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Leaked UN audit proves Oil-for-Food shambles
NEW YORK (Mineweb.com) -- A United Nations internal audit report leaked to Mineweb cracks open the door on hitherto secret details of the disgraced Iraq Oil-for-Food Programme. The report details irregularities that went on for years, with hundreds of millions of dollars not properly accounted for, hinting at disarray in the programme from start to finish. The report was never forwarded to the UN Security Council.
The leaked document is the first audit involving the Office of the Iraq Programme (OIP) to see the light of day. Despite intensifying US Congressional scrutiny, Oil-for-Food remains concealed and the Bush administration appears reluctant to embarrass the UN by pressing for answers.
Since the war in Iraq ended, the murky world of the OIP has been unravelling. The war voided the secrecy and ignorance that insiders and Saddam’s chums relied on to plunder billions of dollars in cash and goods under cover of UN humanitarian missions and even in plain site of the institution's bureaucrats.
Audit No. AF2002/23/1 offers a unique glimpse into the UN’s scandal-ridden “humanitarian” involvement in Iraq where $10 billion – nearly one year’s worth of Iraqi gross domestic product – may have been embezzled. Further exploitation occurred in expired medicines and food shipped to Iraq, or in missiles and other contraband smuggled into the dictatorship camouflaged by phony contracts. In fact, Iraq was even re-exporting OIP goods at times. Most worrying, some of the money may have made its way to terrorists.
The UN Office of Internal Oversight Services (OIOS) addressed the April 2003 report to Benon Sevan, the quasi-retired but still diplomatically-immune Executive Director of the Office of the Iraq Programme. Sevan’s name cropped up in a list of recipients of oil-trading vouchers issued by Saddam Hussein’s regime. The vouchers have been linked directly to kickbacks to Saddam as one aspect of an elaborate sanctions busting and graft scheme tolerated by the UN.
The UN has wavered on coming clean about its corrupt program; initially appointing an internal team to assess allegations, then haltingly acceding to requests for independent scrutiny, only to regress by sending intimidating letters to contractors. Things improved somewhat last week when the UN agreed to sequester OIP documents for outside investigators to examine.
Sevan has steadfastly denied benefiting in any way from Oil-for-Food which he administered. He has also repeatedly insisted that multiple audits gave the OIP a clean bill of health, which seemed to be backed up by a tame reference to "further improvements are still needed in a number of areas" in the OIOS eighth annual report. Similarly, the ninth annual report cited Audit No. AF2002/23/1 indirectly, but made light of the identified problems and did not reference the most serious issues.
The detailed audit report shows something very different and suggests that the OIP barely kept up appearances in fulfilling Security Council resolutions on Iraq.
The report is littered with hair-raising irregularities for which there were no serious consequences.
Cotecna Inspection S.A., a privately owned and managed Swiss "global trade facilitation" firm, won UN contract PD/CON/324/98 which was worth $40.9 million dollars between February 1999 and July 2002. Whereas UN Secretary-General, Kofi Annan, whose son, Kojo, worked for Cotecna, is now adopting a constructionist view of the contract disclosure clauses, the OIP was decidedly generous with Cotecna when it came to pecuniary and operating clauses.
For example, the audit report reveals that Cotecna over-billed the UN to the tune of $335,328 in just one year because it deployed less staff than obligated. The OIP shrugged off the loss and told its internal auditors that future invoices would be matched to actual staffing. Similar contracting abuses had been uncovered in audits from prior years involving the OIP, especially involving the oil services contract. Clearly, few of the earlier admonishments were taken seriously.
The most deplorable disclosure highlights why Kurdish leaders have insisted that half of all humanitarian supplies to the region were stolen, and why the OIOS found in a 1999-2000 audit that the UN was overpaying for supplies there by a margin of 61%.
For the first six phases of the Oil-for-Food Programme, the auditors say Cotecna simply never inspected goods under the “13%” programme – humanitarian supplies for Northern Iraq. When Cotecna did start superficial inspections on supplies flowing to Northern Iraq, the result was a cumulative discrepancy of $111.3 million dollars, or 36% of the total value of goods paid for by the UN in that period.
Cotecna was responsible for authenticating the following categories of imports as they arrived in Iraq: food, medicine, water & sanitation, electricity, agriculture, primary and higher education, and settlement & rehabilitation.
If the discrepancy between UN and Cotecna figures is indicative, then $363.4 million may be unaccounted for from prior years though it is probably much higher because controls were non-existent. It is likely that discrepancies in the Northern Iraq programme top $800 million, of which only 20% might be explained away by administrative foul ups. The audit does not detail probable discrepancies in the other regions Cotecna was responsible for.
The auditors say they have no idea how the OIP reconciled its regular reports to the Secretary General, especially early on when there were no records of inspections. The suggestion is that the Security Council and General Assembly were being fed fictitious information. According to the US Defense Contract Audit Agency, OIP contractors like Cotecna were able to inspect just 7-10 per cent of approved deliveries.
Even when Cotecna did inspect goods, the results are doubtful because the auditors found the company did not have the necessary equipment on site to do the work. Instead of offloading trucks, unpacking boxes and professionally sampling goods as contracted, Cotecna staff accepted truck cargo manifests at face value. The contract required thorough verification.
Incredibly, the OIP defended the lack of inspections by claiming compliance would have caused “delays” that might “bring the organization into disrepute.” What then was Cotecna hired for if the primary objective was delivery rather than verification?
In fact, the OIP persistently defends Cotecna which had also had improper free use of UN facilities such as offices and medical services. The OIP, responding to audit recommendations, goes to incredible lengths to get Cotecna off the hook, especially when it comes to financial clawbacks.
It is clear that there was little, if any, sincere verification of goods entering Iraq under the OIP as required by several Security Council Resolutions. Sanctions busting started in Turtle Bay, New York.
Nice work if you can get it
The audit reveals a contract that was fluid to the unfailing benefit of Cotecna.
The company was reprimanded, not sent packing, when it committed serious breaches. One of those was an inexcusable conflict of interest where Cotecna attempted to be accredited as a supplier to Iraq. It also appointed a sub-contractor, even before the contract with the UN was signed, in clear violation of the organisation’s rules on sub-contracting.
Independent investigators will undoubtedly focus on the curious circumstances of Cotecna’s remuneration.
The firm won the contract by being the lowest bidder at $400 per-man-per-day. Within a year, Sevan’s office had approved an increase in the price to $600pmpd – exactly matching the next lowest bidder, InterTrek Testing of the UK. Cotecna also scored with the addition of 8 more staff, costing the UN another $4,800 per day.
The increase should automatically have triggered a rebid. Suspicions were further aroused by a subsequent contract rebid where Cotecna lowered its price to $520pmpd and won again.
Cotecna’s $600pmpd price was a result of blending operating costs with the per man per day fee structure. It was not the only time the OIP bent over backwards to accommodate operating cost issues.
In violation of the contract and even before a single service had been provided, Cotecna received $356,000 to cover communications equipment and associated operating costs. A further $150,000 was provided for the communications operating costs later on, for total excess spending of $506,000.
In one of the most bizarre exposures, the OIP agreed that Cotecna could own the communications equipment within 6 months in exchange for a “residual” payment of $95,000. The payment was never made, and the OIP could not explain how the residual payment was calculated although it promised to collect the debt.
These are just some irregularities among dozens in the audit.
A Mineweb source says the UN’s internal auditing capacity and authority is pitiful. When the auditors do try to dig in their heels, they are easily railroaded because they are on 6-month contracts and there is a history of recalls and firings.
The OIP’s power surfaces in its response to the audit recommendations which have a formulaic quality to them. Where the OIP agreed, there was usually a pledge to implement reforms in future with no concern to address past problems, especially when money is involved. Promises to recover funds are undermined by the lack of an independent collections authority or accountability to an investigative staff. The glib OIOS annual reporting is a further concern.
Where the OIP disagreed, it simply resorted to steamrolling the auditors with circumlocutions and outright rejections.
For example, even though the contract with Cotecna was clearly all inclusive, the OIP implies that there was a fixed margin in effect. The OIP consistently refused to make Cotecna comply with its obligations on staffing and equipment because it would “incur costs for the organization [the UN].” In other words, the only way the OIP would make Cotecna perform according to the contract was by passing on costs to the UN.
The leaked audit has implications not only for Benon Sevan and his office, but the OIOS and the UN Board of Auditors and, perhaps, the Secretary General himself. The Board, which is made up of General Assembly members South Africa, the Philippines, and France, was supposed to keep an eye on things on behalf of the member states and shares the responsibility for auditing UN operations with the OIOS.
There will be questions about why the OIOS did not investigate the audit findings given the hints of fraud, especially since Sevan previously indicated that the OIOS and Security Council were aware of a Saddam Hussein surcharge on contracts. Indeed, Saddam was openly boasting that sanctions were being violated. The SC delegated the administration of the OIP funds to the Secretary-General and with that the oversight functions.
Mineweb shared the documents with Claudia Rosett who has written about them for the Wall Street Journal. Fred Eckhard, Spokesman for the UN Secretary-General, told her that the UN will no longer comment on Oil-for-Food now that it is being investigated by the Volcker panel. The office of Cotecna Chief Executive, Robert Massey, said the firm was in full compliance with its UN contract.
"History shows that even brutal dictators have been toppled and defeated by sanctions."
-Rep. Dick Gephardt
"What we have to do is get the United Nations far more deeply involved in this. Iraq is not an American prize. This is not something that we possess to dispose of at our will. This is a country and we should behave accordingly with the United Nations. I’m all for Americans keeping command of the security component, but the nation building, the infrastructure, the civilian component, the humanitarian component belong in the shared authority of the United Nations."
-Sen. Flip Flop
"The United States needs help in Iraq. The Bush Administration should be focused on addressing the concerns that are preventing members of the United Nations from providing meaningful and timely financial assistance, personnel and material."
I have the sneaking suspicion that the internationalist UN lovers in the media keep the prison abuse scandal on Page 1 to keep anyone from mentioning the millions these and other UN thieves steal each and every year. Think of it-1 day few yahoo reservists get incredilbly stupid, and they're getting courtmartialed and punished. End of story-NO!Tthe American media can't report that story often enough. And the oil-for-food scandal keeps getting pushed off the pages. How can anyone with any care over US taxpayer dollars trust these Hans Blix-type people to walk the dog, much less run a country? It's as if keeping the prison scandal going will get the UN scummers the cash in pocket and headed to Iraq without any American oversight. And thereby give them all another chance to line their pockets with no one looking.
As to the quality of sanctions, didn't work with Mao, Breznev, Tito, Kim, Ho, Castro, May be South Africa, but who really knows? Facts are tricky, facts are cruel, facts don't do what I want them to!Gephardt should grow eyebrows and read up on all that history stuff. I'm not sure Bug Eyes Pelosi could run anything more challenging than a canasta game, and that's the leadership!
The Democratic Party-learning the wrong lessons from history since 1860 and counting!
Originally posted by Bugg@May 23 2004, 10:17 PM I have the sneaking suspicion that the internationalist UN lovers in the media keep the prison abuse scandal on Page 1 to keep anyone from mentioning the millions these and other UN thieves steal each and every year.
Come on, Bugg. Katie Couric would never engage in journalistic dishonesty. Just ask BTJF.
Anyone who pines for genuine international multilateralism would do well to follow the bribes now being uncovered in the United Nations' Oil-for-Food scandal.
Why did France and Russia oppose efforts to topple Saddam Hussein's regime? And why did they press constantly, throughout the '90s, for an expansion of Iraqi oil sales? Was it their empathy for the starving children of that impoverished nation? Their desire to stop the United States from arrogantly imposing its vision upon the Middle East?
It now looks like they it was simply because they were on the take. Saddam was their cash cow. If President Bush has suffered some discredit over his apparently false -- but not disingenuous -- claims of Iraqi Weapons of Mass Destruction, the lapse is minor compared to the outright personal selfishness and criminality that appears to have motivated many of those who opposed his efforts to rid the world of one of its worst dictators.
Throughout the '90s, France and Russia badgered the United States and Britain to increase Iraqi oil production. President Bill Clinton and Prime Minister Tony Blair fought them at each step, but then reluctantly gave way. First Iraq was allowed to sell 500,000 barrels daily. Then, on Franco-Russian insistence, it was raised to 1 million, then to 2 million and, finally, to 3 million barrels a day.
Each time, America and Britain -- the nations now accused of coveting Iraqi oil -- resisted the increases in Iraqi production and urged tighter controls over the program. Each time, the French and the Russians prattled on about the rights of Iraqi sovereignty and the need to feed the children.
Now we know why the French and Russians were so insistent. Iraqi government documents (leaked to the Baghdad newspaper Al Mada) list at least 270 individuals and entities who got vouchers allowing them to sell Iraqi oil -- and to keep much of the money. These vouchers, and the promise of instant great wealth they carried with them, bought vital support in the United Nations to let Saddam stay in power.
The list of those receiving these bribes includes France's former French Interior Minister Charles Pasqua (who's a leader of Chirac's party) and Patrick Maugein, the head of the French Oil firm Soco International. France's former UN ambassador, Jean-Bernard Merimee, got vouchers to sell 11 million barrels.
In Russia, the payoff chain reached right into the "office of the Russian president." President Vladimir Putin's Peace and Unity Party also got vouchers, as did the Soviet-era Prime Minister Nikolai Ryzhkov and the Russian Orthodox Church. Nationalist leader Vladimir Zhirinovsky shared in the largesse.
Not to be left behind, the Rev. Jean Marie Benjamin of the Vatican got the rights to sell 4.5 million barrels as recompense for setting up a meeting between Iraqi Foreign Minister Tariq Aziz and the Pope.
Indeed, the list indicates that Benon Sevan, the United Nations official in charge of the Oil-for-Food program. received vouchers. He denies the charge, but has decided to retire next month anyway.
At the start of the Oil-for-Food program, America and Britain proposed that the money flow only to accounts entirely controlled by the United Nations. Soon this standard was lowered to include accounts not actually controlled by the United Nations, but only monitored by it.
Then-Sen. Frank Murkowski, R-Alaska, warned that "oil is fungible" and noted that once Iraq was allowed to pump and sell it, Saddam could sell all he wanted outside of officially sanctioned channels and nobody could tell which black liquid was legal and which not. But nobody imagined that there were actual bribes going to specific French, Russian and UN officials as part of the program.
Now it appears that Secretary-General Kofi Annan's sanctimonious posturing may have concealed oil bribes which reached high up in the ranks of the UN organization itself.
The defect of international coalitions is that they include the just and the unjust, the bribed and the honest, the democratic and the autocratic. And their members cannot be trusted equally. The group that stood up and backed the invasion of Iraq was nicknamed "the Coalition of the Willing." Now it appears it was also "the Coalition of the Honest."