Volcker's awkward questions

February 4, 2005
From The Economist Global Agenda
http://www.economist.com/opinion/displaystory.cfm?story_id=3639483

The Volcker committee investigating the scandal surrounding the UN’s oil-for-food programme has issued a critical report. The programme’s director, Benon Sevan, comes in for especially tough judgment. But the questions left unanswered have made the UN’s harshest critics only hungry for more 

TO THE leadership of the United Nations, Thursday February 3rd must have felt like Judgment Day. A few blocks away from the world body’s New York headquarters, Paul Volcker, a respected former head of America’s Federal Reserve, issued the first interim report of his committee’s investigation into the UN's oil-for-food programme for Iraq. Its findings do not flatter the organisation, and are devastatingly critical of Benon Sevan, the executive director of the oil-for-food programme. 
The programme was begun in 1996, allowing Iraq to sell oil to buy food and humanitarian goods to ease the suffering of sanctions-hit Iraqis. Iraq stonewalled the creation of oil-for-food until it received sole discretion from the UN in choosing buyers for oil and sellers of food and medicine. This allowed Saddam Hussein’s regime to make huge amounts of money in a variety of frauds, such as overcharging the programme for imports and levying illegal surcharges on oil sales. It is also alleged that Saddam awarded oil vouchers to buy political influence. 
Mr Volcker’s interim report answered some, though by no means all, of the questions surrounding the scandal. According to the report, Saddam-era Iraqi documents indicated that the programme head asked Iraq to allocate oil to a company called African Middle East Petroleum (AMEP), represented by a friend of Mr Sevan’s, Fakhry Abdelnour (who is also a distant cousin of former UN secretary-general Boutros Boutros-Ghali). In return, Mr Sevan fought to allow Iraq to buy spare parts for its oil infrastructure, as opposed to food and the like, with its oil-for-food proceeds. In doing so, said Mr Volcker, Mr Sevan placed himself in a “grave and continuing conflict-of-interest situation”.
Both Mr Sevan and Mr Abdelnour had claimed to have been in contact just once, at a 1999 conference. But a search of Mr Sevan’s office found two of Mr Abdelnour’s business cards with different addresses, and telephone records showed repeated calls, both directly between the two men and probably through an intermediary. Shown the records, Mr Sevan admitted developing a friendship with Mr Abdelnour: “I came to like the guy. He’s an interesting character, you know.” And Mr Sevan’s explanation of bank deposits totalling $160,000? From an aunt, now deceased, he said. The committee found that she had lived modestly in a plain two-bedroom flat in Cyprus, purchased for her by Mr Sevan. 
Mr Sevan's boss, UN secretary-general Kofi Annan, said in a statement following the report that disciplinary measures had already been taken against Mr Sevan and Joseph Stephanides, now head of Security Council affairs, who is also criticised in the report. Mr Sevan denies any misdeeds and claims he has been made a scapegoat.
Elsewhere, the committee’s findings were less lurid, though there was little good news. Three companies won contracts to inspect Iraq’s imports and exports and handle the programme’s finances in 1996 without a transparent and competitive bidding process. The evidence about why this is so is confused and contradictory, but the political orientations of the countries where the contractors were based probably played a part. Mr Boutros-Ghali, who was running the UN at the time, was among those named as having bowed to political pressure and given a contract to a company that did not make the lowest bid. 
The other two sections of the report are less damning. The committee found that the auditors who monitored oil-for-food were well-intentioned and did the best that they could, but they were given far too few resources for their huge and complex task. In an interview with BBC radio on Friday, Mr Annan’s new chief of staff, Mark Malloch Brown (a former head of the UN Development Programme and one-time journalist at The Economist), admitted that though Mr Annan had strengthened the UN's audit system, “he probably hasn't done it enough.” The one bit of good news was that the committee found little evidence that the funds for administering the programme itself were mishandled. 
As Mr Volcker wrote in Thursday’s Wall Street Journal, the findings “do not make for pleasant reading”. Not so for anti-UN conservatives in America, who are wallowing in Schadenfreude. They had feared a whitewash from the committee, and in anticipation had begun to call into question Mr Volcker’s suitability to investigate the UN. (He had served as a director of UNA-USA, a pro-UN group based in New York.) 
It is still not clear if those who would undermine the UN will see Mr Volcker’s work as going far enough. This report did not examine allegations, strenuously denied, that Kojo Annan, the secretary-general’s son, had corruptly used his connections to win a contract for his Swiss former employer. This will be the subject of a later interim report (the final report is expected in June). And this week’s report does not investigate allegations against oil buyers other than AMEP. As painful as this week's news was for the world body, the UN’s critics are eager for much more.
To achieve the thorough thrashing many Republicans think the UN deserves, five committees in the Republican-controlled Congress are investigating oil-for-food themselves. They have called for the Volcker committee to share all of its witnesses and evidence with Congressional committees and federal investigators. They complain about the committee’s lack of subpoena power. Mr Volcker has pointed out that national legal jurisdictions, including America’s, cannot penetrate the UN’s diplomatic immunity. However, the UN said on Thursday that it would take immunity away from any member of staff thought to have committed criminal acts.
The UN is attempting damage control, praising the report as an example of the body’s openness and willingness to accept criticism and reform itself. The UN says it will now break old taboos in hiring, choosing agency heads on talent alone, rather than taking submissions from key governments.
But the organisation clearly feels it has been unfairly singled out. In his BBC interview, Mr Malloch Brown claimed that some $21 billion in total went missing thanks to oil-related smuggling and the like during the Saddam era, and that the oil-for-food programme accounted for only a small fraction of that. Much of the rest, he said, was dodgy dealing condoned by the governments of America and other countries. The UN's critics thus “need to look closer to home”.
But, for most observers, the big questions still concern the UN's own mistakes and misdeeds: why was the conflicted Mr Sevan left in charge of such an important programme? And, given the scale of the mess, should the secretary-general not be seeking a new job himself?