Annan Disciplines Oil-For-Food Chief
Associated Press
February 3, 2005
By EDITH M. LEDERER, Associated Press Writer
UNITED NATIONS – Secretary-General Kofi Annan ordered disciplinary
action against the head of the U.N. oil-for-food program in Iraq on
Thursday, after a report sharply criticized Benon Sevan for
“undermining the integrity” of the United Nations through a “grave
conflict of interest.”
The investigation report said Sevan solicited oil allocations from
Saddam Hussein’s regime on behalf of a trading company between 1998
and 2001, and it raised concerns he may have received kickbacks for
the help.
Based on the report, Annan has decided to discipline Sevan and another
U.N. official, Joseph Stephanides, who was chief of the U.N. Sanctions
Branch, said Mark Malloch Brown, Annan’s new chief of staff. Malloch
Brown said the type of disciplinary action would be announced early
next week but gave no details.
In its report released Thursday, the investigation led by former
Federal Reserve Chairman Paul Volcker accused Stephanides of
“tainting” bidding for a contract. Stephanides now heads the Security
Council Affairs Division in the U.N. Department of Political Affairs.
Allegations of corruption in the $60 billion oil-for-food program –
which allowed sanctions-bound Iraq to sell oil to buy humanitarian
supplies – have raised steady criticism from members of Congress.
“I am reluctant to conclude that the U.N. is damaged beyond repair,
but these revelations certainly point in this direction,” said
Illinois Republican Henry Hyde after Thursday’s report. His House
International Relations Committee is one of several U.S.
investigations.
Sen. Norm Coleman, who called for Annan’s resignation over the
scandal, said he was pleased with the report and urged Annan to lift
Sevan’s diplomatic immunity so U.S. prosecutors can review the case.
“There is more than enough probable cause to believe Benon Sevan’s
actions constitute criminal activity,” said Coleman, R-Minn.
Despite Sevan’s claims that he never recommended any oil companies,
Volcker’s Independent Inquiry Committee said it had evidence that
Sevan asked Iraq to give a small Swiss-based oil company, African
Middle East Petroleum Co. Ltd. Inc., known as AMEP, the opportunity to
buy oil. The company received the allocations and earned $1.5 million
from them.
Volcker’s panel said it is still investigating “the scope and extent
of benefits” that Sevan received for his requests.
The report did not say Sevan received kickbacks, but expressed concern
at $160,000 in cash that he said he received from his aunt in his
native Cyprus from 1999-2003. The report questioned this “unexplained
wealth,” noting that his aunt, who recently died, was a retired Cyprus
government photographer living on a modest pension.
“The most disturbing finding is the accumulation of evidence that the
executive director of the program Benon Sevan did in fact solicit oil
allocations for a small trading company,” Volcker said at a news
conference. “The Iraqis, who were assigning such allocations,
certainly thought they were buying influence.”
The report said Sevan’s solicitations on AMEP’s behalf “presented a
grave and continuing conflict of interest, were ethically improper,
and seriously undermined the integrity of the United Nations.”
Asked whether the committee found any criminal wrongdoing, Volcker
said, “We are not a criminal tribunal. Other people will have to draw
conclusions from the facts that we have presented.”
He said Sevan had not been entirely cooperative and had not responded
to interview requests in a timely way.
Malloch Brown said Annan “is shocked” and “terribly dismayed” at the
report’s findings about Sevan “and he very much doubts that there can
be any extenuating circumstances to explain the behavior which appears
proven in the report.”
But Sevan’s lawyer, Eric Lewis, accused Volcker’s committee of making
him a scapegoat and denied he ever received any money.
“The IIC has turned its back on the principles of due process,
impartiality and fairness … and it has caved in to the pressures of
those opposed to the mission of the U.N.,” Lewis said in a statement.
The oil-for-food program, launched in December 1996 to help ordinary
Iraqis cope with U.N. sanctions imposed after Saddam’s 1990 invasion
of Kuwait, quickly became a lifeline for 90 percent of the 26 million
population.
Under the program, Saddam’s regime could sell oil, provided the
proceeds went to buy humanitarian goods or pay war
reparations. Saddam’s government decided on the goods it wanted, who
should provide them and who could buy Iraqi oil. But the Security
Council committee overseeing sanctions monitored the contracts.
In a bid to curry favor and end sanctions, Saddam allegedly gave
former government officials, activists, journalists and U.N. officials
vouchers for Iraqi oil that could then be resold at a profit.
Writing to U.N. staff late Thursday, Annan said, “however serious the
flaws revealed in this report, it does not support many of the wilder
allegations made against the program, such as that it was responsible
for the alleged $21 billion of illicit revenue allegedly gained by
Saddam Hussein through smuggling and other means between 1991 and
2003.”
Volcker said the major source of illicit funds to Iraq was from
smuggling, to Jordan, to Turkey, eventually to Syria, and then to
Egypt. What isn’t clear is how much those involved in the oil-for-food
program pocketed, he said.
But he confirmed an estimate in an October report by top U.S. arms
inspector Charles Duelfer that Saddam made $228 million in surcharges
on oil. However, he questioned Duelfer’s estimate that Saddam’s
kickbacks totaled $1.5 billion, saying they could have been as high as
$2.5 billion.
Volcker’s report also found “convincing and uncontested evidence” that
selection of the three U.N. contractors for the oil-for-food program
– Banque Nationale de Paris, Saybolt Eastern Hemisphere BV, and
Lloyd’s Register Inspection Limited – did not conform to established
financial and competitive bidding rules.
Paris-based BNP was chosen by former Secretary-General Boutros
Boutros-Ghali to be the program’s banker without meeting the
U.N. requirement to accept the “lowest acceptable bidder,” the report
said.
Volcker initially told reporters that Boutros-Ghali was under
investigation for that decision. But he retracted that statement
later, saying he misheard the question and thought it was about
Sevan. Volcker said Boutros-Ghali was questioned about BNP and has
told investigators he will continue to cooperate.
The competitive bidding process for a company to monitor Iraqi oil
exports was manipulated by Allan Robertson, who was in charge of the
U.N. procurement department, so Saybolt could lower its bid and win
the contract, the report said.
For the inspection of humanitarian goods, the report said, there was a
clear early preference for Lloyd’s and the competitive bidding process
was “tainted” by Stephanides. His contacts with an unnamed U.N.
mission, which a U.N. committee acquiesced to for political reasons,
led to Lloyd’s winning the contract even though there was a lower
bidder, it said.
Sevan has denied any wrongdoing. He has retired, but remains on the
U.N. payroll for a dollar a year to help with the investigation. It
was unclear what sorts of disciplinary action were possible against
him.
AMEP was run by Fakhry Abdelnour, described as an oil trader. The
report cited an Iraqi official as saying that Sevan asked Iraqi
officials in 1998 to allocate oil vouchers to AMEP to “help a friend,”
and said the friend’s name was “Abdelnour.”
The report pointed to several flaws in the auditing of the program and
called for greater transparency and accountability. It said
U.N. watchdog Dileep Nair had a report critical of program management
but never submitted.
Thursday’s report did not address questions about Annan or the
employment of his son, Kojo, by the Swiss company, Cotecna Inspection
SA, which had a U.N. contract to certify deals under the oil-for-food
program. It said that topic would be addressed in another report.
Volcker said he intends to issue a definitive report in midsummer on
the entire management and oversight of the program.
The program ended in November 2003, after the U.S.-led war that
toppled Saddam, but allegations of corruption first surfaced in late
2000, with accusations that the Iraqi leader was putting surcharges on
oil sales and pocketing the money.
Associated Press writers Nick Wadhams and Desmond
Butler contributed to this report in New York.
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