Oil-for-Food Report Hits 2 Ex-U.N. Officials

One of the targets of the U.N. Oil-for-Food investigation, Alexander Yakovlev (search), was stripped of his diplomatic immunity Monday and taken into custody by federal authorities, a U.N. spokesman announced.

The U.S. attorney's office took Yakovlev into custody hours after Paul Volcker (search), the man in charge of the U.N.-approved probe into Oil-for-Food, fingered Yakovlev as one of two main U.N. officials involved in the program's corruption. Yakovlev later pleaded guilty to conspiracy, wire fraud and money laundering charges.

Yakovlev, a longtime U.N. procurement official who handled tens of millions of dollars worth of U.N. supply contracts annually, was accused in a report Monday of collecting nearly $1 million in kickbacks outside the Oil-for-Food (search) program.

Yakovlev resigned from his job earlier this summer after a FOX News investigation.

The news came after Volcker's U.N.-approved panel, the Independent Inquiry Committee (IIC), released its latest report highlighting mismanagement of Oil-for-Food.

The report also accuses Benon Sevan (search), the one-time head of the Oil-for-Food program who severed his ties with the United Nations on Sunday, of taking kickbacks under the multi-billion dollar humanitarian operation aimed at easing the effects of sanctions on Iraqi civilians.

Volcker, a former Federal Reserve chairman, also said in releasing the report that Sevan should also lose his diplomatic immunity so he can be prosecuted for alleged crimes.

"All I can fairly say is that given the kind of evidence that we have presented, I would think there may well be interest in doing so," Volcker said, referring to Sevan and Yakovlev losing their immunity.

Read the report by clicking here (pdf).

The report, which Volcker said was intended to tie up some "loose ends" in his panel's investigation, touched on topics other than Sevan. It dealt briefly with U.N. Secretary-General Kofi Annan (search) and his son, Kojo (search), and said more would be discussed in the committee's final report, expected in September.

For the first time, the report gave a motive for Sevan's actions, saying his finances were "precarious" shortly before his alleged misdeeds.

"Our conclusions are obviously significant and troubling," Volcker said at a news conference.

Sevan's Rant

Some critics have accused the United Nations of squandering millions — and even billions — of dollars in its mismanagement of the program. Yet Volcker's team found that Sevan appeared to have received kickbacks of just $147,184 from December 1998 to January 2002.

Volcker said Sevan had not responded to the IIC's efforts to contact him to get possible alternative explanations for that money.

Sevan, a 40-year veteran of the world body, announced his resignation Sunday in a scathing letter that lambasted Annan, the U.N. Security Council (search), the United Nations' critics, and the IIC.

"As I predicted, a high-profile investigative body invested with absolute power would feel compelled to target someone and that someone turned out to be me," Sevan wrote in the letter. "The charges are false, and you, who have known me for all these years, should know that they are false."

The resignation is largely symbolic because the U.N. was paying Sevan just $1 a year to keep him on payroll so he would cooperate with the committee. But it removes his diplomatic immunity and could leave him open to prosecution; Sevan, a Cypriot citizen believed to be in Nicosia, is also being investigated by the Manhattan District Attorney's office.

But also by resigning, Sevan may have retained U.N. benefits such as a relocation grant that permits the organization to pay for his move back home to Cyprus.

On Thursday, Sevan's lawyer Eric Lewis said the committee would find in its upcoming report that Sevan got kickbacks for steering contracts under Oil-for-Food to a small trading company called African Middle East Petroleum Co. Ltd. Inc. Lewis said it would also accuse Sevan of failing to cooperate with the investigation.

The report largely confirmed that, but went further. It described how Sevan and his wife repeatedly had overdrawn their bank accounts before Sevan first sought to steer oil allocations to AMEP.

It also found that two men helped Sevan: Fred Nadler, an AMEP director and brother-in-law of former U.N. Secretary-General Boutros Boutros-Ghali; and Fakhry Abdelnour, the president of AMEP.

Volcker's team recommended that the United Nations assist in their possible prosecution as well.

Lewis also said the United Nations was looking for a scapegoat and Sevan was it.

"I fully understand the pressure that you are under and that there are those who are trying to destroy your reputation as well as my own, but sacrificing me for political expediency will never appease our critics or help you or the organization," Sevan wrote in his resignation letter to Annan. "The only thing that will is to speak the truth and stand up to the political pressures from the adversaries of the United Nations."

In a February report, the IIC concluded that Sevan solicited oil allocations on behalf of the company, known as AMEP, between 1998 and 2001. It accused Sevan of a "grave conflict of interest."

That report questioned $160,000 in cash that Sevan said he received from his aunt in his native Cyprus between 1999 and 2003. The report called the money "unexplained wealth" and noted that the aunt, who has passed away, was a retired government photographer living on a modest pension.

Investigators: Yakovlev Took Money

Investigators found that Yakovlev secretly tried to bribe a company called Societe Generale de Surveillance S.A. (SGS), which was seeking an oil inspection contract under Oil-for-Food.

They said Yakovlev passed secret bidding information along to a friend in France, Yves Pintore, who then approached SGS to check if it would "work with" him and "influential people in the U.N. in New York."

Volcker's team found no evidence that the company agreed to the bribe. However, it noted that Pintore essentially agreed to its characterization of his involvement.

The committee found "persuasive evidence" that Yakovlev took some $950,000 from other U.N. contractors outside Oil-for-Food.

It said it had found that some $1.3 million had been wired to a bank account in Antigua, West Indies in the name of Moxyco Ltd. Of that, more than $950,000 had been traced to those companies so far.

Yakovlev was the U.N. officer in charge of awarding both Saybolt (search) and Cotecna (search) big contracts for Iraq, and the Volcker committee relied on his claims that in both cases, but particularly that of Saybolt, he had fought against the violation of U.N. rules.

But Yakovlev, a Russian native, abruptly resigned from the United Nations in late June, after a FOX News investigation revealed that he was involved in an apparent conflict of interest with a regular U.N. supplier, IHC Services Inc., which had hired Yakovlev’s son Dmitry between 2000 and 2003, according to Dmitry’s own resume.

The Oil-for-Food program, launched in December 1996 to help ordinary Iraqis cope with U.N. sanctions imposed after Saddam Hussein's 1990 invasion of Kuwait, quickly became a lifeline for 90 percent of the country's population of 26 million.

Under the program, Saddam's regime could sell oil, provided the proceeds went to buy humanitarian goods or pay war reparations. Saddam's government decided on the goods it wanted, who should provide them and who could buy Iraqi oil. But the U.N. Security Council committee overseeing sanctions monitored the contracts.

Saddam allegedly sought to curry favor by giving former government officials, activists, journalists and U.N. officials vouchers for Iraqi oil that could then be resold at a profit.

Congress Wants Answers

U.S. critics, particularly Republicans in the U.S. Senate and House of Representatives, have frequently cited Oil-for-Food as emblematic of perceived U.N. bungling and outright corruption. Some have called for Annan to resign. The program has become the subject of several congressional investigations, as well as probes by a federal grand jury and the Securities and Exchange Commission.

The chairman of one of the committees investigating the program said Monday that "given the unprecedented breadth and complexity of the scandal, it is not surprising that other important issues remain unresolved."

Rep. Henry Hyde, who heads the House International Relations Committee, said questions that still need to be answered and addressed are how Cotecna — the company which Annan's son, Kojo, worked for — obtained a multi-year inspection contract with the U.N.; the role of Boutros-Ghali and his family in the establishment and initial management of the Oil-for-Food program; and the reliability of testimony provided to the commission by Yakovlev, who previously implicated other U.N. officials in alleged corruption.

"I am grateful for the work undertaken by the Volcker committee in exposing corruption," said Hyde, R-Ill. "I look forward to the committee's additional disclosures on the full breadth of U.N. complicity in the corruption of the Oil-for-Food program."

Arizona Rep. Jeff Flake, vice-chairman of the House International Relations Subcommittee on Oversight and Investigations, said that more congressional action is needed in order for the United Nations to regain credibility.

"There's really nothing revealing about this latest report — everybody knows that the Oil-for-Food program was rife with graft and corruption," Flake said. "What's missing is institutional reform on the part of the U.N. to ensure that something like this never happens again."

Flake once again advocated the need to tie U.S. funding to U.N. reform. The House recently passed the UN Reform Act of 2005, which does just that. The Bush administration has already voiced opposition to the measure.

The United Nations has fired one staffer over findings made by Volcker's team. Joseph Stephanides (search) was dismissed over accusations that he wrongly informed British government officials about the the competitive bidding process for a company to inspect humanitarian goods. Stephanides strongly denies the charges and is appealing.

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