SFO probes British firms in oil-for-food scandal

Peter Koenig 
November 06, 2005
The Sunday Times
Original Source: http://www.timesonline.co.uk/article/0,,2095-1859097,00.html
THE Serious Fraud Office and HM Revenue & Customs are to consider whether British companies broke the law in supplying goods to Iraq under the corrupt UN oil-for-food programme. 
GlaxoSmithKline, Weir and nine other British companies were linked to the programme last week when they were named in the Volcker report, an investigation of the UN initiative by a commission led by Paul Volcker, a former chairman of America’s Federal Reserve. 
“A copy of the Volcker report is on our desk and we are looking at it,” said an SFO spokesman. 
Customs said last week that it, too, was looking at British corporate involvement in Iraq by sifting through the evidence produced by the US Senate. A spokesman said it would “study the US Senate Permanent Subcommittee on Investigations report, and will consider what, if any, breaches it contains”. 
The reviews are preliminary. “Just because we are looking at the report does not mean it’s an SFO criminal investigation at this stage,” said the SFO, “and may not end up being one.” 
But City lawyers regard the reviews as serious. “The seriousness of this should not be underestimated,” said Mike Pullen, a partner at the law firm DLA Piper. “Volcker had no power to compel companies and their executives to talk, or to search and seize. The SFO and Customs do.” 
Lawyers said that charges arising from illicit payments made to Saddam Hussein’s regime could include sanction-busting, fraudulent accounting and violations of a 1999 international anti-corruption protocol. 
The oil-for-food programme was established by the UN to help pay for food and medicine for ordinary citizens in the face of an embargo after Saddam invaded Kuwait in 1990. It went wrong when Iraqi officials started putting surcharges on oil exports and demanded that suppliers of humanitarian goods inflate contracts and pass on the difference. 
More than 2,000 companies from 66 nations paid $1.8 billion (£1 billion) in bribes and kickbacks to Saddam’s regime, according to Volcker. 
Meanwhile, investigators in New York uncovered other abuses at the UN, including alleged corruption at Eurest Support Services, a subsidiary of the British catering company Compass, which had contracts to feed UN peacekeepers. 
Last week Compass dismissed the chief executive of its UK division and two other employees after an internal investigation into Eurest’s business with the UN had raised “serious concerns”. 
Compass is now being investigated by the American authorities. The company said in a statement on Thursday that it “will be continuing to co-operate voluntarily and fully as appropriate with the UN and US authorities”. 
Besides Glaxo and Weir, the 11 British companies identified by Volcker included an Anglo-French affiliate of the American drugmaker Eli Lilly and lesser-known firms such as Mabey & Johnson, a Reading company that makes modular bridges. 
Glaxo did not respond to the Volcker committee’s enquiries, but said after publication of the Volcker report that it had done nothing wrong. 
“GSK had a regular dialogue with officials at the Department of Trade and Industry in this area,” said the company. 
Weir admitted last year that agents acting for it may have made illicit payments. But the Volcker report identified a mid-rank employee named Andrew MacLeod who, it said, signed several agreements to make illicit payments to Iraq’s ministry of oil. Weir’s chief executive, Mark Selway, said last week that the agreements were new to the company, and he would need time to study them. 
On Friday a Weir spokesman said: “We are still continuing our internal investigations.” 
Eli Lilly did not return our phone calls, and nobody was available at Mabey & Johnson to answer questions. 
Additional reporting by Dominic O’Connell and Richard Fletcher