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"Mr. Greenspan is Flat Wrong": Pulitzer Prize-Winning Journalists Respond to Alan Greenspan's Claim that He Didn't Know about Federal Reserve's Role in Iraq's Missing Billions

StoryOctober 09, 2007
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James Steele

investigative journalist and Vanity Fair contributing editor.

Donald Barlett

investigative journalist and Vanity Fair contributing editor.

Last month, during an appearance on Democracy Now!, former Federal Reserve Chair Alan Greenspan questioned a report in Vanity Fair that $12 billion was shipped from the Federal Reserve Bank of New York to Iraq, of which $9 billion cannot be accounted for. Today investigative journalists Donald Barlett and James Steele respond to Greenspan. [includes rush transcript]

This is a rush transcript. Copy may not be in its final form.

AMY GOODMAN: We return to a story we just recently covered: Iraq’s missing billions. Just weeks after the invasion of Iraq, the Bush administration began airlifting planeloads of cash to Baghdad for use by U.S. occupation officials. $12 billion in U.S. currency was shipped in just over a year. But where did the money go? To date, at least $9 billion cannot be accounted for.

Last month, Democracy Now! interviewed the investigative journalist team, Donald Barlett and James Steele. They published a shocking exposé in Vanity Fair tracking how the money went from the Federal Reserve to Iraq.

Well, two weeks later, the former Federal Reserve chair, Alan Greenspan, appeared on Democracy Now! for a debate with the journalist Naomi Klein. In our interview, I asked Alan Greenspan about Barlett and Steele’s piece.

AMY GOODMAN: I wanted to […] ask you about, well, a piece by Jim Steele and Don Barlett that came out in Vanity Fair, where they’re talking about the billions lost in Iraq. And they begin their piece by saying, "Between April 2003 and June 2004, [$12 billion] in U.S. currency — much of it belonging to the Iraqi people — was shipped from the Federal Reserve to Baghdad, where it was dispensed by the Coalition Provisional Authority. Some of the cash went to pay for projects and keep ministries afloat, but, incredibly, at least $9 billion has gone missing, unaccounted for, in a frenzy of mismanagement and greed."

Alan Greenspan, when you were head of the Federal Reserve, how much knowledge do you have of this? And did you investigate this? Were you aware of this at the time?

ALAN GREENSPAN: Well, let me say that what we were involved in was essentially endeavoring to create a viable currency for the central bank of Iraq. And what we did do was — I think very successfully — create what is a viable financial system, even under the circumstances that currently exist. There was, as far as I can judge, a huge drain of the resources into areas which nobody to this day can understand or follow. It had nothing to do with the central bank. In our relationships with them, we were merely acting as an intermediary to assist them in creating a system, which they now have, which is working reasonably well, despite all of the problems that are going on. The issue which you are referring to had nothing to do with the Federal Reserve in any of our relationships with the central bank.

AMY GOODMAN: Well, they are talking about, in one day, for example, the East Rutherford operation center of the Federal Reserve Bank of New York, 100 Orchard Street in East Rutherford, a tractor-trailer truck pulling up, and though accustomed to receiving and shipping large quantities of cash, the vault had never before processed a single order of this magnitude: $2.4 billion in $100 bills. But ultimately, again, $9 billion of $12 billion gone missing in Iraq.

ALAN GREENSPAN: I am not familiar with any such evidence. And it was certainly not brought to my attention. I, frankly, find it very unlikely that those orders of magnitude were involved in any of the numbers that we were dealing with. You have to make certain that — there’s been a lot of confusion about losses, and people have used the dinar, the basic currency unit of Iraq, and assumed they were American dollars. And, of course, that gives you a highly distorted view. There’s been, I’ve seen, several reports fairly recently in which that sort of mistake was being made. But what I can tell you is that no such numbers of any order of magnitude of the type you are discussing came to the attention of the Federal Reserve.

AMY GOODMAN: This is based on that award-winning article in Vanity Fair, or the team who have won —

ALAN GREENSPAN: Let me put it this way, award-winning doesn’t necessarily —

AMY GOODMAN: Well, no, no. I mean Don Barlett and Jim Steele, Pulitzer Prize-winning journalists. I’m sure you know their work. But Naomi Klein?

NAOMI KLEIN: Well, I would just add that it’s quite surprising, actually, that Mr. Greenspan is unaware of this scandal around Iraq’s missing billions, because Paul Bremer had to testify before Congress and was asked directly about those missing billions. It’s been the subject of very high-level investigations. There is a huge paper trail around it. So this is hardly a secret, and it’s hardly just a matter that’s confined to Vanity Fair. This is —

ALAN GREENSPAN: Oh, I’m not saying that the losses are not real. I think they are, because, obviously, we can’t account for all the oil revenues. I’m just merely saying it’s not something which was directly related to any of the actions which the Federal Reserve Bank of New York, to which we were referring, was involved, as far as I know.

AMY GOODMAN: That was the former Federal Reserve chair Alan Greenspan speaking on Democracy Now! last month. For a response, we are joined by that Pulitzer Prize-winning journalistic team, the authors of the Vanity Fair piece: Don Barlett and Jim Steele, two of the nation’s top investigative journalists, joining us now from Philadelphia, where they live. Welcome to Democracy Now!, Jim and Don.

Don, why don’t you begin. Your response to the former head of the Fed, Alan Greenspan?

DONALD BARLETT: Good to be with you, Amy. One of the problems is that Mr. Greenspan speaks in a language that is unknown to most of us. He’s done this for years in a kind of economic doublespeak which goes unchallenged. But in this particular case, Mr. Greenspan is flat wrong. Jim had obtained a lot of this information, which came from Mr. Greenspan’s Federal Reserve Bank.

JAMES STEELE: I mean, one of the things that’s — it’s hard to decide where almost to begin to talk about this comment of his. He talks about confusion. One of the most significant things that’s part of this whole process, the fact that they don’t know where this came from, where these numbers came from, all of these came, numbers from the Federal Reserve Bank of New York, which is a — if not a branch, it’s certainly part of the Federal Reserve system, which Chairman Greenspan headed for so long. And the Federal Reserve Bank of New York provided these to various U.S. government agencies, various congressional committees. There are literally thousands of pages of documents that led to the statistics that we used in our article, which was that basically $12 billion was shipped in this 14-month period. And on the one day in particular you mentioned, the $2.4 billion, all of that is out of records of the Federal Reserve system. So the Federal Reserve system certainly was intimately involved in processing this cash from the very beginning.

Once it got to Iraq, which is the point we made in our story, that’s where everything vanished, where there was absolutely no oversight, where there was no follow-up, where — and the idea that this went into creating a viable system over there is almost comical, because when you look at some of the records in Iraq, you see that much of this money went to the Ministry of Finance, which in turn turned this over to various Iraqi banks. But exactly where it went from there, nobody to this day knows.

JUAN GONZÁLEZ: And, Jim, is it conceivable to you that Chairman Greenspan would not know about the $2.4 billion on that particular day and the inability to track it afterwards?

JAMES STEELE: We are speculating on this, but just based on what he said, it sounds to us that he did not know about this, and —- but, again, as I think Naomi made the point earlier, and we certainly made it in the article, this is not exactly a secret. There’s a substantial amount of documentation out there about those transfers. They’re listed by day. And that’s why we were able to make the statement of the $2.4 billion transfer on that June day back in 2004. That was the largest single transfer of currency in the history of the New York Fed, indeed in the history of any branch of the Federal Reserve. So, all of that -—

AMY GOODMAN: How could Alan Greenspan, who at the time was the head of the Federal Reserve, not know about this transfer?

JAMES STEELE: Your guess is as good as ours on this one.

DONALD BARLETT: But I think an even bigger issue here, Amy, is that Alan Greenspan always speaks with great authority, often on areas and subjects he really doesn’t have much knowledge in, but yet he is never, ever — and when he was head of the Federal Reserve, was very seldom challenged. And this is one case in which he’s put his foot in his mouth, because the Federal Reserve did, indeed, do all of the things that were attributed to them in the article. And there’s nothing — as Jim indicated, there’s a record of this. And there were also — I mean, there were a lot of emails back and forth between the Federal Reserve and the various agencies of the U.S. government. So the record is voluminous here, and for Mr. Greenspan to suggest it’s something — that there were confusing dinars and dollars is really disingenuous.

JUAN GONZÁLEZ: And, Don Barlett, what about the company that was supposed to be monitoring this money, NorthStar, that you wrote about in your piece?

DONALD BARLETT: This is really important, Juan. And maybe a little historical perspective: if you go back through the 1990s, there was a mutual fund, so to speak, in the Bahamas called Evergreen Security, which was selling its certificates around the world, especially in the U.S. A Chicago schoolteacher emptied out her retirement fund and invested the entire amount. Well, Evergreen Security had been run for the most part by Patrick Thomson, a resident of the Bahamas, for a long time. And it was nothing more than a Ponzi scheme, and in the end more than $200 million disappeared. Well, it was to Mr. Thomson that this very mysterious Thomas Howell in La Jolla, California, turned to create a company for him called NorthStar. And a few years later, lo and behold, NorthStar is retained by the Pentagon to make sure the money in Iraq, the $12 billion, and billions more, does not go missing, which, of course, it did go missing.

JAMES STEELE: When we looked into the background of NorthStar, come to find out this is not your normal accounting or auditing operation. It operates out of a private house in a suburb of San Diego. All attempts to interview the individual, Thomas Howell, who apparently heads NorthStar, failed. He would talk to us a couple times, but said that his hands were tied. The Pentagon would have to give him approval to talk, and they did not. We looked into other aspects of the operation out of this house. Turns out some of it’s home improvement. One is supposedly international financial consulting, all very vague, all very, very mysterious.

But what does it say to us about the way, in part, we run this war over there, that the Pentagon and the Coalition Provisional Authority turned to a company, whose ostensible — one of its functions running out of that address is home remodeling, to supervise what’s going to happen to billions of dollars being airlifted from this country to Iraq? It may be almost a metaphor for the way we run that whole operation over there.

JUAN GONZÁLEZ: And were you ever able to trace the way or the connection between these individuals at NorthStar and the contracting agencies in the government that gave them this contract?

DONALD BARLETT: No. The only thing is that it is crystal clear, and Paul Bremer insisted, that this was a Pentagon arrangement and that he had no say over this whatsoever and that NorthStar was basically a creature of the Pentagon, in terms of supposedly tracking this money. And again, you’re talking about a company set up by a person involved in a $200 million stock scam. It just raises all kinds of questions, you know, as to why the Pentagon would utilize such a resource.

AMY GOODMAN: So you have an accounting firm created by a mysterious La Jolla man by an equally mysterious Bahaman resident who specializes in setting up offshore entities used to launder money, concealing assets, avoiding taxes, a man who presided over a securities firm from which $200 million was disappeared. Don Barlett and Jim Steele, we already talked to you about this in our previous piece. How has the press followed up on this expose in Vanity Fair, Don?

DONALD BARLETT: This is interesting. I mean, NorthStar, the company’s identity was hanging out there. It’s been hanging out there for a long time. But basically no one has looked at it. And it goes beyond the news media. It also goes to the heart of congressional investigating committees, of government — nobody’s interested. And that really raises red flags in our mind as to why you wouldn’t be curious about a company assigned the task of making sure billions don’t disappear, and they disappear.

AMY GOODMAN: Well, Don Barlett and Jim Steele, I want to thank you very much for being with us, for doing the piece in Vanity Fair, and for all of your work. The Pulitzer Prize-winning journalistic team, speaking to us from Philadelphia.

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