On Saddam's Money Trail

Whom did Kuwait call? Jules Kroll, business sleuth

Two months after the Iraqi invasion, Kuwait's rulers decided they needed a bit of investigatory work. There had long been rumors that Saddam Hussein had billions of dollars squirreled away in secret accounts and companies. Even before they got their country back, the Kuwaitis wanted a detailed accounting of that hidden wealth so they would know where to find it.

Whom did they call? That was easy--the thugbusters. Kuwait hired Kroll Associates, a New York-based firm of sophisticated business gumshoes who have built a record of high-profile cases. Their digging has included everything from investigating Ivan Boesky's insider trading for Drexel Burnham Lambert to tracking down the hidden assets of Philippine leader Ferdinand Marcos and Haiti's strongman Jean-Claude (Baby Doc) Duvalier.

For Jules Kroll, the 50-year-old former assistant district attorney who heads the firm, the Saddam investigation has been the most celebrated of all. Kroll released some details of his findings last week on CBS's "60 Minutes"--and promptly got nearly 300 calls from journalists. Saddam and his family, Kroll alleged, operated a "Mafia-like" operation that skimmed off at least $10 billion of Iraqi oil revenues over the last 10 years. The money was used, he said, mainly to establish and bankroll a vast network of concealed companies in Europe and the United States, which acted as fronts for buying military technology. Saddam's agents, Kroll said, also invested the money in numerous publicly traded companies, including Hachette, the French publisher of such U.S. magazines as Car and Driver, Woman's Day and Elle.

Kroll's appearance on CBS was no accident. The release of his report was part of a plan to help Kuwait recover money for damages--and some observers found Kroll's numbers questionable. So far an estimated $3 billion in Iraqi foreign assets around the world have been frozen, but claims for reparations will far exceed that. This week the U.S. government is expected to identify 100 companies and individuals worldwide who are fronts for Iraq, mainly in arms procurement. That should lead to more asset freezes. The United States has frozen more than $1 billion in Iraqi assets, including a $300,000 Aston Martin in Miami--a replica of James Bond's car in the movie "Goldfinger"--that is supposedly owned by Saddam's son, Uday.

Kroll's report, drawn mainly from Iraqi expatriates and foreign press accounts, says oil profits were the main source of Saddam's slush fund. According to Kroll, Saddam and his family took 5 percent of Iraq's $200 billion in oil sales over the last decade. Jawad Hashim, Iraq's minister of planning from 1968 to 1975 and adviser until 1982, thinks Kroll's estimate is conservative. He told NEWSWEEK in London that the suspected oil skimming actually dates to 1972, when Iraq set up a "community fund" that set aside 5 percent of the nation's oil revenues. The fund was in the name of Saddam's Baath Party, not the government, Hashim said. "It did not make the minister of finance happy," he recalls, "but that was the decision of the legislative arm." Hashim estimates that after 20 years the fund has grown to some $33 billion.

According to Hashim, Saddam also tapped the so-called secret palace budget, which started in 1969 with a mere $1 million but began ballooning in the early '70s as Saddam tightened his grip on power. When Iraq invaded Kuwait last year it had grown to $4 billion, Hashim says, all supposedly in cash of foreign currencies stored in Saddam's palace and elsewhere. He said he once personally saw Saddam hand over a briefcase containing about $1 million to the president of Chad.

The task of setting up Iraq's financial network around the world appears, as usual with Saddam, to have been a family affair. Investigators have sketched a complex web: they say the operations were run by Barzan al-Takriti, Saddam's half brother and former head of Iraq's security police, and Hussein Kamel, Saddam's son-in-law. While Barzan allegedly handled the financial end (he denies this), Kamel is said to have secretly set up dozens of firms in Europe and the United States controlled by Iraq. Ownership was usually concealed through multiple layers of companies. Take Matrix Churchill Corp., a small Solon, Ohio, company whose assets were frozen last September by the U.S. Customs Service. Officials said Matrix, a machine-tool distributor with a dozen employees, had become a key front for exporting Western weapons technology to Iraq. According to press accounts, the company was a subsidiary of a British firm that was the arm of yet another British company, which traced its ownership to Al Arabi Trading, a Baghdad-based company. Coming full circle, Matrix's president was reportedly Safa Habobi, who has been identified in the British press as a top official of Nassr State Enterprise for Mechanical Industries--a defense firm controlled by Hussein's son-in-law.

In addition to helping bankroll Iraq's arsenal, Kroll alleges, Saddam's financial network also served as a source of kickbacks. Kroll maintains that when Matrix got a contract from Iraq, the company paid a "commission" of between 5 and 15 percent that was sent to Saddam-controlled bank accounts. "That money goes back to the boys," Kroll says. "And that was played out in thousands and thousands of transactions."

Saddam allegedly erected another maze to mask ownership in publicly traded companies. The Hachette stake is owned by Montana Management Inc., which Barzan set up in 1979 and registered in Panama. Montana started buying Hachette stock in 1981 and in 1989 disclosed an 8.4 percent interest. When pressed at the time, a lawyer for Montana said the company represented investors from several gulf countries but insisted he wasn't obligated under French law to disclose their names.

What would Iraq's purpose be in buying the Hachette stock? Analysts doubt that Montana owned enough shares to exercise any editorial or corporate influence, so it could have been simply an investment. Others have noted the coincidence that Hachette is controlled by Jean-Luc Lagardere, who also controls the French arms company, Matra. Some have speculated that Iraq thought it could influence Matra's arms sales to Iraq through Hachette holdings. Hachette denies knowing of a Saddam connection, and is prepared to buy back the stake if hidden ties emerge.

Kroll also asserts that Jordan played a major role in sheltering some of Saddam's money. He told "60 Minutes" that when Iraqi troops were moving into Kuwait, Saddam transferred millions of dollars to the Central Bank of Jordan, which Kroll called Saddam's "house of convenience." Kroll also alleged that Iraq stole more than $300 million worth of cars, including limousines that were shipped to Europe aboard a Royal Jordanian Airlines cargo flight. Jordan's central bank has confirmed that money was transferred from Iraq to Jordan but says that it was payment on Iraqi debt.

While Kroll's report may have shocked many Americans, it didn't surprise Mideast experts. Skimming oil revenues is a fact of life among certain Middle Eastern countries, particularly in the sheikdoms where rulers exercise autonomous control over national treasuries. Observes a Western diplomat: "I'd be very surprised if Saddam hadn't been skimming 5 percent. I'd even say that 5 percent, for a man of his caliber, is modest." How much of that money benefitted Saddam personally? While Mrs. Saddam may be shopping in Switzerland, many Middle East experts agree that the bulk of the money went to building Saddam's war machine. "I can't see him sitting on the Riviera or skiing in Gstaad as the shah did," says Fareed Mohemmedi, of Petroleum Finance Co., a Washington consulting firm. Still, Saddam can take a certain satisfaction if Kroll's findings are right. They would mean he could be added to the Forbes list of the world's richest people.

Investigators hired by Kuwait say that Saddam Hussein controls a vast and hidden financial empire funded with skimmed oil profits. Some alleged elements of the network:

Saddam's friendship with Jordan's King Hussein may have helped him move money out of Iraq and into Jordan's central bank. Jordan also allegedly helped ship Kuwaiti cars to Europe after the invasion. Authorities have already seized an Aston Martin in Miami said to be owned by Saddam's son.

The financial brains behind the network is said to be Barzan al-Takriti, Saddam's half brother and former head of Iraq's secret police (right). As Iraq's ambassador to the U.N. in Switzerland, Barzan is based in Geneva--where Kroll says many of Saddam's financial assets are controlled. Barzan has denied any financial power.

Saddam allegedly set up dozens of companies that were fronts for procuring weapons technology. Among them, say U.S. authorities, was Matrix Churchill, an Ohio machine-tool distributor that was boarded up last fall. The company's suspected Iraqi ownership was hidden in complex layers of British companies.

Iraq-linked firms invested in many publicly traded companies. In Europe the network bought a total of $1 billion worth of stock in such companies as Hachette, the French publisher of some U.S. magazines. Among the investments: an 8.4 percent stake in Hachette.