IRAQI TRADE MINISTRY OFFICIALS ARRESTED ON

C O N F I D E N T I A L BAGHDAD 001176 SIPDIS E.O. 12958: DECL: 05/04/2016 TAGS: ETRD KCOR PGOV IZ SUBJECT: IRAQI TRADE MINISTRY OFFICIALS ARRESTED ON CORRUPTION CHARGES Classified By: ACCO Coordinator Joseph Stafford, Reasons 1.4 (b,d). ¶1. (C) SUMMARY: The Iraqi Commission on Integrity (COI) has obtained arrest warrants for 10 Ministry of Trade (MOT) officials on corruption charges. The charges stem from officials' alleged effort to profit by knowingly making purchases of spoiled food commodities for distribution to the Iraqi public under the MOT-administered Public Distribution System (PDS). Two officials have been detained thus far, and warrants remain outstanding for -- among others -- two Directors General, a former DG, and two of the Trade Minister's brothers (also MOT employees). No warrant has been issued for Trade Minister Al-Sudani, but calls for his resignation continue to mount. The PDS is widely believed to be riddled with corruption, and these arrests could be simply the tip of the iceberg. END SUMMARY. The Baghdad Tea Party Goes Bad -------------- ¶2. (SBU) On April 29, the COI sought to execute 10 arrest warrants against MOT officials on charges of corruption. Included were two current DGs in charge of commodity procurements under the PDS, a former DG, and two of Trade Minister Abd Al-Falah Al-Sudani's brothers (both also MOT employees). The investigation that led to the warrants commenced when an anonymous MOT employee complained to the COI office in Muthana province that senior, Baghdad-based MOT officials had knowingly purchased huge quantities of spoiled tea, which the whistleblower believed posed a hazard to recipients' health. These officials, he alleged, intended to distribute the tea via the normal PDS mechanisms after receiving generous KICKBACKS from the suppliers. (NOTE: The MOT-administered PDS provides a basic basket of commodities to virtually every Iraqi family. It began during the Iran-Iraq war, and is now believed to be the largest government-run food ration program in the world. END NOTE.) The COI asked MOT investigators to inspect a warehouse in Muthana, where they indeed found some USD 6.7 million worth of rotting tea. Based on this, Investigative Judge Abdul Amir Shemen accepted the case, continued the investigation, and ultimately issued the arrest warrants. ¶3. (SBU) The MOT's Company for Iraqi Foodstuffs imports tea for the PDS, but it appears that the COI's investigation uncovered probable wrong-doing more widely within the MOT. A warrant was also issued for arrest of Muthana Jabbar, DG of the Grain Board of Iraq, which imports rice and WHEAT -- the largest procurements under PDS and easily the most lucrative. When Agriculture Attache sought a routine meeting with Muthana this week, we were told first that he was on "extended administrative leave," but later that he was "on the run." Shoot Out at the Ministry -------------- ¶4. (SBU) In accordance with standard procedure, the COI delivered the arrest warrants to the Baghdad Central Command, which sent military units to the MOT to execute them on April ¶29. Ministry Spokesman Mohammid Hanoon and Mohammid Abisashi, deputy director of an office charged with regional PDS storage and distribution, were arrested in the parking lot. However, when soldiers attempted to enter the building, MOT security personnel opened fire into the air, and the Iraqi military did likewise. No one was reported hurt, but the confusion reportedly lasted long enough for those not yet arrested to escape. COI contacts tell us that they have strong reason to believe that the individuals in question may seek to flee Iraq, and have notified immigration personnel to be on the look-out for them. Qbe on the look-out for them. Minister Hotly Denies Charges -------------- ¶5. (C) Trade Minister Al-Sudani has hotly denied all allegations of wrong-doing within his ministry, telling the press (from Paris, where he was as part of a PM's delegation) that the entire investigation is politically motivated or the work of disgruntled employees. No warrant has been issued for Al-Sudani's arrest, although critics are quick to point out that he benefits from a 2007 executive order stating that the COI may not launch corruption investigations against sitting ministers without the Prime Minister's approval. COI sources tell us that they consider Al-Sudani a suspect in this investigation. Rumors have abounded for months regarding Al-Sudani's personal involvement in corrupt activities at the MOT, and Council of Representatives members have even publicly accused him of wrongdoing on the floor of parliament. Public calls for his resignation have now resumed in the wake of the arrest warrants, and even members of his own political party have quietly suggested he should now stand down. Comment -------------- ¶6. (C) It is too early for us to judge whether charges will stick against those arrested or if those not yet in custody will ever be detained. However, the charges seem abundantly plausible. The tainted tea scam is nearly identical to another plot that a former auditor charged with investigating the PDS described to us in mid 2008. At that time, he showed us various documents and photos of obviously spoiled food in MOT warehouses, and claimed that purchasing tainted commodities in return for KICKBACKS was common practice. Given the persistent allegations of corruption within the PDS and its bloated and inefficient structure, these arrests could be just the tip of the iceberg. End comment. HILL