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The New York Times
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Inquiry on Food-for-Oil Plan Cites U.N. Diplomat for Conflict
By JUDITH MILLER and WARREN HOGE
Published: February 4, 2005
An interim report by a commission investigating the United Nations
oil-for-food program in Iraq said the former head of the program had
violated the United Nations Charter by helping a company owned by a friend
to obtain valuable contracts to sell Iraqi oil.
The conduct of Benon V. Sevan, a Cypriot official who ran the program from
1997 until its demise in 2003, was a "grave and continuing conflict of
interest" and had "seriously undermined the integrity of the United
Nations," the report concludes.
The 219-page report, issued yesterday by the Independent Inquiry Committee,
the United Nations-appointed panel headed by Paul A. Volcker, the former
Federal Reserve chairman, depicts what was the United Nations' largest
relief effort as riddled with political favoritism and mismanagement.
The $64 billion program, under which Iraqi oil revenues were used to buy
relief goods for Iraqis, is also being investigated by five Congressional
committees and a federal prosecutor in New York.
The report also says officials violated United Nations competitive bidding
rules in hiring contractors for the program. It says important parts of the
program were not audited, allowing evidence that Saddam Hussein was
demanding and receiving kickbacks from companies selling his oil to go
undetected.
A senior United Nations official announced yesterday that Secretary General
Kofi Annan would try to discipline Mr. Sevan, who retired last year, and
another senior official, Joseph Stephanides, who oversaw the selection of
the program's major contractors.
The report does not say that Mr. Sevan, or other officials it criticizes,
benefited personally from their actions.
But it discloses that Mr. Sevan received $160,000 in cash between 1999 to
2003 from an aunt in Cyprus, a retired government photographer who has since
died. Mr. Volcker did not tie that money to his efforts on behalf of his
friend's company, but the report says that the aunt's way of life did not
suggest that she was wealthy and that the panel was continuing to
investigate "the full scope and extent of benefits received by Mr. Sevan."
It also discloses that the Swiss-based company that Mr. Sevan helped, Africa
Middle East Petroleum, made a $1.5 million profit by selling the oil
allocations that Mr. Sevan had repeatedly solicited on its behalf from
senior Iraqi officials. The report accuses the company of paying an illegal
surcharge of $160,088 to Iraq in 2001.
In a statement yesterday, Eric L. Lewis, a lawyer for Mr. Sevan, denied his
client had acted improperly. He said Mr. Sevan had no interest in any oil
company and had never "accepted anything from anyone." The statement said he
had always acted "in the best interests" of the oil-for-food program and the
United Nations.
Mr. Lewis accused the panel of trying to "scapegoat" Mr. Sevan for
"mentioning a company to the Iraqis as part of his role in advancing the
process of trading oil for food."
"Mr. Sevan never took a penny," Mr. Lewis said, accusing the commission of
succumbing to "massive political pressure."
Describing Mr. Sevan as "proud" of his 40-year service to the United Nations
in some of the world's most dangerous places, the statement said that Mr.
Sevan had fully disclosed the income he had received from his aunt.
The report accuses Mr. Sevan of not having been "forthcoming" with the
committee about his relationship with the oil company, AMEP, or its owner,
Fakhry Abdelnour, a distant relative of Boutros Boutros-Ghali, the former
United Nations secretary general, whom the report criticizes separately for
his role in selecting the program's main banker.
Reached by telephone in Paris, Mr. Boutros-Ghali said he had done nothing
improper, calling Mr. Volcker's investigators "ignorant" of the United
Nations system and their allegations about his conduct "silly."
Mr. Volcker said yesterday that the panel was continuing to investigate Mr.
Sevan and his connections to Mr. Abdelnour, his company and other friends
and associates.
Efforts to locate Mr. Abdelnour for comment yesterday were not successful. A
call placed to his office in Geneva was not answered yesterday evening.
Mr. Stephanides, who oversaw contractor selection, did not return messages
left on his office phone Wednesday night and yesterday morning.
(Page 2 of 3)
Mark Malloch Brown, Mr. Annan's new chief of staff, said Mr. Stephanides
could pay a high price as a result of disciplinary action up to and
including dismissal, but he acknowledged that there was little the United
Nations could do about Mr. Sevan, since he had retired. He said Mr. Annan
would immediately lift the diplomatic immunity of any United Nations
official charged with criminal conduct.
Mr. Volcker said, "This is a painful episode for everyone in the U.N."
This interim report defers judgment on fundamental issues of responsibility
for corruption in the oil-for-food program, saying its investigations are
continuing. Mr. Volcker and the two other commissioners - Richard Goldstone,
a South African judge, and Mark Pieth, a Swiss financial expert -
specifically deferred comment, for example, on allegations that the
secretary general had a conflict of interest because his son Kojo had worked
for Cotecna Inspection, a Swiss-based company hired to inspect the aid
bought by Iraq.
Mr. Annan, who became secretary general in 1997, has previously said he had
no role in selecting contractors.
Mr. Volcker said he hoped to issue his final report this summer.
The interim report, however, criticizes the way in which United Nations
officials selected all three of the program's major contractors: Banque
Nationale de Paris, a French bank that the panel said was not even on the
United Nations' initial "long list" of the most technically qualified banks
for the program; Saybolt Eastern Hemisphere BV, a Dutch oil inspection
company that Mr. Stephanides was said to have promoted; and Lloyd's Register
Inspection Ltd. of Britain, which the report said was chosen partly to
balance lucrative contracts geographically among member nations.
The panel's investigators found "convincing and uncontested evidence" that
the selection process had been "tainted" by irregularities in the case of
all three contractors. The report does not accuse the contractors of acting
illegally.
Both the report and Mr. Volcker emphasized that the major source of Mr.
Hussein's illicit money was not kickbacks from the oil-for-food program but
the estimated $8 billion in illegal oil sales to Jordan, Turkey and Syria
that occurred even before the program was created. Mr. Volcker said that
those sales were known to Security Council members, including the United
States, and that Washington had specifically waived American laws barring
such sales.
The report reserves its harshest criticism for Mr. Sevan, whose contacts
with Iraqi officials on behalf of Mr. Abdelnour and his company AMEP, it
details. The report states that Mr. Sevan first asked senior Iraqi officials
for an allocation of oil "to help a friend" who was from Egypt in mid-1998,
soon after the Security Council permitted Iraq to use up to $300 million of
oil revenues to purchase spare parts for renovations. It was "highly
unlikely," the report notes, "that Iraq would sell oil to a company such as
AMEP unless sponsored by a beneficiary that Iraqi officials wished to
favor."
Citing several Iraqi documents, the report concludes that Iraqi officials
gave the allocations to AMEP at Mr. Sevan's requests hoping that this would
"ensure a good relationship with him" and would help them obtain Mr. Sevan's
assistance in lifting holds on spare part sales that Security Council
members had placed on them.
The former Iraqi oil minister, Muhammad Rashid, specifically told the
panel's investigators that the Iraqi government had allocated oil to Mr.
Sevan "because 'he was a man of influence,' " the report states.
After Mr. Sevan turned out not to be "as helpful as hoped," it continues,
the allocations for AMEP were reduced. "Neither Mr. Sevan nor Mr. Abdelnour
was pleased with the reduction in the oil allocation," the report says. Mr.
Sevan spoke to Mr. Rashid about it at an OPEC conference in Vienna in March
1999.
In the next phase of the program, AMEP's allocation was restored within five
days after Mr. Sevan traveled to Iraqi to meet with Mr. Rashid again in the
summer of 1999 to "discuss an expansion of the oil spare parts program."
The report says Mr. Sevan "denies that he asked for oil allocations or
recommended any company to Iraqi officials for purchasing oil."
(Page 3 of 3)
"But these claims are contradicted by the firsthand accounts of Iraqi
officials involved," as well as by Iraqi oil company documents that list
both Mr. Sevan and AMEP as recipients, "often following occasions when Mr.
Sevan met with Oil Minister Rashid," the report states.
The report says Mr. Abdelnour said Mr. Sevan did not assist him in obtaining
the allocations from Iraq.
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It says Mr. Sevan initially told investigators he had met Mr. Abdelnour only
briefly at the OPEC Vienna conference in 1999. But in later interviews he
"admitted that he had passed at least one inquiry from Mr. Abdelnour to the
Iraqi oil minister."
The report says that after being confronted with United Nations telephone
records showing calls between himself and Mr. Abdelnour, Mr. Sevan
acknowledged that the two men had "developed an acquaintanceship" lasting
"over several years." It quotes Mr. Sevan as telling investigators: "I came
to like the guy. He is an interesting character you know, he's been around
the world."
At the United Nations, Mr. Malloch Brown said the secretary general was
shocked at the report's findings about Mr. Sevan in particular.
"The secretary general is shocked by what the report has to say about Mr.
Sevan, terribly dismayed that a colleague of so many years' standing is
accused of breaching the U.N. code of conduct and staff rules in the ways he
did, and he very much doubts that there can be any extenuating circumstances
for the behavior which appears proven in the report," Mr. Malloch Brown
said.
The mood toward Mr. Sevan, a longtime friend and confidant of Mr. Annan's,
appeared unforgiving.
Mr. Malloch Brown said: "Let me be clear that while Benon Sevan is a very
dear friend of many of us - I've worked with him for years - when you put
together three international investigators, $34 million worth of
investigations, 65 investigators, you don't then set yourselves up as a
court of appeal over the results of that investigation." Any further
investigation, he said, would be in "a judicial process."
Reaction to the report from Congressional investigators was mostly
supportive of Mr. Volcker's work.
Representative Henry J. Hyde, the Illinois Republican who is the chairman of
the House International Relations Committee, said in a statement that the
report painted a picture of "mismanagement, neglect and political
manipulation that resulted in significant corruption of the oil-for-food
program."
"I am reluctant to conclude that the U.N. is damaged beyond repair," he
said, "but these revelations certainly point in this direction."
A similar, but even harsher reaction came from Senator Norm Coleman, a
Minnesota Republican and chairman of the Senate Permanent Committee on
Investigations, who called on Mr. Annan to lift Mr. Sevan's diplomatic
immunity immediately. "The report shows that he repeatedly lied to
investigators, has misled the inquiry about the source of $160,000 in cash
deposits and unethically steered oil-for-food contracts to close associates
and lied about those relationships to authorities," he said.
X-Sender: Asbed Bedrossian <[email protected]>
X-Listprocessor-Version: 8.1 -- ListProcessor(tm) by CREN
Inquiry on Food-for-Oil Plan Cites U.N. Diplomat for Conflict
By JUDITH MILLER and WARREN HOGE
Published: February 4, 2005
An interim report by a commission investigating the United Nations
oil-for-food program in Iraq said the former head of the program had
violated the United Nations Charter by helping a company owned by a friend
to obtain valuable contracts to sell Iraqi oil.
The conduct of Benon V. Sevan, a Cypriot official who ran the program from
1997 until its demise in 2003, was a "grave and continuing conflict of
interest" and had "seriously undermined the integrity of the United
Nations," the report concludes.
The 219-page report, issued yesterday by the Independent Inquiry Committee,
the United Nations-appointed panel headed by Paul A. Volcker, the former
Federal Reserve chairman, depicts what was the United Nations' largest
relief effort as riddled with political favoritism and mismanagement.
The $64 billion program, under which Iraqi oil revenues were used to buy
relief goods for Iraqis, is also being investigated by five Congressional
committees and a federal prosecutor in New York.
The report also says officials violated United Nations competitive bidding
rules in hiring contractors for the program. It says important parts of the
program were not audited, allowing evidence that Saddam Hussein was
demanding and receiving kickbacks from companies selling his oil to go
undetected.
A senior United Nations official announced yesterday that Secretary General
Kofi Annan would try to discipline Mr. Sevan, who retired last year, and
another senior official, Joseph Stephanides, who oversaw the selection of
the program's major contractors.
The report does not say that Mr. Sevan, or other officials it criticizes,
benefited personally from their actions.
But it discloses that Mr. Sevan received $160,000 in cash between 1999 to
2003 from an aunt in Cyprus, a retired government photographer who has since
died. Mr. Volcker did not tie that money to his efforts on behalf of his
friend's company, but the report says that the aunt's way of life did not
suggest that she was wealthy and that the panel was continuing to
investigate "the full scope and extent of benefits received by Mr. Sevan."
It also discloses that the Swiss-based company that Mr. Sevan helped, Africa
Middle East Petroleum, made a $1.5 million profit by selling the oil
allocations that Mr. Sevan had repeatedly solicited on its behalf from
senior Iraqi officials. The report accuses the company of paying an illegal
surcharge of $160,088 to Iraq in 2001.
In a statement yesterday, Eric L. Lewis, a lawyer for Mr. Sevan, denied his
client had acted improperly. He said Mr. Sevan had no interest in any oil
company and had never "accepted anything from anyone." The statement said he
had always acted "in the best interests" of the oil-for-food program and the
United Nations.
Mr. Lewis accused the panel of trying to "scapegoat" Mr. Sevan for
"mentioning a company to the Iraqis as part of his role in advancing the
process of trading oil for food."
"Mr. Sevan never took a penny," Mr. Lewis said, accusing the commission of
succumbing to "massive political pressure."
Describing Mr. Sevan as "proud" of his 40-year service to the United Nations
in some of the world's most dangerous places, the statement said that Mr.
Sevan had fully disclosed the income he had received from his aunt.
The report accuses Mr. Sevan of not having been "forthcoming" with the
committee about his relationship with the oil company, AMEP, or its owner,
Fakhry Abdelnour, a distant relative of Boutros Boutros-Ghali, the former
United Nations secretary general, whom the report criticizes separately for
his role in selecting the program's main banker.
Reached by telephone in Paris, Mr. Boutros-Ghali said he had done nothing
improper, calling Mr. Volcker's investigators "ignorant" of the United
Nations system and their allegations about his conduct "silly."
Mr. Volcker said yesterday that the panel was continuing to investigate Mr.
Sevan and his connections to Mr. Abdelnour, his company and other friends
and associates.
Efforts to locate Mr. Abdelnour for comment yesterday were not successful. A
call placed to his office in Geneva was not answered yesterday evening.
Mr. Stephanides, who oversaw contractor selection, did not return messages
left on his office phone Wednesday night and yesterday morning.
(Page 2 of 3)
Mark Malloch Brown, Mr. Annan's new chief of staff, said Mr. Stephanides
could pay a high price as a result of disciplinary action up to and
including dismissal, but he acknowledged that there was little the United
Nations could do about Mr. Sevan, since he had retired. He said Mr. Annan
would immediately lift the diplomatic immunity of any United Nations
official charged with criminal conduct.
Mr. Volcker said, "This is a painful episode for everyone in the U.N."
This interim report defers judgment on fundamental issues of responsibility
for corruption in the oil-for-food program, saying its investigations are
continuing. Mr. Volcker and the two other commissioners - Richard Goldstone,
a South African judge, and Mark Pieth, a Swiss financial expert -
specifically deferred comment, for example, on allegations that the
secretary general had a conflict of interest because his son Kojo had worked
for Cotecna Inspection, a Swiss-based company hired to inspect the aid
bought by Iraq.
Mr. Annan, who became secretary general in 1997, has previously said he had
no role in selecting contractors.
Mr. Volcker said he hoped to issue his final report this summer.
The interim report, however, criticizes the way in which United Nations
officials selected all three of the program's major contractors: Banque
Nationale de Paris, a French bank that the panel said was not even on the
United Nations' initial "long list" of the most technically qualified banks
for the program; Saybolt Eastern Hemisphere BV, a Dutch oil inspection
company that Mr. Stephanides was said to have promoted; and Lloyd's Register
Inspection Ltd. of Britain, which the report said was chosen partly to
balance lucrative contracts geographically among member nations.
The panel's investigators found "convincing and uncontested evidence" that
the selection process had been "tainted" by irregularities in the case of
all three contractors. The report does not accuse the contractors of acting
illegally.
Both the report and Mr. Volcker emphasized that the major source of Mr.
Hussein's illicit money was not kickbacks from the oil-for-food program but
the estimated $8 billion in illegal oil sales to Jordan, Turkey and Syria
that occurred even before the program was created. Mr. Volcker said that
those sales were known to Security Council members, including the United
States, and that Washington had specifically waived American laws barring
such sales.
The report reserves its harshest criticism for Mr. Sevan, whose contacts
with Iraqi officials on behalf of Mr. Abdelnour and his company AMEP, it
details. The report states that Mr. Sevan first asked senior Iraqi officials
for an allocation of oil "to help a friend" who was from Egypt in mid-1998,
soon after the Security Council permitted Iraq to use up to $300 million of
oil revenues to purchase spare parts for renovations. It was "highly
unlikely," the report notes, "that Iraq would sell oil to a company such as
AMEP unless sponsored by a beneficiary that Iraqi officials wished to
favor."
Citing several Iraqi documents, the report concludes that Iraqi officials
gave the allocations to AMEP at Mr. Sevan's requests hoping that this would
"ensure a good relationship with him" and would help them obtain Mr. Sevan's
assistance in lifting holds on spare part sales that Security Council
members had placed on them.
The former Iraqi oil minister, Muhammad Rashid, specifically told the
panel's investigators that the Iraqi government had allocated oil to Mr.
Sevan "because 'he was a man of influence,' " the report states.
After Mr. Sevan turned out not to be "as helpful as hoped," it continues,
the allocations for AMEP were reduced. "Neither Mr. Sevan nor Mr. Abdelnour
was pleased with the reduction in the oil allocation," the report says. Mr.
Sevan spoke to Mr. Rashid about it at an OPEC conference in Vienna in March
1999.
In the next phase of the program, AMEP's allocation was restored within five
days after Mr. Sevan traveled to Iraqi to meet with Mr. Rashid again in the
summer of 1999 to "discuss an expansion of the oil spare parts program."
The report says Mr. Sevan "denies that he asked for oil allocations or
recommended any company to Iraqi officials for purchasing oil."
(Page 3 of 3)
"But these claims are contradicted by the firsthand accounts of Iraqi
officials involved," as well as by Iraqi oil company documents that list
both Mr. Sevan and AMEP as recipients, "often following occasions when Mr.
Sevan met with Oil Minister Rashid," the report states.
The report says Mr. Abdelnour said Mr. Sevan did not assist him in obtaining
the allocations from Iraq.
Advertisement
It says Mr. Sevan initially told investigators he had met Mr. Abdelnour only
briefly at the OPEC Vienna conference in 1999. But in later interviews he
"admitted that he had passed at least one inquiry from Mr. Abdelnour to the
Iraqi oil minister."
The report says that after being confronted with United Nations telephone
records showing calls between himself and Mr. Abdelnour, Mr. Sevan
acknowledged that the two men had "developed an acquaintanceship" lasting
"over several years." It quotes Mr. Sevan as telling investigators: "I came
to like the guy. He is an interesting character you know, he's been around
the world."
At the United Nations, Mr. Malloch Brown said the secretary general was
shocked at the report's findings about Mr. Sevan in particular.
"The secretary general is shocked by what the report has to say about Mr.
Sevan, terribly dismayed that a colleague of so many years' standing is
accused of breaching the U.N. code of conduct and staff rules in the ways he
did, and he very much doubts that there can be any extenuating circumstances
for the behavior which appears proven in the report," Mr. Malloch Brown
said.
The mood toward Mr. Sevan, a longtime friend and confidant of Mr. Annan's,
appeared unforgiving.
Mr. Malloch Brown said: "Let me be clear that while Benon Sevan is a very
dear friend of many of us - I've worked with him for years - when you put
together three international investigators, $34 million worth of
investigations, 65 investigators, you don't then set yourselves up as a
court of appeal over the results of that investigation." Any further
investigation, he said, would be in "a judicial process."
Reaction to the report from Congressional investigators was mostly
supportive of Mr. Volcker's work.
Representative Henry J. Hyde, the Illinois Republican who is the chairman of
the House International Relations Committee, said in a statement that the
report painted a picture of "mismanagement, neglect and political
manipulation that resulted in significant corruption of the oil-for-food
program."
"I am reluctant to conclude that the U.N. is damaged beyond repair," he
said, "but these revelations certainly point in this direction."
A similar, but even harsher reaction came from Senator Norm Coleman, a
Minnesota Republican and chairman of the Senate Permanent Committee on
Investigations, who called on Mr. Annan to lift Mr. Sevan's diplomatic
immunity immediately. "The report shows that he repeatedly lied to
investigators, has misled the inquiry about the source of $160,000 in cash
deposits and unethically steered oil-for-food contracts to close associates
and lied about those relationships to authorities," he said.