Annan: 'Hard Knocks' in Volcker Report

By Jonathan Hunt and Per Carlson
February 04, 2005
Fox News
http://www.foxnews.com/story/0,2933,146429,00.html
UNITED NATIONS — U.N. Secretary-General Kofi Annan said Friday he would take prompt action in response to a highly critical investigative report about the troubled Oil-for-Food program.
“Obviously there were some hard knocks in the report and we are concerned about it, and that is why we intend to take action promptly,” Annan told reporters at the United Nations. “We are as determined as everyone to get to the bottom of this. We don’t want this shadow to hang over the U.N.”
Annan was responding to a report released Thursday that pointed to significant management problems within the United Nations surrounding the $60 billion Oil-for-Food program. The report by a U.N.-authorized committee headed by Paul Volcker said the man who ran the program had seriously undermined the integrity of the United Nations.
The investigation found that Benon Sevan broke the rules by allegedly trying to obtain oil vouchers from Saddam Hussein's regime in Iraq. Sevan has been accused of receiving about $1 million worth of lucrative oil vouchers but has denied any wrongdoing.
Sevan’s lawyer issued a statement after the report’s release that said the Volcker committee had succumbed to “massive political pressure” and was “scapegoating” the 40-year U.N. employee.
Annan said it was “a bit early” to conclude that anyone was being scapegoated. “This is one in a series of investigative reports. We should wait until the work is done to draw definitive conclusions,” he said.
Although he was not a subject of Thursday’s report, Annan remains under investigation by the Volcker panel because of his son’s links to a company that won one of the most lucrative Oil-for-Food contracts. Kojo Annan was employed for a period by the Swiss company, Cotecna Inspection SA, which had a U.N. contract to certify deals under the Oil-for-Food program.
Annan's predecessor as secretary-general, Boutros Boutros Ghali, has also been eyed by investigators. Boutros Ghali led the United Nations until 1996, when he was prevented from gaining a second term because of U.S. pressure.
The Volcker report is highly critical of Boutros Ghali's decision to hand another contract, worth more than $1 billion, to the French bank BNP Paribas, disregarding all U.N. rules. Boutros Ghali also has apparently been reluctant to help investigators. While investigators have spoken with him, one member of the investigating panel told FOX News that Boutros Ghali has been among the most difficult people to reach.
Annan is beginning disciplinary proceedings against Sevan and he may lift his diplomatic immunity even before the U.S. Justice Department or another judicial authority requests formal charges against him.
Mark Malloch Brown, Annan's new chief of staff, said Thursday that Annan would discipline Sevan and another U.N. staffer early next week. Brown acknowledged that there was limited action Annan could take because Sevan had retired.
But Annan could discipline Joseph Stephanides, who was chief of the U.N. Sanctions Branch and deputy director of the Security Council Affairs Division in the U.N. Department of Political Affairs. The Volcker report found that Stephanides manipulated an Oil-for-Food contract.
One member of the investigating committee told FOX News he believes Sevan's dealings with the former Iraqi regime reach the level of criminal activity.
The Oil-for-Food program, launched in December 1996 to help ordinary Iraqis cope with U.N. sanctions imposed after Saddam Hussein's 1990 invasion of Kuwait, quickly became a lifeline for 90 percent of the population.
Under the program, Saddam's regime could sell oil, provided the proceeds went primarily toward humanitarian goods and pay reparations to victims of the 1991 Gulf War. Saddam's government decided on the goods it wanted, who should provide them, and who could buy Iraqi oil — but the Security Council committee overseeing sanctions monitored the contracts.
FOX News' Jonathan Hunt and Per Carlson contributed to this report.