Iraq's 'Phantom' Electricity Deal Not So Ghostly?

The value of the two contracts amounts to a significant percentage of the money spent on the reconstruction of power production in Iraq over the last eight years, since the US-led invasion of the country which toppled former Iraqi leader Saddam Hussein’s’ regime in 2003.

However over the past week, suspicions began to be cast upon the two companies with whom the Iraqi minister of energy had signed deals. The Canadian Capgent was said to exist on paper only and the German MBH was allegedly a bankrupt firm owned by Lebanese shareholders. Iraqi Prime Minister Nouri al-Maliki apparently ordered the two contracts annulled and demanded that Shalal resign.

Suspicions about the two companies were first raised by Jawad Hashim, a former Iraqi minister of economic planning under Saddam Hussein’s regime, who immigrated to Canada in 1982. Hashim heard about the deals and began making enquiries into Capgent, which only took the name Capgent and began calling itself “a leader in thermal and diesel power plant construction” after May of 2011. He then wrote to al-Maliki’s office of his suspicions that the operation was a bogus one.

Al-Maliki wrote to his electricity minister asking him to justify his decisions on what were already being called “the phantom companies”. Al-Maliki's media advisor, Ali al-Moussawi, told NIQASH that the past week has brought no response from Shalal. “So Al-Maliki ordered the dismissal of the minister because he did not respond to his inquiries,” al-Moussawi said. The media adviser also stressed that the decision was final but that any resignation also needed to be accepted by the Iraqi parliament.

News agency AFP reported that at a news conference on Monday the Deputy Prime Minister for Energy Hussein al-Shahristani said that Capgent was "a company on paper only" and MBH was bankrupt and facing legal trouble. Apparently there had been no loss of public money though because the contracts signed with both companies stipulated that they would be paid after the work was completed.

However whether those allegations about the “phantom companies” are completely true is uncertain.

It is true that MBH was declared insolvent by a German court early in 2011 and their management was handed over to insolvency management firm Mueller and Rautmann, also of Germany, with offices in Halle, Hannover and Magdeburg. But the insolvency was certainly not hidden: it was announced in local media.

In a mid-May press release issued by Mueller and Rautmann, the insolvency administrators reported that the firm would continue to operate. Creditors at a meeting had been satisfied and MBH’s liabilities would be paid, with the help of the Sakr Group in Lebanon, who had investments in the firm. Only 14 employees would be made redundant and MBH’s own website announced a restructuring. Contacted by NIQASH on the phone, a representative at MBH in Magdeburg said the company currently had no comment to make on the situation but that MBH did still exist and was still “a working company”.