U.S. Defense officials don't know what happened to $6.6 billion in cash bound for Iraq; for the first time auditors are saying it may have been stolen.

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WASHINGTON — After the U.S.-led invasion of Iraq in March 2003, the Bush administration flooded the conquered country with billions of dollars in cash.

Pentagon officials determined that one giant C-130 Hercules cargo plane could carry $2.4 billion in shrink-wrapped bricks of $100 bills. They sent an initial full planeload of cash, followed by 20 other flights to Iraq by May 2004 in a $12 billion haul that U.S. officials believe to be the biggest international cash airlift of all time.

This month, the Pentagon and the Iraqi government are closing the books on the program. But despite years of audits and investigations, U.S. Defense officials still cannot say what happened to $6.6 billion in cash.

For the first time, federal auditors are suggesting some or all of the cash may have been stolen, not just mislaid in an accounting error. Stuart Bowen, special inspector general for Iraq reconstruction, said the missing $6.6 billion may be “the largest theft of funds in national history.”

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The mystery is a growing embarrassment to the Pentagon, and an irritant to Washington’s relations with Baghdad. Iraqi officials are threatening to go to court to reclaim the money, which came from Iraqi oil sales, seized Iraqi assets and surplus funds from the United Nations’ oil-for-food program.

Theft of such a staggering sum might seem unlikely, but U.S. officials aren’t ruling it out. Some U.S. contractors were accused of siphoning off tens of millions in kickbacks and graft during the post-invasion period. But Iraqi officials were viewed as prime offenders.

The U.S. cash airlift was a desperation measure, organized when the Bush administration was eager to restore government services and a shattered economy.

The White House decided to use the money in the Development Fund for Iraq, created by the Federal Reserve Bank of New York to hold money amassed when Saddam Hussein’s regime was under crippling economic and trade sanctions.

The cash was carried by tractor-trailer trucks from the Federal Reserve currency repository in East Rutherford, N.J., to Andrews Air Force Base in Maryland, then flown to Baghdad. U.S. officials eventually distributed it to Iraqi ministries and contractors.

U.S. officials often didn’t have time or staff to keep strict controls.

House investigators charged in 2005 that U.S. officials “used virtually no financial controls to account for these enormous cash withdrawals once they arrived in Iraq, and there is evidence of substantial waste, fraud and abuse in the actual spending and disbursement of the Iraqi funds.”

Iraqi police killed: Iraqi police and hospital officials say five policeman were killed and 18 people injured early Monday when a suicide bomber rammed a vehicle into the gates of a police building in Basra.

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