Transcript: Paul Volcker

NEW YORK – PAUL VOLCKER, CHAIRMAN, U.N. INDEPENDENT INQUIRY COMMITTEE, HOLDS PRESS CONFERENCE, MARCH 29, 2005

VOLCKER: Welcome to you, ladies and gentlemen.

We are here again.

(OFF-MIKE) you have also a short press statement which covers the main findings.

Now, let me just make a few comments to sort of provide the setting for those most familiar with this area. I want to emphasize that as with our first interim report, we are dealing with only a limited part of our assigned mandate.

And, specifically, both reports deal mainly with circumstances surrounding the procurement and retention of U.N. contractors involved themselves in the administration of the U.N. oil-for-food program.

While the scope of this second report is limited, it is particularly sensitive because it does deal with matters directly concerning the secretary general, Mr. Kofi Annan, and possible conflicts of interest in the light of the employment of his son, Mr. Kojo Annan, by Cotecna Inspection SA.

It is that company that won the humanitarian goods inspection contract through a bidding process in 1998.

That contract was renewed at six-month intervals right to the end of the oil-for-food program in 2003.

Now, I think it's almost an understatement to say our investigation into the facts and circumstances has been extensive and detailed. It covers complex matters.

And I want to take just a few minutes to clarify as best I can the background and nature of our findings.

First, let me give you some uncontested facts. Cotecna is an established Swiss company engaged in offering inspection services to governments and others. It negotiated with the U.N. and was, in fact, the designated winner of an auction for an inspection contract held in 1992 when an earlier version of the oil-for-food program was under consideration.

Agreement between the Security Council and Iraq on that program was not reached, so the contract was never consummated.

Cotecna did not win a renew bidding process in 1996 when the oil- for-food program was formally agreed.

Later, in 1998, it entered into a further bidding process for the humanitarian goods import contract. And this time it had the low bid and it won.

Kojo Annan was employed first in a junior position by Cotecna in 1996, before his father became secretary general. That employment was known to his father.

Kofi Annan was then U.N. controller, and he had some knowledge of Cotecna's winning, but ultimately frustrated bid in 1992.

As undersecretary general with peacekeeping operations in 1996, Mr. Kofi Annan had no involvement with the 1996 procurement process. He was secretary general during the 1998 procurement process, and knew that Kojo Annan remained with Cotecna, at that time as a consultant.

Now, a key point of issue here is whether the bidding process in 1998 was tainted by the appearance or reality of a conflict of interest because of the relationship of father and son.

A further question is whether, when it became publicly known in January 1999 of the continuing consulting relationship of Cotecna with Kojo Annan during 1998 when the bidding took place, adequate action was taken by the secretary general and the U.N. to investigate the matter thoroughly so that appropriate action could be taken to deal with the appearance of or an actual conflict of interest.

Now, on that first critical point, the committee finding is clear: Diligent and extensive search of written and electronic records and intensive interviews with all of those involved have provided no evidence of any influence by the secretary general on the bidding and selection process for humanitarian goods inspector in 1998.

As I said, Cotecna won that by the fact it was indeed the low bidder by a wide margin.

On the second point, the appearance or reality of a conflict of interest, the secretary general has consistently affirmed that he had no knowledge of the fact that Cotecna participated in the bidding process in 1998. And by normal U.N. practice, the secretary general was removed from the procurement process.

Now, our investigation has disclosed several instances in which he might or could have become aware of Cotecna's (ph) participation in the bidding process. However, there is neither convincing testimony to that effect nor any documentary evidence.

Taking all of this into account, the committee has not found the evidence is reasonably sufficient to show that the secretary general knew that Cotecna had participated in the bidding process in 1998.

The secretary general was clearly alerted to the possibility of a conflict of interest by a newspaper report in January of 1998 that his son was employed by Cotecna and that there were further questions about whether Cotecna was qualified in all respects to enter the bidding process. He prompted inquired of his son, and a Cotecna official and set in motion to his chief of staff an internal U.N. inquiry.

Within a very short time -- and we're talking a matter of a day or two -- responses to those inquiries indicated that Kojo Annan was not involved in the procurement process, that his consulting agreement with Cotecna had ended by December 31st, the day the Cotecna procurement contract was signed, and that Kojo's employment was not known to the procurement decision-makers.

The brief U.N. report also indicated lack of knowledge by U.N. officials of questions related to criminal charges in Switzerland against the Cotecna president.

At that point, the brief U.N. inquiry is dropped. The continuing business and financial relationships between Kojo Annan and Cotecna into 1999 were not discovered.

Those relationships, in fact, continued until 2004. The committee finds that, given the nature and importance of the issues presented, the U.N. inquiry initiated by the secretary general was inadequate.

There was no referral to the U.N. departments bearing the responsibility for thorough and independent investigation of such matters.

Among the consequences of that failure, the 1998 Cotecna contract was not challenged and was subsequently extended through the end of the program.

And finally, while Cotecna has cooperated with the committee on a number of important respects, the committee finds that both Cotecna officials and Kojo Annan acted to disguise their continuing business and financial relationship, misleading the secretary general himself, other U.N. officials and the public in the process.

It is a failure of the U.N. officials to discover and of Cotecna and Kojo Annan to fully disclose these relationships that has contributed so heavily to the questions about the integrity of the U.N. administration and the need for this particular report.

The nature of these continuing financial arrangements, as well as questions about Kojo Annan's further dealings with aspects of the oil- for-food program are detailed in the report that you have and the investigation on these matters is continuing.

There are also some subsidiary findings outlined in the press release and fully described in the report.

For the concluding of this introduction I want to emphasize that the committee is aware of the proposals of broad reform of the U.N. that the secretary general set out last week. They concern matters of both organizational structure and policy.

And I think we all share the hope and conviction that the results of our investigation concentrated on administrative matters 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.

Now, I'm reminded, this is not a new issue. I went back and looked at a report that I co-chaired some 13 years ago on U.N. financing, and I was curious about what we concluded. And I'll just read you one sentence from that report.

"The credibility of the U.N. will depend in large measure on the effectiveness of its management and the quality of its staff and on improvements in its structure and administration."

I think that remains true today. In recognition of that need, our committee aim is to provide a comprehensive report on the entire U.N. administration of the oil-for-food program by mid-summer.

Clearly, we have a great deal of work to do in the months ahead. Further interim reports will made only if investigative progress makes such reports appropriate.

So with that much introduction, your questions?

QUESTION: I wanted to ask you if you have -- is the committee satisfied with the level of cooperation of both Mr. Kofi Annan and his son?

And secondly, in light of your findings, will you say that Kofi Annan is the right man at this point in time to conduct the reform that is needed in the organization?

VOLCKER: On your first question, we have had an interview with Kofi Annan some time ago, but in recent weeks and months, he has refused for the contact. Kofi Annan has always responded to our requests for an interview.

It's not our judgment to comment on your last part of the question. We lay out the facts. Let me say, we've always approached this -- our duty was very clear: to ascertain the facts of this matter -- not just this matter but the whole U.N. administration of the oil-for-food program. We will follow where the facts lead us and make the facts public and that is part of this report.

QUESTION: Mr. Volcker, for seven days now, as leaks of this report have come out and even now with the full report, U.N. officials have said that it clears Kofi Annan, that it exonerates Kofi Annan.

I wonder, first, would you agree with that characterization of it, and secondly, do you think you might have found sufficient evidence of wrongdoing on the part of Mr. Annan, had Iqbal Riza not shredded three years of documents in his office?

VOLCKER: On the first point, I think I will let you characterize the report. We indicated that we feel that there was no evidence of any influence on the bidding process that was central to this.