- The Washington Times - Thursday, February 3, 2005

The U.N. official who ran the Iraq oil-for-food program received $160,000 in questionable payments even as he was drumming up contracts under the program for a company with which he had close ties, according to the report released yesterday by former Federal Reserve Chairman Paul Volcker.

The revelations involving U.N. Undersecretary Benon Sevan were only one highlight of the 219-page interim report by the Independent Inquiry Committee that found glaring problems with the oil-for-food program’s setup, contract procedures, administration and auditing.

Mr. Sevan’s solicitations on behalf of the Africa Middle East Petroleum Co. (AMEP), a small trading company, “presented a grave and continuing conflict of interest, were ethically improper and seriously undermined the integrity of the United Nations,” the report concluded.

“In addition, Mr. Sevan was not forthcoming to [investigators] when he denied approaching Iraqi officials and requesting oil allocations on behalf of AMEP.”

The report sheds new light on the biggest monetary scandal in the world body’s history, one that has reached up to U.N. Secretary-General Kofi Annan. Questions about contracts given to Kojo Annan, the U.N. chief’s son, will be dealt with in later reports, Mr. Volcker said yesterday.

The U.S. Government Accountability Office last year estimated that Saddam Hussein skimmed about $10 billion in kickbacks and illegal oil sales from the U.N. program, which ran from 1996 to 2003.

The interim report gives no overall figure, but said an estimate by the U.S. Iraq Survey Group of $1.5 billion in kickbacks on food, medical and humanitarian aid contracts under the program could be as much as $1 billion too low.

House International Relations Committee Chairman Henry J. Hyde said the report “paints a picture of mismanagement, neglect and political manipulation that resulted in significant corruption.”

The report names multiple officials and players in the program’s history, but Mr. Sevan, who has denied wrongdoing, is the only one with an entire section dedicated to his actions. A career U.N. bureaucrat, the Cypriot national was appointed to lead the oil-for-food program in 1997.

The interim report outlines how Mr. Sevan, 67, used his influence to muscle Iraq into selling more than 7 million barrels of oil to AMEP. AMEP’s owner, Fakhry Abdelnour, a cousin of former U.N. Secretary-General Boutros Boutros-Ghali, was a close associate of Mr. Sevan’s.

The two made separate trips to Baghdad to meet with Iraqi officials regarding oil contracts for the AMEP, the report said.

Iraqi officials eventually agreed to millions of barrels’ worth of oil sales to AMEP, which would resell them for lucrative profits. AMEP made more than $1.5 million from the relationship.

The report also questions Mr. Sevan’s statements that he received cash payments totaling $160,000 from 1999 through 2003, which he said in U.N. financial disclosure forms had come from an aunt in Cyprus.

But the report found that the aunt was “a retired Cyprus government photographer, living on a modest pension, for about twenty years.”

Mr. Sevan remains on the U.N. payroll on a nominal $1-per-year contract and has an agreement to cooperate with investigations into the scandal.

Among the other findings of the Volcker panel:

• Top U.N. officials intervened to give Banque Nationale de Paris (BNP) the contract to manage the oil-for-food escrow account in 1996, even though the French bank finished third out of four finalists in the ranking of their bids. Geneva-based bank Credit Suisse “won the competition but not the contract.”

U.N. officials told investigators that one reason Credit Suisse lost out is because U.S. officials refused to let a Swiss bank win the contract, citing Switzerland’s bank secrecy laws.

• The U.N. internal audit division never had the manpower and money to monitor the vast and complex program. There was little auditing of Mr. Sevan’s New York-based office, and auditors did not even review oil and humanitarian contracts let under the program under the “erroneous” belief that it was not part of their job.

• Despite weak oversight of the escrow accounts, investigators found no misuse of the money earmarked for overhead expenses during the seven-year program. About $372 million in escrow funds were returned to the United Nations for spending on other Iraqi humanitarian needs.

The scandal has proven to be a major black eye for the United Nations and a public relations headache for companies caught up in the controversy.

In a letter attached to the Volcker report, attorneys for BNP objected to passages in the report that casted doubt on the bank’s selection for the escrow contract.

Defending the bank’s record, the attorneys said such “speculation” about the contract “would case irreparable harm to BNP Paribas, especially in the highly charged atmosphere in which such speculation would be received.”

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