Oil for Fraud
Paul Volcker's latest report details the graft over which Kofi Annan presided.

Tuesday, August 9, 2005 12:01 a.m.

Imagine an American administration in which the Attorney General secretly derives nearly half his income from the Gambino crime family. Imagine, too, that this hypothetical AG is a longstanding confidant of the President. That is what Paul Volcker's investigation of the Oil for Food Program has now demonstrated was roughly the case with Kofi Annan's United Nations. 
We are referring to the publication yesterday of Mr. Volcker's latest report on Oil for Food, which focuses chiefly on the activities of Benon Sevan, formerly executive director of the U.N.'s Office of Iraq Program, and Alexander Yakovlev, a U.N. procurement officer. Although the report contains few surprises, it shows in meticulous detail how Messrs. Sevan and Yakovlev benefitted to the tune of $150,000 and $950,000 respectively from various U.N. procurement-related schemes. In doing so, it provides a vivid picture of how Mr. Annan's U.N. works. 
The accusations against Mr. Sevan are straightforward. On a visit to Baghdad in June 1998, he asked Iraq's oil minister for an allocation of 1.8 million barrels of crude oil in the name of a small Geneva-based oil-trading firm called AMEP. One of AMEP's directors, Egyptian-born Efraim Nadler, was Mr. Sevan's closest friend. 
Between 1998 and 2001 AMEP was granted 7.3 million barrels of Iraqi oil, from which it netted $1.5 million in profit. Of that, nearly $600,000 was deposited in a Geneva bank account controlled by Mr. Nadler. According to Mr. Volcker's report, cash withdrawals totaling $257,000 were made during periods when Mr. Nadler and/or Mr. Sevan were in Geneva and returning soon to New York. 
It is not clear how Mr. Sevan and Mr. Nadler divided the money, but we do know that Mr. Sevan and his wife (also a U.N. employee) made cash deposits in New York banks of $147,184, and that there is a high degree of correlation between these deposits and prior cash withdrawals from Mr. Nadler's Geneva account. The Sevans, who jointly earned $200,000 in tax-free dollars and maintained two residences, then used this money to pay off some of their chronic debt. 
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Mr. Yakovlev, who was recently dismissed for getting his son a job with a company that did business with the U.N., is accused by Mr. Volcker of trying to trade secret bidding information in exchange for a bribe from the French oil inspections company SGS. Mr. Volcker has turned up no information suggesting SGS paid the bribe. But Mr. Volcker did find that some $1.3 million was wired to an account controlled by Mr. Yakovlev in Antigua, $950,000 of which came from various companies--or persons affiliated with such companies--that collectively won more than $79 million in United Nations contracts and purchase orders. 
Yesterday, Mr. Yakovlev was taken into U.S. custody, where he pleaded guilty to bribery, wire fraud and money laundering charges. Mr. Sevan, however, maintains his innocence, and has written Mr. Annan to say the charges are false, and you, who have known me all these years, should know that they are false. What Mr. Annan knows will be the subject of Mr. Volcker's next report, due in September. In the meantime, it will be interesting to see whether the Secretary General honors his pledge to lift Mr. Sevan's diplomatic immunity if and when he is indicted. 
What is clear is that the Secretary General intends to spin the Volcker report not as an indictment of his tenure in office, but--and this is amazing--as another reason to endorse his reform agenda and, therefore, his continuance in office. As part of its investigation of Mr. Yakovlev, a U.N. press release states, the U.N. will separately make recommendations for further reforms, particularly regarding strengthened supervision and controls over individual procurement officers. 
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Mr. Sevan's graft is reprehensible, but the real scandal is that Saddam Hussein was able to manipulate the Oil for Food program and bend the U.N. to his will for such comparatively tiny sums. That didn't happen because of U.N. oversight failures; it happened because of the U.N.'s political commitment to continued dealings with Saddam, something Mr. Annan endorsed personally, both through his own diplomatic initiatives and his stalwart defense of the prewar status quo. 
Even now, the U.N.'s defenders like to paint Oil for Food as a great humanitarian effort slightly tarnished by a few overhyped instances of corruption. In fact, Oil for Food was a huge field of graft, helped by the fact that the man in charge of policing it was, based on the evidence Mr. Volcker has collected, in the service of the bad guys. Mr. Annan might think of this as yet another opportunity for reform. If he's even remotely serious on that score, he can begin by reflecting a little harder on his own responsibility for the failures over which he, and nobody else, presided.