AGSCAM: the new world money order; the Department of Agriculture's long, dirty dance with a dictator - loan guarantee program to Iraq

Washington Monthly, April, 1991 by Mark Feldstein

While the government report did not identify the three exporters, congressional sources did. The Louis Dreyfus Corp., a giant grain-trading company, allegedly supplied Iraq with more than $33,000 in laboratory equipment and fumigants. The American subsidiary of Japan's Mitsui & Co. delivered $250,000 in unspecified chemicals, spare parts, and copy and fax machines, and the Los Angeles-based Comet Rice, Inc., supplied more than $97,000 in illegal after-sales services. According to the government report, Iraq requested spare parts that the company feared "were for military use."

The Customs Service is currently investigating possible arms sales under the program; it won't reveal which American companies complied with the war-bound Iraqis' wish list. But some a agricultural loans may have wound up helping Iraq fire its erratic Scud missiles at U.S. troops and civilians in Israel and Saudi Arabia. According to federal investigators and other sources, Iraq managed to use the U.S. loan program to obtain trucks and cranes. "You don't have a mobile Scud without a truck and a crane," says James Blackwell, a military analyst at the Center for Strategic and International Studies. "The only way to transport Scud missiles around Iraq is by truck. And a crane is necessary to lift the missile up and to reload it." While it's unclear how many of these trucks and cranes iraq received under the U.S. loan program, some information can be gleaned from one truck order that Iraq placed with a U.S. agricultural company. According to analyst Blackwell, who examined it, Iraq ordered only trucks large enough and powerful enough to carry a Scud.

Although Iraq could have purchased this machinery on the open market in Europe or elsewhere, it would then have had to pay for it. Under the U.S. loan guarantee program, it won't. For on August 2, 1990, Iraq stopped payment on $2 billion of USDA-guaranteed loans, leaving taxpayers liable for the bill.

How could such double-dealing happen with publicly guaranteed funds? GAO and inspector general reports suggest that the answer lies not just with duplicitous Iraqis and agribusiness CEOs, but with the USDA itself, which trusts businesses to regulate themselves as they enter the moral and economic maze of international export.

No investigator ever peers into the crates of most of the 80 or so commodities that qualify for loan guarantees; instead, USDA relies wholly on the exporters' own records. The obvious flaw in that thinking led GAO to complain in 1988 that there was no "accurate accounting" of billions of dollars in USDA's outstanding loans.

Ironically, the first complaints about abuse in the USDA guarantee program came, not from government auditors, but from high-ranking Iraqi officials, who in early 1986 claimed to have received a blend of American and cheaper Brazilian tobacco when they had paid for-rather, borrowed the money for-all-American tobacco. The Iraqi claim was never verified, but congressional investigators on the case discovered that USDA rarely questioned an exporter's statements about a shipment's contents. As one congressional investigator put it, "For all the Agriculture Department knew, the shipments could have been military equipment."