Very U.N.-Attractive
A leaked audit gives hints of the Oil-for-Food corruption.

By Claudia Rosett
May 19, 2004
Wall Street Journal
http://www.opinionjournal.com/columnists/cRosett/?id=110005099

In the scandal over the U.N. Oil-for-Food program in Iraq, Kofi Annan's main line of defense has been that he didn't know. Perhaps he should take a closer look at internal U.N. Oil-for-Food audit reports, more than 50 in all, produced by his own Office of Internal Oversight Services--the same reports he's declined to share with the Security Council, or release to Congress. 
One of these reports has now leaked. It concerns the U.N. Secretariat's mishandling of the hiring of inspectors to authenticate the contents of relief shipments into sanctions-bound Iraq. (Obtained by a journalist specializing in the mining industry, Timothy Wood, a copy of this report can be found at www.mineweb.com.) 
Reflecting the findings of a U.N. internal audit conducted during the sixth year of the seven-year Oil-for-Food program, the report focuses on one contractor hired directly by the U.N. Secretariat: Swiss-based Cotecna Inspection SA. This is the same company that, while bidding against several rivals for its initial Oil-for-Food contract in 1998, had Mr. Annan's son, Kojo, on its payroll as a consultant. Both Mr. Annan and Cotecna's CEO, Robert Massey, have insisted that the contract was strictly in accordance with U.N. rules. 
Although this report doesn't mention Kojo, it does go on for 20 pages about inadequacies and violations in the U.N.'s handling of the Cotecna contract. The report explains that the Contract had been amended prior to its commencement, which was inappropriate and recounts that within four days of Cotecna signing its initial lowball contract for $4.87 million, both Oil-for-Food and the U.N. Procurement Division had authorized additional costs totaling $356,000 worth of equipment. 
The U.N. auditors say this contravened the provisions of the Contract, and that Cotecna (not the U.N., which was using the Iraqi people's money) should have paid the extra costs. Within a year of the start of Cotecna's services, its contract was further amended to add charges above those initially agreed to, including a hike in the per man day fee to $600 from an initial $499. This higher fee was exactly equal to the offer of the second lowest bidder, say the auditors, adding that the Procurement Division and Oil-for-Food should have gone for a fresh bid. 
http://www.opinionjournal.com/images/storyend_dingbat.gif \* MERGEFORMATINET
The report also describes understaffing of inspection agents at entry points and a lack of procedures to verify actual attendance by inspectors. Protesting that lax staffing violates not only the Contract, but also affects the performance of the services, the auditors note that the Oil-for-Food office had been aware of this problem for some years, but hadn't fixed it. Despite the $1.4 billion in commissions collected by the U.N. to run Oil-for-Food, there was no one from the U.N. to keep an eye on Cotecna agents in Iraq. The report warns that in absence of a contract manager, there can be no assurance that the services provided were in consonance with the spirit and letter of the Contract. The report adds that in north Iraq, where at some hours there were no inspectors on the job, the result was huge differences between the figures for goods reported to have arrived by the U.N. agencies and the Contractor. 
There are further critiques, such as Inadequate understanding and Unprofessional conduct by Cotecna, and Inadequate coordination by the U.N. Yet after the report's April 2003 submission--and three months before handing over the reins of Oil-for-Food to the Coalition Provisional Authority--the U.N. Secretariat signed a new $9.79 million contract for Cotecna. 
A U.N. spokesman says all the internal audit reports on Oil-for-Food have now been turned over to the U.N.-authorized inquiry headed by former Fed Chairman Paul Volcker. But under terms drawn up by Mr. Annan, Mr. Volcker not only lacks the power of subpoena, but must submit his own report directly to Mr. Annan. And guess who has the final say over what we get to see--or not see. Why, Mr. Annan, of course. 

Ms. Rosett is a fellow at the Foundation for the Defense of Democracies and the Hudson Institute. Her column appears here and in The Wall Street Journal Europe on alternate Wednesdays.
Copyright © 2005 Dow Jones & Company, Inc. All Rights Reserved.