Oil-For-Food Probe: UN Needs Overhaul to Stop Fraud

By Colum Lynch
September 7, 2005
The Washington Post 
http://www.washingtonpost.com/wp-dyn/content/article/2005/09/06/AR2005090600666.html 
UNITED NATIONS, Sept. 6 -- The U.N. Security Council and Secretary General Kofi Annan failed to adequately manage and police the $64 billion U.N. oil-for-food program, creating a permissive environment that enabled Saddam Hussein's government in Iraq to take billions of dollars in illicit kickbacks, according to the findings of a U.N. investigation to be released Wednesday.
The report by Paul A. Volcker, the former U.S. Federal Reserve chairman who heads the U.N. Independent Inquiry Committee, will portray a largely dysfunctional, leaderless international effort to operate the humanitarian relief effort for Iraq from December 1996 until the U.S.-led invasion in March 2003. Volcker will urge world leaders attending a Sept. 14 summit on U.N. reform to support steps to strengthen the quality of independent oversight of the organization's spending.
To settle for less, to permit delay and dilution, will invite failure, further erode public support, and dishonor the ideals upon which the United Nations is built, says the preface of Volcker's report.
The document, which is expected to exceed 700 pages, is the fourth and most comprehensive report by Volcker's panel and will summarize previously published findings while offering new details of abuses in the program.
Among those conclusions, the report will say that Iraq's neighbors, including Jordan, Turkey and Syria, violated U.N. sanctions by smuggling billions of dollars of Iraqi oil from Hussein's government, U.N. sources said. The report will also fault key Security Council members, including France and Russia, for impeding efforts to reform the oil-for-food program. And it will criticize the United States for doing too little to discourage allies in the region from violating the sanctions and by abetting the smuggling of Iraqi oil by Jordan immediately before the invasion, the sources said.
The committee report documents how differences among member states impeded decisions, tolerated large-scale smuggling, and aided and abetted grievous weaknesses in administrative practices within the [U.N.] Secretariat, says the preface, which was released Tuesday. As the years passed, reports spread of waste, inefficiency, and corruption, even within the United Nations itself. Some was rumor and exaggeration, but much -- too much -- has turned out to be true.
The U.N. program was established to allow Iraq, which was under a U.N. trade embargo following its 1990 invasion of Kuwait, to sell oil and use the proceeds to buy food and medicine and pay billions of dollars in war reparations. The report to be issued Wednesday says the program achieved important successes by improving nutritional and health standards and by undermining Hussein's efforts to build weapons of mass destruction. But it says the United Nations allowed Hussein to abuse the program by bribing U.N. officials and by forcing hundreds of companies to pay kickbacks in exchange for the right to trade in oil and humanitarian goods. The abuses cast a dark shadow over the program, Volcker's report says.
The oil-for-food scandal has triggered federal criminal investigations and several congressional probes of the United Nations' management of the program. The U.S. attorney for the Southern District of New York has charged two Russian nationals with wire fraud and money laundering. One of them, a U.N. procurement officer who has pleaded guilty, was cited in a previous Volcker report for soliciting a bribe from a Swiss company seeking to do business in the oil-for-food program and for receiving more than $950,000 in bribes from contractors in other U.N. programs.
Volcker's new report will sharply criticize Annan's oversight of the oil program as lax, citing serious instances of illicit, unethical, and corrupt behavior by U.N. officials under his watch. The report will draw attention to administrative shortcomings by the nine U.N. humanitarian agencies, including the U.N. Development Program and Habitat, the main housing agency. It also will accuse the 15-nation Security Council of providing uncertain, wavering direction to U.N. officials running the program. Neither the Security Council nor the Secretariat leadership was clearly in command, the preface states.
Annan conceded in an interview with the BBC on Monday that mistakes were made in managing the program, but he insisted that there were concessions that had to be made to get Saddam Hussein to agree.
I accept responsibility for inadequacies and failures, he told the BBC. But when it comes to Iraq, on this issue, no one is entirely covered in glory. . . . Honestly, I wish we had never been given that program, and I wish the U.N. will never be asked to undertake that kind of program again.
The Volcker panel singled out Annan's son, Kojo, for abusing diplomatic privileges extended to his father. The report claims that Kojo Annan received a $3,000 loan in 1998 to buy a $39,000 Mercedes-Benz from an executive of a Swiss company, Cotecna, that was trying to do business with the United Nations through the oil-for-food program, according to a member of Volcker's staff.
The report will also assert that Kojo Annan obtained thousands of dollars in diplomatic benefits -- including breaks on taxes and customs fees -- from the transaction by falsely claiming that he was purchasing the car for his father, according to the staff member. The sale was first reported by Time magazine. Efforts to reach Kojo Annan's attorney last night were unsuccessful.
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