UN's Annan: Oil-for-food scandal broke on US, Britain's watch 
Thu Apr 14, 9:47 PM ET 
UN Secretary General Kofi Annan, whose integrity and son were dragged into a scandal surrounding a UN oil-for-food program in Iraq, said Thursday the United States and Britain shared the blame.
Annan made reference to the fact that the bulk of the money that Saddam (Hussein) made came out of smuggling outside the oil-for-food program, and it was on the American and British watch.
Earlier Thursday, US prosecutors charged three people with scheming to pay millions of dollars in kickbacks to Saddam's Iraq regime out of oil-for-food funds, which were meant to purchase relief supplies for Iraqis.
Annan, addressing a meeting on the United Nations and the news media, said of the United States and Britain: Possibly they were the ones who knew exactly what was going on, and that the countries themselves decided to close their eyes to smuggling to Turkey and Jordan because they were allies.
Oil-for-food is the subject of an independent inquiry by a committee headed by former US Federal reserve chairman Paul Volcker.
The committee has so far issued two interim reports which charged the program's director Benon Sevan with unethical behavior, and raised serious questions over the dealings of Annan's son, Kojo.
One had hoped that when Volcker comes out with his final report in June, putting things in perspective, this will die down.
But I don't think with that group it will die down, he said.
Thursday morning Texan David Chalmers and Bulgarian national Ludmil Dionissiev were arrested in Texas, US Attorney David Kelley said. Extradition of the third defendant, British oil trader John Irving, was sought from England.
If convicted, the three men could each face a maximum term of 62 years in prison.
These disturbing indictments illustrate a continuing pattern of corruption that we have found in numerous instances involving the United Nations, said US Representative Henry Hyde (news, bio, voting record), chairman of the House International Relations Committee, which has held hearings on the scandal.
We will continue our investigation and follow it wherever it may lead, he said.
Oil-for-food was the largest aid program in UN history, overseeing 64 billion dollars in deals beginning in 1996 as the United Nations supervised Iraqi oil sales and the purchase of humanitarian supplies with the revenues.
Under the program, the Iraqi government had the power to select the companies and individuals who received the rights to purchase Iraqi oil.
Those selected were able to reap large profits by selling their allocations of Iraqi oil to brokers or companies capable of transporting the oil to a refinery.
Allocation of the purchase rights was conditional, according to Thursday's indictment, on payment of a secret surcharge to be paid into bank accounts under the control of the Iraqi government.
Chalmers and his associates engaged in the surcharge scheme through two companies -- Bay Oil Inc. and Bay Oil Supply and Trading -- in which Chalmers was the sole shareholder, prosecutors said.
In order to hide the rise in price for Iraqi oil occasioned by the illicit surcharges, the defendants allegedly conspired with Iraqi officials to deflate the official selling price of Iraqi oil. 
Each played a major role in fine-tuning the oil-for-food program as a cash cow masquerading as a humanitarian venture, said John Klochan, assistant director of the FBI's New York office. 
The system set the price for Iraqi oil so low, Klochan said, that Bay Oil was getting a great business deal, even taking into account the kickback they were required to pay.