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Conflicts Cited in Iraq Oil Program

U.N. Report Says Chief Undermined Sanctions

By Colum Lynch
Washington Post Staff Writer
Friday, February 4, 2005; Page A01

UNITED NATIONS, Feb. 3 -- The former director of the U.N. oil-for-food program had serious conflicts of interest that violated the integrity of the world body and helped undermine economic sanctions against Iraq, U.N.-appointed investigators reported Thursday.

Benon Sevan repeatedly sought -- and received -- from Iraqi officials the rights to purchase millions of barrels of discounted oil while he was running the program, and then misled investigators about his relationship with an Egyptian national who sold those rights for $1.5 million in profits, the inquiry found.

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Oil-for-Food Report: The interim report by the Independent Inquiry Committee into the United Nations Oil-for-Food Programme (PDF).
Independent Inquiry Committee
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The findings are the first to come from a panel appointed by U.N. Secretary General Kofi Annan to investigate allegations that the $64 billion oil-for-food program was corrupt and mismanaged. Those allegations have led to calls for Annan's resignation by some members of Congress and have spurred probes by five congressional committees. Those, like the probe by the United Nations, are continuing.

In its preliminary report Thursday, the U.N.-appointed panel, led by former Federal Reserve chairman Paul A. Volcker, also said that former secretary general Boutros Boutros-Ghali was one of a few U.N. officials who improperly helped steer contracts related to the program to selected companies, and that two of his relatives were involved in the sale of the oil allocated to Sevan.

Annan announced that he will pursue "disciplinary proceedings" against Sevan and another U.N. official, Joseph Stephanides, who allegedly helped the British government circumvent the United Nations' competitive bidding process to steer a contract to a British company. Stephanides did not respond to a request for comment.

Annan said Volcker's report contains "extremely troubling evidence of wrongdoing" by Sevan.

"Should any of the findings of the inquiry give rise to criminal charges, the United Nations will cooperate with national law enforcement authorities pursuing those charges, and in the interests of justice I will waive the diplomatic immunity of the staff member concerned," Annan said.

Annan noted that he is awaiting a report by Volcker probing possible wrongdoing by Annan's son, Kojo, who received $150,000 over a five-year period from a Swiss company while it profited from the oil-for-food program. The company maintains that Kojo Annan, who had been an employee, had nothing to do with its work in Iraq and that the payments were part of a standard agreement that would bar him from working for a competitor.

Sevan's attorney, Eric L. Lewis, said that "Mr. Sevan never took a penny" from the program. Volcker's commission has "succumbed to massive political pressure and now seeks to scapegoat" Sevan, Lewis said.

"Mr. Sevan's goal throughout the life of the program was to expedite the pumping of oil in order to pay for urgently needed humanitarian supplies" in Iraq, he said.

Some in Congress viewed Volcker's report as vindication of their criticism of the organization. Rep. Henry J. Hyde (R-Ill.), chairman of the House International Relations Committee, said the findings "reinforce evidence we have developed detailing lapses in program oversight, management, fiscal controls and an absence of even the most rudimentary standards of accountability."

Sen. Richard G. Lugar (R-Ind.), chairman of the Foreign Relations Committee, said that "part of the blame for the current imbroglio lies with the U.N." but that "we must recognize that those nations who sat on the Security Council . . . another during the life of the program -- and this includes the United States -- must also answer questions as to why they, too, did not pay greater scrutiny to this program."

The United Nations established the program in December 1996 to allow Iraq, which had been put under U.N. sanctions after its 1990 invasion of Kuwait, to buy food, medicine and other humanitarian goods.

The program helped ease the plight of millions of undernourished Iraqis, but it also provided the Iraqi government with at least $2 billion in illicit kickbacks and payoffs, according to a report last year by CIA adviser Charles A. Duelfer. Volcker said that the government received far more in illicit funds from unauthorized oil sales outside the oil-for-food program to Jordan, Turkey, Syria and Egypt.


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