Head of oil-for-food may be disciplined
(Agencies)
Updated: 2005-02-04 23:04

UNITED NATIONS - The United Nations vowed to discipline two officials implicated in a report that detailed conflicts of interest and flawed management in the U.N. oil-for-food program, while the man leading the investigation warned that more revelations were forthcoming.

The interim report, released Thursday, zeroed in on the chief of the oil-for-food program, Benon Sevan, saying Saddam Hussein's regime awarded oil allocations in his name to a trading company between 1998 and 2001.

It said Sevan had "seriously undermined the integrity of the United Nations" and suggested he may have received kickbacks, possibly using an aunt to mask his trail.

Sevan has denied he ever received any money.

Based on the report, Secretary-General Kofi Annan will discipline Sevan and another U.N. official, Joseph Stephanides, who may have "tainted" bidding for an oil-for-food contract, said Mark Malloch Brown, Annan's chief of staff.

The $60 billion oil-for-food program, which ran from December 1996 to November 2003, allowed sanctions-bound Iraq to sell oil to buy humanitarian supplies. But it allegedly became a way for Saddam to curry favor and push to end sanctions — by awarding former government officials, activists, U.N. officials and journalists vouchers for Iraqi oil that could then be resold at a profit.

Allegations that the United Nations itself was enmeshed in corrupt practices in the program led Annan to appoint former Federal Reserve Chairman Paul Volcker to investigate. Several U.S. congressional teams are also looking into it.

Volcker told The Associated Press that the investigation found no "systematic mismanagement" of the oil-for-food program. But he said there were serious problems.

He told AP he hoped that his report, which also detailed investigations into U.N. administrative expenses, internal audits and procurement, will begin to answer serious questions raised by critics of the United Nations.

"There are obviously problems in the institution, and we have identified some of them," he said. "But the end of this should be a reformed and stronger U.N., because I believe — and I know the other committee members believe — that the U.N. has an important role to play. But it cannot be effective if it is under suspicion all of the time."

Volcker's investigators are still probing Annan and his son, Kojo, who had been employed by a Swiss company, Cotecna Inspection SA, which had a U.N. contract to certify deals under the oil-for-food program. Volcker is expected to issue a report on this investigation later this winter.

Additional wrongdoing could be exposed when Volcker's commission releases a final report by midyear.

Investigators are still looking into the actions of the U.N. Security Council, which authorized and monitored the oil-for-food program, as well as the performance of U.N. contractors and the activities of U.N. agencies in the field in Iraq.

"It is not the whole story by a long shot," Volcker said at a news conference to release the report.

Despite Sevan's claims that he never recommended any companies for oil vouchers, Volcker's Independent Inquiry Committee said it had evidence that Sevan asked Iraq to give a small Swiss-based oil company, African Middle East Petroleum Co. Ltd. Inc. the opportunity to buy oil. The company, known as AMEP, received the allocations and earned $1.5 million from them.

The report did not say Sevan received kickbacks, but said it was suspicious of $160,000 he said he received from his aunt in his native Cyprus from 1999-2003. The report questioned this "unexplained wealth," noting that his aunt, who recently died, was a retired Cyprus government photographer living on a modest pension.

The report said Sevan's solicitations on AMEP's behalf "presented a grave and continuing conflict of interest, were ethically improper, and seriously undermined the integrity of the United Nations."

It also noted that Sevan had been uncooperative with investigators by changing his story and sometimes not responding promptly to interview requests.

The report also found "convincing and uncontested evidence" that selection of the three U.N. contractors for the oil-for-food program — Banque Nationale de Paris, Saybolt Eastern Hemisphere BV, and Lloyd's Register Inspection Limited — did not meet established financial and competitive bidding rules.

Paris-based BNP was chosen by former Secretary-General Boutros Boutros-Ghali to be the program's banker without meeting the U.N. requirement to accept the "lowest acceptable bidder," the report said.

The competitive bidding process for a company to monitor Iraqi oil exports was manipulated by Allan Robertson, who was in charge of the U.N. procurement department, so Saybolt could lower its bid and win the contract, the report said.

For the inspection of humanitarian goods, the report said, there was a clear early preference for Lloyd's and the competitive bidding process was "tainted" by Stephanides, the U.N. official. His contacts with an unnamed U.N. mission led to Lloyd's winning the contract even though there was a lower bidder, it said.

Asked whether the committee found any criminal wrongdoing, Volcker said, "We are not a criminal tribunal. Other people will have to draw conclusions from the facts that we have presented."

Annan said the United Nations was still deciding how to discipline Sevan, but it wasn't clear how much it can do. Sevan is officially retired, though he is still being paid a token salary of one dollar a year so he is available to investigators.

While Sevan was featured prominently in the report, the amount of money he may have pocketed — $160,000 — is a pittance compared with the $21 billion that U.S. congressional investigators claim Saddam illegally made under the oil-for-food program.

Sen. Norm Coleman, who is leading one U.S. investigation into oil-for-food wrongdoing, said the report showed the program was "inherently flawed" and asked that Sevan's diplomatic immunity be lifted so federal prosecutors can review the case.

"There is more than enough probable cause to believe Benon Sevan's actions constitute criminal activity," Coleman said in a statement.

Volcker's investigators would not say how much they believe Saddam made illegally. But the report did say that "the major source" of illicit funds to Saddam came from oil smuggling not covered by the oil-for-food program — including smuggling to Jordan and Turkey that the United States and other members of the U.N. Security Council knew about at the time.

Sevan's lawyer, Eric Lewis, accused Volcker's committee of making him a scapegoat and denied he ever received any money.

"Mr. Sevan ran the largest humanitarian program in U.N. history, a program that literally saved tens of thousands of innocent people from death by disease and starvation," Lewis said. "He is enormously proud of his service."

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