Conflicts compromised oil-for-food, panel reports

U.N. investigators find favoritism in contracts

February 04, 2005|By Stevenson Swanson | Stevenson Swanson,CHICAGO TRIBUNE

NEW YORK - In its first detailed report on the United Nations' oil-for-food program, a panel of investigators painted a picture yesterday of a humanitarian effort that was run with little oversight and headed by a U.N. bureaucrat who repeatedly made improper requests for oil from Saddam Hussein's Iraq.

Condemning the actions of program chief Benon Sevan, the investigation led by former Federal Reserve Chairman Paul A. Volcker said that Sevan's oil deals "created a grave and continuing conflict of interest," which "seriously undermined the integrity of the United Nations."

Mark Malloch Brown, chief of staff for U.N. Secretary-General Kofi Annan, said that Sevan and Joseph Stephanides, another U.N. official named in the report, would be disciplined and could face criminal charges.

Yesterday's report did not address allegations involving Annan and his son, Kojo, who worked for a Swiss company that had a contract to inspect goods bound for Iraq under the $64 billion oil-for-food program.

Critics have questioned whether Annan used improper influence to get the contract for the company, Cotecna Inspection SA, or whether Kojo traded on his family name to get his job and lobby U.N. officials to award the contract to his employer.

Volcker said those questions would be the subject of another report, likely in a few months. Annan has denied any wrongdoing. Brown read a statement from Annan in which he said he awaited the Volcker panel's findings "with a clear conscience."

The oil-for-food program was intended to ease the burden of the comprehensive U.N. sanctions that were imposed in 1990 after Iraq's invasion of Kuwait.

Starting in 1996, the U.N. Security Council allowed Iraq to sell oil and use the proceeds to buy food and other essential supplies, theoretically under close supervision of U.N. officials, who were supposed to ensure that none of the items Iraq bought could be used for military purposes.

In its 219-page initial report, the panel said Sevan, a Cyprus native, asked Iraqi officials for several allocations of oil in 1998-2001 totaling 7.3 million barrels. Iraqi officials, wishing to curry favor with the program's head, granted his requests.

Sevan solicited the allocations on behalf of a small Swiss-based oil company, African Middle East Petroleum Co. Ltd., which made $1.5 million by reselling the oil, the report said.

The company, known as AMEP, was run by Fakhry Abdelnour, described in the report as an Egyptian-born oil trader. The report quoted an Iraqi official as saying that when Sevan first asked for an oil allocation in 1998, he said it was to "help a friend" and named Abdelnour.

The three-member Volcker committee, which includes a South African judge and a Swiss criminologist, found no hard evidence that Sevan received kickbacks from AMEP but noted that he reported $160,000 in cash payments between 1999 and 2003 on U.N. financial disclosure forms.

Sevan, who has denied any wrongdoing, said he received the money from his aunt, but panel members were clearly skeptical of this "unexplained wealth," noting that his aunt was a retired Cyprus government photographer who lived on a modest pension.

Another major area of concern in the panel's report was in the awarding of three key contracts when the program was established in 1996.

The panel found "convincing and uncontested evidence" that selection of the three contractors - Banque Nationale de Paris of France, Saybolt Eastern Hemisphere BV of Holland and Lloyd's Register Inspection Limited of Great Britain - did not conform to established bidding rules.

The Chicago Tribune is a Tribune Publishing newspaper.

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