Osamu Honda  /  AP
Secretary-General Kofi Annan, left, shakes hands Wednesday with former U.S. Federal Reserve chairman Paul Volcker, who will chair the investigation into the oil-for-food program.
By U.N. correspondent
NBC News
updated 4/23/2004 2:53:03 PM ET 2004-04-23T18:53:03

The United Nations credibility as an honest broker in world affairs is on the line as a special investigative panel begins to examine allegations of massive corruption related to the U.N. Oil for Food program in Iraq.

The stakes couldn't be higher for the United Nations, as disclosures emerge that high-level U.N. officials may have received kickbacks from Saddam Hussein's regime -- just as the White House is again looking for a greater U.N. involvement in the troubled transition in Iraq.

In response to intense scrutiny, U.N. Secretary-General Kofi Annan and the Security Council  asked Paul Volcker, former head of the U.S. Federal Reserve, to head the three-person panel entrusted with investigating the program. 

“We think he’s a strong choice,” said Richard Grenell, spokesman for the U.S. Mission to the U.N. “The appointment shows the seriousness of the investigation.”

Volcker expects the investigation to be a long-term affair but says that the panel will issue its first report within three months. 

“We will be following the money as well as we can,” Volcker said at a recent news conference. 

Oil for Food program
The Security Council began the Oil for Food program in 1996 as a way of providing humanitarian aid to the Iraqi people whose government was under sweeping U.N. sanctions for failure to comply with 1991 Gulf War cease-fire terms. 

Under the rules for the $67 billion program, the Iraqi government could sell oil as long as the proceeds went to pay for food, medicine, and other humanitarian needs, as well as for reparations to victims of Saddam’s 1990 invasion of Kuwait. 

The monies also helped finance U.N. weapons inspectors' efforts to disarm Iraq of weapons of mass destruction.

Program looked ripe for corruption
Since the Iraqi government had the right to select the companies, agents, and governments who would participate in what was the U.N.’s largest ever humanitarian program, there were plenty of incentives for bribes and kickbacks in the process of negotiating what were often lucrative deals.  

After the fall of Saddam last year, there were growing rumors of documents that gave details of unsavory dealings while the first press report that named names of those who allegedly benefited from abuses of the program appeared in an Iraqi newspaper in January 2004.

In March, the U.S. General Accounting Office issued a report estimating the illegal surcharges and kickbacks to officials in the Saddam regime at some $4.4 billion, out of a total of $67 billion of sales during the program’s duration. Additionally, the report estimated that the Iraqi government got another $5.7 billion by smuggling oil to neighboring countries.  

It is likely that the Volker panel will be investigating private companies, middlemen, and officials from governments involved in deals with the Saddam government.

The Iraqi newspaper that broke the story in January listed some 270 government officials and others, from nearly 50 countries, as having allegedly been part of the scams. 

Implications of U.N. officials involvement
Far more worrying to the United Nations are claims that leading members of the Oil for Food Program illegally accepted oil vouchers from the Iraqi government and cashed them in. These include the committee’s executive director, Benon Sevan, who is alleged to have received more than $3 million in oil vouchers.  

The Secretary-General’s office began its own inquiry in February but abandoned it to make way for an examination with enough independence to ensure its findings will be regarded as impartial and credible. 

The U.N.’s leaders must now wait for the panel’s work to unfold before they know if any of their key staff were guilty of corrupt actions. 

A U.S. State Department official told Congress recently that reports of abuses by U.N. staff are “unsubstantiated allegations without any evidence to support them.” 

This has not mollified critics, including some in Congress, who are skeptical that the United Nations. is capable of identifying and punishing abuses by its own high-level staff.

In fact, Volcker’s panel does not have subpoena power and will need the political will and voluntary cooperation of foreign governments to conduct its work.

The United Nations has promised him that its staff will cooperate fully with the inquiry. Volcker seems comfortable that the panel has enough backing to do its job. 

“A full, fair investigation, as conclusive as we can make it, is in the long-term interest of the U.N. – that’s the only reason I’m here,” he said to reporters when his appointment was announced. 

Volcker’s colleagues on the panel are South African Richard Goldstone, a prosecutor in the Yugoslav war crimes trials, and Mark Pieth, a law professor from Switzerland who specializes in money laundering.

The panel has begun hiring the accountants, lawyers, investigators and others needed in the complicated task of establishing who allegedly paid the kickbacks and who received them.

Credibility hangs in the balance
Much hangs on the panel’s findings. Conclusive evidence that U.N. personnel were involved in the abuses would not only tarnish the world body’s image but give additional ammunition to  critics in the United States, who have long claimed that the U.N. is incompetent and ineffective.

From the U.N.’s perspective, it would be ironic, indeed, if corruption among its ranks should prevent it from playing the larger role in Iraq, and possibly elsewhere, that the Bush administration now seems both willing and eager to give it.

Many are hoping here that the allegations against Sevan will not become the U.N.'s Achilles heel.

Linda Fasulo covers the United Nations for NBC News. She is the author of  “An Insider’s Guide to the UN,” recently published by Yale University Press.

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