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Jewish World Review Dec. 14, 2004 / 2 Teves, 5765

Mort Zuckerman

Mort Zuckerman
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A devil's brew at the U.N. | Sixty years ago, the signing of the United Nations charter in San Francisco was a beacon of hope to a world still laid low by the ravages of World War II. The U.N.'s agencies, like UNICEF, have done lots of noble work since then, and its blue-helmeted peacekeepers have been, and remain, essential guardians of humanity in areas of conflict.

Yet today the prestige of the U.N. is at a record low, mired in a monstrous scandal in which a vital humanitarian cause seems to have been perverted into a front for larceny on a dizzying scale. The U.N.'s oil-for-food program may turn out to be the largest financial scandal in history, involving a fraud of some $21 billion. Money aside, the alleged scandal is all the more nauseating because instead of providing relief for desperate Iraqis over the past decade, the U.N. appears to have become a conduit for kickbacks, graft, and smuggling on a grand scale. It is a diplomatic scandal of the first order because some Security Council members, notably France and Russia, seem to have abandoned principle and honor in pursuit of oil bribes. It is a personal scandal reaching to the under secretary general of the U.N., Benon Sevan, and, sadly, Kojo Annan, the son of the secretary general, Kofi Annan, holder of the Nobel Peace Prize. The whole stinking brew gives added resonance to the question of the U.S. ambassador to the U.N., John Danforth: "Why have this building? What is it all about?"

Shopping lists. The oil-for-food program was designed by the U.N. as a means of relieving the suffering of ordinary Iraqis as a result of the sanctions imposed on Saddam Hussein in the wake of the Persian Gulf War. The idea was that the Iraqi government would be allowed to sell a limited amount of oil, at fair market value, with the proceeds to be used to purchase food and other necessities. Kofi Annan had a direct hand in the initiation of the project as undersecretary general, when he led the first U.N. team to negotiate with Saddam over the terms of the program. (Remember Kofi Annan's comment about Saddam? "This is a man we can do business with.") When Annan became secretary general, he appointed Sevan, his colleague and close friend at the U.N. for 39 years, to head the program and report directly to him.

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There was a glaring weakness in the original plan. It gave Saddam the right to negotiate contracts, choose his customers, draw up shopping lists, and write his own deals for relief supplies. Ultimately, over $100 billion of transactions occurred — but only $15 billion went for food and medicine. The terms also allowed the U.N. to collect, in effect, a 2 percent fee on every barrel of Iraqi oil sold, so that the more oil that was sold, the bigger the fees collected for Annan's U.N., which ultimately took in roughly $1.9 billion. Ironically, the money freed U.N. bureaucracies from seeking financing from member states and allowed them to remain essentially unaccountable. It was left to the U.N. to check the Iraqi contracts, keep the records, control the bank accounts, arrange for audits, and provide public reporting on the program. But with all that money rolling in, it appears, there was simply too much incentive for U.N. managers to look the other way while Saddam, as the intrepid journalist Claudia Rosett reported, "skimmed the money, bought influence, built palaces, and stashed away funds for other purposes" (including, perhaps, support of terrorism). The U.N.'s Iraqi employees, all handpicked by Saddam, used the program to set up a series of business deals to benefit Saddam's pals, including France, Russia, and Syria, with the hope that all that money would encourage them to support the end of sanctions. A veil of secrecy was flung over billions of dollars in contracts, creating a safe haven for every kind of corrupt practice. Saddam was able to stand the oil-for-food program on its head, pocket enough money, and blithely ignore the U.N. sanctions while he continued to rebuild his military — using money that should have gone to help his desperate countrymen.

Even worse, in 1998, according to documents and interviews conducted by Charles Duelfer, the head of the U.S.-Iraqi Study Group, Saddam's government may have begun covertly sending gifts of oil vouchers to Sevan, the U.N.'s under secretary assigned to the oil-for-food program by Annan, by way of a Panamanian firm, allegedly earning Sevan over $3 million. That same year, the U.N. dismissed the British firm that had been overseeing the oil-for-food contracts and hired a Swiss firm named Cotecna to do the job. Questions were raised by the move because Cotecna was thought to have employed Kofi Annan's son, Kojo, a 26-year-old of modest skill and experience. When questioned about the possibility of nepotism or conflict of interest, the U.N. said Secretary General Annan had no knowledge of Cotecna's having been hired — even though the contract was let by a U.N. agency that reported directly to him. After it became known publicly that Kojo Annan had indeed been employed by Cotecna, the U.N. asserted that that there was no nepotism or conflict of interest because Annan had resigned before Cotecna won the contract, in early December 1998. Now this assertion, too, has been proven false, to the chagrin of the elder Annan, who had apparently been misinformed by his son. The secretary general is angry about it, and with good cause. Now it is known that Kojo Annan was not only working for Cotecna when it got the U.N. contract but was paid $2,500 a month until Feb. 26, 2004 — five years longer than the U.N. initially advised the public, covering the entire duration of Cotecna's contract with the U.N. In a letter to U.S. News , after an earlier editorial by me on this subject, the CEO of Cotecna denied Kojo Annan's role with the company after 1998.

Given that the U.N. asserted that the allegations about Kojo Annan had been "thoroughly investigated" by the U.N., with the finding that there was "nothing" to them, it is difficult to overlook the contradictions from the secretary general regarding the payments received by his son. Even more troubling than the role of Kojo Annan, though, is that of Under Secretary Sevan. He constantly urged the U.N. to remove limits on the sale of Iraqi oil at a time when Saddam, Rosett wrote, was selling it at below-market prices to handpicked customers, including the French and the Russians, who could then resell the oil to third parties at fat profits, part of which they returned to Saddam. When this was made public in the press, the U.N. haggled with Saddam but did not stop dealing with him. There was no investigation, and Sevan sidestepped questions about Iraq's demands for kickbacks by telling complainants to submit formal documents to the U.N. Security Council.

By 2002, it was no longer possible to believe that the U.N. remained unaware of Saddam's systematic violations. But Sevan said he had no authority to stop them. In May 2002, the U.N. Security Council passed a new resolution "cutting itself out of the loop on oil-for-food contracts deemed humanitarian," as Rosett put it, transferring responsibility for such contracts to Secretary General Annan and his staff. What happened? Kofi Annan promptly approved items that had nothing to do with food and medicine but a whole lot to do with propping up Saddam. There was the $20 million Annan approved to pay for an Olympic sports city, and an additional $50 million to support Saddam's propaganda-mad Ministry of Information. At no time did Annan reveal the commercial interests of key parties in continuing the oil-for-food program, nor was mention made of the fact that France and Russia were reaping fat profits on the Iraqi oil sales. Indeed, at the very time the Security Council was debating how to respond to Iraq's repeated violation of 16 U.N. resolutions, French legislators were promising Saddam's government that France would veto any Security Council effort to authorize military action against Iraq.

Knaves or fools. After Saddam's government was finally toppled, the oil-for-food contracts had to be turned over to the new Coalition Provisional Authority in Baghdad, and officials in the U.N.'s New York office began frantically editing them to expunge evidence of skimming and graft. This could mean only that at least some U.N. staff had known exactly what was going on with the contracts. Yet, in November 2002, incredibly, Benon Sevan praised oil-for-food as "one of the most efficient U.N. programs." Kofi Annan chimed in, offering praise to staffers who administered the program and "particularly to its executive director," Sevan — the same person who had delayed the turnover of the oil-for-food contracts to the Coalition Provisional Authority so that they could be "edited."

This, by any standard, is a sorry bill of particulars. Rosett, who first alerted the public to the bribery and graft in the oil-for-food program, wrote that the U.N. was peopled by either knaves or fools. It was about this time, unsurprisingly, that Sevan stopped giving interviews and headed into retirement. Kofi Annan has since been forced to bow to demands for an independent inquiry, recognizing the perception these transactions created and acknowledging, after his son's employment at Cotecna was revealed, the possibility that there had been "a lot of wrongdoing."

Kofi Annan cannot be held responsible for the activities of his son. He can, and should, be held responsible for the failures of the U.N. bureaucracy and for not having made a more diligent attempt to unearth and publicize what was going on, especially with regard to theactivities of Sevan and the Cotecna contract. Quiet mismanagement and grave negligence have put the U.N. under a moral cloud.

The secretary general has appointed former Federal Reserve Chairman Paul Volcker to investigate all these matters, and he can be trusted to be thorough and forthright. It will be tragic if Volcker concludes that the U.N. has sustained and protected a tyrant at the expense of the very people the U.N. is in business to protect. It will be a disgrace if payments to U.N. officials led them to avert their eyes from the abuses in the oil-for-food program. It will be an outrage if he finds that the payments enabled Saddam to fund insurgents and other terrorists in the region. And it will be a grievous moment for Kofi Annan to find his efforts to reform the U.N. now overshadowed by scandal. One cannot sup with the devil without a very long spoon.

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JWR contributor Mort Zuckerman is editor-in-chief and publisher of U.S. News and World Report. Send your comments to him by clicking here.



© 2004, Mortimer Zuckerman