Probe reveals rotten deals in oil-for-food scheme
October 28, 2005
New York - More than 2 200 companies pumped $1.8 billion in bribes and illegal surcharges into the coffers of Saddam Hussein's regime in a rush to profit from the UN oil-for-food program in Iraq, an inquiry reported on Thursday.
In its fifth and final report, the independent panel probing the now-defunct program detailed how it was hijacked by corruption and political favouritism, amid a lack of proper United Nations oversight.
Among those companies named in the report were industrial giants such as Volvo, Siemens and DaimlerChrysler, although the chairman of the inquiry, Paul Volcker, stopped short of attributing direct culpability.
"The identification of a particular company in the report does not necessarily mean that that company as opposed to an agent... made, authorised or even knew about illicit payments," Volcker told reporters.
The report said Saddam's regime received more than $1.5 billion in kickbacks disguised as transport fees and "after-sales service" payments. A further $229 million was derived from illegal surcharges levied by the Iraqi government in connection with oil contracts.
The oil-for-food program, which was created in 1996 by the UN Security Council and ran until 2003, was designed to allow Saddam's regime to export a limited amount of oil to purchase food and medicine under UN supervision.
According to the Volcker report, the imposition by Iraq of kickbacks and surcharges had become mandatory by the year 2000, causing some of the larger foreign oil buyers to halt purchases.
"Then other companies stepped in and middlemen stepped in, and front companies were made up," Volcker said.
"That point was where there was a real failure. That's where the program got corrupted.
"There should have been a reaction and there wasn't," he said, questioning the role of the UN Secretariat, as well as foreign governments who were vetting the individual buyers.
"There was clearly a failure... and more than one actor or body was involved," Volcker said.
The report raised doubts over the French bank, Banque Nationale de Paris (BNP), which operated the oil-for-food escrow account and was less than diligent in reviewing the transactions of some of its clients.
"Although there is no evidence that BNP knew of, or approved of the use of its facilities to pay illegal surcharges, BNP was uniquely positioned to probe such payments -- but failed to do so," the report said.
The companies and other individuals that paid the illegal kickbacks came from nearly 70 nations.
Volcker said it was up to the law enforcement agencies in those countries to determine whether there were sufficient grounds for prosecution.
The Swiss government said Thursday it had opened a criminal investigation of four people and frozen bank accounts linked to the oil-for-food program.
Nearly a dozen related indictments have been handed down in the United States, and France has placed two top diplomats under judicial investigation on suspicion of having received oil vouchers from Baghdad.
The Volcker report highlighted the politicisation of the program as the Iraqi government began directing oil allocations to particular countries and individuals that were "friendly to Iraq".
Baghdad decided to deny US, British and Japanese companies direct oil allocations due to their opposition to the lifting of sanctions on Iraq, it said.
At the same time, Saddam's regime gave preferential treatment to France, Russia and China which were all Security Council permanent members and perceived as more favourable to lifting sanctions.
Russian companies purchased almost one-third of the oil sold under the program, with French companies the second-largest purchasers.
UN Secretary General Kofi Annan reacted to Thursday's report by urging UN member states to take action against firms falling under their jurisdiction.
In a prior report in September, the inquiry committee found there were isolated cases of corruption by UN officials, including the head of the office overseeing the program, Benon V. Sevan. He has denied the allegations.
But the main problem, according to the inquiry, was the UN's administrative ineptitude and failure to strictly supervise what Volcker described as "the mother of all UN humanitarian programs." - AFP
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