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INSIGHT
INSIGHT
Aired March 13, 2003 - 17:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JONATHAN MANN, CNN ANCHOR: Saddam's not-so-secret stash. The Iraqi leader has billions of dollars in accounts and assets worldwide. Some of the money may have come from you.
Hello and welcome.
You don't really think of Queen Elizabeth and Saddam Hussein in the same company, and they're not. Saddam Hussein is a lot richer. By one estimate, he's a billionaire, at least twice over. Other estimates have put his personal wealth at up to 10 times that much.
The queen, by comparison, is a rather modest monarch, estimated at just over half-a-billion dollars, and she got her money the old fashioned way, she inherited a lot of it.
Money analysts say Saddam Hussein has had to rely on luck, larceny and a lot of people looking the other way.
On our program today, Saddam Hussein's billions.
Some things are too big to hide, like really enormous piles of money. While U.N. inspectors scour the Iraqi countryside for hidden weapons, other kinds of investigators are hunting for Saddam Hussein's hidden fortune.
They're not sure where to find it, but the amazing thing is, they say it's fairly obvious that it's out there.
Our Maggie Lake has a look.
(BEGIN VIDEOTAPE)
MAGGIE CNN CORRESPONDENT (voice-over): It's not an easy task, hunting for Saddam Hussein's hidden fortune. Western financial investigators believe the Iraqi leader has billions of dollars stashed in accounts around the world.
In it's annual list of the world's wealthiest people, Forbes ranked Saddam Hussein fourth among global leaders with assets of at least $2 billion.
But experts who've been involved in tracking the money say his wealth could actually run in the tens of billions. Investigators note it's difficult to distinguish between Saddam Hussein's personal wealth and the assets of the country, but those same investigators insist he has profited enormously from his decades in power.
How did he get so rich? Iraqi is sitting on a goldmine, black gold. The country has the second largest oil reserves in the world. But exported crude has been restricted since the last Gulf War. A U.N.-sponsored program allows Iraq to sell some oil on the world market on the stipulation that any money received is used only for food and medicine. At least that's the idea.
But analysts say Saddam Hussein has amassed vast sums of money despite or even because of U.N. sanctions.
A September 2002 report from the Coalition for International Justice, a Washington-based human rights group, claimed that when Iraq sold oil under the U.N. program it also imposed additional surcharges or kickbacks that bring in extra income, income that the report's author says is not accounted for by the United Nations.
JOHN FAWCETT, COALITION FOR INTL. JUSTICE: Virtually contract for the purchase of oil includes a 30, 50, 70-cents per barrel kickback. That's money that does not go through the U.N. bank accounts. It goes straight to Saddam Hussein's family.
LAKE: Investigators estimate that Saddam Hussein's family pulls in more than $2 billion a year. Some of that, the investigators say, comes from skimming from the United Nations program, although the United Nations has recently taken measures to curb kickbacks.
But the vast majority allegedly comes from illegal oil exports, through neighboring countries of Syria, Jordan, Turkey and Iran.
Jules Kroll, who tracked Saddam Hussein's money in the early 1990's on behalf of the Kuwaiti government, says the Iraqi leader directly benefits from the illegal exports.
JULES KROLL, KROLL INC.: There have been over the last 12 years billions and billions of dollars of oil being sold illegally against and under the U.N. embargo. They get a piece of every transaction, or else it doesn't happen.
LAKE: Investigators say Iraq, using middlemen and shell companies, nets about $1 billion by smuggling oil through Syria; about $450 million smuggling through Jordan; $400 million through Turkey; and $200 million through Iran.
Neighboring countries have taken some measures to try and stem the flow. Turkey has closed the border to Iraqi oil, and Iran has cracked down on the smuggling. But money continues to pour into Saddam Hussein's coffers through other avenues. The Iraqi leader allegedly reaps about $40 million annually by taking a cut of what Pilgrims and tourists pay when they visit the Shiite holy sites in Iraq.
And Saddam Hussein's family also allegedly gets a cut of profits from products smuggled in to Iraq, such as cigarettes.
The European Union is trying to address this last issue. In October, the European Union sued three major tobacco companies in the U.S. federal courts, alleging the firms illegally funneled millions of dollars of cigarettes into Iraq.
But the investigators insist the U.N. has made little effort to stem the principle source of Saddam Hussein's cash, illegal oil smuggling and abuse of the U.N. Oil for Food program.
(on camera): A spokesman of the United Nations Oil for Food program told us it only monitored Iraqi oil flows at two officially-sanctioned terminals and had no mandate to investigate allegations of illegal Iraqi exports.
Analysts say officials are turning a blind eye.
FAWCETT: The Oil for Food program, in my view, is like the monkeys with their hands over their eyes and over their mouth and over their ears. They're willfully ignorant of violations of the U.N. program. They will turn and blame it either on the Iraqi government itself or back upon the Security Council for not taking stronger action to enforce this program.
LAKE (voice-over): Complicating matters for investigators, an intricate arrangement of middlemen willing to do business with Saddam.
KROLL: When you're purchasing oil, what you have is you have small to middle-sized oil companies, most of them foreign-based, and their controls are pretty lax, and if they can get a good break on the price, they're happy to send the funds wherever you indicate those funds should go.
LAKE: Following the Gulf War, authorities did have some success tracking Iraqi assets to force payment of reparations.
The United States and other governments located and frozen more than $5 billion in assets, but investigators say Saddam Hussein and his advisors have created a complex system of transfers to circumvent efforts to locate the current money flow.
NATHAN VARDI, "FORBES": He's able to move a lot of these revenues offshore. He does it through Rifadin (ph) Bank and other vehicles. Rifadin (ph) is a bank that is owned by his Finance Ministry. It has branches in places like Lebanon and Jordan, and they conduct transactions with other banks and move that money offshore.
So he's able -- to the Caribbean or what not -- so he's able to have bank accounts that are liquid and hidden from just about everybody.
LAKE: Hidden, they say, in places like the Cayman Islands, Switzerland and the Bahamas, which have banking laws that protect the identity of the depositor and limit transparency.
Once funds are filtered through the banks in those countries, it is extremely difficult to trace the origin.
That means Saddam Hussein's fortunes could be sitting in a bank in New York or a company in Paris. That's exactly what authorities discovered a decade ago when they learned Saddam Hussein owned an 8 percent stake in Hachette Filipacchi, the publisher of magazines like "Elle" and "Car and Driver." That stake in Hachette, which is now worth around $90 million, is currently frozen.
Lawyers pursuing claims against Iraq believe that was just the tip of the iceberg and are determined to unravel the rest of Saddam Hussein's financial web.
(END VIDEOTAPE)
MANN: Maggie Lake joins us now with more on all of this.
Maggie, tell me about more of the iceberg, because it's easy to imagine that the money would be salted away in gold bouillon or somewhere exotic, piles of cash sitting in some vault somewhere.
LAKE: Well, Jonathan, amazingly, there might be a grain of truth to that.
Investigators that we talked to say they do believe that there are actually piles of cash stashed away in various houses and offices around Baghdad, presumably so that Saddam Hussein or officials or part of the regime could get their hands on it quickly without having to liquidate.
Now, people are not sure how much that money -- how much there is -- or if it even exists for sure. It's just speculation. Most of the rest of it, they say, are in investments, real estate, stock investments, mutual funds -- the type of things you'd expect to see in the portfolio of any wealthy person.
The one thing they say you're not going to find is a bank account with the name Saddam Hussein on it. That's why it's so difficult, trying to trace this money.
MANN: And yet if it is in the kinds of places you described, fairly dull, safe investments, they tend to be in dull, safe places, the kinds of places that have rules, that have investigators, that have police forces, and that respond to international pressure. It's hard to really understand why so much of this money is broadly known to be out there and yet seems to be out of reach.
LAKE: Absolutely, and this is why we're hearing more and more about that. That's exactly what critics are saying, and what they say is there's really a policy of benign neglect going on.
And when you tend to think of Iraq, you tend to think of a country that has sanctions, that is isolated in the world. And people say that's not true. There're actually a lot of business relationships between countries.
For instance, even big countries on the Security Council of the United Nations, Russia and France, very large recipients of contracts of the Oil for Food program, in the beginning of that, earlier in the decade. Now that's shifted somewhat, but countries like Syria, Jordan, all benefit -- Egypt -- all benefit from that.
If you think about Australia, they export wheat. Vietnam, a big exporter of rice. Even the United States, at a time when President Bush was identifying Iraq as one of the axis of evil, the United States was consuming 75 percent of the oil that Iraq was allowed to put on the world market. Even up until recently, they were a big consumer of oil.
So a lot of business relationships, a lot of companies -- even in November, back in November, Baghdad held a trade fair. 1,600 companies from 40 different countries went. Critics are saying, when you take a look at this, as long as there are those business relationships, there is a vested interest in not enforcing the sanctions.
MANN: Maggie Lake, in New York, thanks very much.
We take a break. When we come back, a closer look at those oil contracts that are making all this money.
Stay with us.
(COMMERCIAL BREAK)
MANN: The oil industry is trying to anticipate war on Iraq and the impact it would have on production. Iraq and Kuwait together export nearly 1/10 of OPEC's total output.
Welcome back.
At a meeting of oil ministers in Vienna this week, OPEC said it has no plans to increase production, but it says it will react promptly if and when the need arises.
The oil market could change a lot in the next few months, depending on a war, on sanctions, and on Saddam Hussein.
A short time ago, we spoke with "Wall Street Journal" correspondent Chip Cummins, in Kuwait City. He said Saddam Hussein's side of the market has already been changing.
(BEGIN VIDEOTAPE)
CHIP CUMMINS, "WALL STREET JOURNAL": First of all, you've got to realize that there's essentially two oil markets in Iraq. There's the U.N.-monitored oil market, which is under extremely strict sanctions. You have about 14 U.N. inspectors at each of the two export terminals -- one a pipeline going out of the northern fields and an export terminal in the south.
And those exports really are fairly tightly controlled. The money that's made by Iraq from those sales do in fact go to the U.N. Oil for Food program and it essentially works.
However, what you have in addition to that is a second market, where you have smuggling from essentially all of Iraq's borders -- going in Syria, going into Jordan. At one time, it was also going through Turkey in tanker trucks, but that's been stopped, you know, within the last two or three months.
And also, just recently we've learned from the United Nations that there has been loading at an abandoned export terminal in the northern Persian Gulf which Iraq has frankly never tried to do before. It is clearly in violation of U.N. sanctions. And that money would be going directly to Saddam Hussein's coffers.
What we believe is happening is in the months coming up to a likely war with the United States, Saddam Hussein has realized he needs a war chest, and he is pumping all he can and trying to get it out in any way he can, under the nose of the United Nations.
MANN: If this is going on and so many people seem to know about it, why haven't there been muscular efforts to stop it?
CUMMINS: Well, you've got to remember, there's about 90 ships from 15 different countries in the Persian Gulf attempting to stop this very thing.
But with international shipping, when you have tankers, you have -- last week, for instance, you had 20 million barrels of oil coming out of the Persian Gulf in tankers. It's very difficult to determine once those ships leave the export terminals, first of all, where they came from, what sort of crude they loaded up on, and whether it was authorized by the United Nations or not.
So although it seems very simple, you've got a very slow-moving ship that you could zero in on, determining which ships are actually breaking sanctions and which ships are legitimate is a very difficult task, and it's also something that's happened fairly recently. We've got to give the United Nations credit for being fairly strict and fairly competent in monitoring this.
So you will see the United Nations working through the coalition forces in the Persian Gulf to clamp down on this. What's harder to do, however, is the overland exports, illegal exports, going into places like Jordan, Syria and Turkey, to some extent.
MANN: Well, there are people who allege, then, the fact even the legal Oil for Food exports are tainted because they are sold on the international market for below market prices with some of the difference between the actual sale price and the normal sale price being kicked back to Iraq, and some of that money, at least, going directly to Saddam Hussein.
CUMMINS: Yes, that's true, and Iraq has gone through periods where when scrutiny was less, they were able to do that, to get away with that, and take advantage of that, and oil companies desperate for oil, especially Iraqi oil, which can be used in a lot of refiners in the southern United States and other places that burn this heavier crude that Iraq produces, are willing to pay that surcharge.
However, once again, that has been -- the United Nations is on to that. There was a lot attention paid just a couple of months back, and Iraq decided to drop that surcharge.
Now also in the U.N. Food for Oil -- Oil for Food program, there is inevitably a lot of skimming going on there, but it's in quantities that are just very difficult for monitors to peg, and to put their finger on.
MANN: So when we see reports, and we've just seen another one, about Saddam Hussein getting rich, basically having a personal treasure chest worth $2 billion, maybe $20 billion, do you think those are exaggerated?
CUMMINS: I don't think they're exaggerated, but in a state like -- in a state like Iraq, where essentially the state is Saddam Hussein, that oil revenue, it sounds like a hell of a lot, but it's actually, you know, it's not that much when you consider that Iraq is exporting 200 million barrels a day, roughly. And that's illegal -- that's legal shipments and also illegal shipments.
So that wealth is going to the state, and the state in Iraq is Saddam Hussein. So when you ask me if it's surprising that that sort of money is going into his personal coffers, it's not.
(END VIDEOTAPE)
MANN: Chip Cummins, of the "Wall Street Journal."
We have to take another break. When we come back, counting the money and cutting it off.
Stay with us.
(COMMERCIAL BREAK)
MANN: "Forbes" magazine publishes an annual list of the richest people in the world. This year it introduced a new category, "Kings, Queens and Despots." That's where Saddam Hussein made his appearance.
Welcome back.
The Iraqi leader is in fact No. 4 on the "Forbes" list with an estimated personal wealth of $2 billion. As we said, the people who track that fortune say in fact it is a conservative estimate.
Joining us now, from New York, is Leah Goldman. She covers the world's wealthiest people as a senior reporter for "Forbes" magazine.
LEAH GOLDMAN, "FORBES": Hi.
MANN: Hi. Thanks so much for being with us.
It sounds like you have a fun job, but let's not talk about that. Let's talk about Saddam Hussein. $2 billion -- how do you get a number like that?
GOLDMAN: It was months of research and reporting, basically. Our number is historically lower than the rest of the numbers floating out there for his net worth, but we were able to determine, make certain estimates based on percentages that we know Saddam Hussein has been skimming off the top of the Oil for Food program, the United Nations Oil for Food program, as well as illegal smuggling of nonessential items, like cigarettes and liquor, and other kind of violations of U.N. sanctions that have been going on for years and years now that are at this point rather well-documented.
MANN: But it is lower -- forgive me for interrupting. It is lower than earlier estimates, and I am wondering whether in fact Saddam Hussein has fallen on hard times, whether he did used to be worth more.
GOLDMAN: Well, I think the international community often overlooks the cost of war-making, and it's not cheap to build a national infrastructure with a, you know, potential chemical arsenal that Saddam Hussein is accused of having. Those things don't come cheaply.
He also lives the kind of lavish lifestyle that also doesn't come cheaply. At the end of the Clinton administration in 2000, the State Dept. issued a report that talked about a multi-billion-dollar palace building program. We're talking like several palaces above and beyond what any kind of dictator or royal would mean, and man-made lakes, gilded plumbing, I mean, just decadence beyond the wildest imagination.
He lives a lavish lifestyle.
MANN: And yet in the midst of this, the U.S. government and governments around the world are going after the financial assets of al Qaeda, of organizations affiliated with al Qaeda, of organizations suspected of being affiliated with al Qaeda, of charities that are suspected of being affiliated with al Qaeda. They're trying very hard. And there just seem to be a lot of explanations about why no one is going after Saddam Hussein's money.
GOLDMAN: Well, during the process of researching his net worth, we found -- and I'm sure the U.S. government is no doubt facing this same conclusion, that the assets are so obscure, so opaque and obfuscated. We're talking about in the early 90's there were reports of shell companies and front companies in Panama, Europe and elsewhere -- Switzerland -- companies that had other companies with investments in even U.S. organizations.
Everything was just so mangled and difficult to discern and parse out and determine where Saddam Hussein laid in all of that.
It's also our understanding that he has a network of people who are facilitating him and his investments. It's just such an enormous undertaking that, you know, it's going to take years to unravel, I suspect.
MANN: Well, you're as experienced as anyone outside of the intelligence community, I guess, at trying to following this money. How does he compare to the other kings, queens and despots? Is he particularly clever at digging holes and burying the cash?
GOLDMAN: Well, he definitely has revenue sources that, say, the Queen of England doesn't have. She comes in at nearly $600 million, I mean, that goes without saying.
Iraq obviously has this enormous lucrative resource, and that is oil, and he has made a fortune on it. The surcharges that were spoken about on this program just a moment earlier that have only recently stopped -- but between '97 and 2001 there was talk of at least $7 billion coming into Saddam Hussein's coffers through those illegal surcharges and smuggling of oil barrels outside the country, which was clearly in violation of U.N. sanctions.
The man has made a fortune of this practice.
MANN: They are looking for Mabuttah Sesaseko's (ph) money in and around Zaire long after he died, looking for Marcos' missing millions long after he died in the Philippines. Are they ever going to find Saddam Hussein's money do you think?
GOLDMAN: You know, I doubt it will ever be unraveled entirely.
There was talk not too long ago about, you know, getting in touch with people who worked in international financial communities with relatives in Iraq, you know, so as a kind of extortionary tactic, to prevent them from talking about it, or prevent them from not assisting him in those investments.
It's just such a sordid and tangled web of financial machinations that I highly doubt it will be resolved in its entirely anytime soon.
MANN: So it is conceivable that there will be a war against Iraq, the war will be successful and Saddam Hussein will be spirited into exile or somehow get away, and could live out his days without his government but still with his money.
GOLDMAN: Yes. I mean, even at $2 billion he will live a very comfortable lifestyle. He will not live hand-to-mouth as unfortunately some of his citizens probably do.
He's got money tucked away all over the world, we suspect.
MANN: Leah Goldman, of "Forbes" magazine, thanks so much for talking with us.
GOLDMAN: Thank you.
MANN: That's INSIGHT for this day. I'm Jonathan Mann. The news continues.
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