NEWS: UN Suspends Two Over Oil for Food Program

POLITICS: UN Suspends Two Over Oil for Food Program

Head of the UN Oil for Food Program Benon Sevan and Security Council Affairs Division Chief Joseph Stephanides were suspended Friday over results of an investigation into one of the largest fraud in history.

In keeping with the UN tradition for treating serious matters with strong measures, both officials will continue to draw pay and benefits.

What makes it one of the largest frauds in history, exactly? Nothing in the article. Please post sources.

What makes it the largest fraud in history is the agenda(s) of the author or the editor, as best I can tell.

The most useful tool in the politicization of fraud, is fraud. What makes one bigger than another, couldn't tell you. I remember funding the sale of weapons to Iran in the 80s. That's in my top 3. And maybe there's some objective economic or ethical calculus to determine this, in which case, apologies.

The response to those kinds of questions, here on SG, is that News entries are "opinion writing" and that "if you don't agree with it, don't read it."

As if misinformation only affects one person at a time. As if misinformation is transactional, and not contagious.

[Edited on Feb 08, 2005 4:56PM]

1. The vast sums of money involved. The total amounts over several years totaled about $64b, of which $20b or so went into the hands of Saddam and his accomplices both in Iraq, Middle eastern countries like Jordan, Syria, and Lebanon, and Western businessmen. One of whom was Kofi Annan's son.

2. The fact that this was ostensibly a humanitarian program under the auspices of the UN. But the UN not only looked away at the diversion of cash to Saddam (remember, the idea was oil-for-food so fungible cash couldn't be used to support the Saddam regime) but started feeding from the trough of corruption itself.

Then we start to see why the UN was so loathe to enforce the resolutions it passed against Saddam, and so stridently opposed the war. It was effectively bought off. And as if this whole revolting situation couldn't be worse, the very people that this program was intended to help, the people of Iraq, received almost nothing from the program. That's what makes it the biggest fraud in history. But don't worry, Kofi Annan is on the case and suspending the official in charge, Benon Sevan, even though he's already retired.

Another thing that this doesn't mention is that Benon's kindly aunt who generously gave him $160,000? Turns out she died a few weeks ago after falling down an elevator shaft. Maybe O.J. will help find out what happened to her after he finds Nicole's real killer.





[Edited on Feb 08, 2005 5:26PM]

First off this is not to defend any of the actions of the motherfuckers who took advantage of the Oil for Food program. Second I should say at this point that the US Fund for Unicef is part of what pays my salary, so take my commentary with that in mind.

That said, your math is mad and deceitful. The size of the fraud is not the size of the program (64b). That's exactly the kind of sloppy number that gets thrown around to conflate the evil of the scandal with the goals and effects of the program. Why not point to the entire US GNP, back when part of it was diverted to give weapons to a terrorist state in the 80s?

Of that 64 billion in the OfF program, 46b went to provide for humanitarian needs of the people of Iraq (that's who we're fighting for, remember?) and since 2000, 25% of the funds were spent on Gulf War Reparations (Kuwaiti victims, etc). Some of it even funded the weapons inspections, at the demands of the United States. It is a legitimate debate about whether the program ever eactually helped the people of the Iraq, but that debate has to do with the structure of the program, not the abuse of it by a bunch of really corrupt people.

The fraud was that specific people kicked back money to the Iraqi government in exchange for a markup they got on cheap oil. That's horrible, shameful, and fraudulent. Some of the people who did it were UN-connected. Some weren't. Either way, the fraud is in the % cut they got on those kickbacks. Not in the program itself.

The UN program to try to help secure medicine and water, etc for the people of Iraq was opposed by certain conservative elements within the US from the very beginning, because the 1991 Gulf War was never about helping the people of Iraq. Somehow, our humanitarian concern for them has u-turned sometime between 1991 and 2005, which is itself a fascinating exercise in propaganda.

The political motives behind attacking the OfF program have to do with trying to assign ulterior motives to the UN opposition to the "coalition of the willing." The hyperbolic, misleading, claim of "the greatest fraud in history" and "64 billion dollars" are consistent with the political smear tactics that have been in play since the United States broke the economy -- but not the regime -- of Iraq, back in 1991. It's just so crazy to me when the smear filters all the way down to places like these.

proxy,

I take strong objection to your contention that the US broke the Iraqi economy in 1991. Your statement presumes that there was an Iraqi economy left to break after Saddam's ruinous war with Iran. Saddam's attempt to restore his economy through looting Kuwait in 1990 cannot in any way be viewed as a measure taken by a functional economy.

Nobody is saying that the UN showed ulterior motives, we are saying that they are dishonest politicians because they did not stay bought. The US provides more funding to the UN than any other nation.

The fraud also included unaudited purchases from suppliers selected by Saddam's government. The price of those purchases was massively inflated and a substantial amount of the resulting overages was kicked back. The $46 billion you mentioned did not purchase anything like that amount of good for the people of Iraq.

If you know of a greater fraud in history than the minimum $10 billion that everybody admits was improperly distributed, please let us know. If you know of a reason why French munitions manufactured in 2001 were used against Coalition forces in 2003 that does not include fradulent behavior, please let us know. If you know of a way that all that money went to all those UN and diplomatic corps personnel and their relatives that does not include fraud, please let us know.

I am not pissed at the UN because they are internationalist, I am pissed at the UN because they define that term to mean "for sale to the most recent bidder." The UN needs a massive shakeup so that they can adhere to standards of integrity that lead to success. The current standards of the UN are non-existent or not enforced where it counts.

I'm sure you are trying to do your job and earn your pay. Not everybody who is angry at UN corruption is angry at the basic concept of the UN.

psst we knew certain countries were buying oil illegally. we encouraged it and said, hey they're our boys so thats ok.

http://www.cnn.com/2005/WORLD/meast/02/02/iraq.oil.smuggle/index.html

it was some big ass fraud but we knew.

theseeman,

I notice that the source in question chose not to stick around for Condi. I strongly suspect that a number of "business as usual" types at State are going to have a high heeled footprint on their asses.

History has changed, and a lot of people at State need to start scrambling to get on the right side of it.

The value of the oil traded was about $64b-$65b

Well, if we did that, then we'd have to do the same for the Russians and the French. But that's besides the point. Iraq wasn't under the authority of UN at the time, wasn't under obligations to obey the resolutions and conditions imposed by the UN under a cease-fire. The breaking of which stipulated the regime had to go. If there was no such threat behind the resolutions, then what point is there in imposing them?

No, it has more to do with showing the UN is completely untrustworthy and incompetent, and that their claims that they alone confer moral legitimacy upon international affairs is a sick joke.

If you think criticism of the UN's management is just propaganda, you need to really wake up to the realities of your organization. The UN likes to think of itself as an indispensible institution, but it really continues at the whim of the United States. It would crumble away if we did not support it. And its recent behavior does not inspire confidence or trust.

Resistance to reform will antagonize the US, and that's something the self-interested bureaucrats at the UN can't afford, because they're pretty much incapable of performing their mission as it is, and once the illusion is gone, they're out of a sweet little racket.

[Edited on Feb 09, 2005 by stockula]

Stockula you are the first to complain about 'moral equivilance' but it seems to be your only line of argument.
it's hard to understand how you still believe 64 billion was the size of the fraud when it is actually the size of the entire program, and nobody is suggesting that the entire program is fraudulant. Nick Gleeson traded fraudulently in foreign exchange markets resulting in the collapse of Barings Bank, Does this mean that all foreign exchange transactions are fraudulant? that figure would have to be in the trillions...


As for saying that this is one of the biggest ever frauds, Are you aware of the history of the world bank and corrupt loans to third world countries?

Basically dozens of corporate Banks loaned billions of dollers to corrupt third world countries (which they wasted or used to buy weapons to start wars or oppress their populations). The banks acted incredibly irresponsibly and there was never any chance that they would be repayed, so the World Bank Stepped in and assumed the debt of these corporate banks, buying their debt including the interest at the expense of Tax Payrs in Europe and America. Hundreds of Billions of dollers were transferred from the taxpayers of Europe and America into the hands of Bankers, Weapons Manufacturers and Corrupt Dictators.

Akrasia,

I don't think that stockula is going to bat for the World Bank. You are correct that the World Bank system of loans is an utter failure, but blaming it on commercial banking investment is kind of bizarre. What about the corrupt dictators who contributed massively to the failure, and the diplomats who enpowered them to do so? You know, like the "status quo at any price" folks at the UN?

The World Bank is be a massive failure due to diplomatic standards that precluded expecting results. The Oil for Food program was a fraud because the bureaucrats failed fundamental standards of integrity and allowed Saddam to call the shots.

There is a difference between bad execution and corruption. There is some hope that the World Bank can be fixed by changing goals, like giving outright grants to countries that agree to follow rule of law and allow democracy, and then holding them accountable for their own actions. There is no hope that an unreformed UN can do its job.

Corruption is the enemy of all mankind, and the sooner the UN stops making excuses and works to deserve the world's trust, the better we will all be.

The world bank was formed to protect the commercial banks who had tried to milk the third world for every penny by taking advantage of the corruption of the dictators du jour. Even at the time these loans were being criticised as utterly irresponsible, but the banks know that the governments can not allow the banking sector to collapse. You can count on one hand the number of western commercial banks that have folded in the last 40 years even though there has been mass fraud and corruption amongst banking institutions during that period.

And if you like Stock's math, you should check out his racist poetry.

Does that make the $9 billion in missing reconstruction money in Iraq the second biggest fraud in history?

Why is there more news and information in the comments section than in Lasswell's article? Writing two sentences and cutting and pasting is lazy.

Manufacture of consent.

Since it was 8.9 billion of Iraq's money that they spent, we just don't "feel" they had enough conrols. I don't know that it would count.

The idea that any institution -- whether it's the World Bank, the UN, the U.S., or the Army -- is implicitly any one thing or the other, is the kind of essentialist thinking that might make racist poetry seem funny, but not much else.

And if the UN ever claimed that they alone confer moral legitimacy upon international affairs, please point that out. Otherwise the sick joke has you as its punchline.

It's not my organization. All I said was that they are partially responsible for my paycheck. Not everyone on the news boards here is straightforward about how their income might bias their opinions. But the UN is not "my organization," believe me. Another part of my paycheck comes from the U.S. government, too.

That's a fascinating opinion, considering that the United States doesn't even pay its dues to the United Nations. Oh yeah... they did consent pay part of what we owed -- 582 million dollars -- about two weeks after 9/11, and 12 days after the President began to push towards war in Iraq. Just feeling philanthropic, I guess.

Even the approval to release the funds was passed against the vigorous objections of Tom DeLay and the like. In total, it was about a billion dollars that the United States first refused to pay, and then tried to tie to a Republic-base agenda. Crumbling away, indeed. Fraud, indeed.

By "they" you evidently refer to the U.N., rather than the motherfuckers who took kickbacks on the humanitarian aid. I have no doubt that you feel the same way about the United States mission in Iraq, that it too is an utter failure, given the behavior of the troops at Abu Ghraib. The condemnation of nations, governments, NGOs, ethnicities, and religions -- based on the behavior of a few well-placed thugs and criminals -- is a really useful tactic, and time-tested. Thanks for bringing it by.

Where do you think the oil for food money came from? The Oil for Food money was Iraqi oil revenue administered by the UN with the oversight of the Security Council. The missing $ 9 bn was Iraqi oil revenue money administered by Paul Bremer and the US occupation government. The only differences I see are about $1 bn and who the controlling authority was over the funds.

Where has Iraq’s money gone?

By George Monbiot. Published in the Guardian 8th February 2005

The Republican senators who have devoted their careers to mauling the UN are seldom accused of shyness. But they went strangely quiet on Thursday. Henry Hyde became Henry Jekyll. Norm Coleman’s mustard turned to honey. Convinced that the United Nations is a conspiracy against the sovereignty of the United States, they had been ready to launch the attack which would have toppled the hated Kofi Annan and destroyed his organisation. A report by Paul Volcker, the former chairman of the US federal reserve, was meant to have proved that, as a result of corruption within the UN’s oil-for-food programme, Saddam Hussein was able to sustain his regime by diverting oil revenues into his own hands. But Volcker came up with something else.

“The major source of external financial resources to the Iraqi regime,” he reported, “resulted from sanctions violations outside the [oil-for-food] Programme’s framework”. These violations consisted of “illicit sales” of oil by the Iraqi regime to Turkey and Jordan. The members of the UN Security Council, including the United States, knew about them but did nothing. “United States law requires that assistance programs to countries in violation of United Nations sanctions be ended unless continuation is determined to be in the national interest. Such determinations were provided by successive United States administrations.”(1)

The government of the United States, in other words, though it had been informed about a smuggling operation which brought Saddam Hussein’s regime some $4.6bn,(2) decided to let it continue. It did so because it deemed the smuggling to be in its national interest, as it helped friendly countries (Turkey and Jordan) evade the sanctions on Iraq. The biggest source of illegal funds to Saddam Hussein was approved not by officials of the United Nations but by officials in the United States. Strange to relate, neither Mr Hyde nor Mr Coleman have yet been bellyaching about it. But this isn’t the half of it.

It is true that the UN’s auditing should have been better. Some of the oil-for-food money found its way into Saddam Hussein’s hands. One of its officials, with the help of a British diplomat, helped to ensure that a contract went to a British firm, rather than a French one.(3) The most serious case involves an official called Benon Sevan, who is alleged to have channelled Iraqi oil into a company he favoured, and who might have received $160,000 in return.(4) Kofi Annan, the UN Secretary-General, has taken disciplinary action against both men, and promised to strip them of diplomatic immunity if they are charged.(5) There could scarcely be a starker contrast to the way the United States has handled the far graver allegations against its own officials.

Four days before Paul Volcker reported his findings about Saddam Hussein, the US Inspector General for Iraq Reconstruction published a report about the Coalition Provisional Authority: the US agency which governed Iraq between April 2003 and June 2004. The Inspector General’s job is to make sure that the money the authority spent was properly accounted for. It wasn’t. In just 14 months, $8.8bn went absent without leave.(6) This is more than Mobutu Sese Seko managed to steal in 32 years of looting Zaire. It is 55,000 times as much as Mr Sevan is alleged to have been paid.

The authority, the Inspector General found, was “burdened by severe inefficiencies and poor management.”(7) This is kind. Other investigations suggest that it was also burdened by false accounting, fraud and corruption.

Last week a British adviser to the Iraqi Governing Council told the BBC’s File on Four programme that officials in the Coalition Provisional Authority (CPA) were demanding bribes of up to $300,000 in return for awarding contracts.(8) Iraqi money seized by US forces simply disappeared. Some $800 million was handed out to US commanders without being counted or even weighed. A further $1.4bn was flown from Baghdad to the Kurdish regional government in the town of Irbil, and has never been seen since.(9)

The CPA awarded contracts to US companies without any financial safeguards. They were issued without competition, in the form of “cost-plus” deals. This means that the companies were paid for the expenses they incurred, plus a percentage of those expenses in the form of profit. They had a powerful incentive, in other words, to spend as much money as possible. As a result, the authority appears to have obtained appalling value for money. Auditors at the Pentagon, for example, allege that, in the course of just one contract, a subsidiary of Halliburton overcharged it for imported fuel by $61m.(10) This appears to have been officially sanctioned. In November, the New York Times obtained a letter from an officer in the US Army Corps of Engineers insisting that she would not “succumb to the political pressures from the … US Embassy to go against my integrity and pay a higher price for fuel than necessary.”(11) She was overruled by her superiors, who issued a memo insisting that the prices the company was charging were “fair and reasonable,” and that it wouldn’t be asked to provide the figures required to justify them.(12)

Other companies appear to have charged the authority for work they never did, or to have paid sub-contractors to do it for them for a fraction of what they were paid by the CPA. Yet, even when confronted by cast-iron evidence of malfeasance, the authority kept employing them.(13) When the Inspector-General recommended that the US army withhold payments from companies which appear to have overcharged it, it ignored him.(14) No one has been charged or punished. The US Department of Justice refuses to assist the whistle-blowers who are taking these companies to court.(15)

What makes all this so serious is that more than half of the money the CPA was giving away did not belong to the US government but to the people of Iraq.(16) Most of it was generated by the coalition’s sales of oil. If you think the UN’s oil-for-food programme was leaky, take a look at the CPA’s oil-for-reconstruction scheme. Throughout the entire period of CPA rule, there was no metering of the oil passing through Iraq’s pipelines,(17) which means that there was no way of telling how much of the country’s wealth the authority was extracting, or whether it was paying a fair price for it. The CPA, according to the international monitoring body charged with auditing it, was also “unable to estimate the amount of petroleum … that was smuggled”.(18)

The authority was plainly breaching UN resolutions. As Christian Aid points out, the CPA’s distribution of Iraq’s money was supposed to have been subject to international oversight from the beginning.(19) But no auditors were appointed until April 2004: just two months before the CPA’s mandate ran out. Even then, they had no power to hold it to account or even to ask it to cooperate. But enough information leaked out to suggest that $500m of Iraqi oil money might have been “diverted” (a polite word for nicked) to help pay for the military occupation.(20)

I hope that Messrs Hyde and Coleman won’t stop asking whether Iraqi oil money has been properly spent. But perhaps we shouldn’t be surprised if their agreeable silence persists.

References:

1. Paul Volcker, Richard Goldstone and Mark Pieth, 3rd February 2005. Interim Report. Independent Inquiry Committee into the United Nations Oil-for-Food Programme. http://www.iic-offp.org/documents/InterimReportFeb2005.pdf

2. I have compiled this figure from the lowest estimate (the one provided by the Coalition for International Justice) in the table published by Paul Volcker et al, 3rd February 2005. Comparison of Estimates. http://www.iic-offp.org/documents/ComparisonofEstimates.pdf

3. Paul Volcker, Richard Goldstone and Mark Pieth, 3rd February 2005. Interim Report, ibid.

4. ibid.

5. BBC Online, 4th February 2005. Annan vows action on corruption.
http://news.bbc.co.uk/1/hi/world/americas/4235139.stm

6. Stuart W. Bowen, Jr, Special Inspector General for Iraq Reconstruction, 30th January 2005. Report to Congress.
http://www.cpa-ig.com/pdf/SIGIR%20Jan05%20-%20Report%20to%20Congress.pdf

7. ibid.

8. Claude Hankes-Drielsma, 1st February 2005, interviewed on File on 4, BBC Radio 4.

9. File on 4, 1st February 2005. BBC Radio 4.

10. The Defense Contract Audit Agency, cited by Michael Hedges and David Ivanovich, 12th December 2003. Audit: Halliburton overbilled millions. The Houston Chronicle.

11. Letter from Mary C. Robinson, contracting officer for the Army Corps of Engineers in Kuwait, to KBR (formerly Kellogg, Brown and Root), 6th Dec 2003. Quoted by Erik Eckholm, 11th November 2004. Halliburton May Have Been Pressured by U.S. Diplomats to Disregard High Fuel Prices. The New York Times.

12. Erik Eckholm, 11th November 2004. Halliburton May Have Been Pressured by US Diplomats to Disregard High Fuel Prices. The New York Times.

13. File on 4, ibid.

14. Eg Seth Borenstein, 25th November 2004. Auditors: Withhold Part of Fee from Halliburton. The Miami Herald.

15. File on 4, ibid.

16. Stuart Bowen’s report (see (6) above), gives the following figures. As of December 31st 2004, $24.1 billion of the reconstruction money for Iraq has come from US government funds, $32.8 billion from Iraqi funds, and $3.4 billion from donor funds (other bilateral aid and international organisations).

17. Report of the International Advisory And Monitoring Board of the Development Fund for Iraq, 2004.
http://www.iamb.info/pdf/IAMBreport.pdf

18. ibid.

19. Christian Aid, 28 June 2004. Fuelling suspicion: the coalition and Iraq’s oil billions. http://www.christian-aid.org.uk/indepth/406iraqoilupdate/Fuelling_Suspicion.pdf

20. Christian Aid, ibid.

Missing makes it sound like it disappeared and that is obviously untrue. The money was released to Iraqi agencies, which then used it to, among other things, pay employee wages. The report I saw said that there were not adequate controls to be sure where all the money went. It didn’t just disappear. There is more than enough real thing to worry about. It’s like the boy who cried wolf.

The government at the time was the US occupation government. Tell, what consitutes an "Iraqi agency" in that context. $ 9 billion was spent, its just no one can tell what it was spent or who recieved it. I'm no accountant, but that sounds to me like the functional equivalent of missing.

My car keys aren't missing, I just don't know where I put them.

Still no sources? No?

All I've seen is "everybody knows". Time was when "everybody knew" that women and black people were inherently stupid. I want to know whether there is any real issue here, and if so how big an issue it is. What I'm hearing is "the UN is bad because everybody knows it is".
Plus a lot of unreferenced smears and sneers, many of which are utterly unrelated to the topic.

D-

How about their police, Gov. employee's, their military. While some of the money could of gone into people pockets th even think that amount is gone is nuts. If audited I have no doubt they would find the majority of it, but they don't have computer payrolls and can't wait to pay people untill they have "foolproof" systems set up. If they weren't paying you would prob. yell about that.