NEW YORK, Jan. 9 -- Internal auditors at the United Nations failed to investigate allegations that Iraq siphoned billions of dollars in illicit profits through kickbacks from companies that bought more than $64 billion in oil and humanitarian goods, depriving the organization of a "potentially powerful agent in helping to ensure accountability," a U.N.-appointed investigator said Sunday night.
Paul A. Volcker, the former chairman of the Federal Reserve Bank, said U.N. auditors "capably reviewed" many aspects of the organization's largest humanitarian program, uncovering evidence of mismanagement that led to the loss of at least $5 million. The U.N. commission established to compensate for losses from the Iraq invasion of Kuwait in 1990 may have wasted billions more, according to audits cited by Volcker.
But he said the audits did not monitor several elements of the oil-for-food program, including activities of a French bank that disbursed payments and U.N. leaders' management of Iraqi funds.
Volcker's report accompanied release of 55 internal audits and other documents by the Internal Audit Division of the U.N. Office of International Oversight Services. Several congressional committees also are investigating the U.N.-Iraq program and have demanded that the United Nations make the audits available.
"There was no examination of the oil and humanitarian contracts by the IAD during the oil for food program," the Volcker commission said in a briefing paper. "The potential use of oil and humanitarian contracts by the former regime to gather illicit payments was a major concern" through the life of the program.
The Volcker commission focused on activities of companies hired to monitor and manage different parts of the program. Its initial findings are expected by the end of the month.
The United Nations' internal audits were posted on the Volcker commission's Web site Sunday night. Volcker's office had announced last week that the audits would be released Monday.
The audits "shouldn't be seen as the final conclusions," said U.N. spokesman Stephane Dujarric. "What they do show is that these were U.N. auditors looking at what was going on in the program."
The oil-for-food program was established in 1996 to allow Iraq, which was placed under a comprehensive trade embargo after its invasion of Kuwait, to sell oil to buy food and other humanitarian goods under strict U.N. supervision. Saddam Hussein's regime effectively siphoned $2 billion to $4 billion through illegal kickbacks from companies that did business with the regime.
U.N. Secretary General Kofi Annan appointed Volcker last year to probe allegations that U.N. officials -- particularly the program's director, Benon Sevan -- received payoffs from Iraq. A report by a senior CIA adviser, Charles Duelfer, alleges that Sevan received a voucher to buy millions of barrels of Iraqi oil on extremely favorable terms. Sevan denies this.
The Volcker commission also intends to investigate charges concerning other programs, including the Geneva-based U.N. Compensation Committee, which oversaw the payment of billions of dollars in Iraqi compensation to governments and companies.
The commission cited a Nov. 27, 2002, letter from the former U.N. legal adviser, Hans Corell of Sweden, saying auditors had no legal basis to probe many of the compensation committee activities. The auditing agency challenged the finding and pressed ahead with its audits.
The audit division charged that the U.N. commission routinely overpaid claims and may have wasted as much as $2 billion by using a different method for currency conversion. It also drew attention to claimants "who file grossly inflated fraudulent or unsubstantiated claims."
A spokesman for the compensation commission, which published its rebuttals on its Web site, denied the charges to Reuters.
The auditors cited several cases in which countries made huge, undocumented claims. Iran claimed $2.7 billion in costs for providing humanitarian assistance to waves of refugees crossing its border. It received $7.87 million.
Jordan put in a claim for more than $6.5 billion for providing relief to people fleeing Kuwait and Iraq, but received $72 million. Israel, which sought $1.06 billion in damages for Iraq's Scud missile attacks, got $74.6 million.
