Inside Saddam Inc.

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In the event of war, U.S. special forces will scour Iraq in search of Saddam Hussein, but another team of American sleuths will be hunting something even more shadowy: his money. Severing the dictator from his dollars would make it far more difficult for Saddam to survive in hiding like Osama bin Laden, while the recovery of those assets could help rebuild Iraq.

But it won't be easy. Saddam is considered one of the world's richest men, but over the past three decades, he has gone to great lengths to conceal his vast, ill-gotten fortune. "Money is profoundly important to Saddam, but not because of greed," says Dr. Jerrold Post, a psychiatrist and former CIA profiler of the Iraqi leader. "It represents instead his insurance policy and a tool through which he exercises power and manipulates others."

Before the 1991 Gulf War, Saddam's wealth was estimated at $10 billion by a senior Iraqi defector. But after more than a decade of sanctions, he is no longer as fat a cat. The State Department's Richard Armitage recently put the figure at $7 billion. Forbes magazine, in its annual tally of the world's most affluent, put Saddam at a mere $2 billion.

Since 1990, Saddam has faced U.N. sanctions designed to control all of Iraq's foreign trade. In response, he has demonstrated a genius for milking cash from the very system meant to squeeze him dry. He has set up a network--call it Saddam Inc.--that involves smuggling, kickbacks and other scams that rack up steady profits year after year.

HOW SADDAM DODGES THE U.N. The Oil for Food program, part of the U.N. sanctions on Iraq, theoretically controls all Iraqi oil sales. But according to a recent estimate by the General Accounting Office, between 1997 and 2001 Saddam generated an extra $6.6 billion in illegal revenue from oil smuggling and kickbacks.

Iraq is required to apply each month to the U.N. for approval of the price it charges for crude. But Iraq usually requests a number at least 50¢ per bbl. below the going price. Then Baghdad demands an illegal surcharge of, say, 30¢ per bbl. on top of the U.N.-approved price. The arrangement still gives buyers a 20¢ discount.

Buyers then write two checks. One, at the official, U.N.-approved price, is deposited in a U.N.-monitored Iraqi bank account in New York City. But the 30¢ kickback goes directly to Saddam after deposit in an Iraqi bank account in Jordan or some other location over which the U.N. has no control. During one 10-month period in 2000 and 2001, officials working with the U.N. determined that Iraq had successfully imposed a 30¢-per-bbl. surcharge, netting Saddam $175 million.

The system works because, under U.N. rules, Baghdad gets to choose which companies are allowed to buy its oil, and it often selects lesser-known brokers or offshore shell companies. These shady middlemen quickly resell the petroleum to more established oil dealers and companies around the world.