Annan Fires Oil-for-Food Official
The U.N. chief's move is the first dismissal after a probe of alleged corruption in the aid program. Accused says he was following orders.
By Maggie Farley
Times Staff Writer

June 2, 2005

UNITED NATIONS — Secretary-General Kofi Annan fired a mid-level official in the U.N.-run oil-for-food program Wednesday for misconduct, the first dismissal to result from an investigation of alleged corruption in the multibillion-dollar program. 

Joseph J. Stephanides, a Cypriot who headed the U.N. Security Council Affairs Division, has been accused of steering a lucrative inspection contract to a British company in 1996 in violation of U.N. procurement rules.

Stephanides acknowledged that he informed the company, Lloyd's Register Inspection Ltd., of how much it needed to lower its bid to win the contract, but he said in an interview Wednesday that he was carrying out his superiors' orders. 

He was notified of his dismissal by letter Tuesday night and said he was disheartened and very, very upset about the decision because he thought he would have had a chance to defend his case at an internal hearing. He said he would appeal. 

Annan, under fire himself last year for not stopping fraud and mismanagement in the $64-billion aid program, which was designed to ease the effect of international sanctions on Iraqi civilians, had commissioned an independent investigation. In February, a panel led by former U.S. Federal Reserve Chairman Paul Volcker found that the U.N. official managing the program, Benon V. Sevan, had violated U.N. rules and had a serious conflict of interest.

Investigators also found that the process for awarding contracts was tainted, and they criticized former Secretary-General Boutros Boutros-Ghali, along with Sevan, Stephanides and other mid-level officials, for steering contracts for political and personal reasons. 

Stephanides is the first U.N. staff member to lose his job over wrongdoing in the program. Sevan has been suspended but is being kept on at a dollar-a-year salary, making him available to investigators but also providing him with diplomatic immunity. 

The Volcker report said Stephanides did not act for personal gain but for political reasons, which nevertheless broke U.N. rules. During competition for a contract to monitor imports of humanitarian goods to Iraq, Stephanides gave inside information to the British ambassador at the time to ensure that Lloyd's would win the bidding. He told investigators that his superiors on the sanctions steering committee had decided that the U.N.'s oil-for-food contracts should be spread among key Security Council member countries.

A French bank, BNP Paribas, already held the banking contract, and the committee wanted to make sure the inspection contract would not go to another French firm, Bureau Veritas, even though it was the lowest bidder, Stephanides said. He said he had been instructed to notify the British company that it needed to drop its price by nearly $1 million to win the contract, and Volcker's committee found Stephanides' name on a memo about the bid, but no other related documents. 

Stephanides says he is being made a scapegoat, a view shared by some at the U.N., who point out that others who appear to have acted for personal gain remain unpunished.