House Holds Hearings on Oil-for-Food

House hearings on Tuesday raised the possibility that Saddam Hussein (search) bought votes in the United Nations Security Council in exchange for benefits from the Oil-for-Food program approved by the world body.

House Government Reform subcommittee chairman Rep. Christopher Shays (search), R-Conn., suggested the Oil-for-Food program actually helped keep the now-deposed Iraqi leader in power because the former dictator gave oil contracts to Security Council members who protected him.

The "U.N. sanctions regime against Iraq was all but eviscerated and turned inside-out by political manipulation and financial greed," said Shays. "Saddam's regime was not collapsing from within, it was thriving."

The Oil-for-Food program (search), which ran from 1996 to 2003, was created to allow the Iraqi government to sell oil in exchange for humanitarian goods. But on Tuesday, representatives from companies hired to monitor oil sales and the products entering Iraq bought with the proceeds said they were threatened by Iraqi officials — on one occasion by 20 armed guards — and stymied by Hussein's ability to manipulate records and trade.

U.N. Ambassador Patrick Kennedy said the program successfully provided critical food and medicine to the Iraqi people. But under heated questioning from Shays, he acknowledged that Cotecna, the company hired to monitor goods coming into Iraq, and Saybolt International B.V., the company inspecting oil exports, did not have the authority they needed to do adequate inspections.

Stronger oversight, he said, would have been blocked by other countries on the U.N. Security Council who did not want to undermine Iraq's sovereignty. Companies from some of those countries also were doing business with Iraq, either buying oil or selling products.

"It was about as leaky as it could get," Shays said. "Almost every transaction may have been a rip-off" that compromised the United Nations and allowed Hussein to make money.

The scandal-scarred program pumped more than $10 billion into the former Iraqi dictator’s pockets through a sophisticated system of bribes, payoffs and kickbacks.

David Smith, the director of corporate banking operations at BNP Paribas (search), the French bank used in Oil-for-Food, also acknowledged problems in the program, but placed the responsibility on the U.N.

"The U.N. was the bank's customer," Smith said. "The U.N. approved the parties... under the contracts

BNP Paribas handled $64 billion in Iraqi deposits. Though it is not a target in the congressional probe involving companies and individuals in 50 countries, it has supplied thousands of documents that  could provide a road map to alleged corruption at the U.N. and by politicians from France, Russia, Britain, Indonesia and Persian Gulf states who have been implicated.

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.

Democrats on the subcommittee chose not to concentrate on Hussein despite a Government Accountability Office report that estimated the Iraqi government skimmed $4.4 billion through kickbacks and another $5.7 billion through oil smuggling. Instead, Democrats turned their attention to the Bush administration, wanting to know how Halliburton received oil contracts after the Oil-for-Food program ended.

"These actions are hypocritical, they are arrogant, they breed resentment in the Arab world, and they further deteriorate our global alliances," Rep. Henry Waxman, D-Calif., said.

He went on to suggest the Halliburton deals harm U.S. operations because they give credence to allegations of American greed.

"Most of all, [the deals] undermine our efforts in Iraq because they reinforce the image that our primary objective in Iraq was to seize control of the country's oil wealth," he said.

Shays said he did not agree on the argument for needing the information; he said the request had merit. The subcommittee is expected to issue a subpoena to the Federal Reserve Bank of New York for information on management of oil revenues and to send a letter to Defense Secretary Donald Rumsfeld seeking audits on noncompetitive contracts.

In addition to the congressional investigation, a CIA report to be presented on Wednesday is expected to detail how Hussein allegedly bought $1 billion worth of weapons systems using money generated by the Oil-for-Food program.

FOX News' Eric Shawn and The Associated Press contributed to this report.