When the embezzlement of the equivalent of almost $2.5 billion from the Iraqi tax authorities was made public last week, it was quickly dubbed the “theft of the century.”
For many Iraqis, however, that seemed to be an exaggerated label and an attempt to paint a partial picture of the endemic corruption in Iraq.
The “biggest robbery in Iraq’s history,” which is also how the heist has begun to be known, amounts to disinformation that benefits the regime of kleptocrats in Iraq, a country that has been one of the most corrupt in the world for nearly 20 years.
The case was disclosed by the oil minister in the outgoing Iraqi cabinet, Ihsan Abdel-Jabbar, who said he had ordered an investigation when he was acting finance minister.
Abdel-Jabbar was appointed to the job following the resignation of former minister Ali Allawi in August following the uncovering of a similar scandal at the Iraqi Rafidain Bank.
Preliminary reports emerged on 14 October when the Finance Ministry said it had uncovered the theft of 3.7 trillion Iraqi dinars (about $2.5 billion) from the account of the General Tax Authority at the Rafidain Bank.
The Iraqi State News Agency (INA) reported that an internal probe by the Finance Ministry had found that the money had been withdrawn from the account at the state-owned bank.
The agency said that the ministry had asked the Integrity Commission, the government’s anti-corruption body, to investigate the case. Later, a Baghdad court ordered the summoning of the director-general of the General Tax Authority and his assistant, as well as other authority officials.
A statement by the judiciary, which has been tasked with carrying out its own probes, noted that its decision was in accordance with the Iraqi code on crimes against government funds.
No more details have been released from the government, the commission, or the judiciary, but Iraqi social media has been awash with talk and documents about the scandal.
According to a 40-page document quoted by some media outlets, the theft was carried out by using five fake companies and was done by a large group of officials and employees of the General Tax Authority and the Rafidain Bank, along with senior officials in the government and parliament.
The five fake companies, with suspicious names such as the Hunchback Whale, the Baghdad Wind, the Worshipper, the Creatives, and the Evening Desert, were registered with the state-run National Investment Commission (NIC) without mentioning their business interests or financial portfolios.
One of these companies, Baghdad Wind, is registered by an owner named Hussein Kawa Abdel-Qadir, 21, who withdrew some 624 billion dinars (about $500 million) from the Tax Authority’s account.
The company was only established a short while before the withdrawal of the cash, and it started with a registered capital of only one million dinars, or about $750.
Other significant details have showed that the collaborators targeted a bank account set up by the General Tax Authority for pending income tax refunds.
Under regulations set out by the authority, large taxpayers deposit advance payments in the Rafidain Bank account pending a review of how much they are required to pay.
Until last year, the review was usually made by the Board of Supreme Audit (BSA), Iraq’s primary state-run audit institution, which is entitled to oversee government financial operations.
The procedure was surprisingly terminated in 2021 when the head of the parliament’s Finance Committee asked the Ministry of Finance, which oversees the General Tax Authority, to apply an “internal audit to the refund account.”
The move to stop the BSA audit, legal experts say, is a violation of the law endorsed by Mustafa Al-Kadhimi, who was chosen as prime minister after massive nationwide anti-corruption protests in 2019.
Between September 2021 and August 2022, some 247 cheques were cashed to a value of some $2.5 billion to the owners of the fake companies, leaving only $100 million in the account.
Public outrage following the scandal has prompted reactions from other stakeholders and the UN mission in Iraq.
Iraq’s Supreme Judicial Council said a Baghdad court had started investigating the case in August. It described those behind it as an “organised network linked to influential figures.”
In a statement, the council said arrest warrants had been issued against a number of people, and it has heard evidence from Finance Ministry employees.
The Ministry of Finance issued a lengthy statement detailing the scandal and confirming the arrest of some of the officials accused. The General Tax Authority said it had ordered the seizure of the assets of five of its top officials involved in the case.
Iraq’s prime minister-designate Mohamed Shia Al-Sudani has vowed to make the fight against corruption a top priority of his government.
“We will not hesitate to take real measures to curb the corruption that has so brazenly spread throughout the state and its institutions,” Al-Sudani tweeted.
Al-Kadhimi, who lost his chance to secure a second term as prime minister after Al-Sudani’s nomination, denied any wrongdoing and blamed unnamed rivals for spreading “misinformation and attempting blackmail”.
UN Special Representative for Iraq Jeanine Hennis Plasschaert has called on the Iraqi authorities to recover the $2.5 billion that was embezzled. “Retrieve these funds and return them to their rightful owners,” she tweeted.
Corruption has been rife in Iraq since the 2003 US-led invasion of the country that toppled former dictator Saddam Hussein. Many politicians have been arrested or removed from office for malpractice.
Iraq is considered to be one of the most corrupt countries in the world. It was ranked 160th out of 180 nations on the international NGO Transparency International’s 2021 Corruption Index, slightly better from previous years when Iraq topped the list.
The latest corruption case is the second biggest to take place in Iraq this year. In August, a court awarded an electronic-payment processing company $600 million in compensation from the Rafidain Bank in a dispute.
The ruling disclosed a shady deal between the Rafidain Bank and a Baghdad foreign-currency bureau to provide electronic-payment services to government employees and pensioners.
The deal was cancelled by former finance minister Ali Allawi on the grounds that the Ishtar Gate company, which was set up by the currency bureau to carry out the transactions, did not meet the terms and conditions set by the ministry.
The cancellation of the contract prompted the company to sue the bank for compensation on the grounds of a penalty clause between the two sides.
Though it is not clear if the owner of the company, reportedly well-connected to a Shia political group, has received the compensation, the disclosure sparked protests on social media platforms in Iraq and calls for an investigation.
Lawmakers and activists in Iraq have also revealed other shady business deals involving millions of dollars, including a Baghdad International Airport security programme.
A bogus Canada-based firm was awarded a $22-million contract for security at Baghdad Airport to replace the contract previously held by the UK’s G4S.
According to Iraqi activists, including some in Canada, Biznis Intel, which was awarded the contract, may be a front company set up to disguise the business interests of Iraqi politicians.
MP Alia Nassif said the company, registered under the name of Hafeez Oki, an Afghan asylum-seeker in Canada, had not provided credible accreditation for its capital assets, expertise, or previous business deals.
The deal with Biznis Intel is similar to countless other contracts signed with bogus companies over the past two decades.
In 2013, the government of then Iraqi prime minister Nouri Al-Maliki signed a $6 billion contract with Satarem, a company based in Switzerland, to build and operate a 150,000 barrels per day (bpd) oil refinery in the southern province of Maysan.
An Iraqi expert based in Switzerland who investigated the deal concluded that Satarem was a fake company and only existed on paper. The revelation forced Al-Maliki to cancel the deal.
In 2011, the Iraqi government cancelled a $1.2 billion power generation contract with Capgent, a Vancouver-based company, after it was disclosed that it was fake.
Corruption in Iraq has become so deep-rooted that many Iraqis believe that the government is so full of compromised officials that they can do little to stop it.
In 2021, former president Barham Salih said that $150 billion of oil money had been stolen and smuggled out of Iraq in corrupt deals since the 2003 US-led invasion.
In a report last month, the London based think tank Chatham House estimated that from 2006 to 2014 Iraq lost an estimated $551 billion to corruption.
With annual budgets that reach over $100 billion and a government that is based on a power-sharing system, graft forms the backbone of conducting business and getting things done in Iraq.
“I know to what extent government capacity has deteriorated over the past 15 years, in a way that the political parties, as well as the various interest groups, have practically confiscated broad areas of the state,” former finance minister Allawi wrote in his resignation letter in August.
*A version of this article appears in print in the 27 October, 2022 edition of Al-Ahram Weekly.