Bank lapses cited in Iraq oil program

By Bill Gertz
November 18, 2004
The Washington Times
http://www.washtimes.com/national/20041118-120331-8156r.htm
     The French bank that handled funds for the U.N. oil-for-food program in Iraq made tens of millions of dollars in fees and did not properly monitor transactions involving Saddam Hussein's oil sales, congressional investigators said yesterday. 
    The New York branch of the Banque Nationale de Paris-Paribas, or BNP Paribas, was the sole bank for administering the $64 billion U.N. program and did not have adequate checks on whether money was being funneled to terrorists, a House International Relations Committee probe found. 
    We have uncovered what appears to be serious malfeasance on an international scale, said Rep. Henry J. Hyde, Illinois Republican and chairman of the committee. There are indications that the bank may have been noncompliant in administering the oil-for-food program. If true, these possible banking lapses may have facilitated Saddam Hussein's manipulation and corruption of the program. 
    Committee investigators uncovered evidence that BNP Paribas made payments without proof that goods were delivered and sanctioned payments to third parties not identified as authorized recipients, Mr. Hyde said at a hearing yesterday. 
    Mr. Hyde said investigators think the bank facilitated improper payments to companies that were shipping illegal goods to Iraq. 
    Investigators estimate that the bank received more than $700 million in fees under the U.N. program that began in 1996 and ended after the ouster of Saddam in March 2003, Mr. Hyde said. 
    This is a lot of money, and it is reasonable to ask if BNP Paribas adequately supervised its compliance programs overseeing the administration of the oil-for-food program, he said. 
    Mr. Hyde said problems with the oil-for-food program prompted him to introduce legislation yesterday to require greater accountability at the United Nations. We need international institutions that are transparent, answerable to outside scrutiny and beyond reproach, he said. The bill was co-sponsored by Rep. Tom Lantos, California Democrat. 
    The House inquiry is one of at least three congressional investigations into the oil-for-food program. In addition, the Bush administration is investigating the program, and the United Nations has started its own probe, led by former Federal Reserve Chairman Paul Volcker. 
  Everett Schenk, the chief executive officer of BNP Paribas in North America, told the committee that the bank followed the direction of the United Nations in issuing letters of credit under the oil-for-food program. 
    He denied that the bank improperly made payments under the program. Apart from temporary backlogs in administering letters of credit, the bank acted within U.S. laws and regulations, he said. 
    However, committee investigators said that in at least one case, the bank issued three U.N.-approved payments for Al Riyahd International Flowers that instead were paid to a company known as East Star Trading Co. Ltd. 
    These third-party payments were an exception to BNP's procedures relating to the assignment of letter of credit proceeds, one investigator said. BNP explained that a senior manager at BNP authorized this exception based on the request of Al Riyahd International Flowers and did so in accordance with BNP's procedures for the escrow account. 
    Committee investigators said eight government agencies notified the French bank about deficiencies in handling money in the U.N. program. Four internal audits and memoranda also found problems with the bank's procedures. 
    Mr. Hyde said some U.S. allies did all they could to facilitate business with Saddam's regime, and that committee investigators think Saddam used money obtained through oil sales to fund terrorists. 
    According to the information provided to this committee, Saddam paid $25,000 rewards to the families of Palestinian suicide bombers through the Iraqi ambassador to Jordan out of accounts in the Rafidain bank in Amman, which held kickback money Saddam demanded from suppliers to his regime, Mr. Hyde said. 
    Mr. Lantos, the committee's ranking Democrat, said Russia and France were involved in helping the regime through commercial transactions and political support within the United Nations. He also said the State Department failed to act against illegal activities in the U.N. program. 
    I'm stunned at the failure of our own State Department to put a halt to Saddam's larceny, Mr. Lantos said, adding that the committee should turn our attention as far as Moscow and Paris, and as near as Foggy Bottom. 
    The panel investigators say Saddam was allowed to set the sale price of Iraqi oil 50 cents per barrel above market prices. That added amount was then paid back to his aides by oil purchasers and placed in banks in Jordan, Lebanon and Syria. 
    The U.S. and British governments first uncovered the kickback scam in 2001 and, through a diplomatic battle at the United Nations, ended the spot-pricing of oil. 
    Russia and France opposed the U.S. and British effort because both countries were making money from the illicit oil sales, the investigators said.