August 9, 2005
Panel Accuses Former U.N. Aide of Bribe Scheme
By WARREN HOGE
The commission investigating the United Nations oil-for-food program in Iraq yesterday accused the former director, Benon V. Sevan, of accepting money from kickbacks in Iraqi oil sales and accused another United Nations official of soliciting a bribe from a program contractor.
The panel, led by Paul A. Volcker, the former Federal Reserve chairman, said that Mr. Sevan had accumulated just under $150,000 in his New York accounts from exploiting the program and that Aleksandr V. Yakovlev, a procurement officer, had sought money in exchange for confidential bidding information.
While that bribe offer was unsuccessful, the committee said it turned up persuasive evidence that Mr. Yakovlev had siphoned as much as $1.3 million in payments from contractors in other United Nations programs and deposited it offshore.
Indeed, Mr. Yakovlev pleaded guilty yesterday to charges of conspiracy, wire fraud and money laundering in Federal District Court in Manhattan, prosecutors announced. David N. Kelley, the United States attorney for the Southern District of New York, said Mr. Yakovlev had admitted receiving at least several hundred thousand dollars in bribes from foreign companies between 1993 and 2005 in exchange for information about bids for United Nations contracts. He faces up to 20 years in prison on each of three counts to which he pleaded guilty.
Past reports from the Volcker panel have exposed instances of regulations violations and conflicts of interest, but the report on Monday was the first to accuse United Nations officials of outright corruption and personal benefit.
In response to it, Mr. Sevan, a 67-year-old Cypriot who retired after a 40-year United Nations career last year, sent a letter on Sunday through his lawyer to Secretary General Kofi Annan denying the charges and saying he was being made a scapegoat by enemies of the United Nations.
As I predicted, he wrote, a high-profile investigative body invested with absolute power would feel compelled to target someone, and that someone has turned out to be me. The charges are false, and you, who have known me all these years, should know that they are false.
Mr. Sevan, who is believed to be in Cyprus, announced Sunday that he was resigning from his $1-a-year advisory position at the United Nations, a post meant specifically to ensure his availability for the Volcker inquiry. 
Manhattan District Attorney Robert M. Morgenthau announced last month that he had opened a criminal investigation of Mr. Sevan.
The Monday report - 88 pages with a 39-page appendix - was the third from Mr. Volcker's committee, which Mr. Annan has asked to investigate the $65 billion oil-for-food program. The regime allowed Iraqi oil revenues to be used to buy relief goods for Iraqis constrained by United Nations penalties, but it was exploited by Saddam Hussein to skim $1.7 billion in illegal profits.
Mr. Annan himself was mentioned only in passing in the new report, and the committee said remaining questions about whether he influenced the awarding of a contract to a company that employed his son Kojo Annan would be answered in the panel's definitive report, expected early in September.
In its last report, in March, the committee said Mr. Annan had had no prior knowledge of the contract, but since then investigators have been pursuing new allegations of meetings at which the contract might have been discussed in his presence.
Noting that it was a fact-finding mission and not a law enforcement body, the committee said it was cooperating with national inquiries and urged Mr. Annan to remove diplomatic immunity from any official whose testimony was being sought by appropriate law enforcement agencies. 
According to the committee, Mr. Sevan profited from illegal Iraqi oil allocations through a hidden arrangement with two Egyptian friends, Efraim (Fred) Nadler and Fakhry Abdelnour. Mr. Abdelnour was president of African Middle East Petroleum Company, known as AMEP, a small oil trading company that Mr. Sevan is accused of favoring. In addition, investigators recently discovered that Mr. Nadler was the company's treasurer.
Both of the Egyptians are related to Boutros Boutros-Ghali, the secretary general at the time the seven-year-long aid program began in 1996. But the Volcker committee drew no attention to the connection nor suggested that he had played any role in any corrupt activities.
The committee said that from 1998 to 2001, in a series of transactions that the report said were deliberately fashioned to be difficult to trace, AMEP transferred $579,669 in proceeds from Iraqi oil sales to Caisor Services Inc. in Geneva, a firm that did nothing other than serve as a bank account for Mr. Nadler.
The report said that Mr. Nadler withdrew $432,983 from November 1998 to October 2001, including $257,000 in cash on dates that coincided with periods when Mr. Sevan made $147,184 in cash deposits to New York accounts in his and his wife's name.
The committee said that in addition to receiving money from the scheme, Mr. Sevan and Mr. Nadler knew that Mr. Abdelnour had paid illegal surcharges to Mr. Hussein's government. 
It also turned aside claims by the men that they were just passing acquaintances, detailing 868 phone calls between them from 1998 to 2001. Much of the telephone traffic corresponded with moments when money was being transferred between them, the committee said.
The committee suggested the corrupt proceeds might be greater, noting that further investigation had been thwarted by Mr. Sevan's ending cooperation with the panel when the new evidence emerged and by Mr. Nadler's refusal to answer requests for information and interviews.
Though the amount of illicit profit tied to Mr. Sevan was relatively little in contrast to the $65 billion size of the program, the committee suggested he had the motive of rescuing himself from the precarious financial situation he found himself in 1997 when his checking account balances hovered near zero and he was overdrawn on other accounts.
Starting in 1998, his prospects improved dramatically, the committee said, and his New York bank accounts grew through a pattern of cash deposits in $100 bills.
The committee said it did not accept Mr. Sevan's explanation that an additional $160,000 whose origins have been in dispute had come from an aunt who has since died. The panel said that the woman, a former government photographer in Cyprus, had no access to such wealth.
Mr. Yakovlev, a 52-year-old Russian with 20 years of experience in the United Nations procurement office, was accused of seeking bribes from the Geneva-based Société Générale de Surveillance S.A. in June 1996. In return, he offered to give the company confidential information during competitive bidding on an oil inspection contract. It said the company did not accept the offer and, when asked about it, assisted Mr. Volcker's inspectors in uncovering Mr. Yakovlev's involvement.
According to the criminal information unsealed yesterday, Mr. Yakovlev in 2000 created a company called Moxyco Ltd. to receive secret payments from foreign companies seeking to win oil-for-food contracts. Through the company, he received funds wired to bank accounts in Antigua and Switzerland, in exchange for inside information about contracts that were coming up for bid. 
Mr. Yakovlev entered his plea before Judge William H. Pauley in proceedings that were closed to the news media. The plea came shortly after Mr. Annan agreed to a request from Mr. Kelley to waive Mr. Yakovlev's diplomatic immunity from prosecution, according to Marc Malloch Brown, Mr. Annan's chief of staff.
According to the Volcker committee, Mr. Yakovlev denied all knowledge of the arrangement when the panel confronted him with the evidence, which included incriminating faxes that were linked to him through handwriting analysis.
Julia Preston contributed reporting for this article.