Oil-For-Food Scandal Involved 2,000+ Companies

by Haider Rizvi

(IPS) UNITED NATIONS, -- Some of the world's richest nations have come under fire from a leading corruption watchdog group for failing to take action against companies that illegally profited from a United Nations-sponsored humanitarian program in Iraq.

"It is sheer hypocrisy if high-income countries demand stringent accountability conditions from low-income countries in development cooperation without holding their companies to those same standards," said Peter Eigen, chairman of Transparency International, an independent group that tracks corrupt practices by government officials and private firms worldwide.

His harsh remarks came hours after independent investigators revealed Thursday that more than 2,000 companies were involved in bribes and surcharges to the Iraqi government during the time the UN ran its Oil for Food Program.

A staggering 50 percent of the 4,500 companies involved are being investigated for making illegal payments under the program, according to the Independent Inquiry Committee's 623-page report.

The committee, led by Paul Volcker, a former chairman of the U.S. Federal Reserve, said it discovered nearly $2 billion in bribes from prominent companies, including German manufacturing giant Siemens and the German-U.S. carmaker DaimlerChrysler.

Volcker, however, made it clear at a news conference Thursday that the "identification of a particular company's contract does not necessarily mean that company made, authorized or even knew about the illicit payment."

In their previous reports, investigators reprimanded UN Secretary-General Kofi Annan, other UN officials and the Security Council for mishandling the $62 billion program, which was set up to minimize the impact of harsh sanctions imposed on Iraq as a punishment for attacking neighboring Kuwait in 1990 and for trying to develop weapons of mass destruction.

Under the program, which began in 1996, Saddam Hussein's government sold Iraqi oil worth more than $64 billion to 248 companies. In turn, more than 3,600 companies sold over $34 billion in humanitarian goods to Iraq, according to the Volcker committee.

The investigators said they found that companies purchasing the oil at reduced prices would funnel extra money to Iraq through "surcharges," while those receiving money from Iraq for humanitarian goods and services would return a part of the kickbacks.

Noting that the Organization for Economic Cooperation and Development (OECD) is bound by a treaty obligation that prohibits the bribing of foreign nationals, Transparency International says there is no excuse for the behavior of companies from the wealthiest countries.

"We thought that the OECD Anti-Bribery Convention represented a watershed," Eigen said, "but we must sadly conclude that there is still a very long way to go."

Reacting to the report findings, a spokesperson for Annan told reporters that the UN chief would like to see governments take action against companies falling within their jurisdiction and adopt measures to prevent such lapses in the future.

Though supportive of the UN call for action, Eigen and others wonder whether governments will demonstrate the necessary political will.

"With all the recriminations flying," said Cobus de Swardt, Transparency's director of global programs, "it should not be forgotten that the Oil for Food Program was meant to feed hungry children and prevent needless deaths."

"Punitive sanctions will not undo the human suffering that has been caused," de Swardt added.

In the 1990s, hundreds of thousands of Iraqi children died from disease and malnutrition caused by shortages of food and medicine resulting from the economic sanctions.

Volcker said he and his colleagues were not in the business of "law enforcement," but that they would provide information to countries interested in taking legal action against companies or individuals named in the report.

While a response from other governments is still awaited, Switzerland's economic ministry has declared its readiness to launch criminal proceedings against four people in connection with the Volcker report.

For its part, Transparency International suggests that countries employ "the full arsenal" of punitive measures at their disposal to ensure that bribery "does not pay" for companies. Such measures can include financial penalties and debarment from public contracting.

"There is a great deal of skepticism as to whether prosecutions will actually follow," said Eigen. "But we and other civil society voices will not let the transgressions of these companies be forgotten, nor will we let national governments back away from the promises they have made."