U.N. Audits Show Repeated Oil-for-Food Woes

By Jonathan Hunt and Liza Porteus
January 10, 2005
Fox News
http://www.foxnews.com/story/0,2933,143855,00.html
NEW YORK — Audits done of the U.N.-administered Oil-for-Food program during its existence show a systemic failure by the United Nations to adequately oversee the program, resulting in contractors overcharging the U.N. by millions of dollars.
Released a day earlier than expected, the audits show that senior U.N. officials were repeatedly warned that the $60 billion dollar program was riddled with management-and-control procedural shortcomings, violations of U.N. procedures, monetary losses and other serious irregularities.
The audits, which were carried out from 1996 to 2003 by an internal U.N. watchdog, the Office of Internal Oversight Services, have been a source of contention between the United Nations and members of Congress examining allegations of corruption in the humanitarian program.
They were released as part of investigation being conducted by Paul Volcker, the former Federal Reserve chairman who was tapped by U.N. Secretary General Kofi Annan to run an independent probe.
Later this month, Volcker is expected to release the first interim report about the program, which was created to enable Iraq to purchase food, medicine and other humanitarian materials while U.N. sanctions forbade it from selling its oil on the open market.
[The audits] paint a picture of widespread mismanagement and incompetence, said Nile Gardiner, a policy analyst at the Heritage Foundation. I think it's going to greatly increase the pressure on Kofi Annan to step down.
Edward Luck, director of the Center for International Organization at Columbia University, said that despite the numerous examples of such mismanagement, as outlined in the audits, there is no sure evidence of actual corruption.
We don't see any smoking gun at this point, he said.
The panel Volcker leads mostly praised the U.N. auditors, but noted that the audits did not focus on administration from U.N. headquarters and on oil-purchase and humanitarian-aid contracts — the areas where outside investigators have focused.
The panel implied that the auditors' focus missed exposing the alleged corruption, mostly in the form of kickbacks, which may have allowed the Iraqi government to skim hundreds of millions of dollars from the program.
The reports offer a picture of several organizations debilitated by stress and insufficient resources that too frequently operated in an ineffective, wasteful and unsatisfactory manner, Volcker said in a briefing paper accompanying the audits.
Five of the more than 50 reports, including an audit of a U.N. program that was working to help secure humanitarian goods purchased under the oil-for-food program in Kurdish-controlled northern Iraq, showed widespread mismanagement.
Among the findings:
— Overpayments to 1991 Gulf War victims totaled approximately $2.2 billion.
— Payments to building inspectors, who did little to no work, totaling $500,000 per year; one petty cash custodian in Baghdad didn't even have an account book.
— One audit of the London-based Lloyd's Register, which had the contract to monitor all goods being imported into Iraq under the Oil-for-Food program, notes that Lloyd's billed the United Nations for 1,800 days when its agents weren't at their inspection posts in Iraq. The audit found that the United Nations was overcharged $1.38 million.
— Another audit focused on work done by the Dutch company Saybolt, which was hired to monitor oil exports. It claimed that Saybolt overcharged $471,000 for workers' accommodations and other expenses.
— Audits of Saybolt, Lloyd's Register and a Swiss company, Contecna Inspection Services — the latter two of which were responsible for inspecting humanitarian imports — show that about $1.4 million was lost by these three companies through various contract failures.
U.N. officials claim the audits show how closely the Oil-for-Food program was supervised, although they conceded that the audits illustrate negligent management of contracts.
These audits do show that this was a program that was highly audited with a great level of oversight by the U.N., spokesman Stephane Dujarric said Saturday.
The report issued along with the audits also criticized the management of the U.N. program for failing to correct many of the mistakes raised by the auditors.
It appears the OFFP management was not quick to react to criticism and was either unable or unwilling to address issues raised, the report stated, referring to the Oil-for-Food program.
Volcker also revealed that the auditors didn't even look into the operation of the headquarters of the Iraq program in New York, run by Benon Sevan, who himself is accused of taking bribes from Saddam Hussein. Sevan has denied any wrongdoing.
But the U.N. emphasized that Sevan commissioned some of the audits in order to improve the execution of the program.
Some of these audits were done by U.N. internal auditors at the request of the program director, said Dujarric. The reports are management tools.
Lawmakers: Audits Only a 'Piece of the Puzzle'
Besides being analyzed by Volcker's group, the audits are sure to be reviewed by five congressional panels. A source with the House International Relations Committee said the audits reveal clear problems.
This is clear evidence of the gross mismanagement by the U.N. Oil-for-Food program, the source said.
California Rep. Tom Lantos, the ranking Democrat on the House International Relations Committee, said in a statement it was critical to get to the bottom of the scandal.
In the future, the U.N. will have to operate in a more transparent way and further controls may have to be implemented over U.N. contracts and the performance of U.N. employees, Lantos said Monday.
Sen. Norm Coleman, R-Minn., who has called on Annan to resign, said the audits were simply another piece of the puzzle and show an ongoing pattern that justifies concerns about the management of the program.
Our preliminary review of these audits only underscores my long-held concern about the fraud, mismanagement and lack of adequate oversight at the U.N.'s Oil-for-Food program, Coleman said in a statement, adding that he still had doubts about the Volcker commission's ability to be thorough.
These audits do not answer even a fraction of the questions we have been asking or will be continuing to ask as our investigation moves ahead in the months to come, Coleman added.
Rep. Christopher Shays, R-Conn., said what's missing from the audits speaks volumes about United Nations oversight, since key elements of the Oil-for-Food program — such as humanitarian-goods contract-processing procedures and oil-contract procedures — were never examined.
Audits of those critical functions could have validated long-standing concerns by some member states that the program was vulnerable to Saddam's machinations and other abuses, Shays said in a statement. Still, these reports substantiate persistent claims the program was poorly planned and badly managed.