Scratching the Surface
The Volcker committee details $1.1 million in fraud--out of billions.

BY CLAUDIA ROSETT
Thursday, August 11, 2005 12:01 a.m.

A single dollar lost to corruption is a dollar too much if you're handling international public monies: With this pious utterance did United Nations chief of staff, Mark Malloch Brown, greet the findings that the head of the U.N.'s Oil for Food program, Benon Sevan, was on the take from Saddam Hussein. 
Mr. Malloch Brown has a point, of course. Every dollar of public money should be handled as a sacred public trust. But his words are hard to reconcile with the workings of today's U.N., where it seems about the only thing top management is unwilling to do with cold cash is actually account for it. 
In tracking even a small portion of the money that flowed through Oil for Food--and in this case into Mr. Sevan's hands--Paul Volcker's U.N.-authorized investigation has performed a service, as far as it goes. Mr. Volcker's latest report, released Monday, documents bribes Mr. Sevan took from Saddam, via an Oil for Food contractor who happens to be a cousin of former Secretary-General Boutros Boutros-Ghali, as well as what appears to be more garden-variety graft collected by a Russian staffer in the U.N. procurement department, Alexander Yakovlev, who among other matters was involved in the U.N. Secretariat's hiring of Oil for Food inspectors. These tales, dramatic though they are, only begin to dabble in the river of graft that flowed through U.N.-administered deals under Oil for Food. 
For the moment, however, the two cases presented by Volcker are instructive. Following the denials, stonewalling and outrage with which not only Mr. Sevan but Secretary-General Kofi Annan greeted allegations of graft in the program, the first lesson ought to be that at the U.N., protestations of honesty and promises of virtue are cheap. We don't need more words. We need to see what, exactly, the U.N. does with its money--or, for that matter, with anyone else's money. The funds grafted out of Oil for Food never belonged to the U.N.; they were by rights the property of the people of Iraq. Any ill-gotten gains spent by Mr. Sevan on New York restaurants and his Hamptons home were swiped from the same Iraqi children the U.N. was entrusted to care for. 
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Inside today's U.N., immune from law and veiled from public view, the gritty details and motivating effects of money are presumed to take a backseat to grand visions and good works. The two chronic demands of U.N. senior officials are that they need more money and that we should trust them to monitor themselves. As it happens, Mr. Malloch Brown provides an excellent case in point. Press reports earlier this year disclosed that he has been renting a house for $10,000 a month from tycoon George Soros, who has collaborated extensively with the U.N. Development Program, which Mr. Malloch Brown has run since 1999 and until next month is still heading, concurrently with serving since January as Mr. Annan's chief of staff. 
Mr. Malloch Brown has declared that under U.N. rules it is no conflict of interest for him to rent a house from Mr. Soros, and that he is under no obligation to disclose his personal financial affairs to the public. We are asked simply to trust him, and he has implied at U.N. press briefings that it is very bad manners to raise the subject at all. But even assuming that Mr. Malloch Brown is a man of complete integrity, it is unwise to foster a U.N. system in which agency heads administer public money in concert with projects of their personal landlords--subject only to the oversight of the same system that in the words of one of Kofi Annan's former spokesmen, audited to death the Oil for Food program. 
Insisting at every turn that we must simply trust them, U.N. officials since the end of the Cold War have been channeling a rising tide of public funds, as well as private donations--seeking ever more ways both to raise money and spend it. The U.N. peacekeeping mission launched in Cambodia in 1992 was, in dollar terms, the biggest ever at the time. The U.N. Oil for Food relief program launched in Iraq in 1996 was even bigger. Ted Turner's billion-dollar bequest in 1998 blazed the way for big private donors to leverage their own agendas via the U.N. brand name. And around the so-called core U.N. annual budget of roughly $1.5 billion, there now orbits an asteroid belt of agencies, programs, special initiatives and chronic drives for emergency funding, totaling billions more--great chunks of it funded by U.S. taxpayers. 
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Thus do we come to the case of Benon Sevan, a longtime U.N. staffer, who according to the Volcker committee was having trouble in the mid-1990s simply managing his own household budget. With a wife who also worked at the U.N. and a combined household income of close to $200,000, Mr. Sevan was nonetheless overdrawing his bank account and running up high-interest debts on his credit cards. This was the man whom Kofi Annan--who had some acquaintance with money matters himself, having worked in the early 1990s as U.N. controller--picked in 1997 to run Oil for Food, the biggest relief program in U.N. history, administering tens of billions in oil sales and relief purchases by Saddam. Even then Saddam was notorious both at the U.N. and beyond as one of the kickback kings of the Middle East. It wasn't long before Mr. Sevan accepted what was effectively Saddam's offer to bail him out of his restaurant bills. 
What followed, on Mr. Sevan's end, was amateur hour, as Oil for Food money laundering went; but a highly efficient use of Saddam's graft money to corrupt the core of a huge U.N. program, tasked with the important job of supervising aid to Iraqis while preserving U.N. sanctions on Saddam's regime. Mr. Sevan collected cash in Geneva via an Oil for Food contractor on whose behalf he solicited lucrative deals from Saddam. And for about three years, starting in late 1998, Mr. Sevan made dozens of cash deposits, largely in $100 bills, into family bank accounts in New York. 
Mr. Sevan's take, as far as Mr. Volcker was able to document, came to just over $147,000. Compared with the billions grafted out of Oil for Food by the true pros, this is a sum so low it suggests Mr. Sevan sold himself and the U.N.'s integrity for chump change. Indeed, if Mr. Volcker's figures are in the ballpark, then Mr. Sevan as head of Oil for Food collected less in bribes than Kofi Annan's son, Kojo, collected in payments from 1999 through 2004 from a major Oil for Food contractor, his former employer, as compensation for not competing with their business in West Africa. 
Scant information about even the legitimate aspects of the Oil for Food deals was made available by the U.N. to the public at the time, and there was no adequate inquiry into, or discipline of, flagrant internal signs of trouble throughout the program. It was only after the U.S.-led coalition toppled Saddam and secret documents began turning up in Baghdad that the U.N. was finally forced by press headlines and congressional pressure into launching an investigation. One lesson that jumps out is the extent to which secrecy can leave huge U.N. programs vulnerable to corruption by way of even relatively small bribes. It bears noting also that officials, once corrupted, are liable to blackmail. 
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No less disturbing is the case of Alexander Yakovlev, a humble Russian staffer in the U.N. procurement division, who even without Mr. Sevan's advantage of running the largest humanitarian program in U.N. history managed to amass, by Mr. Volcker's estimate, more than $950,000 in illicit payments. This came to light via the Oil for Food investigation, but it underscores the question of what might be going on in the rest of the institution. 
Mr. Sevan, kept on by Mr. Annan since last year on a $1-a-year salary to assist in the investigation, had enough warning to skip the country, possibly to his native Cyprus, and from his undisclosed location resigned last weekend. Mr. Yakovlev had already resigned in June, following media reports questioning some of his activities. He was taken into U.S. custody Monday, he copped a plea, and we now wait to see what insights he may be able to provide to prosecutors who have already been tracking yet more signs of bribery at the U.N. 
Mr. Volcker's latest report, after more than a year of investigation, is the first from his team to document actual bribes. It covers a grand total of $1.1 million in graft and runs to 130 pages, annexes included. If that ratio holds for the billions grafted, skimmed and smuggled out of Iraq relief funds under the U.N. cover of Oil for Food, we can expect that the final two reports, promised in September and October, will run to well over 1.5 million pages combined. No one is seriously expecting anything that massive, but it does give some idea of the scale of corruption with which the U.N. under Oil for Food became complicit. And it perhaps gives a hint of the scope of reform that will truly be required to clean up the U.N. 

Ms. Rosett is a journalist-in-residence with the Foundation for the Defense of Democracies. Her column appears here and in The Wall Street Journal Europe on alternate Wednesdays.
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