JORDANIAN BANKS RECEIVE LARGE DEPOSITS FROM

S E C R E T SECTION 01 OF 05 AMMAN 005136

SIPDIS

NOFORN

E.O. 12958: DECL: 06/15/2015
TAGS: PGOV ECON PREL IZ JO
SUBJECT: JORDANIAN BANKS RECEIVE LARGE DEPOSITS FROM
ALLEGED IRAQI MOD FRONT COMPANY

REF: A. AMMAN 3963


B. BAGHDAD 2145

C. BAGHDAD 213

Classified By: DAVID HALE, CHARGE D'AFFAIRES A.I., REASONS: 1.4 (B &D)

Summary
--------------


1. (U) This cable represents a joint message from Embassies
Amman and Baghdad.


2. (S/NOFORN and throughout) In the course of checking into
recent rumors about alleged large-scale deposits into
Jordanian banks by Iraqi government personnel, Amman Emboff
learned of an alleged Iraqi Ministry of Defense-related
front company that has reportedly placed over $400 million
in Jordanian banks over the last several months. According
to sources (primarily a prominent Iraqi businessman close
to Sha,lan, who claimed to be relating information given
too him by a former senior MOD official and the senior
management of two Jordanian banks),the front company was
set up by a "cabal" within the MOD with the cooperation of
former IIG President Yawwer and IIG Defense Minister
Sha,lan, among others.


3. (S/NF) The company, reportedly headed by a former
Baghdad money changer, allegedly received at least 46 MOD
contracts for items ranging from Polish helicopters to
Kalashnikov weapons and ammunition, side arms, and much
else. Sources claim that the MOD was grossly over-charged
for these contracts, in some cases by as much as 400
percent. We have independently received partial
confirmation of the businessman's story from a current
senior MOD official and the Chairmen of two leading
Jordanian banks. While conclusive evidence is lacking
(and may never be available),the incident is illustrative
of what many of our Iraqi and Jordanian sources assert is
a common pattern in Iraqi government contract awards.


4. (S/NF) The overall issue of corruption in the MOD was
raised by former Prime Minister Allawi and the Commissioner
on Public Integrity at the end of the Interim Government
period (ref c) and flagged for the current government by
recent completion of a Board of Supreme Audit review. On
June 19, a key MOD official cited below as heavily involved
in procurement corruption was removed from the ministry.
Embassy Baghdad continues to follow up and assist Iraqi
security and other ministries to regularize procurement
practices. New Minister of Defense Duleimi is committed
to rooting out corruption in his ministry. End Summary.

Jordanian Deposits by Alleged MOD-Tied Iraqi Front Company
-------------- --------------


5. (S/NF) Amman Emboff spoke to prominent Amman-based Iraqi
businessman Talal al-Gaaod (reftel) on June 6 about a
rumor that an unnamed "senior Iraqi government official"
deposited approximately up to $1 billion in various
Jordanian banks sometime in May. Al-Gaaod responded that
he had been contacted separately by senior management from
the Jordanian National Bank (JNB) and the Housing Bank of
Jordan (HBJ) and asked if he knew anything about an Iraqi
national named Nair Mohammed Ahmed.


6. (S/NF) Al-Gaaod said the bankers told him that
Ahmed was personally introduced to them by wealthy
Iraqi businessman Sa,ad Bunnia, and subsequently made USD
money deposits of over $400 million, transferred into
Jordanian banks from the al-Warka bank in Baghdad.
Al-Gaaod said he was told by the bankers that Ahmed was
working with four Jordanian banks, however Al-Gaaod
acknowledged that he was only contacted directly by the
management of the above two banks. Al-Gaaod said he
understood that Ahmed set up most of these accounts in the
name of the Al Layen al Jarieyeh company.

Money Changer Makes Good
--------------


7. (S/NF) Al-Gaaod said that he told the bankers he had
never heard of Ahmed or the al-Jarieyeh company before, but
would check. He said that he subsequently ascertained that
Ahmed ("uneducated, with three wives") owns a Baghdad
money-changing business and is now playing a role in
obtaining procurement contracts from the Ministry of
Defense. Al-Gaaod said the bankers told him that Ahmed
showed them his passport, which included multiple-entry US
and UK visas.


8. (S/NF) Al-Gaaod called Emboff later on June 6 to relate
that he had confirmed (from unnamed sources) that Ahmed
is acting as a front man for former Defense Minister Sha,
lan and former President Gazi Yawwer. According to
al-Gaaod, the money represented funds provided to the MOD
for supplying the Iraqi security forces. Stating that he
had "important new information" on this issue, al-Gaaod
asked that Emboff meet again with him again in person.

New Information: Naming Names
--------------


9. (S/NF) Emboff met al-Gaaod on June 7. Talal then
provided his "new information," most of which he claimed
came from a meeting he had the previous evening with Mishal
al-Saraf, whom he described as a long time acquaintance and
a former senior IIG MOD official (see paragraph #22 below).
Talal said that al-Saraf had recently contacted him about
lobbying the new Minister of Defense, Sa,adoun Dulaimie
(a good friend of al-Gaaod,s),in favor of awarding
some new MOD contracts to a Lebanese company. Al-Gaaod
said he told al-Saraf that he did not want to get involved,
but agreed to meet with him on the evening of June 6 at his
current residence in Amman, where he used the opportunity
to ask al-Saraf about Ahmed.

How the Scheme (Allegedly) Worked
--------------


10. (S/NF) According to al-Gaaod, al-Saraf confirmed that
Ahmed is a front man who was set up in the al-Jarieyeh
company last summer by a "cabal" whose chief operating
officers are MOD Director General Ziad Kattan and MOD
"Contract Manager" Brusqa Shaways, brother of former IIG
Vice President and current ITG Deputy Prime Minister Rowsch
Shaways. Talal said that al-Saraf admitted that he also
played a role and claimed that Sha,lan cooperated the
scheme and that Yawwer, VP Shaways, and Massoud Barzani
were also aware of it. Al-Gaaod said that al-Saraf
explained to him that the basis of the cabal's strategy
involved taking advantage of severe pressure from CentCom
and the USG generally to rapidly award contracts related to
rebuilding the Iraqi security forces.

Alleged Cash Pay-Off to Gazi Yawwer
--------------


11. (S/NF) Al-Saraf told Talal that, to accommodate this
pressure (or using it as an excuse),normal contract award
procedures were not followed and there was no regulated
bidding process. Among other outcomes of this (alleged)
uncontrolled procedure, al-Saraf related, 46 contracts
amounting to $1.2 billion were awarded to Ahmed,s front
company. These contracts ranged from provision of Polish
MI-8 and Sokol helicopters to ammunition, side arms, AK-47,
s, and much else. Talal claimed that al-Saraf added that
most of the $1.2 billion was paid out and moved into
Jordanian and Lebanese banks by December 2004 (i.e., before
most of the contracts were fulfilled). Talal said that
al-Saraf told him that cabal members were paid shares of
the profit in stages, and asserted that he personally
delivered a payoff of $4.8 million in cash to Gazi Yawwer.

Leaking to Chalabi?
--------------


12. (S/NF) Al-Gaaod said that al-Saraf then removed copies
of all 46 contracts from inside a cabinet and allowed Talal
to leaf through them. Talal said that al-Saraf explained
that he had retained the copies along with other
documentation to protect himself and to maintain leverage
against the other cabal members, whom he complained are
"cheating" him of his fair share of the take. Talal added
that al-Saraf is aligning himself with Ahmed Chalabi and
may have already given some of this documentation to Chalabi.


Al-Gaaod: Ahmed Has Put $400 Million in Jordanian Banks
-------------- --------------


13. (S/NF) Based on his conversation with al-Saraf and
others (allegedly including the Chairman of the Jordanian
National Bank),al-Gaaod asserted that over $400 million is
or was recently held in Jordanian banks in various
accounts, and that Ahmed has at least another $200 plus
million in the al-Warka bank in Baghdad, and in Lebanon.


14. (S/NF) Al-Gaaod said that the bankers told him that
Ahmed said he would use some of this money to finance
investments in Jordan. He added that the JNB Chairman told
him that Ahmed has already drawn funds from his accounts to
purchase local real estate (including the former home of
Prince Ra'ad),and $10 million in JNB investment portfolio
packages.

Jordanian Bankers Provide Further Insights
--------------


15. (S/NF) Embassy Amman ECON Counselor met on Thursday,
June 8 with Michel Marto, Chairman of the HBJ. Marto
confirmed that Ahmed held large accounts at the Housing
Bank. Marto described Ahmed as an ethnic Kurd affiliated
with President Talabani and the PUK who holds legitimate
contracts from the U.S. DOD to import vehicles and spare
parts for the Iraqi army and security forces, and who
wanted Housing Bank to open letters of credit so that he
could purchase these vehicles.


16. (S/NF) Marto said that after checking up on Ahmed, HBJ
insisted on a 100% cash collateral for the letters of
credit. Ahmed had opened two letters of credit - the first
(8-9 months ago) for JD 40 million ($56.5 million) and more
recently for JD 70 million ($99 million); he had deposited
exactly these amounts at Housing Bank to cover Marto's
requirement for cash collateral, and according to Marto had
not used them for any investments in Jordan. Marto also
said that while some of the money deposited to cover the
letters of credit had come in as wire transfers, the bulk
had come in as cash - "U.S. bills still in the wrapped
stacks, never touched by human hands."

Real Estate Purchases
--------------


17. (S/NF) On Tuesday, June 14, Emboffs met with Rajai
Muasher, Chairman of Jordan National Bank (JNB). Muasher
claimed that the al-Warka Bank had contacted JNB eight
months earlier and had asked that it open an account for
Ahmed; JNB had done so in response to this request,
presumably after doing due diligence. Muasher said that
JNB had only received deposits in the form of $30 million
in wire transfers from the Housing Bank and that the
transactions off the JNB accounts were primarily letters of
credit for purchase of military vehicles. He noted,
however, that in addition to conducting substantial real
estate speculation in Amman, Ahmed had bought out two
issues of JNB 2- and 3-year CDs (valued at a total of $5
million) and had contacted Muasher requesting the
opportunity to purchase five million shares of JNB stock
(valued at $28 million). Muasher had refused the latter
offer, but noted that Ahmed was only one of many new faces
appearing in Amman with ridiculous sums of money about
whose origin he could only speculate.

Central Bank Comments
--------------


18. (S/NF) Emboffs met on Sunday, June 12 with Central
Bank of Jordan Deputy Governor Faris Sharaf, whose
portfolio includes banking regulation. Sharaf noted that
the large transactions being made by Ahmed had come to the
CBJ's notice as well, and that the CBJ had looked into it,
but had been satisfied that the transactions were
legitimate. Sharaf did not know of any other banks with
which Ahmed had dealt, or the extent of his cash deposits.
Sharaf expressed confidence in Housing Bank's
know-your-customer (KYC) due diligence, but showed
less confidence in the Jordan National Bank. He noted,
however, that the CBJ would further investigate the
accounts.

Iraqi MOD Official Provides Further Confirmation
-------------- ---


19. (S/NF) In a further development, Emboff met informally
on Saturday, June 11 with Iraq MOD Deputy Director for
Security and Intelligence Asaad Abbood (strictly protect),
who was in Amman along with other (non-MOD) Iraqi officials
to participate in A U.S. Institute of Peace (USIP)
workshop. Without going into any other details, Emboff
asked Abood (a former London-based exile who has worked in
MOD since 2003) if he knew anything about MOD contracting.
Abood took Emboff aside and volunteered considerable
information on what he called an "outrageous" situation.


20. (S/NF) Abood was and is unaware of our discussions on
this subject with al-Gaaod and the Jordanian bankers. He
independently confirmed al-Gaaod,s claim that Ziad Kattan
and ("Barzani man") Shaways are central to a massive
contracting scam initiated in 2004 with the cooperation of
former Iraqi Minister of Defense Sha,lan (Abood was unaware
of any involvement in the scheme by ex-President Gazi
Yawwar). Abood said that "everybody in the MOD knows about
this." Without elaborating, he asserted/speculated that
most of the money has been paid into, and subsequent
transactions conducted via, Lebanese banks.

A "Polish Connection"?
--------------


21. (S/NF) According to Abood, Kattan maintains complete
control over contract awards in the MOD. Abood said that
Kattan has a Polish wife, now living in Poland, who owns a
company that is a participant in many MOD contracts,
including one that involved the purchase of $5
million-worth of Kalashnikov ammunition for $20 million.
Abood related that at a group meeting Kattan dismissed a
sales approach by some Chinese would-be vendors by telling
them bluntly "I am not interested in Chinese products, and
I am the sole person deciding on MOD contracts for the Iraqi
government."

Misha al-Saraf: "The Biggest Thief of All"
--------------


22. (S/NF) In addition to Shaways, Abood named Mishal
al-Saraf (whom he said is a former senior advisor to
Minister of Defense Sha,alan) as a key player with Kattan
in various front company schemes. He called al-Sharaf "the
biggest thief of all." Abood added that al-Sharaf recently
"disappeared" from Baghdad after being asked to meet with a
parliamentary committee investigating corruption; he did
not indicate any knowledge that al-Sharaf is currently in
Amman, or of any involvement by Jordanian banks.

Further Al-Gaaod Comments
--------------


23. (S/NF) In a subsequent discussion, Al-Gaaod (who is
not aware of our other meetings) noted that it is perfectly
possible that all contracts will be officially honored,
with the profits to the cabal coming from major
overcharges and "gold-plating." By way of example he
explained that "new" helicopters and other equipment may
not necessarily be "newly-produced" (i.e., may come from
old inventories) and that AK-47 ammunition can be bought
cheaply in the region and billed as more expensive
ammunition from Eastern Europe, etc. However he
acknowledged that nothing can really be known about any of
this without a full-fledged audit.

Tip of the Iceberg?
--------------


24. (S/NF) During this discussion, al-Gaaod claimed,
without elaborating, that a similar scheme was "probably"
pursued by the IIG Ministry of the Interior, and that Sha,
lan and company also had separate front company structures
including one involving food services, supplies, and
equipment, that has led to over $100 million being placed
in Lebanese banks. (Note: Al-Gaaod is a good personal and
political friend of Sha,lan,s, and seemed clearly disturbed
at the scale of the corruption (if that,s what it is). He
repeatedly tried to make excuses for Sha,lan, suggesting at
one point that he was probably a bit player while at other
times asserting that Sha,lan was the likely originator of
the scheme. He also opined that Yawwer and Sha,lan may
have needed the funds to offset the extensive transfers
provided by Iran to finance their opponents. End Note).

Embassy Baghdad Comments
--------------


25. (S/NF) While the information from sources in Amman
provides new details on MOD corruption, including the
alleged involvement of Barzani, the issue itself is
unfortunately not new. Former Prime Minster Allawi
initiated an investigation near the end of the IIG and
the Bureau of Supreme Audit recently published its
report on the subject - Embassy forwarded a
translation to NEA/I in late May.


26. (S/NF) As highlighted in ref c, which noted the
concerns of Iraqi Commissioner on Public Integrity Judge
Radhi on malfeasance within MoD and other ministries
during the IIG, full support must be given to the
relevant Iraqi authorities in investigating and stamping
out corruption. Capacity within both MOD and MOI was
minimal during the IIG with few if any standard/legal
contracting procedures followed. To this end, Embassy
Baghdad and MNSTC-I have helped put together a number
of training sessions for both MOD and MOI counterparts
on proper contracting procedures.


27. (C) The Iraqi Transitional Government has established a
new committee through which approval must be obtained for
any government contracts valued over $2 million. Any
government payments over $200,000 can also no longer be done
in cash (ref b). The best of procedures or systems, however,
will not prevent corruption when the officials responsible
for implementing them are themselves dirty. With respect to
MoD, it is at least a positive sign that DG Kattan was
removed
from the ministry on June 19. Kattan and Brusqa Shaways are
undergoing magistrate,s investigation. Both may face
prosecution in the Central Criminal Court of Iraq.


28. (C) Due to the efforts of CPI Commissioner Radhi, the
former IIG Minister of Labor, the Deputy Ministers of Housing
and Construction and Defense, and the Commander of the Air
Force have appeared recently before the Central Criminal
Court
of Iraq (CCCI). They have been released on bail pending
completion of judicial investigation and trial. Also, an
arrest warrant has been issued for the former Minister of
Transportation (currently rumored to be in Jordan); the
assets
of former Minister of Housing and Construction have been
frozen,
and the Deputy Minister of Environment has been jailed
pending
completion of a judicial investigation and trial. The recent
detention in Baghdad by MNF-I of Sa'ad Bunnia, a member of
the
Bunnia family business clan, with $6 million in cash he
claimed
was related to an MoD contract, however, illustrates that
fighting corruption and bringing Iraqi procurement practices
in
line with professional standards will realistically be a
long-term work in progress. New Minister of Defense Duleimi
has repeated to us on several occasions his personal
commitment
to eliminating corruption in his ministry.

HALE