2,000 companies made illicit payments to Iraq — report

UNITED NATIONS (AP) — More than 2,000 companies paid about $1.8 billion in illicit kickbacks and surcharges to Saddam Hussein’s government through extensive manipulation of the UN oil-for-food programme in Iraq, according to key findings of a UN-backed investigation obtained by the Associated Press.
The report — to be released in full Thursday by the committee probing claims of wrongdoing in the $64 billion programme — indicates that about half the 4,500 companies doing business with Iraq paid illegal surcharges on oil purchases or kickbacks on contracts to supply humanitarian goods.

The investigators reported that companies and individuals from 66 countries paid illegal kickbacks through a variety of devices while those paying illegal oil surcharges came from, or were registered in, 40 countries. The names will be included in Thursday’s report but were not in the key findings obtained Wednesday by the AP.

Thursday’s final report of the investigation led by former US Federal Reserve chairman Paul Volcker strongly criticises the UN Secretariat and Security Council for failing to monitor the programme and allowing the emergence of front companies and international trading concerns prepared to make illegal payments.

According to the findings, the Banque Nationale de Paris S.A., known as BNP, which held the UN oil-for-food escrow account, had a dual role and did not disclose fully to the United Nations the firsthand knowledge it acquired about the financial relationships that fostered the payment of illegal surcharges.

The oil-for-food programme was one of the world’s largest humanitarian aid operations, running from 1996-2003.

Under the programme, Iraq was allowed to sell limited and then unlimited quantities of oil provided most of the money went to buy humanitarian goods. It was launched to help ordinary Iraqis cope with UN sanctions imposed after Saddam’s 1990 invasion of Kuwait and became a lifeline for 90 per cent of the country’s population of 26 million.

But Saddam, who could choose the buyers of Iraqi oil and the sellers of humanitarian goods, corrupted the programme by awarding contracts to — and getting kickbacks from — favoured buyers, mostly parties who supported his regime or opposed the sanctions. He allegedly gave former government officials, journalists and UN officials vouchers for Iraqi oil that could then be resold at a profit.

Tracing the politicisation of oil contracts, the new report said Iraqi leaders in the late 1990s decided to deny American, British and Japanese companies allocations to purchase oil because of their countries’ opposition to lifting sanctions on Iraq. At the same time, it said, Iraq gave preferential treatment to France, Russia and China which were perceived to be more favourable to lifting sanctions and were also permanent members of the Security Council.

Volcker’s previous report, released in September, said lax UN oversight allowed Saddam’s regime to pocket $1.8 billion in kickbacks and surcharges in the awarding of contracts during the programme’s six-year operation.

According to the new findings, Iraq’s largest source of illicit income from the oil-for-food programme was the more than $1.5 billion from kickbacks on humanitarian contracts.

The smuggling of Iraqi oil outside the programme in violation of UN sanctions poured much more money — $11 billion — into Saddam’s coffers during the same period, according to a finding in the new report.

Volcker’s Independent Inquiry Committee calculated that more than 2,200 companies worldwide paid kickbacks to Iraq in the form of “fees” for transporting goods to the interior of the country or “after-sales-service” fees, or both.

The report to be released Thursday chronicles Saddam’s manipulation of the programme and examines in detail 23 companies that paid kickbacks on humanitarian contracts, including Iraqi front companies, major food providers, major trading companies, and major industrial and manufacturing companies.

According to the findings, the programme was just under three years old when the Iraqi regime began openly demanding illicit payments from its customers. The report said that while UN officials and the Security Council were informed, little action was taken.

The report is the fifth by Volcker and wraps up a year-long, $34 million investigation that has faulted Secretary General Kofi Annan, his deputy, Canada’s Louise Frechette, and the Security Council for tolerating corruption and doing little to stop Saddam’s manipulations.

The investigation also accused Benon Sevan, the former head of the UN oil-for-food programme, of taking $147,000 in illegal kickbacks.