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June 6, 2004. Lockboxes, Iraqi Loot and a Trail to the Fed

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Lockboxes, Iraqi Loot and a Trail to the Fed

New York Times

Published: Sunday, June 6, 2004 at 5:55 a.m.

Last Modified: Sunday, June 6, 2004 at 12:00 a.m.

WHEN a United States Army sergeant broke through a false wall in a small building in Baghdad on a Friday afternoon a little over a year ago, he discovered more than three dozen sealed boxes containing about $160 million in neatly bundled $100 bills.

Later that day, soldiers found more cash in other hideaways near the Tigris River, in an exclusive neighborhood that elite members of Saddam Hussein's government once called home. By the end of the evening, they had amassed 164 metal boxes, all riveted shut, that held about $650 million in shrink-wrapped greenbacks. The cash was so heavy, and so valuable, that the Army needed a C-130 Hercules cargo plane to airlift it to a secure location.

Just two days later, on Sunday, April 20, 2003, Thomas C. Baxter, head of the legal unit of the Federal Reserve Bank of New York, read a brief news account of the discovery. Most of the money that turned up in Baghdad was new, bore sequential serial numbers and was stored with documents indicating that it had once been held in Iraq's central bank. One fact particularly bothered Mr. Baxter: the money had markings from three Fed banks, including his own in New York.

Iraq, of course, had been subject to more than a decade of trade sanctions by the United States and the United Nations, so large piles of dollars, especially new bills, were not supposed to have found their way to Baghdad.

"How could that happen?" Mr. Baxter thought to himself, as he recalled later in Senate testimony. "Not only with U.S. sanctions, but with U.N. sanctions. How could that happen?"

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