U.N.: 2,200 firm gave Iraq illicit funds ("Final" Oil-FoR-Food Report released)

UNITED NATIONS - More than 2,000 companies made about $1.8 billion in illicit payments to Saddam Hussein's government through extensive manipulation of the U.N. oil-for-food program in Iraq, according to key findings of a U.N.-backed investigation.

The report — to be released in full Thursday by the committee probing claims of wrongdoing in the $64 billion program — indicates that about half the 4,500 companies doing business with Iraq paid illegal surcharges on oil purchases or kickbacks on contracts to supply humanitarian goods.

The investigators reported that companies and individuals from 66 countries paid illegal kickbacks through a variety of devices while those paying illegal oil surcharges came from, or were registered in, 40 countries. The names will be included in Thursday's report but were not in the key findings that were obtained Wednesday by The Associated Press.

Thursday's final report of the investigation led by former U.S. Federal Reserve chairman Paul Volcker strongly criticizes the U.N. Secretariat and Security Council for failing to monitor the program and allowing the emergence of front companies and international trading concerns prepared to make illegal payments.

According to the findings, the Banque Nationale de Paris S.A., known as BNP, which held the U.N. oil-for-food escrow account, had a dual role and did not disclose fully to the United Nations the firsthand knowledge it acquired about the financial relationships that fostered the payment of illegal surcharges.

The oil-for-food program was one of the world's largest humanitarian aid operations, running from 1996-2003.

Under the program, Iraq was allowed to sell limited and then unlimited quantities of oil provided most of the money went to buy humanitarian goods. It was launched to help ordinary Iraqis cope with U.N. sanctions imposed after Saddam's 1990 invasion of Kuwait and became a lifeline for 90 percent of the country's population of 26 million.

But Saddam, who could choose the buyers of Iraqi oil and the sellers of humanitarian goods, corrupted the program by awarding contracts to — and getting kickbacks from — favored buyers, mostly parties who supported his regime or opposed the sanctions. He allegedly gave former government officials, journalists and U.N. officials vouchers for Iraqi oil that could then be resold at a profit.

Volcker's previous report, released in September, said lax U.N. oversight allowed Saddam's regime to pocket $1.8 billion in kickbacks in the awarding of contracts during the program's operation from 1997-2003.

The smuggling of Iraqi oil outside the program in violation of U.N. sanctions poured much more money — $11 billion — into Saddam's coffers during the same period, according to a finding in the new report.

The report to be released Thursday chronicles in detail Saddam's manipulation of the program and examines in detail 23 companies that paid kickbacks on humanitarian contracts including Iraqi front companies, major food providers, major trading companies, and major industrial and manufacturing companies.

According to the findings, the program was just under three years old when the Iraqi regime began openly demanding illicit payments from its customers. The report said that while U.N. officials and the Security Council were informed, little action was taken.

AP article update

U.N.: 2,200 Cos. Gave Iraq Illicit Funds

By EDITH M. LEDERER, Associated Press Writer

http://news.yahoo.com/s/ap/20051027/ap_on_re_mi_ea/un_oil_for_food

UNITED NATIONS - About 2,200 companies in the U.N. oil-for-food program, including corporations in the United States, France, Germany and Russia, paid a total of $1.8 billion in kickbacks and illicit surcharges to Saddam Hussein's government, a U.N.-backed investigation said in a report released Thursday.

The report from the committee probing the $64 billion program said prominent politicians also made money from extensive manipulation of the U.N. oil-for-food program in Iraq.

"The corruption of the program by Saddam would not nearly have been so pervasive if there had been dilligent management by the United Nations and its agencies," said Paul Volcker, a former Federal Reserve chairman who led the investigation.

Using terminology that Saddam coined in the first Gulf war, Volcker said Saddam preyed on the "mother of all humintarian programs," the largest aid effort at the United Nations.

The investigators reported that companies and individuals from 66 countries paid illegal kickbacks using a variety of ways, and those paying illegal oil surcharges came from, or were registered in, 40 countries.

There were two main types of manipulation: surcharges paid for humanitarian contracts for spare parts, trucks, medical equipment and other supplies; and kickbacks for oil contracts.

Among the companies that paid illegal surcharges were South Korea's Daewoo International and Siemans SAS of France. On the oil side, contractors listed included Texas-based Bayoil and Coastal Corp., and Russia's oil giants Gazprom and Lukoil.

Russian companies were contracted for approximately $19.3 billion in oil from Iraq, which amounted to about 30 percent of oil sales, by far the largest proportion among all participating countries.

Germany-based automaker DaimlerChrysler, meanwhile, appears to have paid just $7,000 on a contract worth $70,000. DaimlerChrysler said it was aware of the report but declined to comment because of an ongoing investigations by the Securities and Exchange Commission and the Justice Department.

In July, DaimlerChrysler said it had been asked for a statement and documents regarding its role in the oil-for-food program, according to documents filed with the Securities and Exchange Commission.

The report said, for example, that Brussels-based Volvo Construction Equipment paid $317,000 in extra fees to Iraq on a $6.4 million contract. Volvo Construction is part of Swedish-based Volvo Group, which referred all questions to Volvo Construction Equipment's headquarters in Brussels. The group is separate from Volvo automobiles, which is owned by Ford.

Beatrice Cardon, a Volvo spokeswoman, said she was unaware the company was listed in the U.N. report, or what the alleged payments were for. "This is the first I hear about it," she said.

The report alleged that Jean-Bernard Merrimee, France's former U.N. ambassador, received $165,725 in commissions from oil allocations awarded to him by the Iraqi regime. He is now under investigation in France.

Merrimee "began receiving oil allocations that would ultimately total approximately 6 million barrels from the government of Iraq," the report said.

Other so-called "political beneficiaries" included British lawmaker George Galloway; Roberto Formigoni, the president of the Lombardi region in Italy, and the Rev. Jean-Marie Benjamin, a priest who once worked as an assistant to the Vatican secretary of state and became an activist for lifting Iraqi sanctions.

Vladimir Zhirinovsky, who heads Russia's Liberal Democratic Party, received millions of barrels of oil he could turn around and sell for a profit, the report said. Iraqi Oil Ministry records show that 4.3 million barrels were allocated to Alexander Voloshin, who at the time was chief of staff in the administration of Russia's president. Both Voloshin and Zhirinovsky have denied any wrongdoing.

The report strongly criticizes the U.N. Secretariat and Security Council for failing to monitor the program and allowing the emergence of front companies and international trading concerns prepared to make illegal payments.

In a letter to Secretary General Kofi Annan, the committee said its task had been to find mismanagement and evidence of corruption, and "unhappily, both were found and have been documented in great detail."

It said responsibility should start with the U.N. Security Council, which is dominated by its five permanent members: Britain, China, France, Russia and the United States.

"The program left too much initiative with Iraq," the letter said. "It was, as one past member of the council put it, a compact with the devil, and the devil had means of manipulating the program to his ends."

The oil-for-food program was one of the world's largest humanitarian aid operations, running from 1996-2003.

It allowed Iraq to sell limited and then unlimited quantities of oil provided most of the money went to buy humanitarian goods. It was launched to help ordinary Iraqis cope with U.N. sanctions imposed after Saddam's 1990 invasion of Kuwait.

But Saddam, who could choose the buyers of Iraqi oil and the sellers of humanitarian goods, corrupted the program by awarding contracts to — and getting kickbacks from — favored buyers, mostly parties who supported his regime or opposed the sanctions.

Tracing the politicization of oil contracts, the report said Iraqi leaders in the late 1990s decided to deny American, British and Japanese companies allocations to purchase oil because of their countries' opposition to lifting sanctions.

At the same time, it said, Iraq gave preferential treatment to France, Russia and China, which were perceived to be more favorable to lifting sanctions and were also permanent members of the Security Council.

Volcker's previous report, released in September, said lax U.N. oversight allowed Saddam's regime to pocket $1.8 billion in kickbacks and surcharges in the awarding of contracts during the program's operation from 1997-2003.

According to the new findings, Iraq's largest source of illicit income from the oil-for-food program was the more than $1.5 billion from kickbacks on humanitarian contracts.

Volcker's Independent Inquiry Committee calculated that more than 2,200 companies worldwide paid kickbacks to Iraq in the form of "fees" for transporting goods to the interior of the country or "after-sales-service" fees, or both.

Tables accompanying the report give a detailed look at the value of each company's contracts and the amount of money it paid in kickbacks.

According to the findings, the Banque Nationale de Paris S.A., known as BNP, which held the U.N. oil-for-food escrow account, had a dual role and did not disclose fully to the United Nations the firsthand knowledge it acquired about the financial relationships that fostered the payment of illegal surcharges.

The report chronicles Saddam's manipulation of the program and examines in detail 23 companies that paid kickbacks on humanitarian contracts including Iraqi front companies, major food providers, major trading companies, and major industrial and manufacturing companies.

According to the findings, the program was just under 3 years old when the Iraqi regime began openly demanding illicit payments from its customers. The report said that while U.N. officials and the Security Council were informed, little action was taken.

The report is the fifth by Volcker and wraps up a year-long, $34 million investigation that has faulted Annan, his deputy, Canada's Louise Frechette, and the Security Council for tolerating corruption and doing little to stop Saddam's manipulations.

The smuggling of Iraqi oil outside the program in violation of U.N. sanctions poured much more money — $11 billion — into Saddam's coffers in the same period, according to the report.

___

On the Net:

http://www.iic-offp.org/

Key findings from U.N. oil-for-food probe

http://www.bakersfield.com/24hour/world/story/2848612p-11509453c.html

The Associated Press

The Independent Inquiry Committee issued a 623-page final report on corruption in the U.N. oil-for-food program. Here is a look at its key findings.

- More than 2,200 of the 4,500 companies that participated in the program paid kickbacks or illegal fees to Saddam Hussein's regime, earning him $1.8 billion.

- Some 18 million barrels of oil were allocated for British lawmaker George Galloway, an outspoken opponent of U.N. sanctions against Iraq, for later sale. A portion of the profits from those sales were put into a bank account belonging to his wife.

- The United Nations is responsible for the lack of transparency in the program that contributed to the abuses that plagued oil-for-food. According to the investigators, that underscores the need for urgent U.N. reform, especially if the world body wants to take on a program of this magnitude ever again.

- Former U.N. Secretary-General Boutros Boutros-Ghali, who headed the world body when the oil-for-food program was launched, is cleared of accepting bribes. Volcker had earlier raised suspicion about the extent of his involvement.

- Russian companies contracted for about $19.3 billion under oil-for-food, about 30 percent of its overall $64 billion worth. That made Russia by far the largest participant in the program.

- Name-brand companies accused of paying kickbacks include DaimlerChrysler, Siemens AG, Volvo Construction Equipment and Daewoo International. There are U.S. companies including Bayoil and Coastal Corp., and Russian oil giant Gazprom.

- Banque Nationale de Paris S.A., known as BNP, was the bank that monitored the U.N. account that held oil money. It did not disclose fully to the United Nations that it knew of shady financial relationships and front companies that led to the payment of illegal surcharges.

- Jean-Bernard Merrimee, France's former U.N. ambassador, received $165,725 in commissions from oil allocations awarded to him by the Iraqi regime. The report said Merrimee ultimately received allocations that totaled approximately 6 million barrels.

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