Final report on the corruption of the UN oil for food program
Regional-UN, Politics, 10/28/2005

Receiving the final report of the Independent Inquiry Committee (IIC) into maladministration and corruption in the United Nations-run Iraqi Oil-for-Food Program, Secretary-General Kofi Annan yesterday called on Member States to take action against illegal practices by companies under their jurisdiction and to prevent recurrences.

At the same time he reiterated his commitment to "vital" reform of the UN management structure in response to criticism in earlier IIC reports that found failures in actions by the UN Secretariat in regard to the now defunct $64-billion Program which allowed Saddam Hussein's sanctions-bound regime to sell oil to buy essential supplies.

Annan "notes that a vast network of kickbacks and surcharges has been exposed, involving companies registered in a wide range of member states, and certified by them as competent to conduct business under the Program," a statement by his spokesman said, hours after he received the report from IIC Chairman Paul Volcker, a former United States Federal Reserve Chairman.

"He hopes that national authorities will take steps to prevent the recurrence of such practices in the future, and that they will take action, where appropriate, against companies falling within their jurisdiction," the statement added.

Annan recalled that, in his speech to the Security Council after the IIC's previous report, he had already accepted responsibility for management failures in the Secretariat.

He also noted that the latest report confirms the earlier finding that the respective roles and responsibilities of the Secretariat, the Security Council and the so-called 661 Committee, which approved all of the contracts, including the prices, were never clearly enough defined.

"Most importantly, the Secretary-General believes that thorough reform of the management structures and practices of the United Nations, especially those that relate to oversight, transparency and accountability, is vital," the statement said.

"He has already instituted extensive reforms -- including broader and more rigorous financial disclosure requirements, a stronger policy to protect whistle blowers, and a review of all oversight and audit arrangements. He intends to pursue these and other reforms with even greater vigor in the weeks and months ahead, and looks to Member States for their support," it added.

In its previous reports the IIC said it had found evidence of both mis- or maladministration and corruption within the UN and by contractors.

But it said it had found that there was no evidence of any affirmative or improper influence by Annan in the bidding or selection process that selected a company for which his son, Kojo, had worked.

Annan has repeatedly said he has already initiated reforms following the earlier reports, which noted the significant role played by the Program in assuring that ordinary Iraqis received food and medicine during the sanctions from 1996 until 2003.

Thanking the IIC members for their "extremely thorough investigation," Annan said in his statement today that such a probe was exactly what he had hoped for when he set up the inquiry 18 months ago.

"He notes, as Volcker himself has done, that few other organizations would voluntarily expose themselves and their activities to such detailed scrutiny," the statement concluded.

In a later briefing for members of the UN General Assembly, Volcker said the world body needed reform in its broader administrative practices and structures, with a chief operating officer appointed to oversee management discipline and professionalism. These tasks cannot be dependent on a Secretary-General alone, who is usually chosen for diplomatic and political skills and is busy with security issues.

"What is at stake is whether this organization will be able to act effectively, whether it will have the funds, the competence and the administrative leadership to respond. The world will be a poorer, more dangerous place without an effective United Nations," he added.

"There is an overwhelming common interest, a common interest in a strong, competent United Nations, an organization that can in practice respond to the various challenges sure to arise that no country or group or countries has the capacity or legitimacy to deal with effectively."

Talking to reporters after the briefing, Annan said there were "lessons for all of us to learn. And obviously, we are going to learn from the lessons, take measures to strengthen the Organization."

"And we already have proposals for reforms that will ensure that, in future, we are better equipped to handle this sort of program," he added.

More than 2,000 companies that did business with the United Nations now-defunct Iraqi "oil-for-food" program were involved in bribes and kickbacks that allowed Saddam Hussein's sanctions-bound regime to divert nearly $2 billion, said the Chairman of the panel probing abuse of the program.

"What stands out is not only individual instances of corruption but the politicization of the process," said Paul Volcker, in a special briefing to United Nations Member States, just hours after the release of the fifth and final report of the Independent Inquiry Committee (IIC).

The report documents Hussein's extensive manipulation of the $64 billion program, which was launched by the United Nations in 1996 to allow Iraq to sell oil to buy food, medicine and other humanitarian goods. The report also notes that the initiative's "gatekeepers" -- the Secretariat, the Security Council and United Nations contractors, failed "most grievously" in their responsibilities to monitor the program's integrity.

Volcker added that political differences and pressures within the United Nations frustrated an effective response and contributed to the corruption of the program. Saddam Hussein targeted cooperation with countries that he hoped would end the sanctions, and the corruption of the program by the Iraqi regime would not have been nearly as effective if there had been more disciplined management by the world body and its agencies.

The Committee spent 18 months investigating how the oil-for-food program went wrong. The fourth report, issued in September, focused on malfeasance and maladministration by United Nations management and staff. Earlier reports also concluded that the world body's procurement process was politicized and in some instances corrupt, and that the head of the program, Benon Sevan, received payoffs. Sevan resigned from the United Nations, but had denied wrongdoing.

Secretary-General Kofi Annan had previously vowed that the United Nations would act vigorously to ensure there are no more "bad apples" in its procurement department, pledging that the corruption outlined by the Inquiry Committee "will not happen again." He said that he would initiate other systemwide reforms in the wake of the Committee's findings.

This afternoon, Volcker called for wide-ranging reform within the Organization, stressing that the oil-for-food program had been "the mother of all United Nations humanitarian programs;" one part had focused on providing relief aid and another aimed at maintaining sanctions and preventing Iraq from acquiring weapons of mass destruction. Its measure of success had come at an intolerable cost, however, wounding global confidence in the integrity of the United Nations, he said.

Other complex challenges were sure to crop up in the future, either alone or in combination with other events or emergencies, he said, warning that, "What is at stake is whether this Organization will be able to act effectively, whether it will have the funds, the competence and the administrative leadership to respond."

Saying that the world would be a poorer, more dangerous place without an effective United Nations, Volcker called for a broad upgrade in the Organization's management discipline and professionalism. Strong oversight, auditing and inspection functions should also be a priority. Such things should not automatically fall to a Secretary-General, who was usually chosen for diplomatic and political skills and occupied by security issues. There needed to be a strong chief operating officer, who can have the respect of general staff, as well as the Secretary-General and other top officials. Such changes should be designed and put into effect by the General Assembly, he added.

"There is an overwhelming common interest, a common interest in a strong, competent United Nations, an Organization that can in practice respond to the various challenges sure to arise that no country or group or countries has the capacity or legitimacy to deal with effectively," he said.

Asked to distinguish between the activities of companies involved in the program and United Nations administration reform, Volcker said that the connection between the two had become increasingly clear during the investigation. As financial corruption became very widespread, and was imposed by Iraq in the form of surcharges, why was that not known and why was no action taken by the United Nations, he asked. "Enough was known, or should have been known, that some type of action could have been taken from within the Organization against this. Internal management needed to act, and they didn't -- so the two are intertwined," he said.

Responding to other questions, Volcker said that although the program presented some unusual challenges, some of the weakness in administration seemed to reflect a systemic problem most evident in the United Nations auditing, inspecting, and oversight role. Indeed, it seemed the "gatekeepers" did not have the necessary clout, independence or staffing.

He added that the report was quite critical of the Security Council's role. Part of the problem with the program was that the Council did not delegate the administration to the Secretariat in any clear way. Throughout the life span of the program, the Secretariat appeared unclear in its responsibilities. As a result, administration was clouded, decisions were not taken, and agreement was not reached on effective action even when symptoms of difficulty emerged.

Faced with a program of this sort, the Security Council ought to "make up its mind" about what to do and sufficiently delegate authority to the Secretariat to get it done. "If unable to do that, it raises a real question of whether the United Nations ought to get involved at all," he said.

The regime of Saddam Hussein diverted $1.8 billion in illicit surcharges and kickbacks from the sale of oil and purchase of humanitarian goods and netted another $11 billion through smuggling while under U.N. sanctions. These windfalls were due in part to the grievous failure of U.N. officials and member states to properly oversee the program, the Independent Inquiry Committee into the United Nations Oil-for-Food Program reported.

Worth noting that the US and The UK were the main driver for the sanctions on Iraq and the main sponsors of the resolutions against Iraq that sought to place a stranglehold on Iraq. On issues that mattered to these two countries and their supporters, such as weapons and so-called dual use items, the sanctions were monitored watertight.

Previous Stories:
  UN work on removing landmines   (10/27/2005)
  Arab League lashes out at De Sotto report on Mideast   (10/20/2005)
  Oti will not visit Damascus; Lebanon is progressing   (10/14/2005)
  UN Security Council reforms fail   (9/17/2005)
  UN General Assembly president urges Member States to deliver on Summit declaration   (9/17/2005)
  Annan takes quick steps in response to Oil-for-Food findings   (9/9/2005)
  UN credibility must be restored, says Volcker   (9/8/2005)
  Mismanagement and corruption in Iraq oil-for-food program   (9/7/2005)

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