FSO Editorials: "The Int'l Enron: U.N.'s Food for Oil Program" by Dr. Joe Duarte 09/20/2004

The International Enron:
The U.N.'s Food for Oil Program
by Joe Duarte, MD
September 20, 2004

Editor’s note:

In mid September, U.N. Secretary General Kofi Annan called the war in Iraq “illegal” during a BBC interview, and caused a significant stir in the international diplomatic community.

On September 19, 2004, the Fox News Channel’s "Breaking Point," news magazine did a story titled “Oil For Food: Blood Money.”

In the story, the Fox news team recounted a large body of evidence that exposes the Food For Oil program at the U.N. as a fraudulent mechanism for putting money in the pockets of Saddam Hussein and an international cast of players.

The fact that Fox did the story, suggests that indeed, there may be some developments coming in the future, as there are several Congressional investigations and an internal U.N. investigation ongoing into the matter.

Indeed, the fact that Kofi Annan lost his cool, might have been a sign that the U.N. was preemptively trying to do damage control based on the knowledge that Fox was about to take the story to the mainstream. According to Fox, Kofi Annan declined to be interviewed for the show. No currently active members of the U.N. agreed to be interviewed for the segment.

This retrospective, based on a compendium of prior columns by Dr. Joe Duarte, recounts how the story evolved, and how www.joe-duarte.com, and Financial Sense.com readers were aware of the situation months in advance of the mainstream media

The story took shape over the several years in which the program operated. But the media scrutiny began in January 2003. We begin by highlighting the Kofi Annan episode and working our way from the beginning to the most recent developments.

U.N. Secretary General Kofi Annan told the BBC that the war in Iraq was illegal. According to the Washington Times, the remarks were “made in an interview with the British Broadcasting Corp. over the weekend,” and the comments “startled and angered governments in the U.S.-led coalition that toppled Iraqi dictator Saddam Hussein last year.” In fact Annan’s comments were negatively received by several governments, including Iraq’s.

To be fair, according to the L.A. Times, Annan was repeatedly pressed by the BBC interviewer: “Pressed repeatedly in a Wednesday interview with the BBC on whether the U.S.-led invasion of Iraq was illegal, Annan finally said, ["Yes, if you wish."] He added, ["I have indicated it is not in conformity with the U.N. Charter. From our point of view and from the charter point of view it was illegal."]

The Times also described the ambivalent position of the U.N. with regards to Iraq: “The wrangle over how to deal with Iraq's failure to catalog its weapons programs was, for Annan, one of the most difficult chapters of his tenure at the United Nations. Despite the Security Council's division over whether to invade Iraq, it unanimously endorsed the U.S.-led occupation of Iraq after the war, and called for a ["leading role"] for the U.N. in the country's reconstruction. The U.N. has since helped create an interim government there and is now involved in preparing elections and a constitution.”

Frankly, Annan’s comments are bizarre, considering the fact that under his watch, the U.N. Food for Oil program, enriched Saddam Hussein and his cronies to the tunes of billions of dollars, while the Iraqi public suffered under austere rations. Furthermore, there have been several reports in the press over the last few months, that one of the companies administering the Food for Oil program, was the employer of Kofi Annan’s son. Although the company has denied the charges that Annan’s son had anything to do with the program, some would argue that there was favoritism displayed in the choice of the company due to the presence of Kojo Annan on its employee roster.

Annan’s remarks may be a way to deflect attention from the investigation into the Food for Oil Program by former Fed Chairman Paul Volcker, who has moved extremely slowly in his endeavor due to stonewalling inside the U.N.

As we reported on August 13, U.N. insiders have come public about the fraud involved in the program, under Annan’s watch. Here is an excerpt from our report, which can be fully accessed under our archive link on the left navigation bar.

“ … On 8-12, New York Times, investigative reporters Susan Sachs and Judith Miller, penned what could be the first in a series of scathing articles on the U.N.’s involvement and at least indirect encouragement of one of the largest international frauds in history.

According to the Times [“toward the end of 2000, when Saddam Hussein's skimming from the oil-for-food program for Iraq kicked into high gear, reports spread quickly to the program's supervisors at the United Nations.”] According to the account [“Oil industry experts told Security Council members and Secretary General Kofi Annan's staff that Iraq was demanding under-the-table payoffs from its oil buyers. The British mission distributed a background paper to Council members outlining what it called ["the systematic abuse of the program"] and described how Iraq was shaking down its oil customers and suppliers of goods for kickbacks.”

Making the situation more damning for the U.N., if indeed the allegations are proven is the fact that according to the Times, [“When the report landed in the United Nations' Iraq sanctions committee, the clearinghouse for all contracts with Iraq, it caused only a few ripples of consternation. There was no action, diplomats said, not even a formal meeting on the allegations.”]

According to the Times: “As recently as February, the official position of the United Nations office that ran the program was that it learned of the endemic fraud only after it ended. But former officials and diplomats who dealt directly with the program now say the bribery and kickback racket was an open secret for years.”

The scathing report, sure to cause major problems for the U.N. and its Secretary General Kofi Annan continued with more damaging information: ‘["Everybody said it was a terrible shame and against international law, but there was really no enthusiasm to tackle it,"] said Peter van Walsum, a Dutch diplomat who headed the Iraq sanctions committee in 1999 and 2000, recalling the discussions of illegal oil surcharges. ["We never had clear decisions on anything. So we just in effect condoned things." ]”

In our opinion, Annan, whose U.N. ran away from Iraq when the going got tough, and whose own house may crumble, if and when Volcker gets some cooperation, should be concentrating on his own troubles and seeing how some of those billions that were skimmed under his watch, as he looked the other way, might be returned to the people of Iraq.

To be sure, the war in Iraq is a mess. There were clear misjudgments in the strategy, and there have been multiple mistakes in the way it has been carried out. And the outcome, is still not totally clear.

And yes, the U.N. did organize the transfer of power to the interim Iraqi government.

The issue here though, is not whether the war is right or wrong, or whether individuals agree with its premise, its prosecution, or its consequences. For us, it is clearly a matter of a diplomat whose record on the issue of Iraq, is one of total ineffectiveness, and full of potential legal problems, taking a clear and open jab at the United States in a presidential year.

In our opinion, cronyism, if it applies to Kofi Annan and his son, which has not been proven, and may not be applicable, is illegal. In our opinion the U.N. looking the other way as Saddam made billions by cheating his people is illegal. But, we don’t see the BBC asking Annan questions about those issues. And we don’t see Annan making any statements about those issues either.

Those who live inside glass houses are often the ones whose windows are stoned. Kofi Annan, an experienced hand, should know better than to give in to the BBC’s badgering, knowing full well that his remarks could and would have significant repercussions during a time of elections.

An Iraqi newspaper reported in late January that ["millions of barrels of (Iraqi) oil were offered to individuals who had nothing to do with the oil business"] in what it called the former regime's ["largest corruption operation".]

Saddam Hussein was an international bribe artist, according to the Al-Mada newspaper, a Baghdad newspaper that emerged after the fall of the dictator. According to the U.K.’s Telegraph, the paper published a list of 270 individuals and institutions on Saddam’s payroll. The Telegraph article was based documents obtained by Al-Mada, who in turn, based its list on “documents allegedly obtained from the former State Oil Marketing Organisation, or Somo, the commercial arm of Saddam's oil ministry.” According to the Telegraph, quoting the editor of al-Mada, Fahkri Karim, there are rooms full of documents such as the ones used to construct the list used in the article.

The Telegraph reported that Saddam “bribed his way around the world, buying the support of presidents, ministers, legislators, political parties and even Christian churches,” noting that “the list of those who allegedly benefited from Saddam's largesse spans 46 countries.”

The paper reported that the list included: “the sons of a serving Arab president, Arab ministers, a prominent Indonesian leader, the Palestinian Liberation Organisation, the party led by the Russian nationalist Vladimir Zhirinovsky and even the Russian Orthodox Church.”

The article has the look and feel of a well placed White House leak as the Bush administration looks for ways to build a case for the war despite the lack of WMD findings, something that should come as no surprise to our readers since we were among the first services, on 1-26 to piece together the emerging story of the weapons that can‘t or won‘t be found.

A perfect example, of the possible White House touch is the quote of an Iraqi oil minister who said the documents ["reveal how Saddam jeopardized the oil wealth of Iraq on personalities who had supported him and turned a blind eye on the mass graves and injustice he inflicted on the sons of the Iraqi people".] The Telegraph continued with: “He said the ministry was building up a legal case and might seek the help of Interpol to recover the money. Interpol refused to comment. Another senior official at the oil ministry said last night: ["This is oil money that should be used for reconstructing Iraq. We will use all means to get it back."]

The Telegraph wrote that “The newspaper showed two sets of photocopied documents to The Daily Telegraph. One was a set of contracts signed by Sadam Zibn, director of Somo, and Ali Rajeb Hassan, his deputy in the late 1990s. The other was a list of recipients of oil contracts, arranged by nationality. Their awards of oil were given in a spreadsheet over a three-year period.”

Several things can be gleaned from this article, which may have significant repercussions, and that by default serve the White House’s current line that although WMD have not been found, going after Saddam was still justified. First, the article was published by an Iraqi newspaper. The message here is clear. This is now a country with a free press, where with Saddam, there was no such thing.

Second, the fact that the bribes were conducted under the food for oil program immediately implicates the U.N., the Russians, and the French as potential co-conspirators, at a time when these three bodies may be thinking of re-igniting a negative anti-war campaign against the U.S.

On 1-28, we reported that an Iraqi newspaper, al-Mada, had publicized a list of 270 individuals and institutions that had been allegedly bribed by Saddam Hussein with oil in exchange for their support.

The Washington Post, a conservative newspaper often rumored to be a favorite place for White House leaks under Republican administrations, brought the al-Mada report to the U.S. On 1-28, the paper ran the provocative headline: “Iraqi govt. papers: Saddam bribed Chirac.”

The article does not name Mr. Chirac by name anywhere else, but does note that if there was some kind of proof making the link: “Such evidence would undermine the French position before the war when President Jacques Chirac sought to couch his opposition to the invasion on a moral high ground.“ The article added that “a senior Bush administration official said Washington was aware of the reports but refused further comment.”

Interestingly, the Dallas Morning News, on 1-9-04 reported that a French judge is investigating a possible bribery scandal in Nigeria in the early 1990s, and whether Vice President Dick Cheney, who was the CEO of Halliburton at the time might have been involved. The paper reported that “Judge Renaud Van Ruymbeke suspects that the payments (totalling some $180 million) by TSKJ, ( a joint venture ) whose members include Halliburton unit Kellogg Brown & Root, may have been bribes to Nigerian officials or kickbacks to unknown people, the conservative Paris newspaper Le Figaro has reported, but a venture partner has denied any secret payments. The government of Nigeria was headed at the time by Gen. Sani Abacha.

The Dallas Morning News also reported that “A Cheney spokesman declined to comment , citing a need to analyze the issue. Halliburton spokeswoman Wendy Hall referred questions about TSKJ to Technip, a French oil and gas company that is one of the venture's partners.”

According to the Morning News: “A French government official who spoke on condition of anonymity confirmed ["a criminal investigation is under way by the judge regarding Nigeria,"] but that no decisions on indictments have been reached. The U.S. government has not been asked to assist in the investigation, the official said, adding that ["there have been many inaccuracies about this matter in the French press."]

The Washington Times added that “French diplomats have dismissed any suggestion their foreign policy was influenced by payments from Saddam, but some European diplomats have long suspected France's steadfast opposition to the war was less moral than monetary. ["Oil runs thicker than blood,"] is how one former ambassador put his suspicions about the French motives for opposing action against Saddam.”

The timing of these two reports suggest that the hostilities between France and the U.S. about the war in Iraq have a long way to go before they calm down.

ABC News has obtained a copy of the list which contains the names and details of Saddam Hussein’s “slush fund,” used to bribe international dignitaries, political parties, businessmen, and religious figures. Many of these individuals and entities were instrumental in leading the opposition to the U.S. attack on Iraq.

On April 14, 2003, we penned the first installment of a series called “The Secret War – And How It Will Change The World.” In the first installment we described a communiqué’ that we received from a well placed, reliable source. The note described a long term “secret war” that had been waged by U.S. intelligence agents in Iraq for an extended period of time, and predicted that the cache of information that was captured by the U.S. when it invaded Baghdad would lead to significant developments.

In the article we wrote: “The source thinks that once the U.S. intelligence agencies comb through the bonanza of information that they have found, they will have access to deep dark secrets of all the major Arab rulers. The information that is available thus far, although impressive, is a mere [“trickle”] compared to what the source as the upcoming [“flood stage.“] It is quite plausible that major and highly sensitive information such as personal habits, perversions, and other sensitive information will become property of the U.S. Intelligence agencies. Sensitive photographs in compromising positions, records of secret deals that have been cut, and even access to significant health and personal data, which could be put to use as leverage by the United States.

Regular readers will recall that on 1-28-04, we reported on a story that originated in the U.K.’s Telegraph: which “reported that Saddam [“bribed his way around the world, buying the support of presidents, ministers, legislators, political parties and even Christian churches,” noting that “the list of those who allegedly benefited from Saddam's largesse spans 46 countries.”]

Two days later, the cat is out of the bag. According to ABC News.com: “Among those named (in the list were) : Indonesia President Megawati Sukarnoputri, an outspoken opponent of U.S.-Iraq policy, who received a contract for 10 million barrels of oil — about a $5 million profit. The son of the Syrian defense minister received 6 million barrels, according to the document, worth about $3 million. George Galloway, a British member of Parliament, was also on the list to receive 19 million barrels of oil, a $90.5 million profit. A vocal critic of the Iraq war, Galloway denied any involvement to ABCNEWS earlier this year. ["I've never seen a bottle of oil, owned one or bought one," Galloway said in a previous interview with ABCNEWS.]

ABC continued by noting that “France was the second-largest beneficiary, with tens of millions of barrels awarded to Patrick Maugein, a close political associate and financial backer of French President Jacques Chirac.” Readers will recall that in early 2003, we were among the first services to widely disseminate the story of Chirac’s 30 year friendship with Saddam.

According to ABC: “Maugein, individually and through companies connected to him, received contracts for some 36 million barrels. Chirac's office said it was unaware of Maugein's deals, which Maugein told ABCNEWS are perfectly legal.

Another interesting note was that “The single biggest set of contracts were given to the Russian government and Russian political figures, more than 1.3 billion barrels in all — including 92 million barrels to individual officials in the office of President Vladimir Putin. Another 1 million barrels were contracted to the Russian ambassador to Baghdad, 137 million barrels of oil were given to the Russian Communist Party, and 5 million barrels were contracted to the Russian Orthodox Church. It should also be noted that recently, several stories have appeared connecting Cuban President Fidel Castro with Saddam Hussein. According to several sources, Saddam was sending oil to Cuba. Just recently, the leader of the Russian Orthodox Church made a trip to Cuba, reportedly to bless a Cathedral in Havana. Castro participated in the ceremony, even though he is an excommunicated Catholic, and a professed atheist.

But the Orthodox Church did not monopolize Saddam’s largesse. “Also on the list are the names of prominent journalists, two Iraqi-Americans, and a French priest who organized a meeting between the pope and Tariq Aziz, Saddam's deputy prime minister.

International reaction to the Bush administration and U.K. government’s nearly simultaneous calls for investigations into alleged intelligence failures with regards to Iraq’s weapons of mass destruction has been muted.

VOA News.com, quoting Russian news services reported that: “Russian news agencies quote Deputy Foreign Minister Fedotov as saying, neither the U.S.-led Iraq Survey Group, nor the U.N. inspectors found any weapons of mass destruction in Iraq. But in what appears to be a change in Russia's position, Mr. Fedotov was quoted as saying that, rather than insisting on the return of U.N. inspectors to Iraq, Moscow would accept the U.S.-led coalition findings.”

But, French President Jacques Chirac has been very quiet about the Bush administration’s backpedaling on Iraq’s WMD. Conventional wisdom would suggest that Chirac, who was the most visible opponent of the war, would be leading a chorus of “I told you so’s,” as Bush and Company may be starting to roast some crow.

A closer look at France suggests that President Chirac has a few things to worry about on his plate, such as the possibility that his close political ally, Former Prime Minister Alain Juppe, and now the mayor of Bordeaux, is in some judicial hot water. More precisely, Juppe, according to AP was “handed an 18-month suspended prison sentence and barred him from holding office for 10 years.”

AP noted that “Chirac offered public support Monday for Juppe, saying ["France needs men of his quality."] The two men also dined together Monday night at the presidential Elysee Palace.” Juppe agreed to postpone his retirement and will appeal the case. But his change of heart did not come without significant influence from Chirac and other party notables.

The reason that Chirac is being so supportive is that Juppe “was convicted for his role in an illegal party funding scheme while he served as finance director at Paris City Hall during Chirac's 18-year tenure as mayor of the French capital, from 1977-1995.”

According to the AP article: “ The verdict was an embarrassment to Chirac, whom investigating judges have tried unsuccessfully to question in the scandal. He is protected by presidential immunity - which he will lose if not re-elected in the next presidential race in 2007.”

But, aside from Chirac’s own potential legal problems as a result of the sentence, barring it being overturned on appeal, Reuters noted that when “Alain Juppe announced Tuesday he would remain in politics and fight a conviction for political corruption,“ the event, “salvaged President Jacques Chirac's hopes that his close ally could eventually succeed him as president and heads off a potentially divisive power struggle in their center-right UMP party.”

Of interest to Chirac watchers, and observers of this situation is this from Stratfor.com. In a February 2, 2003 article, titled “The Chirac Hussein Connection,” the intelligence site described an “unsubstantiated rumor that still can be heard in places like Beirut was that Hussein helped to finance Chirac's run for mayor of Paris in 1977, after he lost the French premiership. Another, equally unsubstantiated rumor was that Hussein had skimmed funds from the huge amounts of money that were being moved around, ( from deals between France and Iraq, brokered by Chirac) and that he did so with Chirac's full knowledge.”

In all fairness to Chirac, Stratfor noted in the article that these were “endless rumors, all unproven and perhaps all scurrilous, about the relationship.”

Nevertheless, it is interesting to note that Chirac is quiet about the WMD question, at a time when it is possible that in the Juppe investigation, and appeal, all kinds of interesting things about his relationship with Saddam Hussein, and where some of his campaign resources for his mayoral run at Paris came from.

The investigation into allegations of fraud in the U.N. Food for Oil Program with Iraq is moving slowly. The Volcker Commission and the U.S. Congress are feuding over jurisdiction and authority, and time is passing, with little appearing in the way of useful information.

The story is not dead. But it’s difficult to assume anything other that some people are uncomfortable with the potential discoveries that someone is going to make along the way.

But while all is outwardly quiet, an interesting story that appeared a few days ago caught our eye.

According to Reuters, quoting a government source in a July 22 story “Engineering company Weir Group (a maker of pumps for moving minerals, sewage, oil and seawater) has found evidence of 4.2 million pounds of irregular payments it made while working with the U.N. oil-for-food program in Iraq, says the firm,” and “the UK government is investigating the matter.“ What makes the story interesting is that “the firm, which previously denied the payments, said its Wesco Dubai business paid the extra money to an agent in the field, on top of normal commissions, and it was possible this money had returned to Iraq.”

The story quotes Weir as saying that: "In the course of 2000, trading terms were amended at the request of certain Iraqi customers, resulting in the prices payable on subsequent oil-for-food programme contracts being uplifted by an aggregate of 4.2 million pounds. Weir said an internal review uncovered 15 out of 37 contracts where payments in addition to commission were made to an agent. These discoveries prompted Weir to assign international law firm Herbert Smith to the case.”

This is yet another example of the “controversy that has engulfed the defunct oil-for-food program, set up by the United Nations to shelter ordinary Iraqis from the worst hardships of sanctions by providing food, medicines and other goods paid for by oil sales.”

Originally, as readers of this space are familiar with, the situation involved allegations and suggestions of irregularities that involved French, Russian, and likely Middle Eastern companies, and institutions. But now, “several investigations are now looking into whether money was skimmed off the billions of dollars of goods that flowed through the program.”

Reuters noted that “Weir's statement follows newspaper reports that it had paid kickbacks to the government of deposed Iraqi leader Saddam Hussein under the programme, which ran from 1996 to 2003,” and quotes the company as saying, in a statement: "The group regrets that the denials provided to the media earlier this year have now proved to be incorrect."

The story is not new, and neither is the neglect of the U.S. media, even though Congress is investigating the program as well. According Reuters, “The Guardian newspaper reported in May that Weir was one of hundreds of firms alleged to have agreed to have made illicit payments, according to an internal Pentagon report. The U.S. General Accounting Office has said Saddam and his circle raised $4.4 billion by imposing oil surcharges and commissions on suppliers of goods to Iraq under the scheme. “

A perfect example of the tangled web is the conflict between the U.N. and the U.S. Congress, both of which are involved in a turf war over the program. “In New York, a U.N. official said Weir's disclosure was the kind of issue under investigation in an independent inquiry led by former U.S. Federal Reserve chairman Paul Volcker, opened at the request of U.N. Secretary-General Kofi Annan. Volcker said this month he hopes to issue a full report on his findings by the end of February 2005.”

The U.N. is treading softly, given the speculation by some in the intelligence community that the amount of fraud involved could involve high ranking officials in the U.N. as well as several world governments and major industrial entities. The U.N. official told Reuters that "If this company violated any British laws, it would be up to the British government to investigate. A UK government source said that Weir was under investigation.

The net is being cast widely: “The U.S. Congress and the Iraqi government are also looking into allegations of corruption in the program. Since Saddam Hussein's fall, documents have trickled out indicating bribes and kickbacks were paid to individuals, and millions were skimmed off the $67 billion program. The two largest U.S. oil firms, Exxon Mobil Corp. and Chevron Texaco, said in June they received subpoenas from a federal prosecutor over the Iraqi program. “

The U.S. media is spending a great deal of time on the election, which is understandable. But this is a major story, as the potential for the discovering and unraveling of a major crime ring that extends beyond borders and involves multiple layers of governments and industries could conceivably top Enron.

There is little movement in the Volcker investigation, and there is a developing turf war between Congress and the Volcker commission, which suggests that there is a great deal that is being guarded.

The original threads were implicating major French and Russian involvement with French bank Paribas having administered the program for the U.N. Russian oil companies were also involved.

But the Weir statement and the Exxon and Chevron subpoenas suggest that the net is being cast widely. And that is going to make life interesting.

Any semblance of civility has now been lost. And the big losers are the voters, and any of us who will have to bear witness to what could be the dirtiest campaign in many decades.

While the U.N. fought over Iraq policy, Saddam Hussein made away with billions. According to the Congressional Budget Office, Saddam may have amassed as much as $5.7 billion through the fraudulent conduct of the program.

The New York Times asked and answered a multi billion dollar question: “How did Mr. Hussein amass so much money while under international sanctions? An examination of the program, the largest in the United Nations' history, suggests an equally straightforward answer: The United Nations let him do it.” In fact, quoting former U.N. officials, the Times describes the program “as a drifting ship - poorly designed, leaking money and controlled by a Security Council that was paralyzed by its own disputes over Iraq policy.”

The U.N. turned the other way while Saddam Hussein pilfered a program meant to trade oil for food to feed the people of Iraq. Iraq’s Food For Oil Program and the U.N.’s dubious role in its perpetration may have been cracked wide open.

On August 5, we wrote with regards to the U.N. Food For Oil Program for Iraq, that although the situation was moving slowly, the story was not dead. In fact, we noted that it was “difficult to assume anything other that some people are uncomfortable with the potential discoveries that someone is going to make along the way.”

Indeed, on 8-12, New York Times, investigative reporters Susan Sachs and Judith Miller, penned what could be the first in a series of scathing articles on the U.N.’s involvement and at least indirect encouragement of one of the largest international frauds in history.

According to the Times “toward the end of 2000, when Saddam Hussein's skimming from the oil-for-food program for Iraq kicked into high gear, reports spread quickly to the program's supervisors at the United Nations.” According to the account “Oil industry experts told Security Council members and Secretary General Kofi Annan's staff that Iraq was demanding under-the-table payoffs from its oil buyers. The British mission distributed a background paper to Council members outlining what it called ["the systematic abuse of the program"] and described how Iraq was shaking down its oil customers and suppliers of goods for kickbacks.”

Making the situation more damning for the U.N., if indeed the allegations are proven is the fact that according to the Times, “When the report landed in the United Nations' Iraq sanctions committee, the clearinghouse for all contracts with Iraq, it caused only a few ripples of consternation. There was no action, diplomats said, not even a formal meeting on the allegations.”

The scathing report, sure to cause major problems for the U.N. and its Secretary General Kofi Annan continued with more damaging information: ‘["Everybody said it was a terrible shame and against international law, but there was really no enthusiasm to tackle it,"] said Peter van Walsum, a Dutch diplomat who headed the Iraq sanctions committee in 1999 and 2000, recalling the discussions of illegal oil surcharges. "We never had clear decisions on anything. So we just in effect condoned things."

What’s worse is the allegation that “As the flow of money (in the program) ballooned, the United Nations, with an annual budget of just $1.5 billion, was responsible for collecting and disbursing as much as $10 billion a year in Iraqi oil revenues. Even as the fraud engineered by Mr. Hussein's government became widely understood, the officials said, neither the Security Council nor United Nations administrators tried to recover the diverted money or investigate aggressively.”

There was plenty of blame to go around. According to the story: “Despite an elaborate system in the United Nations for overseeing oil-for-food contracts, corruption never seemed to be the chief concern of anyone involved. The United States and Britain were focused on keeping material related to illicit weapons out of Iraq. Other nations that had greater financial stakes in Iraq, including France and Russia, favored lifting the sanctions. And for the United Nations bureaucracy, diplomats said, the priority was keeping goods flowing to the Iraqi people.”

The Times report summarized the program as one in which the Security Council, charged with overseeing the program was paralyzed by inertia, while being split and influenced by the focus of each of the member countries. In essence, the Food For Oil Program “became a battleground for the competing commercial interests and political agendas of the 15 individual nations that made up the Security Council.”

And while member countries endlessly debated allegations and reports of major problems with the program, but did nothing to correct the situation “ money and contracts continued to flow through the Office of the Iraq Program.”

The man in charge of the program for the U.N. Benon V. Sevan, “has denied that he received any kickbacks and would only say in a statement that his office was not responsible for ferreting out corruption.”

But in fact, there were plenty of kickbacks to go around. According to the Times: “The Hussein government demanded kickbacks on almost every contract it negotiated, beginning in 2000, according to documents from Iraqi ministries obtained by The New York Times this year. Senior Iraqi leaders ordered ministries to notify companies that they had to pay an amount equal to 10 percent of the contract value into secret foreign bank accounts, a violation of the United Nations sanctions. To do so, Iraqi officials said, suppliers would deliberately inflate the prices of their goods.”

Indeed, the fraud was ignored. ‘["When the 10 percent came in, companies came and asked us what to do,"] said Jacques Sarnelli, who was the commercial counselor of the French Embassy in Baghdad at the time. ["We said it's illegal, you do it at your own risk, we don't want to know about it, and we are against it."] From his vantage point, he said, pinpointing evidence of a kickback would have been difficult. ["It was a shadow part of the business,"] he said.’

According to the Times: “Evidence of fraud passed from office to office in a round robin ending nowhere. A former State Department official who was part of an interagency committee that reviewed trade contracts with Iraq said the group detected ["abnormalities in pricing that suggested fees and kickbacks."] The former officials said the committee ["asked why Iraq needed to import gilded tiles for palaces, or liposuction equipment."] Peter Burleigh, who was the deputy American representative to the United Nations in the late 1990's, said those concerns had been relayed to Mr. Sevan's office. Mr. Sevan's office said it had passed information regarding suspicious contracts to the sanctions committee, on which the United States held a permanent seat.”

The three monkey theorem was apparently in full force at the U.N., where no evil was seen, heard, or even feared. According to Michel Tellings, one of the three oil overseers who monitored Iraq's oil sales for the United Nations: ‘["Benon saw that he had a divided Security Council in front of him and was more concerned about getting the food in and the oil out,. So he took a middle way and didn't investigate problems. He'd say, ['If you've got clear evidence, I've got to go to the Security Council. If it's a rumor, don't bother.'] In fact, the Times reports that “The lack of coordination in the program was evident in the fact that while United Nations auditors produced 55 reports on the program over the years, several diplomats on the sanctions committee said in interviews that they never even saw them.]

Readers of this column are familiar with allegations of French and Russian companies having been involved in the scam. But the Times story brings the disclosure of those involved to a much higher and clearer level. “Under Security Council resolutions and the oil-for-food program, all of Iraq's oil revenues were to be paid into a United Nations bank account to be used for relief goods. But Iraq's booming trade in illicit oil continued under the eyes of the Council. Iraq's suppliers included Russian factories, Arab trade brokers, European manufacturers and state-owned companies from China and the Middle East. In one instance, American officials in Iraq found, Syria had been prepared to kick back nearly 15 percent on its $57.5 million contract to sell wheat to Iraq. And some of the world's biggest oil traders and refineries did business with Baghdad, including Glencore, a Swiss-based trading company.

According to Mr. Tellings (see above) “Different Security Council members had different levels of tolerance for the abuse. When the United States and others wanted the sanctions committee to confront Syria on oil sales, they were blocked by Russia and France, which argued that Syria should not be singled out when the Americans refused to investigate Iraq's equally lucrative oil trade with their allies, Jordan and Turkey.”

The sad truth is that the U.N. Security Council, including the U.S. dropped the ball, and in many ways, is at least indirectly involved in having set the conditions for the war in Iraq, by allowing Saddam Hussein to build a huge wad of cache which even now is likely being used by his exiled families and cronies to finance the seemingly endless insurgence against the U.S. and the increasingly thin coalition.

According to the New York Times: “At one point, the sanctions committee outmaneuvered Mr. Hussein on the illegal surcharges the Iraqis levied on every barrel of oil. In late 2000, the oil overseers relayed complaints by major oil companies that were buying from Iraq. After the committee debated for months about what to do, the United States and Britain pushed through a change in the way Iraq's oil was priced, bringing it more in line with world prices and drastically reducing the margin for fraud. But no attempt was made to recover the surcharge payment or to investigate which companies paid. ["You couldn't ask the committee for guidance because you'd never get an answer,"] Mr. Tellings said. ["It was nobody's responsibility."]

Former Fed Chief Paul Volcker’s commission on the Food For Oil Program has noted that it will take $30 million and 12 months of work to get to the bottom of the situation.

But, as far as we can see, two gumshoe scribes at the New York Times already got the scoop, probably for a few weeks worth of work and at the cost of the portion of their salary for the year, plus probably a few expenses here and there.

So with all due respect to Mr. Volcker, the $30 million price tag seems to be more in order with business as usual at the U.N., than with getting answers, which seem to have been gotten already.

The second part of the issue is that the timing of this story is interesting. Just as Mr. Kerry is touting his “better” and “international” approach to conducting the war in Iraq, this bombshell hits, again suggesting some White House help has been rendered to the reporters.

To be sure, the sources cited are former U.N. insiders with apparent hands on experience in the program. And only a few names of those involved were uttered here. But, we suspect that as time passes, and this becomes more of a front page issue, especially after the election, there will be much discomfort at the upper echelons of power at the U.N., as well as individual governments and international corporations.

We expect that when the debate season arrives, both Mr. Bush and Mr. Cheney may cite the fraud in the U.N. Food For Oil Program as a good reason to carefully consider how the U.S. handles its international commitments.

September 20, 2004
FOX News: Did Saddam Hussein use any of his ill-gotten billions filched from the United Nations Oil-for-Food program to help fund Al Qaeda?

With President Bush slated to address the U.N. this week, the Food For Oil Program is now in the spotlight.

Last week, Kofi Annan lost his cool. Soon thereafter, the French government agreed with the U.N. Secretary General, and his remarks that the war in Iraq was “illegal.”

The only question that we could think of at the time was why? Kofi Annan is too crafty to have mistakenly said something like that. That means that he said it, knowing full well that it would have a desired effect, to deflect from something else which might be damaging to him, such as the ongoing investigation into the U.N.’s Food for Oil program. (Editor’s note: According to the U.N.’s biographical information on Kofi Annan: “In 1990, following the invasion of Kuwait by Iraq, Mr. Annan was asked by the Secretary-General, as a special assignment, to facilitate the repatriation of more than 900 international staff and citizens of Western countries from Iraq. He subsequently led the first United Nations team negotiating with Iraq on the sale of oil to fund purchases of humanitarian aid.”)

So we started to search aggressively for clues. And what we found made sense, even though it came from Fox News.com, a source that is not known for its central bias, although, it has not been involved in any out and out Dan Rather like antics, despite its bias. At least not lately.

The Fox report penned by Claudia Rosset and George Russell, both consultants to Fox, starts by setting the familiar stage of the situation. “Investigations have shown that the former Iraqi dictator grafted and smuggled more than $10 billion (editor’s note: the GAO, as we reported noted that the figure was at least $5.6 billion) from the program that for seven years prior to Saddam's overthrow was meant to bring humanitarian aid to ordinary Iraqis. And the Sept. 11 Commission has shown a tracery of contacts between Saddam and Al Qaeda that continued after billions of Oil-for-Food dollars began pouring into Saddam's coffers and Osama bin Laden declared his infamous war on the U.S.”

But, then it gets interesting rather quickly, when it notes that “buried in some of the United Nation's own confidential documents, clues can be seen that underscore the possibility of just such a Saddam-Al Qaeda link — clues leading to a locked door” in the Swiss lakeside resort of Lugano Switzerland.

The door referred to belongs to “MIGA, the Malaysian Swiss Gulf and African Chamber,“ an organization “registered (in Switzerland) 20 years ago as a society to promote business between the Gulf States and Asia, Europe and Africa.: According to the report, “MIGA is a company that the United Nations and the U.S. government says has served as a hub of Al Qaeda finance: A terrorist chamber of commerce. In a recent interview, U.S. Assistant Treasury Secretary Juan Zarate described MIGA as ["a very good example of an investment company that is used as a shell to hide and move money."]”

The report then notes that MIGA’s chief is one Ahmed Idris Nasreddin, who is on “the U.N. watchlist of entities and individuals belonging to, or affiliated with Al Qaeda.“ More interesting is the fact that “Nasreddin is a member of the terror-linked Muslim Brotherhood,” an organization recently profiled in detail here. See our archived report for September 13, 2004.

According to the Fox report, “Nasreddin's longtime business partner, Egyptian-born Youssef Nada, also of the Muslim Brotherhood, likewise appears on the U.N.'s Al Qaeda watchlist, as do a slew of both Nasreddin's and Nada's enterprises. Former Treasury Secretary Paul O'Neill in August 2002 described Nada and Nasreddin as ["supporters of terrorism"] involved in ["an extensive financial network providing support to Al Qaeda and other terrorist-related organizations."]

Another connection is closer to home. “One of them, Iraqi-born Ahmed Totonji, set up shop years ago just outside Washington, D.C., and is now among those named by U.S. federal authorities in an investigation into a cluster of companies and Islamic non-profits based in Herndon, Virginia, suspected of having funneled money to terrorist groups. MIGA had other founders as well. One of them, who does not appear on the U.N. terror list, is an Arab businessman now in his early 60s, Abdul Rahman Hayel Saeed. Described by an acquaintance as urbane, polite and fluent in English, Hayel Saeed was born into one of Yemen's most prominent business clans, owners of a family-held global conglomerate based in the Yemeni capital of Taiz and named for its founding patriarch: the Hayel Saeed Anam Group of Companies, or HSA. From Yemen, the HSA group boasts a far-flung business empire, including a Yemen-based Islamic bank, and a host of business subsidiaries, affiliates and regional trading offices in places ranging from the United Kingdom to Egypt, Morocco, Nigeria, Ethiopia, Malaysia, Indonesia, Russia and China.”

Fox continued: “Abdul Rahman Hayel Saeed sits on the HSA board of directors, and ranks high in the management — he is currently running HSA's regional office in Jeddah, Saudi Arabia. In MIGA, Hayel Saeed holds a prominent spot, as one of four co-founders who back in 1984 delegated power of attorney to the terrorist-linked Nasreddin, giving him authority to run the company. Swiss registry documents show that Hayel Saeed has never resigned from MIGA, nor revoked that power of attorney. Queried about this link to MIGA, neither Hayel Saeed nor the HSA Group's chairman of the board, Ali Mohamed Saeed, has made any response.”

The report notes that although “HSA is unquestionably a company involved in legitimate businesses.” But it does note that “given the involvement of Abdul Rahman Hayel Saeed, it is striking that between 1996 and 2003, while the United Nations ran its Oil-for-Food relief program in Iraq, the HSA Group — via U.N.-approved Oil-for-Food contracts — sold at least $400 million worth of goods to Saddam.

And here is where things begin to heat up. The fact that H.S.A. had business ties with Saddam under a U.N. program, “might be unremarkable, had the United Nations ran Oil-for-Food with enough integrity and transparency to prevent Saddam and many of his business partners from plundering oil earnings meant to help the people of Iraq. The original United Nations plan was to let Saddam sell oil solely to buy humanitarian goods such as food and medicine, with the U.N. Secretariat collecting a 2.2 percent commission on Saddam's oil sales to supervise the integrity of this process. “

But, as has been discovered, things were different than that, as the program became a slush fund for Saddam and his cronies, as well as allegedly having been used to grease the palms of dignitaries and businessmen all over Europe and the rest of the world. Indeed, Fox notes: “as the Oil-for-Food program actually worked, however, the United Nations let Saddam choose his own business partners. The world body also kept secret the details of those contracts and the identities of the contractors, and it let Saddam graft at least $4.4 billion out of the program through manipulated contract prices, by estimates of the U.S. General Accountability Office.

And here is how it worked. “Saddam's standard scam was to underprice oil sales and overpay for relief supplies, thus generating fat profits for his business partners. Many of those contractors would kick back part of the take to Saddam's regime — or divert it to whatever uses Saddam might fancy. By various accounts, those uses ranged from building palaces to buying arms to supplying Saddam's sadistic son Uday with equipment for torturing Iraqi athletes.

An important point raised by the report is “whether any of the money skimmed from Oil-for-Food also slopped into terrorist-financing ventures such as MIGA.

Fox notes that “It's important to note that in tracking terrorist financing, the simplest starting points are the visible links, the potential connections through which money might most easily have flowed. Proving that funds actually coursed through those conduits is far more difficult.“ And “In the case of Hayel Saeed, MIGA and the HSA Group, there is no public information available about the precise flow of funds, and no proof that Saddam's money made its way to MIGA. But in looking for patterns that beg for further investigation — especially by authorities with access to detailed U.N. records and information on MIGA accounts — some items here stand out.

Most important, there is the question of why HSA was among those companies favored by Saddam for such a fat slice of business. It is increasingly clear that Saddam did not, on average, choose his contractors either at random, or because they were the most cost-efficient suppliers of relief for the people of Iraq. While some of the deals may have been entirely legitimate, many melded payments for humanitarian goods with illicit kickbacks and payoffs. In such cases, it was a lucrative privilege to be tapped as an Oil-for-Food contractor by Saddam's regime.

The report also reveals that “For reasons still unknown, Saddam clearly smiled upon the HSA Group. Not only does HSA account for the bulk of all Saddam's business with Yemen, but dozens of deals that appear in the United Nation's generic public records to originate elsewhere were in fact signed with HSA companies in countries such as Egypt, Malaysia and Indonesia. Within that HSA empire, one company in particular stands out: A trading house called Pacific Interlink, based in Kuala Lumpur, Malaysia. Abdul Rahman Hayel Saeed also sits on Pacific Interlink's board of directors.

From leaked copies of secret U.N. Oil-for-Food records, it appears that Pacific Interlink alone accounted for more than half the HSA group's sales of relief supplies to Saddam, with contracts for such goods as soap, ghee and construction materials totaling at least $246 million. Pacific Interlink also belonged to the select set of companies chosen by Saddam and approved by the United Nations as authorized to buy Iraqi oil under Oil-for-Food — though whether Pacific Interlink actually got any of Saddam's fat oil contracts is something the United Nations has so far managed to keep secret. FOX News attempted to reach Pacific Interlink for comment, but to date has received no reply.”

According to the article, in a report released last year by the U.S. Defense Contract Management Agency (DCMA): “Just after Saddam fell, the DCMA, together with the U.S. Defense Contract Audit Agency, looked at the terms of 759 sample contracts out of the tens of thousands of deals done by Saddam's regime under Oil-for-Food. In that sample, Pacific Interlink pops up as a purveyor of $20 million worth of palm oil to Saddam, via a contract approved by the United Nations under Oil-for-Food in mid-2001. By DCMA estimates, Saddam overpaid Pacific Interlink on that contract, to the tune of about 15 percent above market price, which would work out to some $3 million in funds diverted from relief on that deal alone.”

The article then speculates that “if similar arrangements went on within other Pacific Interlink Oil-for-Food contracts, which totaled close to a quarter of a billion dollars, then even at the more modest rate of what has been widely described as Saddam's typical 10 percent over-pricing scam, that would suggest well over $20 million diverted from relief. If so, where did it go? The question is vitally important, because much of the money grafted out of Oil-for-Food by Saddam remains unaccounted for.”

Is there a connection, then? According to Fox: “Both HSA's and MIGA's offices overlap in locations that are hubs of normal commerce, but also served as hotspots of Al Qaeda meetings and finance, such as Dubai (where Hayel Saeed reportedly ran an HSA company, Frimex, in the late 1990s) or Kuala Lumpur (where some of the Sept. 11 hijackers gathered for a planning conference in January 2000). Pacific Interlink boasts offices or agents in places thick with terror networks, such as Algeria, Sudan, and Syria. MIGA, on its Lugano sign, lists offices in places such as Italy, Turkey, Syria, Nigeria and Kuwait, and both HSA and MIGA list offices in Morocco, Malaysia and Jeddah, Saudi Arabia, where Hayel Saeed is now based.”

There are still plenty of loose and somewhat loose ends here. “MIGA is now under active investigation by the U.S. Treasury and prosecutors in Switzerland and Italy – there is no sign that any of these investigations have been tracking funds specifically via Oil-for-Food contracts or that any of the multiple investigations into Oil-for-Food have zeroed in on possible terror connections. It's not even clear that the United Nations has allowed terrorist-tracking authorities full access to its records.”

Also “none of these figures has been arrested. Nasreddin, long a resident in Lugano and neighboring Milan, Italy, is believed by Italian investigators to have moved about two years ago to Morocco.“ Fox quotes an Italian state investigator who asked to stay anonymous, as saying tha t”Nasreddin maintains a global business network that includes some 2,000 links so far identified to businesses and individuals worldwide, some tied to terror, and some not,“ and that “It is precisely that mix of legitimate and sinister business that makes it so difficult to prosecute Nasreddin, or shut down his businesses.

A perfect example is Nasreddin's four-star hotel in Milan, Hotel NASCO, “which opened — ironically enough — in September 2001, at the same address as Nasreddin's longtime residence. That is also the same address used by a precursor of MIGA, an outfit called the Arab Gulf Chamber. Hotel NASCO remains open for business, serving tea and crescent-moon shaped sugar cookies at its non-alcoholic lobby bar. MIGA remains active in the Lugano business registry, and listed in the Lugano phone book. A recent phone call to MIGA's shuttered office in Lugano, Switzerland, was answered by someone who picked up the phone in Milan, Italy — in the Hotel NASCO. MIGA's network, it seems, migrates as needed.”

Unraveling the mystery requires much greater access to Oil-for-Food records than the United Nations currently allows.