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Pa l l e t s of C a s h

Sometimes the federal government gives very important buildings

very dull names. The East Rutherford Operations Center of the Fed-
eral Reserve Bank of New York is one such place. The three-story
building, nondescript and surrounded by a 13-acre compound,
fenced off from the outside world, sits in New Jersey’s Meadow-
lands, literally in the shadows of a far more recognizable land-
mark, MetLife Stadium, the home of the New York Giants and New
York Jets football teams — and the 2014 Super Bowl. Nearby is the
Izod Center, which hosts huge live entertainment acts, from Bruce
Springsteen to Ultimate Fighting. People driving down the New Jer-
sey Turnpike through the flat, gray wetlands just south of New York
City would never notice the unmarked semi-tractor trailers pulling
onto the turnpike at exit 16W, coming from the operations center
just down the street.
But the East Rutherford Operations Center is hiding riches be-
yond imagining. Deep inside the complex sits a gargantuan vault,
measuring 1 million cubic feet. It is filled with U.S. currency, capable
of holding as much as $60 billion. And those trucks driving onto the

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turnpike are loaded with secret cargo — cash. The East Rutherford

Operations Center is to paper currency what Fort Knox is to gold.
The New York Federal Reserve Bank has long served as a key oper-
ational hub of the Federal Reserve system. It is the hardwired connec-
tion between Washington and Wall Street, between the White House
and the financial system. And its storehouse of currency in East Ruth-
erford is there to make sure that banks have the cash they need to re-
fill ATMs across the country. But in 2003, East Rutherford’s routine
was secretly twisted by the White House. It was placed in the mid-
dle of one of the most bizarre operations of the entire Iraq war. The
scheme was so weird that it seems hard to believe anyone thought it
might be a good idea at the time. It was also symbolic of the profligacy
that has been the hallmark of America’s endless war on terror — the
waste, in both lives and treasure, that two successive presidencies
have produced. And it was the moment when thievery in the global
war on terror achieved industrial scale.

Within weeks of the toppling of Saddam Hussein’s statue in Bagh-

dad’s Firdos Square in April 2003, a televised event that came to sym-
bolize the ouster of Saddam’s regime in Iraq by the U.S.-led military
coalition, unmarked trucks started backing up to the loading docks at
the East Rutherford Operations Center. There, they were filled end to
end with dozens of pallets of shrink-wrapped $100 bills. The trucks
then moved out, down the New Jersey Turnpike, carrying billions of
dollars in cash. They hauled their cargo of riches past Newark, where
nearly one third of the people live below the poverty level.
The trucks stopped at Andrews Air Force Base outside Washing-
ton, D.C., where the palletized cash was transferred to the cargo holds
of air force C-17 transport planes. The aircraft taxied down the run-
way and took off for Iraq, making intermediate stops in Germany and
Kuwait. Finally, the planes landed at Baghdad International Airport,
where the cash was unloaded and counted in the presence of both
American and Iraqi personnel.

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 Pallets of Cash

What happened next is still one of the great unsolved mysteries of

the Iraq war.
Between $12 and $14 billion, mostly in $100 bills, was taken from
East Rutherford and flown into the war zone of Iraq in 2003 and
2004, with virtually no supervision or safeguards. Another $5.8 bil-
lion was sent from the New York Federal Reserve to Baghdad by elec-
tronic funds transfers. All told, approximately $20 billion was sent to
Iraq without any clear orders or direction on how the money was to be
used. The controls on the money were so lax that few credible records
exist of exactly how much cash there was or where the cash went once
it arrived in Baghdad.
Almost certainly, a portion of it ended up in the hands of some of
the most powerful Iraqi leaders of the post-Saddam era. Billions of
dollars in cash were wasted. And billions more simply disappeared.

Now, there is explosive new evidence that for the first time may help
to solve the mystery of the missing cash. Approximately $2 billion
of the money that was flown from the United States to Baghdad was
stolen and secretly transported out of Iraq in what may be one of the
largest robberies in modern history.
American investigators have traced the missing cash to Lebanon.
It is believed to have been stolen after it arrived in Baghdad, and then
secretly transported to Lebanon, where it has been hidden away ever
since. Between $1.2 and $1.6 billion is believed to be hidden in a bun-
ker in a rural village in Lebanon, according to current and former U.S.
officials. These officials have received reports that the cash was stolen
and stored in the bunker with the knowledge of several of Iraq’s most
prominent leaders.
At least several hundred million dollars in additional cash is also
being hidden in several other locations in Lebanon, according to for-
mer U.S. officials, bringing the total amount stolen from Iraq and
moved to Lebanon to approximately $2 billion. The figures of how
much money was stolen and transported out of Iraq are inexact,

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but the reality is indisputable. One former American official even

reported seeing the cash for himself, stored in the bunker in Leba-
non.
In addition to cash, hundreds of millions of dollars’ worth of gold
was stolen from the Iraqi government and is also being hidden in Leb-
anon, current and former U.S. officials have said.
The CIA and FBI, along with the Pentagon and State Department,
have all been told about the theft of the cash, and have received ev-
idence about the bunker in Lebanon and other locations where the
cash is believed to be hidden. But the agencies have not tried to re-
trieve the money. Nobody went after it during the Bush adminis-
tration, nor has the Obama administration tried. Instead, the U.S.
government has kept the entire matter secret.
The Iraqi government of Prime Minister Nouri al-Maliki has also
been given information about the money’s whereabouts. But the Iraqi
government has not taken any action to retrieve it either. Instead, the
Iraqi government has kept the information about the Lebanese bun-
ker secret. Officials in both Washington and the Middle East seem
content to let the truth lie hidden.

Like so many things about the Iraq war, the cash flights from New
York started with good intentions. But ideology, chaos, and finally
greed all got in the way.
Ged Smith was a veteran of the Treasury Department’s tiny band
of international firemen who make their living rebuilding lost and
broken economies. In the 1990s, he worked in the Balkans following
the breakup of Yugoslavia and the ethnic cleansing of Bosnia. In the
early weeks of 2003, as the Bush administration geared up for war
with Iraq, Smith, the director of the Treasury’s Office of Technical As-
sistance, was assigned to figure out how to get Iraq’s financial system
restarted after the toppling of Saddam Hussein.
He quickly realized that he was facing much different problems
than he had ever seen in Sarajevo. He was going to have to deal with a

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 Pallets of Cash

government of true believers who did not want to hear bad news. And
that was just in Washington.
Smith’s team of Treasury officials was part of a larger postwar re-
construction organization led by retired army general Jay Garner,
who had been appointed by President Bush to get Iraq up and run-
ning again after the invasion. Garner had been named because he had
been in charge of providing food and shelter to the Kurds following
the first Gulf War, and the Bush administration believed that it would
only face short-term problems, like feeding refugees, before Iraq was
back on its feet. The White House and Pentagon thought that Gar-
ner’s group, the Office of Reconstruction and Humanitarian Assis-
tance (ORHA), would only be needed in Iraq for a few weeks — a few
months at most. Bush and Defense Secretary Donald Rumsfeld were
convinced that, after a short time, U.S. troops could come home. They
neither wanted nor expected an extended occupation; as a result, any
plans that assumed a long-term commitment from the United States
were dismissed or ignored.
During one of the few interagency meetings on postwar planning
held before the March 2003 invasion, Smith briefed a crowd of sen-
ior officials in an auditorium at Fort McNair in Washington on Trea-
sury’s plans for Baghdad. He warned that because the Iraqi economy
was so centralized under Saddam Hussein, taking down the Iraqi gov-
ernment would likely mean the forced closure of hundreds of Iraqi
companies and state-owned enterprises. Factory managers would not
know what to do without orders from the regime. That meant that
tens of thousands of Iraqis would almost certainly be thrown out of
work immediately after Saddam lost power.
Smith looked up after he issued this dire prediction. No one in the
crowd said a word. No one asked a single question.
At a follow-up meeting at Fort McNair, Smith mentioned that one
of the lessons he had learned in the Balkans was the importance of
maintaining a government’s ability to collect tariffs and customs du-
ties, so it could meet its payroll. This time, someone did challenge
Smith. A Republican political appointee stood up in the audience and
forcefully argued that the Bush administration was for free trade

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and that the United States was going to sweep away the remnants
of protectionism along with Saddam’s regime. “We are free traders
in America, and we will be free traders in Iraq.” Treasury’s actions
in the Balkans, the Republican operative said, were not going to be
repeated in Iraq. “That’s when you started to hear these ideologi-
cal things coming out, how they were going to remake Iraq,” recalls
Smith.
His team waited in Kuwait during the initial stages of the inva-
sion, and then raced for Baghdad, becoming one of the first civilian
missions to make it into the capital after Saddam’s regime fell. While
Smith ran things from Washington, his team made its way through a
broken Baghdad to the Iraqi Central Bank.
Smith had asked the U.S. military to protect the bank’s compound.
But when his people arrived, there were no U.S. troops in sight, and
looters had already stripped the bank’s buildings bare — except in
the vault room. Looters and criminals had tried to get into the main
vaults, which held both U.S. dollars and Iraqi dinars, but they were
unable to break through. The looters stole some bags of cash held in
less secure cage areas outside the main vaults but were never able to
get to the bank’s main deposits.
Still, the looters did set fires in the building. Pipes burst, water
cascaded down into the vaults belowground, and before long the
vaults were under 5 feet of water. It took weeks of digging out before
the central bank could resume normal operations in its own facilities.
Planning went out the window.
The Treasury team had to improvise. They had assumed that
once Saddam Hussein was ousted, the Iraqi currency used by his top-
pled regime would be considered worthless. But to Smith’s surprise,
Iraqis continued to use the so-called Saddam dinar. Treasury officials
couldn’t find the printing plates used by Saddam’s regime to print the
currency, however, and didn’t even know where the printing presses
for the currency had been hidden.
Eventually, Iraq was going to need new currency. But it would take
months to develop, print, and distribute billions of new dinars in a
newly designed, post-Saddam currency. In the meantime, Iraq had to

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