U.N. Allegedly Overpaying Iraq Victims

NEW YORK – Independent investigators looking into alleged corruption in the Iraq oil-for-food program (search) said Monday they would check into allegations that victims of Iraq's 1991 invasion of Kuwait are being overcompensated by about $4 billion.

The allegations — a sidelight to the main investigation — came from internal United Nations auditors who maintain the U.N. Compensation Commission (search) used the wrong exchange rates in calculating how much should be paid. The auditors said the commission should have used the rate at the date of payment, rather than the date of loss.

The independent investigators said the internal auditors "raised significant issues about claims processing and claims decisions." U.N. oversight officials said the commission had made "significant overpayments to claimants."

The auditors did not allege corruption by the commission, but said it had relied too much on outside experts to determine the value of losses.

The commission, which consists of the 15 members of the U.N. Security Council, was set up in 1991 to compensate victims of the Iraqi aggression.

It has received claims for $353 billion from individuals, companies and governments, and has approved payments of $51.8 billion. The money comes from Iraqi oil sales, as did the funds for the oil-for-food program.

The independent investigators said the commission disputed the payments were too large, saying this will be "the subject of investigation" by the panel headed by former U.S. Federal Reserve Chairman Paul A. Volcker (search).

The internal auditors criticized the commission's practice of determining the dollar value of claims made in foreign currencies by using exchange rates from the date of loss rather than the date of payment.

The auditors said this has already resulted in an overpayment of $2.2 billion and that a further $1.27 billion would be paid out if the practice isn't changed.

The commission rejected the argument, however, saying its guiding legal principle was "to put the claimant back into the position that it would have been in if the wrongdoer had not committed its unlawful acts."

It said its practice was the same as that used by other commissions dealing with similar cases.