Global Policy Forum

UN Set to Probe Fraud Allegations in Iraq Program


By Evelyn Leopold

March 16, 2004

The United Nations intends to probe allegations of corruption in the U.N.-run Iraqi oil-for-food program and will probably ask the U.N. Security Council to authorize a wider investigation, diplomats said.

The finance committee of the Iraqi Governing Council, led by Ahmed Chalabi, alleges as much as $2 billion was siphoned off by ousted President Saddam Hussein, who paid bribes to his allies, many of them government officials, and various firms.

U.N. officials said on Monday that Secretary-General Kofi Annan could investigate charges involving U.N. employees' handling of the program, begun in Dec. 1996 to help alleviate the impact of international sanctions on ordinary Iraqis.

But the secretariat does not want to be blamed for what it could not control. Any comprehensive inquiry would involve backing from the 15-nation Security Council, such as investigating middle men that bought oil, companies that supplied civilian goods and the French bank, BNP-Paribas, which handled the U.N. escrow account.

Since some of the firms and individuals charged with accepting bribes are nationals of countries on the council, the body could set limits on any probe. Diplomats said the U.N. investigative office had asked the U.S.-led Coalition Provisional Authority for help. But the United Nations has not yet announced any official probe.

Claude Hankes-Drielsma, a British businessman and long-time acquaintance of Chalabi, who advises the Governing Council, said Iraqis kept detailed records of every illegitimate move. "The paper trail is second to none," said Hankes-Drielsma, a former executive of Price Waterhouse, in an interview.

"It will not come as a surprise if the oil-for-food program turns out to have been one of the world's most disgraceful scams and an example of inadequate control, responsibility and transparency..., he wrote in a letter to Annan, asking that all documents be preserved.

However, no papers documenting the charges have been given to the United Nations. Hankes-Drielsma said the accounting firm KMPG was preparing a report the world body would receive.

In January, an Iraqi newspaper published a list of 270 groups and individuals, many of them past and present government officials, charging they received vouchers for oil they could sell. Hankes-Drielsma calls the list "only the tip of the iceberg."

The most damaging name on the list for the United Nations is Benon Sevan, an assistant secretary-general, who was in charge of the program since October 1997, 10 months after it began. Sevan, who is retiring next month, last month vigorously denied that he received oil vouchers, saying there was "absolutely no substance to the allegations."

The complicated oil-for-food program involved oil companies paying revenues to a U.N. escrow account at BNP and the United Nations paying suppliers of goods going to Iraq. The program was supervised by a 15-nation Security Council sanctions panel, known as the 661 committee.

But under the program, Iraq could choose the suppliers of civilian goods and the oil companies, leaving adequate scope for fraud. Although the bulk of crude oil went through the U.N. program, Iraq also delivered oil by road and through a pipeline to Syria outside the oil-for-food plan.

At one point, the United States, Britain and France attempted to weed out unscrupulous middle men but other members objected. At another stage, the two countries blocked the establishment of oil prices and made sure they were set retroactively to prevent illegal surcharges oil companies had to pay to Saddam Hussein.

More Information on the Iraq Crisis
More Information on Oil in Iraq
More Information on the Oil-for-Food Program


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