Oil-for-Food Director Blocked Audit, Investigators Say

The Associated Press
February 13, 2005
The New York Times
http://www.nytimes.com/2005/02/13/national/13food.html

NEW YORK, Jan. 12 (AP) - The former head of the United Nations oil-for-food aid program in Iraq, Benon V. Sevan, blocked a proposed audit of his office around the same time he is suspected of having solicited lucrative oil deals from Iraq, according to investigators.
A United Nations auditing team determined at the time that running the $64 billion program was a high-risk activity and a priority for review. But Mr. Sevan denied the auditors' request to hire a consultant to examine his office in May 2001 - an act top investigators of the program are now calling into question.
I think the auditors thought they were steered away from some areas, said Paul A. Volcker, who is leading an independent commission appointed by the United Nations to investigate fraud and mismanagement in the program.
Our judgment is that the main office should have been audited, he said. And that leaves the inference that perhaps the auditors were not encouraged to do the work. I think we draw the inference that it was at least suspicious.
Two months after Mr. Sevan refused the auditors' request, African Middle East Petroleum, a Panamanian company run by a friend of Mr. Sevan's, purchased one million barrels of oil that Iraq had allocated to him. That was one of nine allocations between 1998 and 2002 involving Mr. Sevan and believed to have generated $1.5 million for the company, according to an interim report that Mr. Volcker's committee released this month.
Mr. Volcker accused him of a grave conflict of interest, saying his conduct in soliciting oil deals for A.M.E.P. was ethically improper and seriously undermined the integrity of the United Nations.
Mr. Sevan has denied wrongdoing.
The oil-for-food program was the largest United Nations aid operation while it existed, from 1996 to 2003. 
Faced with such an immense program involving multiple United Nations agencies, the small team of internal auditors assigned to monitor it were overmatched and underfinanced. For other programs, Mr. Volcker's investigators said, the United Nations mandated one auditor for every $100 million in financing. 
At that ratio, more than 160 auditors would be assigned to the oil-for-food program. Instead, in 2001, only five were, according to Mr. Volcker's report.
In April 2001, the head of the five-member auditing team, Esther Stern, wrote to Mr. Sevan requesting money for an outside accountant to evaluate the management of the main oil-for-food office he ran at United Nations headquarters in New York, according to the report.
After a month, Mr. Sevan responded, saying that because there was uncertainty about how much longer the program would continue, he could not justify the expense. About the same time, Mr. Sevan and his team moved into a new office at a cost of more than $3 million.
After that exchange, the auditors, following the advice of Mr. Sevan's office, used their resources to review programs inside Iraq, the auditors told investigators in interviews.