A report in a British newspaper says letters of credit (L/Cs) may be central to investigations into a multi-billion dollar alleged fraud in Iraq in which at least one British company was paid for armoured vehicles ordered by the Coalition Provisional Authority (CPA) in Iraq.

The vehicles were never delivered according to the Guardian newspaper, which quotes one of the business people involved in the deal saying he suspects documents associated with an L/C held by JP Morgan Chase in Britain were forged.

Phantom vehicles

The Guardian report says accusations contained in a confidential statement lodged with a New York court name three British companies engaged in this apparently large-scale fraud.

Investigations are expected to focus on documents presented to L/C holder J P Morgan Chase, which was acting in Britain on behalf of the Iraqi Trade Bank. The documents apparently suggest that a shipment of vehicles destined for Iraq was about to be shipped from Russia.

No delivery

On being shown the documents, the bank allegedly agreed to make payments totalling the full contract value of US$8.48 million, but the vehicles specified in the documents were never delivered.

According to the Guardian report, the US authorities in Iraq were unaware that the payment had been made in respect of the deal struck in late 2004. At the end of 2005 they formally declared the contract cancelled.

Suspect documents

The Guardian contacted one of the business people allegedly involved in the deal. Peter Tarrant of Norfolk-based Zeroline - the company awarded the contract - told the newspaper that he had received payment for the vehicles, even though he knew they were never delivered.

The report says Tarrant suspects the documents shown to JP Morgan Chase were forgeries. The former soldier turned businessman is also quoted in the Guardian levelling an attack on L/C management in Iraq at a time when violence had already become a feature of everyday life in Baghdad.

L/C questions

"From what I know, the office in Baghdad that was signing all these letters of credit had only three employees - the president, his driver and a tea boy. He was there all day simply signing letters of credit."

"There was not a single officer there who understood anything more than a goat herder. All the competent staff had been sacked under the anti-Ba'athist regulations," Tarrant is quoted as saying.

Investigations

The UK's Serious Fraud Office is investigating this 'phantom vehicle' case in Britain.

Sources suggest that US investigators suspect widespread corruption in Iraq has siphoned a massive US$9 billion from Iraq's oil revenues in the four years since Saddam Hussein was toppled.

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