U.N. program rife with corruption, study finds

NEW YORK – The United Nations’ oil-for-food program was so badly managed and supervised that more than half of the 4,500 companies doing business with Iraq paid illegal surcharges and kickbacks to Saddam Hussein, an independent investigation into the program will announce today.

The inquiry, led by former U.S. Federal Reserve chairman Paul Volcker, will detail how the United Nations and its member governments failed to stop the former dictator’s exploitation of the $64 billion program, and will expose the participation of prominent international companies, as well as fly-by-night operations, a spokesman for Volcker’s committee said Wednesday.

“There are a few marquee names that everyone will recognize,” Mike Holtzman said. “Some worked with a wink and a nod with their governments. But the corruption was so widespread that literally thousands of companies were caught up in it. To play, you needed to pay.”

The independent panel led by Volcker was established by U.N. Secretary-General Kofi Annan to investigate allegations of corruption and mismanagement in the program, which had been set up to help Iraqis weather international sanctions imposed after Hussein’s 1990 invasion of Kuwait.

Under terms of the program, Iraq could sell oil only through the United Nations, and the proceeds could be used to purchase only humanitarian goods. But in a major loophole, Iraq was allowed to choose its customers.

Russian companies were by far the most heavily implicated, followed by French businesses. U.S. companies made up a very small percentage, the report said, though some did business through intermediaries or foreign branches and may not be listed as U.S. companies.

The report also apparently shows that flamboyant British parliamentarian George Galloway received payoffs, despite his denials before the U.S. Congress this year.

But Holtzman said Volcker’s emphasis would not be on who was involved as much as what the inquiry showed about the failure of the United Nations’ oversight of the massive humanitarian program that ran from 1996 to 2003.

“The moral of the story is that the U.N. was broken, and the program mismanaged to the point where it could be exploited from the outside and the inside. In order to run major humanitarian programs in the future, the U.N. needs to be fixed. Urgently,” he said.

The report is the fifth and final one by the committee, which has spent more than a year and millions of dollars investigating how the oil-for-food program went so wrong, bolstering Hussein’s grip on power when sanctions aimed to weaken him.

Revelations of the program’s failures have also severely undermined the credibility of the United Nations, despite what Volcker describes as the success of the program in feeding Iraqi people under harsh international sanctions.

The last report, issued in September, focused on malfeasance and maladministration by U.N. staffers, including what Volcker deemed as the failure of Secretary-General Kofi Annan to rein in the abuses inside and outside the program.

Today’s report is a “how-to manual” of corruption, said Holtzman. The majority of the companies involved supplied humanitarian goods to Iraq, and the surcharges they paid amounted to about $1.5 billion. Oil companies paid an additional $300 million in kickbacks.

The report will reinforce recommendations made in September, especially that the United Nations needs a chief operations officer to oversee the organization’s sprawling aid programs.