State Dept. Praises Annan Amid Scandal

The State Department on Friday praised U.N. Secretary-General Kofi Annan (search) amid a widening scandal over corruption and flawed management in the $60 billion U.N. Oil-for-Food (search) program.

Annan holds himself responsible and accountable for management of the program, and has reiterated a commitment to take "appropriate action" against misbehaving U.N. officials, Adam Ereli, a State Department spokesman, said approvingly.

"I think this is a clear statement of concern and commitment and responsibility on the part of the leadership of the United Nations," Ereli said. "And we welcome that."

The U.N. program, which was endorsed by the United States, permitted Iraq to sell oil despite a stiff U.N. economic embargo, provided the proceeds were used to buy food and medicine for Iraqi people suffering under the sanctions.

In fact, worldwide pressure to relieve their plight had led the United States and other nations to devise the program in late 1996. It continued until 2003.

A committee appointed by the United Nations to investigate said Thursday the former head of the program, Benon V. Sevon (search), had helped a company owned by a friend obtain valuable contracts to sell Iraqi oil.

Sevan has denied he ever received any money.

Based on the report, Annan will discipline Sevan and another U.N. official, Joseph Stephanides (search), who may have "tainted" bidding for an Oil-for-Food contract, Mark Malloch Brown (search), Annan's chief of staff, said Friday.

To read the full report, click here (pdf).

The 219-page report issued by the panel headed by Paul A. Volcker (search), a former chairman of the Federal Reserve, described the U.N. program as marred by political favoritism and mismanagement.

Ereli, noting another report will follow the interim one isssued on Thursday, said the State Department was not in a position "to come into any definitive conclusions until the full accounting is done."

Investigations also are being conducted by five congressional committees and a federal prosecutor in New York.