The Petty Profiteers of Iraq’s Reconstruction

By Zack Kopplin

Pete Buttigieg, Democratic candidate for president, has refused to share meaningful details of his work for McKinsey & Company. He said the consultancy won’t release him from a nondisclosure agreement, although McKinsey did clear him to release the names of his clients. So far, Buttigieg has only provided the names of his clients empty summaries of his assignments, like grocery pricing in Canada and economic development in Iraq and Afghanistan. “I served a US government department in a project focused on increasing employment and entrepreneurship in those countries’ economies,” he said about the latter project. But client names and summaries aren’t enough.

These projects, especially the ones in built on war profiteering in low-oversight environments like the Middle East and Central Asia, require real transparency.

Internationally, McKinsey is known for serving dictators and advising clients to pay bribes, but Buttigieg believes the public should trust he avoided conflicts of interests and corruption. “I never worked on a project inconsistent with my values,” he said in a statement. That may be, but his work in Iraq put him a few connections away from deals with sketchy oligarchs. Voters shouldn’t have to take his word that he kept his hands clean.

McKinsey was hired to help the Task Force for Business and Stability Operations, a US government office charged with privatizing companies owned by the Iraqi government. At the time this operation was taking place, Nouri al-Maliki, a corrupt CIA-backed warlord, was Iraq’s Prime Minister. His cronies controlled large swathes of Iraqi industry and they benefited from task force projects.

We don’t know exactly what Buttigieg or McKinsey did for the task force, but in 2009, when Buttigieg worked on McKinsey’s Iraq project, the task force was facilitating the construction of a Baghdad hotel, the Shams Rotana. The “task force worked feverishly to support the project,” introducing wealthy Iraqis to American investors, reported the New York Times. According to a leaked State Department cable, the task force also facilitated an Iraqi government land lease and investment license for the hotel. The US government kicked in a $50 million loan for the hotel, but construction stalled.

The hotel was primarily owned by five Iraqi investors, including at least one al-Maliki connected oligarch, Ali Shamara, who has a stake in it through his family companies. Three of the Iraqi investors were never disclosed.

Last year, the Wall Street Journal obtained a General Electric company report about Shamara and corruption in the Iraqi energy industry, prepared by Hakluyt, a business intelligence firm. Shamara partnered with the multinational company on a “massive 2008 deal in which [General Electric] sold 56 9E turbines to the Iraqi Ministry of Electricity.”

Shamara denied allegations of corruption, but according to Hakluyt, he’s connected. “Ali Shamara earned his fortune largely through his relationship with former Prime Minister Nouri al-Maliki,” said the report. “Any firm that partners with him runs—at the very least—serious reputational risks.”

But that wasn’t a problem for the task force.

Beyond the hotel, the task force may even have helped connect Shamara to General Electric in the first place. “With support from the [Task Force for Business and Stability Operations], Daimler Benz, Boeing, General Electric, Caterpillar, Case New Holland, and Cummins established operations in Iraq in 2008,” said a June 2010 task force Lessons Learned report.

Buttigieg needs to show he wasn’t involved with the Shams Rotana or other dirty deals with Shamara and other oligarchs that the task force lined up.

Much of the task force’s work isn’t public, so it is hard to know exactly which deals it helped broker. The task force “helped 66 state-owned factories either restart or increase production,” according to a Defense Department report, but the identities of most of those factories remain undiscovered. However, many privatizing state-owned enterprises fit the profile of companies that ended up in the hands of oligarchs.

Take, for instance, the Baghdad Soft Drinks Co., Iraq’s Pepsi affiliate. There is no evidence connecting the task force to the privatization of Baghdad Soft Drink Co, but it’s exactly the type of project that the task force could have worked on.

Originally, Baghdad Soft Drinks Co. was owned by Saddam Hussein’s son Uday. In 2007, it was bought by a group of investors led by a banker named Iyad Yahya, from al-Bilad Islamic Bank. Al-Bilad bank is connected to the network of the late Ahmad Chalabi, the Iraqi politician who spread false rumors about al-Qaeda and weapons of mass destruction in Iraq. Bank officials allegedly laudered hundreds of millions of dollars for Hezbollah and Iran, and the bank has been sanctioned by the Department of Justice.

The soda company’s other buyers are a group connected to Essam al-Asadi, an oligarch associated with Nouri al-Maliki. Al-Asadi’s network has been involved in a wide-ranging military contractor corruption scandal.

The post-invasion privatization of Iraq’s state-owned enterprises was replete with deals like the sale of Baghdad Soft Drinks Co. and the construction of Shams Rotana, around the time Buttigieg worked for McKinsey in Iraq. Buttigieg has said there’s no reason to worry, but if a presidential candidate was involved in divvying up war spoils in a political environment as corrupt as Nouri al-Maliki’s Iraq then voters have every reason to be worried.

Zack Kopplin is an investigative journalist.

One thought on “The Petty Profiteers of Iraq’s Reconstruction

  1. Pingback: العراق.. جسد ينخره مرض الفساد ..الجزء الاول - ثورة احرار العراق (ثورة التك تك)

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