04 February 2005
Inquiry Finds U.N. Official Involved in Iraq Oil Deal
Iraq program head violated U.N. rules, standards, report says
By Judy Aita
Washington File United Nations Correspondent
New York -- In what investigators are calling "a painful episode" in the history of the United Nations, the head of the U.N. Program in Iraq during Saddam Hussein's regime solicited oil allocations from Iraqi officials for a friend.
That is one of the findings included in an interim report issued by a high-level panel investigating the program's management.
The 240-page interim report released to the public February 3 by Paul Volcker, chairman of the three-person panel officially known as the Independent Inquiry Committee into the United Nations Oil-for-Food Program, details seven instances between 1998 and 2001 when a firm based in Switzerland and linked to Benon Sevan, then U.N. under secretary-general and director of the Office of Iraq Program, received oil allocations from Iraq.
"Obviously the most disturbing finding is the accumulation of evidence that the director of the Iraq Program, Mr. Benon Sevan, in fact, did repeatedly solicit oil allocations for a small trading company called AMEP," Volcker said at a press conference releasing the report.
"The Iraqi government, in providing such allocations, certainly thought they were buying influence," Volcker said. "But whatever the result in terms of actual behavior, I think it is a fact that Mr. Sevan placed himself in a grave and continuing conflict of interest situation that violated explicit U.N. rules and violated the standards of integrity essential to a high-level international civil servant."
In conversations with Iraqi Oil Ministry officials while he was in Baghdad on U.N. business, Sevan asked the officials for oil allocations for African Middle East Petroleum Company (AMEP) run by an Egyptian, Fahkry Abdelnour.
Abdelnour, a cousin of former U.N. Secretary-General Boutros Boutros-Ghali, was described by Sevan to the officials as "a friend," the interim report said. Iraqi officials were lobbying Sevan in hopes of getting funds from the Oil-for-Food Program to repair and rebuild the Iraqi oil infrastructure. Such expenditures were not allowed under the program, which was established to provide humanitarian supplies for Iraqi civilians affected by U.N. sanctions.
The committee concluded that as a result of Sevan's actions, AMEP received several million barrels of oil allocations valued at $1.5 million.
INVESTIGATION CONTINUING
The committee is continuing to investigate the source of $160,000 Sevan received in addition to his U.N. salary while heading the Iraq program. Sevan has told investigators that the money was given to him by an elderly aunt, who is now deceased, when she visited his family from Cyprus. But investigators said in the report that "nothing about Mr. Sevan's aunt's livelihood suggests that she possessed large amounts of disposable cash income."
The committee has not accused Sevan of receiving a kickback from AMEP.
In a statement read by his chef de cabinet, Secretary-General Kofi Annan said that he has initiated disciplinary proceedings against Sevan, who has retired from the United Nations but has been kept on staff at a token salary to ensure his availability to the inquiry. Disciplinary proceedings have also been initiated against another staff member named in the report, Joseph Stephanides, who is still on active duty.
Stephanides, who is chief of the sanctions branch and director of the Security Council Affairs Division, is accused by the inquiry of prejudicing and pre-empting the competitive-bid process to reject the lowest qualified bidder in favor of Lloyd's Register.
U.N. STAFF NOT SHEILDED FROM CRIMINAL CHARGES, ANNAN SAYS
"I made clear from the outset that no one found to have broken any laws would be shielded from prosecution," Annan also said in the statement. "I stand by that pledge. Should any findings of the inquiry give rise to criminal charges, the United Nations will cooperate with national law enforcement authorities pursuing those charges, and in the interest of justice I will waive the diplomatic immunity of the staff member concerned."
"Mr. Volcker has said that 'the findings do not make for pleasant reading' and I agree," the secretary general said. "Indeed, they make especially uncomfortable reading for all of us who love this organization and have done our best to serve it over the years."
In a statement released by his legal counsel, Sevan said that the inquiry "has succumbed to massive political pressure" to make him "the scapegoat" for problems within the program. He denied taking any money and said that he always acted in the best interest of the Oil-for-Food Program and the United Nations.
CONTRACTOR SELECTION PROCESS EXAMINED
The interim report covers the committee's investigation into procurement procedures related to the selection of the bank to handle the Oil-for-Food funds, oil overseers, and contract inspectors when the program was started in 1996.
The selection process for each of the three U.N. contractors selected -- Banque Nationale de Paris, Saybolt Eastern Hemisphere BV, and Lloyd's Register Inspection Limited -- did not conform to established financial and competitive bidding rules, the committee concluded.
"The evidence amply demonstrates that a tainted procurement process took place in 1996 when the program was just getting under way," Volcker said.
Calling the start-up of the multi-billion dollar program a "time of great challenge," Volcker noted that the United Nations was under pressure to get the program started in a hurry and there were "political sensitivities" involved in choosing the companies.
"But in the end, the prescribed rules and regulations for procurement were overridden, and they certainly were importantly influenced by essentially political considerations," he said.
The investigators have not delved into the possibility that contractors who bought the oil or supplied the humanitarian goods were corrupt or corrupted. Both activities are outside U.N. responsibility, the chairman said.
Nevertheless, Volcker said, "it's an activity that, of course, we are interested in and what responsibility the U.N. had for surveillance. It is an area in which there will be opportunities for mutual cooperation with national investigatory authorities."
PANEL TO ESTIMATE HUSSEIN REGIME’S PROFITS FROM PROGRAM
Volcker said that the committee will attempt to come up with its own estimate of the money skimmed from the program by Saddam Hussein through smuggling, kickbacks, and surcharges on oil sales. Estimates from various other investigations range from $9,583 million to $21,149 million.
What is clear, the report said, is that the major source of the Iraqi regime's money came from smuggling to Syria and Egypt and "trade protocols" with Jordan and Turkey to avoid sanctions. The activities began soon after the sanctions were imposed in 1991, well before the Oil-for-Food Program was established.
FUTURE REPORT WILL ADDRESS NEPOTISM, CONFLICTS OF INTEREST
The committee is continuing to investigate allegations of conflict of interest and nepotism involving the secretary-general and his son, Kojo Annan, who was employed by Cotecna, a company that received U.N. contracts from the program.
The results will be in a subsequent report, Volcker said, because "it is an area where we want to take extreme care in making sure we know what the answer is."
The U.N. audit system had too few resources, too few auditors assigned to the program, [and] frequently exercised too little discipline, Volcker said. The resources were "ineffectively deployed" resulting in important program areas not being reviewed.
Nevertheless, the committee said that it did not find any systematic misuse of funds dedicated to the administration of the program.
There was, in fact, Volcker said, "careful budgeting, not all the funds budgeted were spent, and the accounting trail is adequate."
Other issues that will be covered in the final, comprehensive report due out in July or August are: the actual operating performance of the U.N. contractors; the validity of particular audit findings; activities of U.N. agencies and operations in Iraq; and oversight by the Security Council and the council's sanctions oversight committee, known as the 661 Committee.
The inquiry committee also will continue its efforts to identify bad administration and corruption within the program, the chairman said.
"It is an interim report," Volcker said. "It is not the whole story by a long shot."
Other committee members in addition to Volcker, who is a former chairman of the U.S. Federal Reserve System, are Justice Richard Goldstone of South Africa, who was the first chief prosecutor of the U.N. International Criminal Tribunals for the former Yugoslavia and Rwanda, and Mark Pieth of Switzerland, a University of Basel professor of criminal law and criminology with expertise in international bribery and money laundering. They are assisted by a staff of experts from 28 nations.
The committee does not have subpoena powers, which, Volcker pointed out, would not reach into foreign countries or international institutions. Nevertheless, he said, the committee has had "unique cooperation" from some foreign authorities and access to all U.N. records and U.N. staff members.
The Oil-for-Food Program, which started in 1996 and ended in November 2003 when it was handed over to the Coalition Provisional Authority, was intended to allow Iraq to sell oil under U.N. supervision with the proceeds to be used primarily for humanitarian supplies for Iraq civilians and reparations to victims of Iraq's invasion of Kuwait.
(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=2005&m=February&x=20050204180536EAifas0.6967737&t=livefeeds/wf-latest.html
|
NEWSLETTER
|
| Join the GlobalSecurity.org mailing list |
|
|
|
