Identifier
Created
Classification
Origin
08BAGHDAD2935
2008-09-11 10:47:00
SECRET
Embassy Baghdad
Cable title:  

FORMER TRADE MINISTRY DIRECTOR GENERAL DETAILS

Tags:  STATE FOR INL CP NEA AND 
pdf how-to read a cable
VZCZCXRO0523
PP RUEHBC RUEHDE RUEHIHL RUEHKUK
DE RUEHGB #2935/01 2551047
ZNY SSSSS ZZH
P 111047Z SEP 08
FM AMEMBASSY BAGHDAD
TO RUEHC/SECSTATE WASHDC PRIORITY 9358
INFO RUCNRAQ/IRAQ COLLECTIVE
S E C R E T SECTION 01 OF 02 BAGHDAD 002935 

SIPDIS

STATE FOR INL/C/CP, INL/I, NEA/I AND S/I

E.O. 12958: DECL: 09/11/2018
TAGS: STATE FOR INL CP INL NEA AND
SUBJECT: FORMER TRADE MINISTRY DIRECTOR GENERAL DETAILS
RAMPANT CORRUPTION

REF: BAGHDAD 002122

Classified By: Anti-Corruption Coordinator Lawrence Benedict for reason
s 1.4(b) and (d).

S E C R E T SECTION 01 OF 02 BAGHDAD 002935

SIPDIS

STATE FOR INL/C/CP, INL/I, NEA/I AND S/I

E.O. 12958: DECL: 09/11/2018
TAGS: STATE FOR INL CP INL NEA AND
SUBJECT: FORMER TRADE MINISTRY DIRECTOR GENERAL DETAILS
RAMPANT CORRUPTION

REF: BAGHDAD 002122

Classified By: Anti-Corruption Coordinator Lawrence Benedict for reason
s 1.4(b) and (d).


1. (S) SUMMARY: A Director General with 34 years of
experience at the Ministry of Trade detailed to us September
7 allegations of widespread corruption within the Ministry of
Trade including complicity by the Minister and the Deputy
Inspector General. He also described some of the schemes
used to siphon off up to 70 percent of the value of contracts
for wheat, tea, and rice. While we cannot substantiate his
allegations at this time, the DG's reluctance to approach the
Commission of Integrity and his accusations against those
within his ministry responsible for promoting transparency
and accountability underscore the dearth of confidence Iraqi
whistleblowers have in their own institutions to combat
corruption. END SUMMARY.

DG DETAILS IMPORT SCAMS
--------------


2. (S) Assam Muhammad Hassan (strictly protect),who was
until two weeks ago the Director General for Financial and
Commercial Affairs at the Ministry of Trade with 34 years of
auditing experience, described to us in a September 7 meeting
the rampant corruption he had uncovered at the ministry.
Hassan told us he had received death threats because of the
information he uncovered and that he had only very
reluctantly returned to Iraq from Jordan to meet with U.S.
officials. He was nervous to meet with us and insisted on
holding the meeting at the Embassy rather than in a public
place. Hassan brought with him two large folders of
documents that he said provided proof of fraudulent
transactions involving procurement for the Public
Distribution System (PDS) and the complicity of high-ranking
Iraqi officials.


3. (S) Hassan detailed the various schemes by which the
Ministry of Trade imports substandard goods for the PDS. He
said most of Iraq's tea comes from Iran after being smuggled
through Kurdistan where the labels are switched out to
suggest the tea had come from India. The tea is then sold to
the Ministry of Trade through Iraqi front companies, which
pocket the difference between the contract price and the
purchase price of the substandard product. Hassan said
government tests of the tea distributed under the PDS
verified that the tea came from Iran and that it was below

the standards called for under contract in terms of taste,
color, and aroma.


4. (S) Hassan said shipments of wheat, which were contracted
at USD 220 per ton, actually only cost the buyers USD 65 per
ton. Each shipload of wheat, carrying roughly 50,000 tons,
thus led to kickbacks of USD 7-8 million. In other
transactions, the quantity of wheat ultimately delivered fell
far short of that paid for under contract. In one example,
he said his office had uncovered a contract for the delivery
of 1.1 million tons of wheat that had been delivered with a
recorded shortfall of 884,000 tons. Hassan showed us digital
pictures of the substandard quality of wheat (congealed in
columns of rot) and rice (collected in the unlined holds of
rusty ships more than 10 years past their prime and filled
with what appeared to be scrap metal). Hassan noted that
with the exception of wheat contracts which use letters of
credit, deals for other commodities purchased by the ministry
were all done with cash, thus enabling fraudulent
transactions.

ACCUSES DEPUTY IG AND MINISTER
--------------


5. (S) Hassan accused Sabah Aboud, the Deputy Inspector
General at the Ministry of Trade, of being the ringleader of
the fraudulent wheat deals. According to Hassan, Sabah had
been the Director General in charge of wheat imports at the
ministry until Hassan's investigation into questionable wheat
imports had prompted his dismissal in June 2007. Eight days
later, Minister Sudani reinstated Sabah as the Deputy IG.
Hassan uncovered further evidence of Sabah's involvement in
wheat kickbacks but claims he was further rebuffed when he
presented this information to the minister. Two weeks ago,
Sabah took over Hassan's position as DG for Financial and
Commercial Affairs, all the while remaining as Deputy IG and
maintaining de facto responsibility within the ministry for
wheat imports.


6. (S) Hassan claimed to have proof of Trade Minister
Sudani's involvement in fraudulent deals. Hassan said that
he had briefed the results of his investigations to Sudani,

BAGHDAD 00002935 002 OF 002


whose response was "why should we dig old graves?" He said
he had documentation outlining Sudani's personal kickbacks in
one USD 14 million tea deal in January 2008. He said other
documents showed that all Iraqi wheat contracts contained the
signature of the minister, Sabah, or one clerk who worked for
them. In addition, he claimed to have a letter dated July
22, 2007 from National Security Adviser Mowaffaq Rubaie to
the Prime Minister uncovering a USD 50 million scam involving
170,000 tons of Iranian wheat. Another letter dated July 30,
2007 from Minister Sudani claimed that Iraq had never
imported any wheat from Iran.

NO FAITH IN IRAQI ANTI-CORRUPTION INSTITUTIONS
-------------- -


7. (S) Hassan stressed that the reason he had come to us was
because of the lack of faith he had in Iraq's anti-corruption
agencies. After being rebuffed by the Trade Minister, he had
approached a member of parliament, Ali al-Sajri. In July,
Sajri and Hassan jointly approached Embassy Amman, which
helped coordinate our meeting with Hassan. Hassan and
al-Sajri described to Embassy Amman threats to Hassan and his
family, as well as offers of bribes, to encourage him to drop
the matter. They indicated a total lack of confidence in the
Iraqi government to either investigate the matter or to
protect Hassan and were reluctant even to discuss the idea of
returning to Iraq. Hassan told ACCO he wrote to the Prime
Minister and met with Ali al-Basri in the Prime Minister's
office in early September, who reportedly told him that he
could not promise anything would be done. We asked Hassan if
he would be willing to approach the Commission of Integrity
with his information. Hassan replied that he did not trust
any Iraqi institutions and that he feared for his personal
safety in doing so.

COMMENT AND NEXT STEPS
--------------


8. (S) Hassan's reluctance to bring his case to the
Commission of Integrity is not surprising following the poor
reception he has faced in presenting his allegations within
his own ministry (to an allegedly corrupt Deputy IG and
Minister) and to the Prime Minister's office. ACCO is
coordinating with the FBI Major Crimes Task Force (MCTF),
which intends to reach out to Hassan and review his
documentation to see whether a criminal case can be made. If
Hassan's allegations are true, it reveals another troubling
case -- besides that in the Ministry of Health, reported
reftel -- of staff in an Inspector General's office who are
charged with promoting transparent practices being among the
worst perpetrators of corrupt acts. Even if Hassan's
allegations are not warranted, which we will not be able to
fully assess until the MCTF has had a chance to follow up and
review his documentation, the case reveals a troubling
reluctance by Iraqi whistleblowers to use GoI institutions
such as the Commission of Integrity to voice their concerns.
CROCKER