washingtonpost.com
Oil-for-Food Official May Have Blocked Inquiries
Head of U.N. Program in Iraq Accused of Improperly Accepting Purchasing Rights
By Colum Lynch
Washington Post Staff Writer
Sunday, November 14, 2004; Page A26


UNITED NATIONS -- Benon Sevan, the official accused of improperly receiving lucrative rights to purchase oil from Saddam Hussein's government while he was running the U.N. oil-for-food program in Iraq, discouraged his staff from probing allegations of corruption and helped block efforts by the U.N. anti-corruption unit to assess where the program was vulnerable to abuse, according to senior U.N. officials.

Sevan said that such an assessment would prove too costly and that U.N. member governments bore primary responsibility for policing the program, according to senior U.N. officials and other former program members. He did initiate reviews of possible overcharging on some program contracts, reviews on which the U.N. Security Council took no action.

The disclosures, drawn from interviews with more than two dozen current and former U.N. officials and diplomats, follow a report last month by the top U.S. weapons inspector, Charles A. Duelfer, that Hussein personally approved the allocation of vouchers to Sevan, among about 270 other officials and businessmen, to sell millions of barrels of Iraqi crude at a profit of 10 cents to 35 cents a barrel.

Evidence that Hussein used the program to raise illicit billions and erode economic sanctions emerged over years, drawing strong criticism of the United Nations from U.S. legislators and conservative groups. The new disclosures provide a view into how the United Nations limited scrutiny of the program from within.

China, France, Russia, Syria and other governments, which represented companies competing for billions of dollars' worth of business, stalled measures aimed at ending corruption, U.S. Ambassador Patrick F. Kennedy, who tracked the program for more than three years, told a House subcommittee last month.

The U.N. Security Council established the oil-for-food program to address the humanitarian impact of economic sanctions against Iraq by allowing the country to sell oil so it could purchase food, medications and other essentials. It oversaw the export of $64 billion worth of Iraqi oil between December 1996 and November 2003. Sevan's policy took shape in late 2000, just as Hussein's government stepped up its efforts to siphon money from the program by requiring companies to pay kickbacks for the privilege of purchasing Iraqi oil or selling goods to the government.

Sevan declined to be interviewed for this article. In an e-mail to friends, he said he was the target of an "intense smear campaign" by groups seeking to discredit the United Nations and prevent it from returning to Iraq. He defended the program as making "a real difference in the daily lives of the average Iraqi people."

After Hussein's government fell in April 2003, evidence of corruption in the program spurred investigations in Baghdad, Washington and New York. U.N. Secretary General Kofi Annan appointed former U.S. Federal Reserve chairman Paul Volcker to investigate allegations that U.N. officials, including Sevan, and foreign companies received illegal payoffs. That investigation continues.

During his tenure, which ran from October 1997 to November 2003, Sevan, a Cypriot, opposed some internal efforts to review the program and issued written instructions to employees who had received tips about illegal payoffs to tell whistleblowers to make formal complaints to their governments. The gist of Sevan's orders was, "We can't act on telephone conversations. They should put it in writing and go to their government," according to a U.N. official who served under Sevan and spoke on the condition of anonymity because he had not been authorized to speak publicly on the matter.

The whistleblowers demurred, noting that Iraq could retaliate by barring their companies from future business.

Sevan also disagreed with an effort in late 2000 by the U.N. corruption watchdog, Dileep Nair, to submit the program to a major vulnerability assessment, saying that at a cost of nearly $50 million it would be too expensive, according to two U.N. officials and a senior diplomat.

Sevan was backed by the U.N. deputy secretary general, Louise Frechette. Both Nair and Frechette declined to comment for this article, citing concern that their public remarks might interfere with Volcker's investigation. A U.N. source familiar with Frechette's position said she believed it would be overstepping his role for Nair to oversee a management assessment while he was probing the program for signs of abuse.

Edward Mortimer, U.N. communication chief, said the world body may have deferred too much to the concerns of powerful member states. "Maybe we should have treated it more as a straightforward managerial problem, but we treated it as a very sensitive political matter where we were anxious not to offend the sensibilities of any important member of the Security Council," he said.

Toward the end of July 2000, U.N. officials began receiving tips from Iraq's commercial partners that the Hussein government was demanding kickbacks, according to three U.N. officials, who spoke on the condition of anonymity because of the sensitivity of the matter. In December 2000, one company told U.N. oil experts that Iraq had demanded an illegal surcharge of 50 cents on each barrel of oil, according to the U.N. official who served under Sevan. Shortly thereafter, the tips became the subject of Security Council meetings.

Representatives from about half a dozen other companies that traded with Iraq informed U.N. officials that Iraq was forcing them to pay illegal commissions into a secret bank account for the purchase of food, medicine and humanitarian goods, according to two U.N. officials who worked for Sevan. "The chatter was that the regime was asking suppliers to agree to sign contracts with a percentage going to another account," one of the officials said.

Sevan was reluctant to embark on an anti-corruption effort because it would complicate his relations with Iraq, whose cooperation was essential to the program's success, several U.N. officials believed. He was also loath to antagonize key Security Council members, particularly Russia, which routinely opposed efforts to reform a multibillion-dollar program that served its political and economic interests.

"He used to say, 'I have to sail between Scylla and Charybdis,' " a senior U.N. official said, referring to the two sea monsters in Greek mythology who tormented Odysseus and his crew.

Several U.N. officials, echoing Sevan's view, said they could not investigate crimes committed in their programs without far more resources and a specific mandate from the Security Council. Only in rare cases in which irrefutable evidence of abuses existed would they formally present the council with an allegation of corruption.

In one case frequently cited by U.N. officials as evidence of their commitment to fighting corruption, Sevan told the council's sanctions committee in October 2001 that the Greek captain of the oil tanker Essex admitted conspiring with Iraq to smuggle $10 million worth of crude oil. Sevan's briefing was arranged after Capt. Chiladakis Theofanis provided a written account of the scheme to both the United States and the United Nations. "If we got something which was so clear as the Essex case, we had no choice" but to bring it to the sanctions committee's attention, said Michel Tellings, one of three U.N. officials who oversaw Iraqi oil sales. But "we did not feel we had a mandate to go and investigate."

Although Sevan declined to pursue allegations of corruption, he took some action to address the problem, ordering a study of Iraqi imports to determine whether the costs were inflated. The report, which has not been released, was "inconclusive," according to the official who served under Sevan. In September 2003, a Pentagon study of 759 contracts valued at $6.9 billion showed "potential overpricing" by as much as $656 million.

Sevan also instructed U.N. customs experts to review individual contracts to determine whether the prices were "abnormally high" -- a move that was aimed at flagging possible wrongdoing to the council, several U.N. officials said.

Over the next 18 months, U.N. officials presented the sanctions committee with 70 contracts that were potentially overpriced, Mortimer said. But "nobody placed a single contract on hold," he said -- including the United States and Britain, Baghdad's toughest critics on the Security Council. He said Sevan's office "did its job by doing some investigation and informing the committee of its doubts."

U.S. and U.N. officials acknowledge that by allowing Hussein's government to negotiate contracts directly with thousands of foreign companies, the Security Council provided wide scope for abuses in the program. The council's decision-making process, which requires consensus among all its 15 members, made it difficult to impose anti-corruption reforms, U.S. and U.N. officials said.

"Any plan that would have denied the authority of the Iraqi government to select its own purchasers of Iraqi oil and suppliers of humanitarian products would have been rejected by a number of key Security Council member states," Kennedy told Congress.