UN IIC report faults former "Oil-for-Food" director

February 3, 2005

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.