Last summer the United States Agency for International Development (USAID) closed one of its largest projects in Iraq, declaring that it had been a virtually unqualified success. The Community Stabilization Program (CSP), which cost $675 million over its three years of operation, has been lauded as one of the war's most effective counterinsurgency operations. Launched in May 2006, it was USAID's chief contribution to the Bush plan of rescuing a tailspinning military adventure with a civilian surge and increased focus on economic development. "Bottom line: it worked," said Jeanne Pryor, USAID's deputy director for Iraq reconstruction, during a recent colloquy on the CSP at the United States Institute of Peace. An evaluator contracted by USAID recommended that the CSP be replicated elsewhere, and in Afghanistan recent cash-for-work projects have emerged that appear to be based on the model it pioneered.
According to several senior military and government personnel, however, this vaunted program was responsible for sending millions of taxpayer dollars to Iraqi insurgents via a complex web of contractors and subcontractors. These sources claim that although USAID was fully aware of the problem, it delayed acting for as long as possible, unwilling to pull the plug on a program that generated propitious statistics, even when it jeopardized American lives.
When George W. Bush unveiled his "National Strategy for Victory in Iraq" in November 2005, the approach—summarized as "clear, hold and build"—called for exactly the kind of work USAID had been doing for decades. The CSP was similar to past undertakings in that it sought to create jobs and engage youth; it was unique, however, in that it concentrated on fighting-age males vulnerable to recruitment by insurgents. Almost all USAID projects are administered through intermediaries—either private firms or nonprofits—and this one was no different. The cooperative agreement went to International Relief and Development (IRD), an American nonprofit run by a minister in the United Church of Christ.
As with most USAID "implementing partners" in Iraq and Afghanistan, IRD delegated much of its authority to local subcontractors; in the case of the CSP, this meant paying Iraqis to hire other Iraqis to clear streets of rubble and trash. The upshot was that money had to pass through several middlemen before reaching its intended target, flowing from USAID to IRD to IRD subcontractors—to sub-subcontractors sometimes, sub-sub-subcontractors other times—to young men at risk of joining the insurgency. On paper the scheme was successful. By the summer of 2007, IRD was not only meeting its employment goals; it was far exceeding them. The problem was that the reports belied rather than reflected reality.
"It was just a sham," says retired Lt. Col. Felix Boston, a member of a provincial reconstruction team deployed to Baghdad's Kadhimiya district, a Shiite stronghold ruled by various militias, including Muqtada al-Sadr's Mahdi Army. Civil conflict was uncommon in Kadhimiya—its Sunni population had been decimated, with many people fleeing or killed by Shiite death squads after the fall of Saddam. But the militias that found safe haven there were still active in the insurgency, and USAID hoped to lure potential recruits away by enlisting them in the trash campaigns. Time sheets submitted to IRD by Kadhimiya contractors listed thousands of Iraqis, each receiving wages from USAID. But according to several embedded provincial reconstruction team members, many of these workers were phantoms, never seen by the US Army's Dagger Brigade during its regular patrols of the area. "The numbers were so inflated," says Boston. "They'd say 5,000, and there might have been a hundred people."
That contractors were not employing anywhere near the number of men they claimed to be was less worrisome than where the money went. Col. Louis Fazekas, a senior governance adviser to Baghdad's beladiya, or city planners, attended many of the meetings where contract recipients were nominated by local Neighborhood Advisory Councils (NACs). "Basically, we looked at the local council leaders like contract brokers," he says. Intelligence reports made available to Colonel Fazekas indicated that the council in Kadhimiya was directing some contracts to militia members and that additional militia members were extorting "protection" bribes from legitimate contract winners. "We saw reports that a particular contractor was being blackmailed for a thousand dollars a day," Fazekas says. "It was feeding [the insurgents'] ability to continue to resupply and fight against us."