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Oil-for-food panel to finger Iraqi bribes to firms

Posted on: Wednesday, 26 October 2005, 23:12 CDT

By Evelyn Leopold

UNITED NATIONS (Reuters) - More than 2,500 companies from at least 60 countries that did business with Iraq in the U.N. oil-for-food program were the target of bribes and kickbacks to Saddam Hussein's government, a report on the program is expected to disclose on Thursday.

It is the final report from a U.N.-established Independent Inquiry Committee, and it aims to put into context the manipulation of the now-defunct program by companies all over the world as well as individuals, groups and governments.

South African Judge Richard Goldstone, one of the three commissioners of the inquiry led by Paul Volcker, a former U.S. Federal Reserve chairman, said earlier that the committee had written to 4,000 companies and asked for explanation of irregularities in the dealings of more than 2,500 of them. But the report is not expected to accuse them all of wrongdoing.

"The manipulation of the program, which led companies, entities and individuals to pay, directly or indirectly, surcharges and kickbacks will be the focus of the report," said Reid Morden, executive director of the committee.

Illegal payments on oil and other goods are estimated at more than $1 billion, sources close to the investigation said. The surcharges on oil were finally stopped in 2001 by the United States and Britain in the Security Council.

Previous reports from the inquiry, which has probed the $64 billion humanitarian program for 19 months, castigated Secretary-General Kofi Annan and other U.N. officials for mismanagement and faulted the 15-member Security Council for turning a blind eye to known oil smuggling outside of the program.

The operation, which began in December 1996 and ended in 2003, was aimed at easing the impact of the U.N. sanctions, imposed in 1990 after Baghdad's troops invaded Kuwait. It achieved considerable success in feeding Iraqis, and allowed Iraq to sell oil in order to pay for food, medicine and other goods.

But illicit oil sale surcharges, kickbacks and smuggling schemes provided Saddam with access to hard currency. Iraq was allowed to write its own contracts and choose the contractors.

BNP IN REPORT

Definitely included in the report, investigators say, will be an analysis of the role of the New York branch of Banque Nationale de Paris, now known as BNP-Paribas, which held the escrow account for Iraq's legal oil sales.

The French bank was selected by then-Secretary-General Boutros Boutros-Ghali in 1996 when the program was set up, against objections from U.N. staff, the panel said earlier.

And in April, a U.S. congressional committee said BNP oversaw at least 400 payments that appear to have violated its contract with the United Nations.

In response, Everett Schenk, chief executive of BNP Paribas North America, said the bank may have made some procedural mistakes but these did not involve corruption.

But members of the House of Representatives subcommittee on oversight and investigations said dozens of payments by BNP were made to third parties for supplies delivered to Iraq.

Any follow-up would be left to countries involved and Volcker was to address U.N. ambassadors on Thursday.

In the United States, federal prosecutors in the Southern District Court of New York have already charged executives of Bayoil, one of the largest traders with Iraq for engaging in "prohibited financial transactions."

Last week the same court charged Texas oil tycoon Oscar Wyatt, the former chairman of Coastal Corp. and two Swiss executives and their companies with paying kickbacks.

The companies included the Cyprus-based oil trading companies Nafta Petroleum Company Ltd. and Mednafta Trading Company Ltd., collectively known as the Wyatt Foreign Companies.

Source: REUTERS

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