Tracking Saddam's Billions


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 Iraqi 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 Iraqi accounts "as a matter of urgency."

The combatants aren't the only searchers. Iraq 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 & 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 Lagardère, 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-Mokhtar, 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 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, Issam 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 Iraqi 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. "It 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 served 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 Iraqi 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


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