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Volcker report sharply critical of oil for food operation { February 3 2005 } Original Source Link: (May no longer be active)
http://www.baltimoresun.com/news/nationworld/bal-oilforfood0203,1,1439763.story?coll=bal-nationworld-headlineshttp://www.baltimoresun.com/news/nationworld/bal-oilforfood0203,1,1439763.story?coll=bal-nationworld-headlines
Volcker report sharply critical of U.N. oil-for-food operation
Former Fed chairman says the program chief's actions 'created a grave and continuing conflict of interest'
By Edith M. Lederer
The Associated Press
Originally published February 3, 2005, 5:56 PM EST
UNITED NATIONS -- Secretary-General Kofi Annan is taking disciplinary action against the head of the U.N. oil-for-food program in Iraq following an investigation of alleged corruption in the humanitarian program, a senior U.N. official said today.
The decision came after a report by former Federal Reserve Chairman Paul Volcker accused program chief Benon Sevan of unethical conduct and Joseph Stephanides of manipulating an oil-for-food contract, according to Mark Malloch Brown, Annan's chief of staff.
At the time the contract was awarded, Stephanides was chief of the U.N. Sanctions Branch and deputy director of the Security Council Affairs Division in the U.N. Department of Political Affairs. He now heads the division. Malloch Brown did not say what disciplinary steps would be taken but said they would be announced early next week.
Although Sevan said he never recommended any oil companies, the investigation led by Volcker concluded that he repeatedly solicited allocations of oil from Iraq under the program and "created a grave and continuing conflict of interest."
Volcker also said there was "convincing and uncontested evidence" that the 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 conform to established financial and competitive bidding rules.
Sevan denied any wrongdoing, the report said, but it added that evidence from Iraqi officials contradicted those denials. However, a summary of the report's findings did not accuse Sevan of any criminal actions.
Volcker's committee said it investigated allegations that Sevan, while executive director of the oil-for-food program, requested oil allocations from the Iraqi government on behalf of the African Middle East Petroleum Co. Ltd. Inc., a Swiss-based oil trading company known as AMEP.
The committee concluded that Sevan solicited and received several million barrels of allocations on behalf of AMEP in 1998-2001. Those allocations generated $1.5 million in revenues, the report said.
Those solicitations "presented a grave and continuing conflict of interest, were ethically improper, and seriously undermined the integrity of the United Nations," the report said.
The report said Sevan "was not forthcoming to the committee when he denied approaching Iraqi officials and requesting oil allocations on behalf of AMEP."
In a separate investigation by U.S. arms inspector Charles Duelfer, allegations surfaced that Sevan may have personally profited by receiving vouchers to sell Iraqi oil. According to the Duelfer report -- which got its information from the former Iraqi oil ministry -- Sevan allegedly received vouchers for 7.3 million barrels of oil through various companies and representatives that he recommended to Iraqi ministries.
The financial take would have been in the range of $700,000 to $2 million, depending on oil prices.
The oil-for-food program, launched in December 1996 to help ordinary Iraqis cope with U.N. sanctions imposed after Saddam Hussein's 1990 invasion of Kuwait, quickly became a lifeline for 90 percent of the population.
Under the program, Saddam's regime could sell oil, provided the proceeds went primarily to buy humanitarian goods and pay reparations to victims of the 1991 Gulf War. Saddam's government decided on the goods it wanted, who should provide them and who could buy Iraqi oil. But the Security Council committee overseeing sanctions monitored the contracts.
The program ended in November 2003, after the U.S.-led war that toppled Saddam. Allegations of corruption first surfaced in late 2000, with accusations that the Iraqi leader was putting surcharges on oil sales and pocketing the money.
The report by Volcker's committee said the budgeting, accounting, auditing and administration of the program was relatively disciplined, although there were isolated violations.
However, it highlighted flaws in the auditing of the program, saying there was insufficient funding and staff, and poor planning. It stressed that important areas of the program were never reviewed, and it called for greater transparency and accountability.
The interim report did not address questions about Annan or the employment of his son, Kojo, by the Swiss company, Cotecna Inspection SA, which had a U.N. contract to certify deals under the oil-for-food program. It said that topic would be addressed in another report.
Volcker said he intended to issue a definitive report this summer on the entire management and oversight of the program, including the role of the U.N. Security Council, the U.N. Secretariat and the U.N. agencies that administered the program in Iraq.
Volcker said the investigation also will focus on some of the parties involved in selling Iraqi oil or purchasing goods under the program.
Copyright © 2005, The Associated Press
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