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Diplomat: U.S. Coped With Oil-for-Food Abuses

Former Iraqi leader Saddam Hussein's efforts to swindle the U.N. Oil-for-Food program was no secret to U.S. officials, but any efforts to tighten the program would have endangered international support for Oil-for-Food (search), a U.S. diplomat told the Senate on Tuesday.

Patrick Kennedy, deputy ambassador to the United Nations, said the main goal of the United States was to preserve the sanctions, even if they were flawed.

"If we couldn't have a solid wall (with the sanctions), then we wanted a screen," Kennedy told a Senate panel investigating the breakdown of Oil-for-Food and the billions in illegal funds funneled through it to countries, companies and individuals close to the program.

One of those who stood to profit and should be prosecuted is former Oil-for-Food executive director Benon Sevan (search), said Norm Coleman, chairman of the Senate Permanent Subcommittee on Investigations.

Coleman said newly acquired Iraqi documents show Sevan made as much as $1.2 million through oil deals with Saddam Hussein's government.

The Iraqi Oil Ministry (search) documents appear to suggest that Sevan participated in a scheme by Saddam to issue vouchers to people that let them profit from illicit sales of Iraqi oil.

"As a former prosecutor, I believe that clear and direct evidence establishes probable cause that Benon Sevan broke the law," Coleman said. "I call upon Secretary General Kofi Annan to strip Mr. Sevan of his diplomatic immunity so that he will be available for judicial process."

Sevan has denied accusations that he profited from the program. Investigators say Sevan was not only responsible for misconduct and conflict of interest, but also appears to have violated U.S. criminal laws because he directly received payments.

Sevan has been suspended from his position at the United Nations for recommending a friend's oil company for the contracts. The $1.2 million was given directly to Sevan rather than the company, according to the documents. Sevan's lawyer, Eric Lewis, claims his client never received any money.

Earlier this month, a U.N.-commissioned investigative panel, headed by former Federal Reserve Chairman Paul Volcker, showed that Sevan received $160,000 in cash over four years, money he claims he received from his elderly aunt, who has since died.

Examples of Gross Negligence

The Senate panel also presented newly uncovered information detailing abuses and gross negligence by U.N. officials and contractors. Saddam's government circumvented sanctions and amassed millions through manipulation of the seven-year, $64 billion Oil-for-Food program (search), investigators allege.

Investigators say that other Iraqi Oil Ministry documents and letters show that Armando Carlos Oliveira, an inspector employed by Saybolt International BV (search), took a $105,819 bribe in return for allowing an oil sale, worth more than $9 million, that was in violation of U.N. sanctions against Iraq.

If substantiated, the payments would be the first documented case of a U.N. inspector having been bribed by the Iraqi regime.

Saybolt is a Dutch company that was contracted to monitor oil exports under the Oil-for-Food program.

One former Oil-for-Food inspector said officials should be held responsible for what went wrong.

"Those are losses but who suffered those losses? Those losses were suffered by the Iraqi people but who caused the losses?" asked Stafford Clarry, a former Oil-for-Food adviser. "This is what I believe this investigation and others have to get to."

Investigators estimate that Saddam, aside from Oil-for-Food scams, also smuggled $9.7 billion worth of oil out of Iraq. The oil was sent via pipeline to Syria, by truck to Jordan and Turkey and by ship through the Persian Gulf.

The subcommittee's ranking Democrat, Michigan Sen. Carl Levin, pointed out that Saddam made most of his illegal revenue through oil smuggling.

Saybolt officials say that they have also been examining allegations against employee Oliveira, a Portuguese national, since they were first raised in October.

Also on hand at the hearings was Robert Massey, chief executive officer of Cotecna Inspection S.A. (search), the Swiss firm hired by the United Nations to monitor humanitarian goods entering Iraq under the Oil-for-Food program.

Cotecna has been accused of failing to inspect shipments and allowing rampant overcharging. It also employed Kojo Annan (search), the son of U.N. Secretary-General Kofi Annan, in a position not directly related to the Oil-for-Food program.

Massey said Kojo Annan did not play any role in the company's landing of the lucrative Oil-for-Food contract.

"The employment of Kojo was in connection with West Africa and had nothing to do with Oil-for-Food," Massey said, adding that his company performed well and in accordance with rules.

"Kojo Annan played no role in helping Cotecna get the contract ... Cotecna fully met its obligation to the United Nations and I am proud," Massey said.

But subcommittee investigators say Kojo Annan's version of events is dubious.

Last week, Kojo Annan told investigators he could not recall details of a 15-day visit he made to New York during the 1998 U.N. General Assembly. Cotecna was awarded the contract soon after Kojo Annan's trip.

Kojo Annan denies having anything to do with the U.N. program.

Subcommittee staff who briefed reporters on condition they not be identified said Kojo Annan could not explain the meaning of a cryptic memo he wrote before his visit.

The memo said Kojo Annan had put together a "machinery," centered in New York, "that will facilitate the continuation of contacts established and assist in developing new contacts for the future."

Coleman has called for Kofi Annan's resignation as U.N. secretary-general. Other lawmakers also expressed dismay at the actions of the program's operators.

"I always wondered how Saddam could remain so strong when sanctions would deplete him," said Sen. Pete Domenici, R-N.M., who spoke at the hearings. "We have been misled and put upon by those who have done this in a very, very serious way."

But Kennedy told lawmakers that while the program was "certainly not perfect," if the U.S. faced a choice between losing support altogether or continuing to feed Iraqi civilians while keeping Saddam from rearming after the 1991 Persian Gulf War, the choice was clear.

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