NEW YORK – Congressional investigators examining "a semitrailer truck load" of subpoenaed documents are trying to determine whether lax monitoring at a French bank that held more than $60 billion for the U.N. oil-for-food program (search) facilitated illicit business deals by the former Iraqi government, officials told The Associated Press.
Although BNP Paribas (search) isn't the target of the probe involving companies and individuals in 50 countries, the documents could provide a road map to alleged corruption at the United Nations and by politicians from France, Russia, Britain, Indonesia and Persian Gulf states who have been implicated.
The three congressional panels that subpoenaed BNP Paribas documents are looking into whether the bank met minimum standards that require financial institutions to identify customers, partly to prevent money laundering (search). The committees are among at least five in Congress investigating allegations of U.N. corruption and reports that Iraqis skimmed billions of dollars in kickbacks through deals administered by the United Nations.
Investigators also are pressing for information from the Federal Reserve Bank of New York, which is responsible for regulating foreign banks operating in the United States.
"From our perspective this is a scandal of overwhelming proportions. There are so many pieces. We want to follow the money wherever it leads," said Sen. Norm Coleman, R-Minn., chairman of the Senate Government Affairs Permanent Subcommittee on Investigations.
The United Nations' largest humanitarian aid program from 1996 to 2003, when it ended, oil-for-food was designed to allow the former Iraqi government to sell limited amounts of oil in exchange for humanitarian goods as an exemption from sanctions in place since 1991.
The BNP bank, which held the escrow account through which all of the U.N. program's oil money flowed, maintains investigators sought its documents as evidence targeting other companies and individuals. But several congressional panels say the bank also is under scrutiny.
"The subpoena for BNP Paribas stems from concerns expressed about the bank's compliance with existing 'know your customer' rules and similar laws enacted as part of the Patriot Act (search)," said a spokesman for Rep. Henry Hyde, R-Ill., who chairs the House International Relations Committee.
The spokesman, Sam Stratman, said that BNP, which has offices in New York, was being cooperative and that the investigation had not yet drawn any conclusions.
U.S. "know your customer" rules (search) require banks to collect information about their clients' businesses with an eye toward detecting illegal activities such as money laundering. The USA Patriot act strengthened the regulations in 2001 after the Sept. 11 terrorist attacks.
Coleman's panel is investigating similar questions and allegations the bank may have overcharged the United Nations for its services. Coleman said BNP is "not our primary target," however, and the bank is cooperating. Coleman and others stressed the probes are at an early stage.
In a statement, the bank said, "BNP Paribas is fully cooperating with all inquiries. We are not the target of any investigation."
Rep. Chris Shays, R-Conn., who chairs the House Government Affairs committee, has set new hearings for Oct. 5.
The panel hopes to hear testimony from BNP and two European contractors facing allegations in the scandal, Swiss-based Cotecna Inspection SA (search), and Saybolt International BV (search) of the Netherlands. Hyde's committee also plans fresh hearings in the near future, a spokesman said.
Cotecna, a company which once employed U.N. Secretary-General Kofi Annan's son Kojo, in 1998 began monitoring goods entering Iraq to make sure they matched a U.N.-approved list. Saybolt was brought in to monitor oil exports. Congressional investigators told AP they have subpoenaed internal documents from the two companies, which are cooperating.
The large number of documents delivered by the French bank in addition to other subpoenaed records amount to "a semitrailer truck load," a congressional investigator said.
An internal U.N. probe being led by former Fed Chairman Paul Volcker has maintained exclusive access to many U.N. documents, however.
Last week, a congressional delegation returning from a trip to Baghdad called for more U.N. cooperation. The delegation said they had viewed large numbers of documents which the interim Iraqi government has secured and is storing for its own investigation.
"There is substantial evidence" of corruption, said Rep. Joe Barton, R-Texas, who is leading one of the investigations at the House Energy and Commerce Committee.
An April report by the General Accounting Office, now called the Government Accountability Office (search), estimated that the Iraqi government skimmed $4.4 billion dollars through the kickbacks and an additional $5.7 billion through oil smuggling.
The oil-for-food program began in 1996 amid concerns that U.N. sanctions put in place in 1991 after the first Gulf War had led to widespread malnutrition among Iraq's 27 million people. The program is credited with nearly doubling the Iraqi population's annual food intake.
The world body, in consultation with the Iraqi government, named BNP to hold the sole escrow account. During the program, over $60 billion passed through the account.
The program ended after the U.S. invasion of Iraq and the ousting of President Saddam Hussein. In January, the Iraqi daily Al-Mada newspaper published a secret list — purportedly from the former Iraqi government — of 270 companies and individuals from over 50 countries who received vouchers for oil by the former Iraqi government.
The report led to allegations the former Iraqi government had used the vouchers as bribes. The list included prominent politicians from France, Russia, Britain, Indonesia and Gulf states as well as the executive director of the oil-for-food program, Benon Sevan, who has denied receiving vouchers.
Critics have also alleged that the Iraqi government, which had the authority under the program to approve deals to sell oil and to import humanitarian goods with the proceeds, manipulated prices to afford kickbacks from those awarded contracts. U.N. officials have admitted, for instance, that there is evidence the Iraqi government underpriced its oil on the understanding that its customers would kick back the premium.