By Colum Lynch
Washington Post Staff Writer
Tuesday, August 9, 2005
NEW YORK, Aug. 8 -- A federal prosecutor investigating corruption in the $64 billion oil-for-food program issued the case's first criminal charges against a U.N. official, accusing a former Russian procurement officer of receiving hundreds of thousands of dollars in bribes from companies doing business with the United Nations.
Alexander Yakovlev, 52, pleaded guilty to three counts of wire fraud, conspiracy to commit wire fraud and money laundering, said David N. Kelley, the U.S. attorney for the Southern District of New York. The charges could carry a penalty of up to 60 years in prison.
The case against Yakovlev grew out of the United Nations' own investigation of its marred oil-for-food program, and it came on a day when a U.N.-appointed panel accused Benon V. Sevan, the program's former director, of receiving nearly $150,000 in kickbacks from a company run by relatives of former U.N. secretary general Boutros Boutros-Ghali.
The criminal charges represent a turning point in the U.N. scandal, which until now had yielded no public evidence that U.N. officials had broken any laws. Even so, the allegations of corruption have damaged Secretary General Kofi Annan's standing and shaken confidence in the organization.
Monday's events also signaled that U.N. investigators and prosecutors have expanded their probes beyond the oil program to include allegations of corruption in other parts of the U.N. bureaucracy.
Former Federal Reserve chairman Paul A. Volcker, who is leading the U.N. investigation, said Yakovlev tried to solicit bribes from a Swiss company that was bidding for business in the oil program. In addition, Volcker alleged that Yakovlev received more than $950,000 in an offshore bank account from contractors doing other types of business with the United Nations.
A senior U.N. official said that Annan waived Yakovlev's diplomatic immunity from prosecution Monday and was prepared to do the same in the case of Sevan, who has denied wrongdoing and who recently returned to his native Cyprus. Cyprus does not have an extradition treaty with the United States covering financial crimes.
In a document outlining charges Monday, Kelley's office said Yakovlev faxed privileged bidding information in 1996 to a company pursuing business through the oil program. Yakovlev was also charged with creating a front company, Moxyco Ltd., "to facilitate the illicit and secret payment of money to him by foreign companies" trying to do business with the United Nations.
Yakovlev was released from custody Monday on a $400,000 bond and restricted from travel, said Megan Gaffney, a spokeswoman for Kelley. Yakovlev declined to comment through his attorney, Arkady Bukh. Bukh would not say whether his client was cooperating with Kelley. But he said he expected a "substantially more lenient" sentence than the maximum allowed.
Congressional leaders conducting their own investigations said the latest revelations underscore the need for far-reaching changes in the way the world body does business. "This report demonstrates the United Nations lacks the institutional red lights and alarms necessary to warn of misconduct," said Rep. Christopher Shays (R-Conn.). "This absence of basic oversight has allowed individual corruption to flourish system-wide."
John R. Bolton, the U.S. ambassador to the United Nations, did not respond to a request for comment.
The oil-for-food program was created in 1996 to permit Iraq, which had been under U.N. sanctions since its 1990 invasion of Kuwait, to sell oil in order to buy food and medicine and pay war reparations. Saddam Hussein's government used the program to collect more than $2 billion in kickbacks from companies, according to a report last year by CIA adviser Charles A. Duelfer.
In April of last year, Annan appointed Volcker to lead an inquiry into allegations that senior U.N. officials, including Sevan, profited from the program.
Volcker accused Sevan in a February report of engaging in a "grave conflict of interest" by asking senior Iraqi officials to give business to Africa Middle East Petroleum Co. (AMEP), a Panamanian-registered company controlled by Fakhry Abdelnour, Boutros-Ghali's cousin. AMEP bought 7.3 million barrels of Iraqi oil from 1998 to 2001 and sold them for more than $1.5 million in profit.
Monday's report accused Sevan of accepting cash from Abdelnour and Boutros-Ghali's brother-in-law, Efraim "Fred" Nadler, an officer at the company.
The evidence against Sevan presented Monday included telephone and bank records and was largely circumstantial. The report cited Nadler's withdrawal of $257,500 from a Geneva bank in November 1998 and October 2001, when Sevan was in the Swiss city. Shortly after his return to New York, Sevan and his wife, Micheline, made deposits totaling $147,184, the report said.
"Mr. Sevan, with the assistance of Mr. Nadler and Mr. Abdelnour, corruptly derived substantial financial benefits by soliciting and receiving oil allocations for AMEP from the government of Iraq," the report said.
Abdelnour's attorney in Geneva did not respond to a request for an interview. Efforts to reach Nadler, who has declined to speak to investigators, were unsuccessful. Sevan's attorney, Eric L. Lewis, issued two statements over the past week saying that Sevan is innocent and that he is being made a scapegoat.
Volcker said he will issue a more comprehensive account of the oil program's failings in September. That report will revisit allegations of influence peddling by Annan, whose son, Kojo, received payments from a company that conducted business in the U.N. program. It will also examine Boutros-Ghali's role in establishing the program and the U.N. Security Council's oversight of it.