ABC News
Annan Disciplines Iraq Oil-For-Food Chief
Kofi Annan Orders Disciplinary Action Against Head of U.N. Oil-For-Food Program in Iraq
CAPTION
By EDITH M. LEDERER Associated Press Writer
The Associated Press
UNITED NATIONS Feb 3, 2005  Secretary-General Kofi Annan ordered disciplinary action against the head of the U.N. oil-for-food program in Iraq on Thursday, after a report sharply criticized Benon Sevan for "undermining the integrity" of the United Nations through a "grave conflict of interest."
The investigation report said Sevan solicited oil allocations from Saddam Hussein's regime on behalf of a trading company between 1998 and 2001, and it raised concerns he may have received kickbacks for the help.
Based on the report, Annan has decided to discipline Sevan and another U.N. official, Joseph Stephanides, who was chief of the U.N. Sanctions Branch, said Mark Malloch Brown, Annan's new chief of staff. Brown said the type of disciplinary action would be announced early next week but gave no details.
In its report released Thursday, the investigation led by former Federal Reserve Chairman Paul Volcker accused Stephanides of "tainting" bidding for a contract. Stephanides now heads the Security Council Affairs Division in the U.N. Department of Political Affairs.
Allegations of corruption in the $60 billion oil-for-food program which allowed sanctions-bound Iraq to sell oil to buy humanitarian supplies have raised steady criticism from members of Congress.
"I am reluctant to conclude that the U.N. is damaged beyond repair, but these revelations certainly point in this direction," said Illinois Republican Henry Hyde after Thursday's report. The House International Relations Committee Chairman, which Hyde heads, is one of several congressional committees investigating the program.
Despite Sevan's claims that he never recommended any oil companies, Volcker's Independent Inquiry Committee said it had evidence that Sevan asked Iraq to give a small Swiss-based oil company, African Middle East Petroleum Co. Ltd. Inc., known as AMEP, the opportunity to buy oil. The company received the allocations and earned $1.5 million from them.
Volcker's panel said it is still investigating "the scope and extent of benefits" that Sevan received for his requests.
February 3, 2005


United Nations building in New York City

Former U.S. Federal Reserve Chairman Paul Volcker delivered a preliminary report of the investigation into the United Nation's Oil-for-Food program with Iraq under Saddam Hussein, which is sharply critical of the procurement process used and former program director Benon Sevan.

Volker heads the Independent Inquiry Committee, an investigation requested by UN Secretary-General Kofi Annan in June, 2004.

Annan has already responded to the report, ordering disciplinary action for Sevan and other UN officials of the former program.

Volker expects the report will go some ways to responding to critics of the UN program. "I think it's important to find out the extent those attacks are justified," he is quoted as saying. "There are obviously problems in the institution and we have identified some of them. But the end of this should be a reformed and stronger U.N., because I believe - and I know the other committee members believe - that the U.N. has an important role to play but it cannot be effective if it is under suspicion all of the time."

Charges that UN officials misused 1.4 billion USD of administrative funds are unfair, Volker said. "We do not find evidence that this was a big slush fund," he said. "The money was carefully budgeted. They didn't spend all of the money they had budgeted. They gave some of it back to Iraq."

The Independent Investigation Committee report faulted the contract procurement process which selected Banque Nationale de Paris, Saybolt Eastern Hemisphere BV, and Lloyd's Register Inspection Limite, saying it did not conform to financial and competitive bidding standards. The choices were "clearly affected by political considerations" according to Volker.

Sevan is particularly faulted for personal financial transactions, including $160,000 over 1999-2003 which his lawyer has stated came from an aunt who has since died.