SUNDAY TELEGRAPH(LONDON)
February 06, 2005, Sunday

The scandal Kofi couldn’t cover up
Evidence of double-dealing in the Iraq oil-for-food programme is
stacking up by the week as more and more of the United Nation’s
officials are being implicated. PHILIP SHERWELL in Washington and
CHARLES LAURENCE in New York report

BY PHILIP SHERWELL and CHARLES LAURENCE

It was just two weeks ago, in a rented suite of offices on the 15th
floor of an anonymous Manhattan office block, that Benon Sevan
finally discovered that his story would not hold. For months, the
burly, bristling Armenian-Cypriot, known within the UN for both his
bonhomie and bad temper, had insisted that the talk of oil deals with
Saddam Hussein and strange petroleum companies in Panama had nothing
to do with him.

On January 21, however, the former head of the UN’s Iraq oil-for-food
programme was confronted by proof of his deception by Paul Volcker.
The former Federal Reserve chairman is leading the UN’s investigation
into a scheme — established by the UN in April 1995 — from which
Saddam Hussein skimmed off about $2-billion and bribed foreign
allies. Its aim was to allow the Iraqi government to sell a limited
amount of oil to buy food, medicine and other essentials for its
people in the aftermath of the first Gulf War in 1991.

Mr Volcker’s interim report, delivered last week, not only contained
a damning verdict on the behaviour of Mr Sevan, an official long
defended by the current UN Secretary General, Kofi Annan, it also
threw an unexpected new focus on the role of Mr Annan’s predecessor,
Boutros Boutros-Ghali, as the unravelling scandal dragged in new
names.

The meeting was the 13th time that Mr Sevan had met the investigators
since the allegations of financial abuse were first raised by Claude
Hankes-Drielsma, a British banker who was advising the interim Iraqi
government in Baghdad. Although it was an open secret at the UN that
the oil-for-food scheme had been subject to surcharges and kickbacks
for years, Mr Annan had consistently refused to launch an
investigation until then.

On his first 12 visits, Mr Sevan refused to discuss the specifics of
the claims against him. But by this trip, the investigators had
obtained his full telephone records after clearing his office files
and computer disks (Mr Sevan had previously provided the “clean”
telephone data from his home). These records proved that Mr Sevan’s
claim to have spoken with Fakhry Abdelnour, the man who ran African
Middle East Petroleum Co (AMEP), the Panamanian oil dealership, only
once, by chance at an Opec meeting in Vienna in 1999, was
demonstrably false.

Senior former Iraqi officials had already told the commission that Mr
Sevan had solicited contracts for AMEP – claims that Mr Sevan denied,
saying he barely knew Mr Abdelnour, who also happens to be a nephew
of former UN Secretary General Boutros Boutros-Ghali. This new set of
telephone numbers showed several calls between the two men, who also
sometimes conducted back-to-back conversations with Fred Nadler, Mr
Boutros-Ghali’s brother-in-law. The former Secretary General’s role
in pushing the French bank preferred by the Iraqi authorities to
administer the programme’s accounts also comes in for close scrutiny.

But Mr Volcker and his fellow commissioners have become accustomed to
digging into the activities of Secretary Generals (past and present)
and their relatives. Their second report, due out next month, will
focus on the business links of Mr Annan’s son, Kojo, with Cotecna,
the Swiss company that won the UN contract to oversee oil-for-food
imports into Iraq in 1998. Kojo has said that he played no part in
Cotecna’s Iraq work; his father said that he did not have any idea
that Kojo remained on Cotecna’s payroll until a year ago.

Mr Annan had done his best to avoid ordering an inquiry, but the
Volcker findings may yet help save his job – for now, at least. The
UN is not a body in which the buck stops with the boss, and now, in
the belligerent form of Benon Sevan, there is a senior official to
blame.

He was not, however, the only UN official singled out for criticism
in the report and now subject to disciplinary proceedings: so, too,
was Joseph Stephanides, a fellow Cypriot who oversaw the selection of
the programme’s major contractors. The report said that the UN broke
its own competitive tendering rules when it chose Lloyd’s Register of
London, Banque Nationale de Paris of France and Saybolt, a Dutch
company, to implement the scheme. In particular, Mr Stephanides is
criticised for co-operating with British diplomats at the UN to
ensure that Lloyd’s Register, the 245-year-old inspection and risk
management group, won the contract to oversee imports into Iraq. A
lower tender was submitted by a French rival, but the UN decided that
the deal should go to Lloyd’s since BNP, the Parisian bank, had been
awarded another key contract.

Sir John Weston, the then British ambassador to the UN, said on
Friday that he was operating under “ministerial instructions” from
London in advising Lloyd’s Register on the best tactics to win the
contract. Suggestions that there was improper behaviour are based on
“ignorance of the practices of diplomatic missions”.

Lloyd’s Register is furious at being dragged into the row and says
that its reputation has been damaged badly by the release of UN
audits suggesting that it over-charged. David Moorhouse, the
executive chairman, also said that it was customary for British
diplomats to be helpful to British companies seeking overseas
contracts.

Carne Ross, the British diplomat in charge of Iraq policy at the UN
at the time, told The Sunday Telegraph that the scheme was “deeply
politicised” and “carved up” between member states. “It was our job
to lobby for British companies and we did so vigorously. Nobody in
Britain would have expected any less,” said Mr Ross, who resigned
last year. “That is the way the UN operates and it seems a little
harsh if Joseph Stephanides is carrying the can.”

The Volcker committee’s criticism of Mr Sevan was scathing. It
concluded that he had solicited and received oil allocations of
several million barrels on AMEP’s behalf, helping the company to earn
about $1.5-million. Saddam’s regime apparently believed he would help
it ease economic restrictions in return. The committee also said that
Mr Sevan failed to adequately explain the source of $160,000 of extra
income between 1999 and 2003 (he told them he was given the money by
an aged aunt who died in Cyprus last year after falling down a lift
shaft). The committee said that it “continues to investigate” whether
he “received personal or financial benefits” for soliciting the oil
deals for AMEP.

Even after the publication of the interim Volcker report, Mr Sevan’s
status with the UN remains strangely blurred, and UN officials seem
to have remarkable trouble defining it. Does he still have diplomatic
immunity? Yes. Has he retired? Yes, but he still has the status of a
contract employee, at $1 per year, maintaining his immunity. Does he
have a pension? Yes, but it is not yet being paid.

Last week, Eric Lewis, a Washington lawyer issued a spirited defence:
“Mr Sevan never took a penny.” He said that the commission had
“succumbed to massive political pressure” to find a scapegoat.

There was no sign of Mr Sevan at his Manhattan apartment block
yesterday. When The Sunday Telegraph tracked him down last year as he
visited his aunt in a Cyprus hospital, he rejected all suggestions of
impropriety and claimed that he would be vindicated.

Even if Mr Annan escapes censure in Mr Volcker’s next report, he is
not out of the woods. There are also five US congressional
investigations into the oil-for-food scandal and UN mismanagement (as
well as two criminal inquiries being conducted by federal and New
York prosecutors). And in Republican-controlled Washington, where
many politicians consider “United Nations” to be dirty words, the
Secretary General’s role still faces intense scrutiny. Nile Gardiner,
a fellow at the Heritage Foundation, an influential conservative
think tank, who has studied the scandal, said: “The UN continues to
display breathtaking arrogance with regard to the oil-for-food
scandal. The organisation does not seem to recognise the extent to
which it has been damaged by this. Five major congressional
investigations are looking at the role of Kofi Annan and any of them
have the potential to force his resignation.”

The Volcker findings have provided fresh ammunition for prominent
American critics of the UN. “I am reluctant to conclude that the UN
is damaged beyond repair, but these revelations certainly point in
this direction,” said Henry Hyde, the Republican chairman of the
House International Relations Committee, one of the investigating
panels.

At the UN, the fightback is being led by Mark Malloch Brown, the
eloquent British official who Mr Annan recently promoted to his chief
of staff with a brief to “renew” the organisation. “Benon Sevan has
been a lifelong colleague and a dear, dear friend,” he said. “But
these are extremely serious charges of wrongdoing and no one will be
shielded from prosecution. If there are criminal charges, the UN will
fully co-operate and waive diplomatic immunity of staff members,
whoever they are.” Mr Malloch Brown said the Volcker report was
“encouraging” and a “step in the right direction”.

But, he said, the report showed that the UN bureaucracy would have
done better at controlling Saddam’s oil-for-food schemes if they had
been allowed to do their jobs without the interference of the “member
nations”, particularly those on the Security Council. The report also
said that the major source of Saddam’s illicit money was not
kickbacks but oil smuggling to Jordan and Turkey, to which the US and
Britain turned a blind eye because the two countries were allies.
“Back off — that’s the message to the member states,” Mr Malloch
Brown declared. “They should look to the mote in their own eye
because what has been revealed is a process of politicisation.”

The famously haughty Mr Boutros-Ghali was even blunter in his
response after the report detailed how he “acquiesced” to the Iraqi
authorities in the choice of BNP as the programme’s banker, despite
apparently stronger competitive bids from others. According to Sir
John Weston, he did not get a second term, because he was not
regarded as a good enough secretary general to deserve a second term.
Sir John said of him: “I think he was an honourable public servant.
But he had a number of shortcomings. One of them was that he was a
singularly poor manager.”

The former Secretary General, reached by telephone in his Paris
apartment soon after the interim report was published, insisted that
he had done nothing improper. He called the allegations “silly” and,
in a telling remark, dismissed the Volcker investigators as
“ignorant” about the UN system.

In fact, the investigators have become all too well-informed about
how the UN system operated – and the rest of the world is now
learning fast. -Additional reporting by Ed Simpkins and Damien
McElroy