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Oil-for-Food Official May Have Blocked Inquiries

Representatives from about half a dozen other companies that traded with Iraq informed U.N. officials that Iraq was forcing them to pay illegal commissions into a secret bank account for the purchase of food, medicine and humanitarian goods, according to two U.N. officials who worked for Sevan. "The chatter was that the regime was asking suppliers to agree to sign contracts with a percentage going to another account," one of the officials said.

Sevan was reluctant to embark on an anti-corruption effort because it would complicate his relations with Iraq, whose cooperation was essential to the program's success, several U.N. officials believed. He was also loath to antagonize key Security Council members, particularly Russia, which routinely opposed efforts to reform a multibillion-dollar program that served its political and economic interests.

Benon Sevan, executive director of the U.N. oil-for-food program, had said an assessment of the program's vulnerability to corruption would be too costly. (Jassim Mohammed -- AP)

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Putin and the Oligarchs

"He used to say, 'I have to sail between Scylla and Charybdis,' " a senior U.N. official said, referring to the two sea monsters in Greek mythology who tormented Odysseus and his crew.

Several U.N. officials, echoing Sevan's view, said they could not investigate crimes committed in their programs without far more resources and a specific mandate from the Security Council. Only in rare cases in which irrefutable evidence of abuses existed would they formally present the council with an allegation of corruption.

In one case frequently cited by U.N. officials as evidence of their commitment to fighting corruption, Sevan told the council's sanctions committee in October 2001 that the Greek captain of the oil tanker Essex admitted conspiring with Iraq to smuggle $10 million worth of crude oil. Sevan's briefing was arranged after Capt. Chiladakis Theofanis provided a written account of the scheme to both the United States and the United Nations. "If we got something which was so clear as the Essex case, we had no choice" but to bring it to the sanctions committee's attention, said Michel Tellings, one of three U.N. officials who oversaw Iraqi oil sales. But "we did not feel we had a mandate to go and investigate."

Although Sevan declined to pursue allegations of corruption, he took some action to address the problem, ordering a study of Iraqi imports to determine whether the costs were inflated. The report, which has not been released, was "inconclusive," according to the official who served under Sevan. In September 2003, a Pentagon study of 759 contracts valued at $6.9 billion showed "potential overpricing" by as much as $656 million.

Sevan also instructed U.N. customs experts to review individual contracts to determine whether the prices were "abnormally high" -- a move that was aimed at flagging possible wrongdoing to the council, several U.N. officials said.

Over the next 18 months, U.N. officials presented the sanctions committee with 70 contracts that were potentially overpriced, Mortimer said. But "nobody placed a single contract on hold," he said -- including the United States and Britain, Baghdad's toughest critics on the Security Council. He said Sevan's office "did its job by doing some investigation and informing the committee of its doubts."

U.S. and U.N. officials acknowledge that by allowing Hussein's government to negotiate contracts directly with thousands of foreign companies, the Security Council provided wide scope for abuses in the program. The council's decision-making process, which requires consensus among all its 15 members, made it difficult to impose anti-corruption reforms, U.S. and U.N. officials said.

"Any plan that would have denied the authority of the Iraqi government to select its own purchasers of Iraqi oil and suppliers of humanitarian products would have been rejected by a number of key Security Council member states," Kennedy told Congress.

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