An Accounting Scandal
That Could Dwarf ENRON

Douglas A. Borer
9 September 2004

Sometime in the not-too-distant future, Alex Trebek, host of the TV game show "Jeopardy," will unveil a category labeled "scandals." Afer low-value questions on Watergate, Whitewater and Monica Lewinsky, behind the $1000 card will appear the answer "the biggest accounting scandal in U.S. history." Thinking that easy money is at hand, the fastest contestant will pose the question "What is Enron?" only to be stunned by the buzzer signaling a wrong answer. It is likely that the other stumped players will remain silent until time runs out and Trebek, symbolic grandmaster of truth and factoid, states in his faintly superior yet ever-patient voice, "Iraq, Iraq..."

In the months to come, even as Congressional efforts to balkanize the CIA play themselves out among Washington's power elite, the revelation that the Iraq War began as an accounting scandal will emerge. Prior to hostilities, President Bush perceived the proliferation of Iraqi weapons of mass destruction as the greatest threat to U.S. national security. As such, the American case against Iraq was based on a fairly simple set of rules and some basic accounting. The rules were clear: Saddam Hussein was required by various U.N. Security Council resolutions to account fully for his weapons of mass destruction; he was required to disarm; and it was up to him to prove he had no illegal weapons.

Hussein swore on a stack of Korans no weapons or programs existed, but virtually every intelligence analyst on the planet did not believe him, because the books did not balance. David Kay and Richard Butler, both former U.N. chief weapons inspectors, have testified that official Iraqi records seized in the 1990s clearly showed significant quantities of various chemical agents that Iraq had produced, but did not turn over for destruction.

Bush agreed with the intelligence experts -- one side of the deadly ledger did not match the other. These ledgers served as the most compelling evidence that the President pointed to in making his case for war.

In ferreting out the truth, we must remember that Hussein's Iraq was controlled by a Baathist Party apparatus whose tens of thousands of members were all enriched by their connections to the government. Like past totalitarian regimes, the official salaries of army generals, police officers, party members and family cronies were relatively modest. Great wealth, however, was generated for members of "the regime" through widespread corruption.

Corruption occurred most readily in government contracting, with defense contracts among the most lucrative sources of graft. The United States always asserted that Iraq was a "corrupt" regime but the entire global intelligence community, including the CIA, apparently failed to factor in the element of corruption in the assessment of Iraq's WMD capabilities.

Corruption may be very difficult to quantify, but just because something is difficult does not mean it is not vital. Here's a hypothetical example of how corruption worked. Ali, a Baathist Party loyalist, served as the deputy minister of defense procurement. He contracted with Baba, the manager of Baghdad Chemical Corporation, to produce 50,000 liters of Sarin nerve gas. The government paid Baba the entire price of the contract, but Baba's factory produced only 40,000 liters. However, Ali recorded the delivery of 50,000 liters in the government ledger. He and Baba then split the money for the 10,000 liters that were never produced.

The Baathists were fat and happy until years later, when the U.N. inspectors and the CIA started cross-checking the official books with the inventory of destroyed material. They assumed the books were accurate and concluded Hussein was lying. In retrospect, it appears he was apparently telling the truth about WMD, even though he knew very well that the books did not tell the whole story of how he and his cronies had skimmed billions from state contracts. Indeed, corruption helped keep Hussein in power for three decades; ironically, it was the CIA's failure to compute that corruption in its intelligence estimates that ultimately led to his downfall.

Even as Enron fades to become a minor footnote in the collective memory of our time, the accounting scandal that helped catalyze the Iraq War is a crucial lesson that intelligence analysts and policy-makers must learn by heart.

Douglas A. Borer, an associate professor in the Department of Defense Analysis at the Naval Postgraduate School in Monterey, is the author of Superpowers Defeated: Vietnam and Afghanistan Compared, (Frank Cass, 1999).

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