updated 2/7/2005 3:31:46 PM ET 2005-02-07T20:31:46

Secretary-General Kofi Annan suspended the head of the U.N. oil-for-food program in Iraq and a senior official who dealt with contracts after an independent inquiry accused them of misconduct, a U.N. spokesman said Monday.

Benon Sevan, who was in charge of the $64 billion humanitarian program, and Joseph Stephanides, head of the U.N. Security Council Affairs Division, were informed Friday that they had been suspended with pay, spokesman Fred Eckhard said.

Sevan and Stephanides were told they would receive a letter “laying out the charges against them,” which will allow them to defend themselves before U.N. disciplinary bodies, he said.

“Suspension is the beginning of a disciplinary process,” Eckhard said.

“It means that they should not come onto the premises here unless it’s in connection with summoning their defense, which they have 14 days to present in writing,” he said.

After Sevan and Stephanides respond to the charges, the U.N. Secretariat headed by Annan will make a final decision on sanctions.

Examining the options
Eckhard said there are three options: the cases could be closed, Annan could decide to dismiss them, or the matter could be referred to the Joint Disciplinary Committee which would then make a recommendation to Annan.

Sevan and Stephanides are entitled to two appeals; the process can take months.

Annan said he was shocked by the findings of an investigation led by former U.S. Federal Reserve Chairman Paul Volcker regarding Sevan. The secretary-general has said that if any of Volcker’s findings lead to criminal charges, he would lift diplomatic immunity.

Eckhard noted Monday that Volcker is still investigating Sevan but has not alleged any criminal wrongdoing.

Sevan ran the oil-for-food program from 1996 until it ended in November 2003. He retired from the United Nations last year but remains on the payroll for $1 a year to help with the investigation. Stephanides is scheduled to retire in about five months.

Eckhard said their U.N. pensions cannot be touched.

The investigation led by Volcker accused Sevan in an interim report released Thursday of a “grave conflict of interest,” saying his conduct in soliciting oil deals from Iraq was “ethically improper and seriously undermined the integrity of the United Nations.”

'Unexplained wealth'
Volcker did not say that Sevan received kickbacks, but expressed concern at $160,000 in cash which Sevan said he received from his aunt in his native Cyprus from 1999-2003. The report questioned this “unexplained wealth,” noting that the aunt, who recently died, was a retired government photographer living on a modest pension.

Volcker said he is still investigating “the scope and extent of benefits” that Sevan received from his request that a small Swiss-based oil company, African Middle East Petroleum Co. Ltd. Inc., be given a chance to buy Iraqi oil.

Sevan’s lawyer, Eric Lewis, accused Volcker’s Independent Investigative Committee of trying to make his client a “scapegoat” and said “Mr. Sevan never took a penny.” He said Sevan was proud of his 40-year U.N. career and of the oil-for-food program, which saved tens of thousands of Iraqis “from death by disease and starvation.”

Under the program, Saddam Hussein’s regime could sell oil, provided the proceeds went primarily to buy humanitarian goods and pay reparations to victims of the 1991 Gulf War. Saddam’s government decided on the goods it wanted, who should provide them, and who could buy Iraqi oil. The U.N. Security Council committee overseeing sanctions monitored the contracts.

In a bid to curry favor and end sanctions, Saddam allegedly gave former government officials, activists, journalists and U.N. officials vouchers for Iraqi oil that could be resold at a profit.

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