Development fund for Iraq: a situation of chaos

A criminal inquiry has been launched into a suspected case of embezzlement by US officials administering &to=http:// ' target=_blank>Iraqi construction money in the town of Hilla, where almost $100m (Ј52m) went missing in little more than a year.

The special inspector general for Iraqi reconstruction chose the south-central region headquarters at Hilla, 62 miles south of Baghdad, as a test case to study how reconstruction funds were being spent.

Staff discovered a situation of chaos, with millions of dollars in cash changing hands every day with little or no paperwork, leaving $96.6m unaccounted for between June 2003 and October 2004.

The special inspector general's office reported that the coalition provisional authority, which held power until last June, had lost track of $9bn in reconstruction funds as a result of poor book-keeping.

The Hilla case marks the first time American officials have been investigated for large-scale corruption in Iraq, publishes the Guardian Unlimited.

The money came from the Development Fund for Iraq, an account created with revenue from Iraqi oil sales, funding from the United Nations' now-defunct &to=http:// ' target=_blank>oil-for-food program and Iraqi assets repatriated from abroad. An office in the U.S.-led multinational force, which has helped run the country since power was transferred to the Iraqis in June 2004, was responsible for overseeing the money. But the audit found that its efforts were beset by rampant disorganization and sloppy bookkeeping.

Criminal investigators with the office of Special Inspector General Stuart W. Bowen Jr. will be looking into whether anyone involved committed fraud, the audit says, although it does not disclose who is being investigated.

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