UN Oil-for-Food Audit Finds Much Ado About Not Much

by Thalif Deen

(IPS) UNITED NATIONS -- A series of 58 internal audits of the multi-billion-dollar oil-for-food program in Iraq has revealed overbilling and management lapses by its UN supervisors, but no large-scale fraud.

The United Nations, which provided food and relief supplies to 27 million sanctions-hit Iraqis during 1996-2003, was charged with overseeing some 65 billion dollars in oil revenues to finance goods and services.

But preliminary UN audit reports made public by the Independent Inquiry Committee, created by the UN Security Council last year, show management failings resulting in losses amounting to about two million dollars -- mostly due to overbilling.

"The scale is the key," says Jim Paul, executive director of the New York-based Global Policy Forum, which closely monitors the United Nations.

"When you have a 65-billion-dollar program and manage to find two million dollars missing, you don't have a big story," he told IPS.

Paul said that newspaper editors who play up the story are "complicit" in an ongoing virulent campaign by U.S. right-wing neo-conservatives to undermine the world body.

The lapses pointed out in the audit reports include failure to supervise contractors, overcharging by companies hired to monitor oil sales, lack of direction and coordination, and ad hoc management practices and procedures.

UN spokesman Stephane Dujarric told reporters Monday that the United Nations is already focused on issues of management and accountability.

"We are engaged in a critical review of the way we work, which will lead to a broad overhaul of the UN's management structure and systems in order to improve performance and accountability," he said.

"And let's not forget that the oil-for-food program did fulfill its main objective by providing humanitarian relief to 27 million Iraqis and thereby helping to maintain political support for UN sanctions which, in turn, prevented (Iraqi President) Saddam Hussein's regime from acquiring weapons of mass destruction," Dujarric said.

UN Secretary-General Kofi Annan, who described the U.S.-led war on Iraq as "illegal" in a television interview last year, has come under heavy fire from right-wing groups in the United States.

These groups have also accused the world body of facilitating the Saddam Hussein regime to siphon off some $10 - 20 billion in illegal profits from the oil-for-food program.

But in an newspaper interview Saturday, the head of the Independent Inquiry Committee, Paul Volcker, a former head of the U.S. Federal Reserve Bank, said those figures were "grossly exaggerated." He said his own investigations show only about $1.7 billion in illegal profits.

Volcker also said he did not see any "flaming red flags" in the audit reports.

Paul said that "people in Washington have continued to exaggerate the figures for political reasons." He said the figures were getting bigger and bigger every day. "They were being repeated until they came to be accepted as truth."

He referred to a monumental scandal the United States has chosen to ignore involving the Development Fund for Iraq, which was under the U.S.-administered Coalition Provisional Authority (CPA) set up after the invasion of Iraq in March 2003.

Paul said the United Nations transferred about 8 billion dollars in Iraqi oil revenues to that Fund. The Fund also accumulated another 10 billion dollars of oil revenues when the CPA administered Iraq.

"A number of countries in the Security Council described the Fund as a 'black hole' because it was totally non-transparent," he added. There were even stories of how some of the monies ended in Swiss banks, he said.

"So the people who are so troubled by the misuse of funds by the United Nations have not taken the trouble to look at the U.S.-administered Development Fund for Iraq," Paul said.

He said the oil-for-food program has been turned into scandal as part of a right-wing conspiracy. "What is also sinister about it is that it is also being used as lever to change personnel at the highest levels of the United Nations," he added.

Last week, three senior officials-- the Under-Secretary-General for Management and Administration, the Financial Controller, and Annan's Chief of Staff-- indicated they would either retire or leave the Organization, mostly under pressure.

In an editorial titled "Housecleaning at the UN," the New York Times said Monday that Annan is "doing the right thing" by changes in his top management staff.

"Further changes are certainly warranted, but they should not just be aimed at appeasing Washington and improving the UN's public image. They are needed in such critical areas as peacekeeping and refugee assistance," the editorial said.

Paul said that a group that calls itself "Friends of the UN" is putting pressure on Annan to make changes at the top. "The campaign lays the ground work for these so called "friends" to urge Annan to bow to U.S. pressure. And it is happening," he added.

He said it is very similar to the way the United States gets rid of UN ambassadors by pressuring foreign governments. U.S. officials are "masters at this game," Paul said. "It's a disgrace."

Meanwhile, Annan has cautioned against any rush to judgment until the Volcker committee releases its report. The secretary-general says he will abide by the decisions of the committee.

Among those under investigation are Benon Sevan, a senior UN official who once headed the oil-for-food program, and Annan's son Kojo Annan, who worked for a Swiss company that had contracts related to the program.

Volcker has said that a preliminary report will be released by the end of January and the final report by June 30.

Predicting that he may not be able to find a "smoking gun," Volcker said last week that when he releases his final report, he expects criticisms from both sides -- those who are supportive of the United Nations and those who are against.