SPEAKERS CONTENTS INSERTS
Page 1 TOP OF DOCDIVESTING SADDAM: FREEZING, SEIZING,
AND REPATRIATING SADDAM'S MONEY TO
Wednesday, May 14, 2003
U.S. House of Representatives,
Subcommittee on Oversight and Investigations,
Committee on Financial Services,
The subcommittee met, pursuant to call, at 10:00 a.m., in Room 2128, Rayburn House Office Building, Hon. Sue W. Kelly [chairwoman of the subcommittee] presiding.
Present: Representatives Kelly, Paul, Shadegg, Hensarling, Garrett, Murphy, Brown-Waite, Barrett, Oxley (ex officio), Gutierrez, Moore, Inslee, Crowley, Maloney, Lynch, Davis and Renzi.
Chairwoman KELLY. Before I begin this hearing I want to explain that I am on another committee as well which is in the middle of a markup. I may have to take a break every once in a while to go over for votes. So, just to give you all fair warning that may happen, I hope that we can move along with this hearing.
So that being said, this hearing of the Subcommittee on Oversight and Investigations will come to order.
Over the last 20 years, Iraq and its people have been systematically looted by the brutal tyranny of Saddam Hussein. Today, tens of billions of dollars in assets and cash lie somewhere outside of Iraq in the smoky depths of phony front companies, hidden trusts, and cash accounts in the names of regime family members and loyalists. This stolen money represents another layer of destruction and deceit that the Hussein regime inflicted on the Iraqi people.
Page 2 PREV PAGE TOP OF DOC Specifically, you can recall the reaction of the Iraqi who stormed one of many Presidential palaces on April 14 and was finally free to express his feelings. And as he passed through that ruined palace, with shards of crystal from chandeliers and shattered mirrors and all that gilt furniture, he was marveling bitterly at Saddam's life of luxury and commented that his family couldn't even afford bread.
The Iraqi people have suffered enough and this money that was taken belongs to them. These assets must be found and they must be returned to the people of Iraq to build schools and reopen businesses and hospitals and repair the country's infrastructure, all of it destroyed by the malicious neglect of a tyrant and his inner circle.
Today the Oversight Investigations Committee holds the first congressional hearing on the search for Saddam's money and the efforts to return it to the Iraqi people. Initial press reports are startling, with stories of shell companies in numerous countries, discoveries in Iraq of hundreds of millions of U.S. Dollars, and oil smuggling schemes that are without parallel among other petty dictators and thugs.
Passage of this committee's work on the Patriot Act has been a tremendous step toward monitoring the flow of illicit money and it has also served to raise the bar for the international community. Foreign financial institutions can no longer seek access to the U.S. market without providing U.S. financial enterprises with sufficient information to determine that no one is being misled by Saddam, his family, or their agents.
Our message to the world is straightforward and it should be heeded: The willingness to share cross-border information is now a license required to do business in America.
In case you missed that, let me repeat it: The willingness to share cross-border information is now a license required to do business in America.
We have accomplished a great deal in Iraq in a very short time. President Bush has been steadfast in his resolve to end tyranny, terrorism, and torture. The Administration, our brave soldiers and sailors, the coalition troops, have earned the admiration of the American people and the world for the rapid liberation of a terribly oppressed nation, a nation that spent its money funding, aiding, and exporting terrorism instead of caring for its people.
Page 3 PREV PAGE TOP OF DOC Congress must continue to give the Administration the resources it needs to locate and return the money to its rightful owners: the men, women and children of Iraq. While a collaborative effort is underway to seize this money, let's be very clear. America expects nothing less than the highest level of cooperation from financial institutions, international entities, and foreign governments across the globe. We know the money is out there and we will find it and we will return it to the Iraqi people, and we expect others to do the same thing.
We are pleased to have with us here today witnesses from the three principal departments responsible for efforts to repatriate this money to Iraq. At this time it is unclear what role each entity plays in the process. I am hoping that you can shed some light, you who are testifying, on how the U.S. Government works with the international community and the financial services industry to repatriate financial assets of dictators.
The committee has also an immediate interest in determining how entities across the world are working together to return Saddam's illegal money to the Iraqi people. Therefore, I would also like to announce that we will be requesting, this committee will request for GAO to study these issues. Chairman Oxley and I, along with Ranking Members Frank and Gutierrez have agreed that this is an issue that must be examined as closely as possible and we will be sending a letter this afternoon to request this study from the GAO.
There are many challenges ahead and we believe that this independent investigation by GAO will help to address them in a comprehensive and effective way.
I thank this panel for their appearance. I look forward to working with you all to ensure the Iraqi people recover the assets that they now own and that will be critical to building a free and democratic Iraq.
And Mr. Gutierrez's plane just landed, so I am going to call on Mrs. Maloney.
Page 4 PREV PAGE TOP OF DOC
[The prepared statement of Hon. Sue W. Kelly can be found on page 63 in the appendix.]
Mrs. MALONEY. And I thank the gentlelady from the great State of New York for holding this important hearing. And I thank all our panelists.
This morning the subcommittee examines the seizure of Saddam Hussein's assets and Administration efforts to repatriate them. These assets were the product of years of looting from the Iraqi people, including the diversion of resources from humanitarian programs such as Oil for Food, and are further evidence of the sickness of Saddam's regime.
Just prior to military action on March 20, the President issued an Executive Order confiscating and vesting property of the Government of Iraq in the United States. The Executive Order operates under authority in section 106 of the Patriot Act. The order resulted in the seizure of 1.7 billion in assets by the U.S. Treasury Department from accounts held in the U.S. In the name of the Government of Iraq, the central bank of Iraq, the State organization for marketing oil, the Rafidain bank, the Rasheed bank.
As CRS explains and I quote: This authority becomes available when the United States is engaged in armed hostilities or has been attacked by a foreign country or its nationals. At this time, the property of any foreign person, organization or nation which planned, authorized, aided, or engaged in the hostilities or attack become forfeitable.
Given that we have yet to find Saddam, this seizure is especially important because of flight risk and the threat that his assets could be used to assist terrorists.
This morning our panelists will testify to the success of their efforts to track down Saddam's assets through his tangled web of accounts. This was difficult work and our witnesses and their departments deserve credit for a job well done. However, the job of limiting Saddam's funding sources is far more complex. Treasury's own testimony estimates that his family's wealth could be as much as $40 billion worldwide.
Page 5 PREV PAGE TOP OF DOC I also look forward to a discussion this morning of what is next for the assets seized from Saddam. The President's Executive Order stated, and I quote, ''such a vested property should be used to assist the Iraqi people and to assist in the reconstruction of Iraq,'' end quote.
This is a very broad statement that gives the Administration wide latitude for potential uses of this money. As this money was stolen from the people of Iraq, the U.S. in a sense is acting as a fiduciary for the Iraqi people. Iraq is a nation that suffers massive international debts. The Iraqi people will need every resource available to them to rebuild the country and service their debt obligations.
Whatever the final determination is for the uses of this money, I believe these decisions should be made in the open, not in closed Administration meetings. This money does not belong to the United States and it must not be obligated in no-bid rebuilding contracts, as has been the case with other Iraq projects. I think this issue is so important that last week I offered an amendment in the Government Reform Committee that would apply the highest Federal contracting standards to seized Iraqi assets. I withdrew the amendment because I wanted to hear from our witnesses this morning before proceeding. I did offer another amendment that requires full and open disclosure of contracts that were awarded without open bidding to the lowest responsible bidder. I am pleased that this amendment was accepted by the majority and attached to the defense authorization bill. I believe a similar one may be required for the assets that are the topic of this hearing. And I look very much forward to your statements.
In short, the Iraqi people suffered for 25 years and it is very important to get this money back into their hands for the rebuilding effort. And I hope that we are working with the United Nations, which happens to be in the district that I represent, to broaden the burden sharing so that other countries will be participating in a multilateral effort to help Iraq and to help rebuild it.
Page 6 PREV PAGE TOP OF DOC I am also interested in any efforts to seize the assets in foreign countries and where the United Nations stands in assisting our country to find these assets, seize them, return them to the Iraqi people. I am very concerned and dedicated to helping them. But we have many domestic challenges here at home in education, health care, and we really cannot carry this burden alone. So I hope the Administration is working to share this burden with other countries.
I thank you very much for being here and I yield back the balance of my time.
Chairwoman KELLY. Thank you.
[The prepared statement of Hon. Carolyn B. Maloney can be found on page 38 in the appendix.]
Chairwoman KELLY. Mr. Murphy. No opening statement?
Mr. GUTIERREZ. So that we can get to the witnesses, may I hand my opening statement for the record?
Chairwoman KELLY. Yes. Without objection, all members' opening statements will be made part of the record.
[The prepared statement of Hon. Luis V. Gutierrez can be found on page 36 in the appendix.:]
Chairwoman KELLY. Mr. Barrett. Mr. Oxley, I am sorry, I didn't see you down there.
Page 7 PREV PAGE TOP OF DOC Mr. OXLEY. Thank you. I was hiding behind
Chairwoman KELLY. Mr. Chairman.
Mr. OXLEY. behind our distinguished freshman here. I just want to congratulate the Chairlady for this hearing today, submit my statement for the record, and welcome our witnesses.
This is a very important issue that our committee has undertaken, having passed the anti-money laundering provisions of the USA Patriot Act, and I know your interest in this personally. And we are looking forward to this as being the first step in finding where Saddam's money is and going after it.
So again, I thank you for your perseverance and I yield back.
Chairwoman KELLY. Thank you.
[The prepared statement of Hon. Michael G. Oxley can be found on page 34 in the appendix.]
Chairwoman KELLY. All right, then, we are just going to go on down here.
Mr. Barrett. No? No statement.
Mr. RENZI. I am good to go.
Chairwoman KELLY. Mr. Hensarling?
All right, then, if there are no more opening statements, we proceed to the witness panel, the witnesses this morning. We welcome David Aufhauser, General Counsel, the Treasury Department, and Mr. E. Anthony Wayne, Assistant Secretary for the Economic and Business Affairs of the State Department, who together represent the lead Cabinet departments in the worldwide search for Saddam's money.
Page 8 PREV PAGE TOP OF DOC We also welcome Larry Lanzillotta, who is Principal Deputy of Defense in the Comptroller's Office and Deputy Under Secretary of Defense for Management Reformthat is a lot of water you are carrying there sirwho is testifying about the assets found in Iraq by our troops which will be used for the benefit of the Iraqi people.
We thank the witnesses for testifying. We welcome you on behalf of the committee and, without objection, your written statements and any attachment that you may have will be made part of the record. You will now each be recognized for a 5-minute summary of your testimony. When the light goes on green, obviously means you have time; yellow means you have 1 minute to sum up; and red means the time is over.
And we will proceed with you, Mr. Aufhauser.
STATEMENT OF DAVID AUFHAUSER, GENERAL COUNSEL, DEPARTMENT OF THE TREASURY
Mr. AUFHAUSER. Thank you, Madam Chairwoman, and thank you to members of the committee for holding this session. We look forward to not only informing you about what we are doing, but we look forward to your counsel and to your recommendations and suggestions.
A great deal of money will be required to put Iraq back on an even keel. But that is not because of 25 days of war. It is because of 25 years of tyranny, a tyranny that made a prisoner of thought and a criminal of honest enterprise. The long war with Iran, the unlawful invasion of Kuwait, the elevation of palace corruption to an art form, and the decade of sanctions, book-ended by obscene public extravagances in the palaces while the common man lined up at one of 55,000 U.N. food distribution points, all bankrupted a rich country in everything except the hunger for freedom.
Page 9 PREV PAGE TOP OF DOC Now that they have the freedom, the Iraqi people deserve their wealth back: the inestimable wealth of the oil in their soil; the $1.7 billion of vested assets here in the U.S.; the approximately $2.3 billion of similarly frozen or blocked accounts in countries around the globe dating back to 1990; the recovery of the stolen assets of the central bank; the unallocated U.N. OFF money, Oil for Food program money; the establishment of the donors fund from the community of nations under the supervision of the World Bank or the IMF; and, of course, the identification, capture, and repatriation of the hidden money or previously unaccounted for wealth of the nation.
This last tranche of money is expected to occupy much of this morning's testimony. And it should. It should not be because we are Pollyanna-ish in the belief that much of it has not been widely misspent in acts of unimagined profligacy, and not because it makes good theater, and not because much of it may already have taken flight; but rather, it is the right thing to do for so many reasons. Whatever unfound money there is ought to be returned to feed people. Whatever the hidden wealth is, it needs to be captured before it falls into the hands of purveyors of terror. And whatever commerce took place by corrupting the U.N. Oil for Food program and by nakedly gaming the economic sanction program up at the U.N., it needs to be answered and punished by denying profit to the illegal trade.
Now, frankly this last point is perhaps the most troubling. Some of the best of our kids perished in Iraq because a significant part of the world did not effectively enforce the U.N. sanctions program to keep arms from Saddam Hussein. One of the first acts of the Bush Administration back in March of 2001 was to introduce a resolution in the U.N. to smarten those sanctions, to accelerate the delivery of humanitarian goods, to close the trafficking in smuggled oil, and to try to stem the holiday of corruption that Hussein had made of the Oil for Food program. We succeeded only in the former. The price has been the lengthened tenure of a tyrant, and now blood in the sand.
Page 10 PREV PAGE TOP OF DOC The search for the hidden wealth of Hussein and his regime is therefore more than a search for assets. It is a reaffirmation of the rule of law and a necessary reinforcement of the notion that while economic sanctions can be a powerful tool for policing state sponsors of terror, where the enemies of democracy worldwide, if casually enforcedif casually enforced, they can be a lethal tonic of false security. So the search both in-country, back in Iraq, and around the globe is an imperative.
I am happy to report there are promising advances in that search, both in setting up the process and in capturing previously unknown monies. I leave you with one example. We have been in dialogue, near constant dialogue with the central bank of Lebanon. They have confirmed yesterday that more than $495 million of previously unknown assets held by the central bank, the former central bank of Iraq, and by SOMA, the State Oil Marketing Organization, have been secured and will not be released to anyone until we stand up a new central bank, at which time they commit to send it back to and to repatriate it back to Iraq.
More importantly, we have an open invitation from that jurisdiction and others, but particularly that jurisdiction and the governor of the central bank, to proceed with presenting them with what evidence we have of suspected front companies, again with the commitment that if the evidence is sufficient to act upon, they would secure those accounts, whatever they are, with the ultimate intention of repatriating them back to Iraq.
I give that to you as one example. I will be glad to give you more during the testimony. With that I will close.
Chairwoman KELLY. Thank you, Mr. Aufhauser.
[The prepared statement of Hon. David Aufhauser can be found on page 42 in the appendix.]
Page 11 PREV PAGE TOP OF DOC Chairwoman AUFHAUSER. Mr. Wayne.
STATEMENT OF E. ANTHONY WAYNE, ASSISTANT SECRETARY FOR ECONOMIC AND BUSINESS AFFAIRS, DEPARTMENT OF STATE
Mr. WAYNE. Thank you very much, Madam Chair, and esteemed members of the subcommittee and the general committee.
It is a pleasure to be here to discuss this very important topic of all the work that we are doing to identify, freeze, and prepare for the return of Iraqi State assets so they can benefit the Iraqi people. This is a truly interagency effort with the active participation of a number of agencies and departments not represented here today, and it has to be that to succeed.
And as you know, this is one part of the broader effort to deal with all the challenges that have arisen and are now there to get back on a path to development and prosperity for the people of Iraq. But finding and restoring these assets can be a very important part in that process, in providing the resources that are needed for the people of Iraq to develop themselves and to build their prosperity.
After the 1990 invasion of Kuwait, the United States acted very quickly and decisively to deprive the regime of Saddam Hussein of the means and materials to continue its regional aggression, to further develop its programs of weapons of mass destruction, and to continue the repression of the Iraqi people.
Based on U.N. Security Council Resolution 661, we quickly froze and blocked all of the Iraqi State assets legally in our jurisdiction. We also acted to prevent the regime of Saddam Hussein from acquiring additional revenues and goods through the illicit sale of Iraqi oil. We mounted and continued through the decade a very aggressive campaign, a diplomatic campaign to pressure countries to enforce the sanctions against Iraq. We worked with our Gulf War coalition partners to interdict illicit oil in the Gulf, and we took punitive actions in a number of cases for sanction busters where we had those options available.
Page 12 PREV PAGE TOP OF DOC As Mr. Aufhauser has made clear, there are two dimensions to our current effort to assure that Iraqi State assets are made available for the benefit of the Iraqi people:
First, President Bush has acted to vest more than $1.7 billion in Iraqi Government assets in the U.S., and these assets are being made available to assist the Iraqi people and to assist in the reconstruction of Iraq.
And secondly, we are working with other countries around the world. We have reached out first to about 30 countries that declared that they have assets that were frozen in 1990 and 1991, and simultaneously to an additional 20 or so countries where we thought there might be additional assets available. And we have asked all of these countries to carefully examine their bank records, their other financial records, to verify the numbers that are there, to find additional assets and to work with us to prepare for the return of these assets to Iraq.
Many countries have expressed their support in this effort. Also many countries have different legal systems than we do. In fact, not many countries have the robust set of tools which you and your fellow Members of Congress have made available to the President to act as he did, vesting these assets in the United States. And many governments are looking forward to a new U.N. Security Council resolution that will help prepare the way for them to feel that they can return the assets to Iraq.
As you know, we have now tabled, along with the United Kingdom and with Spain, on May 9, such a Security Council resolution. As President Bush has made clear, this resolution is aimed at lifting the sanctions on Iraq. But part of this resolution also would direct other countries to identify all the Iraqi State funds, other economic resources and financial assets tied to Saddam Hussein and members of his regime, and repatriate those funds into an Iraqi Assistance Fund, which would be held in the Iraqi central bank, would be held there in conjunction with an international advisory board, and would be used to help rebuild Iraq and to help meet the urgent humanitarian needs.
Page 13 PREV PAGE TOP OF DOC The State Department is now deeply engaged, as you have seen on the front pages every day, from Secretary Powell on down and our Ambassadors around the world and our team in New York, working hard to get this resolution passed very quickly. We are also working extremely closely with the Departments of Treasury, Justice, Defense, Homeland Security, as well as the law enforcement and intelligence agencies to identify the assets that are out there and to identify the front companies that have been connected to Saddam Hussein and his regime.
We have focused on a number of countries in this effort. We have reached out to countries in the region such as Jordan, Turkey, Lebanon, Syria, Bahrain and the UAE. Overall, we have found foreign governments very open to cooperating in this effort, as Mr. Aufhauser indicated.
We are reaching out to countries such as Switzerland, the United Kingdom, the other countries in Europe. We are very closely working to identify all the illicit channels, and we can get into this further in the testimony, since I see my time has run out.
I would just say that as we have also worked through this effort, we have a very closely knit interagency team. They are in practically dailynot practically, really dailycontact in working this through so we can use law enforcement intelligence and diplomatic channels in this overall effort.
We have also been, I think, very clear on the use of assets, as Mrs. Maloney mentioned in her introductory remarks, that these have to be for the benefit of the Iraqi people and that these assets need to be spent in a transparent, publicly explainable, accountable method that is evidently for the benefit of the Iraqi people.
We look forward to talking about this and also some of our broader efforts, if you are interested, against corruption and in favor of transparency around the world. And we look forward and I look forward to working with you, Madam Chair, and the other members of the committee in this ongoing discussion and this ongoing effort of how we best take these tasks on and bring them to a successful conclusion.
Page 14 PREV PAGE TOP OF DOC Thank you very much.
Chairwoman KELLY. Thank you, Mr. Wayne.
[The prepared statement of Hon. E. Anthony Wayne can be found on page 54 in the appendix.]
Chairwoman KELLY. Mr. Lanzillotta.
STATEMENT OF LAWRENCE LANZILLOTTA, PRINCIPAL DEPUTY AND DEPUTY UNDER SECRETARY OF DEFENSE FOR MANAGEMENT REFORM, DEPARTMENT OF DEFENSE
Mr. LANZILLOTTA. Madam Chairwoman and members of the subcommittee, we appreciate this subcommittee's interest in the disposition of Saddam Hussein's assets and returning these assets to the Iraqi people. I welcome the opportunity to summarize the role of the Department of Defense in this area as well as discuss our procedures pertaining to the administrative use and accounting of the vested and seized Iraqi property.
Now that the regime of Saddam Hussein no longer rules Iraq, it is the primary aim of the Department of Defense to take all measures necessary to ensure much needed humanitarian and reconstruction assistance is brought to the Iraqi people so that they can begin to rebuild their lives and the country after decades of oppression.
Towards this end, the Department is committed to using Iraqi State- and regime-owned property that has been vested in the U.S. Treasury from banking accounts in the U.S. and state- and regime-owned cash, funds, or realizable securities found and seized in Iraq to assist the Iraqi people and to assist the reconstruction of their country.
Page 15 PREV PAGE TOP OF DOC On March 20, 2003 the President, acting pursuant to the International Emergency Economic Powers Act, confiscated and vested in the Treasury approximately 1.7 billion in Iraqi Government assets to be used to assist the Iraqi people and to assist in the reconstruction of Iraq. The Secretary of the Treasury has subsequently designated the Secretary of Defense with the authority to use approximately 92 million of this property.
On April 30, 2003, the President confirmed the authority of the Secretary of Defense under the laws and usage of war to seize, sell, administer, or use state- or regime-owned cash, funds, or realizable securities in Iraq. The President specified that this property shall be used only to assist the Iraqi people in support of the reconstruction of Iraq.
The Department of Defense is dedicated to work with the affected U.S. Government agencies to ensure that vested and seized properties are subject to rigorous procedures to ensure that such property is properly safeguarded, accounted for, audited, and used only to assist the Iraqi people and to assist in the reconstruction of Iraq.
Presently the Department, in collaboration with U.S. Government entities such as the Department of the Treasury, Office of Management and Budget, GAO, has developed procedures for administrating, using, and accounting for vested assets. These procedures outline, for example, the manner in which vested property will be secured, transported, accounted for, disbursed, and used and audited to ensure it applies, as authorized by law and approved by the President.
To date, nearly 22.8 million in vested assets have been used to assist the Iraqi people and assist in reconstruction efforts. These vested funds have been used to make greatly needed emergency payments to Iraqi civil servants and pensioneers; to help pay for startup costs of Iraqi ministries; and to provide other forms of intermediate impact humanitarian assistance.
With regard to state- and regime-owned property seized in Iraq, the Department is in the process of developing in coordination with other affected government agencies, procedures similar to those used for vested assets regarding safeguarding, auditing, accounting for, and use of such property to ensure its use as authorized by law and approved by the President.
Page 16 PREV PAGE TOP OF DOC The procedures will specify, among other things, that seized state- and regime-owned property shall be held on behalf and for the benefit of the Iraqi people and shall only be used to assist the Iraqi people in support of reconstruction of Iraq. The procedures will also ensure that determinations of whether the property found in Iraq is public or private are made in accordance with applicable domestic and international law.
In summary, the Department of Defense is deeply committed to ensure that vested and seized assets of the Saddam Hussein regime are used in accordance with law, and rigorous accounting and auditing procedures are in place, and only to assist the Iraqi people and assist the reconstruction of Iraq.
I thank you for this opportunity. This concludes my formal statement, and I would welcome any questions from the committee.
Chairwoman KELLY. Thank you very much Mr. Lanzillotta.
[The prepared statement of Lawrence Lanzillotta can be found on page 51 in the appendix.]
Chairwoman KELLY. Mr. Aufhauser, I want to thank you for the very important information about the Lebanon bank. Congratulations on that, sir. I think most Americans were completely appalled when the news came out that there was someone in the Saddam regime who was essentially using U.S. currency as what might be called an insulation in their house. So when they opened that wall and found all those dollars in boxes, we knew that there was a lot of money. And I am delighted to think that the Bank of Lebanon is now working with us, and you are to be congratulated on that.
You mentioned that you might have other examples. Would you be willing to share some of those with us?
Page 17 PREV PAGE TOP OF DOC Mr. AUFHAUSER. Well, let me go through, if I can, thethank you first for that comment.
It is more than Treasury, though. It was, again to reflect Mr. Wayne's comments, everything we do actually is quite joined at the hip, interagency, on this matter. Tony and I know each other too well because of all of this.
It might be helpful if we rehearse the litany of actions we have taken. The first and most important is the exploitation of the data that we find in Baghdad which is effectively shared in what is called the fusion center of information, either in Qatar or Kuwait, or back in CENTCOM down in Tampa, made available to those of us working on these matters. That is the exploitation of the data.
Some of the documents, by way of exampleand I want to refer to this somewhat elliptically and maybe we can get into it in a later sessionis perhaps a road map for front companies that we previously didn't know about.
Second major resources, of course, would be information made available to us by the detainees, and interrogations have gone forward on some of the key detainees, such as the Finance Minister. But that is an interactive process and those will continue.
Those participating either in scripting it or actually in conducting the interrogations include representatives from the FBI and Customs and Treasury and DOD and others.
Third, of course, is reaching out to the jurisdictions of the border states which did a great deal of what we will term the illicit trade with Iraq, and to secure document exploitation there as well as the attempts to request that they freeze assets.
Let me pause there for a second and underscore how important the documents are. A lot of the information we get in this kind of endeavor, as is the case in the war on terrorist financing, is really suspect. It comes from disreputable people, or it comes from people who find themselves in distress and will say anything. But the one thing that doesn't lie are the financial records that you get ahold of. And these financial records are very useful for three reasons: One is not only trying to secure the assets; but, two, telling us who participated, who participated in the nefarious activity; and three, perhaps helping us track down suppliers or purveyors of what is necessary to put together weapons of mass destruction. So going after the records is almost as important as going after the assets.
Page 18 PREV PAGE TOP OF DOC But to return to the litany of actions taken, we have gone to those border jurisdictions and we have investigative teams in some of themI don't want to identify them in this sessionagain, to good accord, to the effect of another $800 million, give or take, that has been secured. I use the word ''secured.'' I don't want to use the word ''locked'' or ''frozen,'' because they are in a suspense account under a different kind of legal regime.
Then, of course, we have the jurisdictions which were the switching stations for where the money went. Some of those are border states. Some of those are other Gulf States, and we have gone to them to see whether or not we can get access to information to trace where the money might be nested.
And finally, we have gone to many of the jurisdictions which are known as nested jurisdictions or potential nested jurisdictions where we think the money might be, if it hasn't flown the coop already.
On all of those actions we are actually making substantial progress. I will be making a fair amount of trips in very short order, delivering some material information developed by the U.S. Government to whet the appetite of those nested jurisdictions and others to climb on board and help us.
Chairwoman KELLY. Thank you. I want to ask both you and Mr. Wayne, who is the single official in charge of this effort?
Mr. AUFHAUSER. Out of deference to the man who gave me my job, I want to say President Bush is first. In country, in country in Iraq, mainly DOD is in charge of marshaling the assets and setting up the interrogations and exploiting the documents. But we are inas I referred to the fusion center before, we are in constant dialogue with them. But short answer, in country, it is DOD. The rest of the globe it is Treasury, but it is Treasury building consensus, not in a linear fashion of commanding people what to do.
Chairwoman KELLY. But is there one single individual who is in charge of this?
Page 19 PREV PAGE TOP OF DOC Mr. AUFHAUSER. Yes.
Chairwoman KELLY. The reason I am asking is
Mr. AUFHAUSER. The answer is me, on behalf of Secretary Snow.
Chairwoman KELLY. All right. So that in other words, you have the authority if there isthe agencies disagree on a strategy or an action, you have the authority then to make the final decision; is that correct?
Mr. AUFHAUSER. No, I don't want to overstate my importance. I have the authority to make a recommendation to Secretary Snow to make the final decision.
Chairwoman KELLY. So Secretary Snow is the individual in charge.
Mr. AUFHAUSER. Yeah. But I do want to come back to you and I want to underscore the dynamics of the process. It is nearly like an NSC interagency policy coordinating committee. So we ultimately make recommendations to the NSC, which is to say, the White House and the President, if there is disagreement. But our job is to make sure that we iron out disagreement at our level.
Chairwoman KELLY. Thank you very much. I am out of time.
Mr. GUTIERREZ. Thank you very much. I guess just for the panel, how much do you believe is out there, approximately? If there is aand of that, and I understand a little bit more about the decisionmaking but how dois there a plan? How much does the United States get? How much do those that have claims, how much do the KuwaitisI mean, if there isI guess if somebody said there were $50 billion out there and I suspected there were $50 billion out there and I knew that there were different people claiming the money, and I was in charge, and I also had expenses in terms of the rebuilding of Iraq and providingis there a plan that says well, you know, it is costing the United States Government so much, so maybe 10 percent of every dollar should go here and 5 percent should go here and, you, know the Kuwaitis are demanding 100 billion, so maybe 40 cent of every dollaris there a plan that says here is how we are going to distribute the money?
Page 20 PREV PAGE TOP OF DOC Mr. AUFHAUSER. I will give you paragraph one and perhaps Tony will give you paragraph two.
First, on the estimate, it is wild-eyed guesstimating frankly, Congressman. Probably the best single guess is the GAO guess, which was $6.6 billion, to use their term, ''conservatively'' between 1997 and 2001. And, of course, we would have 2 more years of the gaming and the corruption, so that number is undoubtedly, in my mind, conservative. With one exception. I do believe that amount of money was generated, at least that amount of money and more, perhaps twice, perhaps three times that, but I also believe a great deal of it was misspent, misspent either on those extravagances of personal disgrace, or for supplying, resupplying their army with spare parts, weapons, and the like.
In terms of the plan, the ultimate plan is that wherever these assets arewith the resolution tabled in New York by the United Statesis that they will be marshaled, gathered, and repatriated to the people of Iraq through the Iraqi Assistance Fund to be set up under the resolution established there. And that is the plan. It is not intended to reimburse the U.S. In any way for any of the costs incurred in freeing and liberating the people of Iraq, if I understood your question correctly.
Mr. GUTIERREZ. Well, I just thought that as we move forward and we have plans as a government to assist the people of Iraq in the reconstruction, and those plans incur bills that need to be paid, if thatI think I understand that there is going to be a fund, and then they will
Mr. AUFHAUSER. Well, in addition to the fund, a part of the current resources that we have command ofand Larry referred to itis, under the law of occupation law, free to be expended for the benefit of the Iraqi people currently by General Franks and the coalition provisional authority right now. So the ongoing costs, if you will, the standing-up of the Iraq economy and the Iraq civilian authorities, is being underwritten by the Iraqi assets that have either been vested here in the U.S. Or found or seized in Iraq.
Page 21 PREV PAGE TOP OF DOC To give you one specific example, $91 million in cash was shrink-wrapped here on the East Coast, put on convoy, taken to Andrews, I believe, put on planes and flown to Iraq, and that money has been used to underwrite the initial costs of pensioneers, pensions for the pensioneers, civilian costs of the oil workers and dock workers down in Kazar and the like. So the vested funds are being used precisely how the President said they would be used, and, Congressman Maloney, with every intention of being absolutely transparent about the expenditure of that money.
Mr. GUTIERREZ. We are going to paragraph two.
Mr. WAYNE. I might just add, you mentioned compensation claims. There are indeed a number of compensation claims from Kuwait and others that have been treated under a U.N. compensation commission. A number of those have been awarded, a large number have not yet been adjudicated.
In the draft U.S. Security Council resolution that we have tabled, we have proposed to reduce the percentage of oil revenues that go into that from 25 percent right now to 5 percent, so that more of the oil revenues would go into rebuilding Iraq and that the compensation claims would be repaid over a longer period of time.
There is also outstanding Iraqi debt. There is at least 19 billion indicated in the Paris Club initial look at this that we are now going out and trying to do additional, what we call data calls, to find out how much other debt is out there. That does not include any interest that might have accrued on this debt, because much of this debt has not been paid since 1990 or 1991, no payments into it.
Additionally, just in totals of money, in 1991 there were about $6 billion of assets reported frozen around the world under the initial U.N. Security Council freeze orders, U.N. Security Council Resolution 661. Much of that remains in place. Much of that was the money that President Bush vested.
Page 22 PREV PAGE TOP OF DOC In some countries, under their legal systems, some of that money has been used to pay claims that existed in that country, in the same way there are a number of court cases in the United States which had claims against some of the money inthat had been frozen in the United States.
Mr. GUTIERREZ. Thank you very much.
Chairwoman KELLY. Thank you. Chairman Oxley.
Mr. OXLEY. Thank you, Madam Chairwoman.
I had an opportunity to look over some of the press reports of some of the activities going on, the smuggling of oil under the oil forsomebody described the oil for palaces program, which I think really calls into question whether this type of plan set up by the United Nations really does work. It appeared that Saddam was skimming profits almost from the get-go on the sale of embargoed oil. And the article says Saddam even found ways to profit from the U.N.-run Oil for Food program. The Baghdad regime billed a 30-cent to 50-cent per barrel kickback for its oil price. Can you imagine a 50-cent kickback on oil?
And then it goes on to say, since U.N. sanctions were imposed, investigators and expatriates say the regime has kept most of its money outside Iraq in such safe and liquid investments as bank deposits and government bonds, even U.S. Treasuries.
So these folks were obviously sophisticated in many ways. And apparently Saddam's half brother, al-Tikriti, Hassan al-Tikriti who is now in our custody, was essentially the major bag man, although he had apparently a lot of help from Tariq Aziz who was operating, of course, under diplomatic immunity all over the world. Rather interesting. And I am going to ask all of you to just comment on this general situation.
But it also indicates how difficult all of this process is as we learned, I think, when we were working on the anti-money laundering provisions of the USA Patriot Act. Althoughand this is a quote from a Money Magazine article: Although agreements were reached in the 1990s to make asset recovery easier, the system remains difficult to negotiate, as I am sure all you gentlemen know. Eighteen years after Ferdinand Marcosremember himwas overthrown in the Philippines, for example, at least six Swiss banks still are holding deposits he had made, even though they acknowledge the money is illicit and Marcos is long since dead.
Page 23 PREV PAGE TOP OF DOC All of us recognize, again, how difficult this is, but perhaps the good news is now that we have access to some of these major players, that we can start to unravel that. Let me just open it up to all three of you in terms of some comments you may have.
And lastly, if I could, it appears that without a concerted effort by either the Group of 8 or the U.N. or some international organization, this is going to be even more difficult. So let me just throw all of those out and let youI know it is a softball, but that is what we are here for.
Mr. AUFHAUSER. Mr. Chairman, I think we would just be repeating what you said. As for the U.N. program, as I pointed out in my brief oral statement, the Bush Administration immediately seized on the opportunity to try to tighten up the sanctions, because they were being corrupted in a naked, nefarious, brazen fashion, one that should have embarrassed the whole world. We failed up at the U.N. in doing that. So we resorted, if you will, to plan B, to make sure that to the extent we have the capabilities, intelligence or otherwise, to follow the money, that none of it is used to buy arms.
Mr. OXLEY. Do you think that thegiven the abject failure of the U.N. that front and obviously on the military front, that there is any hope that the U.N. could be shamed into changing their ways based on the incontrovertible evidence that is out there?
Mr. AUFHAUSER. Well I don't want to use the word ''shamed.'' and I occupy this office because I am actually a sanguine guy. The U.N. Security Council resolution tabled last week in Manhattan by Secretary Powell puts the ball right back into the U.N.'s court. It says we have to havethe worst and lousiest model in the world is 18 years of litigation in Switzerland over $600 million dollars of the Marcos assets. It is precisely that example that informed us in the drafting of the omnibus resolution tabled in New York, that said we need an alternative for the quick repatriation of these monies. So there continue to be a lot of complexities.
Page 24 PREV PAGE TOP OF DOC If I can tell you one brief anecdote. Shortly after we vested assets here in the U.S., I was visited by an Ambassador from one of the former eastern bloc states who said to me, David, unfortunately in my country, we cannot take title to people's property without going to court first. What he meant by thatand I, of course, retorted that was probably something, a difficult habit to kick. But they have changed their regime. The problem is the Patriot Act gave and vested in the President of the United States the most extraordinary power, the power to actually, through the stroke of a pen, take people's money, take possession of people's money and title to it, and apply it and disburse it. There is almost no other nation on Earth that has a similar statute. So we have to deal with the litigationthe legal issues posed in those countries in terms of dealing with third-party claims against the assets.
Tony did you have something?
Mr. WAYNE. Well, just to say there definitely were kickbacks that were going on. We were aware that there were kickbacks going on during this period. As you remember, it came in the context of establishing the Oil for Food program where there was a great concern expressed around the world, including in the United States, that the Iraqi people were not getting the food and the medicines that they needed to survive at a minimal level. So there was an attempt to really modify these comprehensive sanctions so you could allow and monitor certain kinds of sales and try to direct a lot of that to the humanitarian needs.
Now, clearly Saddam Hussein and his officials figured out a lot of ways to try and get around that and the GAO study, that was done was a very good study. It identified how they started accumulating illicit assets. As we tried to work that through, as the U.S. Government over the past several years, at one point the United States and the U.K. put in a whole different way of pricing oil, so one didn't get paid for oil until a month after the prices were set. And that actually cut back significantly the amount of kickbacks on the oil sales that had been going on. But it was far from perfect. And one of the real challenges here was that this was such a comprehensive sanction system, existing for such a long time, that very clever people found a lot of ways to go about it.
Page 25 PREV PAGE TOP OF DOC We had an active interagency process involving the intelligence community, the law enforcement community, and others aimed at trying to find sanctions busters and to act against them. But often we were the strongest voice and the loudest voice in the world to act on this. And it was very tough slogging, as I am sure you remember, both in the U.N. and internationally a lot of times, to keep the momentum up on this issue.
On the more general question of going after assets, it is exactly right that it is extremely complicated, because we have a plethora of different legal systems around the world. One of the additional areas where we are working on now to see if we can't get a multilateral agreement is a proposed anticorruption convention in the U.N.. This would have a special chapter specifically on going after the assets, illicit assets of leaders and exposed leaders and others around the world. The idea is trying to get some common baseline so we can more easily work together with other countries and they can more easily work together with U.S..
It is an ongoing process. It is a real tough process, and certainly the tools that you have given the President and the Administration are very helpful in this effort.
Mr. OXLEY. How many countries would you need to get to critical mass on something like that?
Mr. WAYNE. Well, I think there are 120-some countries right now in the negotiation on this broad convention. There are clearly a number of key financial centers that will be essential to have in any convention. And they are all engaged in this. Some of them are in Europe, some of them in Asia, some in the Middle East and other places. And we are engaging with them not only, of course, in this U.N. Convention, but also in this process that is going on. In fact, one of the very nice stories in this so far is Switzerland. One of our colleagues just returned from Switzerland. The Swiss have actually stepped up and issued new ordinances and guidances to all of their institutions regarding the assets of Saddam Hussein and have been very actively cooperating with us in this effort.
Page 26 PREV PAGE TOP OF DOC Mr. AUFHAUSER. On Saddam Hussein's assets, if we had 20 countries, whether or not it is under the umbrella of the U.N. or through some other agreement, that would be critical mass. We have specifically identified countries.
Mr. OXLEY. Very good. Thank you, Madam Chairman.
Chairwoman KELLY. Thank you.
Mr. MOORE. Thank you, Madam Chairwoman.
To the panel generally, there is an Executive Order that some of you mentionedit was in Mr. Wayne's testimonyon March 20 issued by the President that says, ''All right, title, and interest in any property so confiscated,'' and obviously he is talking about property confiscated in Iraq or elsewhere, ''should vest in the Department of the Treasury. I intend that such vested property should be used to assist the Iraqi people, and should be used for the reconstruction of Iraq.''.
To that end, Mr. Wayne or others on the panel, what is the time frame for getting the oil fields in Iraq up and producing again? If you spoke to that while I was outI met with some constituents briefly, so please forgive me, but I would like to know the answer to that, if there is an answer.
Mr. WAYNE. Just about the Iraqi oil fields, you may have noted that we havean Iraqi who has assumed leadership in the Oil Ministry and in the effort to restore the Iraqi oil fields, with the very strong support from our Defense Department and also some contract help on the ground to get that production restored. If I remember correctly, he gave a press conference a few days ago.
Mr. MOORE. He, who?
Mr. WAYNE. Mr. Ghadhban, Thamir Ghadhban. He estimated that he would hope to have production restored to its postto the pre-conflict level by the end of June. That was about 1.5 million barrels a day, with the aim of getting to 3 million barrels a day by the end of the year.
Page 27 PREV PAGE TOP OF DOC All of this, of course, is estimates, and it is going to take a lot of hard work to get it up and running not only because of damage that might have been done during the conflict, but because a lot of it was being held together by duct tape up until that point.
Mr. MOORE. Duct tape has been very handy, hasn't it?
Mr. WAYNE. Duct tape does a lot of things.
Do you want to add anything, Larry?
Mr. LANZILLOTTA. I really don't have anything to add to that. The Administration is committed to get these oil fields producing as fast as possible. We have run into some technical difficulties we are trying to overcome. These are the estimates out there now, and we are trying to make them.
Mr. MOORE. Do you have any information about sales? I am talking about monthly or annual sales prior to us going to Iraq, and what might be expected and what might be anticipated in terms of sales?
I understand this is all kind of speculative right now because of damage to the oil fields, but I'm looking for a number that we might use a portion of to help in the reconstruction of Iraq. Any ideas?
Mr. AUFHAUSER. There is no question that whatever oil revenues are produced, they are going to be poured over into an Iraq assistance fund to underwrite the cost of reconstruction, to underwrite the budget of the IIA and the new Iraq. There is no question about that. That is reflected in the U.N. Security Council resolution.
I can't put a number, sir, on it; but I am aware that very soon, very soon production in Iraq will exceed domestic requirements, which means there will be oil for sale.
Mr. MOORE. Okay. Any other answers there, Mr. Wayne?
Mr. WAYNE. Well, one very important point is that pending the lifting of the oil sanctions, and thus the U.N. resolution in New York, there were not international sales going on at present.
Page 28 PREV PAGE TOP OF DOC Secondly, of course, the amount of money that comes in from this will depend upon the price of oil in general. Some of the ballpark figures have been perhaps $20 billion a year. A lot of that depends on the price of oil and the amount of production you get going.
Mr. MOORE. Thank you.
Thank you, Madam Chairman. Thank you, members of the panel.
Chairwoman KELLY. Thank you, Mr. Moore.
Mr. MURPHY. Thank you, Madam Chairman.
As you were reviewing companies that have been cooperative with these efforts in freezing and seizing assets, how do European countries rate on their cooperation level, and in particular, Russia, Germany, and France?
I might add to that, have there been some assets hidden in some of their banks that you have found, too?
Mr. WAYNE. Well, the process is actually just going on right now. I would rather not get into details in this open session, but would be happy to in the next session that we are having.
What I can say is that the initial response from all of those countries has been ''yes, we want to cooperate in this effort; and yes, we agree that any assets need to be restored to Iraq.''
Mr. MURPHY. I appreciate that.
Have there been any attempts to access any of the assets since the war began from some of the operatives from Iraq? Can you tell us any information on that, what they have tried to do?
Mr. AUFHAUSER. Why don't we deal with that in the next session?
Page 29 PREV PAGE TOP OF DOC Mr. MURPHY. I am apparently asking some excellent questions.
How about issues involved with our knowledge of these deals being done on the Oil for Food? What were some of the things they were doing with this money instead of buying food? When did we become aware of that?
Can I ask that one? Is that okay?
Mr. AUFHAUSER. Yes. The money skimmedyou have seen on videotape some of the things they have used it for, which are the extravagances in their palaces. We also know they used some of the skimmed money to buy goods and weapons otherwise prohibited under the U.N. sanctions program.
Just to show you how this would be comic, except it turned into a terrible tragedy, the U.N. program was wildly successful in one sense. It is the source of food for the better part of the people of Iraq. When I mentioned those 55,000 distribution points, that is because of the U.N. program.
The ration card that the common Iraqi holds today is as good as currency, as is the Saddam dinar, because it is his meal ticket.
Notwithstanding that, there are other portions of the program which were designed to fail. For example, they had 75 inspectors on a porous border thousands of miles long located at a limited number of border crossings, say three or four, who were empowered only to look at authorized imports into the country.
Step back and think about that. If something came in and it was not a U.N. import, a U.N. Oil for Food program import, they were disempowered from investigating what is going in.
Mr. MURPHY. Were those authorizations set up by the U.N.?
Mr. AUFHAUSER. Yes. So it was comic, leading to tragedy. Those borders were not policed.
Page 30 PREV PAGE TOP OF DOC Mr. MURPHY. With some of the food that was purchased, I heard some reports that some of that was to go for food supplies for the Iraqi soldiers and not for the citizens. Was that accurate?
Mr. AUFHAUSER. I can't confirm that. I don't know.
Mr. WAYNE. I don't know. But I do know that there was a very tight system for going through all the contracts in the formal system. In many cases, we had holds on contracts for years and stopped them up. We gave them very careful scrutiny. There was also a very tight system for auditing the use of money within the system.
The real challenges came to things that were taking place outside the system, or the special deals that were made around the edges of the contracts. That is where we got a lot of the challenges that we tried to deal with, and we can talk about in the next session, and the ways that we worked to deal with them.
Mr. MURPHY. Another area. I hear mixed reports in the media that the people in Iraq are grateful to us, and some say, Thanks for the war, now get out.
Clearly, there must be an awarenessyou talk about the 25 years of the incredible oppression that took place, and these issues about the continued corruption and deceit that leaders in Iraq had with the money and Oil for Food that became oil for weapons.
How aware are the Iraqi people being made of what is being discovered now, and what is their reaction to that?
Mr. AUFHAUSER. I don't know the level of their awareness of what is being discovered now. I don't know what is being broadcast to them in Iraq about the discoveries.
You know, many of the discoveries are just confirmation of what has been a public source information for the last decade in terms of the corruption.
Mr. MURPHY. Certainly I would hope, Madam Chair, that is something we can check to see what the State Department does with these kinds of discoveries, because it is important for them to know.
Page 31 PREV PAGE TOP OF DOC Mr. WAYNE. We could work to get back to you, because I know that the U.S. Authorities in Iraq have been working to get information out to them. General Franks and his colleagues have been working hard on this to inform the Iraqi people of what is going on, so we can certainly take your question and get back to you.
Mr. MURPHY. I appreciate that. It may well be that part of what was done, if it was not becoming food for people and people were harmed, it is one of those more subtle weapons of mass destruction that the people in Iraq were using against their own people.
Chairwoman KELLY. We will make that an official request of the committee. If you will get back to us with an answer, that would be good.
Chairwoman KELLY. Mrs. Maloney.
Mrs. MALONEY. Thank you. You have testified we have seized roughly $7.5 billion, an additional $8 billion has been added in our own country, 20 countries are cooperating.
Do we have a sense of how much is in those other countries? Do we know how many billions are there that belong to the Iraqi people in Saddam's accounts?
Mr. AUFHAUSER. Two answers. By definition, the hidden wealth we don't know yet. We need to track that down. As for the money that has been held in suspense or frozen accounts, yes, we have a pretty good peg on it. That is a broadit is upwards of $2.3 billion.
By the way, that represents a substantial leakage from the amount of money seized by those countries back in 1990, following U.N. Security Council Resolution 661. In other words, as Mr. Wayne alluded to, a lot of the money has been awarded to other claimants, so it shrunk. Also, other parts of the money seized in other countries require explanation as to why it disappeared.
Page 32 PREV PAGE TOP OF DOC Mrs. MALONEY. You testified we have spent roughly $91 million on dock workers and the border, for pensioners and oil workers. Can you describe how this decision was made? Apparently Treasury is making decisions on seizing assets and DOD is making decisions on how this is spent.
Certainly during war, decisions need to be made quickly, but now that things have calmed down you mentioned that it is transparent. How can we see this information? How is it transparent and how is it publicly disclosed, and how are you making decisions to hire dock workers as opposed to teachers, or the security force that is now trying to be built in collaboration with the American government?
Mr. LANZILLOTTA. Until the appointment of Ambassador Bremer, Jay Garner was assigned that exact responsibility. These payments were made based on his assessment of what it was going to take to get certain industries or functions like ministries working.
The types of payments we have been making basically boil down to emergency payments to civil service type people to get the Government of Iraq back working. Outside that arena, I believe there was a payment made to oil workers and at the docks to try to be able to offload the humanitarian aid that has been coming in from other countries as well as the United States. So this assessment is made on the ground of what it is taking to be able to get the country up and moving.
I think in the long-term plan that we are developing spending plans that outline exactly the concerns that you have: where this money is going, how it is being spent. But Jay Garner, and now Ambassador Bremer, had a very difficult task of stepping in on ground zero and immediately trying to get the Government of Iraq stood up and some of the necessary supplies to come in.
So that is where the initialI think so far an estimate of $22 million has gone.
Page 33 PREV PAGE TOP OF DOC Mrs. MALONEY. You testified earlier $91 million.
Mr. LANZILLOTTA. That is how much money has been made available, but $22 million has been disbursed.
Mrs. MALONEY. You mentioned that it is transparent. If I didn't have the opportunity to ask you these questions and I was a taxpayer and just wanted to know, where would I go? With our government spending, we can go to agencies and look at their budgets and go to the Office of Procurement and look at the budgets. Where can citizens go? Where is the transparency?
Everybody keeps saying it is transparent, but I don't know where it is. I don't know how to find out this information without having a hearing and asking you, so how is it transparent?
Mr. LANZILLOTTA. It is not on the Web site yet, and most of this is just developing now. On these interagency meetings we have, we have invited GAO as a participant to talk about exactly how this money is spent and where it is going, with that very purpose in mind, to assure the American peopleand as directed by the Presidentthat this money is going for reconstruction and, in fact, to the Iraqi people.
I don't know of any reason why, for the record, that we can't provide where these disbursements to date have gone.
Mrs. MALONEY. I think it would be good to put it on the Web site. I would send it back to the committee, that I would like to see it and to understand where we are going.
When we let these contracts to Halliburton and others, is this money being used for that, to run the oil fields and to rebuild the construction that is taking place to rebuild the water works and electricity? Is that coming from the seized Iraqi money, or is that coming from the U.S. Government?
Page 34 PREV PAGE TOP OF DOC Mr. AUFHAUSER. No, for the most part that is USAID money.
Mrs. MALONEY. USAID.
Mr. WAYNE. There are actually two different sets of money. There is USAID money, which is one set, and then there are Department of Defense contracts that are being let. The oil contracts have been under the Army Corps of Engineers, I believe, that are in charge of that.
The AID money, when the choice of contractors and others are put on their Web site right away, whenever there has been a decision.
Mrs. MALONEY. Could this seized Iraqi money be used to pay Halliburton and Bechtel and some of the companies that have gone in on the groundwork to restore water and electricity?
Mr. WAYNE. What I can say is that up until now the proposed uses of this have been to go right to the benefit of the Iraqi people, notably to pay salaries.
There was an emergencythere is an emergency plan to give people an emergency payment for 1 month in various parts of the country. There has been a proposal to buy some emergency equipment for the Ministry of Trade, which runs the Oil for Food distribution program, so they can start distributing food again.
I am not aware of any proposal to use this to pay for contractors.
Mr. LANZILLOTTA. From the Department's point of view, we have not used any of the seized or vested property to pay for contracts. It has all gone towards payroll or operational costs to try to clear out ministry buildings in a small amount, to try to get these ministries up and running. The department has taken the administrative costs for operating Jay Garner's group, or that group that is trying to put Iraq back together out of appropriated funds. We assume that is within the Department of Defense's budget.
We have not used any of the invested or seized assets to date on any of those types of contracts you mentioned.
Page 35 PREV PAGE TOP OF DOC Chairwoman KELLY. Mrs. Maloney, why don't we make your request, as you had asked the expenseslet us make it an official request of this committee. That will get it started.
Mr. Lanzillotta, Mrs. Maloney has a good point. It would be good for all of the people in America who are interested in this subject if we could get that on the Web site. Thank you very much.
Mrs. MALONEY. I know my time is up. Can I ask one question on debt?
Chairwoman KELLY. No, I'm sorry, your time is up. We have others who have been waiting as well.
Mr. HENSARLING. Thank you, Madam Chairman.
Gentlemen, quite obviously the Oil for Food program left much to be desired. I think, Mr. Aufhauser, in your written testimony you said that Hussein not only survived under the U.N. sanctions regime, he flourished. I think we would all agree with that assessment.
My question is, what is it precisely that we can dowhat is it the United States can do in future sanction programs or limited trade programs to ensure that the U.N. does a better job of monitoring these programs?
Mr. AUFHAUSER. We have to structure the architecture of the program in a manner so it is policed similar to our own financial borders, so money cannot be diverted and so that you can more easily catch people if there are kickbacks and the like. That is, if you will, country-specific or product-specific or industry-specific, so I can't give you a better answer than that.
But in my professional opinion, also wearing my hat with responsibilities for the country's money laundering program, what was designed in New York was not designed well to capture wrongdoing; it was designed well to get food into people's mouths.
Page 36 PREV PAGE TOP OF DOC Mr. HENSARLING. Do the other two gentlemen have a comment?
Mr. WAYNE. Just to say that we are goingwe do definitely need to sit back and think about the lessons from this 10-year effort to have a sanctions regime in place. It is very hard to maintain the political enthusiasm of countries all around the world, in a long-term situation, for a sanctions regime. So there are clearly a number of lessons that we need to draw from this. I haven't drawn them all yet, but clearly we could do this better, and we need to think of a different set of tools, if we are approaching a long-term effort like this again.
Mr. HENSARLING. Mr. Lanzillotta.
Mr. LANZILLOTTA. I really don't have any specific comments, since it is outside of the Department of Defense. But, of course, we are interested in a viable program, and would continue to work with the Agency to make it most efficient.
Mr. HENSARLING. It appears that the money laundering provisions of the Patriot Act are a very powerful tool to enable you to accomplish your mission to identify, seize, and repatriate assets.
If your agencies or departments had their wish list granted, are there other tools, other provisions, that you would like to bring to this subcommittee's attention that would better help you accomplish your mission?
Mr. AUFHAUSER. I have only one specific request which is long outstanding up here on the Hill. The section 11 power to effectively bar a foreign financial institution from doing business in the U.S. Is an extraordinarily powerful tool in undermining, if not downright destroying, the franchise of any international institution. The ability, also, to argue that it reaches barring anybody who does business with such an institution has a potentially paralyzing effect, so it is the nuclear bomb of the Patriot Act.
Unfortunately, I can't use it as oftenI can't recommend to John Snow to use it as often as I think I would like, because much of the evidence in support of such actions is highly classified and becomes subject to revealing and disclosure in a courtroom.
Page 37 PREV PAGE TOP OF DOC I have asked the Hill to consider giving section 311 the same evidentiary privileges that IEEPA now enjoys under the Patriot Act, which is to present, ex parte and in camera, sensitive information in support of our legal actions.
Beyond that, our real problem is abroad. I don't think a U.S. law can change it. That is when the venue turns to Tony, and we need to go abroad and convince people to follow suit, because most of the assets we are concerned about are abroad, most of the cash flow we are concerned about capturing is abroad, and most of the records we hope to exploit are abroad.
It is all the more reason Tony and I have a direct line. The Treasury Department can't do this without the State Department, and vice versa.
Mr. HENSARLING. Mr. Wayne?
Mr. WAYNE. I would just add that this is exactly what we have been working on since 2001 in the area of terrorist financing, where we have the same team essentially working all around the world. What is very key is having the bilateral agreements and building in, as we can, the multilateral agreements to get other jurisdictions to cooperate with us without using, as David said, the nuclear weapon of our sanctions.
In this connection, the work that has been done in the Financial Action Task Force, for example, has been extremely important in building up money laundering best practices, and now, over the past year and a half, terrorist financing best practices.
Again, this work that is going on in the U.N. Convention Against Corruption is exceptionally important. We have also been trying to work in the G-8 process to come up with a multifaceted attack on corruption and promotion of transparency, which is all part of this same problem.
Then we have been working in regional institutions like the Organization of American States, where they have put in place for the first time a very thorough anticorruption convention. Now, the challenge is to actually implement it. So the effort is part using our own tools, but also building that network and building up that base of cooperation.
Page 38 PREV PAGE TOP OF DOC Mr. HENSARLING. Thank you, gentlemen.
Chairwoman KELLY. Thank you. Mr. Lynch.
Mr. LYNCH. Thank you, Madam Chair.
Gentlemen, thank you for your willingness to help the committee with this important work.
Most of the members of the committee are aware of a report from back on May 6, and there was a related story in the New York Times, where at about 4 o'clock in the morning on March 18, one of Saddam Hussein's sons, accompanied by one of his chief advisers, went to the central bank of Iraq and withdrew about $1 billion, $900 million in U.S. Currency, $100 bills, and about $100 million in Euros, and put them all in three semi-tractor/trailers.
Then we have a corresponding report from the U.S. Military that intelligence tells us that a convoy of three semi-tractor/trailers pulled into Syria at the same time, shortly after the seizure of money. We have the U.S. Treasury that confirms that that happened.
I just wanted to know specifically what we are doing about that incident. If you can't speak to that specific incident for security reasons and, I hope, for recovering the money, maybe you can give me an example of how we respond to large robberies, if you will, like the one I have just described.
Mr. AUFHAUSER. Congressman, the incident you described is an astonishing example of the plunder of the Hussein family. Perhaps with serendipity and perhaps with some pretty good forensic work by DOD and others in Iraq, we may well be on being able to confirm that a substantial amount of the found money is indeed the plundered money. Let me be more specific.
This is all subject to confirmation. There is no certainty to this, but it is more likely than not. Some 236 boxes of cash, either Euros or U.S. Dollars, were packaged that night by central bank personnel, but they were very meticulous in the records they kept. They indexed the boxes and numbered them, and they put certificates in the boxes indicating how much money had been placed in them.
Page 39 PREV PAGE TOP OF DOC Out of the 236 boxes, we may well have found 191, constituting $850 million U.S., give or take, and $100 million of Euros, leaving still an unbelievable amount of wealth unaccounted for in that theft. But if this information is correct, a substantial amount of the found money that you have been reading about in Iraq is indeed the plundered money.
Mr. LYNCH. That is great. That is good news. I hope we can confirm that. Thank you.
Chairwoman KELLY. Thank you, Mr. Lynch.
Mr. SHADEGG. Thank you, Madam Chairman. Thank you for holding this very, very important hearing.
Gentlemen, I appreciate the job you are doing. I wish you the best in doing it, but I have grave concerns. I listened to you read and stress that the current Executive Order says that the purpose of this is only to assist the people of Iraq and in the reconstruction of Iraq. For political purposes, I fully understand that, and think that it is important that Iraqi assets be used for that purpose.
But I am here concerned about a different issue. As you gentlemen I think know, particularly in the State Department and at the Treasury, in the first Gulf War as a result of Iraq's invasion of Kuwait, millions of dollars in property losses were suffered by American citizens.
A procedure was put in place to compensate those American citizens. It was structured to go through the United Nations Compensation Commission, UNCC.
As I understand the process, a group of Americans litigated their claims in the United States in front of the United States Foreign Claims Settlement Commission, and actually a case was pending. There were more claimants that came forward. A judge made a decision to bifurcate the cases. One set of cases went to judgment and was concluded. A second set of cases involving other claimants with claims and losses that were every bit as legitimate has not been resolved as a result of that judge's decision to bifurcate the two cases.
Page 40 PREV PAGE TOP OF DOC Where we stand at this point has been that it has been some 12 years since these people suffered losses, losses in the millions of dollars. Only a small handful of Americans are aware of this circumstance. Only a small handful of Members of Congress are aware of this circumstance.
Nonetheless, those U.S. Citizens who lost millions of dollars in property claims in the first Gulf War have been totally frustrated by the UNCC process and have not received any compensation. I can tell you that personally because I have met and sat with them. Some of them have had their financial lives ruined, and some have had their personal lives ruined because their families have fallen apart as a result of the economic pressure. I can take you to people who are divorced and whose children are now raised in single-family homes because of the consequences of this.
My concern is, given that right now we are focused on the current war, and given that we are as a Nation focused on rebuilding Iraq, as we should be, I am deeply worried about this other small subset of claims of people who are not Iraqi citizens, but American citizens. They are not even Kuwaitis; they were American citizens who were in Kuwait at the time of the first Gulf War and who lost homes, cars, businesses, and property.
As I read the language of the President's Executive Order, it precludes or could be read to preclude that any of those assets be used to take care of those claims.
I must tell you before I put the question to you, number one, I am convinced that the UNCC's process is a joke. It has not worked or functioned to help those American families. I am interested in what you can do to help solve that problem.
Second, I would like your answer today, and if not, if you can get a better answer at a subsequent time. I am intensely interested in the Administration's plan to help these American victims obtain compensation for the property they lost in the first Gulf War.
I suppose that question is directed both at you, Mr. Aufhauser, and you, Mr. Wayne.
Page 41 PREV PAGE TOP OF DOC Mr. AUFHAUSER. There were a lot of questions there. Let me see if I can capture most of them.
Mr. SHADEGG. Please do. Take your best shot. If you want to submit more in writing later, that is good.
Mr. AUFHAUSER. I will pick the ones I think I can answer.
First, a little background. The assets that were invested previously had been frozen. Those frozen assets, by law, were beyond the reach of judicial process to anybody, with one exception: holders of victims' judgments, the shield people. But property, property judgment holders could not access those funds under TRIA, the Terrorist Risk Insurance Act.
So the funds that were invested were funds that were never historically available, and this is not a perfect answer to your question, I understand, but never historically available for judicial process and award to property claimants. That is point one, okay?
Point two, the President's first desire in applying the funds here is to make sure that there are no more victims of terror and the like. The $1.7 billion really represents the kickstart to the Iraqi economy.
I think it was Congresswoman Maloney who asked how we can account for this. The ambition is that the lion's share of that money will go back into the reserves of the central bank, because it was the reserves of the central bank; $1.1 billion of the vested funds were held by the central bank up at the New York Fed. It is absolutely necessary to kickstart the economy there in Iraq.
In terms of whether the UNCC process is frustrating these claimants, I confess I am unaware of it, and I am happy to look into it for you and reply to you in writing. I will say, although still uninformed, the receipt of claims against the State of Iraq is one of the necessary things the Treasury Department, our economic team under Ambassador Bremer right now in Baghdad, and ultimately the interim Iraqi Authority, is going to have to deal with in some setting, dealing with everybody's claims and using the wealth of the nation, which is the oil generated, the oil generated, to try to satisfy those claims in a sensible fashion.
Page 42 PREV PAGE TOP OF DOC Mr. SHADEGG. Maybe Mr. Wayne can add greater clarity. But let me tell you this much. These claims have been submitted to the State Department, were submitted years ago to the State Department, and have been submitted to the UNCC and have not been paid. I can assure you that people are frustrated.
Not only have I introduced legislation, but other Members of the House have introduced legislation and several Members of the Senate have introduced legislation to try to get these victims compensated.
Chairwoman KELLY. I am sorry, Mr. Shadegg, you are out of time. If you want, we can go to the adjacent hearing, or you can ask Mr. Wayne to submit his answer in writing.
Mr. SHADEGG. If he would submit his answer in writing, Madam Chairman, that would be fine.
[The following information can be found on page 94 in the appendix.]
Chairwoman KELLY. Thank you.
Mr. GARRETT. I will begin by yielding to Mr. Murphy.
Mr. MURPHY. I just have one question. I thank the gentleman for yielding.
I have a question which relates back to the March 11 hearing on efforts to stop terrorist financing, and we have talked about groups such as al Qaeda, Hamas, and Hezbollah. At the time, the President's critics didn't seem to want to face the truth of those links; but weren't those alliances further proven during the liberation and with some of the investigations you have done?
Page 43 PREV PAGE TOP OF DOC Mr. WAYNE. Well, we have no doubt that there were very strong links between Saddam's regime and terrorist organizations. Ansar al Islam, the Mujaheddin, al-Aqsa, the Abu-Nidal organization, the Arab Liberation Front, and the Palestinian Liberation Front are among those that enjoyed safe haven and various levels of support from the Iraqi regime.
The U.S. Government is in the process and the people on the ground are in the process of gathering and assessing information from captured terrorists such as the PLF leader, Abu Abbas. We expect to gain from this effort a great deal of additional information, but right now we are still in the process of gathering this all together.
We might be able to add a little bit in the next session.
Mr. MURPHY. Thank you. I appreciate it.
I yield back, Mr. Garrett.
Mr. GARRETT. Just following up on Mrs. Maloney's question, one of the answers we received was going back to the 1991the term used was a linkage occurred back then. I wondered if in the time remaining if you could just briefly explain what was the nature of that linkage.
I know the initial question by the Chairwoman was who was on the ground, who was in charge. So the question is, who was in charge when the past linkage occurred, what have we learned since then, and what will be implemented differently?
Mr. AUFHAUSER. I am trying to count the countries by orders of magnitude. There are about 30 countries outside of the United States back in 1991 that froze approximately $2.35 billion, according to our estimates, including United Kingdom, Switzerland, Germany, Bahrain, Italy, and France, by way of example.
By today's date, if you take out the close to $1.2 billion of new money that has been found since Secretary Snow announced in March this effort of outreach of finding hidden assets, if you take out that $1.2 billion, that had been reduced down to about $1 billion. I am reading from a chart now.
Page 44 PREV PAGE TOP OF DOC So the differences in accountingby way of example, in Germany in 1991, they reported $359 million was frozen. Today, we have been unable to identify from them whether any of those frozen assets remain. It is zero right now, just by way of example.
Now, back to your question of who was in charge in 1991, I confess I was in private practice and I don't know.
Mr. WAYNE. In that accounting, that is part of what we are doing right now in going out and asking people, what is the difference between this money and what happened to it?
I know in the case of Switzerland they have told us recently, when they turned their number in in 1991 they included the assets of Swiss banks that were in the United States. So there was a double counting, they are telling us, that went on. When we froze that money we counted it in our total.
They also reported it because it was in the accounts of a Swiss bank, even though it was in the United States. So there is part of that that we are doingwe are trying to sort the numbers through now.
Also, as David Aufhauser mentioned earlier, a number of countries in their legal systems allowed claims to be paid off over the years, claims against Iraq. Their courts would make a judgment. So we are trying to figure out exactly what the tallies were of each of these right now.
Mr. GARRETT. The GAO says about $61 billion in the Oil for Food program, and they have only spent about $41 billion. Does that mean there is $20 billion in the bank?
Mr. WAYNE. There is about $10 billion in the pipeline and about $3 billion unencumbered in the OFF program. That is as ofour estimate now.
Mr. GARRETT. And the other seven?
Page 45 PREV PAGE TOP OF DOC Mr. WAYNE. I can only tell you what our estimates are right now. Sorry.
Chairwoman KELLY. Thank you very much, Mr. Garrett.
Ms. BROWN-WAITE. Thank you very much.
This question is for Mr. Aufhauser. Last year, this committee heard testimony about the successful effort to recover funds misappropriated by Nigeria's former dictator. The effort actually involved private attorneys working on behalf of the people of Nigeria.
If the U.N. is ineffective at this, should we try to set up a permanent asset recovery system in the financial action task network?
Mr. AUFHAUSER. I don't think they are mutually exclusive. We should try, in my judgment, every alternative means to facilitate the repatriation of stolen wealth to people so kleptocrats cease to have a motive to steal.
Ms. BROWN-WAITE. I like the term ''kleptocrats.'' so you obviously would support such a privatization and attempts to recover the money?
Mr. AUFHAUSER. I want to be careful. The devil is in the details. I don't support anything I haven't written, read, and perhaps even edited. But the conceptthe concept, the concept of an alternative to a U.N. mechanism, is very attractive.
Ms. BROWN-WAITE. I think the follow-up question is, are you as frustrated as many of us are at the current U.N. ineffectiveness?
Mr. AUFHAUSER. Our government has tabled a resolution at the U.N. that puts the responsibility right back at the U.N. in repatriating these assets. So right now I back our government's efforts to infuse more legitimacy, authenticity, effectiveness, in that mechanism through the U.N..
Page 46 PREV PAGE TOP OF DOC Ms. BROWN-WAITE. Thank you.
Chairwoman KELLY. Thank you, Ms. Brown-Waite.
Mr. PAUL. Thank you, Madam Chairman.
I have a question somewhat related to Congressman Shadegg's question dealing with property ownership, because I think we drift away from our goals, at least what I think our goals should be. Those are not only to defend here the private property principle, as well as the market, butwe talk glibly about bringing democracy to Iraq, but we very rarely see many comments dealing with what are we going to do about private property ownership.
I think terminology is so important. Earlier on it was referred to that the Halliburton money came from USAID, but more accurately what we should say is that money came from American taxpayers. I know that is just a technical detail, but it makes a big difference if we know what we are dealing with.
You know, we have a lot of financial assests recovery going on. We are talking about the oil assets. It has been conceded here several times today that these assets belong to the Iraqi people, but we never talk like that in this country. We don't talk like that in Texas. We don't say, the oil belongs to the people. I live in Texas, but I don't have any oil.
Why do we make these assumptionsthe President has these extraordinary powers which, quite frankly, frighten me. We have the U.N. that is in the oil business. They are making the profits and they store the money. They have controls. Nothing is going to be done without the U.N. making some deal somewhere along the way. We don't talk about, you know, who owned this stuff once.
Cuba, it is so much different. We have a Helms-Burton Act that emphasizes the fact that once Castro and communism is gone, the rightful owners will get their property back again. But there were at one time rightful owners and property owners of the oil wells over there. It may be because it might have been that the French owned a little bit that we have to drop those ideas. The French and the Germans and the Americanswe never seem to emphasize the importance of returning this to the owners. Contracts are a form of property.
Page 47 PREV PAGE TOP OF DOC Is there any concern at all or any interest in talking about how we might settle some of this, whether it is financial or whether it is the oil, in trying to get it back to the rightful owners, and get us away from the idea that we are in control and it belongs to the people and we do with it what we want?
It is all fungible, so nobody is going to end up knowing where this money goes anyway. Or it might sit in a bank, like Congressman Shadegg indicates; it sits there, and nobody touches it.
What about is it worthwhile pursuing this, and emphasizing the need to talk about private property ownership in a country that once understood private property ownership?
Mr. AUFHAUSER. I don't think there is any doubt that the long-term strategy of the United States Government is a freestanding Iraq that can determine things like what is the best way to promote private enterprise and the like. That is the surest way to make sure that the U.S. Taxpayer is not paying the bill. A thriving and enriched Iraqi economy that honors property rights and the like is a central part of our strategy. How you get there from here is a complicated calculus.
In direct response to your question about the oil, we were both trying to recollect herethe oil has been titled in the Iraqi State for the last half of the 20th century. It is not like there was a sudden taking from private parties during any of our recent lifetimes.
Mr. PAUL. But may I interject, it has been probably a half a century that Castro has owned the property as well, but we still talk about returning it to the original owners.
Mr. AUFHAUSER. Now I turn to the State Department.
Mr. WAYNE. Mr. Congressman, I guess I would add that certainly the importance of private property can't be underestimated as we move forward and work in Iraq.
Page 48 PREV PAGE TOP OF DOC In fact, already, as you probably noted, in the north of the country there has been a lot of discussion about who has title to what land, what apartments, what homes. Sorting these issues out has been a very important priority for the Americans working in that part of the country.
Similarly, as we move forward, one of our clear intentions is as quickly as possible to move decisions into Iraqi hands and to move to an elected government in Iraq so they can make some of these decisions themselves.
In that process, of course, as you know, we will be talking of the benefits of a market system and the benefits of private property. But we are trying to be very respectful of the need for Iraqis to come to these conclusions and to build this system themselves.
Chairwoman KELLY. Thank you, Mr. Paul.
Before I end this hearing, I would like to read something that I find is important for people to think about. It is a paragraph from Mr. James Lacey, who is a Times correspondent embedded with the 101st Airborne Division.
He says, ''It was the American soldiers who handed over food to hungry Iraqis, who gave their own medical supplies to Iraqi doctors, and who brought water to the thirsty.
''it was the American soldiers who went door-to-door in a slum because a girl was rumored to have been injured in the fighting. When they found her, they called in a helicopter to take her to an Army hospital. It was the American soldiers who wept when a 3-year old was carried out of the rubble where she had been killed by Iraqi mortar fire.
''It was American soldiers who cleaned up the houses they had been fighting over and later occupied, because they wanted the places to look at least somewhat tidy when the residents returned.
Page 49 PREV PAGE TOP OF DOC ''it was these same soldiers who stormed Baghdad in only a couple of weeks, accepted the surrender of three Iraqi army divisions, massacred any Republican Guard unit that stood and fought, and disposed of a dictator and a regime with ruthless efficiency.
''there is no other army and there are no other soldiers in the world capable of such merciless fighting and possessed of such compassion for their fellow men. No society except America could have produced them.'' .
I would like to add, and no society but America can lead the way to finding the money that rightfully belongs to the Iraqi people.
Now the Chair notes that some members may have additional questions for this panel that they may wish to submit in writing. Without objection, the hearing record will remain open for 30 days for members to submit written questions to these witnesses and to place their responses, as well as other pertinent information, in the record.
Chairwoman KELLY. This panel is excused with the committee's great appreciation for your time and your patience. I want to briefly thank all the members and their staffs for their assistance in making this hearing possible.
This hearing is adjourned.
[Whereupon, at 11:50 a.m., the subcommittee was adjourned.]