- The Washington Times - Sunday, February 6, 2005

LONDON - Is the United Nations damaged beyond repair? Evidence of double-dealing in the Iraq oil-for-food scandal is stacking up by the week, and more and more of the organization’s officials are being implicated.

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 United Nations for both his bonhomie and bad temper, had insisted that the talk of oil deals with Iraqi dictator Saddam Hussein and strange petroleum companies in Panama had nothing to do with him.

On Jan. 21, however, the former head of the U.N. oil-for-food program in Iraq was confronted by proof of his deception by Paul Volcker. The former Federal Reserve chairman is leading the U.N. investigation into a scheme from which Saddam skimmed off about $2 billion and bribed foreign allies.

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

The meeting was the 13th between Mr. Sevan and the investigators since accusations 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 United Nations that the oil-for-food scheme had been subject to surcharges and kickbacks for years, Mr. Annan initially refused to order an investigation.

On his first 12 visits, Mr. Sevan refused to discuss the specifics of the accusations against him. But by this trip, the investigators had obtained his full telephone records after clearing his office files and computer disks. (Mr. Sevan already had 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 the African Middle East Petroleum Co. (AMEP), the Panamanian oil dealership, only once, by chance at an Organization of Petroleum Exporting Countries (OPEC) meeting in Vienna, Austria, in 1999, was false.

Senior former Iraqi officials already had told the commission that Mr. Sevan had solicited contracts for AMEP — statements Mr. Sevan denied, saying he barely knew Mr. Abdelnour, who is a nephew of Mr. Boutros-Ghali. This new set of telephone numbers showed several calls between the two men, who sometimes conducted back-to-back conversations with Fred Nadler, Mr. Boutros-Ghali’s brother-in-law.

Relative trouble

The spotlight thrown on the relatives of Mr. Boutros-Ghali was one of the surprises of the report released Thursday. The former secretary-general’s role in pushing the French bank preferred by the Iraqi authorities to administer the program’s accounts also comes in for close scrutiny.

But Mr. Volcker and his fellow commissioners have become accustomed to digging into the activities of secretaries-general and their relatives. Their second report, due next month, will focus on the business links of Mr. Annan’s son Kojo with Cotecna, the Swiss company that won the U.N. contract to oversee oil-for-food imports into Iraq in 1998.

Kojo Annan has said he played no part in Cotecna’s Iraq work, and his father said he had no idea that Kojo Annan remained on Cotecna’s payroll until a year ago.

Although the secretary-general had avoided ordering an inquiry, the Volcker findings might help save his job — for now, at least. The United Nations is not a body in which the buck stops with the boss, and now, in Mr. Sevan, there is a senior official to blame.

Defiant diplomats

He was not, however, the only U.N. official singled out for criticism in the report and now subject to disciplinary proceedings. So was Joseph Stephanides, a fellow Cypriot who oversaw the selection of the program’s major contractors. The report said the United Nations broke its own competitive-bidding rules when it chose Lloyd’s Register of London, the French Banque Nationale de Paris (BNP) and Saybolt, a Dutch company, to implement the program.

In particular, Mr. Stephanides is criticized for cooperating with British diplomats at the United Nations 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 bid was submitted by a French rival, but the United Nations decided the deal should go to Lloyd’s because BNP had been awarded another key contract.

John Weston, then head of the British mission, said Friday that he had been operating under “ministerial instructions” from London when he advised Lloyd’s on the best tactics to win the contract. Suggestions that there was any improper behavior are based on “ignorance of the practices of diplomatic missions,” he added.

Lloyd’s is furious that it has been dragged into the row and says its reputation has been badly damaged by the release of U.N. audits that suggested it overcharged. David Moorhouse, executive chairman of the group, also said 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 United Nations at the time, said the program was “deeply politicized” and “carved up” between member states.

“It was our job to lobby for British companies, and we did so extremely vigorously. Nobody in Britain would have expected any less of us,” said Mr. Ross, who resigned from the diplomatic service last year. “That is the way the U.N. operates, and it seems a little harsh if Joseph Stephanides is carrying the can for this as a U.N. official.”

Missing money

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 earn about $1.5 million. Saddam’s regime apparently thought Mr. Sevan would help ease economic restrictions in return.

The committee also said Mr. Sevan failed to adequately explain the source of $160,000 of extra income from 1999 to 2003. He had told the panel that he was given the money by an aged aunt who died in Cyprus last year after falling down an elevator shaft.

The committee said 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 report, Mr. Sevan’s status with the United Nations remains strangely blurred, and U.N. 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.

The U.N. press office had been speaking on Mr. Sevan’s behalf until last week, when calls were referred to Eric Lewis, a Washington lawyer who issued a spirited defense. He said, “Mr. Sevan never took a penny,” adding that the inquiry committee “succumbed to massive political pressure” to find a scapegoat.

There was no sign of Mr. Sevan at his Manhattan apartment block on Saturday. When the Sunday Telegraph tracked him down last year during a visit to see his aunt in hospital in Cyprus, he defiantly rejected all suggestions of impropriety against him and said he would be vindicated by the report.

Future fights

Even if Mr. Annan escapes censure in Mr. Volcker’s next report, he is not out of the woods. There are five U.S. congressional investigations into the oil-for-food scandal and U.N. 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, who has studied the scandal, said: “The U.N. continues to display breathtaking arrogance with regard to the oil-for-food scandal. The organization does not seem to recognize 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 U.S. critics of the United Nations.

“I am reluctant to conclude that the U.N. is damaged beyond repair, but these revelations certainly point in this direction,” said Rep. Henry J. Hyde, the Republican chairman of the House International Relations Committee, one of the investigating panels.

At the United Nations, the defense is being led by Mark Malloch Brown, the eloquent British official whom Mr. Annan recently promoted to chief of staff, with a brief to “renew” the organization.

“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 U.N. will fully cooperate 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 continued, the report showed that the U.N. bureaucracy would have done better at controlling Saddam’s oil-for-food schemes if it had been allowed to do its jobs without the interference of the “member nations,” particularly those on the Security Council.

The report also said the major source of Saddam’s illicit money was not kickbacks but oil smuggling to Jordan and Turkey, to which the United States 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 boldly. “They should look to the mote in their own eye, because what has been revealed is a process of politicization.”

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 program’s banker, despite apparently stronger bids from others. Mr. Weston said Mr. Boutros-Ghali did not get a second term because he was not regarded as good enough to deserve it.

Mr. Weston said of Mr. Boutros-Ghali: “I think he was an honorable 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 at his Paris apartment shortly after the interim report was published, insisted that he had done nothing improper. He called the accusations “silly” and dismissed the Volcker investigators as “ignorant” about the U.N. system.

In fact, the investigators have become well-informed about how the U.N. system operated, and the rest of the world is now learning fast.

• Mr. Sherwell reported from Washington and Mr. Lawrence from New York, with additional reporting by Ed Simpkins and Damien McElroy in London.

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