US embassy cable - 05AMMAN5136

S E C R E T SECTION 01 OF 05 AMMAN 005136 
 
SIPDIS 
 
NOFORN 
 
E.O. 12958: DECL: 06/15/2015 
TAGS: PGOV, ECON, PREL, IZ, JO 
SUBJECT: JORDANIAN BANKS RECEIVE LARGE DEPOSITS FROM 
ALLEGED IRAQI MOD FRONT COMPANY 
 
REF: A. AMMAN 3963 
 
     B. BAGHDAD 2145 
     C. BAGHDAD 213 
 
Classified By: DAVID HALE, CHARGE D'AFFAIRES A.I., REASONS: 1.4 (B &D) 
 
Summary 
------- 
 
1. (U) This cable represents a joint message from Embassies 
Amman and Baghdad. 
 
2. (S/NOFORN and throughout) In the course of checking into 
recent rumors about alleged large-scale deposits into 
Jordanian banks by Iraqi government personnel, Amman Emboff 
learned of an alleged Iraqi Ministry of Defense-related 
front company that has reportedly placed over $400 million 
in Jordanian banks over the last several months.  According 
to sources (primarily a prominent Iraqi businessman close 
to Sha,lan, who claimed to be relating information given 
too him by a former senior MOD official and the senior 
management of two Jordanian banks), the front company was 
set up by a "cabal" within the MOD with the cooperation of 
former IIG President Yawwer and IIG Defense Minister 
Sha,lan, among others. 
 
3.  (S/NF) The company, reportedly headed by a former 
Baghdad money changer, allegedly received at least 46 MOD 
contracts for items ranging from Polish helicopters to 
Kalashnikov weapons and ammunition, side arms, and much 
else.  Sources claim that the MOD was grossly over-charged 
for these contracts, in some cases by as much as 400 
percent.  We have independently received partial 
confirmation of the businessman's story from a current 
senior MOD official and the Chairmen of two leading 
Jordanian banks.  While conclusive evidence is lacking 
(and may never be available), the incident is illustrative 
of what many of our Iraqi and Jordanian sources assert is 
a common pattern in Iraqi government contract awards. 
 
4.  (S/NF) The overall issue of corruption in the MOD was 
raised by former Prime Minister Allawi and the Commissioner 
on Public Integrity at the end of the Interim Government 
period (ref c) and flagged for the current government by 
recent completion of a Board of Supreme Audit review.  On 
June 19, a key MOD official cited below as heavily involved 
in procurement corruption was removed from the ministry. 
Embassy Baghdad continues to follow up and assist Iraqi 
security and other ministries to regularize procurement 
practices.  New Minister of Defense Duleimi is committed 
to rooting out corruption in his ministry.  End Summary. 
 
Jordanian Deposits by Alleged MOD-Tied Iraqi Front Company 
--------------------------------------------- -------------- 
 
5.  (S/NF) Amman Emboff spoke to prominent Amman-based Iraqi 
businessman Talal al-Gaaod (reftel) on June 6 about a 
rumor that an unnamed "senior Iraqi government official" 
deposited approximately up to $1 billion in various 
Jordanian banks sometime in May.  Al-Gaaod responded that 
he had been contacted separately by senior management from 
the Jordanian National Bank (JNB) and the Housing Bank of 
Jordan (HBJ) and asked if he knew anything about an Iraqi 
national named Nair Mohammed Ahmed. 
 
6.  (S/NF) Al-Gaaod said the bankers told him that 
Ahmed was personally introduced to them by wealthy 
Iraqi businessman Sa,ad Bunnia, and subsequently made USD 
money deposits of over $400 million, transferred into 
Jordanian banks from the al-Warka bank in Baghdad. 
Al-Gaaod said he was told by the bankers that Ahmed was 
working with four Jordanian banks, however Al-Gaaod 
acknowledged that he was only contacted directly by the 
management of the above two banks.  Al-Gaaod said he 
understood that Ahmed set up most of these accounts in the 
name of the Al Layen al Jarieyeh company. 
 
Money Changer Makes Good 
------------------------ 
 
7.  (S/NF) Al-Gaaod said that he told the bankers he had 
never heard of Ahmed or the al-Jarieyeh company before, but 
would check.  He said that he subsequently ascertained that 
Ahmed ("uneducated, with three wives") owns a Baghdad 
money-changing business and is now playing a role in 
obtaining procurement contracts from the Ministry of 
Defense.  Al-Gaaod said the bankers told him that Ahmed 
showed them his passport, which included multiple-entry US 
and UK visas. 
 
8.  (S/NF) Al-Gaaod called Emboff later on June 6 to relate 
that he had confirmed (from unnamed sources) that Ahmed 
is acting as a front man for former Defense Minister Sha, 
lan and former President Gazi Yawwer.  According to 
al-Gaaod, the money represented funds provided to the MOD 
for supplying the Iraqi security forces.  Stating that he 
had "important new information" on this issue, al-Gaaod 
asked that Emboff meet again with him again in person. 
 
New Information: Naming Names 
----------------------------- 
 
9.  (S/NF) Emboff met al-Gaaod on June 7.  Talal then 
provided his "new information," most of which he claimed 
came from a meeting he had the previous evening with Mishal 
al-Saraf, whom he described as a long time acquaintance and 
a former senior IIG MOD official (see paragraph #22 below). 
Talal said that al-Saraf had recently contacted him about 
lobbying the new Minister of Defense, Sa,adoun Dulaimie 
(a good friend of al-Gaaod,s), in favor of awarding 
some new MOD contracts to a Lebanese company.  Al-Gaaod 
said he told al-Saraf that he did not want to get involved, 
but agreed to meet with him on the evening of June 6 at his 
current residence in Amman, where he used the opportunity 
to ask al-Saraf about Ahmed. 
 
How the Scheme (Allegedly) Worked 
--------------------------------- 
 
10.  (S/NF) According to al-Gaaod, al-Saraf confirmed that 
Ahmed is a front man who was set up in the al-Jarieyeh 
company last summer by a "cabal" whose chief operating 
officers are MOD Director General Ziad Kattan and MOD 
"Contract Manager" Brusqa Shaways, brother of former IIG 
Vice President and current ITG Deputy Prime Minister Rowsch 
Shaways.  Talal said that al-Saraf admitted that he also 
played a role and claimed that Sha,lan cooperated the 
scheme and that Yawwer, VP Shaways, and Massoud Barzani 
were also aware of it.  Al-Gaaod said that al-Saraf 
explained to him that the basis of the cabal's strategy 
involved taking advantage of severe pressure from CentCom 
and the USG generally to rapidly award contracts related to 
rebuilding the Iraqi security forces. 
 
Alleged Cash Pay-Off to Gazi Yawwer 
------------------------------------ 
 
11.  (S/NF) Al-Saraf told Talal that, to accommodate this 
pressure (or using it as an excuse), normal contract award 
procedures were not followed and there was no regulated 
bidding process.  Among other outcomes of this (alleged) 
uncontrolled procedure, al-Saraf related, 46 contracts 
amounting to $1.2 billion were awarded to Ahmed,s front 
company.  These contracts ranged from provision of Polish 
MI-8 and Sokol helicopters to ammunition, side arms, AK-47, 
s, and much else.  Talal claimed that al-Saraf added that 
most of the $1.2 billion was paid out and  moved into 
Jordanian and Lebanese banks by December 2004 (i.e., before 
most of the contracts were fulfilled).  Talal said that 
al-Saraf told him that cabal members were paid shares of 
the profit in stages, and asserted that he personally 
delivered a payoff of $4.8 million in cash to Gazi Yawwer. 
 
Leaking to Chalabi? 
------------------- 
 
12.  (S/NF) Al-Gaaod said that al-Saraf then removed copies 
of all 46 contracts from inside a cabinet and allowed Talal 
to leaf through them.  Talal said that al-Saraf explained 
that he had retained the copies along with other 
documentation to protect himself and to maintain leverage 
against the other cabal members, whom he complained are 
"cheating" him of his fair share of the take.  Talal added 
that al-Saraf is aligning himself with Ahmed Chalabi and 
may have already given some of this documentation to Chalabi. 
 
 
Al-Gaaod: Ahmed Has Put $400 Million in Jordanian Banks 
--------------------------------------------- ---------- 
 
13.  (S/NF) Based on his conversation with al-Saraf and 
others (allegedly including the Chairman of the Jordanian 
National Bank), al-Gaaod asserted that over $400 million is 
or was recently held in Jordanian banks in various 
accounts, and that Ahmed has at least another $200 plus 
million in the al-Warka bank in Baghdad, and in Lebanon. 
 
14.  (S/NF) Al-Gaaod said that the bankers told him that 
Ahmed said he would use some of this money to finance 
investments in Jordan.  He added that the JNB Chairman told 
him that Ahmed has already drawn funds from his accounts to 
purchase local real estate (including the former home of 
Prince Ra'ad), and $10 million in JNB investment portfolio 
packages. 
 
Jordanian Bankers Provide Further Insights 
------------------------------------------ 
 
15.  (S/NF) Embassy Amman ECON Counselor met on Thursday, 
June 8 with Michel Marto, Chairman of the HBJ.  Marto 
confirmed that Ahmed held large accounts at the Housing 
Bank.  Marto described Ahmed as an ethnic Kurd affiliated 
with President Talabani and the PUK who holds legitimate 
contracts from the U.S. DOD to import vehicles and spare 
parts for the Iraqi army and security forces, and who 
wanted Housing Bank to open letters of credit so that he 
could purchase these vehicles. 
 
16.  (S/NF) Marto said that after checking up on Ahmed, HBJ 
insisted on a 100% cash collateral for the letters of 
credit.  Ahmed had opened two letters of credit - the first 
(8-9 months ago) for JD 40 million ($56.5 million) and more 
recently for JD 70 million ($99 million); he had deposited 
exactly these amounts at Housing Bank to cover Marto's 
requirement for cash collateral, and according to Marto had 
not used them for any investments in Jordan.  Marto also 
said that while some of the money deposited to cover the 
letters of credit had come in as wire transfers, the bulk 
had come in as cash - "U.S. bills still in the wrapped 
stacks, never touched by human hands." 
 
Real Estate Purchases 
--------------------- 
 
17. (S/NF) On Tuesday, June 14, Emboffs met with Rajai 
Muasher, Chairman of Jordan National Bank (JNB).  Muasher 
claimed that the al-Warka Bank had contacted JNB eight 
months earlier and had asked that it open an account for 
Ahmed; JNB had done so in response to this request, 
presumably after doing due diligence.  Muasher said that 
JNB had only received deposits in the form of $30 million 
in wire transfers from the Housing Bank and that the 
transactions off the JNB accounts were primarily letters of 
credit for purchase of military vehicles.  He noted, 
however, that in addition to conducting substantial real 
estate speculation in Amman, Ahmed had bought out two 
issues of JNB 2- and 3-year CDs (valued at a total of $5 
million) and had contacted Muasher requesting the 
opportunity to purchase five million shares of JNB stock 
(valued at $28 million).  Muasher had refused the latter 
offer, but noted that Ahmed was only one of many new faces 
appearing in Amman with ridiculous sums of money about 
whose origin he could only speculate. 
 
Central Bank Comments 
--------------------- 
 
18.  (S/NF) Emboffs met on Sunday, June 12 with Central 
Bank of Jordan Deputy Governor Faris Sharaf, whose 
portfolio includes banking regulation.  Sharaf noted that 
the large transactions being made by Ahmed had come to the 
CBJ's notice as well, and that the CBJ had looked into it, 
but had been satisfied that the transactions were 
legitimate.  Sharaf did not know of any other banks with 
which Ahmed had dealt, or the extent of his cash deposits. 
Sharaf expressed confidence in Housing Bank's 
know-your-customer (KYC) due diligence, but showed 
less confidence in the Jordan National Bank.  He noted, 
however, that the CBJ would further investigate the 
accounts. 
 
Iraqi MOD Official Provides Further Confirmation 
--------------------------------------------- --- 
 
19.  (S/NF) In a further development, Emboff met informally 
on Saturday, June 11 with Iraq MOD Deputy Director for 
Security and Intelligence Asaad Abbood (strictly protect), 
who was in Amman along with other (non-MOD) Iraqi officials 
to participate in A U.S. Institute of Peace (USIP) 
workshop.  Without going into any other details, Emboff 
asked Abood (a former London-based exile who has worked in 
MOD since 2003) if he knew anything about MOD contracting. 
Abood took Emboff aside and volunteered considerable 
information on what he called an "outrageous" situation. 
 
20.  (S/NF) Abood was and is unaware of our discussions on 
this subject with al-Gaaod and the Jordanian bankers.  He 
independently confirmed al-Gaaod,s claim that Ziad Kattan 
and ("Barzani man") Shaways are central to a massive 
contracting scam initiated in 2004 with the cooperation of 
former Iraqi Minister of Defense Sha,lan (Abood was unaware 
of any involvement in the scheme by ex-President Gazi 
Yawwar).  Abood said that "everybody in the MOD knows about 
this."  Without elaborating, he asserted/speculated that 
most of the money has been paid into, and subsequent 
transactions conducted via, Lebanese banks. 
 
A "Polish Connection"? 
---------------------- 
 
21.  (S/NF) According to Abood, Kattan maintains complete 
control over contract awards in the MOD.  Abood said that 
Kattan has a Polish wife, now living in Poland, who owns a 
company that is a participant in many MOD contracts, 
including one that involved the purchase of $5 
million-worth of Kalashnikov ammunition for $20 million. 
Abood related that at a group meeting Kattan dismissed a 
sales approach by some Chinese would-be vendors by telling 
them bluntly "I am not interested in Chinese products, and 
I am the sole person deciding on MOD contracts for the Iraqi 
government." 
 
Misha al-Saraf: "The Biggest Thief of All" 
------------------------------------------ 
 
22.  (S/NF) In addition to Shaways, Abood named Mishal 
al-Saraf  (whom he said is a former senior advisor to 
Minister of Defense Sha,alan) as a key player with Kattan 
in various front company schemes.  He called al-Sharaf "the 
biggest thief of all."  Abood added that al-Sharaf recently 
"disappeared" from Baghdad after being asked to meet with a 
parliamentary committee investigating corruption; he did 
not indicate any knowledge that al-Sharaf is currently in 
Amman, or of any involvement by Jordanian banks. 
 
Further Al-Gaaod Comments 
------------------------- 
 
23.  (S/NF) In a subsequent discussion, Al-Gaaod (who is 
not aware of our other meetings) noted that it is perfectly 
possible that all contracts will be officially honored, 
with the profits to the cabal coming from major 
overcharges and "gold-plating."  By way of example he 
explained that "new" helicopters and other equipment may 
not necessarily be "newly-produced" (i.e., may come from 
old inventories) and that AK-47 ammunition can be bought 
cheaply in the region and billed as more expensive 
ammunition from Eastern Europe, etc.  However he 
acknowledged that nothing can really be known about any of 
this without a full-fledged audit. 
 
Tip of the Iceberg? 
------------------ 
 
24.  (S/NF) During this discussion, al-Gaaod claimed, 
without elaborating, that a similar scheme was "probably" 
pursued by the IIG Ministry of the Interior, and that Sha, 
lan and company also had separate front company structures 
including one involving food services, supplies, and 
equipment, that has led to over $100 million being placed 
in Lebanese banks.  (Note: Al-Gaaod is a good personal and 
political friend of Sha,lan,s, and seemed clearly disturbed 
at the scale of the corruption (if that,s what it is).  He 
repeatedly tried to make excuses for Sha,lan, suggesting at 
one point that he was probably a bit player while at other 
times asserting that Sha,lan was the likely originator of 
the scheme.  He also opined that Yawwer and Sha,lan may 
have needed the funds to offset the extensive transfers 
provided by Iran to finance their opponents.  End Note). 
 
Embassy Baghdad Comments 
----------------------- 
 
25.  (S/NF) While the information from sources in Amman 
provides new details on MOD corruption, including the 
alleged involvement of Barzani, the issue itself is 
unfortunately not new.  Former Prime Minster Allawi 
initiated an investigation near the end of the IIG and 
the Bureau of Supreme Audit recently published its 
report on the subject - Embassy forwarded a 
translation to NEA/I in late May. 
 
26. (S/NF) As highlighted in ref c, which noted the 
concerns of Iraqi Commissioner on Public Integrity Judge 
Radhi on malfeasance within MoD and other ministries 
during the IIG, full support must be given to the 
relevant Iraqi authorities in investigating and stamping 
out corruption.  Capacity within both MOD and MOI was 
minimal during the IIG with few if any standard/legal 
contracting procedures followed.  To this end, Embassy 
Baghdad and MNSTC-I have helped put together a number 
of training sessions for both MOD and MOI counterparts 
on proper contracting procedures. 
 
27. (C) The Iraqi Transitional Government has established a 
new committee through which approval must be obtained for 
any government contracts valued over $2 million.  Any 
government payments over $200,000 can also no longer be done 
in cash (ref b).  The best of procedures or systems, however, 
will not prevent corruption when the officials responsible 
for implementing them are themselves dirty.  With respect to 
MoD, it is at least a positive sign that DG Kattan was 
removed 
from the ministry on June 19.  Kattan and Brusqa Shaways are 
undergoing magistrate,s investigation.  Both may face 
prosecution in the Central Criminal Court of Iraq. 
 
28. (C) Due to the efforts of CPI Commissioner Radhi, the 
former IIG Minister of Labor, the Deputy Ministers of Housing 
and Construction and Defense, and the Commander of the Air 
Force have appeared recently before the Central Criminal 
Court 
of Iraq (CCCI).  They have been released on bail pending 
completion of judicial investigation and trial.  Also, an 
arrest warrant has been issued for the former Minister of 
Transportation (currently rumored to be in Jordan); the 
assets 
of former Minister of Housing and Construction have been 
frozen, 
and the Deputy Minister of Environment has been jailed 
pending 
completion of a judicial investigation and trial.  The recent 
detention in Baghdad by MNF-I of Sa'ad Bunnia, a member of 
the 
Bunnia family business clan, with $6 million in cash he 
claimed 
was related to an MoD contract, however, illustrates that 
fighting corruption and bringing Iraqi procurement practices 
in 
line with professional standards will realistically be a 
long-term work in progress.  New Minister of Defense Duleimi 
has repeated to us on several occasions his personal 
commitment 
to eliminating corruption in his ministry. 
 
HALE