be a good guardian of the Iraqi oil money. So 
I think it is appropriate that we examine that the United 
States live up to high standards when asked to be the guardian.
    Mr. Oliver, quoting from your testimony, you served as the 
Coalition Director for the Management and Budget for the Iraqi 
Government, the Administer, the Senior Advisor to the Iraqi 
Ministry of Finance.
    I find it very troubling in a BBC report, and I will finish 
up what Ms. Watson had started earlier, when you were asked 
about their money: ``Yeah, their money.''
    I am quoting you: ``Billions of dollars of their money 
disappeared. Yeah, I understand that. I am saying what 
difference does it make?'' Question: ``But you don't know what 
happened to that money. You don't know whether it was used 
wisely or whether it was stolen.'' Mr. Oliver: ``That is right. 
You have no idea. And the question is whether or not you set up 
a system to do that. I chose not to.'' Question: ``Was that the 
right decision?'' Mr. Oliver: ``Absolutely.''
    I am very concerned, Mr. Chair, and I would ask this of the 
committee, to followup because there is some conflicting 
testimony. I am finding on page 4 of Mr. Bowen's report, he 
would lead one to believe that the International Monetary Fund 
found the existing Iraqi systems were adequate and recommended 
that we use them as they went forward disbursing funds, and in 
Mr. Bowen's report on page 6, the Monitor Board says there 
weren't adequate systems.
    We could followup with that, so that we can learn lessons, 
Mr. Chair, so that we can be a better guardian ad litem in the 
future. Thank you so much for the hearing, and I thank the 
gentlemen, all three of them, for staying for the whole time.
    Chairman Waxman. Thank you, Ms. McCollum.
    We do thank you very much for your participation in this 
hearing. I think it has been helpful. We want to be 
retrospective to understand what has happened, but the 
objective has to be not to let things happen again. We should 
learn from what has happened. If we are going to make mistakes, 
let us make new ones and maybe even prevent some.
    Thank you very much.
    The meeting stands adjourned.
    [Whereupon, at 3:15 p.m., the committee was adjourned.]
    [Additional information submitted for the hearing record 
follows:]
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