Volcker's report also said U.N. auditors had "inadequate" resources and staff to conduct a proper investigation of the program, and it charged that the United Nations violated its own competitive bidding practices in 1996 when it selected three companies -- BNP Paribas of France, Saybolt Eastern Hemisphere BV of the Netherlands and Lloyd's Register Inspection Ltd. of Britain -- to monitor Iraq's trade.
Boutros-Ghali, of Egypt, acting on the instructions of the Iraqi government, helped steer a banking contract to hold Iraqi's oil revenues to BNP, the report said. "When provided with the short list, he contacted the government of Iraq and asked for its choice," the report said. "Apparently the Government of Iraq indicated a preference for BNP, and the secretary general acquiesced."
Boutros-Ghali could not be reached at a number in Paris provided by the United Nations.
Volcker said the "most disturbing finding" is that Sevan solicited oil for a small company headed by an Egyptian relative of Boutros-Ghali's. A brother-in-law of Boutros-Ghali "was a likely intermediary" between the two men, the report said.
Shortly after he was appointed to run the oil-for-food program in October 1997, Sevan championed an Iraqi initiative to allow Iraq to use its oil profits to buy $300 million worth of spare parts to repair its oil infrastructure. Two days after the U.N. Security Council adopted the proposal in June 1998, Sevan traveled to Baghdad and asked Iraq's oil minister, Amir Rashid, to grant an associate rights to buy discounted oil, the report said.
The Iraqi government granted the oil company headed by the Boutros-Ghali relative rights to buy 1.8 million barrels of oil, which were sold for a profit of $300,000.
The report continued with the following account:
Sevan subsequently made a similar request, but the Iraqis cut the oil allocation to 1 million barrels to express disappointment with his failure to counter U.S. efforts to block the export of some spare parts.
Sevan returned to Iraq in the summer of 1999 with a fresh proposal to expand the spare-parts arrangement. Within five days of his departure, Iraq approved the rights to buy 2 million barrels of oil, which the oil company sold for $500,000 in profits.
Volcker's team has not proved that Sevan received money from the company's oil deals. Volcker is examining cash payments Sevan received between 1999 and 2003 amounting to $160,000. Sevan has filed U.N. financial disclosure forms saying the money came from his aunt, who died last year after falling into an elevator shaft.
"Her lifestyle did not suggest this to be so," the report said. "She was a retired Cyprus government photographer living on a modest pension."
"Mr. Sevan placed himself in a grave and continuing conflict of interest situation," the report concluded. "The Iraqi government, in providing such allocations, certainly thought they were buying influence."
