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UN Oil-for-Food Procurement System 'Tainted'

An independent investigation showed on Thursday the process of selecting contractors under the scandal-plagued oil-for-food program was "tainted" and former program chief Benon Sevan was engaged in "a grave conflict of interest" by requesting oil allocations from the former Iraqi government of Saddam Hussein.  

A report issued in New York by chief investigator Paul Volcker said that with the help of Sevan, the Geneva-based oil trading company, the African Middle East Petroleum Co (AMEP), purchased 7.3 million barrels of Iraqi oil from 1998 through 2001 at preferential prices, with a resale revenue of US$1.5 million.


Sevan, with a rank of UN under-secretary-general, has vehemently denied asking for oil allocations or recommending any company to Iraqi officials for purchasing oil. But the 246-page report said his claims "are contradicted by the firsthand accounts of Iraqi officials and the Saddam government's records on the granting of oil allocations.


The inquiry committee "finds also that Mr. Sevan's solicitations on behalf of AMEP and AMEP's resulting purchases of oil presented a grave and continuing conflict of interest, were ethically improper, and seriously undermined the integrity of the United Nations," it added.


"In any event, by soliciting oil allocations from the government of Iraq on behalf of AMEP -- while acting in the capacity of executive director of OIP -- Mr. Sevan violated the Charter of the United Nations and various staff regulations and rules of the United Nations."


The report also accused Sevan, who had been executive director of the US$67-billion oil-for-food program since 1997, of lack of cooperation with the investigative panel.


Sevan "was not forthcoming to the committee when he denied approaching Iraqi officials and requesting oil allocations on behalf of AMEP," said the report.


But the report did not mention whether Sevan took a bribe from AMEP. It only noted that Sevan received US$160,000 in additional cash income from 1999 through 2003 and his statements regarding the money are not adequately supported by the information reviewed by the Volcker's team.


"The full scope and extent of benefits received by Mr. Sevan asa result of his solicitation of oil allocations for AMEP is under continuing investigation," the report said.


Volcker, who was appointed as chief investigator by UN Secretary-General Kofi Annan in April last year, said a comprehensive report would come out this summer. The inquiry team includes South African jurist Richard Goldstone and Swiss lawyer Mark Pieth.


The oil-for-food program, which started in December 1996, allowed Iraq to export oil worth some US$67 billion. The United Nations oversaw Iraq's oil sales and its purchase of humanitarian supplies. The program was shut down in November 2003.


The corruption rumors surfaced in January 2004 when an Iraqi newspaper published a list of about 270 prominent figures from more than 46 countries, saying they received oil money from Saddam Hussein's regime. The list allegedly includes Benon Sevan. Saddam is said to have skimmed billions of dollars from the program by taking advantage of its mismanagement.


Thursday's initial report also covered the selection of three UN contractors in 1996 for inspecting Iraqi oil exports, importing humanitarian goods for Iraqis, and managing program funds; internal audits of the program; and management of program administrative funds.


The report said there is "convincing and uncontested evidence" that selection of the three contractors -- Banque Nationale de Paris, Saybolt Eastern Hemisphere BV, and Lloyd's Register Inspection Limited -- was not in accordance with the UN financial regulations and competitive bidding rules.


The selection process deviated from established financial and procurement rules and "failed to meet reasonable the organization's own standards of fairness, objectivity and transparency," it said.


The report also criticized the UN's internal auditing division, saying it lacked "the independence, the clear reporting lines and the management responsiveness critical to achieving a fully effective auditing process."


Volcker told reporters on Thursday that his next interim report will focus on the procurement of another UN contractor, the Geneva-based Cotecna Inspection SA, which employed UN chief Annan's son, Kojo Annan. He said a final report will come out this summer.


(Xinhua News Agency February 4, 2005)

Annan 'Disappointed' over Son's Iraq Oil-linked Cash
UN Corruption Probe Gets US$30m of Financing
US, UN Probe Oil-for-food Corruption
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