UN Oil For Food Scandal: The Paper Chase Is On

[NATO AIR]

evidence not out in the open everywhere, but the investigation carries on with some breakthroughs and in spite of setbacks

http://www.msnbc.msn.com/id/6747436/site/newsweek/

Investigators are struggling to find concrete evidence of fraud and corruption in the U.N.’s Oil-for-Food program in Iraq
WEB EXCLUSIVE
By Michael Isikoff and Mark Hosenball
Newsweek
Updated: 6:23 p.m. ET Dec. 22, 2004Dec. 22 - U.S. investigators trying to develop criminal cases out of the scandal surrounding the United Nations pre-war Oil-for-Food program in Iraq appear to be running into some serious roadblocks.

One of the most important questions that officials—led by the U.S. Attorney’s Office and the New York county district attorney’s office in Manhattan—want to answer is whether American criminal laws were broken in connection with the scandal. Among those that investigators particularly seek to scrutinize are middlemen or oil companies—including U.S. refiners and traders—who participated in a humanitarian aid program that now appears to have been tainted by fraud and allegations of corruption. The U.S. Government Accountability Office says Saddam Hussein diverted $4.4 billion to himself from the U.N.-run initiative. The issue has political implications, as well, with some right-wing Republicans recently calling for the resignation of U.N. Secretary General Kofi Annan.

But some of the heated rhetoric from U.N. critics may be running well ahead of the facts available to official investigators. One problem facing U.S. investigators is that hard evidence and witnesses critical to any American prosecution—such as financial records showing that a U.S. party knowingly participated in the funneling of illegal kickbacks to Saddam’s regime—are often only to be found in banking havens like Switzerland and Liechtenstein, where law enforcement processes move slowly. Other evidence may be in countries like Jordan and Lebanon, where serious financial investigations are difficult to carry out.

U.S. oil companies stopped openly buying oil from Saddam under the program several years ago, after the Iraqi leader openly began demanding kickbacks on each barrel of crude. But U.S. refiners are believed to have continued to buy Saddam’s oil indirectly through a tangled web of Mideast and Alpine traders whose transactions and corporate activities investigators have only begun to examine.

Some conservative activists and U.N. critics have recently started to “connect dots,” which seem to link oil traders like Swiss-based Marc Rich—controversial beneficiary of a Bill Clinton pardon—via Saddam and the Oil-for-Food program to financing of alleged terrorist networks.

Sources familiar with New York-based Oil-for-Food inquiries acknowledge investigators are looking at possible involvement by Rich in Oil-for-Food transactions. But the sources say investigators are nowhere near putting together a case under which charges could be brought for violations of U.S. law. One senior U.S. law-enforcement official said that investigators at this point believed it is possible that even if Rich was involved in Oil-for-Food deals, he was “clever enough” in structuring deals so as to avoid U.S. legal exposure. Rich has denied any allegations of wrongdoing.

Investigators contacted by NEWSWEEK said they were unaware of any evidence connecting Rich to specific Iraq oil deals subsequently tied to alleged terror groups. U.S. and European investigators also say that despite claims by some conservative researchers and media outlets that other individuals or companies involved in Oil-for-Food deals may have some connection to Al Qaeda, there is little, if any, hard evidence to validate such allegations so far.

One example: a Portuguese company called GALP, which may once have sought Oil-for-Food deals via a Liechtenstein subsidiary, shared a legal representative and mail drop in the Alpine tax haven with a company which U.S. investigators allege is connected to Al-Taqwa, a Swiss-based Islamic financial network subject to international sanctions for allegedly supporting Al Qaeda and other terror groups. But investigators say no evidence has turned up that any business ever was transacted between Al-Taqwa and GALP. There is also no evidence that GALP ever succeeded in arranging an Oil-for-Food deal for itself.

Investigations by the U.S. government’s Iraq Survey Group did turn up documentary evidence that Saddam Hussein earmarked Oil-for-Food deals to finance the cultlike anti-Iranian Mujahedin-e Khalq (MEK) movement. Investigators for the House International Relations Committee, chaired by Rep. Henry Hyde, also came up with a plausible scenario explaining how Saddam might have used Oil-for-Food money to finance his well-publicized program to pay bounties to the families of Palestinian suicide bombers. But MEK representatives denied the group got Oil-for-Food money, and U.S. documentation is inconclusive as to how much of such funding extremist Palestinian groups ever actually received.

While the evidence is sketchy that Oil-for-Food money played a significant role in financing terrorism, the United States and the U.N.’s own blue-ribbon investigative team appear much closer to producing evidence that will bolster the conservative case that the U.N., at best, managed the Oil-for-Food program poorly and at worst was riddled with corruption that may have touched the family of Secretary-General Annan.

Federal prosecutors in New York are said to be conducting criminal investigations which touch on allegations involving Annan’s son Kojo and, separately, Benon Sevan, the senior U.N. bureaucrat who was the chief Oil-for-Food administrator before the U.S. invasion of Iraq. Sevan, who has vigorously denied any wrongdoing, has been under investigation by the Feds and a U.N. inquiry headed by former Federal Reserve chairman Paul Volcker since documents surfaced in Baghdad alleging he was a secret beneficiary of Oil-for-Food allocations set aside for him by Saddam.

The precise nature of federal inquiries that relate to Kojo Annan is unclear. But it is known that Volcker’s investigation is looking into Kojo’s relationship with Cotecna, a Swiss company hired by the U.N. to monitor operations of the Oil-for-Food program to ensure a porous rulebook was being enforced. Kojo Annan left the staff of Cotecna shortly before the company was hired as a U.N. contractor. But evidence recently surfaced that Kojo Annan continued to receive “non- compete” payments from Cotecna until early this year—payments that Kofi Annan says he knew nothing about.

Investigators are now said to have evidence that Kojo charged phone calls to the U.N. to Cotecna’s telephone accounts (even though the U.N. has denied Kojo had anything to do with its contract with Cotecna). Investigators also are poring over evidence suggesting Cotecna may not have been happy covering some of the expenses that Kojo charged to the firm.

Kojo has denied any wrongdoing. Clarissa Amato, one of Kojo’s London-based lawyers. said her firm was unaware of any U.S. criminal investigation but that her client was “fully cooperating” with the U.N. inquiry led by Volcker.