The US flew nearly $12 billion in shrink-wrapped $100 bills into Iraq, then distributed the cash with no proper control over who was receiving it and how it was being spent.

The staggering scale of the biggest transfer of cash in the history of the Federal Reserve has been graphically laid bare by a US congressional committee.

In the year after the invasion of Iraq in 2003, nearly 281 million notes, weighing 363 tons, were sent from New York to Baghdad for disbursement to Iraqi ministries and US contractors. Using C-130 planes, the deliveries took place once or twice a month with the biggest of $2,401,600,000 on June 22, 2004, six days before the handover.

Details of the shipments have emerged in a memorandum prepared for the meeting of the House committee on oversight and government reform which is examining Iraqi reconstruction.

Its chairman, Henry Waxman, a fierce critic of the war, said the way the cash had been handled was mind-boggling. "The numbers are so large that it doesn't seem possible that they're true. Who in their right mind would send 363 tons of cash into a war zone?"

The memorandum details the casual manner in which the US-led Coalition Provisional Authority disbursed the money, which came from Iraqi oil sales, surplus funds from the UN oil-for-food program and seized Iraqi assets.

"One CPA official described an environment awash in $100 bills," the memorandum says. "One contractor received a $2 million payment in a duffel bag stuffed with shrink-wrapped bundles of currency.

"Auditors also found that $774,300 in cash had been stolen from one division's vault. Cash payments were made from the back of a pickup truck, and cash was stored in unguarded sacks in Iraqi ministry offices. One official was given $6.75 million in cash, and was ordered to spend it in one week before the interim Iraqi government took control of Iraqi funds."

The minutes from a May 2004 CPA meeting reveal "a single disbursement of $500 million in security funding labelled merely 'TBD', meaning 'to be determined'."

The memorandum concludes: "Many of the funds appear to have been lost to corruption and waste ... thousands of 'ghost employees' were receiving pay cheques from Iraqi ministries under the CPA's control. Some of the funds could have enriched both criminals and insurgents fighting the United States."

Source: China Daily/The Guardian