Investigators probing the Oil-for-Food program in Iraq said Tuesday there was not enough evidence to show that U.N. Secretary-General Kofi Annan (search) knew of a controversial contract bid by his son's employer.
But the report criticized the U.N. chief for not determining the exact nature of his son's relationship with the Swiss firm that won a major contract to oversee humanitarian relief efforts in Iraq. Annan told reporters later in the afternoon that he is urging his son, Kojo Annan, to be more cooperative in the investigation.
Asked at a Tuesday news conferences if he was going to quit his post at the United Nations, Annan said: "Hell no."
Annan told reporters that he was "well aware" of the insinuation that he improperly influenced procurement processes in favor of Cotecna, the Swiss contractor.
"But I knew that to be untrue and I was therefore absolutely confident that a thorough inquiry would clear me of any wrongdoing," Annan said. "After so many distressing and untrue allegations have been made against me, this exoneration by the independent inquiry obviously comes as a great relief."
But the conclusions in the report, released Tuesday by Paul Volcker (search), was not the clear vindication the United Nations chief had wanted.
"While the scope of the second report is limited … it does deal with matters dealing directly with the secretary-general, Mr. Kofi Annan, and possible conflicts of his interest" with his son and Cotecna Inspection SA (search), Volcker told reporters earlier during a noon press conference.
The 144-page report is the second issued by the team of investigators led by Volcker, the former U.S. Federal Reserve chairman, who was picked by Annan to head up the investigation. The report looks at who is to blame for the program's $64 billion mismanagement and abuse.
"Some of the best investigative minds in America and from around the world have been at this for 12 months," Mark Malloch Brown, Annan's chief of staff, told a news conference.
"No other leader of an organization has put himself through this kind of cross-examination ... But it's done. It's past. The verdict is delivered."
U.S. State Department spokesman Adam Ereli on Tuesday wouldn't comment specifically on the report but said regarding Annan: "We've made it clear that we support the United Nations and we support the secretary-general and his work. He has been cooperating with the Volcker investigation, and we have every expectation that he will follow up on his findings and move forward on an ambitious agenda of reforming the U.N. so that these kinds of systemic weaknesses are addressed."
The report comes at a time when the United Nations continues to try to regain its balance after allegations of gross mismanagement of the Oil-for-Food program and accusations of sex abuse on U.N. peacekeeping (search) missions.
Last week, U.N. officials laid out plans to reform the organization and its peacekeeping operation. The secretary-general introduced a sweeping reform plan that he wants member states to agree to at their meeting in New York in September. The plan represents the United Nation's biggest overhaul attempt in its 60-year history.
Volcker said it's his hope that the latest report "may contribute to the larger objective of a reformed U.N. — a U.N. capable of commanding and maintaining the support of its member states and the public at large."
A more comprehensive report on the Oil-for-Food program will be released by his panel, the Independent Inquiry Committee (IIC), this summer.
The Bush administration said it would support Annan's efforts to reform the United Nations.
"This is a very serious matter," said White House spokesman Scott McClellan. "Congress has been looking into it as well. We continue to support the United Nations. We continue to support Secretary-General Annan in his work at the United Nations."
Report: Cotecna Didn't Have Leg Up On Contracts
This latest report considers the award in 1998 of the humanitarian goods inspection contract to Cotecna and deals only with limited aspects of the Oil-for-Food program.
Kojo Annan (search) worked for Cotecna in West Africa from 1995 to December 1997, and then was a consultant for the firm until the end of 1998 — when it won the Oil-for-Food contract. He remained on the Cotecna payroll until 2004.
"There is no evidence" that the selection of Cotecna for an Oil-for-Food inspection contract "was subject to any affirmative or improper influence of the secretary-general in the bidding or selection process" that took place in 1998, the report said.
But it does blame Annan for not effectively investigating connections between his son, Cotecna and Oil-for-Food after he learned about them in January 1999 news reports.
"We think the investigation that he [Annan] initiated was inadequate and his own inquiries are inadequate — that is why we are here," Volcker said.
Annan noted that point, saying: "I accept that criticism, however, I have, through my attorney, provided a comment to the committee, explaining my reasonings for ordering a different kind of inquiry in light of the information available to me at that time. The steps I took were fully consistent with U.N. regulations."
The Volcker report accused Kojo Annan and Cotecna of trying to conceal their relationship from both the U.N. secretary-general and the IIC and said the investigation was still probing "significant questions" surrounding Kojo Annan's business dealings with Oil-for-Food.
In a letter annexed to the report, Kojo Annan's lawyer, William R. Taylor, rejected claims that Kojo Annan had been less than cooperative with the IIC but admitted he had not told his father the whole truth.
"Mr. Annan has consistently acknowledged that he was not completely candid with his father when the Cotecna-U.N. contract first attracted publicity in late January 1999," Taylor wrote. "He regrets the embarrassment that omission caused to his father and to the United Nations and accepts responsibility for it."
Annan took time to specifically address concerns regarding his son's behavior.
"For reasons parents everywhere must understand, the most difficult and painful moments for me throughout this past year were those when it appeared my son, Kojo, might have acted inappropriately or may not have told me the full truth about his actions," Annan said. "I love my son and have always expected the highest standards of integrity from him."
He added: "I have urged him to cooperate."
Other U.N. Officials Named
The IIC found that although Cotecna has generally cooperated with the investigation, the company made false statements to the public, the United Nations, and the Volcker panel by asserting even up until 2004, Kojo Annan had stopped consulting for it on Oct. 9, 1998. The report also concluded that Cotecna disguised its continuing relationship with the younger Annan by routing the payments for him through other companies.
The report notes that the United Nations didn't ask Cotecna to complete a questionnaire and submit a financial statement as required; it's now known that there were strains on Cotecna’s financial position at the time.
Plus, the report found, no account was taken of a Swiss criminal investigation against Cotecna CEO Robert Massey (search), which involved alleged payments on behalf of the company for the benefit of the family of Benazir Bhutto to secure an inspection contract in Pakistan.
A more thorough investigation commissioned by Annan could have uncovered a lot of this information, the report said.
"Had there been such an investigation of these allegations, it is unlikely that Cotecna would have been awarded renewals of its contract with the United Nations," the report concluded.
Other U.N. officials named in the report for their inappropriate or inactions include: Annan's former cabinet chief, S. Iqbal Riza; the former undersecretary-general for management, Joseph Connor; and the undersecretary-general in charge of the Office of Internal Oversight Services (OIOS), Dileep Nair (search).
"These findings raise different and complex issues in each case, which I need to study carefully before deciding what steps need to be taken," Annan said.
The report says Conner, after being made aware of allegations surrounding Cotecna and illegal payments to Bhutto, "failed to take any action beyond the one-day inquiry that was conducted."
As for Riza, the IIC found that he allowed documents of potential relevance to the Volcker investigation to be shredded by his staff even though he was aware of the ongoing probe. The shredding occurred just 10 days after he wrote to the heads of the nine U.N.-related agencies that administered Oil-for-Food in northern Iraq to suggest they cooperate with the investigation and "take all necessary steps to collect, preserve and secure all files, records and documents" relating to the program.
Riza claims neither he nor his staff ever destroyed any papers relating to the program and that he didn't know the shredding was going on for a long period of time.
And for Nair, the IIC found that he got authorization to use Oil-for-Food funds for a special assistant post within the OIOS but the person who got that job did virtually no Oil-for-Food related work for the two years the program funded his position; the misuse of funds violated U.N. regulations.
Under the Oil-for-Food program, from 1996 to 2003, Saddam Hussein's government was allowed to sell limited — later unlimited — barrels of oil in exchange for humanitarian goods to relieve civilian effects of U.N. sanctions imposed after Iraq's 1990 invasion of Kuwait.
Saddam allegedly gave former government officials, activists, journalists and U.N. officials vouchers for Iraqi oil that could be resold. Investigators claim Saddam's regime may have illegally made more than $21 billion by cheating the program and other sanctions-busting schemes.
Some U.S. lawmakers, like Sen. Norm Coleman, who has previously called for Annan's resignation over the scandal, repeated the call on Tuesday.
"His lack of leadership, combined with conflicts of interest and a lack of responsibility and accountability point to one, and only one, outcome: His resignation," the Minnesota Republican said in a statement.
"While Kofi Annan may not be responsible for the acts of his son, he is responsible for failing to reveal a serious conflict of interest. Specifically, he permitted the U.N. to give massive contracts to the company that employed his son. This egregious conflict of interest is simply inexcusable and further damages the credibility of the organization he leads."
In a previous report on Feb. 3, Volcker's committee accused former Oil-for-Food program chief Benon Sevan (search) of serious wrongdoing in his handling of the operation.
The report accused Sevan of a "grave conflict of interest," saying his conduct in soliciting oil deals from Iraq "seriously undermined the integrity of the United Nations." Sevan's attorney has said he did nothing wrong.
Several congressional committees, including the House International Relations Committee, are conducting their own investigation into the scandal.
Committee Chairman Rep. Henry Hyde said Tuesday that he still intends to move forward later this spring with legislation calling for quicker U.N. reform. He's pursing measures that would make U.S. contributions to the U.N. contingent on that reform.
"Status quo at the U.N. can no longer be defended because the U.N.'s vital humanitarian missions worldwide are too important to the interests of member states including the United States ... This vital work is threatened when the integrity of the U.N. is questioned," the Illinois Republican said in a statement.
"More than any time in a generation — in the wake of the Oil-for-Food scandal — the world has a unique and precious opportunity to undertake reform consistent with the spirit embodied in the U.N. charter. We must act now."