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Volcker Denies Conflict in Oil-for-Food Probe

Paul Volcker (search) told FOX News his committee isn't going soft on U.N. Secretary-General Kofi Annan in the Oil-for-Food investigation and denies that there was any conflict of interest over his link to a U.N. official being questioned in the probe.

Volcker, who heads up the Independent Inquiry Committee (IIC) commissioned by Annan, told FOX News' Eric Shawn in an interview that he had an acquaintance with Maurice Strong (search) "as many people do over the years."

Strong is Annan's envoy for North Korea, but he has stepped aside while Volcker's commission checks for any ties he had to Oil-for-Food. Strong has acknowledged that he had business ties to South Korean Tongsung Park (search), who was recently indicted by federal prosecutors on charges of trying to bribe U.N. officials so Saddam Hussein's regime could benefit further from scamming the program. Strong, however, has denied any link to such dealings.

Besides Park, federal prosecutors indicted a Houston-based American oilman and associates at his company, Bayoil, for participating in regime schemes that allowed them to pocket money that was originally destined for humanitarian relief efforts in Iraq.

Volcker's panel is investigating allegations of widespread fraud in the $64 billion Oil-for-Food program (search), which ran from 1996-2003 and was meant to help Iraqi civilians suffering under U.N. sanctions. The former Iraqi government had authority to pick and choose who could buy oil under the program; it's believed that Saddam's regime raked in kickbacks ranging from an estimated $9 billion to $21 billion from various illegal oil deals.

Volcker's panel has so far concluded that the program was subject to mismanagement and poor oversight from the United Nations and overseers on the ground in Iraq.

But last week, two IIC senior investigators — Robert Parton and Miranda Duncan — resigned because they believed the latest committee report was too soft on Annan.

"I thought we criticized him quite severely. I would not call it an exoneration," Volcker, the former Federal Reserve chief, said during the interview. "We are not meant to be soft or hard — we are out to get the facts and I've said from the beginning our responsibility is to follow the facts wherever they lead."

When the report was released, Annan said he was relieved that the report had exonerated him of meddling in the contract selection.

"After so many distressing and untrue allegations have been made against me, this exoneration by the Independent Inquiry Committee obviously comes as a great relief," Annan said.

Annan said he accepted the committee's criticism that he didn't seek a formal investigation of the circumstances surrounding the contract. He also defended himself against that criticism, saying his actions were "fully consistent with U.N. regulations."

Annan's lawyer sent a letter to the IIC defending the secretary-general's claim that he was exonerated in its latest report, according to a copy obtained Tuesday by The Associated Press.

The letter from Gregory Craig told the panel that media reports of Annan's March 29 statement in which he responded to the latest Volcker report were "inaccurate and inadequate." Craig wrote that Annan had asked him to make sure the committee had a "clear understanding" about what was said.

"It is simply not true, as many in the media have reported, that the secretary-general characterized the second interim report as having 'cleared him of any wrongdoing,' or as having 'exonerated' him with respect to any and all criticism," Craig wrote in the letter, dated April 19.

Parton and Duncan also claim that the committee allowed Annan to control access to his personal files and downplayed evidence that could have implicated the secretary-general more in the scandal. But Volcker insists there was no manipulation of the report's findings and that his panel had "full access" to any pertinent documents. He told FOX News that Annan had no control whatsoever over the material examined.

"There should not be, and there has not been, any question as to whether the report itself reviewed all the investigators' leads in some considerable detail," Volcker responded in regard to that charge.

Volcker's connection to Strong has also raised questions.

Volcker once served on the advisory board of Power Corp. of Canada (search), a company Strong had led many years before. Strong was Power Corp. chief from 1964-66, while Volcker was on the board in 1988, long after Strong ceased to be associated with the company, Volcker told FOX News.

Volcker said neither his acquaintance with Strong nor his ties to Power Corp. posed conflicts of interest.

"It's a ludicrous stretch," Volcker said. "There is no, absolutely no conflict of interest."

Strong, a prominent Canadian businessman, has acknowledged that Park once invested in a company he was associated with, but denies any link to Oil-for-Food. He later said the Volcker committee was checking his possible connection to the program.

Volcker's committee has released two reports so far on abuses in Oil-for-Food. The latest faulted Annan's management of the program, but cleared him of interfering in the awarding of a $10-million-a-year U.N. contract to the Swiss employer of his son, Kojo Annan (search). It did, however, point the finger at Annan for not ordering a more thorough investigation of his son's ties to the program after he learned of the connection between Cotecna and Oil-for-Food.

Kofi Annan later said he accepted the criticism and urged his son to cooperate with the investigation but claimed the report exonerated him. Volcker, however, made clear when he unveiled the report that the findings against the secretary-general were "adverse."

"When he found out his son was employed by Cotecna (search ) and continued to be employed [there], there was not a real investigation," Annan told FOX News in the interview. "I think that is a serious matter — we said it was a serious matter."

But the report was far from an exoneration, Volcker stressed again. "I would not use that word ... we gave the facts as we saw them," he said.

Meanwhile, Volcker's probe into the Oil-for-Food program is still open regarding Benon Sevan (search), the former head of the program who has been accused of taking payoffs from Saddam's oil sales. He has denied any wrongdoing.

Volcker was supposed to close shop this summer after the release of his final report, but now his committee may not disband so quickly. He is leaving open the possibility that as more Oil-for-Food allegations surface, his mandate will be extended.

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