BATTLING CORRUPTION IN IRAQ: OVERVIEW AND WAY

C O N F I D E N T I A L SECTION 01 OF 06 BAGHDAD 000101 SIPDIS E.O. 12958: DECL: 01/12/2019 TAGS: KCOR KCRM PGOV PREL EAID IZ SUBJECT: BATTLING CORRUPTION IN IRAQ: OVERVIEW AND WAY FORWARD REF: A. 08 BAGHDAD 1588 ¶B. 08 BAGHDAD 4058 ¶C. 08 BAGHDAD 4067 ¶D. BAGHDAD 10 Classified By: ANTI-CORRUPTION COORDINATOR JOSEPH STAFFORD, REASON 1.4 (B AND D) SUMMARY -------------- ¶1. (C) There are signs of the GOI's growing concern over widespread corruption, although the depth of its professed commitment to curbing it remains uncertain. In a recent meeting with the Ambassador, Deputy Prime Minister Barham Salih spoke of convening a meeting of representatives of the GOI, Council of Representatives, and civil society to discuss Iraq's obligations under the UN Convention Against Corruption and Extractive Industries Transparency Initiative. The GOI has achieved some progress in establishing the legal and institutional foundation for its anti-corruption regime, but has far to go to make it truly effective. Article 136B of the Iraqi Penal Code remains a major constraint on the GOI's anti-corruption (AC) efforts, as this measure authorizes ministers to quash arrests and investigations of their employees for corruption. There is also a separate measure that prohibits any investigations of ministers and others without the Prime Minister's permission. ¶2. (C) The USG has a compelling interest in working with the Iraqis to establish an effective anti-corruption regime; it is difficult to see how our overriding objective -- a unified democratic, federal Iraq able to govern, defend, and sustain itself and is an ally in the War on Terror -- can be achieved if Iraq is ravaged by unchecked corruption. There is a wide array of USG programs, civilian and military, that either focus directly on anti-corruption institutions or on broader areas of governance and economic reform, coordinated through our Anti-Corruption Coordinator. The centerpiece of the USG's anti-corruption effort in Iraq should be to promote the GOI's full compliance with its numerous obligations under the UN Convention against Corruption, and our existing programs serve this objective. Specific elements of the proposed AC strategy are contained in paragraphs 19-20. End summary. OVERVIEW: CORRUPTION IN IRAQ -------------- ¶3. (C) By all accounts, corruption in Iraq is widespread and present at all levels of the GOI, reflecting its inadequate performance in the three key areas of an effective state anti-corruption system: transparency, accountability, and enforcement. Corruption takes many forms and ranges from citizens paying bribes to low-level functionaries to obtain official documents, to higher-ups pocketing the salaries of "ghost workers" on their staff, to top-level officials receiving kickbacks on major procurement contracts, siphoning off money from ministry programs into their own bank accounts. Notable are schemes to steal oil and sell it for personal profit on the black market. Corruption remains a significant deterrent to large-scale foreign direct investment in Iraq, thereby denying the country the transfer of desperately needed skills and technology. Corrupt activities continue to be a source of funds for the insurgency. Various factors are cited in explanations for corruption here, among them: the weakness of state institutions exacerbated by the insurgency, the legacy of Saddam's rule, and the insistence of Shia's and Kurds, in particular, to "take their turn at the trough" following Sunnis doing so under Saddam. The extent of Iraq's corruption problem is suggested by Transparency International's (TI) ranking it as tied for second as the world's most corrupt country in its 2008 rankings. The TI ranking Qcountry in its 2008 rankings. The TI ranking notwithstanding, the actual extent of corruption in Iraq is not known with any precision, but it is clearly a major problem and may be getting worse. GOI'S ANTI-CORRUPTION INITIATIVES -------------- ¶4. (C) Iraqi officials have termed corruption "the second insurgency" and acknowledge its seriousness. But they express resentment over Iraq's abysmal ranking by TI, claiming that it fails to take into account the GOI's anti-corruption efforts. In fact, there are signs of the GOI's growing concern over corruption, although the actual depth of its professed commitment to curbing it remains uncertain. As previously reported (ref a),in January 2008 Deputy Prime Minister Barham Salih proclaimed 2008 the "year of fighting corruption" and presented a "national campaign to fight BAGHDAD 00000101 002 OF 006 administrative corruption" based on an 18-point plan. In March 2008, a meeting under the auspices of the International Compact with Iraq Initiative on Good Governance and Anti-Corruption Conference was held in Baghdad. The meeting produced a joint GOI/UN document, "The Baghdad Declaration on Combating Corruption," in which the GOI undertook to accede to the UN Convention Against Corruption (UNCAC) and immediately signed and ratified the convention. The GOI later joined the Extractive Industry Transparency Initiative (EITI). ¶5. (C) In a December 28 meeting with the Ambassador (ref c), Barham Salih spoke of convening a meeting of representatives of the GOI, Council of Representatives (COR),and civil society to discuss Iraq's obligations under the UNCAC and EITI. The GOI has also joined the Arab Anti-Corruption and Integrity Network (ACINET). As for the 18-point AC plan, per ref a, the GOI has made limited progress to date on implementation and recognizes the need to refine it. Council of Ministers (COM) Secretary General Ali Alaq recently told us that a revised AC plan is being drafted and should be ready in about a month (ref d). PRINCIPAL ANTI-CORRUPTION INSTITUTIONS -------------- ¶6. (U) The basic institutional framework for Iraq's AC regime is in place. The country's three principal AC institutions include the Board of Supreme Audit (BSA),Commission on Integrity (COI),and Inspectors' General (IG),assigned to ministries and other GOI entities. The COI (1,400 employees),envisaged as the lead AC agency with responsibility for investigations as well as other AC-related functions, was established in 2004 by the CPA, as was the IG institution (34 IG's, 1,740 staff),which was modeled to some extent along USG lines. The BSA (2,000 employees) was established in 1927 and its mandate is similar in some respects to that of our GAO. The laws creating the COI and IGs and refining the BSA's responsibilities stipulate their independence from the executive branch, with oversight by the National Assembly's Committee on Integrity. ¶7. (U) To promote coordination among these AC bodies, in May 2007 the GOI established the Joint Anti-Corruption Council, renamed the National Anti-Corruption Board in November 2008, composed of the heads of the COI and BSA, an IG representative, COM Secretary General Alaq, and the head of the High Judicial Council -- in recognition of the judiciary's vital role in combating corruption. Among judicial institutions, the Central Criminal Court of Iraq (CCCI),established by the CPA, is specifically charged with handling corruption cases. THE LEGAL AND POLICY FRAMEWORK -------------- ¶8. (U) The GOI has also made progress in establishing the legal and policy framework for what could be, with full implementation and enforcement, the basis of an effective AC program. In its mid-2008 study of Iraq's AC efforts, the UN Office on Drugs and Crime (UNODC) concluded that the GOI's laws and policies were partially in compliance with UNCAC requirements. It stated that the legislative framework underpinning the BSA, COI, and IG appeared to be "broadly consistent" with UNCAC requirements. It noted that while Iraq "does not currently have a specific nationwide preventive anti-corruption policy," it had begun to implement "numerous preventive practices," citing, inter alia, a financial disclosure system for public officials and the conduct of AC educational and public awareness campaigns. However, it added that according to "many commentators" these activities Qadded that according to "many commentators" these activities had not been fully implemented and that doing so would require continued technical assistance. ¶9. (U) Among other highlights of UNODC's report, it described provisions in Iraq's Penal Code criminalizing bribery of "national public officials" as in compliance with UNCAC requirements, but pointed to lack of provisions to criminalize bribery of "international and foreign public officials." (NOTE: The law notwithstanding, corruption of "national public officials" is regarded as commonplace here. END NOTE) It judged that Iraqi laws "fully criminalized" money-laundering activities and met UNCAC requirements, though it did not comment on how often anyone was prosecuted under these laws. At the conclusion of its report, UNODC lauded Iraq's "strong first steps" on AC -- e.g., accession to UNCAC -- but went on to issue a lengthy list of recommendations for GOI action to achieve an effective AC program. PENDING NEW LAWS -------------- BAGHDAD 00000101 003 OF 006 ¶10. (U) As indicated by the UNODC study, the legal framework for Iraqi's AC efforts remains a work in progress. A comprehensive AC law is being prepared and, according to COM Secretary General Alaq, the draft will be completed "soon." He said that when the draft is finished, it will be circulated among the donor community, including the U.S., for suggestions before submission to the COR for consideration. Meanwhile, prospects for three draft laws covering each of the principal AC institutions, BSA, COI, and IG, are uncertain. Following submission of these draft laws to the COR in 2008, the GOI abruptly withdrew them. As previously reported (ref d),COR Integrity Committee chairman Sheikh Sabah Saidi, in his December 30 remarks at the COI-sponsored "Integrity Day," criticized the GOI for its move and demanded that it re-submit the draft laws for the COR's action. In its study, the UNODC reviewed at length the provisions of these draft laws and concluded that, on balance, they would strengthen the independence of the three AC bodies. For example, it noted that these measures reinforce the requirement that the COI report directly to the COR, clarifies that the BSA is "administratively and financially independent" and expands its investigative powers, and frees the IG's from dependence on the respective ministers for resources by providing them with their own independent budget. AREAS FOR IMPROVEMENT -------------- ¶11. (C) Despite the GOI's progress in laying the legal and institutional foundations, it has far to go in establishing a genuinely effective AC regime. The three main AC institutions are generally regarded as plagued by assorted ills: lack of capacity, interference by the executive branch and political parties, inadequate coordination among themselves, and insurgency-related threats to security of personnel. While our sources generally view the BSA as the most competent and effective of the three, we are told that its operations suffer from reliance on outdated IT equipment and that its audits are not up to international standards -- although few of these audits are made public. The COI's limited capabilities are evident in the paucity of cases that it has submitted to date to the judiciary for prosecution; of the 4417 cases the COI received in 2008, only 386 have gone to trial, and of these, only 87 have resulted in convictions. Moreover, convictions have largely been confined to lower-level functionaries; few senior officials facing allegations of corruption have actually been prosecuted, with even fewer still convicted. As for the IG, one knowledgeable source portrayed them as the least capable AC body, pointing out their lack of expertise and independence from their ministers under current law as among their major weaknesses. THE AMNESTY LAW AND 136B -------------- ¶12. (C) A major legal constraint on the GOI's AC efforts was the Amnesty Law passed by the COR in February 2008. It was designed to facilitate the release of detainees against whom there was insufficient evidence to warrant prosecution. Of the 20,000 persons covered by the law, 1,721 were under investigation for corruption and had their cases thrown out; the upshot was that a large proportion of all AC cases were either dismissed or closed. ¶13. (C) Another major legal constraint is the Iraqi Penal Code, Article 136B, which authorizes ministers to quash arrests and investigations of their employees for corruption and other crimes. Ministers themselves are also shielded under a regulation authorizing the Prime Minister to bar Qunder a regulation authorizing the Prime Minister to bar corruption investigations against them. Both measures have been used. The PM stopped a case against the Minister of Transportation, who happens to be his son-in-law, and intervened in a case involving the current Minister of Oil. According to an informed source, in 2007 136B was invoked in 67 instances to halt corruption investigations in 2007, compared to 15 instances in 2006. Although figures for 2008 are not as yet available, sources express concern about a continued rise in resort to 136B or other tactics. Sources report cases of ministers simply holding or discarding evidence rather than invoking 136B so the international community cannot point to their use of 136B as an obstruction in their commitment to fight corruption. They also assert that the prospect of invoking this measure is sufficient in some cases to deter AC officials -- at the COI, in particular -- from proceeding with an investigation. Defenders of these measures insist they are necessary to forestall politically-motivated corruption allegations that could paralyze the government, with honest officials inhibited from carrying out their duties for fear of facing such allegations leveled by political adversaries or others opposed to their BAGHDAD 00000101 004 OF 006 decisions. This defense is not convincing and underscores a key weakness of Iraq's current AC regime -- i.e., the lack of safeguards to prevent abuse of that regime for political or other unwarranted purposes. ¶14. (C) Article 136B was inherited from the Saddam era and, following its repeal by the CPA, was subsequently reinstated by the GOI. COI Acting Commissioner Judge Rahim Al-Ugaili has publicly called for its repeal. The Ambassador raised the issue in his December 28 meeting with Deputy Prime Minister Barham Salih (ref b),who indicated that a successful effort at repeal by the COR would require a recommendation by the Council of Ministers. But Barham Salih hinted that there was opposition to repeal in some quarters and that overcoming it would not be easy. He went on to refer to a senior official heretofore shielded from prosecution over corruption allegations, Dr. Adil Muhsin, Inspector General at the Health Ministry and the head of Prime Minister Al-Maliki's Anti-Corruption Coordination Office, saying "he cannot be touched." USG'S INTEREST IN PROMOTING IRAQ'S AC EFFORTS -------------- ¶15. (U) The USG has a compelling interest in working with the Iraqis to establish a strong, effective AC regime. The Embassy's Mission Strategic Plan (MSP) sets forth America's overriding goal in Iraq -- a unified democratic, federal Iraq that can govern, defend and sustain itself, and is an ally in the War on Terror. It is difficult to see how that goal can be achieved if Iraq is ravaged by unchecked corruption. An Iraqi government whose treasury is plundered by corrupt officials risks a loss of popular legitimacy that renders problematic its ability to govern and direct the country's development. Iraqi military and security forces whose resources are siphoned off through corruption are less able to defend the country and serve as an effective ally in the War on Terror. In recognition of the major USG stake in a successful AC program here, the MSP accords a prominent place among Mission activities in Iraq to AC-related cooperation. In March 2008, the Anti-Corruption Coordinator's Office (ACCO) was established as a focal point of the Mission's AC effort. CURRENT USG AC PROGRAMS -------------- ¶16. (U) The USG's AC effort in Iraq consists of an array of civilian and military programs, with some focused directly on AC institutions, while others target broader areas of governance and economic reform relevant to the AC dossier. AC-specific programs include the U.S. military's program to train IG staff in the Defense and Interior Ministries, USAID's "Tatweer" program for training of IG staff in other ministries, DOJ's International Criminal Investigative Training Assistance Program (ICITAP) involving the training of COI personnel, GAO's training programs for BSA personnel, and State/ACCO's newly established programs with the UN and the University of Utah to, inter alia, assist the GOI in updating its AC strategy, work with the COR on AC-related legislative reforms, and promote AC efforts at the provincial and local levels. ¶17. (U) Among the numerous other USG initiatives contributing to the AC effort: (a) USAID's economic reform projects that would enhance transparency and accountability in the GOI's budgeting process and management of public benefit programs; (b) DOJ's and State/INL's Rule of Law programs to boost the judiciary's ability to adjudicate corruption and other criminal cases enhance the personal security of judges, and (c) the Embassy Public Affairs Section's public diplomacy Q(c) the Embassy Public Affairs Section's public diplomacy efforts to heighten the citizenry's awareness of corruption's negative impact on their daily lives, e.g., in terms of diminished resources for public services. THE WAY FORWARD -------------- ¶18. (U) It is clear that Iraq's development of a strong and effective AC regime is a long-term proposition, and the GOI will doubtless require assistance from the U.S. and other donors for some time to establish such a regime. The USG's existing AC-related cooperation with the GOI is extensive, and there are no obvious gaps in our multi-agency efforts. Coordination and focus of those efforts is essential to maximize their effectiveness -- as is coordination with the GOI's own initiatives and those of the international donor community generally. ¶19. (U) The centerpiece of the USG's AC effort in Iraq should be to promote the GOI's full compliance with its obligations under UNCAC, which sets forth a broad vision of AC activities BAGHDAD 00000101 005 OF 006 by the individual signatory states and, by our reckoning, contains 166 action items. We judge that the GOI has not as yet fulfilled most of these action items. Many of our existing AC-related programs are consistent with promoting GOI's compliance with UNCAC requirements and should be continued. Following are specific elements of our proposed strategy with the GOI on UNCAC compliance, to be implemented in coordination with the UN and other foreign donors (Note: following represents an update on our AC strategy elaborated in May 2008, per ref a. END NOTE): -- As part of our dialog with senior GOI officials on AC issues, underscore the importance of achieving compliance with UNCAC requirements. We also need to highlight for the GOI at all levels USG efforts to combat corruption by American officials and others to counter any perceptions by Iraqis that the USG presses them on corruption but ignores abuses by its own citizens and firms. ACTION: COM, CETI, POL, ECON, ACCO -- Institute periodic consultations with the National Anti-Corruption Board and affiliated AC bodies to identify UNCAC requirements and assess progress toward compliance. ACTION: ACCO, POL (Constitutional and Legal Affairs Office). -- Assist the COI and COR in reforming Iraq's existing legal framework -- including repeal of Article 136B -- so that it is fully compliant with UNCAC requirements. The COI is mandated to develop AC-related draft legislation for the COR's action, and hence both institutions should be the focus of our intervention in this respect. ACTION: ACCO, POL (Constitutional and Legal Affairs Office). -- Engage in capacity-building with the GOI's three principal AC bodies (BSA, COI, IG),The National Anti-Corruption Board, the judiciary, and the COR's Integrity Committee so that they are capable of implementing an effective AC regime as provided for under UNCAC. In general, we are currently undertaking the sorts of capacity-building efforts foreseen here -- e.g., identification of needs, technical assistance, mentoring, exchanges, and workshops. A crucial component of our effort is the Embassy's Rule of Law programs. ACTION: INL, DOJ, USAID, MNSTC-I, GAO, ACCO, POL (Constitutional and Legal Affairs Office). -- Promote AC efforts at the provincial and local levels, maintaining contact with sub-national offices of BSA, COI, and IG as well as with local authorities, ensuring that local government plans feature an AC component. The UNCAC calls for a vigorous nationwide AC effort, with authorities at all levels fully engaged. ACTION: ACCO, OPA, POL, PRT's. -- Conduct a multi-pronged public diplomacy effort to raise Iraqis' awareness of corruption's negative impact on the country's politics, economy, and society, and also assist the GOI in developing public outreach programs. UNCAC envisages an active public awareness campaign by governments to build popular support for AC initiatives, and the GOI's existing efforts are clearly inadequate. We will make use of the full array of public diplomacy tools in this endeavor -- e.g., public speaking opportunities, media engagement, visits by U.S. AC experts, development of and dialog with AC-oriented Iraqi NGO's and other civil society representatives, training of Iraqi journalists in investigative methods and reporting on corruption. ACTION: PAS, USAID, ACCO -- Promote the introduction of an AC component in Iraqi schools at all levels and assist the Ministry of Education and the COI in devising an AC element for schools. UNCAC envisages that states, as part of their public awareness Qenvisages that states, as part of their public awareness campaigns on AC, will include AC material in schools' curricula. The legislation creating the COI also provides for inclusion of an AC component in curricula, but so far the COI has done little in this area. ACTION: USAID, ITAO, ACCO, POL ¶20. (U) Beyond promoting fulfillment of UNCAC requirements, our endeavors on behalf of economic reform will remain a vital element of our AC programs in Iraq. Corruption here as elsewhere is fostered by opaque and outmoded public finance and procurement systems, inadequate oversight of subsidy programs, and, given Iraq's considerable oil wealth, poor management of oil industry facilities. Following are key components of our proposed AC strategy related to economic reform: -- Assist the GOI in standardizing and making transparent the tender and procurement process for all spending ministries. ACTION: USAID, ECON, ITAO -- Assist the GOI in improving management of the Public Distribution System. ACTION: ECON, USAID BAGHDAD 00000101 006 OF 006 -- Complete the installation of a financial management information system (IFMIS). ACTION: USAID, Treasury, ECON -- Work to ensure the GOI installs functioning oil meters and automated accounting systems at all critical production and distribution points within Iraq. ACTION: ITAO, ECON, -- Encourage laws and regulations that bring transparency to the distribution of revenues from Iraq's natural resources. ACTION: ECON BUTENIS