Sightings from The Catbird Seat

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October 27, 2005

Report: U.N. oil-for-food fraud widespread

2,000 firms made $1.8 billion in illicit
payments to Iraq, investigation finds


UNITED NATIONS (AP) – About 2,200 companies in the U.N. oil-for-food program, including corporations in the United States, France, Germany and Russia, paid a total of $1.8 billion in kickbacks and illicit surcharges to Saddam Hussein’s government, a U.N.-backed investigation said in a report released Thursday.

The report from the committee probing the $64 billion* program said prominent politicians also made money from extensive manipulation of the U.N. oil-for-food program in Iraq.

The investigators reported that companies and individuals from 66 countries paid illegal kickbacks using a variety of ways, and those paying illegal oil surcharges came from, or were registered in, 40 countries.

There were two main types of manipulation: surcharges paid for humanitarian contracts for spare parts, trucks, medical equipment and other supplies; and kickbacks for oil contracts.

Daewoo, Siemens, Texas firms implicated

Among the companies that paid illegal surcharges were South Korea’s Daewoo International and Siemens SAS of France. On the oil side, contractors listed included Texas-based Bayoil and Coastal Corp., and Russia’s oil giants Gazprom and Lukoil.

Russian companies were contracted for approximately $19.3 billion in oil from Iraq, which amounted to about 30 percent of oil sales, by far the largest proportion among all participating countries.

Germany-based automaker DaimlerChrysler, meanwhile, appears to have paid just $7,000 on a contract worth $70,000. DaimlerChrysler said it was aware of the report but declined to comment because of an ongoing investigations by the Securities and Exchange Commission and the Justice Department.

In July, DaimlerChrysler said it had been asked for a statement and documents regarding its role in the oil-for-food program, according to documents filed with the Securities and Exchange Commission.

The report said, for example, that Brussels-based Volvo Construction Equipment paid $317,000 in extra fees to Iraq on a $6.4 million contract. Volvo Construction is part of Swedish-based Volvo Group, which referred all questions to Volvo Construction Equipment’s headquarters in Brussels. The group is separate from Volvo automobiles, which is owned by Ford.

Beatrice Cardon, a Volvo spokeswoman, said she was unaware the company was listed in the U.N. report, or what the alleged payments were for. “This is the first I hear about it,” she said.

Former French envoy accused

The report alleged that Jean-Bernard Merrimee, France’s former U.N. ambassador, received $165,725 in commissions from oil allocations awarded to him by the Iraqi regime. He is now under investigation in France.

Merrimee “began receiving oil allocations that would ultimately total approximately 6 million barrels from the government of Iraq,” the report said.

Other so-called “political beneficiaries” included British lawmaker George Galloway; Roberto Formigoni, the president of the Lombardi region in Italy, and the Rev. Jean-Marie Benjamin, a priest who once worked as an assistant to the Vatican secretary of state and became an activist for lifting Iraqi sanctions.

Vladimir Zhirinovsky, who heads Russia’s Liberal Democratic Party, received millions of barrels of oil he could turn around and sell for a profit, the report said. Iraqi Oil Ministry records show that 4.3 million barrels were allocated to Alexander Voloshin, who at the time was chief of staff in the administration of Russia’s president. Both Voloshin and Zhirinovsky have denied any wrongdoing.

Report criticizes Security Council
Thursday’s final report of the investigation led by former Federal Reserve chairman Paul Volcker strongly criticizes the U.N. Secretariat and Security Council for failing to monitor the program and allowing the emergence of front companies and international trading concerns prepared to make illegal payments.

In a letter to Secretary General Kofi Annan, the committee said its task had been to find mismanagement and evidence of corruption, and “unhappily, both were found and have been documented in great detail.”

It said responsibility should start with the U.N. Security Council, which is dominated by its five permanent members: Britain, China, France, Russia and the United States.

The program left too much initiative with Iraq,” the letter said. “It was, as one past member of the council put it, a compact with the devil, and the devil had means of manipulating the program to his ends.”

Once a sprawling operation

The oil-for-food program was one of the world’s largest humanitarian aid operations, running from 1996-2003.

It allowed Iraq to sell limited and then unlimited quantities of oil provided most of the money went to buy humanitarian goods. It was launched to help ordinary Iraqis cope with U.N. sanctions imposed after Saddam’s 1990 invasion of Kuwait.

But Saddam, who could choose the buyers of Iraqi oil and the sellers of humanitarian goods, corrupted the program by awarding contracts to — and getting kickbacks from — favored buyers, mostly parties who supported his regime or opposed the sanctions.

Tracing the politicization of oil contracts, the report said Iraqi leaders in the late 1990s decided to deny American, British and Japanese companies allocations to purchase oil because of their countries’ opposition to lifting sanctions.

At the same time, it said, Iraq gave preferential treatment to France, Russia and China, which were perceived to be more favorable to lifting sanctions and were also permanent members of the Security Council.

Volcker’s previous report, released in September, said lax U.N. oversight allowed Saddam’s regime to pocket $1.8 billion in kickbacks and surcharges in the awarding of contracts during the program’s operation from 1997-2003.

According to the new findings, Iraq’s largest source of illicit income from the oil-for-food program was the more than $1.5 billion from kickbacks on humanitarian contracts.

Volcker’s Independent Inquiry Committee calculated that more than 2,200 companies worldwide paid kickbacks to Iraq in the form of “fees” for transporting goods to the interior of the country or “after-sales-service” fees, or both.

Kickbacks in detail

Tables accompanying the report give a detailed look at the value of each company’s contracts and the amount of money it paid in kickbacks.

According to the findings, the Banque Nationale de Paris S.A., known as BNP, which held the U.N. oil-for-food escrow account, had a dual role and did not disclose fully to the United Nations the firsthand knowledge it acquired about the financial relationships that fostered the payment of illegal surcharges.

The report chronicles Saddam’s manipulation of the program and examines in detail 23 companies that paid kickbacks on humanitarian contracts including Iraqi front companies, major food providers, major trading companies, and major industrial and manufacturing companies.

According to the findings, the program was just under 3 years old when the Iraqi regime began openly demanding illicit payments from its customers. The report said that while U.N. officials and the Security Council were informed, little action was taken.

The report is the fifth by Volcker and concludes a year-long, $34 million investigation that has faulted Annan, his deputy, Canada’s Louise Frechette, and the Security Council for tolerating corruption and doing little to stop Saddam’s manipulations.

The smuggling of Iraqi oil outside the program in violation of U.N. sanctions poured much more money — $11 billion* — into Saddam’s coffers in the same period, according to the report.

© 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

* Compare with the cost of the Iraq war.

For more, GO TO > > > First Hawaiian Bank: Conquered by the French in ‘98


November 17, 2004

French Bank Is a Focus of Oil Inquiry

 Times By Judith Miller, New York Times

A House committee and an independent United Nations panel exploring fraud and abuse in the oil-for-food program are focusing on the role of BNP Paribas, a French bank that managed billions of dollars in Iraqi oil revenue for the program, according to investigators.

In a statement yesterday, Representative Henry Hyde, Republican of Illinois, who is chairman of the House International Relations Committee, said investigators had found suggestions of banking violations. “If true, these possible banking lapses may have facilitated Saddam Hussein’s manipulation and corruption of the program,” Mr. Hyde said.

Investigators said the bank may not have verified the identity of some payment recipients. The bank’s activities are to be the subject of a committee hearing today.

Bob Bennett, a lawyer for the bank, called the assertions “outrageous” and said that while it was possible the bank made a few questionable payments, it was “grossly unfair” to suggest it had “sloppy procedures.” “Overall, this bank did an amazing job of handling a series of vast, complex transactions,” he said.

Two people familiar with the United Nations investigation, led by Paul A. Volcker, said investigators had become frustrated with BNP resistance to requests for records and other information. But Mr. Bennet said the bank was cooperating.

The United Nations panel is also seeking assistance from foreign bank regulators in tracing payments connected with the program, under which Iraq was permitted to buy food and other goods with $64 billion in oil revenues from 1996 to 2003.

Congressional investigators said that federal regulators had placed BNP under “supervisory action” in July owing to what investigators called “deficiencies” in its operations.

Allegations have spawned several investigations. Yesterday, the Volcker panel sent a letter to the Senate Permanent Subcommittee on Investigations essentially declining to make available United Nations documents and personnel.

As posted in Free Republic…

For more, GO TO > > > First Hawaiian Bank: Conquered by the French in ‘98


May 12, 2004

Update: U.N. Oil for Food Scandal
Continues to Grow

Center for Individual Freedom

Last week, the Center for Individual Freedom outlined the growing scandal surrounding the United Nations’ Oil for Food program. But in the last few days, even more information evidencing the breadth of the scandal and the possible extent of the cover-up has come to light.

On May 11, the Wall Street Journal uncovered a third “hush” letter from the office of U.N. Deputy Secretary General Benon Sevan. Recall that Sevan managed the Oil for Food program and has been implicated in the scandal. Though Sevan remains on vacation pending his retirement, the letter from his office is a clear warning to the recipient, an Oil for Food consultant, that the U.N. will take legal action should any information be disclosed to Congressional or other investigators outside of the U.N.

As the Journal points out, “The Secretary-General has the authority to waive all these confidentiality agreements. The fact that Kofi Annan has chosen instead to pursue a campaign of legal intimidation is a pretty good indication that he intends as much of a whitewash as he can get away with.”

Also this week, the New York Post reported that the French bank BNP Paribas, which handled the bulk of the $111 billion worth of Oil for Food transactions, has hired attorney and Washington insider Bob Bennett who represented President Bill Clinton in the Paula Jones sexual harassment lawsuit. According to the Post, the bank is expecting subpoenas from any of the three Congressional committees now investigating the scandal-plagued program.

Rather than hiding behind gilded lawyers, BNP Paribas ought to provide all of its Oil for Food records to Congressional and other investigators post haste. There have been enough cover-ups. And Congress needs the complete facts, especially the bank’s records of Oil for Food transactions, if it’s going to make a useful independent assessment of the damage the corruption of this program has done to U.S. interests, the war on terrorism and the Iraqi people.

Most important, it’s time for Secretary-General Annan to direct the U.N. bureaucracy to stop stonewalling. If he’s unwilling to do so or unable to bend the bureaucracy to his will, he should resign.

The Oil for Food scandal is already undermining the U.N.’s ability to contribute usefully to the reconstruction of a liberated Iraq. Thanks to the scandal, Iraqi citizens are reported to be very skeptical of the U.N. — and rightfully so, as it is now clear that Oil for Food money which was supposed to be feeding them was instead employed for bribes and pay-offs with billions going to Saddam, himself, and other enemies of peace, possibly even including Al Qaeda.

In order to preserve any notion that the U.N. can play a roll in achieving peace and democracy in Iraq, it must come clean about Oil for Food — right now.


January 2, 2004


By Lizette Alvarez, The New York Times

LONDON – The U.S. government seriously contemplated using military force to seize oil fields in the Middle East during the Arab oil embargo 30 years ago, according to a declassified British government document made public yesterday.

The document reveals that the U.S. Government, under President Richard Nixon, was prepared to act more aggressively than previously thought to secure America’s oil supply if tensions between Israel and its Arab neighbors continued to escalate after the October 1973 Mideast war or the oil embargo did not abate. In fact, the embargo did dwindle, by March 1974.

If this “dark scenario” played out, the British memorandum continued, the United States would consider launching airborne troops to seize oil fields in Saudi Arabia, Kuwait and Abu Dhabi.

The use of military force would be a measure of “last resort,” the document said.

Defense Secretary James Schlesinger delivered the warning to the British ambassador in Washington, Lord Cromer, the documents show.

The seizure of the oil fields was “the possibility uppermost in American thinking when they refer to the use of force,” said the memorandum.

The potential for conflict was taken so seriously by British intelligence that it wrote a report assessing the situation and listing the likeliest scenarios for the use of force and their consequences. The report, dated Dec. 12, 1973, was sent to Prime Minister Edward Heath by Percy Cradock, head of Britain’s Joint Intelligence Committee.

The memorandum was one of hundreds of documents released by Britain’s National Archives under a law that makes government papers public after 30 years.

The exchange between Schlesinger and Lord Cromer came on the heels of the three-week war between Israel and Egypt and Syria in October 1973. Arab members of OPEC imposed the embargo to try to pressure the United States and other Western nations to force Israel to withdraw from Arab land.

The oil embargo lasted almost half a year. It led to sharp increases in the price of fuel and long lines at gasoline stations, and prompted Washington to question its reliance on Arab oil.

As recounted by Lord Cromer, Schlesinger said the United States was unwilling to abide threats by “under-developed, under-populated” countries.

The documents did not rule out the possibility that Washington would consider pre-emptive strikes if Arab governments began issuing greater demands. “The U.S. government might consider that it could not tolerate a situation in which the U.S. and its allies were in effect at the mercy of a small group of unreasonable countries.”

As outlined, military action would be relatively straightforward; two brigades were seen as needed to seize the Saudi oil fields and one each for Kuwait and Abu Dhabi.

The greatest threat would arise in Kuwait, “where the Iraqis, with Soviet backing, might be tempted to intervene,” the document said.

The British warned in their assessment that any occupation of Saudi Arabia, Kuwait and Abu Dhabi might have to last as long as 10 years. The use of force would also anger and alienate Arab countries and irritate the Soviet Union, although a military confrontation with the country would be unlikely, the document stipulated.

Discontent among Western allies was also cited as a possible consequence of military intervention.

“Since the United States would probably claim to be acting for the benefit of the West as a whole and would expect the full support of allies, deep U.S.-European rifts could ensue,” it said.

– – –

For some of the latest news:


April 5, 2003

U.S. Makes Progress on Trial of
Saddam’s Hidden Wealth

By Robert Cohen and J. Scott Orr, Newshouse News ServiceIt’s been dubbed “Saddam Inc.,” a mysterious, multibillion-dollar empire of stolen riches that Saddam Hussein and his sons are said to have methodically stashed away in secret bank accounts around the globe.

Now, as the American military moves closer to toppling Saddam’s regime in Baghdad, U.S. Treasury officials and intelligence agencies are scoring new successes in their effort to unravel and seize Saddam’s hidden wealth.

Last week, the Treasury Department uncovered more than $1 billion in what it says are Saddam’s personal assets in overseas locations that it would not disclose.

Authorities are moving to take control of those holdings, which are on top of $1.62 billion in Iraqi government assets seized by U.S. authorities last month under provisions of the Patriot Act, which gave the government enhanced power to go after suspect accounts abroad.

“We have identified and located previously unknown assets that so far have exceeded $1 billion,” David Aufhauser, the general counsel for the Treasury Department, said in an interview. “We are now talking to these countries and are seeking to have them take measures to secure these funds for the repatriation of this wealth to the Iraqi people.”

Aufhauser said investigators are tracking Saddam’s assets in more than a dozen nations, where the funds are believed to have been hidden through what he described as “traditional but sophisticated ruses.” He declined to name the countries.

He also declined to reveal the specific assets, but said they could be hidden in secret bank accounts, disguised by phony corporations or concealed as investments in “monetary instruments or commodities like diamonds or product credits.”

How rich is Saddam? Jules Kroll, whose international private investigations company probed Saddam’s financial empire for the Kuwaiti government in the early 1990s, said estimates range into the tens of billions of dollars.

“Is it $10 billion? Is it $20 billion? I’d say it’s somewhere in between,” he said.

Bush administration officials say there is evidence that Saddam’s fortune what they call his “blood money” has come from smuggling, kickbacks and a variety of business deals engineered by his sons Odai and Qusai, and by other relatives.

The administration’s financial task force is focusing on evidence that Saddam and his sons extorted huge sums in kickbacks from foreign businessmen who participated in the Oil for Food program sanctioned by the United Nations.

Set up in 1996, the program allows Iraq to sell some of its oil to purchase food and medicines for its citizens. But, according to a number of government and private reports, Saddam demanded that kickbacks be deposited in bank accounts in the Middle East and Europe controlled by him and his family and associates.

The General Accounting Office last year estimated that Saddam generated some $6.6 billion in illegal revenues between 1997 and 2001. It said the money came from Oil for Food kickbacks and from the smuggling and sale of oil through neighboring countries in violation of the sanctions.

Last year, the Coalition for International Justice, a nonprofit organization based in Washington, released a report estimating that Saddam and his family members earned an average of $2 billion a year by illegally exploiting the U.N. system and running extensive smuggling operations in Turkey, Jordan, Syria, Lebanon, Iran and the Gulf states.

The report, “Sources of Revenue for Saddam & Sons: A Primer on the Financial Underpinnings of the Regime in Baghdad,” projected that family earnings were close to $2.5 billion for 2002, with oil smuggling making up 90 percent of that revenue.

The coalition also charged that Saddam’s family enriched itself by exploiting the Iraqi Olympic Committee, fleecing Shiite pilgrims visiting Iraq’s holy sites and exploiting Iraq’s radio and television stations.

Saddam and elder son Odai also have been accused of profiting handsomely in a cigarette-smuggling scheme.

In a lawsuit filed last year in New York, the European Union alleged that R.J. Reynolds Tobacco Holdings Inc. sold billions of cigarettes to Iraq in violation of U.N. and U.S. sanctions, creating bogus paperwork trails that listed Russia instead of Baghdad as the destination for the products.

The lawsuit claims the cigarette sales brought millions of dollars to Saddam’s regime, and specifically to Odai, who “oversees and personally profits from the illegal importation of cigarettes into Iraq.”

R.J. Reynolds has called the allegations “absurd” and has asserted that it operates its businesses “in a legal, responsible manner.”

Although a good deal of the money has gone to finance the building of ornate palaces and a lavish lifestyle for Saddam and his family, Aufhauser said the Bush administration believes Saddam also has used the illegal revenues to purchase weapons of mass destruction.

Others have said he has used some of these proceeds to pay bribes to win the allegiance of various factions inside Iraq. “He’s had expenses. This is money he used to keep himself in power, to buy people off, to bribe people in other countries. It’s not just a saving account,” Kroll said.

Kroll said his company’s investigation following the first Gulf War revealed a sophisticated conspiracy by Saddam to skim the spoils of his country’s oil wealth. At the time, Kroll estimated Saddam’s wealth at $10 billion. Since then Saddam’s hidden treasures have likely increased.

Kroll Associates drew on assertions from Iraqi defectors, intelligence information and corporate records to uncover a flourishing multibillion-dollar global financial network operated out of Geneva.

At the time, the network was being run by Saddam’s half-brother Brzan al-Tikriti and his son-in-law Hussein Kamel, who was later killed by Saddam.

Jerry Long, director of Middle East studies at Baylor University, said he sees Saddam’s thirst for wealth as evidence of “a personality disorder” that is based on his own grandiose vision of himself.

“He sees himself as the embodiment of Iraq. This is more than someone who is selfish,” said Long. “He sees the country as an extension of his ego and believes he is entitled to what he takes.”

Howard Simons, an expert on the international oil industry and a professor of finance at the Illinois Institute of Technology, said he suspects stories of Saddam’s vast wealth are true.

“Is there proof? No. Does it seem plausible? You bet,” he said. “What’s the point of being a greedy dictator if you can’t act like one? A lot of it probably went to buy weapons systems and anything else he felt like buying.”



By its past and present actions, by its technological capabilities, by the merciless nature of its regime, Iraq is unique. As a former chief weapons inspector of the U.N. has said, ‘The fundamental problem with Iraq remains the nature of the regime, itself. Saddam Hussein is a homicidal dictator who is addicted to weapons of mass destruction.’…

“We know that the regime has produced thousands of tons of chemical agents, including mustard gas, sarin nerve gas, VX nerve gas. Saddam Hussein also has experience in using chemical weapons. He has ordered chemical attacks on Iran, and on more than forty villages in his own country. These actions killed or injured at least 20,000 people, more than six times the number of people who died in the attacks of September the 11th….

“Iraq is a land rich in culture, resources, and talent. Freed from the weight of oppression, Iraq’s people will be able to share in the progress and prosperity of our time. If military action is necessary, the United States and our allies will help the Iraqi people rebuild their economy, and create the institutions of liberty in a unified Iraq at peace with its neighbors.”…

– George W. Bush, October 7, 2000





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Last Update August 19, 2006 by The Catbird