Report Cites Major Fraud in Iraq Oil-for-Food Program An independent commission issued its fifth and final report on the United Nations' controversial oil-for-food program. The new report says 2,200 companies were involved paying kickbacks and bribes to the Iraqi government when Saddam Hussein was president. The fraud totaled $1.8 billion dollars.
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Report Cites Major Fraud in Iraq Oil-for-Food Program

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Report Cites Major Fraud in Iraq Oil-for-Food Program

Report Cites Major Fraud in Iraq Oil-for-Food Program

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In New York today, an independent commission issued its fifth and final report on the United Nations controversial oil-for-food program. Earlier reports took issue with UN members connected to the scandal, including Secretary-General Kofi Annan's son, Kojo. The new report says 2,200 companies were involved in paying kickbacks and bribes to the Iraqi government when Saddam Hussein was president. The fraud totaled $1.8 billion. Former Federal Reserve Chairman Paul Volcker chaired the independent inquiry committee. In a statement today he criticized the UN's handling of the program.

Mr. PAUL VOLCKER (Inquiry Committee Chairman): What I do want to emphasize is that the corruption of the program by Saddam and many participants, and it was substantial, could not have been nearly so pervasive if there had been more disciplined management by the UN and its agencies.

CONAN: If you have questions about the oil-for-food scandal, who was involved, who was responsible, what would be done about it, give us a phone call. Our number here in Washington is (800) 989-8255. E-mail is Joining us here in Studio 3A to talk about the investigation is Mark Hosenball, an investigative correspondent for Newsweek magazine.

Thanks very much for coming in today.

Mr. MARK HOSENBALL (Newsweek): Thank you for having me.

CONAN: Now take us back for a moment. What did the independent committee previously discover about UN leadership, including, as we said, the son of the secretary-general?

Mr. HOSENBALL: Well, the most important thing that the previous Volcker reports discovered was that the man, the very senior United Nations bureaucrat who was in charge of actually administering the oil-for-food program, a Cypriot guy named Benon Sevan--he was apparently, at least allegedly according to Volcker, on the take. He got a bunch of money, $100,000, maybe a couple of hundred thousand dollars, through a kind of devious route and that this was money that was set aside for him by Saddam Hussein's government and that he even through intermediaries sent people to Baghdad to solicit this money. And that was pretty unsavory.

Also, it was discovered that Kofi Annan's son, Kojo, who seems to be a businessman of limited talent, perhaps--that he worked in Switzerland or, in fact, in Africa for a Swiss company that was subsequently hired by the UN to monitor the rules or the enforcement of the rules of the oil-for-food program. And that Kojo claimed to have left the employ of this company called Cotecna before he was hired by the UN to enforce the rules of this program, but in fact, had been getting secret payments without telling his father about it, allegedly, from this company even after he supposedly had left its staff and during the period when this company was employed by the UN. And some documents even turned up seeming to suggest that Kojo may have approached his father, the secretary-general, about this company, but his father says that that never happened and it's pretty clear that Volcker never completely substantiated that.

CONAN: Oil-for-food was a byproduct of the sanctions that were placed on Iraq at the end of the Gulf War back in 1991. By 1996, it was clear--Iraq says, `Look, you have to allow us to sell some of our oil to buy food for our people,' and this was then put under a regime that was established under the Security Council that first they had to be--anything that Iraq wanted to purchase had to be approved. But nevertheless, Iraq got to decide who it sold the oil to and who it bought whatever it bought from, and that seems to have been the crux of the problem.

Mr. HOSENBALL: That's correct. Saddam designated both the oil purchasers and he was essentially able to use basically the brokerage fees that these oil purchasers got from selling their oil that he gave them to finance what I would call Saddam fan clubs all over the world, including the United States and Britain with Mr. Galloway. And...

CONAN: More on that in a minute, but...

Mr. HOSENBALL: Right. And Saddam also demanded from both the oil purchasers and from the suppliers of humanitarian goods--in other words, the people who the oil money was used to buy goods from--that they essentially inflate their prices to their consumers and kick back some of the difference between the real price and the inflated price to him via secret bank accounts in Lebanon, Jordan and other places in the world, but principally Lebanon and Jordan.

CONAN: So on both ends of these contracts, you know, selling the oil and buying the food, Saddam was both rewarding his friends and primarily companies in France and in Russia and in China, who he saw as in opposition to sanctions against Iraq--he saw as his international friends...

Mr. HOSENBALL: Correct.

CONAN: ...and similarly he was then extorting money on the way back in.

Mr. HOSENBALL: Correct. On the stuff that the oil was purchasing, that's correct. And those included the suppliers who were supplying humanitarian goods, they were called, included big American companies and big German companies--you know, lots of big companies. I think the biggest single supplier of humanitarian goods to Iraq was the Australian Wheat Board, and I think there's some controversy there over, you know, how they did those deals.

CONAN: We're talking with Mark Hosenball of Newsweek magazine about the oil-for-food scandal, another report in the series out today.

You're listening to TALK OF THE NATION from NPR News.

And wanted to get to--again, some major companies were involved in this and, indeed, not just a big Gazprom, a big Russian oil company, but Volvo Construction, Daimler-Benz were named today?

Mr. HOSENBALL: Right. I mean, again, I haven't been through all the list because these--today's report alone was, like, 700 pages and I've just started to dip into it. It's about a pound's worth of paper or more. But yes, these were respectable, legitimate companies that were involved in supplying Saddam. But of course, he was buying respectable, legitimate goods--at least supposedly--and at least some of these respectable, legitimate companies did in fact, you know, drink at Kool-Aid--they paid him off.

CONAN: Let's get a caller on the line. This is Kent; Kent's calling from Tucson, Arizona.

KENT (Caller): Oh, hello. Thanks for taking the call.

CONAN: Sure, go ahead.

KENT: I had two questions. First of all, I've heard Kofi Annan just trashed over this in this country, but it's my understand that he had little to no oversight at all over the oil-for-food program, that it went through the Security Council; it administered it and that, as we know, we have a very strong arm in, and I'd like to hear your opinion on that. And secondly, I think you just answered--whether you can answer this or not. How many of the 2,200 companies were US companies? And if you'd like, I'll take the answer off the air.

CONAN: All right, Ken. Thanks very much for the call.

Mr. HOSENBALL: To take the second point first, I haven't counted them yet. I don't know. I just can't answer that 'cause I haven't been through the whole report yet. To take the first question, you know, Kofi Annan was certainly--he was the secretary-general. He was at least partially responsible for the appointment of this guy Sevan to run the program within the UN, who Volcker pretty convincingly establish at the very least has some questions to answer, if not actually establishing that he was on the take. On the other hand, it is also true that the rules for the program were established by the Security Council whose members included Russia and China and these members were very reluctant to tighten up the rules to make it harder for all this corruption to occur. So the members--yes, the Security Council--the member states as well deserve a lot of responsibility for what happened.

CONAN: There was also--and it's important to point out--an estimated $11 billion worth of oil that was smuggled out of Iraq, not under the oil-for-food program, and much of that through northern Iraq past--through Kurdish territory which the United States winked at.

Mr. HOSENBALL: Well, it ultimately ended up in Turkey or Jordan or Syria, and you know, you don't hear the US complain about Syria really, and the US clearly knew about this other oil trail because there are notifications that I've seen that the administration sent to Congress saying this oil is going--being smuggled but we're going to ignore it for foreign policy reasons.

CONAN: And there are also some individuals that we should get to, and these include--I think blanket we can say all of these people deny the allegations, but Jean-Bernard Merimee, France's former ambassador to the UN; Roberto Formigoni, who's a political ally of Mr. Berlusconi in Italy; George Galloway, as we mentioned, the iconoclastic British parliamentarian; and there are various other people--Jean-Marie Benjamin, a priest who once worked as an assistant in the Vatican. So there are a lot of individuals who are charged in this.

Mr. HOSENBALL: Well, there are individuals who are alleged to have benefited from dubious oil deals. I'd put it that way. I mean, nobody's been criminally charged...

CONAN: ...(Unintelligible).

Mr. HOSENBALL: that particular way. Some people are, in fact, facing criminal charges both in the United States and I think Mr. Merimee, who you just mentioned, may face charges in France. There are definitely people charged in the United States for abuses related to oil-for-food, but not necessarily the people you mentioned on that list.

CONAN: And we just have a very few seconds with you left, but how bad does this make the UN look?

Mr. HOSENBALL: I think it makes the UN look pretty bad. I mean, they had this billion-dollar program. They didn't run it very well. The head of the program was apparently on the take. The son of the secretary-general was taking advantage of it to get money out of people. It doesn't look very good. And the UN has a certain amount of explaining still to do.

CONAN: Mark Hosenball, thank you very much for joining us today.

Mark Hosenball's an investigative correspondent with Newsweek magazine and was kind enough to join us here in Studio 3A. Tomorrow, it's "Science Friday"; Ira Flatow will be here. We'll see you Monday.

This is TALK OF THE NATION from NPR News. I'm Neal Conan in Washington.

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