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October 11, 2024

Greetings From Amsterdam,

In this edition of OCCRP Weekly, we’re taking a look behind the scenes of a years-long investigation into a fraud that has funneled billions of dollars ([link removed]) from an account at the U.S. Federal Reserve to fraudsters and militant groups across the Middle East.

The reporting began late one evening in Jordan, where reporter Aisha Kehoe Down and OCCRP’s Senior Middle East Editor Rana al-Sabbagh were meeting a source about a cigarette smuggling scheme. He stopped them short: They were digging into the wrong story, he told them. The scam they were investigating paled in comparison to the free-for-all that was the Iraqi “dollar auction.”
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A relic of the U.S. occupation of Iraq, the dollar auction was set up to direct money from Iraqi oil sales to importers through an account at the Federal Reserve Bank in New York. Iraq’s central bank sells the dollars to commercial banks, which apply for the funds on behalf of companies so they can pay for imported goods, like spices or hygiene supplies.

Down, Sabbagh, and colleague Lara Dihmis began researching the system, unsure of what they would find. They built dossiers of Iraqi banks and their owners, spoke to a researcher in Washington D.C. who had analyzed dollar flows from the auction, scraped information from the Iraqi central bank’s website, and began interviewing sources. Months later, someone came to Down with a tip: They knew someone in Baghdad with documents from a 2015 Iraqi parliamentary committee investigation into the system, which had never been made public.

She and Sabbagh worked together to build trust with the source over months. “We eventually, through a lot of meetings, negotiated that we would go to Baghdad and get this cache of documents.”

When the reporters landed in the Iraqi capital in spring 2023, their first voyage was to a series of dusty shopping malls in search of a scanner. Down and Sabbagh spent the next three days making copies of thousands of documents, which were bound and neatly organized in a clear, multi-gallon storage container.

Once the documents were in hand, Down spent months poring over the dollar applications. Dihmis, an expert researcher, was meanwhile using public records to track down the mysterious names and shell companies listed in the files.

The research uncovered clear signs of fraud. Many of the applications had contradictory information about the type or amount of product, country of origin, or the name of the ship transporting the goods, Down said. It was common to find no customs slip or other documentation attached to applications — just invoices that appeared to be poorly photo-copied. Often, reporters found replicas of the same invoice, with small alterations of the company’s name and logo. They were “lazy photocopies,” said Down, equating the results to a phoned-in middle-school book report.

OCCRP’s North America Editor Kevin G. Hall tracked down U.S. officials familiar with the auction system. Half a dozen U.S. and Iraqi experts reviewed the documents with OCCRP, confirming the team’s findings.

At the applicant bank’s request, money “did not go to pay for imports. The money just went to random places, from Turkey to China to Dubai to Jordan, with no correlation with what was said to be imported — except for one case, which was a massive import of refrigerators,” said Down.

OCCRP analysis indicates that over 99 percent of the money obtained by one bank in a single month in 2012 was cleared based on documents that appeared fraudulent. Reporters corroborated and expanded claims by the Iraqi parliamentary committee that several Iraqi banks were committing fraud through the auction — and that little was done by the U.S. to stop it.

The investigation found that billions of dollars flowed to institutions linked to alleged financiers of U.S. adversaries: Al-Huda, an Iraqi bank whose owner was sanctioned after a January drone attack on U.S. forces and a company that handled funds for a financier of Yemen’s Houthi rebels were among them.

“The numbers are stunning,” said Down of the fraud scheme. “The consequence is that it’s funding people who are bombing our soldiers, and it’s funding them in vast amounts… This is an artery and it’s going straight through the Federal Reserve.”

Read the full story ([link removed])

We’ll have more for you on the dollar auction soon.


** More Investigations
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** How Private Equity and an Ambitious Landlord put Steward Healthcare on Life Support
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Our latest reporting on disgraced U.S. healthcare operator Steward reveals how business partners squeezed the firm for all it was worth — and more ([link removed]) — even as its hospitals slipped into dire conditions.

Documents reviewed by OCCRP and the Boston Globe show that private equity firm Cerberus Capital Management and Steward’s longtime CEO Ralph de la Torre extracted more than $1.3 billion from the company.

Meanwhile, Steward’s landlord, Medical Properties Trust (MPT) bought Steward’s hospital buildings and other real estate at almost nine times above market rate, then charged the firm equally exorbitant rents it could not afford. Documents reviewed by reporters paint a vivid picture of MPT’s activities: The real estate company secretly funneled capital to Steward to keep it afloat, failed to file legally required public disclosures for shareholders and regulators, and misrepresented Steward’s financial vulnerability and indebtedness to MPT. The real estate investment trust was also working behind closed doors to increase its stake in Steward, which may have breached U.S. regulations.

U.S. senators have equated MPT’s entanglement with Steward to a Ponzi scheme. Spokespeople for MPT and de la Torre denied any wrongdoing. Their respective actions were intended to support critical healthcare access, they said.
But OCCRP’s reporting shows that basic supplies at Steward’s hospitals fell to the wayside while the company put funds from MPT towards dividends, executive payouts, and massive lease commitments. Stretchers were broken, elevators were out of service, drinking water was rationed and medical supplies ran dry. OCCRP partner the Boston Globe found that 15 patients died and more than a dozen others were injured after receiving insufficient care at Steward hospitals. Two Steward hospitals have closed since the company filed for bankruptcy, severing entire communities from access to medical care. (Learn more through our story on the impact on hospital staff and patients ([link removed]) .)


** How We Reported the Story:
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Reporters have been sifting through nearly 300,000 documents leaked from Steward Health Care to OCCRP. They include contracts, internal correspondence, budgets, and invoices from auditors, law firms, and intelligence firms.

These documents also helped us map how Steward sent roughly $8 million ([link removed]) to a Swiss firm that in turn paid consultancy fees to former Maltese Prime Minister Joseph Muscat — who is on trial for corruption. A criminal inquiry said Steward had used the Swiss company to set up a “political support fund” for the former prime minister and other officials.

Last month, we reported how leaked communications and bank transactions showed that a private intelligence firm working for Steward had orchestrated a British politician’s claims ([link removed]) that a well-known short-seller was doubling as a Russian agent. Made in Parliament, false allegations were protected from defamation suits under the principle of parliamentary privilege. They came shortly after the short-seller published two damning reports about Steward and its biggest shareholder in early 2023.

Read the full story ([link removed])
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** More Corruption News
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** Yemenis in Russian Military Plead For Help to Escape Ukraine War
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After fleeing their own war-torn country, scores of Yemenis signed up for what they say were supposed to be lucrative non-combat roles with the Russian military. Now they find themselves on the frontlines of the war in Ukraine ([link removed]) . OCCRP reporters spoke with novice soldiers who said they had no prior military experience; one said he had been expecting to work in construction or as a security guard.

They were recruited by an Oman-based tour company, which has targeted Yemenis who have crossed the border into Oman with offers of work and eventual citizenship in Russia. The company’s owner said the recruits signed up willingly.

Some recruits have sent a letter to Yemen’s ambassador in Moscow, asking to be rescued. But the embassy’s military attache says the contracts are legal documents, and they are stuck in the Russian military.


** OCCRP Awards and Press
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OCCRP’s Africa editor, Beauregard Tromp, spoke with The Reuters Institute this week ([link removed]) about the state of investigative journalism on the continent, and how his team works across borders to strengthen the field. He also gave a sneak peek into his plans as the new convener of the African Investigative Journalism Conference.

Plus, an OCCRP member center in Serbia was honored with the first prize at the EU Investigative Journalism Awards in the Western Balkans and Turkey ([link removed]) this week for its investigation “CINS Inside SNS’s Call Center ([link removed]) .” The story exposed potential illegal activity in the pre-election campaign of the ruling Serbian Progressive Party, from vote buying to call center operations.


** Your Turn to Report
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Are you a true crime fan? A YouTube regular? We want to hear about what you watch and why. Share your insights and help fine-tune OCCRP’s YouTube content.

Fill in our short survey here ([link removed])

P.S. Thanks for reading the OCCRP newsletter. Feel free to reply to this email with feedback, thoughts, or questions.

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