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UN: Panel Cites Misconduct By Chief Of Oil-For-Food Program

UN Secretary-General Kofi Annan (file photo) The independent inquiry into abuses of the UN’s oil-for-food program in Iraq has found that the program’s director engaged in unethical conduct. The panel’s initial report also cited improper contracting and auditing practices, but n-o systematic misuse of funds. UN Secretary-General Kofi Annan has signaled he will discipline two officials involved in the program and was prepared to waive immunity if criminal charges are filed. The chief of the program, Benon Sevan, repeated denials of wrongdoing and said he was a “scapegoat” of the panel.

United Nations, 4 Febraury 2005 (RFE/RL) -- The most serious initial finding by the panel investigating the United Nation’s humanitarian program for Iraq is that its director, Benon Sevan, repeatedly solicited allocations of oil from the Iraqi regime.

The report (available at says that from 1998 to 2001, Sevan asked for and received allocations of oil worth $1.5 million in revenues for a Swiss-based oil company. The Iraqi government, under heavy sanctions, was allowed to sell oil under the program to purchase humanitarian goods, but there are widespread reports the regime profited under a system of kickbacks.

The panel is still investigating whether Sevan personally profited from the allocations, which went to the small African Middle East Petroleum company. Panel chairman Paul Volcker told reporters that Iraqi officials believed the allocations would help gain Sevan’s support in lifting contract holds on oil industry parts.

“The Iraqi government providing such allocations certainly thought they were buying influence," Volcker said. "But whatever the result in terms of actual behavior, I think it is a fact that Mr. Sevan placed himself in a grave and continuing conflict of interest situation that violated explicit UN rules and violated the standards of integrity essential to a high-level international civil servant.”
"It is a fact that Mr. [Benon] Sevan placed himself in a grave and continuing conflict of interest situation that violated explicit UN rules and violated the standards of integrity essential to a high-level international civil servant.” -- Paul Volcker

In general, Volcker said the commission did n-o-t find systematic UN misuse of funds in the program, which fed an estimated 90 percent of Iraqis. He also said the majority of money gained illicitly by the Iraqi regime -- estimated at $11 billion dollars -- came from oil smuggling, with the knowledge of UN Security Council members.

But the panel has more work ahead. Its 60-person investigative team has yet to complete a probe into the Security Council role in the program, as well as connections to former UN Secretary-General Boutros Boutros-Ghali.

Annan has been questioned three times by the panel’s investigators. Volcker said an investigation is ongoing into possible misconduct involving the son of UN Secretary-General Kofi Annan, Kojo, who worked for a contractor with the program.

“The questions concerning possible conflicts of interest with the secretary-general himself, Mr. Kofi Annan, related to the alleged involvement of his son in certain program activities, is going to be addressed in a subsequent report,” Volcker said.

Sevan, a Cypriot, is a veteran UN official who has held high-level posts in missions in Afghanistan and Africa. His attorneys issued a statement yesterday repeating his denials of improper conduct, saying he “never took a penny” from the program.

But Annan responded to the panel report by announcing disciplinary proceedings against Sevan and a second official cited for misconduct in procurement matters.

Annan’s chief of staff, Mark Malloch Brown, said immediate measures against Sevan would be limited because he is retired. But he stressed Annan would waive diplomatic immunity against any UN staff member in the event criminal charges are lodged by a sovereign nation.

"[Annan is] terribly dismayed that a colleague of so many years' standing is accused of breaching the sort of UN code of conduct and staff rules in the way he did," Malloch Brown said. "And he very much doubts that there can be any extenuating circumstances to explain the behavior which appears proven in the report.”

Another major charge in the report is corruption in the handling of the three United Nations contractors selected at the beginning of the oil-for-food program in 1996. It said the other senior UN official involved in the program in 1996, Joseph Stephanides, intervened in procuring major contracts for large firms. Currently serving as director of the Secretariat’s Security Council Affairs Division, Stephanides faces UN disciplinary action.

Volcker said there is "convincing and uncontested evidence" that the selection of the three UN contractors for the program did not follow established financial and competitive bidding rules. The contractors were a French bank (Banque Nationale de Paris), a Dutch oil inspection firm (Saybolt Eastern Hemisphere BV), and a British goods inspection company (Lloyd's Register Inspection Limited).

"In the end," Volcker said, "the proscribed rules and regulations for procurement were overridden, and they certainly were importantly influenced by essentially political considerations."

A report by the U.S.-led Iraq Survey Group released late last year says more than 50 percent of the oil vouchers were given by Saddam Hussein to beneficiaries in Russia, France, and China. The three countries at various times challenged efforts by the United States and Britain to end surcharges on Iraqi oil, which Saddam began using to circumvent the sanctions.

But officials from some of the countries mentioned as beneficiaries have complained that the U.S. report failed to mention American companies involved in the kickback schemes.

Annan’s aide Malloch Brown says the panel’s report should be seen more as a critique of the politicization of the United Nations rather than of the position of the secretary-general.

“On the secretariat side, there needs to be greater transparency in the way decisions are made and accounted for," Malloch Brown said. "On the member state side, there is a message in this report, too -- ‘Back off and allow us to manage this organization, and don’t try to, in the name of micromanagement, actually introduce political trades into the way decisions are made.'”

The program ended in November 2003, after the U.S.-led war ousted Saddam Hussein. One year ago, the Iraqi newspaper "Al-Mada" published a list of about 270 former government officials, activists, journalists, and UN officials from more than 46 countries that were part of the UN program and were suspected of profiting from Iraqi oil sales. Annan appointed Volcker in April to lead an independent investigation.

The alleged list of contract beneficiaries included an apparent reference to Sevan, members of Arab ruling families, religious groups, political parties, and organizations in Egypt, Jordan, Syria, Turkey, Russia, France, Belarus and China, among other countries.