Thursday, February 3, 2005

NEW YORK — An independent panel headed by former U.S. Federal Reserve chief Paul Volcker yesterday accused the former head of the U.N. oil-for-food program of “a grave and continuing conflict of interest” and said his actions had seriously undermined the integrity of the United Nations.

U.N. Secretary-general Kofi Annan promptly announced that he had taken disciplinary action against the retired official, Benon Sevan, and a current U.N. employee named in the report, Joseph Stephanides.

Reaction to the report from Capitol Hill to Baghdad was largely exasperation and disappointment.

“The report indicates that the United Nations was simply not up to the task of managing such a vast operation in a transparent manner,” said Sen. Richard G. Lugar, chairman of the Foreign Relations Committee. “As this investigation moves forward, I expect that any individuals and companies identified as having participated in illegal activities will be brought to justice to the maximum extent possible, with the complete cooperation of their home governments.”

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

His committee also is probing the scandal.

The interim report, which runs 219 pages plus annexes, has been anxiously awaited inside the United Nations and on Capitol Hill, which also is investigating the oil-for-food program for Iraq. The program was instituted to produce funds for needy Iraqis suffering under the burden of international sanctions.

Accusations about the $64 billion effort have drawn demands for Mr. Annan’s resignation, and have clouded the integrity of the United Nations, most clearly in Washington.

The investigation report said Mr. Sevan solicited oil allocations from Saddam Hussein’s regime on behalf of a trading company from 1998 to 2001, and it raised concerns that he might have received kickbacks for the help.

The report does not say how the former administrator profited, but it does say that he failed to account satisfactorily for $160,000 deposited into his bank account.

The Independent Inquiry Committee also outlined a widespread lack of U.N. oversight of the huge humanitarian program and said key contracts for banking and inspection services were not awarded in a way that meets “reasonable standards of fairness and transparency.”

“This is a painful episode in the life of the U.N.,” Mr. Volcker said.

“The most disturbing finding is that Benon Sevan did repeatedly solicit oil allocations for a small company called African Middle East Petroleum Co.,” Mr. Volcker told reporters in an overflowing hotel ballroom here. “The Iraqis certainly thought they were buying influence.”

Specifically, the panel found that in 1998, Mr. Sevan successfully lobbied the U.N. Security Council to allow Baghdad to expand the definition of humanitarian goods to include spare parts and improvements for the dilapidated oil infrastructure.

U.N. officials indicated last night that Mr. Sevan, who retired in November after 40 years with the United Nations, would be stripped of his diplomatic immunity as early as next week and vowed that he and others would not be shielded from national prosecutions.

Mr. Sevan says he is a scapegoat and the victim of politically motivated search for a smoking gun in the scandal, according to a statement released last night by his lawyer, Eric Lewis.

Mr. Stephanides, the former chief of the council’s sanctions branch and now head of the Security Council Affairs Division, also will face disciplinary action for intervening in the selection of program contractors.

“Mr. Volcker has said, ‘The findings do not make for pleasant reading,’ and I agree,” Mr. Annan said last night. “Indeed, they make especially uncomfortable reading for all of us who love this organization and have done our best to serve it over the years.”

The report praised U.N. management of the account that paid for the oil-for-food program. The Volcker team also noted that few organizations would have submitted to such an intense scrutiny.

U.N. officials yesterday seized on these as proof of the international organization’s continued trustworthiness.

Mr. Volcker said that some of the biggest questions about whether the Security Council should have been more diligent in vetting humanitarian contracts and the role of Mr. Annan’s son, Kojo, in steering work toward a former employer will have to wait for the final report expected this summer.

To piece together, their overview of the enormously complex program, experts employed by the Independent Inquiry Committee have interviewedformer U.N. Secretary-general Boutros Boutros-Ghali and scores of other U.N. officials and employees of inspection and banking companies.

During a frequently combative press conference, Mr. Volcker told hundreds of reporters that too much had been made of the panel’s lack of subpoena power. He noted that the United Nations as an organization has diplomatic immunity and that foreign governments, corporations and people would not be bound by it.

Instead, he said, he had Mr. Annan’s staff directive and a Security Council resolution to compel cooperation.

“We very much hope this report will help Mr. Coleman with his investigation, and others on the Hill,” said Mark Malloch Brown, an aide to Mr. Annan. Sen. Norm Coleman, Minnesota Republican, is a member of the Senate Foreign Relations Committee.

Iraqi Human Rights Minister Bakhtiyar Amin seemed particularly offended by the findings.

“Through the report, it has become clear to us that some of those who were shedding crocodile tears for Iraqi children shamelessly showed their ugly face by stealing Iraqi children’s bread,” he told the Associated Press.

The Volcker panel will wait until it issues its summer report will not address the role of U.N. Security Council members, who were responsible for vetting all contracts to buy food, humanitarian aid, services and oil industry improvements.

It would have been up to the council to reject or at least question contracts with kickbacks or suspicious riders for spare parts and service warranties. But few objections were ever raised.

Diplomats from several Security Council members — past and present — attended the press conference yesterday. Nearly all declined to comment until they could digest the information in the inch-thick report. Several expressed relief that information about the council’s role had been deferred until summer.

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