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U.S. Official: Probe Didn't Clear Annan

A U.S. State Department official said Thursday that an interim report on bribery and other wrongdoing in the U.N. Oil-for-Food program didn't exonerate Kofi Annan (search) as the secretary-general had proclaimed.

The statement from Mark Lagon (search), the Deputy Assistant Secretary of State for International Organization Affairs, was the first time the United States had rebutted Annan's claim, made shortly after the release of the report on March 29, that he had been cleared by the committee.

Annan came under fresh scrutiny a day after The Associated Press reported that two senior investigators with the Independent Inquiry Committee resigned because they believed the report that cleared the secretary-general of meddling in the $64 billion program was too soft on him.

Lagon said the resignations were further reason to suggest Annan wasn't cleared.

"It appears that two people who had a hand in forming that report think that even what the report said was perhaps a little too charitable about the secretary-general and his leadership," Lagon said.

The committee led by former U.S. Federal Reserve Chairman Paul Volcker (search) faulted Annan's management of the Oil-for-Food program, which was set up to help ordinary Iraqis cope with crippling U.N. sanctions imposed on Saddam Hussein's (search) regime after his 1990 invasion of Kuwait.

The report did clear Annan of interfering in the awarding of a $10 million-a-year U.N. contract to the Swiss employer of his son, Kojo Annan (search). But it also said Kofi Annan didn't sufficiently investigate possible conflicts of interest surrounding the contract.

"We aren't calling for the resignation of the secretary-general, however it is probably an exaggeration to suggest that the Volcker report exonerated the secretary-general," Lagon said.

Volcker's committee is investigating allegations of widespread fraud in the program, which ran from 1996-2003 and was meant to help ordinary Iraqis suffering under U.N. sanctions.

But Saddam's government had authority to decide who would have the right to purchase oil and it is believed to have extracted kickbacks ranging from an estimated $9 billion to $21 billion.

Scandal surrounding the Oil-for-Food (search) program has become a problem that won't go away for Annan. Last week, U.S. Attorney David Kelley filed charges against three people allegedly connected to Oil-for-Food, including a South Korean businessman with ties to current and past U.N. officials such as former Secretary-General Boutros Boutros-Ghali, according to staff.

The Kelley complaint against the South Korean, Tongsun Park, cited two high-ranking U.N. officials — identified only as "official 1" and "official 2." It said Park met them in an apparent bid to influence the ultimate design of the Oil-for-Food program, and doesn't rule out the possibility that they may have been bribed.

According to the complaint, Park invested $1 million in a company run by the son of one of the officials. The company later folded

And on Wednesday, Annan's special envoy for North Korea, Maurice Strong, stepped aside after he acknowledged business ties with Park. The Volcker committee is investigating Strong's possible role in Oil-for-Food, while Strong denies he had anything to do with the program.

The Toronto Globe and Mail reported Thursday that Strong conceded it was his son, Frederick Strong, who ran the company in which Park invested money. That would make Maurice Strong "official 2."

The newspaper identified the company as Cordex Petroleums Inc.

On Thursday, U.S. Rep. Henry Hyde, an Illinois Republican, sent Volcker a letter demanding that he investigate the actions of the two unidentified U.N. officials.

Volcker and the leaders of his inquiry say their final report — expected in midsummer — will likely lead to dozens of criminal prosecutions by legal authorities in various countries for bribery, sanctions busting, money laundering and fraud.

Volcker recently underwent surgery to repair swelling in his abdominal aorta, his office said Thursday. He's in good health after the April 1 operation, according to a statement from his chief spokesman, Michael Holtzman. The committee's work wasn't delayed, his office said.

The operation is called an endovascular repair of an aneurism in the abdominal aorta. In layman's terms, Volcker's aorta had begun to swell where it passed through his abdomen. Doctors performed a minimally invasive procedure, inserting a stent to help blood flow.

If not addressed, such aneurisms can burst and cause massive internal bleeding.