22 April 2004
Congress Explores Alleged Iraqi Oil-for-Food Abuses
U.S. officials review evidence of surcharges and kickbacks
By David Shelby
Washington File Staff Writer
Washington -- Representative Christopher Shays (Republican from Connecticut) characterized the alleged corruption within the United Nations Oil-for-Food (OFF) program as "a scandal of almost unthinkable scope and seriousness" as he opened a House Government Reform Committee hearing to explore the matter April 21.
"What began as a temporary safety valve to meet the humanitarian needs of the oppressed Iraqi people was allowed to become a permanent torrent of sanctions busting and profiteering," Shays said.
He added, "There has to be a full accounting of all Oil-for-Food transactions, even if that unaccustomed degree of transparency embarrasses some members of the Security Council."
The committee heard testimony from several U.S. government officials as well as independent analysts regarding the accusations of price manipulations and kickbacks in which U.N. officials or member state contractors may have been complicit.
U.S. Ambassador to the United Nations for Management and Reform Patrick Kennedy outlined four areas of alleged abuses: oil smuggling, price manipulation on approved oil exports, kickbacks on humanitarian contracts and possible abuses on the part of U.N. personnel.
Kennedy reported that Saddam Hussein's former regime in Iraq engaged in outright smuggling of as much as $2 billion of oil per year through Syria and the Persian Gulf. He indicated that this was carried via small vessels operating out of the Shatt al-Arab, Iraq's maritime access route to the Gulf, and through the Iraqi-Syrian pipeline.
The international community responded by activating a maritime interception force and raising its concerns with Syrian officials. Kennedy said that these measures had some limited success.
According to Kennedy, the Iraqi regime requested the imposition of additional fees on the sale of Iraqi crude in the fall of 2000, and despite the refusal of the U.N. monitoring committee to allow such fees, some oil companies were evidently willing to pay illicit surcharges of as much as 50 cents per barrel.
United States and United Kingdom officials on the U.N. monitoring committee combated the surcharges by withholding approval of the Iraqis' requested prices until the end of each month, thereby removing any speculative incentives for companies to pay anything over the fair market value on the delivery date.
Kennedy told the congressmen that undocumented allegations of kickbacks related to OFF humanitarian contracts began to surface in late 2000. He said that U.S. and U.K. officials sought to investigate these allegations, but "our proposals received no support: [committee] members claimed that absent receipt of evidence indicating that such kickbacks existed, no action could be taken."
Michael Thibault, Deputy Director of the Defense Contract Audit Agency (DCAA), revealed the findings of his agency, which reviewed numerous OFF contracts as the program was transitioned to CPA administration in May 2003.
The DCAA looked at 759 contracts valued at $6.9 billion and found evidence of overpricing in 48 percent of the contracts. The auditing team determined that the contracts, valued at $3.1 billion, contained as much as $656 million in overpricing.
He noted that the greatest apparent pricing aberrations were related to food shipments. However he also mentioned unusually large quantities of spare parts with vehicle shipments and illicit surcharges such as "after sales service charges" associated with numerous contracts.
Thibault also noted contracts of doubtful humanitarian value, such as $16 million worth of Mercedes Benz touring sedans and $600,000 worth of cigarette paper.
As for allegations regarding the complicity of officials from the U.N. Office of the Iraq Program in the kickback schemes, Kennedy said that the United States government had no knowledge of any malfeasance.
He noted that U.N. Secretary General Kofi Annan has established an independent inquiry into the U.N. office and that the Iraqis are carrying out their own investigation of abuses on the Iraqi side through the Iraqi Board of Supreme Audit.
Kennedy placed the majority of the blame for the abuse of the OFF program on the former Iraqi regime. "The U.N. Oil-for-Food program was established to address the humanitarian needs of the people of Iraq in the face of callous disregard by Saddam Hussein for their welfare ... However, this program was abused by Saddam Hussein in nefarious and clever ways," he said
He added, "The inquiries now being launched will, we hope, identify those who may have conspired with him, and perhaps assist in recouping lost funds for the Iraqi people."
(The Washington File is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
This page printed from: http://usinfo.state.gov/xarchives/display.html?p=washfile-english&y=2004&m=April&x=20040422165714ndyblehs7.661074e-02&t=livefeeds/wf-latest.html
|
NEWSLETTER
|
| Join the GlobalSecurity.org mailing list |
|
|
|
