Sunday, February 13, 2005


Why is this not surprising?

NEW YORK - The U.N. oil-for-food program chief under scrutiny for alleged corruption and mismanagement blocked a proposed audit of his office around the same time he's accused of soliciting lucrative oil deals from Iraq according to investigators.

A U.N. auditing team, which was severely understaffed, said running the $64 billion oil-for-food program was "a high risk activity" and a priority for review. But Benon Sevan denied the internal auditors' request to hire a consultant to examine his office in May 2001 — an act top investigators of the program are now calling into question.

"I think the auditors thought they were steered away from some areas," Paul Volcker, who's leading the independent probe, told The Associated Press. "Our judgment is that the main office should have been audited. And that leaves the inference that perhaps the auditors were not encouraged to do the work. I think we draw the inference that it was at least suspicious."

Two months after Sevan refused the auditors' request, a Panamanian company, African Middle East Petroleum, purchased 1 million barrels of oil, which Iraq had allocated to Sevan — one of nine allocations made between 1998 and 2002 involving Sevan and believed to have netted the company $1.5 million, said an interim report Volcker's committee released this month.

The head of AMEP, Fakhry Abdelnour, a friend of Sevan, told investigators he paid $160,000 as a kickback to an Iraqi-controlled account in Jordan in October 2001 under one of the oil-for-food schemes under examination.

Volcker did not say that Sevan received kickbacks but expressed concern at $160,000 in cash that Sevan said he received from an aunt in his native Cyprus in 1999-2003. The investigative report questioned this "unexplained wealth," noting that the aunt, who recently died, was a retired government photographer living on a modest pension.

U.N. Secretary-General Kofi Annan last week suspended Sevan after Volcker accused him of a "grave conflict of interest," saying his conduct in soliciting oil deals for AMEP was "ethically improper and seriously undermined the integrity of the United Nations."

On the day Volcker issued his report, Sevan's lawyer, Eric Lewis, accused the panel of trying to make his client a "scapegoat," saying: "Mr. Sevan never took a penny." He said Sevan was proud of his 40-year U.N. career and of the oil-for-food program, which saved tens of thousands of Iraqis "from death by disease and starvation."

The oil-for-food program was the largest U.N. humanitarian aid operation, running in 1996-2003. It was designed to let Saddam Hussein 's government sell limited amounts of oil in exchange for humanitarian goods as an exemption from post-Gulf War sanctions imposed in 1991.

Faced with a $64 billion program involving multiple U.N. agencies, the small team of auditors assigned to monitor it were overmatched and underfunded. For other programs, Volcker's investigators said, the United Nations mandated one auditor for every $100 million in funding. At that ratio, the oil-for-food program managers should have expected more than 160 auditors, because the program's budget totaled about $16 billion in 2000.

Instead, in 2001, they had only five, according to Volcker's report.

Via Yahoo News

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