Fraud in Iraq costs $1 billion

BAGHDAD, Aug. 12 (UPI) -- Iraqi investigators have uncovered more than $1 billion of fraud and waste in weapons deals arranged by middlemen, Knight Ridder news service reported.

The report, quoting a confidential report and interviews with U.S. and Iraqi officials, said middlemen who arranged the deals reneged or took huge kickbacks on the contracts to arm Iraq's fledgling military.

The report said an Iraqi audit suggested that senior U.S.-appointed Iraqi Defense Ministry officials used three intermediary companies to hide the kickbacks. It said the contracts involved unnecessary, overpriced or outdated equipment.

The audit board said the waste squandered more than half the Defense Ministry's annual budget for setting up a self-sufficient force.

"If one dinar is misspent, I ache for it, so just imagine how it feels for such huge sums," Iraq's Prime Minister Ibrahim al-Jaafari told Knight Ridder in an interview.

The U.S. Embassy said in a statement that embassy officials "were advising the Iraqis about our concerns relating to (the Defense Ministry's) decisions on procurement and the possibility of corruption."