Politics & Policy

Plunder Down Under

Australia shows how a real Oil-for-Food investigation is done.

At United Nations headquarters, Secretary General Kofi Annan likes to imply that the Oil-for-Food era is over (“If there was a scandal” was his locution earlier this year). But Down Under, that landmark U.N. scam is right now all over the headlines. On Monday, Australia’s Cole commission released the findings of its year-long inquiry into some $220 million in kickbacks allegedly paid by the Australian Wheat Board (AWB) to Saddam Hussein’s U.N.-sanctioned regime under Oil-for-Food.

#ad#In a nutshell, the inquiry has cleared the Howard government, but recommends pursuing possible criminal charges against a dozen individuals, eleven of them connected with AWB. Delving deeper into the report promises to be interesting. It runs to five volumes, totaling more than 2,000 pages — freighted with such Oil-for-Food-isms as arrangements to funnel money through “a Liechtenstein company with a Chinese name.”

But some lessons are clear already. For starters, the Cole inquiry has set a standard of clarity and transparency that the U.N. itself has yet to adopt — and shows no signs of doing so. The Cole commission conducted public hearings, and appears to have posted the vital underlying documents in full on the web. The interviews of the U.N.-authorized inquiry into Oil-for-Food, chaired by Paul Volcker, were all done in secret, with snippets released at the sole discretion of Volcker and his team. And although Volcker’s $35 million inquiry — the only investigation with full access to the U.N. itself — went to the trouble of amassing an archive of some 12 million pages, much of that digitally searchable, Volcker never released many of the vital underlying documents. He now appears poised to hand the trove back at the end of next month to the same U.N. where Annan’s former chief of staff, Iqbal Riza, spent months shredding executive office papers potentially relevant to the investigation.

The Cole report exemplifies why Volcker’s archives need to be delivered into the public domain — or at the very least, entrusted to authorities with a less glaring conflict of interest in handling any potentially damning information not yet disclosed. Cole’s findings, which in the AWB case go well beyond the Volcker report, are presented in a style so clear and direct that one might infer the investigators genuinely wish to communicate to the public the full extent of their discoveries. That’s quite a contrast with the reports released last year by Volcker’s committee — also totaling well over 2,000 pages. These included loads of horrifying detail, but encased it in so much verbal bubble wrap that the welter of dropped leads, unanswered questions, omitted names and gross underestimates of graft escaped wide notice. Volcker’s inquiry, for example, deep in Volume IV of its Sept. 7, 2005, report noted receiving “numerous allegations of corrupt behavior and practices” including “bid-rigging, conflicts of interest, bribery, theft, nepotism and sexual harassment” among U.N. agency staff working in Iraq, but named not a single individual involved. Cole’s commission has looked into the dealings of one large company, and named 12.

The Cole report, complete with tell-tale e-mails and other correspondence, describes the gyrations that the AWB went through as Saddam’s regime pressured the company for kickbacks, under threat of losing a multibillion-dollar business selling wheat to Iraq through the Oil-for-Food program. The basic scam involved Iraq’s demands for illicit payments disguised as trucking fees, which were folded into the prices of U.N. relief contracts. Starting in 1999, about midway through the seven-year program, these illicit charges began at about $12 per metric ton of wheat, then rose until they had almost quadrupled by the time of Saddam’s 2003 overthrow. The inflated prices were paid out of the U.N.-managed Oil-for-Food escrow account, thus enabling Saddam to skim oil money meant solely to pay for relief rations for the people of Iraq.

The Cole commission found that the AWB tried to hide these kickbacks from both the Australian government and the U.N., structuring them “to work a trickery on the United Nations.” But the tale does not stop there. The report goes on to recount that despite AWB’s secrecy, Kofi Annan, his deputy, his chief of staff, and the director of Oil-for-Food, as well as the Security Council, were broadly aware of Saddam’s demands for kickbacks from contractors, and in some cases well informed about other specific instances. The United Nations, however, “took no steps to publicise or warn member states of the Iraqi practices, and it took no steps to stop the practices.”

In other words, while the AWB was tricking the U.N., the U.N. itself was working a trickery on the rest of us. During the seven years in which Oil-for-Food was open for business, from 1997-2003, it was easy to discern the gaping opportunities for graft. But it was extremely difficult for an outsider to produce the all-important documentation of corruption in any individual case, because the U.N. kept secret not only the identities of the contractors, but also the terms of the contracts.

Scandal finally forced the names and revenue totals of Oil-for-Food contractors into the open. But to this day, neither the U.N. nor Volcker has ever released to the public the full records of such vital specifics as the quantities and qualities involved in the $46 billion worth of relief contracts approved by the U.N. — some of this traffic carried out with terror-linked countries such as Sudan, Syria, and Saudi Arabia. Such contract details would allow for a much better-informed appraisal of the price fiddles, and quite possibly light up the trails toward some of the billions collected by Saddam’s favored business partners on inflated relief deals — amounts sufficient, for instance, to be funding the current terrorism in Iraq ten times over. This was an angle the U.N. itself never pursued, and neither did Volcker.

In the AWB case, where thanks to Australia we now have the details, it seems likely that the U.N. could have alerted the world in a snap, had its officials chosen to do so. The U.N.’s own World Food Program deals in large quantities of wheat, and was among the U.N. agencies directly involved in Iraq. For U.N. insiders, the padded prices for Australian wheat — or billions worth of other staple items traded in world markets — should have been easy to spot with, say, a few well-placed phone calls to WFP offices in Rome. More importantly, had the U.N. simply disclosed to the public the terms of Saddam’s contracts, it would have been easy for outsiders to spot specific pricing scams, especially on commodities heavily traded in competitive world markets, such as wheat.

Lest this seem a problem solely of the past, it bears noting that U.N. secrecy goes well beyond Oil-for-Food. Even now, the U.N. keeps secret many of the germane terms of its global business in procurement contracts, through which it spends billions of taxpayer dollars every year on everything from printer paper to peacekeeper rations. This secrecy paved the way for another U.N. scandal, the bribery saga still unfolding in the U.N. procurement division — in which one U.N. staffer pleaded guilty in 2005, in U.S. federal court, and two more have since been indicted (both have pleaded not guilty).

Going back to the Cole report, what also stands out is how very rare it is among the UN’s 192 member states to see such a healthy public airing of UN-related business. The Volcker committee alleged last year that at least 2,200 companies from at least 66 countries had paid illicit kickbacks to Saddam under Oil-for-Food. But Volcker explored only a few cases. The rest he disposed of in his final report, in October, 2005, by tipping out annexes providing only the scantiest information to the public. The Volcker committee then left it to the discretion of U.N. member states to pursue any further inquiries — doling out additional country-specific information secretly and solely upon request of the relevant national authorities.

In a few countries, notably the U.S. (which was not among Saddam’s main trading partners), there were already a series of investigations underway — both federal and congressional — well before Volcker released his findings. A major trial of a number of alleged Oil-for-Food conspirators is now scheduled for early next year in the Southern District of New York. This follows the conviction in the Southern District this past July of a South Korean businessman, Tongsun Park, accused of conspiring to bribe U.N. officials to rig Oil-for-Food in Saddam’s favor from the start.

But among the top-ten countries that did Oil-for-Fraud business with Saddam, only Australia and to a much more shrouded extent France, appear to be actively investigating the U.N.-related graft. The other big players, which have shown no signs of launching any serious investigation, include some of the worst transgressors under the program: Russia, China, Syria, Vietnam, Egypt, Jordan, Turkey, and the United Arab Emirates. Under a U.N. system that relies on member states to police themselves, this does not bode well for the integrity of any U.N. sanctions efforts against oil-rich Iran.

Nor has Kofi Annan shown any continuing interest in cleaning up the Oil-for-Food sleaze he will leave behind when he steps down next month after ten years as Secretary-General. During his time in the U.N.’s top job, Annan, equipped with an Iraq-dedicated $1.4 billion budget, funded out of Saddam’s oil sales, administered all but the first month of Oil-for-Food (having previously represented the U.N. in the first round of talks with Baghdad over terms of the program, and then helped get his son, Kojo Annan, a job in 1995 with the company that in 1998 won the U.N. inspections contract for relief goods entering Iraq). But Annan has made no visible effort to pursue even the case of his handpicked former head of Oil-for-Food, Benon Sevan.

During much of the Volcker investigation, starting in mid-2004, Annan retained Sevan on a $1-per-year contract as a “special adviser,” with the U.N. initially paying his legal fees. The supposition, probably accurate, was that Sevan was in a position to divulge plenty to investigators. But Annan’s office dismissed press queries and raised no alarm when Sevan quietly left the U.S., shortly before the Volcker committee released an interim report in August, 2005, alleging that Sevan had taken at least $147,000 in payoffs on Oil-for-Food deals. (Sevan denies any wrongdoing.) Since last year, Sevan has been sighted out of reach of U.S. extradition, living on full U.N. pension, on his native Cyprus . Annan’s office has refused to answer questions about whether the U.N. paid Sevan’s moving expenses, saying this is a personal and confidential matter.

And so, while most of the alleged collaborators in Saddam’s global web of graft get a free pass, we have headlines about corruption in one of the few countries honest enough to conduct a public investigation — Australia. The silver lining is that the scandal may result in the breakup of the Australian Wheat Board, Australia’s domestic monopoly buyer of bulk wheat for export. In explaining how AWB became enmeshed in Saddam’s Oil-for-Food web of corruption, Cole describes traits common among monopolies, lambasting AWB for “a closed culture of superiority and impregnability, of dominance and self-importance.” Excepting that AWB officials may now pay a steep price, while at Turtle Bay not a single staffer has even been fired over Oil-for-Food, let alone prosecuted, Cole might just as well have been talking about an organization whose failings are too often excused on grounds that it’s all we’ve got — the United Nations.

— Claudia Rosett is a journalist-in-residence at the Foundation for Defense of Democracies who blogs at The Rosett Report.

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