- The Washington Times - Saturday, February 12, 2005

NEW YORK — The U.N. oil-for-food program chief under scrutiny for purported corruption and mismanagement blocked a proposed audit of his office around the same time he’s accused of soliciting lucrative oil deals from Iraq, said investigators.

A severely understaffed U.N. auditing team said running the $64 billion oil-for-food program was “a high-risk activity” and a priority for review, but Benon Sevan denied the internal auditors’ request to hire a consultant to examine his office in May 2001 — an act top investigators of the program now question.

“I think the auditors thought they were steered away from some areas,” said Paul Volcker, who’s leading the independent probe. “Our judgment is that the main office should have been audited, and that leaves the inference that perhaps the auditors were not encouraged to do the work. I think we draw the inference that it was at least suspicious.”

Two months after Mr. Sevan refused the auditors’ request, a Panamanian company, African Middle East Petroleum (AMEP), purchased 1 million barrels of oil, which Iraq had allocated to Mr. Sevan — one of nine allocations made between 1998 and 2002 involving Mr. Sevan and believed to have netted the company $1.5 million, said an interim report Mr. Volcker’s committee released this month.

The head of AMEP, Fakhry Abdelnour, a friend of Mr. Sevan’s, told investigators he paid $160,000 as a kickback to an Iraqi-controlled account in Jordan in October 2001 under one of the oil-for-food schemes under examination.

Mr. Volcker did not say Mr. Sevan received kickbacks but expressed concern about $160,000 in cash that Mr. Sevan said he received from an aunt in his native Cyprus from 1999 to 2003. The investigative report questioned this “unexplained wealth,” noting that the aunt, who recently died, was a retired government photographer living on a modest pension.

U.N. Secretary-General Kofi Annan last week suspended Mr. Sevan after Mr. Volcker accused him of a “grave conflict of interest,” saying his conduct in soliciting oil deals for AMEP was “ethically improper and seriously undermined the integrity of the United Nations.”

On the day Mr. Volcker issued his report, Mr. Sevan’s lawyer, Eric Lewis, accused the panel of trying to make his client a “scapegoat,” saying: “Mr. Sevan never took a penny.”

The oil-for-food program was the largest U.N. humanitarian aid operation, from 1996 to 2003. It was designed to let Saddam Hussein’s government sell limited amounts of oil in exchange for humanitarian goods as an exemption from post-Gulf War sanctions imposed in 1991.

Faced with a $64 billion program involving several U.N. agencies, the small team of auditors assigned to monitor it was overmatched and underfunded. For other programs, Mr. Volcker’s investigators said, the United Nations mandated one auditor for every $100 million in funding. At that ratio, the oil-for-food program managers should have expected more than 160 auditors.

Instead, in 2001, they had only five, according to Mr. Volcker’s report.

Mr. Volcker’s report said structural problems within the U.N. audit system undermined auditors’ authority. In many cases, auditors were forced to seek funding from the budgets of the programs they sought to monitor, giving the managers an implicit veto — which Mr. Sevan exercised.

In April 2001, the leader of the five-member U.N. auditing team, Esther Stern, wrote to Mr. Sevan requesting funds for an outside accountant to evaluate the management of the main oil-for-food office he ran at U.N. headquarters in New York, according to Mr. Volcker’s report.

Because the auditors’ own resources were insufficient for the $70,000 fee to the accountant Arthur Anderson, by protocol — they needed Mr. Sevan’s approval. He declined.

After considering the matter for a month, Mr. Sevan responded to the letter, saying that because of uncertainty about how much longer the oil-for-food program would continue, he could not justify the expense.

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