Oil-for-food probe implicates 2,000 firms

By Evelyn Leopold and Irwin Arieff

UNITED NATIONS (Reuters) – More than 2,000 of the foreign
companies that did business with Iraq in the U.N. oil-for-food
program made illicit payments to Saddam Hussein’s government, a
report on the program said on Thursday.

The U.N.-established Independent Inquiry Committee led by
former U.S. Federal Reserve Chairman Paul Volcker reported that
Saddam diverted some $1.8 billion in kickbacks and surcharges.

The 500-page report is the final one from the panel, which
has investigated the now-defunct program for 19 months.

It detailed the manipulation of the program by companies
around the world as well as individuals, groups and governments
and made clear that nearly half of all the companies that took
part in the program made illegal payments.

“By the year 2000 the imposition of kickbacks and
surcharges by the Iraqi regime of Saddam Hussein brought about
the emergence of illicit payments,” the report said. “This
irrevocably changed the nature of the program.”

The program, which began in December 1996 and ended in
2003, was aimed at easing the impact of 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.

The report said companies in 66 countries paid kickbacks on
selling Iraq humanitarian goods and companies from 40 countries
paid surcharges on oil contracts but the U.N. Security Council
took little action, the report said.

Preferential treatment was given to companies from France,
Russia and China, all permanent members of the Security
Council, who were more favorable to lifting the 1990 sanctions
compared to the United States and Britain.

The 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.

The largest single kickback came from the Malaysian firm
Mastek, the report said.

Iraq’s oil marketing company, SOMO, took more than $10
million in illegal surcharges from Mastek in 2001-2002. The
report said that the Swiss trading firm Vitol financed 33
million barrels of crude through Mastek during that period.

Analyzed in the report were the activities of France’s
BNP-Paribas, which held the escrow account for the $64 billion
program. The panel said BNP failed to act against corruption
and did not disclose “fully the first hand knowledge it
acquired of the true nature of financial relationships that
fostered the payment of illicit surcharges.”

(Deepa Babington, Tim Gardner and Daniel Trotta contributed
to this report)