
HOUSE COMMITTEE ON FINANCIAL SERVICES
MICHAEL G. OXLEY, Ohio, Chairman
JAMES A. LEACH, Iowa
DOUG BEREUTER, Nebraska
RICHARD H. BAKER, Louisiana
SPENCER BACHUS, Alabama
MICHAEL N. CASTLE, Delaware
PETER T. KING, New York
EDWARD R. ROYCE, California
FRANK D. LUCAS, Oklahoma
ROBERT W. NEY, Ohio
SUE W. KELLY, New York, Vice Chairman
RON PAUL, Texas
PAUL E. GILLMOR, Ohio
JIM RYUN, Kansas
STEVEN C. LATOURETTE, Ohio
DONALD A. MANZULLO, Illinois
WALTER B. JONES, JR., North Carolina
DOUG OSE, California
JUDY BIGGERT, Illinois
MARK GREEN, Wisconsin
PATRICK J. TOOMEY, Pennsylvania
CHRISTOPHER SHAYS, Connecticut
JOHN B. SHADEGG, Arizona
VITO FOSELLA, New York
GARY G. MILLER, California
MELISSA A. HART, Pennsylvania
SHELLEY MOORE CAPITO, West Virginia
PATRICK J. TIBERI, Ohio
MARK R. KENNEDY, Minnesota
TOM FEENEY, Florida
JEB HENSARLING, Texas
SCOTT GARRETT, New Jersey
TIM MURPHY, Pennsylvania
GINNY BROWN-WAITE, Florida
J . GRESHAM BARRETT, South Carolina
KATHERINE HARRIS, Florida
RICK RENZI, Arizona
BARNEY FRANK, Massachusetts
PAUL E. KANJORSKI, Pennsylvania
MAXINE WATERS, California
CAROLYN B. MALONEY, New York
LUIS V. GUTIERREZ, Illinois
NYDIA M. VELAZQUEZ, New York
MELVIN L. WATT, North Carolina
GARY L. ACKERMAN, New York
DARLENE HOOLEY, Oregon
JULIA CARSON, Indiana
BRAD SHERMAN, California
GREGORY W. MEEKS, New York
BARBARA LEE, California
JAY INSLEE, Washington
DENNIS MOORE, Kansas
CHARLES A. GONZALEZ, Texas
MICHAEL E. CAPUANO, Massachusetts
HAROLD E. FORD, JR., Tennessee
RUBEN HINOJOSA, Texas
KEN LUCAS, Kentucky
JOSEPH CROWLEY, New York
WM. LACY CLAY, Missouri
STEVE ISRAEL, New York
MIKE ROSS, Arkansas
CAROLYN MCCARTHY, New York
JOE BACA, California
JIM MATHESON, Utah
STEPHEN F. LYNCH, Massachusetts
BRAD MILLER, North Carolina
RAHM EMANUEL, Illinois
DAVID SCOTT, Georgia
ARTUR DAVIS, Alabama
BERNARD SANDERS, Vermont
Robert U. Foster, III, Staff Director
(II)


SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
SUE W. KELLY, New York, Chair
RON PAUL, Texas, Vice Chairman LUIS V. GUTIERREZ, Illinois
STEVEN C. LATOURETTE, Ohio JAY INSLEE, Washington
MARK GREEN. Wisconsin DENNIS MOORE, Kansas
JOHN B. SHADEGG, Arizona JOSEPH CROWLEY, New York
VITO FOSSELLA, New York CAROLYN B. MALONEY, New York
JEB HENSARLING, Texas CHARLES A. GONZALEZ, Texas
SCOTT GARRETT, New Jersey RUBEN HINOJOSA, Texas
TIM MURPHY, Pennsylvania JIM MATHESON, Utah
GINNY BROWN-WAITE, Florida STEPHEN F. LYNCH, Massachusetts
J. GRESHAM BARRETT, South Carolina
(III)


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DIVESTING SADDAM: FREEZING, SEIZING,
AND REPATRIATING SADDAM’S MONEY TO
THE IRAQIS
Wednesday, May 14, 2003
U.S. HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS,
COMMITTEE ON FINANCIAL SERVICES,
Washington, D. C.
The subcommittee met, pursuant to call, at 10:00 a.m., in Room
2128, Rayburn House Ofﬁce Building, Hon. Sue W. Kelly [chair-
woman of the subcommittee] presiding.
Present: Representatives Kelly, Paul, Shadegg, Hensarling, Gar-
rett, Murphy, Brown-Waite, Barrett, Oxley (ex ofﬁcio), Gutierrez,
Moore, Inslee, Crowley, Maloney, Lynch, Davis and Renzi.
Chairwoman KELLY. Before I begin this hearing I want to ex-
plain that I am on another committee as well which is in the mid-
dle of a markup. I may have to take a break every once in a while
to go over for votes. So, just to give you all fair warning that may
happen, I hope that we can move along with this hearing.
So that being said, this hearing of the Subcommittee on Over-
sight and Investigations will come to order.
Over the last 20 years, Iraq and its people have been systemati-
cally looted by the brutal tyranny of Saddam Hussein. Today, tens
of billions of dollars in assets and cash lie somewhere outside of
Iraq in the smoky depths of phony front companies, hidden trusts,
and cash accounts in the names of regime family members and loy-
alists. This stolen money represents another layer of destruction
and deceit that the Hussein regime inﬂicted on the Iraqi people.
Speciﬁcally, you can recall the reaction of the Iraqi who stormed
one of many Presidential palaces on April 14 and was ﬁnally free
to express his feelings. And as he passed through that ruined pal-
ace, with shards of crystal from chandeliers and shattered mirrors
and all that gilt furniture, he was marveling bitterly at Saddam’s
life of luxury and commented that his family couldn’t even afford
rea .
The Iraqi people have suffered enough and this money that was
taken belongs to them. These assets must be found and they must
be returned to the people of Iraq to build schools and reopen busi-
nesses and hospitals and repair the country’s infrastructure, all of
i% destroyed by the malicious neglect of a tyrant and his inner cir-
c e.
Today the Oversight Investigations Committee holds the ﬁrst
congressional hearing on the search for Saddam’s money and the
(1)


2
efforts to return it to the Iraqi people. Initial press reports are star-
tling, with stories of shell companies in numerous countries, discov-
eries in Iraq of hundreds of millions of U.S. Dollars, and oil smug-
gling schemes that are without parallel among other petty dictators
and thugs.
Passage of this committee’s work on the Patriot Act has been a
tremendous step toward monitoring the ﬂow of illicit money and it
has also served to raise the bar for the international community.
Foreign ﬁnancial institutions can no longer seek access to the U.S.
market without providing U.S. ﬁnancial enterprises with sufﬁcient
information to determine that no one is being misled by Saddam,
his family, or their agents.
Our message to the world is straightforward and it should be
heeded: The willingness to share cross-border information is now a
license required to do business in America.
In case you missed that, let me repeat it: The willingness to
share cross-border information is now a license required to do busi-
ness in America.
We have accomplished a great deal in Iraq in a very short time.
President Bush has been steadfast in his resolve to end tyranny,
terrorism, and torture. The Administration, our brave soldiers and
sailors, the coalition troops, have earned the admiration of the
American people and the world for the rapid liberation of a terribly
oppressed nation, a nation that spent its money funding, aiding,
and exporting terrorism instead of caring for its people.
Congress must continue to give the Administration the resources
it needs to locate and return the money to its rightful owners: the
men, women and children of Iraq. While a collaborative effort is
underway to seize this money, let’s be very clear. America expects
nothing less than the highest level of cooperation from ﬁnancial in-
stitutions, international entities, and foreign governments across
the globe. We know the money is out there and we will ﬁnd it and
we will return it to the Iraqi people, and we expect others to do
the same thing.
We are pleased to have with us here today witnesses from the
three principal departments responsible for efforts to repatriate
this money to Iraq. At this time it is unclear what role each entity
plays in the process. I am hoping that you ca'n shed some light, you
who are testifying, on how the U.S. Government works with the
international community and the ﬁnancial services industry to re-
patriate ﬁnancial assets of dictators.
The committee has also an immediate interest in determining
how entities across the world are working together to return
Saddam’s illegal money to the Iraqi people. Therefore, I would also
like to announce that we will be requesting, this committee will re-
quest for GAO to study these issues. Chairman Oxley and I, along
with Ranking Members Frank and Gutierrez have agreed that this
is an issue that must be examined as closely as possible and we
will be sending a letter this afternoon to request this study from
the GAO.
There are many challenges ahead and we believe that this inde-
pendent investigation by GAO will help to address them in a com-
prehensive and effective way.


3
I thank this panel for their appearance. I look forward to work-
ing with you all to ensure the Iraqi people recover the assets that
they now own and that will be critical to building a free and demo-
cratic Iraq.
And Mr. Gutierrez’s plane just landed, so I am going to call on
Mrs. Maloney.
[The prepared statement of Hon. Sue W. Kelly can be found on
page 63 in the appendix.]
Mrs. MALONEY. And I thank the gentlelady from the great State
of New York for holding this important hearing. And I thank all
our panelists.
This morning the subcommittee examines the seizure of Saddam
Hussein’s assets and Administration efforts to repatriate them.
These assets were the product of years of looting from the Iraqi
people, including the diversion of resources from humanitarian pro-
grams such as Oil for Food, and are further evidence of the sick-
ness of Saddam’s regime.
Just prior to military action on March 20, the President issued
an Executive Order conﬁscating and vesting property of the Gov-
ernment of Iraq in the United States. The Executive Order oper-
ates under authority in section 106 of the Patriot Act. The order
resulted in the seizure of 1.7 billion in assets by the U.S. Treasury
Department from accounts held in the U.S. In the name of the Gov-
ernment of Iraq, the central bank of Iraq, the State organization
for marketing oil, the Raﬁdain bank, the Rasheed bank.
As CRS explains and I quote: This authority becomes available
when the United States is engaged in armed hostilities or has been
attacked by a foreign country or its nationals. At this time, the
property of any foreign person, organization or nation which
planned, authorized, aided, or engaged in the hostilities or attack
become forfeitable.
Given that we have yet to ﬁnd Saddam, this seizure is especially
important because of ﬂight risk and the threat that his assets
could be used to assist terrorists.
This morning our panelists will testify to the success of their ef-
forts to track down Saddam’s assets through his tangled web of ac-
counts. This was difﬁcult work and our witnesses and their depart-
ments deserve credit for a job well done. However, the job of lim-
iting Saddam’s funding sources is far more complex. Treasury’s
own testimony estimates that his family’s wealth could be as much
as $40 billion worldwide.
I also look forward to a discussion this morning of what is next
for the assets seized from Saddam. The President’s Executive
Order stated, and I quote, “such a vested property should be used
to assist the Iraqi people and to assist in the reconstruction of
Iraq,” end quote.
This is a very broad statement that gives the Administration
wide latitude for potential uses of this money. As this money was
stolen from the people of Iraq, the U.S. in a sense is acting as a
ﬁduciary for the Iraqi people. Iraq is a nation that suffers massive
international debts. The Iraqi people will need every resource
available to them to rebuild the country and service their debt obli-
gations.


4
Whatever the ﬁnal determination is for the uses of this money,
I believe these decisions should be made in the open, not in closed
Administration meetings. This money does not belong to the United
States and it must not be obligated in no-bid rebuilding contracts,
as has been the case with other Iraq projects. I think this issue is
so important that last week I offered an amendment in the Govern-
ment Reform Committee that would apply the highest Federal con-
tracting standards to seized Iraqi assets. I withdrew the amend-
ment because I wanted to hear from our witnesses this morning be-
fore proceeding. I did offer another amendment that requires full
and open disclosure of contracts that were awarded without open
bidding to the lowest responsible bidder. I am pleased that this
amendment was accepted by the majority and attached to the de-
fense authorization bill. I believe a similar one may be required for
the assets that are the topic of this hearing. And I look very much
forward to your statements.
In short, the Iraqi people suffered for 25 years and it is very im-
portant to get this money back into their hands for the rebuilding
effort. And I hope that we are working with the United Nations,
which happens to be in the district that I represent, to broaden the
burden sharing so that other countries will be participating in a
multilateral effort to help Iraq and to help rebuild it.
I am also interested in any efforts to seize the assets in foreign
countries and where the United Nations stands in assisting our
country to ﬁnd these assets, seize them, return them to the Iraqi
people. I am very concerned and dedicated to helping them. But we
have many domestic challenges here at home in education, health
care, and we really cannot carry this burden alone. So I hope the
Administration is working to share this burden with other coun-
tries.
I thank you very much for being here and I yield back the bal-
ance of my time.
Chairwoman KELLY. Thank you.
[The prepared statement of Hon. Carolyn B. Maloney can be
found on page 38 in the appendix.]
Chairwoman KELLY. Mr. Murphy. No opening statement?
Mr. Gutierrez.
Mr. GUTIERREZ. So that we can get to the witnesses, may I hand
my opening statement for the record‘?
Chairwoman KELLY. Yes. Without objection, all members’ open-
ing statements will be made part of the record.
[The prepared statement of Hon. Luis V. Gutierrez can be found
on page 36 in the appendix.:]
Chairwoman KELLY. Mr. Barrett. Mr. Oxley, I am sorry, I didn’t
see you down there.
Mr. OXLEY. Thank you. I was hiding behind—
Chairwoman KELLY. Mr. Chairman.
Mr. OXLEY. behind our distinguished freshman here. I just
want to congratulate the Chairlady for this hearing today, submit
my statement for the record, and welcome our witnesses.
This is a very important issue that our committee has under-
taken, having passed the anti-money laundering provisions of the
USA Patriot Act, and I know your interest in this personally. And


5
we are looking forward to this as being the ﬁrst step in ﬁnding
where Saddam’s money is and going after it.
So again, I thank you for your perseverance and I yield back.
Chairwoman KELLY. Thank you.
[The prepared statement of Hon. Michael G. Oxley can be found
on page 34 in the appendix.]
Chairwoman KELLY. All right, then, we are just going to go on
down here.
Mr. Barrett. No? No statement.
Mr. Renzi.
Mr. RENZI. I am good to go.
Chairwoman KELLY. Mr. Hensarling?
All right, then, if there are no more opening statements, we pro-
ceed to the witness panel, the witnesses this morning. We welcome
David Aufhauser, General Counsel, the Treasury Department, and
Mr. E. Anthony Wayne, Assistant Secretary for the Economic and
Business Affairs of the State Department, who together represent
the lead Cabinet departments in the worldwide search for
Saddam’s money.
We also welcome Larry Lanzillotta, who is Principal Deputy of
Defense in the Comptroller’s Ofﬁce and Deputy Under Secretary of
Defense for Management Reform—that is a lot of water you are
carrying there sir—who is testifying about the assets found in Iraq
by our troops which will be used for the beneﬁt of the Iraqi people.
We thank the witnesses for testifying. We welcome you on behalf
of the committee and, without objection, your written statements
and any attachment that you may have will be made part of the
record. You will now each be recognized for a 5-minute summary
of your testimony. When the light goes on green, obviously means
you have time; yellow means you have 1 minute to sum up; and
red means the time is over.
And we will proceed with you, Mr. Aufhauser.
STATEMENT OF DAVID AUFHAUSER, GENERAL COUNSEL,
DEPARTMENT OF THE TREASURY
Mr. AUFHAUSER. Thank you, Madam Chairwoman, and thank
you to members of the committee for holding this session. We look
forward to not only informing you about what we are doing, but we
look forward to your counsel and to your recommendations and
suggestions.
A great deal of money will be required to put Iraq back on an
even keel. But that is not because of 25 days of war. It is because
of 25 years of tyranny, a tyranny that made a prisoner of thought
and a criminal of honest enterprise. The long war with Iran, the
unlawful invasion of Kuwait, the elevation of palace corruption to
an art form, and the decade of sanctions, book-ended by obscene
public extravagances in the palaces while the common man lined
up at one of 55,000 U.N. food distribution points, all bankrupted
a rich country in everything except the hunger for freedom.
Now that they have the freedom, the Iraqi people deserve their
wealth back: the inestimable wealth of the oil in their soil; the $1.7
billion of vested assets here in the U.S.; the approximately $2.3 bil-
lion of similarly frozen or blocked accounts in countries around the
globe dating back to 1990; the recovery of the stolen assets of the


6
central bank; the unallocated U.N. OFF money, Oil for Food pro-
gram money; the establishment of the donors fund from the com-
munity of nations under the supervision of the World Bank or the
IMF; and, of course, the identiﬁcation, capture, and repatriation of
the hidden money or previously unaccounted for wealth of the na-
tion.
This last tranche of money is expected to occupy much of this
morning’s testimony. And it should. It should not be because we
are Pollyanna-ish in the belief that much of it has not been widely
misspent in acts of unimagined proﬂigacy, and not because it
makes good theater, and not because much of it may already have
taken ﬂight; but rather, it is the right thing to do for so many rea-
sons. Whatever unfound money there is ought to be returned to
feed people. Whatever the hidden wealth is, it needs to be captured
before it falls into the hands of purveyors of terror. And whatever
commerce took place by corrupting the U.N. Oil for Food program
and by nakedly gaming the economic sanction program up at the
U.N., it needs to be answered and punished by denying proﬁt to
the illegal trade.
Now, frankly this last point is perhaps the most troubling. Some
of the best of our kids perished in Iraq because a signiﬁcant part
of the world did not effectively enforce the U.N. sanctions program
to keep arms from Saddam Hussein. One of the ﬁrst acts of the
Bush Administration back in March of 2001 was to introduce a res-
olution in the U.N. to smarten those sanctions, to accelerate the de-
livery of humanitarian goods, to close the trafﬁcking in smuggled
oil, and to try to stem the holiday of corruption that Hussein had
made of the Oil for Food program. We succeeded only in the
former. The price has been the lengthened tenure of a tyrant, and
now blood in the sand.
The search for the hidden wealth of Hussein and his regime is
therefore more than a search for assets. It is a reafﬁrmation of the
rule of law and a necessary reinforcement of the notion that while
economic sanctions can be a powerful tool for policing state spon-
sors of terror, where the enemies of democracy worldwide, if cas-
ually enforced—if casually enforced, they can be a lethal tonic of
false security. So the search both in-country, back in Iraq, and
around the globe is an imperative.
I am happy to report there are promising advances in that
search, both in setting up the process and in capturing previously
unknown monies. I leave you with one example. We have been in
dialogue, near constant dialogue with the central bank of Lebanon.
They have conﬁrmed yesterday that more than $495 million of pre-
viously unknown assets held by the central bank, the former cen-
tral bank of Iraq, and by SOMA, the State Oil Marketing Organiza-
tion, have been secured and will not be released to anyone until we
stand up a new central bank, at which time they commit to send
it back to and to repatriate it back to Iraq.
More importantly, we have an open invitation from that jurisdic-
tion and others, but particularly that jurisdiction and the governor
of the central bank, to proceed with presenting them with what evi-
dence we have of suspected front companies, again with the com-
mitment that if the evidence is sufﬁcient to act upon, they would


7
secure those accounts, whatever they are, with the ultimate inten-
tion of repatriating them back to Iraq.
I give that to you as one example. I will be glad to give you more
during the testimony. With that I will close.
Chairwoman KELLY. Thank you, Mr. Aufhauser.
[The prepared statement of Hon. David Aufhauser can be found
on page 42 in the appendix.]
Chairwoman AUFHAUSER. Mr. Wayne.
STATEMENT OF E. ANTHONY WAYNE, ASSISTANT SECRETARY
FOR ECONOMIC AND BUSINESS AFFAIRS, DEPARTMENT OF
STATE
Mr. WAYNE. Thank you very much, Madam Chair, and esteemed
members of the subcommittee and the general committee.
It is a pleasure to be here to discuss this very important topic
of all the work that we are doing to identify, freeze, and prepare
for the return of Iraqi State assets so they can beneﬁt the Iraqi
people. This is a truly interagency effort with the active participa-
tion of a number of agencies and departments not represented here
today, and it has to be that to succeed.
And as you know, this is one part of the broader effort to deal
with all the challenges that have arisen and are now there to get
back on a path to development and prosperity for the people of
Iraq. But ﬁnding and restoring these assets can be a very impor-
tant part in that process, in providing the resources that are need-
ed for the people of Iraq to develop themselves and to build their
prosperity.
After the 1990 invasion of Kuwait, the United States acted very
quickly and decisively to deprive the regime of Saddam Hussein of
the means and materials to continue its regional aggression, to fur-
ther develop its programs of weapons of mass destruction, and to
continue the repression of the Iraqi people.
Based on U.N. Security Council Resolution 661, we quickly froze
and blocked all of the Iraqi State assets legally in our jurisdiction.
We also acted to prevent the regime of Saddam Hussein from ac-
quiring additional revenues and goods through the illicit sale of
Iraqi oil. We mounted and continued through the decade a very ag-
gressive campaign, a diplomatic campaign to pressure countries to
enforce the sanctions against Iraq. We worked with our Gulf War
coalition partners to interdict illicit oil in the Gulf, and we took pu-
nitive actions in a number of cases for sanction busters where we
had those options available.
As Mr. Aufhauser has made clear, there are two dimensions to
our current effort to assure that Iraqi State assets are made avail-
able for the beneﬁt of the Iraqi people:
First, President Bush has acted to vest more than $1.7 billion in
Iraqi Government assets in the U.S., and these assets are being
made available to assist the Iraqi people and to assist in the recon-
struction of Iraq.
And secondly, we are working with other countries around the
world. We have reached out ﬁrst to about 30 countries that de-
clared that they have assets that were frozen in 1990 and 1991,
and simultaneously to an additional 20 or so countries where we
thought there might be additional assets available. And we have


9
I look forward to working with you, Madam Chair, and the other
members of the committee in this ongoing discussion and this ongo-
ing effort of how we best take these tasks on and bring them to
a successful conclusion.
Thank you very much.
Chairwoman KELLY. Thank you, Mr. Wayne.
[The prepared statement of Hon. E. Anthony Wayne can be found
on page 54 in the appendix.]
Chairwoman KELLY. Mr. Lanzillotta.
STATEMENT OF LAWRENCE LANZILLOTTA, PRINCIPAL DEP-
UTY AND DEPUTY UNDER SECRETARY OF DEFENSE FOR
MANAGEMENT REFORM, DEPARTMENT OF DEFENSE
Mr. LANZILLOTTA. Madam Chairwoman and members of the sub-
committee, we appreciate this subcommittee’s interest in the dis-
position of Saddam Hussein’s assets and returning these assets to
the Iraqi people. I welcome the opportunity to summarize the role
of the Department of Defense in this area as well as discuss our
procedures pertaining to the administrative use and accounting of
the vested and seized Iraqi property.
Now that the regime of Saddam Hussein no longer rules Iraq, it
is the primary aim of the Department of Defense to take all meas-
ures necessary to ensure much needed humanitarian and recon-
struction assistance is brought to the Iraqi people so that they can
begin to rebuild their lives and the country after decades of oppres-
sion.
Towards this end, the Department is committed to using Iraqi
State- and regime-owned property that has been vested in the U.S.
Treasury from banking accounts in the U.S. and state- and regime-
owned cash, funds, or realizable securities found and seized in Iraq
to assist the Iraqi people and to assist the reconstruction of their
country.
On March 20, 2003 the President, acting pursuant to the Inter-
national Emergency Economic Powers Act, conﬁscated and vested
in the Treasury approximately 1.7 billion in Iraqi Government as-
sets to be used to assist the Iraqi people and to assist in the recon-
struction of Iraq. The Secretary of the Treasury has subsequently
designated the Secretary of Defense with the authority to use ap-
proximately 92 million of this property.
On April 30, 2003, the President conﬁrmed the authority of the
Secretary of Defense under the laws and usage of war to seize, sell,
administer, or use state- or regime-owned cash, funds, or realizable
securities in Iraq. The President speciﬁed that this property shall
be used only to assist the Iraqi people in support of the reconstruc-
tion of Iraq.
The Department of Defense is dedicated to work with the af-
fected U.S. Government agencies to ensure that vested and seized
properties are subject to rigorous procedures to ensure that such
property is properly safeguarded, accounted for, audited, and used
ofnlly to assist the Iraqi people and to assist in the reconstruction
o raq.
Presently the Department, in collaboration with U.S. Govern-
ment entities such as the Department of the Treasury, Ofﬁce of
Management and Budget, GAO, has developed procedures for ad-


10
ministrating, using, and accounting for vested assets. These proce-
dures outline, for example, the manner in which vested property
will be secured, transported, accounted for, disbursed, and used
and audited to ensure it applies, as authorized by law and ap-
proved by the President.
To date, nearly 22.8 million in vested assets have been used to
assist the Iraqi people and assist in reconstruction efforts. These
vested funds have been used to make greatly needed emergency
payments to Iraqi civil servants and pensioneers; to help pay for
startup costs of Iraqi ministries; and to provide other forms of in-
termediate impact humanitarian assistance.
With regard to state- and regime-owned property seized in Iraq,
the Department is in the process of developing in coordination with
other affected government agencies, procedures similar to those
used for vested assets regarding safeguarding, auditing, accounting
for, and use of such property to ensure its use as authorized by law
and approved by the President.
The procedures will specify, among other things, that seized
state- and regime-owned property shall be held on behalf and for
the beneﬁt of the Iraqi people and shall only be used to assist the
Iraqi people in support of reconstruction of Iraq. The procedures
will also ensure that determinations of whether the property found
in Iraq is public or private are made in accordance with applicable
domestic and international law.
In summary, the Department of Defense is deeply committed to
ensure that vested and seized assets of the Saddam Hussein re-
gime are used in accordance with law, and rigorous accounting and
auditing procedures are in place, and only to assist the Iraqi people
and assist the reconstruction of Iraq.
I thank you for this opportunity. This concludes my formal state-
ment, and I would welcome any questions from the committee.
Chairwoman KELLY. Thank you very much Mr. Lanzillotta.
[The prepared statement of Lawrence Lanzillotta can be found on
page 51 in the appendix.]
Chairwoman KELLY. Mr. Aufhauser, I want to thank you for the
very important information about the Lebanon bank. Congratula-
tions on that, sir. I think most Americans were completely appalled
when the news came out that there was someone in the Saddam
regime who was essentially using U.S. currency as what might be
called an insulation in their house. So when they opened that wall
and found all those dollars in boxes, we knew that there was a lot
of money. And I am delighted to think that the Bank of Lebanon
is now working with us, and you are to be congratulated on that.
You mentioned that you might have other examples. Would you
be willing to share some of those with us?
Mr. AUFHAUSER. Well, let me go through, if I can, the—thank
you ﬁrst for that comment.
It is more than Treasury, though. It was, again to reﬂect Mr.
Wayne’s comments, everything we do actually is quite joined at the
hip, interagency, on this matter. Tony and I know each other too
well because of all of this.
It might be helpful if we rehearse the litany of actions we have
taken. The ﬁrst and most important is the exploitation of the data
that we ﬁnd in Baghdad which is effectively shared in what is


11
called the fusion center of information, either in Qatar or Kuwait,
or back in CENTCOM down in Tampa, made available to those of
us working on these matters. That is the exploitation of the data.
Some of the documents, by way of example—and I want to refer
to this somewhat elliptically and maybe we can get into it in a
later session—is perhaps a road map for front companies that we
previously didn’t know about.
Second major resources, of course, would be information made
available to us by the detainees, and interrogations have gone for-
ward on some of the key detainees, such as the Finance Minister.
But that is an interactive process and those will continue.
Those participating either in scripting it or actually in con-
ducting the interrogations include representatives from the FBI
and Customs and Treasury and DOD and others.
Third, of course, is reaching out to the jurisdictions of the border
states which did a great deal of what we will term the illicit trade
with Iraq, and to secure document exploitation there as well as the
attempts to request that they freeze assets.
Let me pause there for a second and underscore how important
the documents are. A lot of the information we get in this kind of
endeavor, as is the case in the war on terrorist ﬁnancing, is really
suspect. It comes from disreputable people, or it comes from people
who ﬁnd themselves in distress and will say anything. But the one
thing that doesn’t lie are the ﬁnancial records that you get ahold
of. And these ﬁnancial records are very useful for three reasons:
One is not only trying to secure the assets; but, two, telling us who
participated, who participated in the nefarious activity; and three,
perhaps helping us track down suppliers or purveyors of what is
necessary to put together weapons of mass destruction. So going
after the records is almost as important as going after the assets.
But to return to the litany of actions taken, we have gone to
those border jurisdictions and we have investigative teams in some
of them—I don’t want to identify them in this session—again, to
good accord, to the effect of another $800 million, give or take, that
has been secured. I use the word “secured.” I don’t want to use the
word “locked” or “frozen,” because they are in a suspense account
under a different kind of legal regime.
Then, of course, we have the jurisdictions which were the switch-
ing stations for where the money went. Some of those are border
states. Some of those are other Gulf States, and we have gone to
them to see whether or not we can get access to information to
trace where the money might be nested.
And ﬁnally, we have gone to many of the jurisdictions which are
known as nested jurisdictions or potential nested jurisdictions
where we think the money might be, if it hasn’t ﬂown the coop al-
ready.
On all of those actions we are actually making substantial
progress. I will be making a fair amount of trips in very short
order, delivering some material information developed by the U.S.
Government to whet the appetite of those nested jurisdictions and
others to climb on board and help us.
Chairwoman KELLY. Thank you. I want to ask both you and Mr.
Wayne, who is the single ofﬁcial in charge of this effort?


12
Mr. AUFHAUSER. Out of deference to the man who gave me my
job, I want to say President Bush is ﬁrst. In country, in country
in Iraq, mainly DOD is in charge of marshaling the assets and set-
ting up the interrogations and exploiting the documents. But we
are in—as I referred to the fusion center before, we are in constant
dialogue with them. But short answer, in country, it is DOD. The
rest of the globe it is Treasury, but it is Treasury building con-
sensus, not in a linear fashion of commanding people what to do.
Chairwoman KELLY. But is there one single individual who is in
charge of this?
Mr. AUFHAUSER. Yes.
Chairwoman KELLY. The reason I am asking is
Mr. AUFHAUSER. The answer is me, on behalf of Secretary Snow.
Chairwoman KELLY. All right. So that in other words, you have
the authority if there is—the agencies disagree on a strategy or an
action, you have the authority then to make the ﬁnal decision; is
that correct?
Mr. AUFHAUSER. No, I don’t want to overstate my importance. I
have the authority to make a recommendation to Secretary Snow
to make the ﬁnal decision.
Chairwoman KELLY. So Secretary Snow is the individual in
charge.
Mr. AUFHAUSER. Yeah. But I do want to come back to you and
I want to underscore the dynamics of the process. It is nearly like
an NSC interagency policy coordinating committee. So we ulti-
mately make recommendations to the NSC, which is to say, the
White House and the President, if there is disagreement. But our
job is to make sure that we iron out disagreement at our level.
Chairwoman KELLY. Thank you ver'y much. I am out of time.
Mr. Gutierrez.
Mr. GUTIERREZ. Thank you very much. I guess just for the panel,
how much do you believe is out there, approximately? If there is
a—and of that, and I understand a little bit more about the deci-
sionmaking— but how do—is there a plan? How much does the
United States get? How much do those that have claims, how much
do the Kuwaitis—I mean, if there is—I guess if somebody said
there were $50 billion out there and I suspected there were $50 bil-
lion out there and I knew that there were different people claiming
the money, and I was in charge, and I also had expenses in terms
of the rebuilding of Iraq and providing—is there a plan that says
well, you know, it is costing the United States Government so
much, so maybe 10 percent of every dollar should go here and 5
percent should go here and, you, know the Kuwaitis are demanding
100 billion, so maybe 40 cent of every dollar—is there a plan that
says here is how we are going to distribute the money?
Mr. AUFHAUSER. I will give you paragraph one and perhaps Tony
will give you paragraph two.
First, on the estimate, it is wild-eyed guesstimating frankly, Con-
gressman. Probably the best single guess is the GAO guess, which
was $6.6 billion, to use their term, “conservatively” between 1997
and 2001. And, of course, we would have 2 more years of the gam-
ing and the corruption, so that number is undoubtedly, in my
mind, conservative. With one exception. I do believe that amount
of money was generated, at least that amount of money and more,


13
perhaps twice, perhaps three times that, but I also believe a great
deal of it was misspent, misspent either on those extravagances of
personal disgrace, or for supplying, resupplying their army with
spare parts, weapons, and the like.
In terms of the plan, the ultimate plan is that wherever these
assets are—with the resolution tabled in New York by the United
States—is that they will be marshaled, gathered, and repatriated
to the people of Iraq through the Iraqi Assistance Fund to be set
up under the resolution established there. And that is the plan. It
is not intended to reimburse the U.S. In any way for any of the
costs incurred in freeing and liberating the people of Iraq, if I un-
derstood your question correctly.
Mr. GUTIERREZ. Well, I just thought that as we move forward
and we have plans as a government to assist the people of Iraq in
the reconstruction, and those plans incur bills that need to be paid,
if that—-I think I understand that there is going to be a fund, and
then they will—
Mr. AUFHAUSER. Well, in addition to the fund, a part of the cur-
rent resources that we have command of-—and Larry referred to
it—is, under the law of occupation law, free to be expended for the
beneﬁt of the Iraqi people currently by General Franks and the co-
alition provisional authority right now. So the ongoing costs, if you
will, the standing-up of the Iraq economy and the Iraq civilian au-
thorities, is being underwritten by the Iraqi assets that have either
been vested here in the U.S. Or found or seized in Iraq.
To give you one speciﬁc example, $91 million in cash was shrink-
wrapped here on the East Coast, put on convoy, taken to Andrews,
I believe, put on planes and ﬂown to Iraq, and that money has
been used to underwrite the initial costs of pensioneers, pensions
for the pensioneers, civilian costs of the oil workers and dock work-
ers down in Kazar and the like. So the vested funds are being used
precisely how the President said they would be used, and, Con-
gressman Maloney, with every intention of being absolutely trans-
parent about the expenditure of that money.
Mr. GUTIERREZ. We are going to paragraph two.
Mr. WAYNE. I might just add, you mentioned compensation
claims. There are indeed a number of compensation claims from
Kuwait and others that have been treated under a U.N. compensa-
tion commission. A number of those have been awarded, a large
number have not yet been adjudicated.
In the draft U.S. Security Council resolution that we have tabled,
we have proposed to reduce the percentage of oil revenues that go
into that from 25 percent right now to 5 percent, so that more of
the oil revenues would go into rebuilding Iraq and that the com-
pensation claims would be repaid over a longer period of time.
There is also outstanding Iraqi debt. There is at least 19 billion
indicated in the Paris Club initial look at this that we are now
going out and trying to do additional, what we call data calls, to
ﬁnd out how much other debt is out there. That does not include
any interest that might have accrued on this debt, because much
of this debt has not been paid since 1990 or 1991, no payments into
it.
Additionally, just in totals of money, in 1991 there were about
$6 billion of assets reported frozen around the world under the ini-


16
And one of the real challenges here was that this was such a com-
prehensive sanction system, existing for such a long time, that very
clever people found a lot of ways to go about it.
We had an active interagency process involving the intelligence
community, the law enforcement community, and others aimed at
trying to ﬁnd sanctions busters and to act against them. But often
we were the strongest voice and the loudest voice in the world to
act on this. And it was very tough slogging, as I am sure you re-
member, both in the U.N. and internationally a lot of times, to
keep the momentum up on this issue.
On the more general question of going after assets, it is exactly
right that it is extremely complicated, because we have a plethora
of different legal systems around the world. One of the additional
areas where we are working on now to see if we can’t get a multi-
lateral agreement is a proposed anticorruption convention in the
U.N.. This would have a special.chapter speciﬁcally on going after
the assets, illicit assets of leaders and exposed leaders and others
around the world. The idea is trying to get some common baseline
so we can more easily work together with other countries and they
can more easily work together with U.S..
It is an ongoing process. It is a real tough process, and certainly
the tools that you have given the President and the Administration
are very helpful in this effort.
Mr. OXLEY. How many countries would you need to get to critical
mass on something like that?
Mr. WAYNE. Well, I think there are 120-some countries right now
in the negotiation on this broad convention. There are clearly a
number of key ﬁnancial centers that will be essential to have in
any convention. And they are all engaged in this. Some of them are
in Europe, some of them in Asia, some in the Middle East and
other places. And we are engaging with them not only, of course,
in this U.N. Convention, but also in this process that is going on.
In fact, one of the very nice stories in this so far is Switzerland.
One of our colleagues just returned from Switzerland. The Swiss
have actually stepped up and issued new ordinances and guidances
to all of their institutions regarding the assets of Saddam Hussein
and have been very actively cooperating with us in this effort.
Mr. AUFHAUSER. On Saddam Hussein’s assets, if we had 20 coun-
tries, whether or not it is under the umbrella of the U.N. or
through some other agreement, that would be critical mass. We
have speciﬁcally identiﬁed countries.
Mr. OXLEY. Very good. Thank you, Madam Chairman.
Chairwoman KELLY. Thank you.
Mr. Moore.
Mr. MOORE. Thank you, Madam Chairwoman.
To the panel generally, there is an Executive Order that some of
you mentioned—it was in Mr. Wayne’s testimony—on March 20
issued by the President that says, “All right, title, and interest in
any property so conﬁscated,” and obviously he is talking about
property conﬁscated in Iraq or elsewhere, “should vest in the De-
partment of the Treasury. I intend that such vested property
should be used to assist the Iraqi people, and should be used for
the reconstruction of Iraq.”.


19
Mr. MURPHY. With some of the food that was purchased, I heard
some reports that some of that was to go for food supplies for the
Iraqi soldiers and not for the citizens. Was that accurate?
Mr. AUFHAUSER. I can’t conﬁrm that. I don’t know.
Mr. WAYNE. I don’t know. But I do know that there was a very
tight system for going through all the contracts in the formal sys-
tem. In many cases, we had holds on contracts for years and
stopped them up. We gave them very careful scrutiny. There was
also a very tight system for auditing the use of money within the
system.
The real challenges came to things that were taking place out-
side the system, or the special deals that were made around the
edges of the contracts. That is where we got a lot of the challenges
that we tried to deal with, and we can talk about in the next ses-
sion, and the ways that we worked to deal with them.
Mr. MURPHY. Another area. I hear mixed reports in the media
that the people in Iraq are grateful to us, and some say, Thanks
for the war, now get out.
Clearly, there must be an awareness—you talk about the 25
years of the incredible oppression that took place, and these issues
about the continued corruption and deceit that leaders in Iraq had
with the money and Oil for Food that became oil for weapons.
How aware are the Iraqi people being made of what is being dis-
covered now, and what is their reaction to that?
Mr. AUFHAUSER. I don’t know the level of their awareness of
what is being discovered now. I don’t know what is being broadcast
to them in Iraq about the discoveries.
You know, many of the discoveries are just conﬁrmation of what
has been a public source information for the last decade in terms
of the corruption.
Mr. MURPHY. Certainly I would hope, Madam Chair, that is
something we can check to see what the State Department does
with these kinds of discoveries, because it is important for them to
know.
Mr. WAYNE. We could work to get back to you, because I know
that the U.S. Authorities in Iraq have been working to get informa-
tion out to them. General Franks and his colleagues have been
working hard on this to inform the Iraqi people of what is going
on, so we can certainly take your question and get back to you.
Mr. MURPHY. I appreciate that. It may well be that part of what
was done, if it was not becoming food for people and people were
harmed, it is one of those more subtle weapons of mass destruction
that the people in Iraq were using against their own people.
Chairwoman KELLY. We will make that an ofﬁcial request of the
committee. If you will get back to us with an answer, that would
be good.
Chairwoman KELLY. Mrs. Maloney.
Mrs. MALONEY. Thank you. You have testiﬁed we have seized
roughly $7.5 billion, an additional $8 billion has been added in our
own country, 20 countries are cooperating.
Do we have a sense of how much is in those other countries? Do
we know how many billions are there that belong to the Iraqi peo-
ple in Saddam’s accounts?


20
Mr. AUFHAUSER. Two answers. By deﬁnition, the hidden wealth
we don’t know yet. We need to track that down. As for the money
that has been held in suspense or frozen accounts, yes, we have a
pretty good peg on it. That is a broad—it is upwards of $2.3 billion.
By the way, that represents a substantial leakage from the
amount of money seized by those countries back in 1990, following
U.N. Security Council Resolution 661. In other words, as Mr.
Wayne alluded to, a lot of the money has been awarded to other
claimants, so it shrunk. Also, other parts of the money seized in
other countries require explanation as to why it disappeared.
Mrs. MALONEY. You testiﬁed we have spent roughly $91 million
on dock workers and the border, for pensioners and oil workers.
Can you describe how this decision was made? Apparently Treas-
ury is making decisions on seizing assets and DOD is making deci-
sions on how this is spent.
Certainly during war, decisions need to be made quickly, but now
that things have calmed down you mentioned that it is trans-
parent. How can we see this information? How is it transparent
and how is it publicly disclosed, and how are you making decisions
to hire dock workers as opposed to teachers, or the security force
that is now trying to be built in collaboration with the American
government?
Mr. LANZILLOTTA. Until the appointment of Ambassador Bremer,
Jay Garner was assigned that exact responsibility. These payments
were made based on his assessment of what it was going to take
to get certain industries or functions like ministries working.
The types of payments we have been making basically boil down
to emergency payments to civil service type people to get the Gov-
ernment of Iraq back working. Outside that arena, I believe there
was a payment made to oil workers and at the docks to try to be
able to ofﬂoad the humanitarian aid that has been coming in from
other countries as well as the United States. So this assessment is
made on the ground of what it is taking to be able to get the coun-
try up and moving.
I think in the long-term plan that we are developing spending
plans that outline exactly the concerns that you have: where this
money is going, how it is being spent. But Jay Garner, and now
Ambassador Bremer, had a very difﬁcult task of stepping in on
ground zero and immediately trying to get the Government of Iraq
stood up and some of the necessary supplies to come in.
So that is where the initial-—I think so far an estimate of $22
million has gone.
Mrs. MALONEY. You testiﬁed earlier $91 million.
Mr. LANZILLOTTA. That is how much money has been made avail-
able, but $22 million has been disbursed.
Mrs. MALONEY. You mentioned that it is transparent. If I didn’t
have the opportunity to ask you these questions and I was a tax-
payer and just wanted to know, where would I go? With our gov-
ernment spending, we can go to agencies and look at their budgets
and go to the Ofﬁce of Procurement and look at the budgets. Where
can citizens go? Where is the transparency?
Everybody keeps saying it is transparent, but I don’t know where
it is. I don’t know how to ﬁnd out this information without having
a hearing and asking you, so how is it transparent?


21
Mr. LANZILLOTTA. It is not on the Web site yet, and most of this
is just developing now. On these interagency meetings we have, we
have invited GAO as a participant to talk about exactly how this
money is spent and where it is going, with that very purpose in
mind, to assure the American people-—-and as directed by the Presi-
dent—that this money is going for reconstruction and, in fact, to
the Iraqi people.
I don’t know of any reason why, for the record, that we can’t pro-
vide where these disbursements to date have gone.
Mrs. MALONEY. I think it would be good to put it on the Web
site. I would send it back to the committee, that I would like to see
it and to understand where we are going.
When we let these contracts to Halliburton and others, is this
money being used for that, to run the oil ﬁelds and to rebuild the
construction that is taking place to rebuild the water works and
electricity? Is that coming from the seized Iraqi money, or is that
coming from the U.S. Government?
Mr. AUFHAUSER. No, for the most part that is USAID money.
Mrs. MALONEY. USAID.
Mr. WAYNE. There are actually two different sets of money.
There is USAID money, which is one set, and then there are De-
partment of Defense contracts that are being let. The oil contracts
have been under the Army Corps of Engineers, I believe, that are
in charge of that.
The AID money, when the choice of contractors and others are
put on their Web site right away, whenever there has been a deci-
sron.
Mrs. MALONEY. Could this seized Iraqi money be used to pay
Halliburton and Bechtel and some of the companies that have gone
in on the groundwork to restore water and electricity?
Mr. WAYNE. What I can say is that up until now the proposed
uses of this have been to go right to the beneﬁt of the Iraqi people,
notably to pay salaries.
There was an emergency—there is an emergency plan to give
people an emergency payment for 1 month in various parts of the
country. There has been a proposal to buy some emergency equip-
ment for the Ministry of Trade, which runs the Oil for Food dis-
tribution program, so they can start distributing food again.
I am not aware of any proposal to use this to pay for contractors.
Mr. LANZILLOI'I'A. From the Department’s point of view, we have
not used any of the seized or vested property to pay for contracts.
It has all gone towards payroll or operational costs to try to clear
out ministry buildings in a small amount, to try to get these min-
istries up and running. The department has taken the administra-
tive costs for operating Jay Gamer’s group, or that group that is
trying to put Iraq back together out of appropriated funds. We as-
sume that is within the Department of Defense’s budget.
We have not used any of the invested or seized assets to date on
any of those types of contracts you mentioned.
Chairwoman KELLY. Mrs. Maloney, why don’t we make your re-
quest, as you had asked the expenses——let us make it an ofﬁcial re-
quest of this committee. That will get it started.


23
right destroying, the franchise of any international institution. The
ability, also, to argue that it reaches barring anybody who does
business with such an institution has a potentially paralyzing ef-
fect, so it is the nuclear bomb of the Patriot Act.
Unfortunately, I can’t use it as often—I can’t recommend to John
Snow to use it as often as I think I would like, because much of
the evidence in support of such actions is highly classiﬁed and be-
comes subject to revealing and disclosure in a courtroom.
I have asked the Hill to consider giving section 311 the same evi-
dentiary privileges that IEEPA now enjoys under the Patriot Act,
which is to present, ex parte and in camera, sensitive information
in support of our legal actions.
Beyond that, our real problem is abroad. I don’t think a U.S. law
can change it. That is when the venue turns to Tony, and we need
to go abroad and convince people to follow suit, because most of the
assets we are concerned about are abroad, most of the cash ﬂow
we are concerned about capturing is abroad, and most of the
records we hope to exploit are abroad.
It is all the more reason Tony and I have a direct line. The
Treasury Department can’t do this without the State Department,
and vice versa.
Mr. HENSARLING. Mr. Wayne?
Mr. WAYNE. I would just add that this is exactly what we have
been working on since 2001 in the area of terrorist ﬁnancing,
where we have the same team essentially working all around the
world. What is very key is having the bilateral agreements and
building in, as we can, the multilateral agreements to get other ju-
risdictions to cooperate with us without using, as David said, the
nuclear weapon of our sanctions.
In this connection, the work that has been done in the Financial
Action Task Force, for example, has been extremely important in
building up money laundering best practices, and now, over the
past year and a half, terrorist ﬁnancing best practices.
Again, this work that is going on in the U.N. Convention Against
Corruption is exceptionally important. We have also been trying to
work in the G-8 process to come up with a multifaceted attack on
corruption and promotion of transparency, which is all part of this
same problem.
Then we have been working in regional institutions like the Or-
ganization of American States, where they have put in place for the
ﬁrst time a very thorough anticorruption convention. Now, the
challenge is to actually implement it. So the effort is part using our
own tools, but also building that network and building up that base
of cooperation.
Mr. HENSARLING. Thank you, gentlemen.
Chairwoman KELLY. Thank you. Mr. Lynch.
Mr. LYNCH. Thank you, Madam Chair.
Gentlemen, thank you for your willingness to help the committee
with this important work.
Most of the members of the committee are aware of a report from
back on May 6, and there was a related story in the New York
Times, where at about 4 o’clock in the morning on March 18, one
of Saddam Hussein’s sons, accompanied by one of his chief advis-
ers, went to the central bank of Iraq and withdrew about $1 billion,


24
$900 million in U.S. Currency, $100 bills, and about $100 million
in Euros, and put them all in three semi-tractor/trailers.
Then we have a corresponding report from the U.S. Military that
intelligence tells us that a convoy of three semi-tractor/trailers
pulled into Syria at the same time, shortly after the seizure of
money. We have the U.S. Treasury that conﬁrms that that hap-
pened.
I just wanted to know speciﬁcally what we are doing about that
incident. If you can’t speak to that speciﬁc incident for security rea-
sons and, I hope, for recovering the money, maybe you can give me
an example of how we respond to large robberies, if you will, like
the one I have just described.
Mr. AUFHAUSER. Congressman, the incident you described is an
astonishing example of the plunder of the Hussein family. Perhaps
with serendipity and perhaps with some pretty good forensic work
by DOD and others in Iraq, we may well be on being able to con-
ﬁrm that a substantial amount of the found money is indeed the
plundered money. Let me be more speciﬁc.
This is all subject to conﬁrmation. There is no certainty to this,
but it is more likely than not. Some 236 boxes of cash, either Euros
or U.S. Dollars, were packaged that night by central bank per-
sonnel, but they were very meticulous in the records they kept.
They indexed the boxes and numbered them, and they put certiﬁ-
cates in the boxes indicating how much money had been placed in
them.
Out of the 236 boxes, we may well have found 191, constituting
$850 million U.S., give or take, and $100 million of Euros, leaving
still an unbelievable amount of wealth unaccounted for in that
theft. But if this information is correct, a substantial amount of the
found money that you have been reading about in Iraq is indeed
the plundered money.
Mr. LYNCH. That is great. That is good news. I hope we can con-
ﬁrm that. Thank you.
Chairwoman KELLY. Thank you, Mr. Lynch.
Mr. Shadegg?
Mr. SHADEGG. Thank you, Madam Chairman. Thank you for
holding this very, very important hearing.
Gentlemen, I appreciate the job you are doing. I wish you the
best in doing it, but I have grave-concerns. I listened to you read
and stress that the current Executive Order says that the purpose
of this is only to assist the people of Iraq and in the reconstruction
of Iraq. For political purposes, I fully understand that, and think
that it is important that Iraqi assets be used for that purpose.
But I am here concerned about a different issue. As you gentle-
men I think know, particularly in the State Department and at the
Treasury, in the ﬁrst Gulf War as a result of Iraq’s invasion of Ku-
wait, millions of dollars in property losses were suffered by Amer-
ican citizens.
A procedure was put in place to compensate those American citi-
zens. It was structured to go through the United Nations Com-
pensation Commission, UNCC.
As I understand the process, a group of Americans litigated their
claims in the United States in front of the United States Foreign
Claims Settlement Commission, and actually a case was pending.


25
There were more claimants that came forward. A judge made a de-
cision to bifurcate the cases. One set of cases went to judgment and
was concluded. A second set of cases involving other claimants with
claims and losses that were every bit as legitimate has not been
resolved as a result of that judge’s decision to bifurcate the two
cases.
Where we stand at this point has been that it has been some 12
years since these people suffered losses, losses in the millions of
dollars. Only a small handful of Americans are aware of this cir-
cumstance. Only a small handful of Members of Congress are
aware of this circumstance.
Nonetheless, those U.S. Citizens who lost millions of dollars in
property claims in the ﬁrst Gulf War have been totally frustrated
by the UNCC process and have not received any compensation. I
can tell you that personally because I have met and sat with them.
Some of them have had their ﬁnancial lives ruined, and some have
had their personal lives ruined because their families have fallen
apart as a result of the economic pressure. I can take you to people
who are divorced and whose children are now raised in single-fam-
ily homes because of the consequences of this.
My concern is, given that right now we are focused on the cur-
rent war, and given that we are as a Nation focused on rebuilding
Iraq, as we should be, I am deeply worried about this other small
subset of claims of people who are not Iraqi citizens, but American
citizens. They are not even Kuwaitis; they were American citizens
who were in Kuwait at the time of the ﬁrst Gulf War and who lost
homes, cars, businesses, and property.
As I read the language of the President’s Executive Order, it pre-
cludes or could be read to preclude that any of those assets be used
to take care of those claims.
I must tell you before I put the question to you, number one, I
am convinced that the UNCC’s process is a joke. It has not worked
or functioned to help those American families. I am interested in
what you can do to help solve that problem.
Second, I would like your answer today, and if not, if you can get
a better answer at a subsequent time. I am intensely interested in
the Administration’s plan to help these American victims obtain
compensation for the property they lost in the ﬁrst Gulf War.
I suppose that question is directed both at you, Mr. Aufhauser,
and you, Mr. Wayne.
Mr. AUFHAUSER. There were a lot of questions there. Let me see
if I can capture most of them.
Mr. SHADEGG. Please do. Take your best shot. If you want to sub-
mit more in writing later, that is good.
Mr. AUFHAUSER. I will pick the ones I think I can answer.
First, a little background. The assets that were invested pre-
viously had been frozen. Those frozen assets, by law, were beyond
the reach of judicial process to anybody, with one exception: holders
of victims’ judgments, the shield people. But property, property
judgment holders could not access those funds under TRIA, the
Terrorist Risk Insurance Act.
So the funds that were invested were funds that were never his-
torically available, and this is not a perfect answer to your ques-


26
tion, I understand, but never historically available for judicial proc-
ess and award to property claimants. That is point one, okay?
Point two, the President’s ﬁrst desire in applying the funds here
is to make sure that there are no more victims of terror and the
like. The $1.7 billion really represents the kickstart to the Iraqi
economy.
I think it was Congresswoman Maloney who asked how we can
account for this. The ambition is that the lion’s share of that money
will go back into the reserves of the central bank, because it was
the reserves of the central bank; $1.1 billion of the vested funds
were held by the central bank up at the New York Fed. It is abso-
lutely necessary to kickstart the economy there in Iraq.
In terms of whether the UNCC process is frustrating these
claimants, I confess I am unaware of it, and I am happy to look
into it for you and reply to you in writing. I will say, although still
uninformed, the receipt of claims against the State of Iraq is one
of the necessary things the Treasury Department, our economic
team under Ambassador Bremer right now in Baghdad, and ulti-
mately the interim Iraqi Authority, is going to have to deal with
in some setting, dealing with everybody’s claims and using the
wealth of the nation, which is the oil generated, the oil generated,
to try to satisfy those claims in a sensible fashion.
Mr. SHADEGG. Maybe Mr. Wayne can add greater clarity. But let
me tell you this much. These claims have been submitted to the
State Department, were submitted years ago to the State Depart-
ment, and have been submitted to the UNCC and have not been
paid. I can assure you that people are frustrated.
Not only have I introduced legislation, but other Members of the
House have introduced legislation and several Members of the Sen-
ate have introduced legislation to try to get these victims com-
pensated.
Chairwoman KELLY. I am sorry, Mr. Shadegg, you are out of
time. If you want, we can go to the adjacent hearing, or you can
ask Mr. Wayne to submit his answer in writing.
Mr. SHADEGG. If he would submit his answer in writing, Madam
Chairman, that would be ﬁne.
[The following information can be found on page 94 in the appen-
dix.]
Chairwoman KELLY. Thank you.
Mr. Garrett.
Mr. GARRETT. I will begin by yielding to Mr. Murphy.
Mr. MURPHY. I just have one question. I thank the gentleman for
yielding.
I have a question which relates back to the March 11 hearing on
efforts to stop terrorist ﬁnancing, and we have talked about groups
such as al Qaeda, Hamas, and Hezbollah. At the time, the Presi-
dent’s critics didn’t seem to want to face the truth of those links;
but weren’t those alliances further proven during the liberation
and with some of the investigations you have done?
Mr. WAYNE. Well, we have no doubt that there were very strong
links between Saddam’s regime and terrorist organizations. Ansar
al Islam, the Mujaheddin, al-Aqsa, the Abu-Nidal organization, the
Arab Liberation Front, and the Palestinian Liberation Front are


27
among those that enjoyed safe haven and various levels of support
from the Iraqi regime.
The U.S. Government is in the process and the people on the
ground are in the process of gathering and assessing information
from captured terrorists such as the PLF leader, Abu Abbas. We
expect to gain from this effort a great deal of additional informa-
tion, but right now we are still in the process of gathering this all
together.
We might be able to add a little bit in the next session.
Mr. MURPHY. Thank you. I appreciate it.
I yield back, Mr. Garrett.
Mr. GARRETT. Just following up on Mrs. Maloney’s question, one
of the answers we received was going back to the 1991—the term
used was a linkage occurred back then. I wondered if in the time
remaining if you could just brieﬂy explain what was the nature of
that linkage.
I know the initial question by the Chairwoman was who was on
the ground, who was in charge. So the question is, who was in
charge when the past linkage occurred, what have we learned since
then, and what will be implemented differently?
Mr. AUFHAUSER. I am trying to count the countries by orders of
magnitude. There are about 30 countries outside of the United
States back in 1991 that froze approximately $2.35 billion, accord-
ing to our estimates, including United Kingdom, Switzerland, Ger-
many, Bahrain, Italy, and France, by way of example.
By today’s date, if you take out the close to $1.2 billion of new
money that has been found since Secretary Snow announced in
March this effort of outreach of ﬁnding hidden assets, if you take
out that $1.2 billion, that had been reduced down to about $1 bil-
lion. I am reading from a chart now.
So the differences in accounting-—by way of example, in Germany
in 1991, they reported $359 million was frozen. Today, we have
been unable to identify from them whether any of those frozen as-
sets remain. It is zero right now, just by way of example.
Now, back to your question of who was in charge in 1991, I con-
fess I was in private practice and I don’t know.
Mr. WAYNE. In that accounting, that is part of what we are doing
right now in going out and asking people, what is the difference be-
tween this money and what happened to it?
I know in the case of Switzerland they have told us recently,
when they turned their number in in 1991 they included the assets
of Swiss banks that were in the United States. So there was a dou-
ble counting, they are telling us, that went on. When we froze that
money we counted it in our total.
They also reported it because it was in the accounts of a Swiss
bank, even though it was in the United States. So there is part of
that that we are doing—we are trying to sort the numbers through
now.
Also, as David Aufhauser mentioned earlier, a number of coun-
tries in their legal systems allowed claims to be paid off over the
years, claims against Iraq. Their courts would make a judgment.
So we are trying to ﬁgure out exactly what the tallies were of each
of these right now.


29
eral times today that these assets belong to the Iraqi people, but
we never talk like that in this country. We don’t talk like that in
Texas. We don’t say, the oil belongs to the people. I live in Texas,
but I don’t have any oil.
vvhy do we make these assumptions—the President has these ex-
traordinary powers which, quite frankly, frighten me. We have the
U.N. that is in the oil business. They are making the proﬁts and
they store the money. They have controls. Nothing is going to be
done without the U.N. making some deal somewhere along the
way. We don’t talk about, you know, who owned this stuff once.
Cuba, it is so much different. We have a Helms-Burton Act that
emphasizes the fact that once Castro and communism is gone, the
rightful owners will get their property back again. But there were
at one time rightful owners and property owners of the oil wells
over there. It may be because it might have been that the French
owned a little bit that we have to drop those ideas. The French and
the Germans and the Americans—we never seem to emphasize the
importance of returning this to the owners. Contracts are a form
of property.
Is there any concern at all or any interest in talking about how
we might settle some of this, whether it is ﬁnancial or whether it
is the oil, in trying to get it back to the rightful owners, and get
us away from the idea that we are in control and it belongs to the
people and we do with it what we want?
It is all fungible, so nobody is going to end up knowing where
this money goes anyway. Or it might sit in a bank, like Congress-
man Shadegg indicates; it sits there, and nobody touches it.
vvhat about is it worthwhile pursuing this, and emphasizing the
need to talk about private property ownership in a country that
once understood private property ownership?
Mr. AUFHAUSER. I don’t think there is any doubt that the long-
term strategy of the United States Government is a freestanding
Iraq that can determine things like what is the best way to pro-
mote private enterprise and the like. That is the surest way to
make sure that the U.S. Taxpayer is not paying the bill. A thriving
and enriched Iraqi economy that honors property rights and the
like is a central part of our strategy. How you get there from here
is a complicated calculus.
In direct response to your question about the oil, we were both
trying to recollect here—the oil has been titled in the Iraqi State
for the last half of the 20th century. It is not like there was a sud-
den taking from private parties during any of our recent lifetimes.
Mr. PAUL. But may I interject, it has been probably a half a cen-
tury that Castro has owned the property as well, but we still talk
about returning it to the original owners.
Mr. AUFHAUSER. Now I turn to the State Department.
Mr. WAYNE. Mr. Congressman, I guess I would add that certainly
the importance of private property can’t be underestimated as we
move forward and work in Iraq.
In fact, already, as you probably noted, in the north of the coun-
try there has been a lot of discussion about who has title to what
land, what apartments, what homes. Sorting these issues out has
been a very important priority for the Americans working in that
part of the country.


30
Similarly, as we move forward, one of our clear intentions is as
quickly as possible to move decisions into Iraqi hands and to move
to an elected government in Iraq so they can make some of these
decisions themselves.
In that process, of course, as you know, we will be talking of the
beneﬁts of a market system and the beneﬁts of private property.
But we are trying to be very respectful of the need for Iraqis to
come to these conclusions and to build this system themselves.
Chairwoman KELLY. Thank you, Mr. Paul.
Before I end this hearing, I would like to read something that I
ﬁnd is important for people to think about. It is a paragraph from
Mr. James Lacey, who is a Times correspondent embedded with the
101st Airborne Division.
He says, “It was the American soldiers who handed over food to
hungry Iraqis, who gave their own medical supplies to Iraqi doc-
tors, and who brought water to the thirsty.
“it was the American soldiers who went door-to-door in a slum
because a girl was rumored to have been injured in the ﬁghting.
When they found her, they called in a helicopter to take her to an
Army hospital. It was the American soldiers who wept when a 3-
year old was carried out of the rubble where she had been killed
by Iraqi mortar ﬁre.
“It was American soldiers who cleaned up the houses they had
been ﬁghting over and later occupied, because they wanted the
places to look at least somewhat tidy when the residents returned.
“it was these same soldiers who stormed Baghdad in only a cou-
ple of weeks, accepted the surrender of three Iraqi army divisions,
massacred any Republican Guard unit that stood and fought, and
disposed of a dictator and a regime with ruthless efﬁciency.
“there is no other army and there are no other soldiers in the
world capable of such merciless ﬁghting and possessed of such com-
passion for their fellow men. No society except America could have
produced them.” .
I would like to add, and no society but America can lead the way
to ﬁnding the money that rightfully belongs to the Iraqi people.
Now the Chair notes that some members may have additional
questions for this panel that they may wish to submit in writing.
Without objection, the hearing record will remain open for 30 days
for members to submit written questions to these witnesses and to
placedtheir responses, as well as other pertinent information, in the
recor .
Chairwoman KELLY. This panel is excused with the committee’s
great appreciation for your time and your patience. I want to brief-
ly thank all the members and their staffs for their assistance in
making this hearing possible.
This hearing is adjourned.
[Whereupon, at 11:50 a.m., the subcommittee was adjourned.]
:-i.


APPENDIX
May 14, 2003
(31)


32
OPENING STATEMENT OF REP. SUE KELLY
CHAIRWOMAN
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
"Divesting Saddam: Freezing, Seizing, and
Repatriating Saddam’s Money to the Iraqis"
May 14, 2003
Over the last 20 years, Iraq and its people have been systematically looted by the
brutal tyranny of Saddam Hussein. Today, tens of billions of dollars in assets and
cash lies somewhere outside of Iraq in the smoky depths of phony front companies,
hidden trusts, and cash accounts in the names of regime family members and
loyalists. This stolen money represents another layer of destruction and deceit that
the Hussein regime inflicted on the Iraqi people.
I speciﬁcally recall the reaction of an Iraqi who stormed one of many presidential
palaces on April 14"‘ and was ﬁnally free to express his feelings. As he passed
shards of crystal from chandeliers and shattered mirrors, the countryman marveled
bitterly at Saddam's life of luxury and commented that his family couldn't even
afford bread.
The Iraqi people have suffered enough, and this money belongs to them. These
assets must be found and returned to the people of Iraq to build schools, reopen
businesses and hospitals, and repair the country's infrastructure — all of it destroyed
by the malicious neglect of a tyrant and his inner circle.
Today, the Oversight and Investigations Committee holds the ﬁrst Congressional
hearing on the search for Saddam’s money, and the efforts to return it to the Iraqi
people.
Initial press reports are startling, with stories of shell companies in numerous
countries, discoveries in Iraq of hundreds of millions in U.S. dollars, and oil
smuggling schemes that are without parallel among other petty dictators and thugs.
Passage of this Committee’s work on the PATRIOT Act has been a tremendous step
toward monitoring the ﬂow of illicit money, and it has also served to raise the bar for
the international community. Foreign ﬁnancial institutions can no longer seek
access to the U.S. market without providing U.S. ﬁnancial enterprises with
sufficient information to determine that no one is being misled by Saddam, his
family, or their agents. Our message to the world is straightforward and should be
heeded: the willingness to share cross-border information is now a license required
to do business in America. In case you missed that — let me repeat: the willingness
to share cross-border information is now a license required to do business in
America.
We have accomplished a great deal in Iraq in a very short time. President Bush has
been steadfast in his resolve to end the tyranny, terrorism, and torture. The
Administration, our brave soldiers, sailors and coalition troops have earned the


34


Submitted for the Record
Opening Statement
Chairman Michael G. Oxley
Committee on Financial Services
Subcommittee on Oversight and Investigations
“Divesting Saddam: Freezing, Seizing, and
Repatriating Saddam’s Money to the Iraqis”
May 14, 2003

I would like to thank Chairwoman Kelly of the Subcommittee for calling this
ﬁrst congressional hearing to examine the urgent matter of dismantling Saddam’s
ﬁnancial regime and returning the money to its proper use. This Committee is the
proud author of the anti-money laundering provisions that were included in the USA
Patriot Act, and we continue our oversight of how terrorists and tyrants exploit the
world’s ﬁnancial institutions and systems for either political or personal gain.
As the events in Riyadh this past Monday clearly demonstrate, we remain in
a global war against cold and calculated terrorism. This war is ﬁnanced by
international thugs who have stashed billions throughout the world. Saddam
Hussein stole precious resources from his own people in order to maintain internal
control, to threaten the world, and to ﬁnance his own lavish palaces. His hordes of
cash and property must be found and returned to the people of Iraq. To accomplish
this, we must ask that all countries of the world work with the United States toward
that end in much the same way we are working to hunt down and bring terrorists to
justice.
Earlier this year, Chairwoman Kelly held a hearing on the status of terrorist
ﬁnancing investigations. Testimony showed that the Administration is successfully
using the USA Patriot Act to deal with those international institutions that continue
to be the ﬁnancial conduit for worldwide terrorism. .I suspect that the Patriot Act
will be useful in gaining access to the assets of the murderous regime of Saddam
Hussein. .
We will use all tools at our disposal to gain cooperation from world
governments and world ﬁnancial institutions to return to the people of Iraq what is
rightfully theirs. .
I look forward to hearing our witnesses today regarding the Treasury,
Defense, and State Departments’ plan to locate these hidden assets by gaining
cooperation from our allies and ﬁnancial institutions. Just yesterday, we heard from
Treasury Secretary John Snow about the multi-agency task force which is
addressing the key ﬁnancial and economic aspects of Iraq’s reconstruction.


35
Oxley, page two
I do want to state for the record this Committee's resolve on this issue. The
President has been steadfast. He faced a lot of naysayers throughout this entire
effort who questioned his rationale, his military plan, and his chances for success.
And yet, we have learned a great deal about the tortur_e and repression of the Iraqi
people, we learned that Saddam really didn’t have many allies in the Middle East,
and we learned that the U.S. military cannot be stopped.
Now. we face different challenges as we work through this new phase of
assisting Iraq in creating a democratic nation. To fulﬁll the sacriﬁce of our military
members and their families, we must bring the beneﬁts of a free‘ society to Iraq.
This Committee will follow closely the actions of the Departments represented here
today, as well as those of foreign governments and ﬁnancial institutions. We hope
to support this effort at gaining cooperation from all involved.
Again, Mrs. Kelly, I commend you for bringing this issue before the
Subcommittee, and I look forward to hearing from our witnesses. Thank you.
' ###


36
Tm .


OPENING STATEMENT OF
LUIS V. GUTIERREZ
RANKING DEMOCRAT
SUBCOMMITTEE ON OVERSIGHT & INVESTIGATIONS
“DIVESTING SADDAM:-FREEZING, SEIZING AND REPATRIATING
SADDAM'S MONEY TO THE IRAQIS”
MAY 14 2003
7
Good morning, Madame Chair, and thank you for holding this timely hearing.
I will be brief since the purpose of today's proceedings is to hear from the agencies who have a
primary role in seizing Saddam Hussein's illegally-eamed assets and returning them to the Iraqi
people.
President Bush's order to seize Iraqi frozen assets was the ﬁrst time the President used the
authority granted to him under the USA PATRIOT Act.
Going forward, I hope that the Administration through the work of the agencies represented here
today and in conjunction with other departments taking a lead role in this important issue, such
as the Justice Department, the Department of Homeland Security through their Bureau of
Immigration and Customs Enforcement, as well as their international counterparts will continue
working together to retum the assets that rightfully belong to the Iraqi people.
In the coming months and years, our country faces the enormous challenge of helping the Iraqi
people rebuild their lives in peace and prosperity. This challenge represents an extraordinary
opportunity for the United States to help the people of Iraq gain stability and security in their
country.
However, we need to ensure that in the process of helping the Iraqi people gain their own identity
after 25 years of dictatorship and despair, that we do not overly exert our will upon them and
remove them from the decision-making process. The Iraqi people must be able to shape their
own future and destiny, not have it imposed on them by outsiders. And we should and must help
create an environment for this to happen.
The reconstruction effort must also continue to restore the basic elements of everyday life, from
ensuring that Iraqi men, women and children have adequate electricity and clean water to aiding
them in the rebuilding of their roads and schools.
1


37
To conclude, I would like to say that I am pleased to be joining Ranking Member Frank,
Chairman Oxley and Chairwoman Kelly in requesting a study by the General Accounting Ofﬁce
to further examine how our government is working with international agencies, the ﬁnancial
services industry and government officials abroad to track Saddam Hussein's assets and retum
them to the people of Iraq. I look forward to working with both Chairs and the Ranking Member
of this Committee during this important investigation.
Thank you again, Madame Chair, for holding this hearing.
I look forward to the testimonies that will be presented today.
2


38
CAROLYN B. MALONEY
ism Dismcr, New You
2331 Rnvwnm House Omm Bantams
Wasmore. DC 2051 541214

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(102) 1257944 (2LZ) 86010606
(DMMIYTEES:
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Qtnngrzss at the elmtth étatta JOINT ECONOMIC communes aénust at Qtptestmatihzg Wu“: “"”"'“°“" "°""“"°""
waiiljingtutl, BC 20515-3214
Statement of Rep. Carolyn B. Maloney (D-NY)
Subcommittee on Oversight
“Divesting Saddam: Freezing, Seizing, and Repatriating Saddam’s Money to the Iraqis”
May 14, 2003
This morning the Subcommittee examines the seizure of Saddam Hussein’s assets and
Administration efforts to repatriate them. These assets were the product of years of looting from
the Iraqi people including the diversion of resources from humanitarian programs, such as oil for
food. They are further damning evidence of the sickness of Saddam’s regime.
Just prior to military action, on March 20 2003, the President issued Executive Order # l3290 —
conﬁscating and vesting property of the government of Iraq in the U.S. The Executive Order
operates under authority in Sec. 106 of the Patriot Act. The Order resulted seizure of $1 .7 billion
in assets by the U.S. Treasury Department from accounts held in the U.S. in the name of the
Government of Iraq, the Central Bank of Iraq, Raﬁdain Bank, Rasheed Bank, or the State
Organization for Marketing Oil. As CRS explains, this “authority becomes available when the
United States is engaged in armed hostilities or has been attacked by a foreign country or its
nationals. At that time, the property of any foreign person, organization, or nation which
planned, authorized, aided or engaged in the hostilities or attack becomes forfeitable.“
Given that we have yet to ﬁnd Saddam, this seizure is especially important because of ﬂight risk
and the threat that his assets could be used to assist terrorists. This morning our panelists will
testify to the success of their efforts to track down Saddam’s assets through his tangled web of
accounts. This was difﬁcult work and our witnesses and their departments deserve credit for a
job well done. However, the job of limiting Saddam’s funding sources is far from complete.
Treasury’s own testimony estimates that his family’s wealth could be as much as $40 billion
worldwide.
I also look forward to a discussion this morning of what is next for the assets seized from
Saddam. The President’s Executive Order stated that “such vested property should be used to
assist the Iraqi people and to assist in the reconstruction of Iraq.” This is a very broad statement
that gives the Administration wide latitude for potential uses of the money. As this money was
stolen from the Iraq, the U.S. is in sense acting as a ﬁduciary for the Iraqi people. Iraq is a nation
‘CRS Report for Congress: “Terrorism: Section by Section Analysis of the USA Patriot
Act”; Updated December 10, 2001; Charles Doyle, Senior Specialist, American Law Division
1
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39
that suffers massive international debts. The Iraqi people will need every resource available to
them to rebuild the country and service their debt obligations
Whatever the ﬁnal determination is for the uses of this money, I believe these decisions should
be made in the open, not in closed Administration meetings. This money does not belong to the
U .S. and it must not be obligated in no-bid rebuilding contracts as has been the case with other
Iraq projects. I think this issue is so important that last week I offered an amendment in the
Government Reform Committee that would apply the highest federal contracting standards to
seized Iraqi assets. I withdrew the amendment because I wanted to hear from our witnesses this
morning before proceeding. I did offer an amendment that requires full and open disclosure of
contracts that were awarded without open bidding. Iam pleased that this amendment was
accepted by the Majority and attached to the Defense Authorization. I believe a similar may be
required for the assets that are the topic of this hearing. I yield back the balance of my time.
2


41
approval of the House of Representatives. Subsequently, during the 107'“ Congress, I introduced
H.R. 1632 - The Justice for Victims of Iraq Aggression Act — a bill which would authorize the
Treasury to establish an Iraqi claims fund from frozen Iraqi assets. The bill would also have
required the USFCSC to coordinate with the UNCC to compensate American citizens for their
losses due to actions by the Iraqi government.
Other members of Congress have recognized the difficulty American nationals have had
in receiving compensation for losses from foreign govemments. In the 107"‘ Congress, S. 2134,
“The Terrorism Victim’s Access to Compensation Act of 2002,” was introduced jointly by
Senator Harkin and Senator Allen to provide American victims of state sponsored terrorism to
receive compensation from blocked assets of those states.
The possibility these victims will eventually receive compensation for their losses has
greatly diminished since March when President Bush issued an Executive Order which vests
Iraqi govemment property with the Department of Treasury to be used to assist with the
reconstruction of Iraq. Unless modiﬁed, the Executive Order has effectively removed the
previously frozen Iraqi assets as a source of payment for American Gulf War loss claims.
In addition, the United Nations Security Council passed Resolution 1472 on March 28,
2003 — an attempt to secure to now-displaced and war-ravaged Iraqi’s with additional
humanitarian, medical and related relief. Under Resolution 1472, however, it is proposed that
monies which would otherwise be made available for payment of UNCC claims would be
intercepted and diverted to the humanitarian purposes identiﬁed in the resolution.
Plainly, there is little argument that the humanitarian needs of the people of Iraq,
especially at this time, must be recognized and addressed. While we assist in the rebuilding of
Iraq, as I believe we should, we should also be aware of the deep frustration and disappointment
of the uncompensated victims of the ﬁrst Gulf War after a decade-long ordeal of tuifulﬁlled
promises of compensation for their losses.
Thank you, Chairwoman Kelly


42
TESTIMONY OF DAVID D. AUFHAUSER
GENERAL COUNSEL
DEPARTMENT OF THE TREASURY
BEFORE THE
HOUSE FINANCIAL SERVICES SUBCOMMITTEE
OVERSIGHT AND INVESTIGATIONS
MAY 14, 2003, 10:00 A.M.
THE UNITED STATES HOUSE OF REPRESENTATIVES
Madame Chair and distinguished Members of the Subcommittee on Oversight and
Investigations, thank you for inviting me to testify today about the Treasury Department's efforts
to track down, freeze, and repatriate to the people of Iraq assets that have been systematically
looted by Saddam Hussein, his family, and his cronies. While major combat operations in Iraq
are over and the Hussein regime has been toppled, the search for assets continues. Our task is
clear — identify and repatriate all assets, whether they are held in the name of the Iraqi
government or hidden in the international ﬁnancial system behind a maze of front companies and
straw men. Whatever Hussein’s legacy may be, it must not include successfully stealing and
hiding billions of dollars in the international ﬁnancial system.
Today I will stress two overarching themes that help to put our task into perspective —
first, identifying and securing the repatriation of Hussein’s assets is but one part of this
Administration’s multifaceted effort to rebuild Iraq for the Iraqi people. President Bush has
made it clear to the world that our liberation of the Iraqi people did not end with the elimination
of Hussein’s regime. It is our obligation to alter the economic conditions that permitted Hussein
to thrive and repress the Iraqi people, creating instead the opportunity for democracy and self-
determination. Second, while it is obvious, it bears repeating: the hunt for Hussein’s assets is not
solely a Treasury initiative. The complex challenge of uncovering the trail of illicit money in a
country that has suffered under a Stalin-esque dictatorship for 25 years demands that our
1


44
- p : -j;-_
0 Preparing for potential sanctions against uncooperative jurisdictions and ﬁnancial
institutions.
I. The Systematic Looting of a Nation
We may never know the full extent to which the Hussein regime stole from the Iraqi
people, or how much money remains hidden in the international ﬁnancial system. Criminals
rarely keep consolidated accounting records. What continues to emerge from the rubble of
Hussein’s fallen regime is a disturbing tale of his ability to create a web of deceit under a
comprehensive international sanctions program; a web in which he trapped and victimized his
own people.
This we do know. Hussein’s circumvention of the United Nations sanctions regime to
the ﬁnancial beneﬁt of his regime has been open, notorious, and well-documented. Sanctions
"imposed by the UN Security Council beginning in 1990 were sweeping, barring virtually all
commercial transactions with Iraq. The international community moved quickly to implement
these and subsequent UN Security Council Resolutions.
In 1995, building upon previous humanitarian exceptions to the sanctions regime, the
international community further responded to the plight of the Iraqi people by creating the oil-
for-food (OFF) program: permitting the ofﬁcial sale of Iraqi oil and placing the proceeds in a
designated UN account to be used for humanitarian purposes.
Despite the laudable goals of the OFF program and the best of intentions, Hussein
intentionally exploited the program to generate substantial illicit income. Hussein not only
survived under the UN sanctions regime, he ﬂourished. The various ways in which he subverted
sanctions have been widely reported and include:
3


46

Ii’--51--<
,-._,,- .-
"T
Powers Act, which is itself a new authority given to the President in the USA PATRIOT Act,
provides us with maximum ﬂexibility to repatriate these assets. Secretary Snow has already
ordered initial disbursements of those funds to meet the immediate humanitarian needs of the
Iraqi people.
Concurrent with the vesting of assets, we began working with the State Department to
engage other jurisdictions around the world to identify, freeze and make available Iraqi
‘B
goverrnnent assets for repatriation. These outreach efforts, which include efforts to secure not
only Iraqi government assets, but also illicit assets of Hussein and his family, have taken place
on many fronts. For example, we have sent out cables and demarches to more than 50 countries
seeking cooperation in our htmt for assets. We have had and continue to have extensive bilateral
and multilateral meetings with key jurisdictions. For example, we took advantage of the
IMF-World Bank meetings held in Washington last month to hold several important bilateral
meetings to discuss the matter. Both Treasury and State ofﬁcials have placed telephone calls to
their counterparts in key jurisdictions. And Secretary Snow brought this message to the meeting
of the G7 last month. -
The response of other nations to our renewed call to locate illicit Iraqi assets has been
positive. To date, we believe that an additional $1.2 billion has been located and held in
“suspense” accounts pending further dialogue. Cooperation has come from many jurisdictions.
We will continue this outreach process to engage other jurisdictions to locate and freeze all
additional Iraqi government assets.
5


47
IH. Illicit Assets of Hussein, his Family, and his Cronies
The greatest challenge lies in identifying and tracing the flow of funds that Hussein has
stolen and injected into the intemational ﬁnancial system. The funds may be hidden in a web of
front companies and straw men, spun to avoid detection. It is therefore essential that we
assemble evidence from all sources, in Iraq as well as in other jurisdictions.
Exploitation of documents and individuals in Iraq and transiting jurisdictions. The
-t
obvious, but essential, ﬁrst step in tracing the illicit assets is to locate evidence that may exist,
whether it be the ﬁnancial audit trail or human intelligence. We have already begun assembling
interagency teams of forensic investigators and sending them to Iraq to assist the Department of
Defense with the search for evidence. These teams will also be available to assist jurisdictions
used as conduits for illicit funds with their own searches for relevant documents and evidence.
Enlisting the cooperation of transiting and nestingjurisdictions. We must have
cooperation all along the emerging money trails, from all the jurisdictions through which funds
transited, as well as jurisdictions in which funds may have ultimately nested. The scope of this
search is ever-expanding. lnternational assistance is needed to track the illicit assets of Hussein,
his family, his cronies, and the front companies and straw men they used. As we develop more
speciﬁc information about money flows, I expect the intensity of interaction and cooperation to
increase.
Enlisting the cooperation of the private sector. The hunt for illicit assets will take us
through the doors and into the records of ﬁnancial institutions worldwide. It is therefore vital
that ﬁnancial institutions lend their assistance to our efforts. We expect ﬁnancial institutions to
be vigilant against accepting the proceeds of corruption, and we expect that when we develop
speciﬁc information on money trails, ﬁnancial institutions will assist in the recovery effort.
6


48
Possible sanctions. Our message from outset has been clear ~- we expect that
jurisdictions and ﬁnancial institutions will assist us in our efforts to recover the plundered assets
of the Iraqi people. Our experience thus far has been positive. But in the event of recalcitrance,
we have available to us various tools to encourage both jurisdictions and individual institutions
to cooperate. For example, section 311 of the USA PATRIOT Act gives the Secretary of the
Treasury, in consultation with other agencies, the authority to require U.S. ﬁnancial institutions
-a
to take appropriate countermeasures against foreign jurisdictions or foreign ﬁnancial institutions
that the Secretary ﬁnds to be of primary money laundering concern. This authority includes the
power to cut off access to the U.S. ﬁnancial system. Should it be necessary, a jurisdiction’s or a
foreign ﬁnancial institution’s refusal to search for and eliminate accounts holding illicit proceeds
may fall within the purview of this provision.
IV. Developing an International Mechanism to Secure the Repatriation of Iraqi Assets
Our efforts to recover illicit Iraqi assets highlights the problem of securing the
repatriation of assets that are stolen by kleptocrats and placed in the intemational ﬁnancial
system. Recent examples demonstrate that locating illicit assets is just the beginning. The
government of the Philippines located accounts throughout the world where Ferdinand Marcos
had stashed illicit funds under the names of real and ﬁctitious friends and accomplices, but the
effort to repatriate those assets through traditional means has taken over a decade.
Under the auspices of the United Nations, the United States has been participating in the
negotiation of an intemational convention that will strengthen international mechanisms to
locate, seize and retum assets stolen by kleptocrats. These negotiations are not scheduled to
7


49
conclude until the end of 2003, and implementation of such an agreement on a global basis is
likely years away.
While the United Nations continues its efforts to devise a general mechanism to facilitate
recovery of illicit assets on a global scale, immediate arrangements must be made for the ﬂuid
repatriation of Iraqi assets, both those in the name of the Iraqi government as well as illicit
Hussein assets. One possibility is a UN Security Council Resolution related directly to the
+2
recovery of funds of the government of Iraq that have been frozen pursuant to existing
Resolutions. Another possibility is consultations or arrangements among jurisdictions that have
located illicit Iraqi assets within their borders in order to facilitate resolution of third party
claims, and thus expedite the return of those assets to Iraq.
Separately, the hunt for illicit Iraqi assets reinforces the need for ﬁnancial institutions to
take responsibility to ensure they do not become the haven for the proceeds of comiption.
Treasury is completing work on a regulation implementing a provision of the USA PATRIOT
Act, section 312, that will place renewed emphasis on U.S. ﬁnancial institutions to guard against
accepting the proceeds of foreign corruption from kleptocrats, their families, and other associated
“politically exposed persons” in the ﬁrst place.
We are not alone in pursuing this type of regulatory requirement. In Switzerland, for
example, recent amendments to Swiss anti-money laundering laws and regulations are designed
to enhance protections against accepting the proceeds of foreign corruption from politically
exposed persons. Additionally, the Financial Action Task Force, as well as groups of private
ﬁnancial institutions, have addressed the need for ﬁnancial institutions to guard against accepting
fLlIl(lS looted by other countries’ political ﬁgures.
8


51
FOR OFFICIAL USE ONLY
UNTIL RELEASED BY THE
HOUSE COMMITTEE ON
FINANCIAL SERVICES
STATEMENT OF
Larry J. Lanzillotta
Principal Deputy Under Secretary of Defense (Comptroller)
Deputy Under Secretary of Defense (Management Reform)
BEFORE THE
House Committee on Financial Services
Subcommittee on Oversight and Investigations
14 May 2003
FOR OFFICIAL USE ONLY
UNTIL. RELEASED BY THE
HOUSE COMMITTEE ON
FINANCIAL SERVICES


-I :i- := 1-: :
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ii 52
Statement Prepared for Larry L. Lanzillotta
Principal Deputy Under Secretary of Defense (Comptroller) and
Deputy Under Secretary of Defense (Management Reform)
Hearing on Freezing, Seizing, and Repatriating Saddam’s Money to the Iraqis
House Financial Services Committee
Subcommittee on Oversight and Investigations
14 May 2003
Madame Chairwoman and Members of the Subcommittee: We appreciate this
Subcommittee’s interest in the disposition of Saddam Hussein’s assets and retuming these assets
to the Iraqi people. I welcome the opportunity to summarize the role of the Department of
Defense in this area as well as to discuss our procedures pertaining to the administration, use,
and accounting of vested and seized Iraqi property.
Now that the regime of Saddam Hussein no longer rules Iraq, it is the primary aim of the
Department of Defense to take all measures necessary toward ensuring much-needed
humanitarian and reconstruction assistance is brought to the Iraqi people so that they can begin
rebuilding their lives and country after decades of oppression. Towards this end, the Department
is committed to using Iraqi state- and regime-owned property that has been vested in the U. S.
Treasury from banking accounts in the U.S., and State- and regime-owned cash, funds or
realizable securities found and seized in Iraq to assist the Iraqi people and assist in the
reconstruction of .their country.
It is important to distinguish between Iraqi government and regime-owned property
conﬁscated and vested in the United States pursuant to the International Emergency and
Economic Powers Act (IEEPA) versus Iraqi govemment and regime-owned property seized by
U.S. troops pursuant to the laws and usages of war.
Vested Property. On March 20, 2003, the President, acting pursuant to IEEPA,
conﬁscated and vested in the Secretary of the Treasury $1.7 billion in Iraqi govemment assets to
be used to assist the Iraqi people and to assist in the reconstruction of Iraq. The Secretary of the
Treasury has subsequently designated the Secretary of the Defense with the authority to use
$91,648,000 of this property. On April 30, 2003, the President confirmed the authority of the
Secretary of Defense, under the laws and usages of war, to seize, sell, administer or use state- or


53
2
regime- owned cash, funds or realizable securities in Iraq. The President speciﬁed that this
property shall be used only to assist the Iraqi people and support the reconstruction of Iraq.
The Department of Defense is dedicated to working with other affected U.S govemment
agencies to ensure that vested and seized property are subject to rigorous procedures that ensure
that such property is properly safeguarded, and accounted for, audited and used only to assist the
Iraqi people and assist in the reconstruction of Iraq.
Presently, the Department, in collaboration with such U.S. Govemment entities as the
Department of Treasury and the Ofﬁce of Management and Budget has developed procedures for
administering, using and accounting for assets vested pursuant to IEEPA. These procedures
outline, for example, the manner in which vested property will be secured, transported,
accounted for, disbursed, used and audited to ensure it is applied as authorized by law and
approved by the President. To date, nearly $22.8 million in vested assets have been used to
assist the Iraqi people and assist in reconstruction efforts. These vested funds have been used to
make greatly needed emergency payments to Iraqi civil servants and pensioners, to help pay
start-up costs of Iraqi Ministries, and to provide other fomas of immediate-impact humanitarian
assistance.
Seized Property. With regard to state- and regime-owned property seized in Iraq, the
Department is in the process of developing, in coordination with other affected government
agencies, procedures similar to those used for vested assets regarding safeguarding, auditing,
accounting for and using such property to ensure its use as authorized by law and approved by
the President. The procedures will specify, among other things, that seized state- and regime-
owned property shall be held on behalf of and for the beneﬁt of the Iraqi people and shall only be
used to assist the Iraqi people and support the reconstruction of Iraq. The procedures will also
ensure that determinations of whether property found in Iraq is public or private are made in
accordance with applicable domestic and international law.
In summary, the Department of Defense is deeply committed to ensuring that vested and
seized assets of Saddam Hussein’s regime are used in accordance with law and rigorous
accounting and auditing procedures. and only to assist the Iraqi people and assist in the
reconstruction of Iraq.


Statement of the Honorable E. Anthony Wayne
Assistant Secretary for Economic and Business Affairs
U.S. Department of State
Testimony before the House Committee on Financial Services
Subcommittee on Oversight and Investigations
May 14, 2003
41
Madame Chair, distinguished Members of the
Subcommittee on Oversight and Investigations, I am pleased
to be here today with representatives of the Department of
Treasury and the Department of Defense to discuss
repatriation of Iraqi state assets to the Iraqi people. I
appreciate the opportunity to appear before you to outline
our efforts to identify, freeze and prepare for return
Iraqi state assets so that they may be made available for
the benefit of the Iraqi people. Our effort is one that
includes participation from appropriate agencies and
Departments across the government acting in concert to
achieve our objective.
Iraqi Assets: Part of the Overall Reconstruction Effort
Making Iraqi state assets and the illgotten gains of
Saddam Hussein and his regime available for the benefit of
the Iraqi people is one part of our overall reconstruction
effort. As the new Iraqi leadership moves forward to build
a better future for all the citizens of Iraq, there are a
number of areas that pose both important challenges and
present real opportunities. Iraq’s abundant natural
resources, particularly its oil wealth, were misused by the
previous regime as a political and economic tool of regime
power, internationally and within Iraq. President Bush's
determination to address the threat posed by Saddam
Hussein's defiance of his international obligations has
liberated the Iraqi people from a murderous tyrant and
created an opportunity for Iraqis to transform their
political and economic landscape. Restoring assets to Iraq
is an important part of our overall effort.
UN Sanctions and Iraq's Assets
with Saddam Hussein's invasion of Kuwait in 1990, the U.S.
acted quickly and decisively to deprive the Iraqi regime of
the means and materials to continue its regional
aggression, further develop its weapons of mass destruction
programs, and continue its repression of the Iraqi people.


55
Consistent with UN Security Council resolution 661, the
United States blocked all Iraqi state assets legally within
its control. Today, the United States is using those
assets, as I will explain shortly, for the benefit of the
Iraqi people, as they build a new and better Iraq.
The United States also acted, throughout the years between
the two wars with Iraq, to prevent Saddam Hussein’s regime
from acquiring revenues and goods through the illicit sale
of Iraqi oil. To this end, the United States mounted an
aggressive, long—term diplomatic campaign to pressure
countries to enforce UN sanctions on Iraq, worked with Gulf
War Coalition partners to interdict illicit oil shipments
and other trade in areas such as the Persian Gulf, and took
punitive actions against sanctions busters where such
actions were available, such as restricting exports and re-
exports of US—origin goods to offending persons or
commercial entities and taking steps to deprive those
responsible for illicit transfers of the privilege of
travel to the United States. These are examples of just
some United States actions; others actions can only be
discussed in a classified setting.
Iraqi Assets are for the Iraqi People
With the outbreak of hostilities in Iraq on March 20 the
President took action to preserve Iraqi state assets for
the Iraqi people. In Executive Order 13290, the President
determined; '
The United States and Iraq are engaged in
armed hostilities, that it is in the
interest of the United States to confiscate
certain property of the Government of Iraq
and its agencies, instrumentalities, or
controlled entities, and that all right,
title, and interest in any property so
confiscated should vest in the Department of
the Treasury. I intend that such vested
property should be used to assist the Iraqi
people and to assist in the reconstruction
of Iraq, and determine that such use would
be in the interest of and for the benefit of
the United States.


57
Iraqi people the burden of economic sanctions originally
directed against Saddam Hussein's regime in order to compel
Iraqi compliance with their disarmament obligations. It
will allow Iraq to resume exports, to sell its own oil,
provided that the proceeds are deposited in the Iraqi
Central Bank, and to use its revenues to purchase needed
goods from overseas. Our proposed resolution directs
countries to identify all Iraqi state funds, or other
economic resources, including financial assets, funds that
Saddam Hussein or members of his regime, their families or
persons acting on their behalf removed from Iraq, and to
repatriate of those funds to an Iraqi Assistance Fund held
by the Iraqi Central Bank with an international advisory
board which will be used to rebuild Iraq.
The State Department is engaged at all levels in working
with our allies and Security Council partners to advance
this proposed resolution. Secretary Powell traveled to New
York May 7-8 to meet with the UN Secretary General and
others on the urgent reasons for this resolution. He has
also spoken directly to many of his ministerial colleagues
to urge support for the resolution. Secretary Powell is
currently in the region, where this issue, as well as
advancing the Israeli-Palestinian roadmap, is at the top of
his agenda. Deputy Secretary Armitage traveled last week
to South Asia to, among other things, build support for our
proposal. Assistant Secretary Kim Holmes visited Moscow
and Berlin to preview the resolution and to convey
personally to our Russian and German colleagues our strong
commitment to Iraq's recovery and reconstruction. We will
be working intensely with other UNSC members, coalition
partners, and allies to achieve agreement to lift Iraqi
sanctions soon.
Identifying Ill-Gotten Gains of Saddam's Regime
The Department of State is working closely with the
Departments of the Treasury, Justice, Defense, and Homeland
Security, as well as law enforcement and intelligence
colleagues across the government to identify assets and
front companies that may be connected to Saddam Hussein or
his fallen regime. The interagency group is coordinating
and disseminating information gathered from intelligence
leads, investigation and interrogations in Iraq, and the
work of teams examining bank records and account
information. Our efforts are leading to the identification


58
of funds that can be made available for the benefit of the
Iraqi people.
Our efforts to identify Iraqi state assets and ill-gotten
gains of Saddam Hussein's regime are focused in a number of
countries. We are actively engaged in discussions with
countries in the region such as Jordan, Turkey, Lebanon,
Syria, Bahrain and the UAE, as well as elsewhere to pursue
this effort. Overall, foreign governments are cooperating
in confirming previously frozen Iraqi state assets, and are
actively looking for assets that can be traced to Saddam
Hussein and his fallen regime. Our effort is being
coordinated with senior officials around the world.
Within hours of the President's announcement on March 20 of
the vesting of frozen Iraqi state assets in the U.S., our
Ambassadors were briefing coalition partners and other
countries known to have Iraqi assets on our actions. We
also asked these governments, at the highest levels, to
cooperate with us in identifying, freezing and preparing to
return ill-gotten gains of Saddam Hussein and his regime.
My colleagues and I have stressed the need for all
countries to search their financial institutions for ill-
gotten gains of Saddam Hussein and his regime in meetings
with dozens of local Ambassadors and visiting officials
from a number of countries.
Among the many countries we are working closely with to
trace Iraqi state assets, Switzerland is often in the
spotlight. The Swiss government has stepped forward to
demonstrate its commitment to make Iraqi assets frozen in
Switzerland available for the benefit of the Iraqi people,
and to investigate accounts that may be linked to the ill-
gotten gains of Saddam's regime. With the onset of
hostilities in Iraq, the Swiss Cabinet moved to expand the
1990 ordinance that had blocked Iraqi regime assets in
Swiss financial institutions. The Cabinet's action
reaffirmed the 1990 freeze and added an additional
reporting requirement on institutions to provide the
additional account detail necessary to make these assets
available for the benefit of the Iraqi people once UN
sanctions are lifted. Swiss authorities have met with
State and Treasury Department officials both in Washington
and Bern to share information on measures they have taken
to ensure that assets with suspected links to the Saddam
Hussein regime are investigated, and to reiterate their
I
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59
commitment to act on any information we share with them in
this effort.
We are also coordinating closely with the U.K. government
in these efforts. The U.K. is taking steps to ensure that
Iraqi assets frozen in the U.K. may be made available for
the benefit of the Iraqi people. Like many of our other
partners the U.K. has also stressed that a new Security
Council resolution would be required for it to be able
under its domestic law to make these assets available for
the Iraqi people. Our efforts at the UN to move forward
with the lifting of sanctions will open the path for return
of assets.
We are actively pursuing Saddam's underground network which
funneled the ill-gotten gains of non-Oil For Food program
oil sales and kickbacks into accounts overseas. This
effort builds on the substantial strides that have been
made in recent years in combating money laundering and
build comprehensive anti-terrorist finance regimes in
countries without them. The United States is leading the
charge to increase regulatory scrutiny"of suspicious
financial transactions and root out illicit transfers of
money. Our sustained effort in this area is paying
dividends through greater information sharing, stronger
laws and institutional infrastructure worldwide. I can
also assure you that the important tools that Congress has
provided in this area, most recently with the passage of
the USA PATRIOT Act, are important as we work to achieve
our goals.
Close Coordination of Effort
The effort to identify, freeze and make these assets
available for the benefit of the Iraq people includes
actions from a host of agencies and departments, working
toward our objective. A senior-level interagency team
meets weekly to coordinate the search for assets. We are
working closely with those on the ground in Iraq to expand
our search using documents obtained during Operation Iraqi
Freedom. We are also beginning the process of
interrogating those Iraqi officials that are in U.S.
custody that have knowledge of the financial affairs of
Saddam's regime. As these leads develop we are expanding
our net further to capture assets that must be made
available for the benefit of the Iraqi people.


61
Treasury has allocated some of the vested assets to
Defense's Office of Reconstruction and Humanitarian
Assistance (ORHA) to meet the most immediate needs on the
ground. We are working interagency to identify and
coordinate the uses of these assets, with the NSC and the
Office of Management and Budget (OMB) playing key roles.
Our goal is to meet the priority needs of the Iraqi people
in Iraq. The Administration is committed to do this in a
fully transparent manner so that it will be clear to the
world that all the assets under our control have met the
priority needs of the Iraqis in Iraq and that the US has
been a good steward of these resources.
Beyond Iraq - Corruption and Kleptocracy
The United States takes very seriously the broader problem
of theft and transfer abroad of state assets by corrupt
heads of state, high government officials, their family
members, cronies and collaborators. Such people, including
of course, Saddam Hussein, have victimized their own people
and abused the world's financial markets for their own
personal gain. They have been able to take advantage of
national and jurisdictional boundaries to hide their
corruption and shield them from law enforcement. G8
members are participating in negotiations on measures to
deny safe haven in our countries to the assets of corrupt
public officials, and have been coordinating in the ongoing
negotiations for a United Nations Convention Against
Corruption, which includes a chapter on asset recovery in
corruption cases.
The United States is also moving forward with an aggressive
anti—corruption/transparency action plan that we have
proposed jointly in the G8 with the U.K. Reducing
corruption and enhancing transparency are top priorities
because they are central to advancing our national security
interests and supporting stable democracies. The U.S. has
long been a leader in the campaign to stop corruption by
promoting transparency and strengthening judicial systems
and rule of law. The United States was the first country
to outlaw foreign bribery in 1977 with enactment of the
Foreign Corrupt Practices Act. Our goal is to improve
country public financial management and governance systems,
drawing upon international best practices and the help of
the international financial institutions‘ experience in
this field.


62
Conclusion
As I have outlined, the Department of State is an active
participant in the U.S. effort to marshal Iraqi state
assets and trace the ill-gotten gains of Saddam Hussein and
his cronies. U.S. Ambassadors and our Embassy teams
overseas are pressing foreign governments to move swiftly
to preserve and make available these assets for the benefit
of the Iraqi people. We are also deeply engaged at the UN
and around the world to build support for the President's
call to lift the burden of sanctions from Iraq, and to open
the door for countries around the world to make these
assets available to meet the humanitarian and
reconstruction needs of the people. I look forward to
continuing to work with the members of the committee in
this effort.


63
Sunday Times - London
Copyright Times Newspapers Ltd, 2003
Sunday, April 13, 2003
Overseas News
Banker who hid Saddam's millions
Stephen Grey, Nick Fielding, Jon Ungoed-Thomas, Edin Hamzic, P
A FINANCIAL adviser to Saddam Hussein has revealed how the Iraqi
dictator channelled hundreds of millions of pounds into secretive
offshore companies.
For more than 10 years Elio Borradori, a company trustee in the
tax havens of Liechtenstein and Lugano, Switzerland, managed the
huge "commissions" and "consultancy fees" from the Iraqi dictator‘s
arms deals and development contracts.
The money was funnelled into companies controlled by Saddam's
appointees operating through Panama, the Bahamas and Switzerland. It
is thought to have partly funded the dictator's palaces and lavish
lifestyle.
Many of the millions moved in and out of an account codenamed
"Satan", which was originally overseen by a relative of Saddam. He
was Saad al—Mahdi. But he made the mistake of falling out with
Saddam and was executed, possibly for pilfering from the Satan
account. A Swiss lawyer took over some of the companies; others went
into the hands of Barzan Ibrahim Hasan al-Tikriti, Saddam's half-
brother.
Just before the first Gulf war in 1991 almost Pounds lbillion was
moved from Satan and other accounts to be hidden around the world.
Italian police last month identified Pounds 300m in one account in
Geneva.
The network of offshore companies remained active long after
United Nations sanctions were imposed on Iraq at the end of the war.
The Sunday Times has uncovered more than 1,000 documents, some of
which confirm Borradori's role. They also provide indications of
export deals relating to Dassault and Thomson—CSF, two French arms
companies (then state owned), and to Russian firms.
Although many of the documents relate to the 1980s, others
suggest activity in the mid-1990s. The material will be a fillip to
investigators in Italy, Switzerland and Liechtenstein trying to
untangle the web of transactions in the hunt for Saddam's billions.
aolo Fusi,


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64
Borradori, who said he met Saddam in person several times,
retired some years ago to live quietly in Switzerland. But a Lugano
court case brought by the al Mahdi family, and the mysterious death
of one of the lawyers involved, revealed documents relating to
Saddam's secret network of companies; Now 75 and living on the
southern shores of Lake Lugano, Borradori admitted he was Saddam's
banking adviser.
In the 1970s Borradori was working in Lugano as a trustee for
companies in Vaduz, the capital of Liechtenstein. A former cycling
champion with a penchant for stylish suits, he was the perfect face
of private financial advice: imposing, charming and discreet.
Through a business associate in Italy he was introduced to al-
Tikriti, the then head of Iraqi’intelligence. Oil prices were
soaring and Iraq was on a buying spree. Saddam, then a rising power
in the government before becoming president in 1979, was keen to get
a share of the multi-million—pound contracts negotiated by the
state. Borradori was hired to set up companies as havens for the
money.
He met Saddam and was encouraged to expand the network of
companies. Once Saddam gave him a bullet engraved with his name. It
was meant, Saddam said, to ensure he was never killed, although
Borradori thought it carried a more sinister message.
By 1977 the network of companies and number of deals had grown so
extensive - with both overt and covert operations — that al—Mahdi
was sent to Europe to oversee them, under the control of al-
Tikriti, who was then the overall head of Saddam's financial
network.
Borradori remains defensive: "Is it worse to work as a trustee of
Saddam Hussein than to work for a mafia godfather or a drug trader,
or for Albanian serial killers, for people trading radioactive
waste? If the answer is yes, everyone in Switzerland should destroy
their passports."
Though he declined to discuss his work for Saddam in detail,
saying he "could not remember", other sources provided the
documentary evidence of the money trail. The main entity was
Mediterranean Enterprises Development Projects (Lugano), which had
branches in New York, Tokyo, London, Paris and other centres. It in
turn controlled about 300 other companies, mainly in Liechtenstein
and Panamau
Three key companies, called Dumynta, Radistal and Technoservice
International (Vaduz);-were among those that received commissions
1


66


According to Borradori, the word "consultancy" was used to mean
the commission or kickback on a deal that would go to Saddam or his
interests. __
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'2
,-
Last week Dassault and Thales (which took over Thomson) both said
they had destroyed documents relating to their arms exports in the
1980s. They also emphatically denied exporting any banned goods to
Iraq in the 1990s.
Saddam's companies are also suspected of receiving kickbacks from
oil trading, both official and covert, after sanctions were imposed
on Iraq. After the first Gulf war, all military exports to Iraq were
illegal and all exports of oil, Iraq's primary source of revenue,
had to be handled by the UN which used the money to buy food and
other imports. ‘-f
Despite this, investigators also suspect the Iraqi regime managed
to extract money from the 0il—for-food programme in the form of
kickbacks which found their way into the Dumynta and Radistal
offshore accounts, though the documents do not detail such
transactions.
The Guardia di Finanza, the Italian financial police, say that
during the 1990s vast amounts of cash went through the accounts of
both companies. It believes the companies, both still registered as
"active" in Panama, were "recycling the results of dirty business".
Giovanni Rinaldi, a Guardia intelligence officer, said: "We
believe there is a connection between these offshore companies and
Saddam Hussein.
We are investigating evidence they have been involved until very
recently in illegal trade with Iraq."
The Borradori network was just one part of the total wealth
Saddam plundered, which runs into billions. US officials estimate he
channelled between Pounds 4b1lion and Pounds 7billion into accounts
around the world.
Downing Street said yesterday that the former dictator's wealth
could total almost Pounds 13 billion.
The US has frozen Pounds 1.lbillion in Iraqi assets,-and the Bank
of England a further Pounds 400m. Saddam also invested in French
companies, including Lagardere, a defence and media groups His
stake, once worth more than Pounds 50m, has been frozen since 1990.
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67
Years after the death of al-Mahdi, his family decided to pursue
some of the millions that had washed through the network of offshore
companies. They hired Gianluca Boscaro, a Swiss lawyer, to bring a
case which named, among others, Borradori's accountant and other
trustees.
In defence against Boscaro‘s claim, a welter of documents was
produced which aimed to show that most of the assets had been
transferred out of the offshore network.
But they also provided clear evidence that the ultimate
beneficiary of the companies was the Iraqi regime and not Saad al-
Mahdi.
Through the legal action, Boscaro secured evidence of how, at
least in part, Saddam had siphoned off a fortune and hidden it
around the world. Increasingly paranoid about his own safety,
Boscaro told one friend that should anything untoward happen to him,
the documents should be brought to public attention.
In the midst of the legal action in August last year, Boscaro, an
adventurous man in his forties, died while taking time off from the
case to relax in the foothills of the Piedmont mountains.
At around 7.30pm on a clear sunny evening, he was floating high
in the sky beneath a paraglider. Suddenly the canopy seemed to
stall. Boscaro plunged to his death.
It is a dangerous sport and such accidents are not uncomon, but
officials who examined the canopy noticed cords were damaged.
Police concluded it was an accident, although friends of Boscaro
dispute their findings.
Accident or murder? It may never be known. But for Saddam, the
end was nearing. Within months coalition troops were on their way to
Kuwait. However, the many millions Saddam siphoned off for his own
purposes may never be fully traced, let alone recovered.
Insight: Stephen Grey, Nick Fielding, Jon Ungoed-Thomas, Edin
Hamzic, Paolo Fusi, Eben Black
---- mnsx REFERENCES ----
nmsn PERSON: HUSSEIN, SADDAM; BORRADORI, suo


69
May 6, 2003
Hussein's Sou Took $1 Billion Just Before War, Bank Aide Says
By DEXTER FILKIN S
V New York Times
AGHDAD, Iraq, May 5 -— In the hours before American bombs began falling on the Iraqi capital, one of
President Saddam Hussein's sons and a close adviser canicd off nearly $1 billion in cash from the
country's Central Bank, according to American and Iraqi ofﬁcials here.
The removal of the money, which would amount to one of the largest bank robberies in history, was
performed under the direct orders ofMr. Hussein, according to an Iraqi ofﬁcial with knowledge of the
incident The ofﬁcial, who asked not to be identiﬁed, said that no ﬁnancial rationale had been offered for
removing the money from the bank's vaults, and that no one had been told where the money would be
taken.
"When you get an order from Saddam Hussein, you do not discuss it,“ said the Iraqi ofﬁcial, who held a
senior position in a bank under Mr. Hussein's government. He said he had been told about the seizure of
the cash by the Iraqi ﬁnancial ofﬁcials who had turned over the money to Mr. Hussein's son and the
adviser. '
The allegations provide a glimpse into the ﬁnal days of Mr. Hussein's rule - which, with its emphasis on
family connections, has been compared to the maﬁa ~ and perhaps a clue about how he intended to
ﬁnance his escape and survive out of power.
Qusay Saddam Hussein, Mr. Hussein's second son, presided over the seizure of the money, along with
Abid al-Hamid Mahmood, the president's personal assistant, the Iraqi ofﬁcial here said. The seizure took
place at 4 a.m. on March 18, just hours before the ﬁrst American air assault.
The two men carried a letter from the president bearing his signature, authorizing the removal of the
money, the ofﬁcial said.
The sheer volume of the cash was so great k some $900 million in American $100 hills and as much as
$100 million worth of euros -— that three tractor-uailem were needed to cart it off, the Iraqi ofﬁcial said.
It took a team of workers two hours to load up the cash. Their work was completed before employees of
the downtown Baghdad bank arrived for work.
The seizure of the money was conﬁrmed by a United States Treasury ofﬁcial assigned to work with Iraqi
ﬁnancial ofﬁcers here to rebuild the country's banking and ﬁnancial system.
Imqi officials said they were uncertain of the effects that the disappearance of $1 billion would have on
the Iraqi economy. The Iraqi ofﬁcial said the removal of the money amounted to about a quarter of the
Central Bank's hard currency reserves.
The billion dollar is nearly twice the amount of hard currency believed to have been looted by Iraqis in
the three weeks after the coilapse of the Iraqi government. American and Iraqi ofﬁcials said about $400
million in American dollars and at least $40 million in Iraqi currency were taken by Looters from banks
across the country after April 9.
The disappearance of such a sizable amount of cash as $1 billion is giving rise to fears here that it is being
used to ﬁnance remnants of Mr. Hussein's government, many of whose senior members are believed to be
hiding in Baghdad or its environs.
Some members of the Iraqi National Congress, an umbrella organization for groups that opposed Mr.
Hussein, assert that the money may be a central element in what they described as an extensive "post-


70
occupation strategy‘ devised by Mr. Hussein that envisioned an American takeover of the capital and his
eventual return to power.
Neither Iraqi nor American ofﬁcials claimed to know the whereabouts of the $1 billion or, for that matter,
of Saddam Hussein, Qusay Hussein or Mr. Mahmood. All three men are being sought by the United
States.
The Iraqi ofﬁcial insisted on anonymity because, he said, he feared that he could fall victim to Mr.
Hussein or one of his associates who remain at large.
Some Americans suspect that the money may have been spirited across the border into Syna, in much the
same way some senior ofﬁcials in Mr. Hussein's government are believed to have ﬂed Iraq.
Col. Ted Seel, a United States Army Special Forces ofﬁcer who said he was aware of the seizure of
money from the Central Bank, said intelligence 1l'lf0l'1'i13iio1l at the time indicated that a group of tractor-
trailers crossed the Iraqi border into Syria. Colonel Seel, who is assigned to the Iraqi National Congress,
said the trucks‘ contents were unknown.
Mr. Hussein held near-absolute power in his government, and so, in a sense, it is unclear what laws might
have been violated by the cash seizure. But the Iraqi bank ofﬁcial said the country's banks had been
largely left alone during Mr. Hussein's years in power. He said the president and his family would
sometimes demand cash from Iraqi banks but not in the amounts said to have been taken on March 18.
"Sometimes they would come in for small amounts, maybe $5 million," the ofﬁcial said.
In the case of the $1 billion, the ofﬁcial said Qusay Hussein and Mr. Mahmood had brought ﬁve Iraqi
ofﬁcials with them to the bank: the director of the Central Bank, the Iraqi ﬁnance minister and the
director of the Iraqi treasury. The only others present, he said, were workers to load the money and the
drivers of the trucks.
The Iraqi ofﬁcial, as well as others in Baghdad, said the former Iraqi ﬁnance minister, identiﬁed as
Hekmet al-Azawi, was in American custody.
George Mullinax, an ofﬁcial with the Treasury Department, said the money had been taken by "Saddam
Hussein's people." He put the ﬁgure taken at about $900 million.
"If you had $900 million dollars, you would need two or three ﬂatbed trucks to carry it all away," he said.
Mr. Mullinax said it was possible that a large chunk of the money had already been recovered. He said the
roughly $650 million in American $100 bills discovered by an American sergeant in one of Mr. Hussein's
palaces last month might be from the Central Bank. He said that had not been determined for certain.
The Iraqi ofﬁcial, howcvcr, said the $650 million certainly belonged to Mr. Hussein's eldest son, Uday,
who, he said, was known for hoarding vast stores of personal cash. "That was Uday's money," he said.
American and Iraqi ofﬁcials have recovered other large sums of cash since the fall of the Hussein
government. Last month, Iraqi bank ofﬁcials, with the help of American soldiers, recovered an armored
car loaded with about $250 million in American currency.
Dhia Habib al-Khyoun, chairman of Raﬁdain Bank, one of Iraq's largest, said the $250 million had been
gathered into the armored car from branch banks around the country.
While it was unclear for what purpose the $1 billion was taken, it seems clear that Mr. Hussein took steps
in the dying days of his government to safeguard at least some of its money.


72
ll
ll
_ (Q-: ll
Iraqi Oil Smugglers Eluded U.S. Patrols
‘Fishing Boat’ Crew Members Describe Elaborate Schemes Used to Skirt Trade Sanctions
By Peter S. Goodman
Washington Post Foreign Service
Wednesday, May 7, 2003; Page A16 .
ZUBAIR, lraq -- It looked like nothing more than a working ﬁshing boat, and that's what it was
before the crew pulled out the freezer containers and the air compressor, inserting an oil tank in
their place. They ﬁlled it with 1,000 tons of diesel fuel purchased from Saddam Hussein's state
oil enterprise. Then they pulled away from this port at the top of the Persian Gulf and headed for
open water.
A few miles south, they were confronted by a U.S. warship, on patrol to enforce trade sanctions
aimed at depriving Hussein of the wealth fetched by his oil. But all the sailors saw was a big boat
pulling nets, followed by hungry seagulls.
“We even threw dead ﬁsh into the water for effect," recalled Ali Lafta Ali, the pilot aboard the
tanlcer-in-disguise on that trip last year -- one of thousands he and other smugglers completed
from this Iraqi port to secret points off Iran and the United Arab Emirates. "The Americans didn't
even board our ship. They just let us go."
Between the Persian Gulf War in 1991 and the U.S.-led invasion of Iraq this year, it proved
impossible to completely cut the ﬂow of Iraqi oil and choke off the regime's ﬁnances. There
were simply too many routes through which Hussein could get oil over borders, too many traders
eager to buy it, and too many Iraqis willing to take risks.
Interviews in southern Iraq with two dozen state oil company managers and lower-level workers,
as well as ﬁve people involved in illegal exports, conﬁrmed widespread reports that Hussein
relied on oil smuggling for revenue.
The trade here in the southern part of the country relied en a network of mostly Iraqi merchants
with ofﬁces in Dubai in the United Arab Emirates, according to those involved in the smuggling.
Most of the merchants also worked out of unmarked ofﬁces in the J aza'ar I-Iai neighborhood of
Basra, a wealthy quarter of the city full of soaring houses hidden behind gates and patrolled by
guards.
There were two ways for the merchants to buy oil from Hussein’s state companies. Outside of the
United Nations-authorized oil-for-food program, they sometimes traded foreign shipments of
food such as rice and beans for letters from the Ministry of Oil that authorized them to claim
equivalent sums of heavy fuel oil or diesel. But mostly they paid cash, sometimes by wire
transfer, and sometimes in sacks. They deposited the funds at the Al Batra Bank in Jordan, in an
account under the name of the State Organization for Oil Marketing, or SOMO, according to Ali
and three oil industry executives.


73
Once the funds reached the bank account in Jordan, a SOMO agent there notiﬁed the oil ministry
in Baghdad, which informed a SOMO branch in Basra. There, in an Office now occupied by the
newly named leader of South Oil Co., a special agency set up to handle smuggled oil released the
needed letters of authorization.
The merchants easily procured old and relatively small tankers from Thailand, Singapore and
Syria, said Ali. They had no difficulty ﬁnding people to operate them. Ali was still working for
the Iraqi Overseas Tanker Co., but much of its ﬂeet had been destroyed in Kuwait by American
bombs. The remainder was mothballed because of the sanctions. He was in Yemen, aboard a
stranded tanker as a security guard, when he heard about a smuggling opportunity in 1995.
Hussain Abdul Kadir, 50, was a jobless engineer when, in 1995, he bumped into Saad Bahar, an
Iraqi trader with an Office in the Emirates who was looking for a crew to smuggle oil.
The ship was a 350-foot tanker called the Rccm. It carried the Honduran ﬂag, though it wasn't
legally registered anywhere. It lacked lifeboats, life vests or insurance, said Kadir, who signed on
as a crew member. Some of the dozen crew members -- mostly Iraqis, but a few Indians and
Pakistanis -- had no passports. But Ba liar was offering $1,500 a month, plus bonuses up to twice
that for successful shipments. In the ﬁrst years after the Gulf War, the smugglers favored
departing from Abu Flous, a port on the Shatt al-Arab waterway. Two pipes connected the
terminal thereto the prodigious ﬁelds of Zubair and a reﬁnery in Basra, bringing in heavy fuel
and diesel. They pulled their tankers up to the hoses, presented their letters of authorization and
ﬁlled out a single sheet of paper marking the total. Then they were free to go.
The tankers were able to cross into Iranian waters and remain within three miles of the shore as
they traveled the length of the Persian Gulf. In that fashion, they were able to avoid U.S. vessels.
The merchants paid fees in cash at a bank in Dubai, which then transferred the money to Tehran,
Ali said.
The fees for passage were dwarfed by the enormous proﬁts. The merchants typically paid
Saddam Hussein's oil marketing agency $80 per ton for diesel fuel. They could usually sell it for
between $180 and $200 per ton.
The route through Iranian waters was closed off in 1998, when Iran began denying entry to the
smugglers. The smugglers shifted to a larger terminal in Zubair. It sat directly on the Persian
Gulf, but it led straight to where the U.S. Navy was panelling most intensely.
The smugglers began shipping only at night, hiring small ﬁshing boats to scout for unwelcoming
vessels, radioing back in code if they encountered any.
" "The master is here’ meant the Iranians were there," said Kadir. " ‘The Red is here‘ meant the
Americans, because their white skin was always so sunburnt. ‘There's no ﬁshing‘ meant it was
safe."
Twice, Kadir's ship was caught by the U.S. Navy. The first time, they were kept in anchorage for
two months, then taken to the Emirates where the Navy sold the boat along with the fuel. But
2


74
ll
" _ ::- :i__' = :11-I-:_‘_:=:m:
Bahar simply bought it back for $70,000 under a different name, Kadir said, and the boat went
back to sailing the same route.
But the second time, in March 1999, the Navy conﬁscated his ship and did not release it. Bahar
cut bonuses and made salaries contingent upon successfully completing shipments. Kadir soon
quit for the construction business.
Ali continued on, albeit with increasing stealth. His crew retroﬁtted the giant ﬁshing boat.
Sometimes they used cargo ships, pumping oil into the ballast, then constructing a false bottom
into the sounding pipe used to check the level of the water inside. They ﬁlled the top few feet
with seawater to hide the real contents.
"When the Americans came on board and examine the sounding pipe, what did they see?" said a
gleeful Ali. "Seawater!"
He was stopped many times, he said, but he was never caught.
The war brought everything to a halt. Today, British soldiers occupy the port, and the pipeline
connecting the reﬁnery to the loading terminal is on ﬁre, sabotaged by Saddam Hussein's
retreating remnants -- or perhaps struck by a shell.
With the dictator gone, the once legitimate sailors-tumed-smugglers wonder when they can go
legitimate again, resuming shipments out of Iraq in the open, free of interception.
© 2003 The Washington Post Company
3»


75
Agence France-Presse
Copyright 2003
Monday, April 14, 2003
Swiss lawyer denies being Saddam's banker
LUGANO, Switzerland, April 14 (AFP) — A Swiss lawyer on Monday
rejected a newspaper report that he was involved in managing Iraqi
president Saddam Hussein's hidden fortune abroad.
The British newspaper The Sunday Times reported on Sunday that
Elio Borradori helped funnel payments to the Iraqi leader from arms
deals and other contracts for about a decade.
US officials estimate Saddam channelled between four and seven
billion pounds (6.3 and 11 billion dollars, 4.9 and 10.2 billion
euros) into accounts around the world, which must now be tracked
down.
"I have never dealt with Saddam Hussein's fortune and I never met
him," Borradori told the Swiss news agency ATS.
"I did have contacts with some of his personal staff and
especially with his nephew, Saad a1—Mahdi, whose financial interests
I managed in Lugano," he added.
The newspaper reported that al-Mahdi controlled an account dubbed
"Satan" with the Banca del Gottardo in the Bahamas.
The Lugano-based bank said on Monday that it had found no record
of the account at its subsidiary in the Bahamas.
Borradori confirmed that al—Mahdi was executed when he was
summoned to Baghdad shortly after his marriage in Paris. He had been
accused of embezzling the Iraqi leader's funds.
"I cried to stop him from going, but in vain. As soon as he
arrived in Iraq, he was beheaded," he added.
Borradori‘s Lugano—based consultancy had managed about 400
offshore companies in offshore havens such as Liechtenstein and
Panama before it was declared bankrupt in the early 1990s.
In February 2002, the 78 year-old lawyer received an 18-month
suspended prison sentence after being accused of embezzling some of


76
his clients‘ funds.
A psychological evaluation ordered by the court also questioned
Borradori’s mental health, and accorded him diminished
responsibility.
According to the newspaper, the former banker could not remember
details of his work for Saddam.
The Swiss government last week said that it hoped to have a
"clearer picture" of any Iraqi funds that might be held in accounts
in Switzerland after it ordered banks, lawyers and accountants to
declare them.
A freeze on transfers to Iraq implemented for more than 12 years
under UN sanctions had been aimed at stopping money flowing back to
Saddam Hussein's regime.
mnb/pac/kjm/sjw
Iraq-war-funds-Switzerland-Britain-banker
---- INDEX REFERENCES ----
nusssnr, snzm
NAMED PERSON:
NEWS SUBJECT:
NEWS CATEGORY:
PRODUCT:
DAF)
REGION:
English language content; Corporate-Industrial News (ENGL CCAT)
INTERNATIONAL
European News-Features; African-Middle East News-Features (DEE
Switzerland; European Countries; Western European Countries;
Switzerland; Europe; Western Europe; Iraq; Asian Countries; Western Asian
Countries; Middle Eastern Countries; Persian Gulf Countries; Iraq; Middle East;
United Kingdom; European Union Countries (SWITZ EURZ WEURZ SZ EU WEU IRAQ ASIAZ
WASIAZ MBASTZ GULFSTZ IZ ML UK EECZ)
Word Count; 371
4/14/03 AGFRP (No Page)


77
KRTBN Knight-Ridder Tribune Business News: New York Daily News
Copyright (C) 2003 KRTBN Knight-Ridder Tribune Business News
Sunday, May 4, 2003
THE SEARCH FOR SADDAM’S BUCKS Billions in oil sales hidden overseas
New York Daily News; New York, N.Y.; May 4, 2003; WILLIAM SHERMAN DAILY NEWS
STAFF WRITER;
In the hunt for Saddam Hussein's billions, investigators have identiﬁed ﬁve networks of more
than 100 companies used to launder money skimmed from Iraqi oil sales.
Saddam's gangster regime set up shell companies in Switzerland, Jordan, Lichtenstein,
Luxembourg and Panama, according to investigators.
Those company networks and their banking affiliations were used to enrich the former Iraqi
strongman, his sons Uday and Qusay, and other family members.
"Ultimately, the money was stolen from the Iraqi people," said Taylor Griffin, spokesman for the
Treasury Department, which is heading the government's laundering probe along with U.S.
Customs, the Secret Service and various intelligence agencies.
Last month, investigators isolated $1.2 billion in previously unknown assets outside Iraq, Griffin
said. The assets include cash, real estate and diamonds held in the names of the companies
controlled by Saddam.
With names like Jaraco SA and Dynatrade SA, the companies used major banks in Switzerland,
France, Russia, Egypt and the United Arab Emirates to conduct transactions, according to
investigators.
The intricate web was managed at the top by about 20 of Saddam's relatives and friends, who
spent most of their time outside Iraq.
Possible road map
The mastermind of this vast criminal enterprise was believed to be Saddam's half-brother,
Barzan Ibrahim Hasan al-Tikriti. Now in American custody, he could provide a road map to
Saddam's hidden wealth.
Hasan, the ﬁve of clubs in the U.S. deck of most-Wanted Iraqis, was Iraq's ambassador to the UN
in Geneva for 10 years, ending in 1998.
During that time, he helped set up and manage a money-laundering network that was among the
most sophisticated in the world, said investigators.


78

A second manager was Tareq Aziz, Iraq's Foreign Minister, according to a Treasury Department
source. Aziz, also in U.S. custody, traveled widely under diplomatic immunity.
Estimates of the hidden loot range as high as $40 billion, but Saddam's personal trove "is in the
sin gle-di git billions, not more than 10," according to investigator John F awcett.
"I'm kind of conservative in calculating his wealth," said Fawcett, who has focused on Saddam’s
ﬁnances for more than three years, most recently on behalf of Kreindlcr & Kreindler, a Park
Ave. law ﬁrm.
The Finn is trying pinpoint the links between Saddam's assets and ﬁnancing of Al Qaeda. Once
identiﬁed, those assets could be seized, recovered in court proceedings and distributed to
families of those who died in the 9/ 1 l terrorist attacks.
"We think Saddam's laundered money was used in pan to provide ﬁnancial support to Al Qaeda,
and we're looking at billions of dollars hidden in ﬁnancial institutions and companies," said
lawyer James Kreindler.
$900 million
One clue as to the size of Saddam's laundered legacy was found two weeks ago - $780 million in
makeshift vaults in a palace compound and another cache of $1 12 million found in dog kennels
on the grounds.
The cash was in $100 bills, and in the dog kennels, there were 200 aluminum boxes with $4
million in each box, all sealed with tags reading Bank of Jordan.
Customs and Secret Service agents in Baghdad are tracing the serial numbers to leam the origin
of the bulk cash shipments, said Customs spokesman Dean Boyd.
The serial numbers on the bills will reveal which U.S. bank ﬁrst received the cash from the
Federal Reserve. From there, it may be possible to trace how the money got to Saddam's palace.
"We've also uncovered a lot of documents on Saddam's ﬁnancial apparatus," Boyd said.
For more than 20 years, Saddam skimmed 5% of j ust about everything that moved in and out of
Iraq.
N
Kickbacks were everywhere," said Fawcctt.
Sulﬁrr and fertilizer exports and imports of tobacco and alcoholic beverages were among the
items subject to the rakeoff, according to the British Foreign Ofﬁce and the Coalition for
International Justice.
2


79
The rakeoff in 2000 alone included monthly imports of 300 million cigarettes, 38,000 bottles of
whiskey, 230,000 cans of beer, 120,000 bottles of vodka and almost 19,000 bottles of wine,
according to Peter Hain, a British foreign office ofﬁcial.
Saddam also ﬂeeced pilgrims to Iraqi Shiite shrines in the holy cities of Najaf and Karbala,
making them travel in buses owned by the Al-Hoda company, controlled by Uday Hussein, and
stay in designated hotels.
A nine-day pilgrimage costs at least $900, much of which went to Saddam‘s family, according to
the coalition.
But the principal source of the regime's skimmed revenue was oil exports, including more than
$6.6 billion from the UN-sponsored oil< fonfood program, General Accounting Ofﬁce
investigators found.
That program involved a direct exchange of exported Iraqi oil for food and medicine. It was part
of UN sanctions imposed on Iraq after the 1991 Gulf War to prevent the diversion of oil
proceeds to weapons.
Large-scale smuggling
In the last ﬁve years, the regime managed to duck the UN sanctions with a large-scale smuggling
operation involving shipments through Jordan, Syria, Turkey and Persian Gulf countries.
During March 2002, Iraq smuggled out between 325,000 and 480,000 barrels a day, according to
the General Accounting Ofﬁce.
Barges, tankers, pipelines and trucks were used to get the oil out past UN inspectors’ scrutiny,
and at one point, an estimated 45,000 Turkish truckers were on the roads, loaded up with oil, the
agency said.
Until the sanctions were imposed, Iraqi oil exports were not monitored, and all were subject to
the 5% kickback. In the early years of Saddam‘s 25-year reign, Iraq exported as much as 3.2
million barrels per day.
The kickback-laundering system is essentially quite simple. Oil buyers, whether companies or
countries, bought Iraqi oil from Saddam- controlled trading companies located outside the
country.
The trading companies would forward 95% of the money to the Iraqi oil ministry and send
Saddam's 5% to shell companies outside Iraq, investigators said.
Directors of those shell companies would deposit the 5% in company bank accounts, and the
money was effectively laundered. Swiss and French lawyers did the paperwork
3


80
Laundry list
Gold, artworks, hotels, construction and metal fabrication concems, money market accounts,
commodity trading companies and publishing are among Saddam's laundered investments.
Kroll Associates, a private investigative company, and the International Campaign to Indict Iraqi
War Criminals, a U.S.-funded organization based in England, have identiﬁed other key ﬁgures in
the ﬁnancial network.
Hussam Rassam, a 67-year-old Iraqi businessman who established residency in Switzerland in
1987, was the administrator of the Saddam family pension fund, valued at $41.6 billion in 1990,
according to a Kroil report.
Hussam "was appointed [administrator] in 1989 after the execution of his predecessor for
skimming ﬁinds," said the report.
A telephone call to Hussein's home in the Swiss Canton of Vaud was answered by a French-
speaking woman who told a reporter, "Mr. Hussam isn't here."
Whether Saddam and his sons are alive remains an open question, but it s unlikely they could
ever again enjoy their over-the-top opulent lifestyles.
Previously frozen Iraqi assets include $20 million in the Cayman Islands, $85 million in the
Bahamas and $14 million in Japan.
"What's the total, and where is it all?" asked Griffin. "I wish I knew."
Graphic: Anatomy of a giant scam

l. Company or country wants to buy oil from Iraq.
2. Instead of paying Iraq directly, it buys the oil from a Saddam- controlled brokerage company
located outside Iraq, typically in Switzerland or Russia
3. Broker forwards 95% of the purchase price to the Iraqi Oil Ministry and keeps 5% as a
kickback for Saddam.
4. Broker deposits that 5% in a bank account set up in the name of a shell company controlled by
Saddam's agents.
5. Shell company converts 5% into cash, gold or other investments and forwards it to other
Saddam-controlled companies. ln some cases, "commissions" go straight to Iraq, like the caches
of dollars recently found in Baghdad.
6. Kickback now is successfully laundered and accessible.
4


82
:LNF'N> PK ".)DL*
Ml Portfolio
P‘ Calculators
- from $6 billion, as Deputy Secretary of State Richard
Armitage estimates, to $20 billion or more.
Finding it won‘t be easy. Over the past three decades,
experts say, the Iraqi regime established an intricate
global apparatus to keep its finances well hidden.
Indeed, many people involved in the asset-recovery
business doubt that all the money can ever be
identified, let alone recovered.


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Looking for legitimate companies
The responsibility for finding the assets will fall to an
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CIA. The British government also is looking.
E] One of the first things they want to
do is find the corporations that
Saddam owns," says Ed Pankau, a
exas-based Private investigator.
Pankau has worked on scores of
asset-recovery projects, Including
ones involving Panamanian strongman Manuel Noriega
and deposed Ethiopian ruler Halle Selassie.
"These people live in a world of their own, with an
unlimited amount of wealth they have to put
somewhere," Pankau says. In the case of Hussein,
"he's going to own hotels, shopping centers, and real
estate."
Managing all the data is a key element of discovery.
“You start with a look at overall sources of ﬁnancing,"
says John Fawcett, of the New York law ﬁrm Kreindler
& Krelndler.
Fawcett is the co—author of an exhaustive report,
"Sources of Revenue for Saddam and Sons," published
last fall by the Coalition for International Justice, a
human rights organization based in the Hague and
Washington.
The study documents a wide-ranging series of
transactions, both legal and illegal. The regime
imported hundreds of millions of dollars worth of steel
from Egypt’s Ginza Co., for example, and mechanical
equipment from Technopromexport of Russia. It
Z
is


84
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partners? Which financial institutions have been
intermediaries in transactions?"
Kroll's earlier study on Iraqi assets, for example,
uncovered an international network of individuals and
ﬁrms involved in laundering activities. They ranged
from unwitting giants like Lagardere to active
accomplices like a 12-person machine tool company in
Ohio.
Looking for bank accounts
On the ﬁnancial side, the hunt will involve a number of
shadowy -- and not so shadowy —- global banking
institutions.
Raﬂdaln Bank, a state-owned enterprise based in
Baghdad, has for years been widely thought to be a
centerpiece of Saddam's ﬁnancial empire. The bank
has branches in Jordan, Egypt, Lebanon, Bahrain and
the United Arab Emirates.
Raﬂdaln is a joint venture partner with some of
Europe's leading ﬁnancial institutions. It has
ownership stakes, for example, in banks controlled by
Britain's HSBC and France's Credit Lyonnals. (Both
European partners have strenuously denied having
working relationships with Rafidain, though Raﬁdain
does hold board seats in each venture.)
Just weeks before the war began, Rafidain boasted of
its global finance capacity to a Bloomberg News
reporter. "The UN is no problem,” the bank's Beirut
manager said. "You can transfer money from Beirut to
Baghdad to any beneficiary if we have a telephone
number or account.“
According to experts, the ability to move money freely
from Baghdad to institutions outside of Iraq is what let
the regime build and control its invisible empire of
cash.
Investigators say the regime routinely transferred
cash through Raﬁdain and 17 privately owned banks
within Iraq to intermediaries in such places as Jordan
and Switzerland.
To ﬁnd evidence of those transactions, the U.S. will be
"going through looking for records in the rubble," says
Pankau. "Going through CIA ﬁles. Searching the trail
of contacts and relationships stemming from any
transaction that comes out of Iraq."


86
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APRIL 3, 2003


WAR IN IRAQ
Tracking Saddam's Billions
Some estimates say as much as $10 billion may be salted away in various
international banks. Can these funds be used to rebuild Iraq?
As U.S. troops advance on Baghdad, a parallel assault on another prize -- the
wealth of Iraq's elite, particularly that of Saddam Hussein and his family -- is also
speeding up. From the U.S. Treasury Dept. to creditors angling to collect
decades-old debts, ﬁnancial sleuths around the world are trying to ﬁgure out how
much money Saddam, his family, and his cronies have stashed away, where it's
hidden, and how quickly they can get their hands on it.
For the U.S., the hunt for Saddam's wealth is a key test. To bolster its case that
the war in Iraq is aimed at liberation, not empire, the Bush Administration has
decreed that any funds looted from Iraq -- starting with $1.7 billion in lraqi
accounts frozen in the U.S. since 1990 -- will be devoted to rebuilding the
country.
U.S. ofﬁcials and private analysts estimate that an additional $7 billion to $10
billion is hidden away, though little of that is likely to be in the U.S. So finding the
disputed loot, claiming it, and winning consensus on how best to use it will
severely tax already strained ties among the U.S., Europe, and the Middle
Eastern nations where the bulk of the cash probably resides.
ON THE BARRELHEAD. A senior Treasury official boasts that allies have
located more than $1 billion in previously unknown Saddam accounts since the
U.S. stepped up the hunt on Mar. 20. The Bank of England, which had already
frozen $648 million in British banks, has also ordered banks to search for lraqi
accounts "as a matter of urgency."
The combatants aren't the only searchers. lraq owes more than $100 billion on
debts incurred before its 1990 invasion of Kuwait, according to Treasury.
Creditors from the French government to South Korea's Hyundai Engineering &


87
Construction are pressing claims as well.
The sources of Saddam's wealth are no secret. Despite a dozen years of U.N.
sanctions, the Iraqi regime has openly smuggled out oil -- by truck, tanker, and
pipeline, via Syria, Turkey, and the Persian Gulf - and smuggled in cigarettes
and luxury goods. Saddam even found ways to proﬁt from the U.N.-run Oil for
Food Program: Although the U.N. controlled the bulk of the proceeds from Iraqi
oil sales, the Baghdad regime built a 30 cent to 50-cent-per-barrel kickback into
its oil price, according to the U.S. General Accounting Office and the Coalition for
international Justice, a Washington-based human-rights group. The group says
Saddam's eldest son, Uday, has overseen much of the skimming and smuggling.
A spokesman for the U.N. Oil for Food Program declined to comment.
SCOUTING THE TRAIL. Where the money went is harder to establish. in the
1980s, Saddam invested in Western companies, including Lagardere, the French
defense and media group that owns Hachette, the French publisher of Elle and
Car & Driver. Hachette says Saddam's 8.4% stake, estimated to be worth $90
million, has been frozen since 1990.
Since U.N. sanctions were imposed, investigators and expatriates say, the
regime has kept most of its money outside Iraq in such safe and liquid
investments as bank deposits and government bonds -- even U.S. Treasuries.
According to a retired Iraqi banker in London who asked not to be named,
Saddam and Uday directed kickbacks and bribes into banks in Jordan, Egypt,
and Lebanon.
From there, the funds would be turned over to Saddam allies abroad, who would
move money through a chain of banks and perfectly legal accounts to disguise its
origins. These fronts played an increasingly important role as the sanctions on
Iraq bit deeper.
CROSS-STREET TRANSFERS? Iraq's state-owned bank, Rafidain Bank, may
have been critical to moving the regime's cash, the Iraqi banker and former U.S.
officials say. They allege that Rafidain's branch officers in Jordan, Bahrain, the
United Arab Emirates, and other Middle Eastern countries would transfer funds
on Saddam's behalf from Baghdad into the global banking system -- in some
cases literally walking money across the street to other banks. The U.S. has
asked that Rafidain's branches be closed, but only Britain has acted.
The manager of Rafidain's branch in Amman, Jordan, Abd Al-Hussein Majid Al-
Mokhiar, denies the bank played any role in laundering Saddam's money.
Rafidain's lawyer in London, Alan Walls of the ﬁrm Linklaters, refused questions
on the bank's activities. Officials at the London branch, in liquidation under the
Bank of England's control, refused comment.
Tracing this money trail isn't easy. U.S. officials hope that the Iraqis‘ penchant for


88
thorough record-keeping will yield a trove when American and British troops
occupy Baghdad. But the really tough job will be laying claim to any funds that
are found. The governor of the Central Bank of Iraq, lssam Rashid Hwaish, has
denounced the U.S. seizure of Iraqi assets as an "act of piracy" that violates U.N.
orders.
"WE NEED COOPERATION." U.S. law gives the President authority to seize
enemy assets during wartime -- but few other nations have such power, and
most of the likely havens for lraqi money aren't at war. Even Switzerland, eager
to prove that its ﬁve-year-old controls on hot money are working, says it will need
a court order from the U.S. to freeze or seize any suspect accounts.
That's why rounding up the money is far from a sure thing. "lt isn't going to matter
that the U.S. is a military superpower -- we need cooperation," says William F.
Wechsler, a money-laundering expert who sewed in the Clinton Administration.
Treasury is hoping that the U.N. or an institution like the Bank for International
Settlements can establish a speedy procedure for resolving claims on lraqi
accounts and redirecting the money to a new Baghdad regime. "It's clear that any
assets accrued by Iraqis since 1990 are violations of U.N. sanctions and illicit,"
says Treasury General Counsel David D. Aufhauser.
Perhaps. But it will take more than a U.N. ﬁg leaf to persuade countries from
Bahrain to France to overrule their own courts and banks and turn over disputed
accounts. Saddam's billions could go a long way toward helping rebuild his
country, but it's too soon to start writing checks on those accounts.

By Mike McNamee in Washington and David Fairlamb, with Kerry Capell, in London
Copyright 2000-2003. by The Mograw-Hill Companies Inc. All rights reserved.
Terms of Use Privacy Policy
. El


91
Questions for the Record Submitted to
Assistant Secretary E. Anthony Wayne by
Rep. Luis V. Gutierrez (#2)
Subcommittee on Oversight and Investigations
Comittee on Financial Services
May 14, 2003
Question 2:
Mr. Wayne, you commented that in the U.S. as well as in
other countries, people have sought retribution against
Iraq through Iraq's frozen assets held in those countries.
How much, as a percentage, if possible, have we lost in
those claims? Is it a significant enough issue where those
in Iraq would see a difference in the amount coming back to
them for aid and reconstruction?
r=_
Answer
The U.S. vested more than $1.7 billion in frozen assets on
March 20, 2003. At that time an additional $122 million in
Iraqi state assets were subject to writs of attachment and
were no: vested. Around the world we have been in touch
with foreign governments to confirm the value Iraqi state
assets they have identified. We have identified $2.9
billion in Iraqi state assets in financial institutions
overseas. We are working with countries to identify the
total value of funds that are not under prior liens or
judgments.


93
Questions for the Record Submitted to
Assistant Secretary E. Anthony Wayne by
Rep. Luis V. Gutierrez (#4)
Subcommittee on Oversight and Investigations
Committee on Financial Services
May 14, 2003
Question {L
Do you think that the UN needs to have a role in the task
at hand? In other words, do you think that a UN resolution
on this regard would help in this mission?
Answer:
As the President has stated, the UN has a vital role to
play in Iraq. We will be working in the UN Security
Council to bring forward a resolution that will support the
reconstruction of Iraq for the Iraqi people. We believe
that the participation of the international community,
including the UN and the World Bank and International
Monetary Fund, in the reconstruction of Iraq will be
critical in reestablishing the Iraqi community.


94
Questions for the Record Submitted to
Assistant Secretary E. Anthony Wayne by
Rep. John Shadegg (#1)
Subcommittee on Oversight and Investigations
Committee on Financial Services
May 14, 2003
ESPOUSAL-UNCC CLAIMS QUESTIONS
Question:
Given the fact that the United Nations Compensation
Commission seems to have utilized differing standards for its
review of UNCC claims, imposing higher requirements of
documentation and proof of “direct loss" for Americans than for
other nationals, does the Administration have any intent to
address and correct this circumstance by considering espousal of
the claims directly to the new government of Iraq?
AIISWG I‘ 2

American claims have not been subject to different standards
by the UNCC. Claims are sorted and considered by type of claim
(individual, corporate or governmental), not by nationality. UNCC
Panels of Commissioners, composed of distinguished international
jurists, review groups of claims within the various categories
and examine the facts of each claim to determine if it meets the
requirements for compensation and, if so, the amount of
compensation to be recommended. The UNCC Governing Council,
composed of the members of the UN Security Council, then decides
whether to approve each recommendation.


95
Questions for the Record Submitted to
Assistant Secretary E. Anthony Wayne by
Rep. John Shadegg (#1)
Subcommittee on Oversight and Investigations
Committee on Financial Services
May 14, 2003
ESPOUSAL-UNCC CLAIMS QUESTIONS
Of the approximately 2.6 million claims from all over the
world that have been reviewed so far, compensation was awarded in
approximately 60%, or about 1.6 million claims. In contrast,
compensation has been awarded in more than 90% of the
approximately 3247 U.S. claims reviewed to date (2,977 out of
3119 individual claims, 73 out of 114 corporate claims, and 12
out of 14 U.S. Government claims). The remaining claims from
U.S. claimants have all been submitted to the UNCC Panels of
Commissioners that consider the merits of claims. We are
expecting all of those claims to be resolved this year.
In actual dollar terms, the 2.6 million world—wide claimants
were awarded about $43.7 billion, which is approximately 28% of
the 150 billion claimed. In contrast, compensation awarded to
U.S. claimants has been about $700 million, which is about 50% of
the $1.4 billion claimed.


96
Questions for the Record Submitted to
Assistant Secretary E. Anthony Wayne by
Rep. John Shadegg (#2)
Subcommittee on Oversight and Investigations
Committee on Financial Services
May 14, 2003
ESPOUSAL-UNCC CLAIMS QUESTIONS
Question:
Since the State Department reviewed all Americans’ UNCC
claims and, by forwarding and submitting them to the UNCC in
Geneva, affirmed under UNCC claims guidelines that as to such
claims the United States had “mno reason to believe that the
information stated [in the claims] is incorrectm,” what basis
exists to decline consideration of espousal of the claims to the
new government of Iraq in the amounts originally submitted by the
American claimants and/or screened, reviewed and forwarded by the
State Department in amounts which it deemed prima facie accurate
and free of error?
Answer:
Before deciding to exercise its discretionary authority to
formally espouse a claim against a foreign government, the
Department of State reviews each case for which espousal has been
requested on its own merits, considering numerous factors. We
have not been requested to espouse any particular claim before
the UNCC and therefore have not conducted such a review with
respect to a UNCC claim. However, the certification by the
Department that it had “mno reason to believe that the
information stated [in any particular claim] is incorrectm,” does


97
Questions for the Record Submitted to
Assistant Secretary E. Anthony Wayne by
Rep. John Shadegg (#2)
Subcommittee on Oversight and Investigations
Committee on Financial Services
May 14, 2003
ESPOUSAL-UNCC CLAIMS QUESTIONS
not constitute a conclusion on the merits of the claim. Such a
conclusion could be reached only after a review of the evidence
in support of the claim in far greater depth than was possible or
required in order to make the mentioned certification at the time
claims were filed with the UNCC.


100
reconstruction projects that are undertaken by the military and civilian personnel that are
deployed in Iraq.
Additionally, Congress has made available $2.475 billion in appropriated funds, which
are available via OMB apportionment for the relief and reconstruction of Iraq.
The coordinated efforts of CPA and the Army 336th Finance Command have effectively
and expeditiously disbursed lraqi funds directly to Iraqi recipients or to cleared Iraqi
ministry officials, who in turn executed the ﬁnal emergency, salary. or project payments
to the intended Iraqi recipient. These payments have signiﬁcantly contributed to winning
the hearts and minds of the Iraqi people and to restarting the Iraqi economy.
The Coalitional Provisional Administration works closely with OMB and the Department
of Defense. Its efforts are directed, in this area, to both humanitarian and reconstruction
efforts. All funds are fully accounted for and expenditures are being recorded in Defense
Finance and Accounting Service records.
O


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