The Magazine

The Buck Still Hasn't Stopped

From the October 3, 2005 issue: The Volcker report on Oil-for-Food is sadly incomplete.

Oct 3, 2005, Vol. 11, No. 03 • By CLAUDIA ROSETT
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ON SEPTEMBER 7, PAUL Volcker's inquiry into the Oil-for-Food program issued its "definitive report" on the biggest relief program--also the biggest scandal--in the history of the United Nations. The investigation alone cost $34 million, took over 16 months, and employed some 75 staff from 28 countries. Running to four volumes and totaling 847 pages, the report is hefty. But definitive it is not.

Volcker's report is at best a beginning, and a skewed and incomplete one at that. To be fair, credit is due to some of the investigators on Volcker's staff, who have conducted many interviews and toiled down many byways of the U.N. paper trail to produce such items as footnote 64, page 27, Volume III. Here we find that "kickbacks were levied on all or nearly all contracts" among the thousands of U.N.-approved deals done by Saddam Hussein, as the program, during its final years, hit its full multibillion annual stride. The investigators have also painstakingly documented such findings as the one on page 124 of Volume III. Here we find that, during Oil-for-Food, Secretary General Kofi Annan, his deputy secretary-general, Louise Fréchette, and his chief of staff, Iqbal Riza, "were all informed of the issue of kickbacks, but remained passive."

But somewhere between the Volcker committee's labors on the ground and the conclusions of the three commissioners at the top--former Fed chairman Volcker, South African justice Richard Goldstone, and Swiss lawyer Mark Pieth--a fog descends. Despite the load of detail, illuminating and deeply damning to the United Nations, the result is a patchwork of dropped leads and watered-down judgments, leading in some cases to unwarranted and even bizarre conclusions.

Not that getting to the bottom of Oil-for-Food could ever be easy. The program was vast. From 1996 to 2003, it was supposed to ensure that more than $110 billion worth of oil sales and relief purchases contracted by Saddam's regime were honest, and that the proceeds were fairly distributed to ease the suffering of more than 24 million people in U.N.-sanctioned Iraq. But, under cover of U.N. secrecy, with the United Nations' approval, and while the international body assured the public that Oil-for-Food was one of its most efficient programs ever, Saddam, by Volcker's estimate, skimmed and smuggled his way to $12.8 billion in illicit income. And this is a conservative estimate that omits some rather obvious scams. By more complete estimates, Saddam swiped as much as $17 billion or upwards. There is abundant evidence--turned up by Congress, Treasury, the CIA, private investigators, and the media--that these illicit billions went not only to build palaces, but also to fortify Saddam's Baathist dictatorship, restock at least his conventional arsenal, bribe politicians, pay off accomplices worldwide, and fill secret bank accounts that may have funded terrorists during Saddam's reign--and may still be funding them today. This picture of where the money went is vital to grasping the full implications of the United Nations' corruption and dereliction in running Oil-for-Food. But Volcker has deferred almost all discussion of it to an "additional report," due out with a lot less fanfare next month.

If Volcker's September 7 "main report" is to be the final word on U.N. management of this fiasco, then the bottom line is this: Under a program involving thousands of U.N. employees, nine U.N. agencies, and an administrative budget totaling $1.4 billion, the United Nations abetted Saddam Hussein in one of the biggest heists in history--and no one, except for a couple of third-tier U.N. officials, is being punished for it. Annan, having taken "responsibility," is still at his post. His deputy, Louise Fréchette, having directly supervised the corrupt official heading Oil-for-Food, is now in charge of U.N. reform. And the former head of Oil-for-Food, Benon Sevan, accused by Volcker of taking at least $147,000 in bribes from Saddam, has been allowed to cash in his U.N. pension and leave the country.

The two U.N. officials penalized to date played relatively small roles in the Oil-for-Food saga. One is a former political affairs officer, Joseph Stephanides, who was never accused of taking a bribe and is appealing Annan's decision to fire him. The other is a Russian staffer in the U.N. procurement department, Alexander Yakovlev, portrayed in an initial, interim report from Volcker this past February as a champion of U.N. integrity. Only after media reports documenting otherwise did Volcker report in August that Yakovlev had tried unsuccessfully to solicit a bribe via Oil-for-Food. (Yakovlev entered a guilty plea in a Manhattan federal court last month for scams that appear to have centered on U.N. business outside Oil-for-Food.)