U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

98–601PDF 2005

THE VOLCKER INTERIM REPORT ON THE UNITED

NATIONS OIL–FOR–FOOD PROGRAM

HEARING

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND 

INVESTIGATIONS

OF THE

COMMITTEE ON 

INTERNATIONAL RELATIONS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

FEBRUARY 9, 2005

Serial No. 109–28

Printed for the use of the Committee on International Relations

(

Available via the World Wide Web: http://www.house.gov/international—relations 

(II)

COMMITTEE ON INTERNATIONAL RELATIONS 

HENRY J. HYDE, Illinois, Chairman 

JAMES A. LEACH, Iowa 

CHRISTOPHER H. SMITH, New Jersey, 

Vice Chairman 

DAN BURTON, Indiana 

ELTON GALLEGLY, California 

ILEANA ROS-LEHTINEN, Florida 

DANA ROHRABACHER, California 

EDWARD R. ROYCE, California 

PETER T. KING, New York 

STEVE CHABOT, Ohio 

THOMAS G. TANCREDO, Colorado 

RON PAUL, Texas 

DARRELL ISSA, California 

JEFF FLAKE, Arizona 

JO ANN DAVIS, Virginia 

MARK GREEN, Wisconsin 

JERRY WELLER, Illinois 

MIKE PENCE, Indiana 

THADDEUS G. MCCOTTER, Michigan 

KATHERINE HARRIS, Florida 

JOE WILSON, South Carolina 

JOHN BOOZMAN, Arkansas 

J. GRESHAM BARRETT, South Carolina 

CONNIE MACK, Florida 

JEFF FORTENBERRY, Nebraska 

MICHAEL MCCAUL, Texas 

TED POE, Texas 

TOM LANTOS, California 

HOWARD L. BERMAN, California 

GARY L. ACKERMAN, New York 

ENI F.H. FALEOMAVAEGA, American 

Samoa 

DONALD M. PAYNE, New Jersey 

ROBERT MENENDEZ, New Jersey 

SHERROD BROWN, Ohio 

BRAD SHERMAN, California 

ROBERT WEXLER, Florida 

ELIOT L. ENGEL, New York 

WILLIAM D. DELAHUNT, Massachusetts 

GREGORY W. MEEKS, New York 

BARBARA LEE, California 

JOSEPH CROWLEY, New York 

EARL BLUMENAUER, Oregon 

SHELLEY BERKLEY, Nevada 

GRACE F. NAPOLITANO, California 

ADAM B. SCHIFF, California 

DIANE E. WATSON, California 

ADAM SMITH, Washington 

BETTY MCCOLLUM, Minnesota 

BEN CHANDLER, Kentucky 

DENNIS A. CARDOZA, California 

THOMAS E. MOONEY, SR., Staff Director/General Counsel 

ROBERT R. KING, Democratic Staff Director 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

DANA ROHRABACHER, California, Chairman 

EDWARD R. ROYCE, California 

JEFF FLAKE, Arizona, Vice Chairman 

MARK GREEN, Wisconsin 

MIKE PENCE, Indiana 

JOE WILSON, South Carolina 

WILLIAM D. DELAHUNT, Massachusetts 

HOWARD L. BERMAN, California 

EARL BLUMENAUER, Oregon 

ADAM B. SCHIFF, California 

GREGG RICKMAN, Subcommittee Staff Director 

JEAN CARROLL, Staff Associate 

(III)

C O N T E N T S 

Page

WITNESSES 

Nile Gardiner, Ph.D., Fellow in Anglo-American Security Policy, The Heritage 

Foundation ............................................................................................................ 9

George A. Lopez, Ph.D., Senior Fellow, Joan B. Kroc Institute for International Peace Studies, University of Notre Dame ........................................... 22

Nimrod Raphaeli, Ph.D., Senior Analyst, Middle East Research Institute ........ 27

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Nile Gardiner, Ph.D.: Prepared statement ............................................................ 12

George A. Lopez, Ph.D.: Prepared statement ........................................................ 25

Nimrod Raphaeli, Ph.D.: Prepared statement ....................................................... 29

APPENDIX 

The Honorable Dan Burton, a Representative in Congress from the State 

of Indiana: Prepared statement .......................................................................... 97

(1)

THE VOLCKER INTERIM REPORT ON THE 

UNITED NATIONS OIL–FOR–FOOD PROGRAM 

WEDNESDAY, FEBRUARY 9, 2005

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, COMMITTEE ON INTERNATIONAL RELATIONS, Washington, DC. 

The Committee met, pursuant to call, at 1:37 p.m. in room 2172, 

Rayburn House Office Building, Hon. Dana Rohrabacher (Chairman of the Subcommittee) presiding. 

Mr. ROHRABACHER. The Subcommittee is called to order. I would 

like to thank the witnesses for joining us on the inaugural hearing 

of the Oversight and Investigations Subcommittee. It is the intent 

of the Chair that the Chair will have a 5-minute opening statement 

or thereabout, the Ranking Member will also have a 5-minute 

opening statement, that other Members of the Subcommittee will 

be limited in their opening statement to 1 minute, but they, of 

course, will be free to revise and extend their remarks for the 

record, and welcome all of you. 

In a series of hearings, we will examine the United Nations’ administration of the Oil-for-Food Program. In the 108th Congress, 

the Full Committee held two hearings on the operations of the Oilfor-Food Program, as well as the actions of the French bank, 

Banque Nationale de Paris. It was this bank which administered 

the financial operation of the Oil-for-Food Program. 

In the future, we plan to expand on our previous findings, as well 

as plan to expand on that today. Our examination today will focus 

on Paul Volcker’s Independent Inquiry Committee’s examination of 

the United Nations Oil-for-Food Program. When reading Mr. 

Volcker’s interim report, we are left with one indelible impression: 

The Oil-for-Food Program was tainted by corruption, rank political 

considerations, and incompetence from the very start. 

Recently, internal reports by the U.N.’s auditors from the Office 

of Internal Oversight and Services (OIOS) identified corruption and 

mismanagement within the U.N.’s Oil-for-Food Program. These audits were specifically not provided to member states but released 

by Mr. Volcker only a few weeks ago. Had our diplomats and other 

people in our Government been afforded the option of reading those 

audits upon completion, as Mr. Volcker suggested in his interim report, the systematic U.N. mismanagement would have been obvious, and perhaps some action may have already been taken to stop 

the corruption that was evident in the program. 

In his interim report released last week, Mr. Volcker found extensive political manipulation of the U.N.’s contracting practices by 

2

senior U.N. officials, including that by the former Secretary-General, Boutros Boutros-Ghali, who arbitrarily and, it appears, unfairly chose BNP to serve as the administrator of the program’s escrow account. 

Mr. Volcker’s findings about the administrator of the U.N. Office 

on Iraqi Programs, Benon Sevan, are even more disturbing. Mr. 

Sevan apparently not only accepted but solicited oil vouchers 

through Saddam Hussein. Obviously, the U.N. failed to adequately 

oversee this program. This was the case in this situation of the fox 

guarding the hen house. Moreover, Mr. Volcker pointed out the 

limitations that were placed on the OIOS audits, which meant that 

the program only looked at Iraq, not at the U.N. management or 

leadership side in New York. We need to know if this limitation 

was imposed on the auditors by Sevan in order to cover up his own 

corruption. 

Mr. Volcker also explained the complicated relationship between 

Sevan and relatives of Boutros Boutros-Ghali. Sevan sold his oil 

vouchers to the nephew of Boutros-Ghali and worked with another 

of Ghali’s relatives, Fred Nadler, to arrange the sale. These revelations point to an even deeper corruption of the program. 

The United Nations’ audits tell us a story of millions of dollars 

of overpayments by United Nations officials to contractors, some of 

the same contractors who won their contracts through political manipulation at the United Nations. The audits tell of rigged bidding, 

understaffing at critical border inspection posts, ghost employees, 

missing office equipment, and miscalculated financial transactions 

costing millions of dollars. Yet these patterns of mismanagement 

are not restricted to just the Oil-for-Food Program. Recent press reports tell us of corruption at other U.N. agencies, and these problems also include financial troubles, as well as missing and unrecovered funds. 

At several U.N. agencies, auditors found poor management, a 

total lack of ethics codes, inadequate controls, as well as inadequate controls and oversight of project funds that were under 

their jurisdiction. 

We have just learned today, in the New York Times, that at the 

World Meteorological Organization, which is part of the United Nations in Geneva, one official stole $3 million over a 3- to 4-year period. Then he withdrew all of his funds from a Swiss bank and fled 

the country and faked his own death, asking his wife to present a 

false death certificate to the United Nations in order to claim his 

pension. 

These stories demonstrate a few of the problems facing the 

United Nations. Add to this mix scandals facing the U.N. involving 

sexual harassment and, worse, sexual predators in the U.N.’s 

Peacekeeping Program in Africa, and we get a sense of an organization that is badly in need of scrutiny and badly in need of reform 

from top to bottom. If we are to have a United Nations that works, 

it cannot continue operating in this same manner. 

I think I can speak for our Committee Chairman, Mr. Hyde, 

when I say that we will make it a top priority of this Committee 

to achieve the passage of legislation that will reform the United 

Nations this year. We must, and we will not shy away from this 

challenge. 

3

With us today to testify to the findings of the Volcker Commission and his independent inquiry, as well as the options of reform 

for the United Nations, are three gentlemen, and we appreciate 

them joining us: Nile Gardiner of the Heritage Foundation; Professor George Lopez of Notre Dame University; and Dr. Nimrod 

Raphaeli of the Middle East Media Research Institute. They join us 

today to discuss these issues. We appreciate having you with us. 

I will turn to my Ranking Member, Mr. Delahunt, for any opening statement that he would like to have. 

Mr. DELAHUNT. Thank you, Mr. Chairman, and before I begin my 

remarks, let me extend to Dr. Lopez a great selection for Notre 

Dame getting Charlie Weiss from the Superbowl New England Patriots. He will make a great coach for them. 

Chairman Rohrabacher, let me begin by extending my congratulations to you on your appointment as Chairman of this Subcommittee and welcoming our Republican colleagues to this assignment, and be assured that myself and our Democratic Members 

look forward to working with you to make this a productive Subcommittee. Such a panel is sorely needed. 

Many of us have expressed a concern that aggressive oversight 

has been lacking, not only in matters under the jurisdiction of the 

International Relations Committee but throughout Congress. Many 

of us believe that Congress, as the first branch of Government, has 

been seriously deficient in fulfilling a core constitutional responsibility: Oversight of other branches of our national Government, especially the Executive Branch. The creation of this new Subcommittee provides us with an opportunity to fulfill that obligation 

and to reinvigorate some of the basic checks and balances that are 

critical to the proper functioning of our democracy, especially when 

the majority party in this body also controls the upper branch as 

well as the Executive. 

As to the subject of today’s hearing, I commend you for its selection as our maiden voyage, if you will. It is a topic that is complex, 

important, and worthy of a thorough and exhaustive review. I 

would only recommend that our inquiry be expanded, and as I listened to you in your opening remarks, it seems that we are on the 

same page. 

To limit ourselves to the Oil-for-Food Program does not begin to 

adequately reveal the magnitude of the circumvention by the Saddam Hussein regime of the sanctions imposed on Iraq after the 

first Gulf War and the role of the United Nations and member 

states. 

I refer you to the chart to our right entitled ‘‘Illicit Iraqi Revenue 

during Sanctions.’’ The data presented in this graphic are taken 

from Appendix E of the so-called ‘‘Duelfer Report,’’ and I ask that 

it be titled Exhibit A. I ask for unanimous consent. It demonstrates 

that during the existence of the sanctions regime, 84 percent of the 

illegal revenue in excess of some $9 billion that was used to sustain 

the regime in power came from sources other than the Oil-for-Food 

Program. Note under that section entitled ‘‘Trade Protocols,’’ the 

following figures: Jordan, $4,446,000,000; Syria, $2,814,000,000; 

Turkey, $710,000,000; Egypt, $33,000,000. 

Now, it is my understanding that these arrangements, these socalled ‘‘trade protocols,’’ were formal agreements between the SadVerDate Mar 21 2002 15:40 Jun 29, 2005 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 F:\WORK\OI\020905\98601.000 HINTREL1 PsN: SHIRL
4

dam Hussein regime and the Governments of these countries. They 

were clearly a gross violation of the sanctions resolution, and it 

would appear that the Security Council was cognizant of those violations, and no action was taken. I find this not only appalling but 

having a certain ‘‘Alice in Wonderland’’ quality to it where up is 

down, and down is up. Pass a resolution, impose sanctions, but pretend when a gross violation occurs on a continuing basis, that it 

is really not happening. 

Well, combined with the smuggling in the segment entitled ‘‘Bor- der and Private Sector Cash Sales,’’ that totals $9 billion to Saddam Hussein for whatever purpose he chose. It certainly was not 

to feed his people, certainly not to meet their basic needs, because 

the Oil-for-Food Program did that. As Chairman Hyde said back on 

a hearing in this very room on April 28th of last year, the Oil-forFood Program is credited correctly with the saving of millions of 

lives. That is Mr. Hyde’s quote. But $9 billion, Mr. Chairman. 

There can be no doubt that this income tightened the grip of Saddam Hussein on Iraq. 

It does call for a full investigation. The American people deserve 

no less. You are correct. We should not excuse any abuse, mismanagement, or corruption that existed in the Oil-for-Food Program as administered by the United Nations and ensure that proper controls, transparency, and accountability are part of any future 

sanctions program. But we must also clarify for the American people that any illegal funds Saddam obtained through the Oil-forFood Program were only a small part of the problem. 

And, furthermore, what was the role and response of the Security Council in the administration of the Oil-for-Food Program? It 

is my understanding that not a single rejection of a contract occurred because of overpricing, even after warnings were issued by 

U.N. officials. 

Likewise, there have been allegations of mismanagement and 

possible corruption in the Development Fund for Iraq, established 

after the fall of Saddam. This was an account set up under the Coalition Provisional Authority, the U.S. occupation government in 

that country. Most of that money was derived from the residual escrow account of the Oil-for-Food Program. In a recent report, the 

U.S. Inspector General for Iraq Reconstruction notes that the CPA 

cannot account for almost $9 billion of this money. Well, you are 

correct. We should expand our effort and our oversight. We need 

to look into this. We should request that the Inspector General 

come and testify before us, as well as Mr. Bremer, the former head 

of the CPA. 

Well, with that, Mr. Chairman, I look forward to working with 

you in a collegial, cooperative fashion and to reach a result that reflects well on this particular Subcommittee and Congress as an institution, and with that, I look forward to hearing from our witnesses, unless one of our colleagues has a desire to make some 

brief comments. 

Mr. ROHRABACHER. As we stated, the other Members of the Subcommittee will have 1 minute to present an opening statement, and 

then they can, of course, revise and extend. Is that what you folks 

would like to do? All right. So we will start off with, as our appearance at the hearing, Mr. Flake for 1 minute. 

5

Mr. FLAKE. Thank you, Mr. Chairman. I appreciate this hearing 

being called and look forward to the testimony. 

Any of us who have traveled to Iraq in the last couple of years 

have looked with dismay and disgust at the so-called ‘‘infrastructure’’ that was built with Oil-for-Food Program proceeds. The palaces: We were told, I think, some 70 have been built around the 

country during the period of time when Oil-for-Food revenue was 

flowing there. What is particularly galling about this scandal is not 

that it is just the largest financial scandal in the history of the 

world but that its impact on individual Iraqi citizens who were supposed to benefit from this really were just further oppressed. 

So I look forward to this testimony and look forward to discussing this. As the Chairman knows, I have legislation that I will 

reintroduce. We had 76 co-sponsors last Congress and expect to 

have at least that many starting off that would ensure that the 

U.N. does comply with requests for information so that this scandal 

can be fully investigated. Thank you, Mr. Chairman. 

Mr. ROHRABACHER. Mr. Blumenauer? 

Mr. BLUMENAUER. Thank you, Mr. Chairman, and I would like 

to add my words of appreciation for our Committee empaneling a 

Subcommittee on Oversight. I think this is very important, and I 

know I, for one, am pleased that we are going to be in a situation 

to try and be proactive. There were too many times in the last session of Congress where we would be reading about scandals and 

abuses, and not only were they broken first in the media, but we 

never had a chance in this Committee to really be able to delve 

into them. 

So I appreciate the Subcommittee being here, I appreciate what 

you and Mr. Delahunt are going to do to try and move us forward, 

and I appreciated your initial comments talking about the expansive approach that we need to take. I think Iraq is a great place 

to start. Lots of things going on. Your cautionary concern, Mr. 

Chairman, about patterns of mismanagement, accountability, contracts being given due to political influence; I think this is something that troubles a lot of Americans relative to Iraq in a lot of 

different areas, and I am hopeful that we will be able to set up a 

model for what some other Committees can do in terms of oversight 

and accountability, that we can find out in the course here, yes, 

about the abuses in Iraq and the United Nations. I am also concerned to find out what the United States knew and when it knew 

it in some of these areas where there was tremendous leakage, and 

I look forward to working with you to be able to understand how 

the big picture works. 

Mr. ROHRABACHER. Thank you very much. I think we will probably understand that some of these issues that are being brought 

up now go back a decade or more and find out who was behind 

them, whether there were policy decisions, and whether these were 

signs of corruption or signs of policy decisions that were being kept 

from the American people. Those are questions that have to be 

asked and answered. Mr. Green? 

Mr. GREEN. Thank you, Mr. Chairman, and thank you for holding this hearing. 

My friend and colleague, Mr. Delahunt, quoted from the Full 

Committee Chairman in saying that the Oil-for-Food Program 

6

saved many Iraqi lives, and it is no doubt true. I guess the question that we will have to ask and answer in this Subcommittee 

and, I think, history will have to ask and answer, is whether or not 

the corruption of this program cost many lives, perhaps even American lives. 

The question, to me, is whether or not the corruption of this program meant that sanctions against Iraq were doomed from the beginning as a diplomatic tool. They were doomed as a tool for bringing Saddam Hussein into compliance with his obligations in the 

international community. And if those diplomatic tools were 

doomed, does that mean that war was inevitable? Does that mean, 

then, that the loss of life was inevitable and that American blood 

was spilled as a result of the corruption? 

Mr. Chairman, that is why I care so much about this issue, and 

that is why I think the American people care. Those are tough 

questions, but we will hopefully have an opportunity to have them 

answered and hopefully they will not suggest that, in fact, war was 

inevitable as a result of the corruption, but I sincerely have my 

doubts. 

Mr. ROHRABACHER. Thank you very much, Mr. Green. 

Mr. Schiff? 

Mr. SCHIFF. Thank you, Mr. Chairman. I want to thank you and 

the Ranking Member for your leadership of this new Subcommittee. I think it is extraordinarily important. I have been critical over the last several years of a lack of oversight of the Administration, an abdication of our role in Congress to oversee the Executive, and I think this Subcommittee gives us the opportunity to 

fill that void. 

The subject of the hearing today, Iraq’s illicit oil trade with its 

neighbors, its scheme of kickbacks and surcharges, the evasion of 

sanctions, I think, is extraordinarily important, and we should follow the trail of criminality to wherever it leads and ask the tough 

questions. I think also some of those questions will be very difficult 

for ourselves to answer ultimately, why it was that when we were 

aware of a very large and illicit oil trade, that we acquiesced in this 

practice when we believed that the proceeds of such illicit trade 

may be used by Saddam Hussein to build up weapons of mass destruction? For some of those questions, indeed, we will need to answer to the American people. But we should follow the trail wherever it leads, even if some of the responsibility comes back to our 

own shores. 

Furthermore, Mr. Chairman, I think it is extraordinarily important that we not just focus on international institutions. There is 

a lot of oversight we need to do of the Administration. How does 

one party oversee the work of another, the same party, in the Executive? Too often, the answer is, it does not; it oversees the governance of international institutions or other countries. 

But there are some extraordinarily important questions that we 

need to answer with respect to our own governance, and chief 

among them, I think, and most pertinent to this Committee’s inquiry, is the one identified by the Ranking Member, and that is 

when the Inspector General identifies $9 billion that cannot be accounted for by the CPA in our expenditures in Iraq at a time when 

we have had trouble getting adequate armor for our troops, this 

7

Committee has a duty to those soldiers to find out where those dollars went. And there is no shortage of issues, I think, that we need 

to ask and tough questions that we need to ask of our own Government, and I hope that today begins the process of examining some 

of those questions. 

Thank you, Mr. Chairman. I yield back the balance of my time. 

Mr. ROHRABACHER. Well, we probably will not get to them all 

today because people do not seem to be limiting their remarks to 

1 minute. I think points are being well made by the minority. 

You know, in a democratic society, when you have one party that 

controls both the Legislative and Executive Branch—as the Democratic Party did for so many decades in our country’s history—it is 

the job of the loyal opposition to yell and scream and point when 

they think something is wrong, and there is nothing wrong with 

that. That is a part of their job. 

Mr. SCHIFF. Mr. Chairman, we would be happy to give you that 

job back. 

Mr. ROHRABACHER. [Laughter.] Having two parties and having a 

free press is what keeps us free. I have been in many countries 

where they do not seem to understand that there is a role for people, even when they are not in power, and I think some of the 

points made by you folks today are well taken, and we do plan to 

look into these areas of concern that reflect poorly on the judgments of our Government. 

Today, however, we are looking at the United Nations and not 

perhaps just decisions on policy but actual corruption. But there 

may be some corruption that we find when looking at the policies 

that have been taking place in the Middle East by this Administration and the last as we move forward. 

We now have Joe Wilson, please. 

Mr. WILSON. Thank you, Mr. Chairman, and I would like to 

thank Chairman Hyde for putting together the Subcommittee. I 

think it is particularly appropriate that Dana Rohrabacher is going 

to be the Chairman of this Subcommittee. He is a person of extraordinary tenacity, a person of the highest integrity, and this is 

just so fitting for what may turn into an investigation of the largest 

financial scandal in the history of the world. 

I also have the extraordinary privilege, as Congressman Flake, 

to visit Iraq, and I have seen numerous opulent palaces with beautiful lakes built around them on hills which had been built solely 

for the purpose of building the extraordinary facilities, the utter 

waste and extravagance. Additionally, I have had a son serving in 

Iraq, and he sent me pictures, and I have seen them, too, of the 

dilapidated schools and hospitals where the women and children of 

Iraq have been denied the needed services that could have been 

provided under the Oil-for-Food Program. 

I am very hopeful that, as we proceed, that we can provide incentives so that monies can be recovered and provided back to the people of Iraq to provide better services and also to better protect, as 

Congressman Green has indicated, our service members and to protect the American taxpayers. Thank you very much. 

Mr. ROHRABACHER. Thank you, Joe. 

Finally, we are very pleased to have with us the Chairman of the 

Subcommittee on International Terrorism and Nonproliferation, 

8

and I would hope that as time goes on that this Subcommittee and 

his Subcommittee will be working very closely together on issues 

like this and other issues. Mr. Ed Royce. 

Mr. ROYCE. Thank you, Chairman. I would like to commend 

Chairman Henry Hyde for naming my good friend from Orange 

County, Congressman Dana Rohrabacher, as Chairman of this Subcommittee. I think Dana did yeoman’s work on foreign affairs over 

the years for the Committee, and he will do likewise here, conducting very vigorous oversight, and I am glad that Chairman 

Hyde has set up this Subcommittee. 

Last fall, when this Committee began to look into the Oil-forFood scandal, I stated that support for similar U.N.-administrated 

programs will be zero unless the United Nations is forthcoming 

with information needed to investigate this scandal and that the 

withholding of this information was a scandal in itself. I think we 

all agree that the credibility of the U.N. is on the line. Wherever 

this investigation leads, the seriousness of this issue cannot be 

underweighed. 

This program touched on issues of war and peace: How Saddam 

Hussein’s regime manipulated a U.N. program to stay in power 

and to strengthen itself and build the 70 palaces, but it was able 

to utilize this to strengthen itself. It also brings into question the 

principles of the United Nations. How do nearly 200 sovereign 

states reach consensus to tackle such monumental issues? I am optimistic that this Subcommittee will play an important role in 

shedding light. Thank you very much, Chairman. 

Mr. ROHRABACHER. Thank you very much, Mr. Royce. 

We will now get to the witnesses. Let us note, as we were talking 

about this issue, if the United Nations is to serve an important 

function in this world, we have got to make sure that the people 

of the United States who fund the United Nations have faith in it. 

Well, right now, there is every reason not to have faith in the 

United Nations until we get to the heart of this scandal and see 

that there are corrections in the way they are handling themselves 

over at the U.N., and we will discuss that as the witnesses move 

forward. 

The first witness today is Dr. Nile Gardiner. He is a Fellow from 

the Anglo-American Security Policy with the Kathryn and Shelby 

Cullom Davis Institute for International Studies at the Heritage 

Foundation. I hope I got that all out right. His areas of expertise 

include the United Nations, the war on terror, postwar Iraq, and 

British foreign policy. 

Before joining the Heritage Foundation, Dr. Gardiner was a foreign policy researcher for former British Prime Minister Margaret 

Thatcher. He received his Ph.D. in History from Yale University in 

1998 and received several academic awards as well as two Master’s 

Degrees from Yale. 

Mr. Gardiner, we would ask you, as well as the other witnesses, 

if you could summarize your central points and get it down to 

about 5 minutes, give or take a few, then we could study the details at leisure. But make sure that the points that you really want 

to emphasize are a part of the discussion today. Mr. Gardiner, you 

may proceed. 

9

STATEMENT OF NILE GARDINER, PH.D., FELLOW IN ANGLOAMERICAN SECURITY POLICY, THE HERITAGE FOUNDATION 

Mr. GARDINER. Chairman Rohrabacher, Ranking Member 

Delahunt, and distinguished Members of the Subcommittee on 

International Oversight and Investigations, thank you for holding 

today’s hearing on a very important topic: The Volcker Interim Report on the United Nations Oil-for-Food Program. The fact that the 

very hearing this newly-created Subcommittee is holding is on the 

Oil-for-Food Program clearly demonstrates the importance of this 

issue and the key role the Subcommittee will play in getting to the 

root of the scandal. Mr. Chairman, this is the right hearing on the 

right issue at the right time. 

My testimony before the Subcommittee today is a brief summary 

of views regarding the Volcker Interim Report and the Independent 

Inquiry Committee. I have submitted for the congressional record 

an in-depth, detailed, 18-page statement. 

Having read all 219 pages of the Independent Inquiry Committee 

Interim Report, my view is that it does a reasonably efficient job 

with regard to its very narrow areas of focus. The Volcker investigation into the activities of Benon Sevan have been detailed and 

should rightly pave the way for a criminal prosecution. It has shed 

important light on the workings of the secretive Iraq Steering Committee and has revealed political interference by a senior U.N. official in the procurement of U.N. contractors, Saybolt and Lloyd’s 

Register. 

Perhaps the most significant revelation in the report is its conclusion that former U.N. Secretary-General Boutros Boutros-Ghali 

personally selected the French Banque Nationale de Paris (BNP) to 

handle the hugely important Iraq escrow account, which administered tens of billions of dollars, this, despite the fact that BNP was 

not the best-qualified bank to handle the task. Boutros-Ghali is 

likely to be the subject of a major investigation by Congress in the 

months to come. 

While acknowledging that this is an interim report published 

midway through the Volcker investigation, it has to be said, however, that it goes to considerable lengths to avoid making broadbased criticisms of the U.N. as an institution and the organization’s 

senior management, including the U.N. Secretariat, despite some 

damning criticism of key aspects of the Oil-for-Food Program. 

To say that the Volcker Interim Report has been soft on the top 

leadership of the United Nations is an understatement. It is little 

surprise that the U.N.’s well-oiled, spin machine has begun already 

to downplay the wider significance of the report’s findings and to 

laugh off suggestions that senior U.N. managers, with the exception of Sevan, might actually be held accountable for the U.N.’s 

failings and be forced to step aside. 

The complete lack of any criticism or even mention of U.N. Secretary-General Kofi Annan is a glaring omission that does not engender confidence in the Volcker Committee’s goal of producing the 

definitive report into the U.N.’s handling of the Oil-for-Food Program. History has shown that few organizations are truly capable 

of investigating themselves in a thoroughly objective manner, and 

the United Nations is no exception. The willingness to give the 

U.N. the benefit of the doubt and permit its head to pick its own 

10

independent committee of investigation with a complete monopoly 

over documents and witnesses may in future years be regarded as 

a huge error of judgment. 

The U.N.’s response to the Volcker report has been predictable: 

Guarantees of disciplinary action against two U.N. officials, combined with grandiose promises of institutional reform, but overshadowed by a collective sigh of relief, a misguided sense of vindication, an open mocking of calls for Kofi Annan’s resignation. Noticeably absent from the U.N.’s response was any sign of humility, 

contriteness, or accountability on the part of the U.N. SecretaryGeneral and his senior aides. 

The breathtaking arrogance displayed by U.N. officials, such as 

Chief of Staff Mark Malloch Brown, in the immediate aftermath of 

the Volcker report will only confirm the fears of many in Congress 

who seriously doubt the U.N.’s ability to learn any lessons from the 

Oil-for-Food scandal. The word ‘‘apology’’ clearly does not appear to 

exist in the U.N. staff handbook, and it is hard to avoid the conclusion that the leadership of the United Nations continues to exist 

in a state of self-denial with regard to the institution’s decline in 

credibility. 

The words of Mark Malloch Brown, head of the United Nations 

Development Program and Annan’s newly appointed right-hand 

man, deserve careful congressional scrutiny if proof be needed of 

the U.N.’s lack of genuine commitment to holding itself accountable 

for the Oil-for-Food debacle. Malloch Brown, who counts Benon 

Sevan as ‘‘a lifelong colleague and a dear, dear friend,’’ has been 

quick to downplay the broader significance of Volcker’s findings. 

Malloch Brown has slammed U.S. critics of the U.N.’s management 

of the Oil-for-Food Program by arguing in an interview with the 

‘‘BBC Today’’ program that:

‘‘Frankly, from our point of view, this report today is overall 

good news. This report says the program overall was apparently well managed. Money was not going missing. It was used 

for purposes it was assigned. The problems were limited to the 

margins.’’

One can only conclude that Mr. Malloch Brown must have been 

reading the ‘‘Alice in Wonderland’’ version of the Volcker report, as 

his observations bear little resemblance to the report I and most 

other people have read. His comments are disturbing, as they represent an attempt by the U.N. to distort reality and to spin the interim report to its own advantage. The smug self-confidence of the 

U.N.’s leadership concerns me and does suggest that they believe 

they have little to fear from the final findings of the Volcker investigation. Indeed, they may have good reason for their optimism. 

The U.N. supporters have hailed the Independent Inquiry Committee as a huge step forward for the United Nations in terms of 

increasing accountability and transparency. They have held it up 

both as an example of a new spirit of openness supposedly sweeping through the world body and as a powerful symbol of Kofi 

Annan’s stated objective to restore the reputation of the U.N. 

In reality, however, the Volcker Committee suffers from a huge 

credibility problem of its own. It is hard to see how a team of investigators hand-picked by the U.N. Secretary-General, whose son is 

11

himself a subject of investigation, can be considered truly independent. There is also a major question mark over its Chairman’s 

neutrality. Considering Mr. Volcker’s several years as a Director of 

the United Nations Association and the Business Council for the 

United Nations, it is difficult to see how he could cast a critical, 

objective eye on the U.N.’s leadership. It is inconceivable that Kofi 

Annan was unaware of Mr. Volcker’s close ties to the United Nations Association when he appointed him to head the Oil-for-Food 

investigation, and it could well have been an important factor influencing his decision. 

As the U.N. faces a major crisis of public confidence, it is imperative that any investigation of U.N. corruption and mismanagement 

be seen as independent, open, and transparent. It is regrettable 

that the Volcker Committee is failing on all counts. 

The U.N.-appointed Independent Inquiry Committee should not 

be seen as the definitive investigation into the Oil-for-Food Program. It should be viewed as one of several major investigations 

and, on current evidence, less credible than its congressional counterparts. 

To conclude, it is my firm view that the U.N. Secretary-General 

should not in the future be allowed to pick his own committee of 

investigation into a U.N. scandal and then pass it off as independent. Such inquiries will always be open to the possibility of political interference and manipulation by those being investigated. 

Congress should insist on future investigations into U.N. scandals 

being completely independent of the United Nations. Chairmen of 

such inquiries should also be asked to disclose on appointment all 

potential conflicts of interest, either business or political. 

I believe also that Kofi Annan must be held accountable for 

failings in the Oil-for-Food Program. In order to begin the process 

of restoring the reputation of the U.N., Mr. Annan should step 

down. The fact that Annan remains in office despite growing evidence of widespread U.N. failings with regard to the Oil-for-Food 

Program sends a message of impunity, arrogance, and 

unaccountability on the part of the leadership of the United Nations. It also sets a poor precedent for future leaders of the U.N. 

who will be encouraged to believe that they will not be held to account for the organization’s failures. 

Annan has become a severe liability to the effectiveness of the 

U.N. as a world body. Serious reform of the organization to make 

it more transparent, effective, and accountable will be impossible 

as long as he remains in power. Thank you. 

[The prepared statement of Mr. Gardiner follows:]

12

1The author is grateful to James Dean, Deputy Director of Government Relations at the Heritage Foundation, for his advice and suggestions. Heritage Foundation intern Nicole Collins assisted with research for this testimony. 2The Heritage Foundation is a public policy, research, and educational organization operating 

under Section 501(C)(3). It is privately supported, and receives no funds from any government 

at any level, nor does it perform any government or other contract work. Members of The Heritage Foundation staff testify as individuals discussing their own independent research. The views 

expressed are their own, and do not reflect an institutional position for The Heritage Foundation 

or its board of trustees. 3For background on the Oil-for-Food issue, see Nile Gardiner, James Phillips, and James 

Dean, ‘‘The Oil-for-Food Scandal: Next Steps for Congress,’’ Heritage Foundation Backgrounder

No. 1772, June 30, 2004, at www.heritage.org/Research/InternationalOrganizations/

bg1772.cfm. 4 ‘‘Expressing the sense of the House of Representatives that due to the allegations of fraud, 

mismanagement, and abuse within the United Nations Oil-for-Food Program, Kofi Annan should 

resign from the position of Secretary-General of the United Nations to help restore confidence 

that the investigations into those allegations are being fully and independently accomplished,’’ 

PREPARED STATEMENT OF NILE GARDINER,1 PH.D., FELLOW IN ANGLO-AMERICAN

SECURITY POLICY, THE HERITAGE FOUNDATION2

AN ASSESSMENT OF THE VOLCKER INTERIM REPORT AND THE INDEPENDENT INQUIRY

COMMITTEE INTO THE UNITED NATIONS OIL-FOR-FOOD PROGRAM

Chairman Rohrabacher, Ranking Member Delahunt, and distinguished Members 

of the Subcommittee on International Oversight and Investigations. Thank you for 

holding today’s hearing on a very important topic: the Volcker Interim Report on 

the United Nations Oil-for-Food Program. The fact that the very first hearing this 

newly created subcommittee is holding is on the Oil-for-Food Program clearly demonstrates the importance of this issue and the key role Chairman Rohrabacher, 

Ranking Member Delahunt, and the Members of the subcommittee will play in getting to the root of this scandal. Mr. Chairman, this is the right hearing on the right 

issue at the right time. 

I am sure that both sides of the political divide in Congress will agree with President Bush’s recent call for ‘‘the U.N. to understand that there ought to be a full 

and fair and open accounting of the Oil-for-Food Program. In order for the taxpayers 

of the U.S. to feel comfortable about supporting the U.N., there has to be an open 

accounting.’’ This testimony examines the Interim Report of the Independent Inquiry Committee into the United Nations Oil-for-Food Program, and raises major 

concerns regarding the overall effectiveness, independence and objectivity of this 

U.N.-appointed investigation. 

PART 1. THE VOLCKER INTERIM REPORT

The Independent Inquiry Committee into the United Nations Oil-for-Food Program (IIC) released its interim report on February 3, 2005. The committee was appointed by U.N. Secretary-General Kofi Annan in April 2004 following calls for a 

Security Council-backed inquiry into the Oil-for-Food scandal. The three-member inquiry is chaired by former Federal Reserve Chairman Paul Volcker and includes 

South African Justice Richard Goldstone and Swiss Professor of Criminal Law Mark 

Pieth. 

The committee’s 75-member staff, which includes three support personnel on loan 

from the U.N., operate on a $30 million budget drawn from the U.N. Oil-for-Food 

escrow account, and comprises 28 nationalities. The committee has so far conducted 

400 interviews in 25 countries, including interviews with 150 current and former 

U.N. employees, as well as with present and former Iraqi officials. 

The IIC’s main terms of reference are to ‘‘collect and examine information relating 

to the administration and management of the Oil-for-Food Program, including allegations of fraud and corruption on the part of United Nations officials, personnel 

and agents, as well as contractors, including entities that have entered into contracts with the United Nations or with Iraq under the Program.’’

The interim report was published at a sensitive time for the United Nations. 

There is little doubt that the scandal has harmed the reputation of the world organization.3 Secretary-General Annan has come under fire for what is arguably the 

biggest scandal in the history of the U.N. and the largest financial fraud of modern 

times. 

Annan is facing growing calls for his resignation from Capitol Hill, where Senator 

Norm Coleman (R–MN), Chairman of the Senate Permanent Subcommittee on Investigations, and 60 Members of the House of Representatives have called for 

Annan to step down.4 Among them are nine members of the House Appropriations 

13

H. Res. 869, 108th Cong., 2nd Sess., December 6, 2004, at thomas.loc.gov/cgi-bin/bdquery/ 

z?d108:HE00869:@@@P Representative Roger F. Wicker (R–MS) sponsored the resolution. 5See Sean Hannity, interview with Colin Powell, partial transcript, Fox News, January 12, 

2005, at www.foxnews.com/story/0,2933,144218,00.html 6 Independent Inquiry Committee into the United Nations Oil-for-Food Programme, Interim 

Report, February 3, 2005, at http://www.iic-offp.org/documents/InterimReportFeb2005.pdf 

(Hereafter referred to as IIC Interim Report). 7 IIC Interim Report, p.123. 

Committee, which provides 22 percent of the U.N. operating budget each year, and 

eight members of the House International Relations Committee. It is likely that 

more Senators will join Coleman’s call for Annan’s departure. 

In addition, the Bush Administration has begun to harden its stance toward 

Annan. Outgoing Secretary of State Colin Powell warned the embattled SecretaryGeneral that he will be held accountable for management failures in the Oil-forFood Program.5 President George W. Bush has so far refused to express his confidence in Annan, declining to meet with him in December when the Secretary-General visited Washington. 

Outside the Oil-for-Food scandal, Annan’s problems are also mounting. He has acknowledged and accepted organizational responsibility for a major scandal involving 

U.N. personnel and peacekeepers in the Congo. In addition, internal unrest within 

the U.N. continues to mount in the wake of a series of harassment scandals involving senior U.N. managers. The threat of a U.N. staff revolt looms large. If 2004 was 

Kofi Annan’s ‘‘annus horribilis,’’ 2005 threatens to be even worse. It was amidst this 

charged atmosphere that Mr. Volcker unveiled his eagerly awaited report. 

Key Findings of the Volcker Interim Report 6

The IIC Interim Report addresses the following subjects:

• The initial procurement in 1996 of the three U.N. contractors responsible for 

critical components of the Oil-for-Food Program: inspection of oil exports 

(Saybolt Eastern Hemisphere BV), the inspection of humanitarian goods imports (Lloyd’s Register Inspection Ltd.), and the holding, in escrow, of the proceeds and payments within the Program (Banque National de Paris).

• Internal Programme Audits carried out by the U.N.’s Office of Internal Oversight Services (OIOS).

• Administrative Expenditures i.e. funds allocated to the U.N. for administrative purposes—the ESD Account funded with approximately 2.2 percent of the 

Program’s oil proceeds.

The Interim Report also addresses allegations made against Benon Sevan, the Executive Director of the Office of the Iraq Program (OIP). The report does not address 

the relationship between Secretary-General Kofi Annan’s son Kojo, and the Swiss 

company Cotecna Inspection SA, which replaced Lloyd’s Register in December 1998. 

Nor does it examine Annan’s overall role in overseeing the Oil-for-Food Program 

The most significant findings of the Interim Report relate to the following: 

• Benon Sevan 

Benon Sevan, a Cypriot, served as Under Secretary-General and Executive Director of the United Nations Office of the Iraq Program from 1997 to 2004. A career 

U.N. employee since 1965, Benon Sevan has served in numerous U.N. positions, including Assistant Secretary-General and Deputy Head of the Department of Political Affairs. He has been the subject of intense scrutiny since being named in the 

report of U.S. weapons inspector Charles Duelfer, in which he allegedly received a 

voucher for 13 million barrels of oil from Saddam Hussein. 

The IIC conducted an intensive investigation of Sevan’s conduct as head of the 

OIP, ‘‘a position of immense power and transnational responsibility.’’ His job placed 

him in a position of constant communication with the Saddam Hussein regime, and 

numerous U.N. member states, including each of the members of the Security Council. Sevan ‘‘supervised or coordinated the activities of hundreds of international staff 

in New York and overseas, including a considerably larger number of citizens of 

Iraq.’’ 7

The Volcker Report’s findings into Benon Sevan’s conduct while head of the OIP 

are damning. The Committee concluded that Sevan ‘‘solicited and received on behalf 

of AMEP (African Middle East Petroleum Co Ltd Inc) several million barrels of allocations of oil from 1998 to 2001. As a result of Mr. Sevan’s conduct, AMEP’s revenue—net bank fees and surcharge payment—totaled approximately $1.5 million.’’ 

The IIC declared that Sevan’s actions ‘‘presented a grave and continuing conflict of 

14

8 IIC Interim Report, p.163. According to the report, ‘‘Sevan solicited and received on behalf 

of AMEP oil allocations totaling 14.3 million barrels, of which AMEP lifted approximately 7.3 

million barrels of oil.’’ (p.151). 9 IIC Interim Report, p.58. 10 IIC Interim Report, p. 109. 11 IIC Interim Report, p.76. 

interest, were ethically improper, and seriously undermined the integrity of the 

United Nations.’’ 8

The seriousness of the charges leveled against Benon Sevan by the IIC Interim 

Report clearly merit criminal prosecution, and the U.N.’s pledge to lift diplomatic 

immunity for Mr. Sevan is an important first step in the right direction. 

Mr. Sevan should also be interviewed by Congressional investigators to shed more 

light on his illicit activities, as well as any criminal activity by members of his staff. 

Besides facing justice, Sevan should additionally serve as a vitally important source 

of information regarding attempts by the Saddam Hussein regime to influence decision-making at the U.N. and the Security Council. Several key questions need to 

be answered:

— How did Sevan manage to blatantly flout U.N. rules without any suspicions 

being raised?

— Why was there no oversight of Sevan’s management of the Office of the Iraq 

Program?

— To what extent was Kofi Annan aware of corrupt practices within the OIP?

— Were other U.N. staff assisting Sevan with his illicit activities?

— How extensive were the ties between Sevan and the Saddam Hussein regime?

— How was Sevan picked to become Director of the OIP?

— Were allegations of corruption leveled against Sevan when he served in previous U.N. positions? 

• Boutros Boutros-Ghali, Banque Nationale de Paris and the UN Escrow Account 

The UN’s decision to appoint the French company Banque Nationale de Paris 

(BNP) to administer the Oil-for-Food escrow account is the subject of intense scrutiny in the IIC Interim Report. Vast sums of money were handled through the escrow account. The Saddam Hussein regime sold more than $64.2 billion of oil under 

the Oil for Food Program between 1996 and 2003.9 BNP was selected by then U.N. 

Secretary General Boutros Boutros-Ghali, even though the decision did not conform 

to the requirement under U.N. financial rules to accept the ‘‘lowest acceptable bidder’’.10

The IIC Report demonstrates that several banks were better placed to manage the 

Iraq escrow account on the basis of their higher credit quality (based on IBCA ratings): Union Bank of Switzerland, Deutsche Bank, Credit Suisse, Citibank and 

Chase Manhattan.11 The U.N. Treasury eventually opted for Credit Suisse as first 

choice to run the escrow account, but BNP was awarded the contract. 

Boutros-Ghali’s decision to select BNP over more qualified competitors should become the subject of Congressional scrutiny. The following questions need to be answered:

— How much influence did Saddam Hussein wield over Boutros-Ghali’s final 

decision?

— To what extent did the U.N. give the Iraqi regime a veto over the choice of 

bank for the U.N. escrow account?

— How close was the relationship between Boutros-Ghali and the Saddam Hussein regime?

— What role did the French government play in the U.N. decision to opt for 

BNP?

— What was the nature of the relationship between BNP and the Iraqi government, both before it won the escrow account, and during the period in which 

it administered the account? 

• The Secretive U.N. Iraq Steering Committee 

The Interim Report sheds initial light on the powerful Iraq Steering Committee, 

created by Boutros-Ghali ‘‘to ensure the timely and effective implementation’’ of the 

Oil-for-Food Program and designed to report to the Secretary General ‘‘on a regular 

basis.’’ It operated in a highly secretive manner, and ‘‘did not keep official records 

15

12 IIC Interim Report, p.69. 13For further biographical details see the IIC Interim Report Glossary of Individuals. 14 ‘‘Internal Audit Reports of the United Nations Oil-for-Food Program,’’ Briefing Paper prepared by the Independent Inquiry Committee into the United Nations Oil-for-Food Program, 

January 9, 2005, at http://www.iic-offp.org/documents/IAD%20Briefing%20Paper.pdf. 15 Ibid.

or minutes of proceedings and determinations.’’ Significantly, the U.N. archives are 

‘‘devoid of records of the Steering Committee.’’ 12

The Steering Committee was chaired by Chinmaya Gharekhan, Under SecretaryGeneral and Senior Adviser to the Secretary-General, and included five other highlevel U.N. officials: Yakushi Akashi, Under Secretary-General for Humanitarian Affairs; Joseph E. Connor (an American), Under-Secretary-General for Administration 

and Management; Hans Corell, Under Secretary-General for Legal Affairs; Marrack 

I. Goulding, Under Secretary-General for Political Affairs; and Yukio Takasu, Assistant Secretary-General and Controller.13

There is a strong case to be made for members of the Iraq Steering Committee 

to testify before Congress, and to assist with the inquiries of Congressional investigators. The impression gained from the Volcker Report is of a powerful policy 

group surrounding the Secretary-General which operated without accountability or 

transparency, and which completely avoided any form of scrutiny. 

The Steering Committee is a symbol of the pervasive culture of secrecy and 

unaccountability within the U.N. system regarding its handling of the Oil-for-Food 

Program. It is in the public interest that the operations of the Steering Committee 

be subject to Congressional investigation. 

The UN Oil for Food Audits 

The Volcker Interim Report should be read alongside the Independent Inquiry 

Briefing Paper which accompanied the release in January 2005 of 55 internal U.N. 

audits on the Oil-for-Food Program.14

It is not hard to see why U.N Secretary-General Kofi Annan strongly resisted the 

release of internal U.N documents relating to the Oil-for-Food Program. The 55 audits produced by the Internal Audit Division (IAD) of the U.N. Office of Internal 

Oversight Services paint an ugly tableau of widespread mismanagement and incompetence on the ground in Iraq, which undoubtedly played an important role in clearing the way for Saddam Hussein to skim billions of dollars from a humanitarian 

program designed to help the Iraqi people. In particular, the United Nations failed 

to effectively oversee the U.N.-appointed contractors whose role it was to inspect humanitarian goods coming into Iraq and the export of oil from the country. In addition, the U.N. wasted millions of dollars as a result of overpayments to contractors, 

appalling lack of oversight, and unjustified spending. 

The U.N. audits were only released after pressure from Congress and the Bush 

Administration, as well as calls from Capitol Hill for U.N. Secretary-General Kofi 

Annan’s resignation. The failure to release the audits earlier has hurt Annan’s reputation and lent the impression of cover-up, as well as reinforcing the general lack 

of openness and accountability on the part of the U.N. with regard to Oil-for-Food. 

In reference to the 24 U.N. audits conducted between 1998 and 2002 covering procurement, project management, and contract management at the Office of the Iraq 

Program and the Iraq-based organizations, the U.N. Office for the Humanitarian 

Coordinator for Iraq (UNOHCI), the U.N. Center for Human Settlements (UNCHS), 

and the U.N. Department of Economic and Social Affairs (DESA), the Volcker Committee concluded,

[T]he audit reports describe inadequate procedures, policy, planning, controls 

and coordination across numerous areas of activity. Some reports, most notably 

those on DESA, present a wholesale failure of normal management and controls. 

The reports offer a picture of several organizations debilitated by stress and insufficient resources that too frequently operated in an ineffective, wasteful and 

unsatisfactory manner. Based on the reports, it appears the OFFP management 

was not quick to react to criticism and was either unable or unwilling to address 

issues raised by IAD. In cases where monetary losses from inadequate control 

and poor judgment were calculated by IAD, the results were often significant—

approximately $5 million in total.15

The Volcker briefing paper was similarly scathing in its assessment of the findings of the three audits of the performance of the U.N. contractors operating in IraqLloyd’s Register, Cotecna, and Saybolt:

The problems identified by IAD during these audits resulted in approximately 

$1.4 million in total losses. In all three cases, auditors determined that the iniVerDate Mar 21 2002 15:40 Jun 29, 2005 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6621 F:\WORK\OI\020905\98601.000 HINTREL1 PsN: SHIRL
16

16 Ibid. 17 Ibid. 18 Ibid. 

tial contract items were not understood or adhered to by the contractors and that 

OIP (Office of the Iraq Program) subsequently failed to conduct adequate monitoring of contract execution.16

Significantly, the audits do not cover the critically important oil and humanitarian aid contracts signed by the Saddam Hussein regime under the auspices of 

the Oil-for-Food Program. Not one oil or humanitarian goods contract was directly 

monitored by the U.N., despite the fact that monitoring was the direct responsibility 

of U.N. officials. Nor was there any significant audit oversight of the New York 

headquarters of the Oil-for-Food Program. 

That the audits were limited in scope was clearly the result of a major abdication 

of responsibility by the senior management of the United Nations. In the words of 

the Volcker Committee (emphasis added),

There were no examinations of the oil and humanitarian contracts by IAD 

during the OFFP. Oil contracts were not examined with an eye to the enforcement of contract requirements, despite the fact that U.N. officials had contract 

approval responsibilities. It is possible that more comprehensive monitoring and 

a greater emphasis on fidelity to contract requirements would have deterred the 

surcharge scheme that resulted in decreased oil prices and lost revenues to the 

Escrow account. In the same vein, humanitarian contracts were not scrutinized 

to ensure consistency of the goods with the distribution plan under which they 

were purchased. They were also not evaluated on the basis of fairness of the price 

and quantity of goods purchased. Testing the humanitarian contracts for price 

fairness could have revealed irregularities and undercut the Iraqi government’s 

kickback scheme that resulted in lost revenues to the Escrow account and significant sanctions violations.17

In addition, the Volcker Committee also makes clear that the Oil-for-Food audits 

virtually ignored the role played by the Office of the Iraq Program, headed by Benon 

Sevan. This is despite the fact the headquarter’s running costs amounted to 40 percent of the nearly $1 billion in total administrative costs of the Oil-for-Food Program, a staggering figure. As the Committee’s report concludes,

[T]he lack of focus on headquarters functions, oil purchase and humanitarian 

aid contracts, and bank letter of credit operations, in combination with the slow 

pace of audit performance, appear to have deprived the U.N. of a potentially 

powerful agent in helping to ensure accountability, particularly in the early 

years of the OFFP.18

Key Omissions from the Volcker Interim Report 

• The Role of Kofi Annan 

For a 219-page report into U.N. management of the Oil-for-Food Program, it 

seems rather odd that the man with overall responsibility for its operations barely 

merits a footnote. Secretary General Kofi Annan is as elusive as the Scarlet Pimpernel at the height of the French Revolution amidst the weighty pages of Mr. 

Volcker’s report. The IIC has promised further details relating to the role of Kofi 

Annan’s son Kojo in the hiring of the Swiss Oil-for-Food contractor Cotecna, but the 

Secretary-General’s glaring omission from the pages of the Interim Report defies explanation and smacks of political interference. 

Considering the fact that Mr. Annan hand-picked Benon Sevan to head the Oilfor-Food Program, it is extremely surprising that the Volcker report does not seek 

to explore the background to Mr. Sevan’s appointment and his working relationship 

with the Secretary-General. Nor does the Report at any time consider what the Secretary-General might have known about failings with regard to the OFFP at various 

stages of its existence. 

• The Lack of U.N. Oversight of the Office of the Iraq Program 

The IIC Interim Report makes no serious effort to explain why the Office of the 

Iraq Program did not receive significant scrutiny from the Office of Internal Oversight Services. It also makes no attempt to question why Secretary-General Annan 

did not keep an eye on the New York headquarters of the U.N.’s biggest humanitarian operation. The strong friendship between Mr. Sevan and Mr. Annan must 

surely warrant investigation as a possible factor behind the lack of oversight exercised over the Office of the Iraq Program. Clearly, Annan was either asleep at the 

17

19 IIC Interim Report, p.58. 20Quoted by Philip Sherwell and Charles Laurence, ‘‘The Scandal Kofi Couldn’t Cover Up’’, 

The Sunday Telegraph, February 2, 2005, at http://www.telegraph.co.uk/news/

main.jhtml?xml=/news/2005/02/06/wun106.xml 

It should be noted that, despite his friendship with Benon Sevan, Malloch Brown has stated 

that ‘‘no one will be shielded from prosecution. If there are criminal charges, the U.N. will fully 

co-operate and waive diplomatic immunity of staff members, whoever they are.’’ 21Mark Malloch Brown, interview with BBC Radio 4 Today Programme, February 4, 2005, 

at http://www.bbc.co.uk/radio4/today/listenagain/friday.shtml 

22 Ibid. 

wheel and grossly negligent, or deliberately turned a blind eye to widespread mismanagement as well as corruption. 

The role of the U.N. Secretariat should also be brought into question. After all, 

the Volcker Report makes it clear that ‘‘although the Security Council and its 661 

Committee exercised combined supervisory and operational oversight of the Programme, the Secretariat of the United Nations administered its day-to-day operation.’’ 19 The IIC sheds no light whatsoever on the involvement of the Secretariat 

in overseeing the work of the OIP. 

• Attempts by Saddam Hussein to influence Security Council members 

The detailed allegations made by Chief U.N. Weapons Inspector Charles Duelfer 

regarding Iraqi attempts to influence members of the Security Council in an effort 

to lift U.N. sanctions receive scant attention in the Interim Report. The close ties 

between Russian and French politicians and the Iraqi regime and the huge French 

and Russian financial interests in pre-liberation Iraq were almost certainly an important factor in influencing their governments’ decision to oppose Hussein’s removal from power. 

The Oil-for-Food Program and its elaborate system of kickbacks and bribery was 

a major source of revenue for many European politicians and business concerns, especially in Moscow. Congressional hearings on the financial, political, and military 

links between Moscow, Paris, and Baghdad should shed light on the tempestuous 

Security Council debates that preceded the war with Iraq and on the motives of key 

Security Council members in opposing regime change in Baghdad. 

The UN’s Response to the Volcker Interim Report 

The U.N.’s response to the Volcker report was largely expected: guarantees of disciplinary action against two U.N. officials, combined with grandiose promises of institutional reforms, but overshadowed by a collective sigh of relief, a misguided 

sense of vindication, and open mocking of calls for Kofi Annan’s resignation. Notably 

absent from the U.N.’s response was any sign of humility, contriteness or accountability on the part of the U.N. Secretary-General and his senior aides. Indeed, the 

breathtaking arrogance displayed by U.N. officials such as Chief of Staff Mark 

Malloch Brown in the immediate aftermath of the Volcker report, will only confirm 

the fears of many in Congress who seriously doubt the U.N.’s ability to learn any 

lessons from the Oil-for-Food scandal. The word ‘‘apology’’ clearly does not appear 

to exist in the U.N. staff handbook, and it is hard to avoid the conclusion that the 

leadership of the United Nations continues to exist in a state of self-denial with regard to the institution’s declining credibility. 

The words of Mark Malloch Brown, former head of the United Nations Development Program (UNDP), and Annan’s newly appointed right hand man, deserve careful Congressional scrutiny, if proof be needed of the U.N.’s lack of genuine commitment to holding itself accountable for the Oil-for-Food debacle. Malloch Brown, who 

counts Benon Sevan as ‘‘a lifelong colleague and a dear dear friend’’ 20, has been 

quick to downplay the broader significance of Volcker’s findings. 

Malloch Brown has slammed U.S. critics of the U.N.’s management of the Oil-forFood Program by arguing in an interview with the BBC that ‘‘frankly from our point 

of view this report today is overall good news . . . This report says the program overall was apparently well managed—money was not going missing. It was used for the 

purposes it was assigned. The problems were limited to the margins.’’ 21

Malloch Brown dismissed the suggestion that the Oil-for-Food scandal may be the 

biggest financial scandal in the history of the U.N., telling the BBC that ‘‘it is 

dwarfed by corporate scandals. It is dwarfed by government scandals around the 

world. Because it is the U.N. it has a particular resonance because this is the snake 

in the garden of Eden.’’ 22

In Malloch Brown’s view, the real culprit in the Oil-for-Food scandal is not the 

U.N., but members of the Security Council such as the United States, who it is alleged turned a blind eye to illicit oil smuggling. Completely ignoring the findings 

of the U.S. Senate Permanent Subcommittee on Investigations, and the General AcVerDate Mar 21 2002 15:40 Jun 29, 2005 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6621 F:\WORK\OI\020905\98601.000 HINTREL1 PsN: SHIRL
18

23See ‘Comparison of Estimates of Illicit Iraqi Income During United Nations Sanctions’, IIC 

Interim Report. 24 Ibid. 25Stephanides was Chief of the Sanctions Branch and Deputy Director of the Security Council 

Affairs Division, United Nations Department of Political Affairs, in 1996. 

countability Office (GAO), that the Saddam Hussein regime illicitly gained billions 

of dollars through the Oil for Food Program23, Annan’s Chief of Staff challenges 

Congressional critics to ‘‘look a little closer to home’’ with regard to the estimated total of $21 billion siphoned off by Saddam: 

‘‘This report (the Volcker Interim Report) makes it clear that a very very very 

tiny fraction of that was within the U.N. program. Most of it was oil smuggling 

condoned by the United States and other Security Council members, including 

Britain (and) reported on to Congress as an acceptable breach of the Program, 

which for political reasons had to be allowed. So the billions which went missing 

was because of that kind of realpolitik calculation by governments. The U.N. bit 

of it is a very small part, yet it’s the bit that has attracted all of the attention 

and allegations of corruption, and I think it’s time the critics took this report 

for what it was—an admission that there were weaknesses and failings and perhaps even corruption on the part of one or two individuals, but that it has to 

be put within the context of much broader failures by governments than those 

that occurred within the U.N.’’ 24

Conclusions Regarding the Volcker Interim Report 

The Independent Inquiry Committee Interim Report does a reasonably efficient 

job with regard to its narrow areas of focus. The IIC investigation into the activities 

of Benon Sevan have been detailed, and should rightly pave the way for a criminal 

prosecution. It has shed important light on the workings of the secretive Iraq Steering Committee, and has revealed political interference by a senior U.N. official in 

the procurement of U.N. contractors Saybolt and Lloyd’s Register. 

Perhaps the most significant revelation in the Report is its conclusion that U.N. 

Secretary-General Boutros Boutros-Ghali personally selected the French Banque 

Nationale de Paris to handle the hugely important Iraq escrow account, which administered tens of billions of dollars. This despite the fact that BNP was not the 

best qualified bank to handle the task. Boutros Ghali is likely to be the subject of 

major investigation by Congress in the months to come. 

While acknowledging that this is an interim report, published mid-way through 

the IIC’s investigation, it has to be said, however, that it goes to considerable 

lengths to avoid making broad-based hard hitting criticisms of the U.N. as an institution and the organization’s senior management. To say that the Volcker Interim 

Report has been soft on the United Nations as a world body as well as its leadership 

is an understatement. It is little surprise that the U.N.’s well oiled spin machine 

has begun already to downplay the wider significance of the report’s findings, and 

to laugh off suggestions that senior U.N. managers (with the exception of Sevan and 

another official Joseph Stephanides25) might actually be held accountable for the 

U.N.’s failings and be forced to step aside. 

The complete lack of any criticism, or even mention, of U.N. Secretary General 

Kofi Annan, is a glaring omission that does not engender confidence in the Volcker 

Committee’s goal of producing ‘‘the definitive report’’ into the U.N.’s handling of the 

Oil-for-Food Program. Indeed, history has shown that few organizations are truly 

capable of investigating themselves in a thoroughly objective manner, and the 

United Nations is no exception. The willingness to give the U.N. the benefit of the 

doubt, and permit its head to pick his own ‘independent’ committee of investigation 

with a complete monopoly over documents and witnesses, may in future years be 

regarded as a huge error of judgment. 

PART 2. THE INDEPENDENT INQUIRY COMMITTEE INTO THE UNITED NATIONS OIL-FORFOOD PROGRAM

Problems of Credibility Relating to the Independent Inquiry Committee 

The Volcker Committee may fail to deliver a final exhaustive account of U.N. 

failings and possible criminal activity by U.N. officials for several reasons, including 

a lack of investigative power and an absence of real independence from the U.N. 

Indeed, the five congressional investigations now underway could well prove more 

effective in uncovering the full story of the Oil-for-Food fraud that allowed the Saddam Hussein regime to enrich itself at the expense of the Iraqi people. 

The Independent Inquiry Committee is severely handicapped by its dearth of investigative power. Even if it wanted to, the committee clearly does not possess the 

19

26 John Danforth, quoted in Fox News, ‘‘Danforth: Volcker Doesn’t Have Right Tools,’’ January 

8, 2005, at www.foxnews.com/ story/0,2933,143714,00.html 27Paul A. Volcker, ‘‘A Road Map for Our Inquiry,’’ The Wall Street Journal, July 7, 2004. 28 United Nations Association of the United States of America, 60 Years of Educating Americans About the United Nations: UNA–USA Annual Report 2003–2004, at www.unausa.org/pdf/

publications/2003—annual—report.pdf 29 United Nations Association of the United States of America, Annual Report 2001–2002, at 

www.unausa.org/../pdf/ar02.pdf, and Annual Report 2000–2001, at www.unausa.org/../pdf/

ar01.pdf 30 Independent Inquiry Committee into the United Nations Oil-for-Food Programme, ‘‘Members,’’ at www.iic-offp.org/members.html 

means to fully investigate this gigantic scandal. As outgoing U.S. Ambassador to the 

U.N. John Danforth has pointed out, the IIC is not equipped with the necessary 

tools to conduct a thorough investigation:

The fact that [Volcker] doesn’t have subpoena power, he doesn’t have a grand 

jury, he can’t compel testimony, he can’t compel production of documents and 

witnesses and documents that are located in other countries might be beyond his 

reach . . . 

Those are tremendous handicaps. . . . [W]hat is possible, is that his focus 

would move from the bad acts, from the criminal offenses to something that he 

will view as more manageable—namely the procedures and was it a tight enough 

procedural system, which might be interesting but not the key question to investigate.26

At the same time, there are also major questions regarding the independence of 

the Volcker Committee. So far, the names of just 10 senior staff have been released, 

including Reid Morden, former Director of the Canadian Security Intelligence Service, and Swiss magistrate Laurent Kasper-Ansermet.27 However, no details have 

been released regarding the remaining staff of investigators that are actually doing 

the investigating and handling the huge volume of documents. It remains unclear 

how many former U.N. employees are involved with the committee. It is self-evident 

that a truly independent inquiry into U.N. corruption should not be staffed either 

by former U.N. employees or by any other people with significant ties to the U.N. 

Without any kind of external oversight, the Volcker Committee is clearly open to 

U.N. manipulation. Paul Volcker, handpicked by Annan, is under immense pressure 

from the U.N. to clear the Secretary-General and restore the reputation of the 

United Nations. Refusing to hand over to Congress the 55 highly damaging internal 

U.N. Oil-for-Food audits until January of this year only added to the impression of 

a major cover-up by the U.N. 

Paul Volcker and an Apparent Conflict of Interest 

In addition to the problems outlined above, the fact that Mr. Volcker’s own outlook may be influenced by past associations should be an issue of serious concern. 

It is vitally important that any independent inquiry into the extremely serious allegations against the United Nations over its management of the Oil-for-Food Program be totally independent of the U.N. It is just as important that the person 

heading the inquiry be completely unbiased and objective in his approach to the organization he is investigating. For example, in the corporate world, it would be inconceivable for an independent inquiry into fraud and corruption to be headed by 

someone with strong ties and loyalties to the corporation being investigated. 

However, in the case of Volcker and the IIC, there is an apparent conflict of interest that brings into question whether or not the committee can be relied upon to 

investigate the United Nations objectively. When Volcker was appointed to head the 

Oil-for-Food investigation in April 2004, it was not widely known by the public, the 

world’s media, and the U.S. Congress that he was a director of the United Nations 

Association of the United States of America (UNA–USA) and the Business Council 

for the United Nations (BCUN). Volcker is listed as a director in the 2003–2004 

UNA–USA annual report,28 as well as in the annual reports for 2001–2002 and 

2000–2001.29

His biography on the Independent Inquiry Committee’s Web site does not mention 

his involvement with the UNA–USA,30 a rather striking omission considering that 

he is charged with conducting a highly sensitive investigation into the U.N. Volcker 

does disclose his other institutional affiliations—including the Trilateral Commission, the Institute of International Economics, the American Assembly, and the 

American Council on Germany—but is seemingly shy about his work with the 

United Nations Association. 

20

31Kofi Annan, quoted in United Nations Association of the United States of America, Annual 

Report 2001–2002, p. 9. 32 United Nations Association of the United States of America, 60 Years of Educating Americans About the United Nations, p. 3. 33 United Nations Association of the United States of America, ‘‘The Oil-for-Food Programme,’’ 

talking points, December 2004, at www.unausa.org/policy/newsactionalerts/advocacy/tpoff.asp 34 United Nations Association of the United States of America, Annual Report 2000–2001, p. 

22. 35 United Nations Association of the United States of America, 60 Years of Educating Americans About the United Nations, p. 28. 36See Bill Gertz, ‘‘Bank Lapses Cited in Iraq Oil Program,’’ The Washington Times, November 

18, 2004, at www.washtimes.com/ national/20041118–120331–8156r.htm 

The United Nations Association of the United States of America is a vocal proU.N. advocacy group that ‘‘supports the work of the United Nations.’’ In the words 

of a grateful Kofi Annan:

There are United Nations Associations in many other countries, but this one 

is unique—both in the challenges it faces and in the energy and resources it devotes to tackling them. From our perspective, it is hard to think of any work 

more valuable than what you do to improve the understanding of United Nations 

issues in our host country. 31

A key goal of the United Nations Association is to ‘‘greatly expand and contribute 

to Americans’ understanding of the U.N. and its importance to the U.S. by increasing the channels through which we inform Americans, particularly opinion-makers, 

elites, UNA–USA members and students.’’ 32 It is also a forceful advocate of U.S. 

membership of the International Criminal Court. 

The UNA–USA has played a significant role in defending the U.N.’s response to 

the Oil-for-Food scandal and the leadership of Secretary-General Annan. It has also 

prominently defended the reputation of the Oil-for-Food Independent Inquiry Committee. To a great degree, the UNA–USA has acted as lead cheerleader for the U.N. 

and the Volcker Committee with regard to the Oil-for-Food controversy. Its talking 

points on ‘‘The Oil-for-Food Programme,’’ for example, argue that the Volcker report 

‘‘will be objective, thorough and fair’’ and that ‘‘the U.N. Security Council—not the 

Secretary-General or his staff—had ultimate oversight authority for the Oil-for-Food 

Programme.’’ The UNA–USA has criticized the ‘‘politically motivated attacks’’ on the 

U.N. over Oil for Food and the calls for Annan’s resignation, which it says ‘‘constitute an effort to undermine the U.N., which is a real objective for many of those 

who are distorting the facts on this complex issue.’’ 33

The UNA–USA’s partner organization, the Business Council for the United Nations, works to ‘‘advance the common interests of the U.N. and business in a more 

prosperous and peaceful world.’’ One of its chief underwriters was BNP Paribas,34

the French bank that held the escrow account for Oil-for-Food funds. BNP donated 

more than $100,000 to UNA–USA and the BCUN in 2002 to 2003.35 BNP’s role in 

the Oil-for-Food scandal is currently being investigated by the House International 

Relations Committee,36 as well as by the Volcker Committee. 

Key Recommendations Regarding the Independent Inquiry Committee 

• A mechanism for external oversight of the operations of the Independent Inquiry Committee should be put in place. Its operations are shrouded in secrecy, with little transparency.

• In the interests of openness and accountability, the IIC should fully disclose 

the identities and previous affiliations of all 60 staff members.

• Transcripts of interviews conducted between the IIC and U.N. officials, including Secretary-General Kofi Annan, should be publicly disclosed along with 

the final findings of the IIC.

• Members of the U.N. Security Council should be furnished with regular 

monthly updates on the IIC investigation, including a full list of interviewees.

• A firm date should be set for final publication of the IIC report. The timing 

of the report’s release must not be open to political manipulation by the U.N.

• The United Nations should make available for interview to congressional investigators all U.N. personnel involved in managing and staffing the Oil-forFood Program.

• All U.N. documents relating to the Office of the Iraq Program, headed by 

Benon Sevan, should also be made available to Congress. The U.N. should not 

have a monopoly of vital evidence. 

21

Conclusions Regarding the Independent Inquiry Committee 

Supporters have hailed the Independent Inquiry Committee into the Oil-for-Food 

Program as a huge step forward for the United Nations in terms of increasing accountability and transparency. They have held it up both as an example of a new 

spirit of openness supposedly sweeping through the world body and as a powerful 

symbol of Kofi Annan’s stated objective to restore the reputation of the U.N. 

In reality, the Volcker Committee suffers from a huge credibility problem of its 

own. It is hard to see how a team of investigators handpicked by the U.N. SecretaryGeneral, whose son is himself a subject of investigation, can be considered truly 

independent. There is also a major question mark over its chairman’s neutrality. 

Considering Mr. Volcker’s several years as a director of the United Nations Association and the Business Council for the United Nations, it is difficult to see how he 

could cast a critical, objective eye on the U.N.’s leadership. It is inconceivable that 

Kofi Annan was unaware of Volcker’s close ties to the UNA–USA when he appointed 

him to head the Oil-for-Food investigation. Indeed, it could well have been an important factor influencing his decision. 

There are also major concerns over the IIC’s lack of transparency. The U.N.-appointed investigation has operated in astonishing secrecy, with virtually no outside 

scrutiny. For an inquiry designed to unearth hidden corruption and malpractice on 

a huge scale, it is strikingly opaque. Such is its level of secrecy that its Web site 

does not even contain a mailing address. 

In addition to its clear lack of independence and questionable covert operating 

style, there are serious doubts with regard to the IIC’s ability to do its job. The 

Volcker Committee bears all the hallmarks of a toothless paper tiger: it carries no 

enforcement authority (such as the power to punish contempt) to compel compliance 

with its requests for information and has no authority to punish any wrongdoing 

that it discovers. 

As the U.N. faces a major crisis of public confidence, it is imperative that any investigation of U.N. corruption and mismanagement be seen as independent, open 

and transparent. It is regrettable that the Volcker Committee is failing on all 

counts. Indeed, the U.N.-appointed Independent Inquiry Committee should not be 

seen as the definitive investigation of the Oil-for-Food Program. It should be viewed 

as one of several major investigations and, on current evidence, far less credible 

than its congressional counterparts. 

OVERALL RECOMMENDATIONS

• Kofi Annan Must be Held Accountable for Failings in the Oil-for-Food Program 

In order to begin the process of restoring the reputation of the United Nations, 

Mr. Annan should step down. The fact that Annan remains in office despite growing evidence of widespread U.N. failings with regard to the Oil-for-Food Program 

sends a message of impunity, arrogance and unaccountability on the part of the 

leadership of the United Nations. It also sets a poor precedent for future leaders 

of the U.N., who will be encouraged to believe they will not be held to account 

for the organization’s failures. Annan is increasingly a ‘lame duck’ Secretary-General who has become a severe liability to the effectiveness of the U.N. as a world 

body. Serious reform of the organization to make it more transparent, effective, 

and accountable will be impossible as long as he remains in power.

• Future Inquiries into U.N. Scandals Must be Fully Independent 

The U.N. Secretary-General should not in future be allowed to pick his own 

committee of investigation into a U.N. scandal, and then pass it off as ‘independent’. Such inquiries will always be open to the possibility of political interference and manipulation by those being investigated. Congress should insist on 

future investigations into U.N. scandals being completely independent of the 

United Nations Secretary-General. Chairmen of such inquiries should also be 

asked to disclose on appointment all potential conflicts of interest, either business 

or political.

• An External Oversight Authority Must be Established for the UN 

The U.N.’s Office of Internal Oversight Services lacks the tools, expertise, public confidence, and above all independence, to conduct effective, transparent and 

impartial investigations of allegations of fraud and mismanagement within the 

United Nations. An external oversight body, completely independent of the UN, 

should be established to act as a watchdog over U.N. operations, including humanitarian programs and peacekeeping operations.

• Congress Should Withhold U.S. Assessed Funding for the United Nations 

The United States has been the United Nations’ biggest contributor since it was 

founded in 1945. In 2004, the U.S. contributed $360 million toward the U.N.’s 

22

routine operating expenses—22 percent of the U.N.’s regular annual operating 

budget and more than the combined contributions of France, Germany, China, 

Canada and Russia. Congressional leaders should make it clear that Congress 

will withhold all of the U.S. assessed contribution until the United Nations has 

provided unlimited access to relevant documentation on the Oil-for-Food Program 

and the sworn testimony of U.N. officials. The withheld funds should be placed 

in an escrow account, with future disbursement contingent on these matters being 

satisfactorily resolved.

Mr. ROHRABACHER. Thank you very much, Dr. Gardiner. I could 

almost hear Margaret Thatcher’s accent there as you testified. 

George Lopez, Dr. Lopez, is with us today. He is a Senior Fellow 

with the Joan B. Kroc Institute for International Peace Studies at 

the University of Notre Dame. He has written more than 20 articles and five books, most notably, The Sanctions Decade: Assessing 

U.N. Strategies in the 1990s and Sanctions and the Search for Security. His policy briefing, ‘‘Winning without War: Sensible Security 

Options for Dealing with Iraq,’’ has been incredibly influential, and 

he has been investigating the U.N. sanctions on Iraq since 1992. 

Dr. Lopez, we appreciate you being with us today, and you may 

proceed. 

STATEMENT OF GEORGE A. LOPEZ, PH.D., SENIOR FELLOW, 

JOAN B. KROC INSTITUTE FOR INTERNATIONAL PEACE 

STUDIES, UNIVERSITY OF NOTRE DAME 

Mr. LOPEZ. Thank you, Mr. Chairman, and thank you to all on 

the Committee for this marvelous opportunity. I would particularly 

like to accept the gracious extension of the New England Patriots 

coach from Congressman Delahunt and also accept what I know 

would have been his thanks for me traveling last night when I had 

to miss the Irish victory over Boston College in that marvelous basketball game. 

Mr. ROHRABACHER. Boy, was that a way to treat the guy who invited you here. [Laughter.] 

Mr. LOPEZ. But this should be our last laugh of the next 5 or 6 

minutes. 

I am delighted to be here this afternoon and to share with you 

my remarks, which are extended, of course, in written form for 

your review. I would highlight now, with regard to this important 

management-reform investigation, concerns in which I would like 

to examine three critical areas. What have we learned from this 

IIC Interim Report about the Oil-for-Food Program and about the 

substantial charges that have been operative in our political culture about how the U.N. and the U.N. Oil-for-Food Program 

worked? 

In reviewing these findings, I would like to speak to what has 

been broken in the system and how to deal with these abuses and 

irregularities, with particular focus in the third aspect of my remarks on how to overcome this flawed behavior to build an effective institution for the security, not only of the globe, but particularly of the United States. 

In terms of findings, the IIC Volcker report provides substantial 

data, it seems to me, in various areas that have dominated our debate thus far. First, and most important, Mr. Volcker has separated for us in this report matters of the Oil-for-Food Program 

which were under the purview of the Secretariat, and for which 

23

that institution must be held accountable, and those individually 

who worked for it from the workings of the Security Council, 

which, at the end of the day, was in charge, through its 661 Committee, with virtually all matters and structured decisions with regard to the sanctions and the working of the Oil-for-Food Program 

itself. 

Under these conditions, Mr. Volcker has recognized that often 

member states made decisions in the context of executing the Oilfor-Food Program which countervailed the sanctions regime itself. 

We have for us here the Duelfer chart, which illustrates the dynamic in which trade operated to underscore Security Council larger concerns as it formulated not only the sanctions in the early 

’90s, but particularly as it brought on line the Oil-for-Food Program. I would be happy to speak to this in more detail in questionand-answer, as it occupied a good deal of my own study through 

the mid-1990s. 

To Mr. Volcker’s credit, he has presented to us an analysis of Oilfor-Food impropriety and mismanagement within the Secretariat, 

to which I would like now to turn. First and foremost, it seems to 

me, Mr. Volcker has shed detailed light on the 2.2 percent account, 

the proceeds from the Iraqi oil sales which were used throughout 

this time to cover the U.N.’s administrative costs. 

Volcker found that the U.N., contrary to continued assertions in 

the press, did not treat this money as a commission, as has been 

alleged. It was not a profit-making enterprise in either design or 

practice. Rather, he found that the 2.2 percent account was a legitimate, transparent charge for Oil-for-Food, and as many on this 

Committee well know, after the change of regime in Iraq through 

United States intervention, the accounting for 7 years of program 

operation funds yielded a surplus of $372 million, in fact, nearly 27 

percent of the $1.4 billion funds that were this 2.2 percent account, 

and it was turned over to the CPA. 

A second matter of concern in the report: The report illustrates 

for us the conflict of interest and the difficult behaviors associated 

with a number of U.N. officials. That is well known in the press. 

I will not deal with this. But I do believe that it is important to 

note that beyond individual charges, the report details for us a 

process of bidding and shows us that, in 1996, this contract process 

was highly politicized and deeply flawed because of the ambiguities 

that existed between the administrative dimensions of the Oil-forFood Program and the role, purpose, and direction of the policies 

of the Security Council. 

I will hold off my remarks to question-and-answer with regard to 

the auditing dimensions and the marvelous array of findings presented in chapter 5 of the report. I think the bottom line for our 

investigation really sits in thinking about meaningful reform. 

Gentlemen, I would like to raise the following very plausible scenario with you. Sometime in the near future, a resource-rich nation 

ruled by a dictatorial regime is likely to engage in law-violating behavior vis-a-vis its own population or its neighbors. These actions 

being perceived as a threat to regional and international security, 

will attract international attention and discussion at the United 

Nations, with the United States being in the lead. Given the dynamics that exist in chapter 7 and our own current national secuVerDate Mar 21 2002 15:40 Jun 29, 2005 Jkt 000000 PO 00000 Frm 00027 Fmt 6633 Sfmt 6601 F:\WORK\OI\020905\98601.000 HINTREL1 PsN: SHIRL
24

rity needs, it is highly likely that the U.N. community will turn 

again to coercive sanctions as a means for redressing the grievances that the world community feels in this regime. 

In an attempt to manage those sanctions and in an attempt to 

mitigate the worst aspects that those sanctions will have on a vulnerable population, it is highly likely that the United States and 

others will take the lead in the Council to establish a percentage 

of funds that emerge from those sanctions to be used to administer 

a program much like what we saw for nearly 8 years in Oil-forFood. Because this is not a fictitious possibility but, in fact, a real 

crisis contingency, we must use these hearings and other matters 

at Congress to understand what can be done to reform programs 

like Oil-for-Food when they will, as they will, be needed again. 

I would recommend the following actions that emerge from the 

findings and from the statements implicit in the Volcker interim 

report. First, that nearly all of chapter 5’s recommendations on the 

auditing system for the United Nations be adopted. It seems to me 

that this is the most thorough investigation of auditing practices of 

an international agency that we have before us in any area of global governance. 

Second, future sanctions resolutions in which the United States 

participates must clearly and unequivocally prohibit a role of the 

targeted state in negotiating any part of its own penalty mechanisms, and must hold it at arms’ length from adjusting aspects of 

humanitarian operations. 

Thirdly, memoranda of understanding generated by the Security 

Council or the Secretariat must be immediately reconciled with the 

internal U.N. management and procurement policies that exist, lest 

we have the kinds of dilemmas, ambiguities, and inequalities that 

we have under Oil-for-Food. 

Fourth, the Council should standardize the creation of a highlevel panel of outside experts who understand sanctions implementation and, given the particular regional or national context in 

which they unfold, can review not only the sanctions, but review 

the procedures that are in place to look at sanctions. The liaison 

and management of sanctions committee work must move out of 

the Department of Political Affairs at the Secretariat and be placed 

in a newly-created Coordinator of Sanctions Affairs, lest there be 

too much ambiguity in the relationships of authority between that 

DPA role and the Security Council and the Secretariat. 

And, finally, Mr. Chairman and Committee, a new conflict-of-interest and anticorruption code of conduct should be adopted and developed for members of the Secretariat. Member states will need to 

recognize in this process their own obligations not to create such 

situations that continually compromise the work of these international civil servants as they try to execute the mandate of the 

organization and the sanctions in question. 

In conclusion, I think we stand at a very important moment in 

time. The investigations that have been generated by yourselves, 

the international press, and the international community create an 

opportunity, a climate, and structure of reform unprecedented in 

the 60-year history of the United Nations. We will fail the United 

Nations, our country, and the people of Iraq if we do not take creVerDate Mar 21 2002 15:40 Jun 29, 2005 Jkt 000000 PO 00000 Frm 00028 Fmt 6633 Sfmt 6601 F:\WORK\OI\020905\98601.000 HINTREL1 PsN: SHIRL
25

ative opportunities and move ahead with them in institutional 

form. Thank you. 

[The prepared statement of Mr. Lopez follows:]

PREPARED STATEMENT OF GEORGE A. LOPEZ, PH.D., SENIOR FELLOW, JOAN B. KROC

INSTITUTE FOR INTERNATIONAL PEACE STUDIES, UNIVERSITY OF NOTRE DAME

Thank you, Mr. Chairman, for the opportunity to testify before this distinguished 

Committee on the findings of the Independent Inquiry Committee (IIC) of the 

United Nations Oil-for-Food program and to assess the implications of these findings for on-going concerns about UN management and reform. Although the IIC has 

much work yet to do, this interim report, combined with the release of audits in 

January, has moved us substantially down the road of determining detailed answers 

which US citizens and the Iraqis whom the program was meant to aid fully deserve. 

Today I will confine my remarks to three critical areas:

1) What have we learned in the IIC report relative to charges made about the 

Oil-for-Food program?

2) In reviewing these findings, what is particularly ‘‘broken’’ in the system that 

led to the abuses, irregularities and inaccuracies found?

3) Can the UN system correct its inadequacies and overcome its flawed behavior to build an effective, honest organization? 

The IIC Findings 

The interim report issued by the Volcker Commission provides substantial data 

and analysis in various areas that have dominated the debate thus far. First, Mr. 

Volcker has separated throughout the report matters of the Oil-for-Food (OFF) program which were within the purview of the UN Secretariat from those which were 

a function of the Security Council. In so doing he reminds us that UN member 

states—through the Council and the 661 sanctions committee—structured and managed many aspects of the OFF program with various strategic and political considerations in mind. He recognizes how this often led the member states to take decisions 

outside of the OFF which countervailed the sanctions regime and permitted, it 

would seem, Saddam to garner illicit assets outside the eye of the OFF. But the full 

scope of that inquiry will be revealed in a future report. To Mr. Volcker’s credit he 

does not permit this reality of Security Council control to excuse impropriety and 

mismanagement of OFF in the Secretariat, issues to which I now turn. 

Volcker discusses in detail the 2.2 percent of the proceeds from Iraqi oil sales 

which covered the UN’s administrative costs. Volcker found that the UN did not 

treat the account as a ‘‘commission,’’ as has been alleged; it was not a profit-making 

enterprise in either design or practice. Rather, the commission found that the 2.2 

percent account was a legitimate and transparent charge for Oil-for-Food administrative expenses. 

The commission did find a few instances of inadvertent miscoding and one isolated instance where remuneration was not correctly allocated. But the UN’s Board 

of Auditors routinely audited accounting and financial reporting processes. The commission acknowledged that the external audit reports were distributed to the Security Council and others. 

In this regard there is also something significant in what the Volcker report did 

not find or state. Critics have contended that the 2.2 percent fund provided such 

inflated revenue to the UN that the Secretariat had every incentive to enhance Iraqi 

use, if not abuse, of the system and thus derive more income from high volume. No 

evidence that UN staff or Secretariat decisions attempted to inflate Iraqi use of OFF 

exists. In fact, the report notes numerous instances where UN officials brought to 

the 661 Committee evidence of Iraqi product or price manipulation which—if permitted—would have increased UN funds thru the 2.2 administrative formula. Moreover, in the seven years of the program’s operation its funds totaled $1.4 billion; of 

these funds, the UN returned $372 million—nearly 27 per cent of the funds. 

The report examines in detail the three contracts awarded in 1996 for goods inspection and banking services in the Oil-for-Food. The report provides documentation to support one case of conflict of interest, involving Benon Sevan, chief administrator of the Office of the Iraq (OIP) program. The report strongly suggests that he 

profited from illegal oil allocations, in direct violation of UN policy, but it does not 

claim that others in the UN knew of his actions or that his superiors knowingly tolerated them. In a quite different case, an official of the Department of Political Affairs, Mr. Joseph Stephanides, influenced the awarding of two contracts in violation 

of UN procedures. Both officials were suspended by the UN on Monday, and the 

26

Secretary-General has indicated that anyone named in the inquiry will have their 

diplomatic immunity lifted so that full accountability for abuse can be had. 

Beyond these individual charges, the report concludes that the bidding process for 

these three 1996 contracts was highly politicized and deeply flawed, most notably 

because it violated the UN’s own internal procedures and in the tensions existing 

between these rules and the Memorandum of Understanding (MOU) for the mobilization of the OFF program 

Regarding corruption or incompetence under the personal leadership of a Secretary-General, all of the violations cited in the interim report took place in summer 

of 1996, when Boutros Boutros-Ghali served as Secretary-General. Certainly there 

is more to learn about the UN and Mr. Annan in the later years of Oil-for-Food, 

most especially regarding allegations about his son’s relationship with the program 

and his employer, the Swiss company, COTECNA. Mr. Volcker has promised a report on these issues soon. 

What is broken in the system that led to these findings and flaws? 

The IIC provides some direct answers, and some indirect ones, regarding what led 

to and sustained the manner in which the UN system went awry. The most significant and debilitating aspect of the system under investigation may reside in the Internal Audit Division (IAD) and the larger Office of Internal Oversight Services 

(OIOS). Various factors combined to lead to the series of inadequacies in IAD which 

the IIC thoroughly details in chapter 5. Insufficient numbers of staff relative to the 

growing and then insurmountable work load that was the OFF was compounded by 

lack of oversight. In addition, the jurisdictional ambiguities of the Memorandum of 

Understanding between the UN and Iraq and the Sanctions Committee regarding 

certain goods review procedures meant that numerous errors of omission occurred 

in IAD performance. 

As I weigh the inadequacies of administration, the sub-standard auditing of the 

UN Oil-for-Food program, and the scope of wrongdoing detailed in the report, I see 

a weakened and battered Secretariat that needs restructuring in areas I will note 

below. But these realities and the report’s evidence simply do not add up to either 

‘systemic’ corruption or organizational incompetence. We did not have auditors doctoring the books. The scope and detail of the inquiry should inspire confidence—and 

this appears echoed by Mr. Volcker in his remarks in various venues since last 

Thursday—that this is not a bureaucracy run amok, nor a cadre of administrators 

lining their pockets. 

The second and most unfortunate dimension of the UN system that failed lies in 

the chasms of authority and accountability that exists when the Security Council 

and the Secretariat each have responsibility (or lack thereof) regarding UN action 

in complex applications of its mandate. To assign blame to the UN Secretariat for 

‘‘failure to follow its own internal procedures’’ regarding contracting and auditing, 

ignores the hard political reality that surrounded Oil-for-Food, where the dominating political and procedural actor at every juncture was the Security Council. 

The Council’s determination was first to hold together a regional coalition of 

states who would continue to participate in denying Saddam Hussein military 

goods, and then to maintain the flow of humanitarian relief to the people of Iraq. 

That the entire sanctions process and the Oil-for-Food program were politicized and 

that the Security Council, and its individual members, made critical decisions that 

overrode the normal mandates of UN agencies, should surprise no one. Perhaps the 

final report will make this clear. 

Toward Meaningful UN Reform. 

Mr. Volcker’s frank assessments can provide both hope and direction for meaningful UN reform. The inquiry itself has generated a new and needed climate of transparency within the organization. Calls for reformation have been in the air since 

the IIC commenced its work, and I believe the challenges placed on the agenda by 

Congressional hearings has created a momentum for renewal and reorganization of 

staff and structure that is unprecedented in the 60 year history of the organization. 

I advocate that the Congress seize this opportunity in constructive engagement 

with the UN guided by a hardcore realism. As unique as the Iraq sanctions saga 

and its related unprecedented mechanisms like the Oil-for-Food program may have 

been, the hard truth is that we are just a few short events away from again finding 

this scenario:

a resource rich nation, run by a dictatorial regime, engages in law-violating 

actions against its own population and its neighbors. These actions occasion coercive UN economic sanctions, the success of which put various elements of the 

target nation’s vulnerable population at risk. In an attempt to manage and administer the punishment, the Security Council establishes a percentage of the 

27

target’s international accounts be charged for border monitoring and humanitarian relief...

This is not a fictitious possibility, but a real crisis contingency for which we must 

be prepared. Substantial and successful preparation dictates that the US join with 

the UN to achieve a number of UN reforms. The ones I believe most essential include that:

• the adoption of the Volcker proposals for reforming the UN audit system as 

detailed in chapter 5 of the report;

• future sanctions resolutions must clearly and unequivocally prohibit a role for 

the targeted state in negotiating any part of penalty mechanisms, re-adjustments of sanctions, or aspects of humanitarian programs;

• the internal review rules of sanctions committees must be reformed so that 

if some portion of the committee, let us suggest five of the fifteen members, 

seek to initiate policy reviews of committee workings, such will occur;

• UN Memoranda of Understanding must be reconciled with internal UN management and procurement policies at the outset of any sanctions incident or 

international relief program;

• the Council should standardize the creation of a high level, independent, investigative panel of experts who evaluate sanctions implementation, assess 

abuse charges, and review the review processes within six months of each 

sanctions imposition;

• the liaison and management of the Sanctions Committees should be moved 

from the Department of Political Affairs to an independent Coordinator of 

Sanctions Affairs who would be less involved with member states sentiments, 

and charged exclusively with sanctions implementation and monitoring;

• A new conflict of interest and anti-corruption code of conduct should be developed for members of the UN Secretariat. And member states will need to recognize their own obligations not to create such situations as compromise the 

international civil servants which comprise the organization.

These recommendations will go a long way to making for a leaner, more transparent and fundamentally honest United Nations sanctions system. Only with such 

reforms will the UN be equipped to meet the needs of member states like the United 

States who will inevitable turn to Security Council action as a way to uphold the 

rule of law and preserve security in the decades ahead. 

Thank you.

Respectfully submitted, 

George A. Lopez

Mr. ROHRABACHER. Thank you very much, Dr. Lopez. 

Dr. Nimrod Raphaeli was born in Iraq in 1932. He received his 

Bachelor’s from the School of Law and Economics in Tel-Aviv, his 

M.A. from the University of Pittsburgh, and his Ph.D. from the 

University of Michigan. Mr. Raphaeli has also been a Fulbright 

Scholar and a Fellow with the Center for Near East Studies at the 

University of Michigan. He was on staff at the World Bank for almost 30 years and then worked as a consultant for the World Bank 

and the IMF. Now, Mr. Raphaeli works as a Senior Analyst at the 

Middle East Media Research Institute. 

Mr. Raphaeli, you may proceed. 

STATEMENT OF NIMROD RAPHAELI, PH.D., SENIOR ANALYST, 

MIDDLE EAST RESEARCH INSTITUTE 

Mr. RAPHAELI. Thank you, Mr. Chairman, for inviting me to 

speak before your distinguished Committee. In my presentation, I 

will raise more questions than answers, but I would like to start 

by taking a minute to pay tribute to the freedom of the press introduced to Iraq in the wake of ‘‘Operation Iraqi Freedom’’ which 

made it possible for the Iraqi daily, al-Mada, to expose a scandal 

that had international reverberations. And I would like to add, Mr. 

28

Chairman, that there is no evidence whatsoever of forgery regarding the list published by al-Mada which was later confirmed by Mr. 

Duelfer. 

I would like to address the issue of audit, and I have a number 

of questions on that, too. The report makes two significant points 

regarding internal audit. First, there was a lack of focus on oil purchases and humanitarian supply contracts. Second, the report 

found that the resources committed to the program were inadequate. 

On the matter of audit, however, I should bring to the attention 

of this Committee a letter authored by Mr. Shashi Tharoor, the 

United Nations Under Secretary-General for Communications and 

Public Information, and published in the Wall Street Journal on 

February 18, 2004. Mr. Tharoor stated in that letter: ‘‘The program 

itself was managed strictly within the mandate given to it by the 

Security Council and was subject to nearly 100 different audits, external and internal . . .’’ I repeat, 100 different audits 

‘‘. . . between 1998 and 2003.’’ Further, according to Mr. Tharoor, 

the Secretary-General had asserted that these reviews could 

produce no evidence of wrongdoing by the U.N. official. 

This letter raises some highly disturbing questions. First, was 

Tharoor, who was a very senior official at the U.N., trying, knowingly and deliberately, to mislead the public? Second, who authorized the exoneration of Benon Sevan even before the issues were 

properly examined? Third, who counted the so-called ‘‘100 audits’’ 

referred to in Mr. Tharoor’s letter? Fourth, was Mr. Sevan himself 

behind the letter? Fifth, did the Secretary-General approve of the 

letter, or was he at least made aware of it? Sixth, what was the 

reason for the Secretary-General to conclude that there was no 

wrongdoing by the U.N. official? Seventh, and last, was Tharoor 

himself investigated by the Volcker Committee to establish the 

sources of his misleading information? In fact, Mr. Tharoor’s name 

does not appear in the glossary of individuals interviewed by the 

Volcker Committee, and it should. 

Now, the issue about the estimates of Iraqi oil income. Almost as 

an afterthought, the Volcker report offers estimates of illicit funds 

received by the Saddam regime under the Oil-for-Food Program, 

ranging from $9.5 billion estimated by the Coalition for International Justice to an ostensibly high figure of $21 billion offered 

by the U.S. Senate. Whatever the ultimate figure, there is consensus that much oil was smuggled into Jordan, Turkey, and Syria 

for an estimated revenue to Iraq of about $6 billion or $7 billion. 

The questions that arise are the following: First, what was the 

rate of discount offered by the Saddam regime to the recipients of 

the smuggled oil? Second, how did these governments pay Iraq, and 

into what accounts was the money deposited? Third, were the payments for oil recorded in the countries’ current accounts? For example, I could not find in the statistics of the Central Bank of Syria 

any data about oil transactions with Iraq. Fourth, in what banks 

were the payments deposited, and who was authorized to sign 

withdrawal requests from these accounts? And, last, was the Office 

of the Iraq Programme aware of oil smuggling, and did it discuss 

it with the Government of Iraq? 

29

1 Al-Mada (Baghdad), January 25, 2004

2 Al-Mada (Baghdad), January 25, 2004

Now, the implications for the United Nations. The problems with 

the Oil-for-Food Program underscore the lack of experience and 

limited capacity of a large, international bureaucracy such as the 

United Nations to handle a program of such magnitude. As a result, the program was poorly administered, and, indeed, it would 

have fared even worse were it not that the United States and the 

United Kingdom had to place hundreds of holds on contracts 

deemed to be inappropriate, such as contracts for luxury goods, 

grossly overpriced contracts, or contracts to supply goods suspected 

of having a dual application, civilian and military. 

Mr. Sevan went out of his way to support the Iraqi complaints 

about the holds by criticizing the efforts of the U.S. and the U.K. 

to put the brakes on what they rightly perceived as a humanitarian 

program gone awry. 

Now, just a couple of sentences on the reform of the U.N. The 

lack of budget discipline by the U.N. is endemic because of a voting 

system that offers an equal vote to every member, regardless of its 

level of contribution to the U.N. budget. An argument can be made, 

and, indeed, has often been made, that the United Nations must 

respect the sovereignty of each of its members as being equal. This 

argument would be valid with regard to voting on political, economic, and social matters. It cannot be defended with regard to determining how U.N. resources derived from special assessments 

should be disposed of. 

The U.N. should consider adopting a weighted voting system 

such as that which has long governed the Bretton Woods institutions wherein each member country has a vote commensurate with 

its contribution to the capital of the World Bank and International 

Monetary Fund. A two-tiered voting system at the United Nations, 

one for budgetary matters based on weighted voting and one for 

equal sovereignty for everything else, would serve to introduce financial discipline into the U.N., a change that is long overdue. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Raphaeli follows:]

PREPARED STATEMENT OF NIMROD RAPHAELI, PH.D., SENIOR ANALYST, MIDDLE EAST

RESEARCH INSTITUTE

COMMENTS ON THE INTERIM REPORT OF THE INDEPENDENT INQUIRY COMMITTEE

Introduction 

It is, perhaps, a tribute to the freedom of the press introduced to Iraq in the wake 

of ‘‘Operation Iraqi Freedom’’ that an Iraqi newspaper should have been able to expose a scandal that had international reverberations. The ‘‘Oil for Food’’ scandal was 

made public by the liberal Iraqi daily al-Mada’s publication of a list of 270 individuals and entities who had received vouchers providing for the purchase of oil below 

market price.1 The Middle East Media Research Institute (MEMRI) translated the 

article and brought it to public attention in the United States and elsewhere, culminating in investigations by various committees of the US Congress and other government agencies.2

The United Nations was made responsible for administration of the ‘‘Oil for Food 

Program’’ (OFF) under Security Council resolution No. 986 (1995). The procedures 

and mechanics for administering the OFF are rooted in a Memorandum of Understanding between the Government of Iraq and the United Nations dated May 20, 

1996. The United Nations proceeded to administer the OFF by creating a special 

30

office on October 15, 1997, known as the Office of the Iraqi Programme (OIP) and 

designated MR, Benon Sevan, a Cypriot, as its Executive Director. 

After denying any wrongdoing, and after much foot dragging following the publication of the list of 270, which included the name of Mr. Sevan, the United Nations 

appointed a high-level committee to look into the mismanagement and corruption 

associated with the program and the possible involvement of its own senior staff in 

corrupt practices. The Committee is chaired by Mr. Paul A. Volcker and includes 

as members Richard J. Goldstone and Mark Pieth. 

The Interim Report 

The Committee issued an interim report on February 3, 2005. The report addressed, with various levels of comprehensiveness and finality, four key issues:

• The Initial Procurement of United Nations Contractors (1966)

• Benon Sevan and Oil Allocations

• Internal Programme Audits

• Management of the Programme’s Administrative Accounts (2.2%)

There are other issues which remain under on-going investigation, one of the most 

critical of which is the employment of Kojo Annan, the son of Kofi Annan, the Secretary General of the United Nations by a Swiss consulting firm, Contecta, while 

the firm was under contract with OIP. A second critical issue that remains to be 

addressed is the role played by the United Nations-related agencies as suppliers of 

goods and commodities, particularly to the three Kurdish governorates in the north 

of Iraq. The Kurdish press has alleged that these UN-related agencies supplied substandard goods and commodities, particularly food grains, and that they allowed the 

Iraqi Intelligence Services (Mukhabarat) to penetrate their offices at will. 

‘‘The Initial Procurement of United Nations Contractors’’

This chapter of the Committee report deals with the selection of three major UN 

contractors, namely Banques Nationale de Paris, Saybolt Eastern Hemisphere BV, and Llyod’s Register Inspection Ltd. 

The report has found that the selection of these three entities deviated ‘‘from the 

established financial and procurement rules . . . of the United Nations.’’ p110. 

There is evidence of political intervention by member countries of the Security 

Council in favor of the companies of their respective countries; however, there is no 

evidence of corruption although the role of the previous Secretary General of the 

UN, Boutros Boutros-Ghali in the selection of the French bank, BNP, remains to 

be clarified. 

‘‘Benon Sevan’s Oil Allocations’’

In many respects, Benon Sevan, the Executive Director of OIP, has emerged as 

the central focus in the scandal and has received considerable negative criticism by 

the Committee. The allegations against Mr. Sevan are that he used his high position 

and influence vis-a-vis the Iraqi government to secure nine lucrative oil allocations 

for his friend Fakhri Abdelnour, the owner of AMEP and a relative of the former 

UN Secretary General Boutros-Ghali. Although only six allocations for a total of 7.3 

million barrels were lifted, they generated a quick net income of $1.5 million to 

AMEP (p.152). Between 1999 and 2003. Mr. Sevan’s bank account was credited with 

four money transfers totaling $160,000. Mr Sevan has claimed that these money 

transfers were made by his now-deceased aunt to ‘‘defray expenses of her annual 

stay’’ with him and his family in New York. (p.161) 

The report cites strong forensic evidence of Mr. Sevan’s influence peddling. But 

even if such evidence were missing, the notations by the Iraqi oil minister that oil 

had been allocated to Mr. Sevan or to his friend Abdelnour would be sufficient to 

sustain the charges against him, for the following reasons: 

First, under Saddam Hussein, Iraq was a totalitarian regime. The experience of 

such regimes in the first half of the last century shows precise record keeping even 

for the most horrible of crimes. By keeping a meticulous record, government employees shield themselves against accusations of insubordination or malfeasance. 

Second, Mr. Sevan was an important figure for the Iraqi regime, and there was 

no reason to believe that any Iraqi official would try to ‘‘frame’’ him. After all, no 

one at the time of the transactions suspected that the records would become public. 

Two statements by Mr. Sevan indicate his sympathy with Iraq’s frequent protest 

that there were too many ‘‘holds’’ on contracts (primarily by the United States and 

the United Kingdom). In one letter, Mr. Sevan claimed ‘‘to fully share the frustrations of the distinguished Minister of Oil.’’ He promised to ‘‘continue our efforts to 

further reduce the number of holds.’’ (p.145). In the month following his return from 

Baghdad, he stated to the Security Council on August 16, 2000, ‘‘I feel duty bound 

31

to draw the attention of the Council to the unacceptably high level of holds placed 

on applications.’’ (p.146.) 

Third, there is absolutely no evidence of forgery regarding the list published by 

al-Mada, which was later confirmed by Mr. Duelfer. 

Mr. Sevan faces an uncertain future. If the transfer of funds to his account can 

be proven to have originated from an illicit source, he will have to deal with the 

implications and consequences in terms of his income tax statements. 

Internal Program Audits 

The report makes two significant points regarding internal audit: First, there was 

‘‘a lack of focus on oil purchase and humanitarian supply contracts.’’ (p.182). Second, 

the report found that ‘‘the resources committed to the Programme were inadequate.’’

On the matter of audit, however, I should bring to the attention of the Congressional Committee a letter authored by Mr. Shashi Tharoor, the United Nations 

Under-Secretary General for Communications and Public Information, and published in the Wall Street Journal on February 18, 2004. a month after the list was 

published by al-Mada (and, subsequently, by MEMRI) and almost a whole year before the Committee’s interim report was issued. Mr. Tharoor states in that letter, 

‘‘The program itself was managed strictly within the mandate given to it by the Security Council and was subject to nearly 100 different audits, external and internal.’’ 

I repeat, Mr. Tharoor says, ‘‘one hundred different times’’ between 1998 and 2003. 

Further, according to Mr. Tharoor, the Secretary General had asserted that these 

reviews ‘‘produced no evidence of wrongdoing by the U.N. official [Mr. Sevan].’’

This letter raises some highly disturbing questions: 

First, was Mr. Tharoor, a very senior official at the U.N., trying knowingly and 

deliberately to mislead the public or, at least, to deflect the voices being raised in 

criticism of the performance of the U.N.? 

Second, who authorized the exoneration of Mr. Sevan even before the issues were 

properly examined? 

Third, who counted the so-called 100 audits referred to in Mr. Tharoor’s letter? 

Fourth, was Mr. Sevan behind the letter? 

Fifth, did the Secretary General approve of the letter or was he, at least, made 

aware of it? 

Sixth, what was the reason for the Secretary General to conclude that there was 

no wrongdoing by the U.N. official? 

Seventh, was Mr. Tharoor himself investigated by the Committee to establish the 

sources of this misleading information? (In fact, Mr. Tharoor’s name does not appear 

in the glossary of individuals interviewed by the Committee, and it should). 

Management of the Programme’s Administrative Account (2.2%) 

Upon being assigned to administer the Oil for Food Program, the UN established 

a special account referred to as ESD (Escrow Account for operational and administrative costs) to manage the proceeds from the 2.2 percent of the total oil revenues 

earmarked for the program’s administration. Eventually, $1.4 billion was deposited 

in the ESD Account, from the sale of $62.4 billion worth of Iraqi oil. 

Expenditures charged against the ESD account were estimated at approximately 

$910 million, of which $482 million, or 53 percent, was transferred to the UN-related agencies involved with the program (p.37). The Committee found no commingling of funds and commended the UN for maintaining separate accounts. (p.40) The 

Committee has not, however, studied the use and application of funds by the UNrelated agencies and, based on the personal experience of this speaker, special attention must be paid to the culture of overheads which pervades many UN agencies 

in their utilization of off-budget funds. 

Estimates of Illicit Iraqi Income 

Almost as an afterthought, the Committee offers estimates of illicit funds received 

by the Saddam regime under OFF ranging from $9,583 million estimated by the Coalition for International Justice to an ostensibly high figure of $21,149 million offered by the US Senate PIC. (p.41) 

Whatever is the final figure, there is consensus that much oil was smuggled to 

Jordan, Turkey and Syria. The estimated value of the smuggled oil is $1.6 billion, 

$2.1 billion and $2.2 billion, respectively. Further investigation must address the 

following questions: 

First, what was the rate of discount offered by the Saddam regime to the recipients of the smuggled oil? 

Second, how did these governments pay Iraq, and into what accounts was the 

money deposited? 

Third, were the payments for oil recorded in the countries’ current accounts? 

32

3The author was given less than 48 hours to prepare this report and there was not enough 

time to articulate any of these ideas in a comprehensive manner although the direction they 

offer is quite obvious 4 Al-Mada, February 7, 2005

Fourth, in what banks were the payments deposited and who was authorized to 

sign withdrawal requests from these accounts? 

Fifth, was the OIP aware of the oil smuggling and did it discuss it with the Government of Iraq? 

Implications for the United Nations 

The problems with the Oil for Food Program underscore the lack of experience 

and the limited capacity of a large international bureaucracy, such as the United 

Nations, to handle a program of such magnitude. As a result, the program was poorly administered and, indeed, it would have fared even worse were it not that the 

United States and the United Kingdom had placed hundred of ‘‘holds’’ on contracts 

deemed to be inappropriate, such as contracts for luxury goods, grossly overpriced 

contracts, or contracts to supply goods suspected of having a double usage-civilian 

and military. 

Iraq complained bitterly over the years about these ‘‘holds,’’ which, they alleged, 

were inflicting harm on the Iraqi people, particularly young children. Mr. Sevan 

went out his way to support the Iraqi claims by criticizing the efforts of the U.S. 

and the U.K. to put the brakes on what they rightly perceived as a humanitarian 

program gone awry. 

However, the US and the UK could have done more. For example, they could have 

intercepted with their fleets in the Gulf the big oil tankers carrying illegal shipments of oil. Instead, they chose to intercept little boats. And during all this time, 

the United States remained one of the largest buyers of Iraqi oil. 

Lack of Budget Discipline 

The lack of budget discipline by the UN is endemic because of a voting system 

that offers equal vote to every member regardless of its level of contribution to the 

UN budget. An argument can be made and, indeed, has often been made, that the 

United Nations must respect the sovereignty of each of its members as being equal. 

This argument would be valid with regard to voting and political, economic and social matters. It cannot be defended with regard to determining how UN resources, 

derived from special assessments, should be disposed of. It is quite absurd that the 

United States should be left defending its position vis-a-vis a hundred other countries whose combined contributions may not match hers. 

The UN should consider adopting a weighted voting system such as that which 

has long governed the Bretton Woods institutions, wherein each member country 

has a vote commensurate with its contribution to the capital of the World Bank and 

the International Monetary Fund. A two-tier voting system at the UN, one on budgetary matters, based on weighted voting and one of equal sovereignty for everything 

else would serve to introduce financial discipline into the UN—a change that is a 

long overdue.3

Ms. al-Suhail at the State of the Union Address 

In addition to the corruption on which the report focuses, there have recently 

emerged some sinister dimensions to the OFF. 

In the course of his State of the Union address on February 2, President George 

W. Bush introduced Ms. Safia Taleb al-Suhail, who is a leader of the Iraqi Women’s 

Political Council and whose father was assassinated by agents of Saddam Hussein. 

On February 7, in al-Mada, the daily which first published the list of the oil coupon 

recipients, there was an article by Mr. Bakhtiar Amin, Iraq’s Interim Minister of 

Human Rights and Ms. al-Suhail’s husband, stating, inter alia, that the murderer 

of Ms. al-Suhail’s father Sheikh Taleb al-Suhail was Lebanese national George 

Dijerian who received a voucher for 7 million barrels for his criminal action.4 This 

episode raises a whole set of new questions regarding the misuse of the Oil for Food 

Program (OFF) by Saddam Hussein to finance terrorist organizations and terrorist 

activities—matters which still must be looked into. 

Mr. ROHRABACHER. Thank you all very much. We will now proceed with the questions, and each Member will have approximately 

5 minutes to ask you your opinion or express opinions of their own 

on what we have heard today. 

I would like to start with Mr. Gardiner. Dr. Gardiner, you mentioned that the Banque Nationale de Paris was not the best bank 

33

to handle the Oil-for-Food Program, and we know that Dr. Boutros 

Boutros-Ghali insisted that that bank be used as that vehicle, as 

that organization. What do you have to justify your analysis that 

says that it was not the best bank? 

Mr. GARDINER. Well, the Volcker interim report does go into considerable detail with regard to the background relating to the procurement of Banque Nationale de Paris for running the escrow account, and the report does reveal that, in fact, there were two short 

lists originally drawn up by the U.N. for consideration. The first 

short list had a list of 18 banks based on credit rating, and BNP 

was not actually one of those original 18 banks. 

Mr. ROHRABACHER. That was a list that was made up by the 

United Nations itself? 

Mr. GARDINER. Yes. 

Mr. ROHRABACHER. The bank that was ultimately chosen was left 

off of the first short list? 

Mr. GARDINER. Yes, the first short list. 

Mr. ROHRABACHER. So they apparently did not think that it had 

the credentials. 

Mr. GARDINER. Yes. And I believe that list was originally drawn 

up by the U.N. Treasury. 

There was then an intervention, I believe, by the Saddam Hussein regime requesting preference toward either French or Swiss 

banks. 

A second short list was drawn up containing, I believe, six major 

banks, including BNP, and, again, it was found that BNP ranked, 

I believe, number four or number five out of the six in terms of 

overall eligibility. 

Mr. ROHRABACHER. Ranked by whom? 

Mr. GARDINER. I believe it was by the International Banking Association based in London. I think it is IBCA. 

Mr. ROHRABACHER. So there is someone with certain expertise 

who is telling us that this was not the best decision to make? 

Mr. GARDINER. Yes. 

Mr. ROHRABACHER. Thus, when Mr. Ghali insisted, this meant 

that he was insisting on this for other reasons rather than professional expertise? 

Mr. GARDINER. Certainly. There was a high degree of, I think, 

political interference here, and ultimately Boutros Boutros-Ghali 

selected BNP pretty much based on his own decision after consulting the Iraqis. It does appear that the United States representative to the U.N. at the time, Madeleine Albright, did not oppose 

the selection, and this, I think, is an area of further inquiry. 

Mr. ROHRABACHER. Mr. Lopez, part of your testimony is that 

when we do have these situations in the future, that the country 

that is going to face certain sanctions not be included in the planning of the sanctions, how the sanctions will operate, so that is one 

of your recommendations. Obviously, they were listening to Saddam Hussein and his recommendations as to what bank to use, as 

well as Boutros Boutros-Ghali. Correct? 

Mr. LOPEZ. I think that is the case, but I think it is also important, Mr. Chair, to put this in a particular kind of context. Let us 

remember that the humanitarian intervention that the United Nations Security Council sought in resolution 986 had been in formuVerDate Mar 21 2002 15:40 Jun 29, 2005 Jkt 000000 PO 00000 Frm 00037 Fmt 6633 Sfmt 6601 F:\WORK\OI\020905\98601.000 HINTREL1 PsN: SHIRL
34

lation since the end of 1993. We were in a difficult dynamic in 

which having a strong sanctions regime and a robust inspection 

process had put us in a situation with the regime that was using 

the humanitarian crisis in Iraq to beat Western powers and the 

U.N. itself over the head with inflicting damage on the people. 

Mr. ROHRABACHER. Dr. Lopez, let us make sure people understand what you are saying here. A lot of people have amnesia 

about what went on 10 years ago——

Mr. LOPEZ. Yes. 

Mr. ROHRABACHER [continuing]. In this program. We initiated 

the sanctions against Saddam Hussein after the invasion of Kuwait, and they were aimed at trying to convince him to reform his 

regime or at least to ensure that his regime would not gain the 

military powers necessary to repeat that type of military aggression. 

At the same time, consideration for the humanitarian needs of 

his people was part of the planning process, and this whole program started with an idea that we were going to provide him 

enough revenue so that all of the medicine and food and other humanitarian supplies needed by the Iraqi people would be available 

to them because there would be enough money for them. Yet what 

happened—and you can jump in and correct me if I am wrong—

was that Saddam Hussein, perhaps in collusion, now that we find 

out, with some certain people who were supposed to be overseeing 

the program, used this money for his own self-aggrandizement as 

well as weapons as well as bribes and political skullduggery. Thus, 

there were a number of people who were suffering in Iraq. That 

was being blamed on the United States and those of us who were 

behind these sanctions. 

So let us remember that when we are discussing what happened 

here. I remember very well that there were many people in this 

country who should have known better who were blaming the 

United States for hungry children in Iraq when they should have 

been blaming Saddam Hussein. And people need to look back in 

the record and find out who was saying those things, that we were 

responsible for the deaths of these Iraqi children, which led to some 

alteration of this whole program, which, in the end, led to strengthening Saddam Hussein’s regime. 

Mr. Lopez, you suggest that all of the auditing requirements and 

suggestions of Mr. Volcker be put into place. Is there anything specific that you disagree with Mr. Volcker about? 

Mr. LOPEZ. Well, I think there is yet a lot to be told in future 

reports. I go back to the Duelfer chart that you have entered into 

the record and realize that we have a very narrow window on the 

amount by which Saddam was able to corrupt the system. Under 

Oil-for-Food, this is about 141⁄2 percent of revenues derived. 

Congressman Flake raised the concern that the absconded funds, 

the way to subvert the system, led to palaces and other things. I 

do not know if we have an exact paper trail about where all of that 

money went, but the money that was outside the Oil-for-Food system is nearly 85 percent of that, and Mr. Volcker, I hope, will answer those questions. 

Mr. ROHRABACHER. Right. 

Mr. LOPEZ. But to bring back to your original remarks——

35

Mr. ROHRABACHER. Before you go on, let me just note on that 

issue that with the cracks in the sanctions program, not the Oilfor-Food Program but the sanctions, these were actually policy decisions made quite often during the Clinton Administration—and 

even before—that were not necessarily reflecting corruption or selfenrichment but, instead, were reflective of thought-out policy decisions, making priorities, et cetera. Is that not correct? 

Mr. LOPEZ. I think that is very correct, and, in fact, we have to 

be cautious about a kind of national revisionist history as we look 

back from this moment in time. The United States and its allies 

on the Security Council were faced with the dilemma of how to 

keep tight, regional cooperation of Governments like Jordan and 

Turkey, whose local economies were paying a very heavy price by 

participating in the sanctions. 

Mr. ROHRABACHER. But that decision was not reflective anyway 

of a corruption of our leaders, payoffs or a lack of character——

Mr. LOPEZ. No. It is not corruption. It is a national security decision. 

Mr. ROHRABACHER. However, when we are talking about the Oilfor-Food Program and the decisions made there, we are actually 

talking about specific self-enrichment and possible corruption that 

led to those decisions, not some policy decision. 

Mr. LOPEZ. It is a little difficult, I think, to separate the climate 

of 1993 to 1997 on the Oil-for-Food side from the wider scope of 

concern by Security Council members that we hold together this coalition to continue to put the squeeze on Saddam. There are ways 

in which now it looks to us, with the charts and other things, that 

Oil-for-Food was here, and the other things were there, and that 

is certainly a part that we need to investigate. But the truth of the 

matter is, on a daily basis, at the Security Council and in Senate 

and congressional investigations here, we were thinking about a 

package of sanctions, a package of programs, that would do two 

things: Deny Saddam weapons so he could not create havoc in the 

region and, at the same time, meet the humanitarian crisis. Those 

were virtually inseparable. 

Mr. ROHRABACHER. So over a decade period, we were trying that 

approach——

Mr. LOPEZ. Right. 

Mr. ROHRABACHER [continuing]. And it demanded some tweaking 

of the system and modification of the system as it went forward. 

It did not seem to work, unfortunately. 

Mr. Blumenauer will now take those 5 minutes from Mr. 

Delahunt. 

Mr. BLUMENAUER. Thank you. Thank you, Mr. Chairman. Thank 

you, Mr. Delahunt, for your courtesy. 

I do not want to start by being nitpicky, but I have heard a couple of my colleagues talk about this as the greatest financial scandal in the history perhaps of the world, and I am just thinking, in 

my community where we lost almost a billion of the $60 billion 

that collapsed in the Enron debacle, and people throughout the 

West were cheated in terms of electrical rates, as my friend from 

California knows, to somehow suggest that this is the biggest financial scandal in the history of the world compared to just one little one that we experienced back home in Oregon and in Houston 

36

troubles me a little bit. I have a little difficulty accepting this as 

being the biggest financial scandal in the history of the world. 

Mr. DELAHUNT. Would the gentleman yield for a moment? Would 

you describe that as the Enron and the Tyco and——

Mr. BLUMENAUER. No, just Enron. 

Mr. DELAHUNT. Just Enron as the mother of all financial scandals. 

Mr. BLUMENAUER. I defer to my Ranking Member. But putting 

that aside, people can characterize it as they will, I wanted to ask 

each of the Committee witnesses, if they would, to just submit, in 

a short, written statement because we would not have time to be 

able to explain it in my 5 minutes, but I would like your thoughts 

as to whether or not the overall Oil-for-Food scheme that was put 

in place was successful in terms of a sanctions regime that ended 

up hollowing out the Saddam Hussein regime and contributing to 

its collapse in the face of American invasion. Just your judgment, 

on balance, if you think it was useful or successful. 

I am trying to place this in context, and I would start with a 

question. Dr. Lopez, you mentioned the dynamics that take place 

with the Security Council, that you would be willing to go into 

greater detail. We are talking about less than $2 billion that was 

involved here as questionable sums, yet it appears as though the 

Security Council looked the other way when there was almost $9 

billion of illegal trade, as shown on the chart that was referenced 

here before. And I am curious if you can indicate whether or not 

we should be just as concerned, or maybe five times as concerned, 

about the corruption of the process that led to the United States 

and other Security Council members looking the other way when 

this illegal trade occurred, enriching this regime, and describe 

briefly what that dynamic was. 

Mr. LOPEZ. Thank you. I think, when we talk about the candy 

striper dimension of the chart here, and we want to get to the monies that flowed illegally to Saddam or he was able to exploit, we 

are talking about two or three different dimensions of the way the 

system worked. The first, and most important, the most corrupt, it 

seemed to me, is the one that the Iraqi regime dreamed up at the 

end of 1999. It was the surcharges on the oil packages that were 

coming forth, and having tried various ways to break the sanctions 

and also to undercut the increasing efficiency of Oil-for-Food as it 

changed caloric and protein intake on the ground with Iraqi children, one of the things that the Saddam folks dreamed up was this 

notion of, in granting the oil contracts, to add their own surcharge. 

As you well know, Mr. Volcker documents part of this. 

There was also a second scheme under Oil-for-Food that we did 

not become aware of until later, and that is that in the importing 

of the humanitarian goods, Saddam was willing to pay a higher 

price, at least at-list, than he was actually willing to pay. So if you 

were going to sell me foodstuffs, I would buy $10 million list price 

but actually only send out $6 million, therefore, saving $4 million 

off the books. 

The combination of the surcharges and the overpricing for humanitarian goods comprise the bulk of what we see in these difficulties. At the same time, these things were not 6, 9, 12 months 

37

after the fact undiscoverable. In fact, the 661 Committee and the 

audit system caught these things. 

We have an interesting dynamic that happens between the fall 

of 2000 and the early part of 2002. Having recognized that the surcharges were occurring on oil, in fact, the Oil-for-Food administration program and the Secretariat bring these difficulties to the 661 

Committee. Mr. Volcker details for you ways in which the 661 

Committee says, fine, Saddam is playing games with overcharging. 

We will cut the price of oil in the following 6-month interval to readjust the price so they do not garner more of these revenues. 

Did we catch all of them? Probably not, but an interesting thing 

happens actually on the humanitarian side. Because you pulled the 

bottom out of the oil prices at that moment in time in early 2001, 

there are actually fewer monies available at that moment in time 

for the humanitarian operation. This back and forth, back and 

forth was standard procedure between the Oil-for-Food administrative program and the 661 Committee because you had what, a determined, obstinate, dictatorial regime trying to break the sanctions as we were imposing an unprecedented new form of governing 

how they were to receive humanitarian aid. 

No one wants to make apologies for the inadequacies, certainly 

not the inefficiencies, nor discoverable corruption, but let us make 

sure when we talk using, let us say, I think the GAO figures of the 

amount of leakage that occurred in the system were monies we 

were trying to catch up on throughout the early part of this decade, 

and other events overtook this in time. I would suggest the humanitarian program could have caught up with itself over time in the 

surcharges and in the overpricing dynamic, and there is evidence 

that we did that through 2002. 

To deal with your first question, if I might, in terms of climate—

are you out of time? Okay. 

Mr. BLUMENAUER. He wanted to finish the answer. 

Mr. LOPEZ. Let us talk about the trade dynamic because it was 

so related to the way we understood our obligations under Oil-forFood. Let us remember that, under United Nations trade sanctions, 

what happened in Iraq is historically unique. Rather than having 

states opt out of a coercive economic system and cheat their neighbors by trying to win short-term gains in trade, actually, in the 

early 1990s, we imposed a tight vise around the economy of Iraq. 

It helped that it was a single-export economy, but this was the 

most dramatically successful, economic-strangulation program of 

our time. The dilemma was it did not produce the political compliance that such economic strangulation is supposed to produce. 

Mr. ROHRABACHER. If I could ask you at this point, what you are 

describing, Mr. Sevan was involved with the decision-making in 

this type of strategy? 

Mr. LOPEZ. I think he was involved in a great deal of the execution. He was probably involved in some of the strategizing and the 

development of some policies because he was the point person in 

going back and forth with the Iraqis. 

Mr. ROHRABACHER. Okay. So you are suggesting that Mr. Sevan 

is not culpable? 

Mr. LOPEZ. No. I have said nothing of the kind, Mr. Chair. 

38

Mr. ROHRABACHER. That is why I want to ask you, because what 

you seem to be describing is a maneuvering that would be a rational maneuvering that is not based on some sort of corrupt decisionmaking. Was there corrupt decisionmaking as well in the play of 

this? 

Mr. LOPEZ. I suspect the evidence will show that there was some. 

What there was, was an air of expediency and necessity driven by 

two outstanding goals: Maintain tight sanctions so that weapons 

and weapons-related parts do not get in and maintain a robust delivery of humanitarian services. 

Mr. ROHRABACHER. But, of course, Mr. Sevan solicited oil vouchers. 

Mr. LOPEZ. It seems that way. 

Mr. ROHRABACHER. Right. 

Mr. LOPEZ. And he may very well have been singular in the operation of this program. I do not have privy to all of that information. 

It certainly was not the design of the program, and it was not 

meant to be the way that the program was to operate. 

Mr. ROHRABACHER. Okay. Thank you very much. 

Mr. Green? 

Mr. GREEN. Thank you, Mr. Chairman. First, Mr. Chairman, my 

friend and colleague, Mr. Blumenauer, was questioning the usage 

of how we describe the scope of the scandal. The numbers range 

from 9 to $21 billion, what we know just on the oil side, but I think 

another dimension to the scandal we must not lose sight of is what 

the money was used for. 

The money was used, arguably, to build weapons of mass destruction or at least pursue that program. Certainly, it was used 

to procure tools of repression. That is what the reports say, and beyond that, again, my great concern is that the money was certainly 

used to block diplomatic tools that would have given some hope to 

bringing Saddam into line with his obligations without resorting to, 

obviously, the conflict that we have seen. So I think it is hard to 

overstate the immensity of the scandal in terms of its implications. 

Dr. Raphaeli, I am going to give you an opportunity to expound 

upon one portion of your written testimony that you did not read 

or refer to, but I found quite stunning. And that is your final paragraph and reference to Ms. al-Suhail at the State of the Union address, if you would like to perhaps talk about that a little bit. I 

think that is of great interest to many of us here. 

Mr. RAPHAELI. In the course of his State of the Union address 

on February 2nd, President George W. Bush introduced Ms. Safia 

Taleb al-Suhail, who is the leader of the Iraqi Women’s Political 

Council and whose father was assassinated by agents of Saddam 

Hussein. 

On February 7, al-Mada, the same newspaper which broke the 

scandal about the oil vouchers, published an article by Mr. 

Bakhtiar Amin, who is Iraq’s interim minister of human rights and 

husband of Ms. Suhail, in which he indicated that the father was 

assassinated by a Lebanese national who received a voucher for 

seven million barrels as a reward for his criminal act. ‘‘This episode,’’ I wrote, ‘‘raises a whole set of new questions regarding the 

misuse of the Oil-for-Food Program by Saddam Hussein to finance 

39

terrorist organizations and terrorist activities,’’ matters which still 

have to be looked into. 

Mr. GREEN. So the implication is that, above and beyond everything else that we have been talking about here, the woman who 

we rightly honored during the State of the Union speech, her father 

was apparently assassinated by one of the recipients of the vouchers under the Oil-for-Food Program. 

Mr. RAPHAELI. That is correct. 

Mr. GREEN. That is absolutely staggering, absolutely staggering. 

Mr. Chairman, I think this is a matter that we should try to obtain more information on. 

Mr. ROHRABACHER. The Chair will work with you in making 

whatever requests are needed and with the legal umph behind 

them to make sure that the requests for information are met. 

Mr. GREEN. Thank you, Mr. Chairman. I thank the witness. 

Mr. RAPHAELI. I would like to beg your indulgence and go back 

to the question of the Banque Nationale de Paris. This is really one 

side of the story. The other side is that Saddam Hussein had made 

the decision at the time, first, to select a French bank and, second, 

to price Iraqi oil in euros rather than dollars, as he stated at the 

time, as a form of punishment for the United States. 

So I think we should keep that in mind that there are two dimensions to the story: The euro and the French bank. Thank you, 

Mr. Chairman. 

Mr. ROHRABACHER. And was it in euros in the end? Was that the 

decision? 

Mr. RAPHAELI. He sold a lot of oil in euros, or he tried. The international oil market prices oil——

Mr. ROHRABACHER. In dollars. 

Mr. RAPHAELI [continuing]. In dollars. 

Mr. ROHRABACHER. For sure. All right. 

Mr. Wilson? 

Mr. WILSON. Thank you, Mr. Chairman, and thank you all for 

being here today, and the information you have provided is very 

helpful. 

Dr. Raphaeli, I was very appreciative of your comment to begin 

as a tribute to freedom of the press. It is extraordinary that this 

issue first came to the attention of so many of us, of all things, out 

of an Iraqi daily newspaper, and I remember very well reading the 

article, but we have not seen much of it since. In particular, it 

identified 270 individuals and entities that received the vouchers 

to receive the oil at below-market price. From your research, is that 

list accurate? Is it still accurate? 

Mr. RAPHAELI. This list was confirmed by the Duelfer report. 

There has been absolutely no question about the authenticity and 

the accuracy of the list. So it is accurate as it was published by the 

newspaper. 

In fact, if I may, I would add one more comment. We have seen 

very few denials by those who received oil vouchers. Most of them 

made the point that they were given vouchers in return for goods 

and services they provided under the Oil-for-Food Program. This is 

not a truthful statement because everybody who provided goods 

and services under the Oil-for-Food Program was paid from the escrow account in Banque Nationale de Paris. So if Saddam paid 

40

these people outside the framework of the Oil-for-Food Program, it 

suggests to me that they had provided either luxury goods or goods 

that were used for weapons purposes——

Mr. ROHRABACHER. Or that there was another payment. 

Mr. RAPHAELI [continuing]. For illicit purposes. 

Mr. ROHRABACHER. Right. There was another payment that took 

place that we do not have a record of. 

Mr. WILSON. And also, it appeared to me, too, of buying of influence, because weren’t some of the recipients of the vouchers political parties? 

Mr. RAPHAELI. Indeed, we find some very interesting figures who 

received the oil vouchers: The son of the minister of defense in 

Syria; the son of the former President of Egypt, Abdul Nasser; 

many Russian political parties; the former minister of interior of 

France. Many friends of Mr. Chirac received enormous amounts of 

oil. Actually, I wrote a paper on the European dimension of the 

scandal which suggests that more than 70 percent of all oil vouchers went to Russian and French individuals and entities. 

Mr. ROHRABACHER. The list—273 people are on the list, did you 

say? 

Mr. RAPHAELI. 270. 

Mr. ROHRABACHER. 270. And you say the majority are French 

and Russians? 

Mr. RAPHAELI. The majority were Russians, in terms of amount 

of barrels of oil I located under these vouchers. 

Mr. ROHRABACHER. Let me ask the staff, do we have that list, the 

list of those names? 

Mr. RAPHAELI. I would be glad to provide the list, MEMRI has 

it published, and I will be glad to send it——

Mr. ROHRABACHER. Dr. Raphaeli, if you could provide us that 

list, I would insert that list at this place in the record of this Committee hearing. 

Mr. RAPHAELI. I would be pleased to forward it tomorrow morning. 

Mr. ROHRABACHER. Thank you very much. 

[The information referred to follows:]

41


98601m.eps
42


98601n.eps
43


98601o.eps
44


98601p.eps
45


98601q.eps
46


98601r.eps
47


98601s.eps
48


98601t.eps
49


98601u.eps
50


98601v.eps
51


98601w.eps
52


98601x.eps
53


98601y.eps
54


98601z.eps
55


98601aa.eps
56


98601ab.eps
57


98601ac.eps
58


98601ad.eps
59


98601ae.eps
60


98601af.eps
61


98601ag.eps
62


98601ah.eps
63


98601ai.eps
64


98601aj.eps
65


98601ak.eps
66


98601al.eps
67


98601am.eps
68


98601an.eps
69

Mr. GREEN. Thank you very much, Mr. Chairman. 

Additionally, Dr. Raphaeli, are the vouchers themselves available 

to be examined, and can they be examined in the context of the 

price of oil as to that particular day or period? 

Mr. RAPHAELI. The vouchers went through two steps. First of all, 

a letter was issued by the Office of the President of Iraq, Saddam 

Hussein, to the minister of oil indicating that the President, and 

they always added, ‘‘May Allah preserve him and protect him,’’ has 

authorized a certain number of barrels of oil to be given to an individual. In 90 percent of the cases, these individuals were not oil 

traders. They took these vouchers. They went to a hotel in Baghdad. They sold it to intermediaries, mainly from the Gulf countries, 

and these intermediaries paid in cash for the vouchers and then 

sold them to oil companies. 

It is intriguing that during all of these sanctions, the United 

States—according to figures published by the U.S. Energy Department—was the largest buyer of Iraqi oil. 

Mr. ROHRABACHER. Thank you very much, Dr. Raphaeli, and let 

us again emphasize the point that was made earlier. We have this 

list of 270 names of people specifically who we know absolutely received these oil vouchers. Your suggestion is many of them are 

French and Russian, but it was suggested as well that one of the 

people receiving these vouchers was the man who murdered the father of the Iraqi woman who was there with us at the State of the 

Union. I think that this is a very dramatic revelation, so let us 

make sure we do not forget it. 

Mr. Schiff? 

Mr. GREEN. Mr. Chairman, as we conclude, I would like to inquire if a copy of a voucher could be provided to us and maybe a 

paper trail as an example of what a voucher actually looks like and 

how it could be interpreted, and I yield. 

Mr. RAPHAELI. Again, MEMRI has published sample vouchers. I 

will send them to you in Arabic and English translation. It is in 

the form of a letter from the office of the President to the minister 

of oil, and then the minister of oil issued instructions to SOMO—

the state oil-marketing organizations to deliver the oil to——

Mr. ROHRABACHER. And let us note, as we are looking at this 

voucher issue, that Mr. Sevan, who directed the program at the 

United Nations, and, Dr. Lopez or Dr. Gardiner, correct me if I am 

wrong, knew that these vouchers were being used. 

Mr. RAPHAELI. Absolutely because he asked for some, and he is 

listed among the 270. 

Mr. ROHRABACHER. All right. I think that that is rather spectacular. 

Mr. Schiff? 

Mr. SCHIFF. Thank you, Mr. Chairman. 

Dr. Gardiner, I want to ask you a couple of questions just to help 

clarify some things in my own mind and put this in context for me. 

The sanctions regime; tell me the cardinal purpose originally of the 

sanctions regime. What was it designed to do? 

Mr. GARDINER. The sanctions regime was principally designed to 

prevent the Iraqi regime from acquiring weapons of mass destruction, and that was the principal purpose, and also to prevent the 

potential for developing future weapons programs. 

70

Mr. SCHIFF. So as degrading a practice and lamentable practice 

of building the fortresses and lining his own pockets, preventing 

that was not the primary purpose of the sanctions? It was to keep 

him from developing nuclear, chemical, or biological weapons? 

Mr. GARDINER. Well, the primary purpose certainly was to prevent the Iraqi regime from being a threat to the rest of the Middle 

Eastern region. 

Mr. SCHIFF. That threat, though, is constituted by the WMD program, not by the palaces—right?—unless the palaces are used to 

hide the WMD program. 

Mr. GARDINER. Well, I think that the report of Charles Duelfer 

did make it clear that Saddam Hussein retained the potential to 

develop weapons programs, and we should bear that in mind. 

Mr. SCHIFF. We can go down the path if you like, but I am not 

seeking right now to try to establish today whether we found them 

or did not find them and why we did not find them. But the primary purpose of the sanctions was to prevent him from getting 

WMD, and, I assume, the primary purpose of the Oil-for-Food was 

to address humanitarian issues that had been raised while still 

preventing Saddam from getting WMD. Is that a fair statement? 

Mr. GARDINER. Yes. The primary purpose of the Oil-for-Food Program was to ensure that the Iraqi people themselves would not suffer as a result of the sanctions regime and so that they could receive humanitarian goods while ensuring that the Iraqi regime did 

not acquire WMD ability. 

Mr. SCHIFF. What would you say was the greatest threat to the 

efficacy of the sanctions against Iraq? Was it the illicit oil trade, 

or was it the surcharge and kickbacks from the Oil-for-Food scandal? 

Mr. GARDINER. I think a combination, actually, and I think it is 

important for us to bear in mind that the figures seen out there 

on that chart produced by the Duelfer survey should be viewed, as 

Volcker points out in his interim report here, alongside the findings 

of the General Accountability Office, as well as the findings of the 

U.S. Senate Subcommittee on Investigations. 

Mr. SCHIFF. Do you quarrel with the summary of that chart, that 

the largest evasion of the sanctions took place through these illicit 

oil transactions rather than the Oil-for-Food Program? 

Mr. GARDINER. We simply, at this stage, cannot establish final 

figures. I think that the investigation still——

Mr. SCHIFF. But this chart indicates that well over three-quarters of the money that was diverted was from the illicit trade in 

oil. Do you have any evidence, for example, that the illicit revenues 

derived from the Oil-for-Food were used for a different purpose 

than the illicit revenues derived from the illicit sales of oil? Or 

were they both equally a threat, the revenue from whatever source, 

if it allowed Saddam to develop WMD? 

Mr. GARDINER. I think that both sources of revenue were a major 

threat, but let us not downplay the potential scale here of the 

amount of money illicitly acquired by the Saddam Hussein regime 

through the Oil-for-Food Program. 

Mr. SCHIFF. No. I do not at all, but if you are looking at Saddam Hussein getting $100 to buy WMD, and $75, you know, is coming 

from one source, and $25 from another, my primary concern, at 

71

least in the first instance, would be where he is getting the bulk 

of the money to potentially develop WMD. Which leads me to another question, which is: If the primary concern of the sanctions regime was the potential for Saddam to develop WMD, why did we 

acquiesce in the $75 of the $100 of the illicit trade? Why would it 

have been, in the Administration’s view or in the view of Congress, 

better for our security to allow these protocols with Turkey, with 

Jordan, or elsewhere if we believed those monies were going to be 

used for WMD? Why would that have been in our national security 

interest to allow that illicit trade to go on? 

Mr. GARDINER. Well, two things. Firstly, I would say that your 

figure of 75 cents out of every dollar is not a final figure, and we 

have to consider the other——

Mr. SCHIFF. Well, I am being generous. According to Duelfer report, it is closer to 85 cents or 86 cents per dollar, so I am being 

generous by saying 75, but if you prefer the 85 number, I can use 

that. 

Mr. GARDINER. You know, my point is we have to look at all of 

the investigations, not just the findings of the Duelfer report of the 

Volcker Committee. We have several different investigations that 

have come up with different figures, and the figures produced by 

Coleman’s investigation, for example, up to $7 billion acquired 

through kickbacks on humanitarian purchases, for example. 

Mr. SCHIFF. But, again, let us not lose sight of the ultimate 

threat here, which is that revenues from whatever source are going 

to be used for WMD. Now, there may be a question about how 

much we knew of the kickbacks and surcharges. There is no question about our knowledge of the illicit oil sales, and why is it that 

we would acquiesce in these multibillion-dollar illicit oil sales if we 

thought they were going to use the revenues from those sales to develop WMD? What security interest was higher and more paramount than preventing them from getting those revenues for 

WMD? 

Mr. GARDINER. I believe that it is still not yet clear whether or 

not the United States, Great Britain, and other members of the Security Council acquiesced in deliberately overlooking the oil smuggling. This is an issue certainly of a separate ongoing investigation. 

Mr. SCHIFF. Was not the Administration required, as a matter of 

U.S. law, to make a finding that it would waive, essentially, prohibitions on providing aid to countries that were knowingly participating in the evasion of sanctions? 

Mr. GARDINER. What we have seen so far are simply just leaked 

documents reported by one or two new outlets. Compare that to the 

huge amount of evidence that we have with regard to widespread 

fraud and corruption within the United Nations relating to the Oilfor-Food Program. 

Mr. SCHIFF. Is it your view, Doctor, then, that the Administration did not know of these illicit sales of billions of dollars worth 

of oil to Jordan, to Turkey, later to Syria, maybe to Egypt? 

Mr. GARDINER. My answer to that is I do not represent the Administration, and——

Mr. SCHIFF. I hope you do not represent the Administration. You 

are an independent expert today. 

72

The question, as an independent party, and I can obviously ask 

the Administration, but as an independent third party: Do you believe the Administration was unaware of these protocols? 

Mr. GARDINER. I am simply not certain as to the degree of knowledge with regard to the oil smuggling. 

Mr. SCHIFF. Mr. Chairman, am I out of time? 

Mr. ROHRABACHER. Well, you have actually been about 21⁄2 minutes over, but feel free to finish your line of questioning. 

Mr. SCHIFF. Well, I will wrap up, Mr. Chairman. 

Dr. Gardiner, you are very qualified to scrutinize every detail of 

the Volcker report and the United Nations. I am surprised that a 

question that is as well documented as what the U.S. Administration was aware of in terms of the trade protocols is open to question. 

But let me ask you, Dr. Lopez, the recommendations you have 

laid out, and one of the primary interests I have, is: How can we 

learn from this to make a more effective sanctions regime in the 

event sanctions are sought and received vis-a-vis Iran or other 

countries? 

Mr. ROHRABACHER. This is a whole new line of questioning, however. 

Mr. SCHIFF. One question. One question. 

Mr. ROHRABACHER. All right. It is one thing to let someone go 

over and then finish his line of questioning, which I will always do, 

but it is another to bring up another issue. 

Mr. SCHIFF. Well, let me ask a question, Mr. Chairman. If it is 

too far removed, then we will strike it. 

I was interested to know whether the recommendations you have 

made, which are very sound, deal with the problem of these trade 

protocols and illicit sales, or is that a problem different in kind 

than the one you have proposed to address? 

Mr. LOPEZ. It will deal with the administration of the conflict between a U.N. bureaucracy and a Security Council that continues to 

insist, for other security reasons, to go ahead with these kinds of 

trade contracts. 

Mr. SCHIFF. Mr. Chairman, thank you for your indulgence. 

Mr. ROHRABACHER. All right. Thank you. Mr. Schiff, again, earlier, I am not sure if you were here when it was discussed, but 

when you have specific decisions that were made to permit Jordan 

and Turkey and other countries to smuggle, for lack of a better 

word, but gain possession of this oil, it was a policy decision by the 

governments involved, by our Government as well. And I am sure 

Dr. Gardiner—I am sure he understands this was, I believe, during 

the Clinton Administration, when the decisions were first made. 

But they were also made during the Bush Administration that 

there were other foreign policy considerations that were made that 

it is very important, for example, to have Jordan in a particular relationship, and they needed to cement that relationship. I am sure 

that this was part of that bargain. That is a lot different, however, 

when you are making a policy decision than when the United Nations official solicits a voucher that will permit him to have some 

form of self-enrichment in order to sell more oil or to participate 

in the oil program. 

73

Mr. SCHIFF. Mr. Chairman, I agree with that. It does, though, 

have a certain reminiscent quality of ‘‘Casablanca,’’ and I am 

shocked, shocked, to find evasion of sanctions going on——

Mr. ROHRABACHER. One is a self-enrichment where you have people who are involved in corrupt practices. Another is where you 

have someone or some government leaders who are, with the authority given to them, making a policy decision that it is important 

for Turkey or Jordan or whoever to have that type of revenue at 

that moment, and, again, this was not made just during the Bush 

Administration. I think this was made probably first Bush, Clinton, 

and now Junior Bush. 

I made a comment. Mr. Delahunt, go ahead and make a comment. 

Mr. DELAHUNT. I would just suggest that what we are saying is, 

and I apologize to my friend, Mr. Royce. I can see that he is anxious. I will defer my comment. 

Mr. ROHRABACHER. All right. Thank you very much. 

Mr. Flake? 

Mr. FLAKE. I will go very quickly. I would like the opinion of 

each of you as to whether or not you believe, given what we know 

so far, given the Volcker report, if the U.N. is willing and capable 

to police itself on this, or if we are going to need to apply additional 

pressure through withholding of funds or whatever else, starting 

with Mr. Gardiner. 

Mr. GARDINER. With regard to the Volcker Committee itself, my 

view is that we do need some system of external oversight for the 

investigation itself. This is a $30 million investigation taken from 

the Iraqi escrow account. This is Iraqi money here. My view is that 

the Volcker investigation operates in a very covert style. We do not 

know a great deal about its operations; we only know the identities 

of 10 of its 75 staff, and it also has not cooperated at all with congressional investigations. 

With regard to the bigger picture and the United Nations, I do 

not believe the U.N. is capable of policing itself, and the U.N. audits, which were very devastating, as we said, did demonstrate the 

complete failure of the Office of Internal Oversight Services within 

the U.N. to do an adequate job of monitoring the Oil-for-Food Program. At the same time, there was absolutely no monitoring whatsoever of Benon Sevan’s Office of the Iraq Program, a huge omission, and it is my view that there does need to be external auditing 

of the United Nations on a very regular basis, perhaps a permanent external audit authority that has the ability to monitor U.N. 

operations, particularly relating to huge humanitarian and relief 

programs. 

Mr. FLAKE. Thank you. Mr. Lopez? 

Mr. LOPEZ. Thank you. I think that the great news about your 

question is that this is a fully transparent and testable proposition. 

If we allow the U.N. to move forward with a number of reforms 

that are on the books—for example, the Office of Internal Oversight Services has already been subject to a thorough reformulation, and in September, remember, the General Assembly passed a 

new set of protocols to strengthen this division, which we have seen 

in the Volcker report all of its inadequacies. 

74

So at least at that one level, on the auditing services, there is 

some momentum already for which we can say the seeds for its 

own self-reformation may exist. The U.N. has always been, from 

the beginning, a product of the individual states that bring it to 

fruition. So powerful states in the Council ought to find ways to 

continue to hold the feet to the fire on reform. 

But is the organization capable of doing this? I think it is manifested in a number of ways. The individuals cited in the report are 

already disciplined and suspended. There has been a degree of 

transparency in the releasing of reports from the U.N. that has not 

been paralleled by a number of nation states, in fact. Some have 

been mentioned here today. Thirdly, it seems to me that the scope 

of recommendations that has been made in this particular report, 

touching on other areas, as well as recommendations some of us 

have made, can certainly be brought by this Committee and others 

and laid at the feet of the administration of the United Nations 

and say, what is the plan? 

I do not think you need to be in a contentious relationship of 

withholding funds—I think we would all hope that day of the 1980s 

is gone, but, rather, constructive engagement in which it is very 

clear that the U.N. carries the burden for its own reform, and you 

can continue to test and push. This is a very favorable environment. 

Mr. FLAKE. Mr. Raphaeli, you are the tie breaker here. 

Mr. RAPHAELI. Yes. The United Nations is probably capable of reforming itself, but the problem is with its components. The Chairman mentioned the International Meteorological Organization. 

I mention another case. The IMO, International Migration Orga- nization, was paid $95 million to organize the elections of Iraqis 

overseas. Now, there were 3 million eligible voters. In the United 

States alone, there would probably be half a million voters. They 

established five voting stations, one in Maryland for the entire 

East Coast of the United States. As a result, only 200,000 voters 

participated in 14 countries at the cost of about $400 per voter. 

So there are issues really about how to reform the U.N. The lack 

of financial discipline, which I referred to in my report, and the 

need for some kind of a voting system that prevents everybody one 

vote on money they do not contribute, a lack of accountability is endemic and inherent into the system of the United Nations. 

Mr. FLAKE. Thank you. My time is up. Thank you, Mr. Chairman. 

Mr. ROHRABACHER. Mr. Royce? 

Mr. ROYCE. Thank you, Mr. Chairman. To me, the interesting 

bottom line here is that you have 270 politicians from 52 countries 

listed as having received vouchers for Iraqi oil. I think it rattles 

one’s faith in the belief of the capacity of international institutions 

to police themselves. What rattles one’s confidence the most, I 

think, are the quotes that Dr. Gardiner gave in his testimony as 

to the response by the U.N. itself when given the bottom line on 

this. The chief of staff says, ‘‘Frankly, from our point of view, this 

report today is overall good news. This report says the program 

overall was apparently well managed.’’

I have spent the last couple of years trying to put pressure on 

the Security Council to try to figure out and formulate a way in 

75

which we could get a little leverage on the regime in Darfur, 

Sudan. I have just returned from Darfur, Sudan. I can tell you that 

with the interest that Russia and China have in Darfur—and 

China is the major oil exporter—and both are supplying arms, it 

is very difficult through the Security Council, to get an agreement 

in which they do not threaten to veto. That is the major reason 

why it is very difficult to bring together international institutions. 

But I am more perplexed by why it is so difficult for the bureaucracies themselves to then allow an investigation. I wanted to ask 

about where you would be looking, what threads would you like to 

carry forward, if Congress is to look into this, and, specifically, to 

what extent have Iraqis been utilized by the Volcker Committee? 

They are fairly forthcoming in talking about some of the circumstances that happened in country. 

To what extent could you suggest to us interviewing some of the 

Iraqis who might want to come forward and give us the details? 

Because any time you have 52 countries involved and 270 politicians benefiting directly from the scheme, I think you have got to 

forthrightly admit that, in this case, this international institution 

has not only shown its incapacity in terms of conducting the program, but now a desire to withhold further information, to quash 

an investigation, to not give us transparency—we have not gotten 

the records that we would really like to look at in this regard. So 

those are some of my questions. 

Also, why was Iraq given the veto? When the Banque Nationale 

de Paris was picked—and we had investigations on this—the thing 

I could not understand was, Why was Saddam Hussein still at the 

table saying, okay, I want this French bank to be in charge of handling, monitoring the transactions, the cash? I am just interested 

in that. 

Mr. RAPHAELI. Is that for me? 

Mr. ROYCE. Yes, sure. 

Mr. RAPHAELI. Thank you, Congressman. Let me just make one 

clarification. The list of 270 are not all politicians. 

Mr. ROYCE. Well, I am quoting from the Financial Times. They 

are people that are politically connected. They may not be elected. 

They might be appointed, but they are politically connected people. 

Mr. RAPHAELI. Maybe the Commission for Fine Arts in Moscow 

is not a political organization. But, anyway, you will see the list. 

You will find many——

Mr. ROYCE. Let me ask you this, Doctor. They are not oil traders. 

They are people that are involved in the political process who become intermediaries and become the recipients of the largesse of 

the premium. 

Mr. RAPHAELI. Or they are able to provide a good image of Saddam Hussein. 

Mr. ROYCE. Well, in addition to these people, there are also journalists and opinion molders that are also on the list. I did not get 

into that. 

Mr. RAPHAELI. Absolutely. Now, I would like to answer your 

question by referring to a point I made in my report about the culture of overheads. What does it really mean? The United Nations 

and the specialized agencies seek this escrow account, this addition 

of budget funds, to finance activities that cannot be financed 

76

through the regular budget. So they are constantly on the lookout 

for programs that provide overheads for additional programs, and 

this is how they expanded over the years because they can collect 

money from donors, bilateral donors, multilateral donors, the 

World Bank, and others. 

I will just mention one anecdote. At one time, I went to the ILO. 

I was sitting with a senior official, and he mentioned to me that 

the budget of the ILO was frozen for a long time, and they were 

unable to recruit more staff. He said, ‘‘Mr. Raphaeli, our problem 

is we are running out of windows.’’ Now, if you are not an international bureaucrat, you would not understand what he meant. 

These people keep getting promotions, and with every promotion 

they need another window, so although the staff was not increasing, they were simply running out of windows rather than running 

out of money. 

This culture of overheads dominates the thinking, and I would 

think also that when the proposal was made to assign the United 

Nations the responsibility to manage the Oil-for-Food Program, I 

am sure the first things that came to their mind were overheads 

and how much extra money they can earn to bolster their regular 

budget. 

Mr. ROYCE. I see. 

Mr. RAPHAELI. This may be a cynical view, but I have been within the system for so many years, I know what I am talking about. 

Mr. ROYCE. Dr. Raphaeli, your testimony was very valuable 

today, and I want to thank you for coming. 

Mr. RAPHAELI. Thank you, sir. 

Mr. ROYCE. Dr. Gardiner, any observations on those questions? 

Mr. GARDINER. Yes. A number of observations. Further errors of 

investigation follow on from the Volcker inquiry. I think that 

Benon Sevan should be made available to be interviewed by congressional investigators. 

Mr. ROYCE. Okay. 

Mr. GARDINER. This is a man who has a huge amount of information. He could well implicate many other individuals as well. We 

simply do not know the extent of the corruption and fraud surrounding this particular individual. 

Also, why on earth was Benon Sevan placed in charge of the 

critically important Office of the Iraq Program? What was his relationship with Kofi Annan, for example? How much did Kofi Annan 

know about Sevan’s corrupt practices? These are all extremely important questions. 

You raised a vitally important issue: Why was Iraq given a veto 

by the United Nations over the choice of bank to run the escrow 

account? This is simply unacceptable. To what extent is Boutros 

Boutros-Ghali implicated in the Oil-for-Food scandal? 

Mr. ROYCE. Getting back to my question, I would really like to 

know what faction on the Security Council wanted that to happen. 

Mr. GARDINER. I would expect that the French, in particular, had 

an important role to play with regard to influencing that particular 

decision. We have to remember, of course, that the French and also 

the Russian Governments had significant political and financial 

ties to the Saddam Hussein regime and, in fact, made significant 

efforts to undermine the sanctions regime program. 

77

A significant omission, I think, in this interim report is any discussion of attempts made by Saddam Hussein to have U.N. Security Council sanctions lifted. And Volcker really does ignore altogether the huge amount of evidence indicating clearly that the Saddam Hussein regime tried to bribe leading French and Russian 

politicians and businessmen in an effort to influence political and 

economic decisionmaking. These are very serious matters which 

have to be fully investigated, and I do not have a huge amount of 

confidence in the Volcker Committee’s commitment or ability to investigate these matters, but they should be fully pursued by Congress. 

Mr. ROYCE. Yes. I think there needs to be an independent investigation, surely. Dr. Lopez? 

Mr. LOPEZ. I think you raised some excellent questions. I would 

follow the 270 vouchers and the people listed there. How many of 

the vouchers were cashed in? How many of the vouchers, in fact, 

facilitated oil transactions? I may echo a sentiment stated here earlier: Let us not be stunned and surprised that a dictatorial, corrupt 

regime tried every imaginative mechanism at its disposal to undercut the system. It is quite possible that any number of us, under 

other conditions, could receive vouchers like I often do on my answering machine that says, ‘‘Congratulations, you have won a 

Miami vacation. All you have got to do is make a call and pick it 

out.’’ Did I receive the vacation? No. I received the notice of possibly winning it. 

If you want an examination of the Security Council and its relationship with the Secretariat and appropriate balancing of the way 

not only these vouchers but allocations in the system worked, look 

at the period September 2000 through the midpoint of 2001. The 

Oil-for-Food Program administrators and the Secretariat brought to 

the 661 Committee more than 70 exceptions that were being made 

to the trade protocols, and the 661 Committee, all five permanent 

members, signed off on that. Why did they sign off on that? Because we were in a very difficult time of trying to renegotiate 

where Oil-for-Food was going. 

It is very important for us to ask questions about off-budget 

funds and the meaning of these, but the implication, at least in the 

general body politic over the last 6 months, has been that the 

United Nations Oil-for-Food system and the Secretariat worked 

hand in hand to encourage new developments and overtures with 

the Iraqis because if you boosted that volume of sales, then you enhance the 2.2 percent system. I do not know how Volcker could be 

any more clear or what documents are yet to be seen that there 

was no attempt to do off-budget funding with the 2.2 percent, and 

I would hope that this Committee would take the lead in the 

United States in suggesting that data and evidence matter if we 

are to look at these issues. There is a lot of reform to be done, but 

let it be based on data that makes sense. 

With regard to the last, and most important, question of bribes: 

Bribes, I suspect, are relatively easy to find out, and I suspect that 

the 75 people on the staff that the Volcker Committee has at its 

disposal may be able to get to most of those most of the time, but 

it is difficult to fault a system that was designed to monitor goods 

78

and deal with the accounting of that to then not know what is not 

known. 

Mr. ROYCE. Thank you, Dr. Lopez. Thank you, Mr. Chairman. 

Mr. ROHRABACHER. Could I be presumptuous enough to ask you 

to explain the very last sentence that you just said? 

Mr. SCHIFF. I have heard Rumsfeld say the same thing about the 

unknown unknowns. 

Mr. LOPEZ. There is a difference between a bribery system that 

was tied to vouchers, a bribery system that might have been tied 

to Oil-for-Food, versus an outside bribery system whereby essentially the Iraqis were trying to influence the peddling. That is, it 

was not about receiving external monies or receiving new cuts on 

oil revenue. It was about changing the minds of people at the Security Council who were continually maintaining the sanctions; and 

so this was a propaganda venture of a different kind. 

I would go back to the Duelfer chart. If we are to investigate how 

Saddam was able to undercut the system, I would look at the 84 

percent of the revenue rather than the 16. 

Mr. ROHRABACHER. Well, let me note that this hearing is concerned not just about the Oil-for-Food Program, and as we stated 

earlier, this goes much deeper into the character of the United Nations and the need in the United Nations to do things differently 

if they are going to maintain the faith of the American people and 

other free people in the world. 

The bribes may or may not, or as you say, these vouchers which 

may or may not be bribes, may or may not have something to do 

with a policy or a manipulation of the program itself, but they certainly reflect on the integrity of the institution, especially when Mr. 

Sevan, who is the executive in charge of the program, solicits the 

vouchers for himself. So what does that mean? Does that mean 

that we can have faith in an organization that permits that to happen? 

Let me just note, we met with Mr. Brown today. Mr. Delahunt 

and I met with Mark Malloch Brown, and I was not satisfied that 

the United Nations is willing to just now open up and make the 

changes that are necessary. At the end of the meeting, it seemed 

to me, the message that was left with us is if you need information 

from the United Nations, you are going to have to go through the 

Volcker Committee. 

Well, that does not sound like someone who is leaving me with 

a message that we are going to be totally cooperative with you. 

That is not a message of total cooperation, and even though I found 

Mr. Brown to be a fine man, I found him to be charming, as many 

diplomats are charming—sometimes diplomats can charm you right 

out of your wallet or whatever it is, but the fact is, charm has nothing to do with it, and being amicable has nothing to do with it. It 

is whether or not we are going to do our duty and whether the people in the United Nations have been doing their duty. And it appears that there is a serious question as to whether the United Nations has had the standards and the culture internally that would 

justify the faith that so many people around the world have in the 

United Nations. And in the future, we are going to try to put more, 

let us say, we are going to put more eggs in that United Nations’ 

basket when trying to solve the problems of the world. Or we try 

79

to rely more heavily on the United Nations, but yet we find within 

the United Nations that they do not have the standards that would 

prevent the head of a program from making these types of solicitations or that when we find that audits have been kept from us, 

kept from member states, and then we find that relatives of 

Boutros Boutros-Ghali have ended up with a certain amount of 

profiteering that went on with these vouchers, and Boutros 

Boutros-Ghali was the one who insisted on the bank, which, in the 

end, permitted the vouchers to come into existence. This leads to 

very serious questions that need to be answered and cannot be answered by saying, ‘‘You are going to have to go to Volcker’s Committee to get your answers rather than directly to the United Nations.’’

So, Mr. Delahunt, would you like to summarize? 

Mr. DELAHUNT. I would like to ask some questions, if I may. 

Mr. ROHRABACHER. Feel free. 

Mr. DELAHUNT. On your last point about Mr. Sevan and the organization not having the appropriate standards, let me suggest 

that if, and let me underscore ‘‘if’’ because I do believe in due process—I do believe in giving individuals an opportunity to have counsel, to consult with them—if there appears to be probable cause or 

some grounds for a criminal indictment, so be it, but if an individual’s lack of personal standards and ethics amounts to a crime, 

which could very well be the case if one accepts what we have 

heard here today, I do not know what the U.N. or the U.S. Congress or any institution can do. 

If an individual is willing to commit a crime, there are consequences, and let us be very candid. We were informed today that 

the Manhattan District Attorney, Robert Morgenthau, has been 

working closely with the United Nations to determine whether, in 

fact, there are grounds to bring criminal charges. So those are the 

standards. They are not very high. 

We talked a lot about Mr. Volcker. You know, I have never met 

Mr. Volcker, but from what I understand and what I read, he is 

an individual of integrity. He has elicited from sources in this Government who carry considerable gravitas significant praise. Let me 

quote Vice President Cheney, who, on August 11, 2004, said the following:

‘‘I can remember Volcker when he was, I believe, Deputy 

Treasury Secretary. A very able and talented man is now in 

charge of the investigation to dig into the bottom of that, and 

I know him well enough to have great confidence that I think 

he will, in fact, do exactly that.’’

Now, that is not me, a Democrat from Boston, speaking; it is the 

Vice President of the United States, a Member of the Republican 

Party. 

Just this past week, two prominent Republican Members of the 

House had this to say: ‘‘I am pleased with the preliminary report 

presented by Mr. Volcker.’’ That was Senator Coleman, who said 

that on February 3rd. A colleague of ours in the House, Chris 

Shays, on February 4th, had this to say: ‘‘I think he is about as 

honest and respected as an individual you can find.’’

80

There are two other people that are part of the Volcker Commission. My understanding is that these are people whose integrity is 

beyond reproach. You are right, Dr. Gardiner. It is very, very difficult for an institution to police itself, and there is no better example than the United States House of Representatives. And I have 

to tell you, I served on a Subcommittee of the Ethics Committee 

that investigated allegations surrounding a vote of some consequence in this branch involving Medicare and prescription drug 

benefits. Two Democrats and two Republicans; we did the job, and 

we did it well because we were individuals, I would suggest, of integrity. So it can be done. 

You get to some point where you are running out of organizations to conduct an investigation. You speak about transparency in 

an investigation. I mean, what you are suggesting is that we have 

an individual come in here, interrogate him for the media to report 

on. That is not the way investigations are conducted. 

In my previous career, I was the elected district attorney in the 

greater Boston area for more than two decades. You do not do it 

that way. You respect the concept of due process. You do not impugn people’s integrity because oftentimes you make a mistake. I 

made mistakes when I was the district attorney. I stood up in public, and I apologized to those that were charged for the errors that 

I made. 

So what I suggest is that we go forward here in a very thoughtful, careful, circumspect way because we are dealing with an issue 

that I think we all agree has great implications. 

You know, isn’t it a surprise that there are politics in the United 

Nations? Wow. You know, that is surprising. You know, Dr. Gardiner, you are English, and I was reading, just as we were sitting 

here, statements during the course of an interview by an individual 

by the name of Carne Ross. Does that name ring a bell? 

Mr. GARDINER. Yes. I know who he is, and I have debated him 

on television, yes. 

Mr. DELAHUNT. You debated him, but you know nothing about 

his character or his integrity, do you? 

Mr. GARDINER. I would question his integrity, actually. 

Mr. DELAHUNT. Well, you are adding to a long list of individuals 

whose integrity you have already questioned here today in their absence, so——

Mr. GARDINER. Well, I should point out something. 

Mr. DELAHUNT. No, no, Dr. Gardiner. This is my turn. Okay? 

These are the rules here, and I am fortunate that these are the 

rules. 

But here is what he says. By the way, for my colleagues, it is 

my understanding that he was the representative of the United 

Kingdom that sat on these sanctions committees and was in charge 

of Iraq policy for our dear friend and ally, the United Kingdom. 

This is in the course of an interview. Every single question was 

controversial. He was talking about these various contracts and everything that came up. There was a kind of division of the spoils. 

The French got the bank account where the money was kept. We 

got Lloyd’s Register. 

I remember, in a 661 Committee meeting, and let us call it for 

what it is so that the American people are not confused, at a meetVerDate Mar 21 2002 15:40 Jun 29, 2005 Jkt 000000 PO 00000 Frm 00084 Fmt 6633 Sfmt 6601 F:\WORK\OI\020905\98601.000 HINTREL1 PsN: SHIRL
81

ing of the Security Council, I remember questioning BNP’s role in 

having the Oil-for-Food funds and the French saying, you take 

BNP, which is the bank, and we will attack Lloyd’s. You know, it 

sounds to me like this was a case of ‘‘I want to get mine, and I am 

going to have mine, or you are not going to have yours.’’ I am not 

suggesting that it is a healthy and good process, and I think we 

ought to make every effort we can to deal with it, but let me get 

to another point that was raised by my friend, the Chairman. 

He was talking about a policy, and I think his words were, well, 

this was the bargain. In other words, the policy that said to Jordan 

and to Egypt, okay, you can do it. It is okay. Going back to the 

chart of exhibit A where you have 84 percent of the illegal revenue 

going into the U.N. have nothing to do with the administration of 

the Oil-for-Food Program, not anything at all to do with it, billions 

of dollars, because we struck, and I am saying ‘‘we’’—obviously, we 

were all complicit—whether it was Bush I, Clinton I, Clinton II, 

and Bush II, we were there. I guess the theory was that if you are 

our pal, it is okay but, if we do not like you, you are in violation 

of the sanctions regime. 

Mr. SCHIFF. Mr. Delahunt, would you yield for one moment? 

Mr. DELAHUNT. I yield to my friend. 

Mr. SCHIFF. Thank you. I just wanted to thank you and thank 

the Chairman for having the hearing today and just express my 

concluding thought, which is that those that are responsible for 

fraud, corruption at the United Nations that have been involved 

with Oil-for-Food, I think, should be brought up on the maximum 

charges possible. They have to be brought to justice, and if we 

could play a role in that, we should. That is the former prosecutor 

in me. 

The legislator in me feels, the policymaker in me feels, that we 

need to investigate and analyze this situation for what it tells us 

about a sanctions regime and how a sanctions regime can be 

evaded, how it can be evaded with our knowledge, how it can be 

evaded without our knowledge, and what that tells us, the next 

time, as Dr. Lopez points out, that there is a call to the United Nations Security Council for sanctions. We may be making that call. 

We are making that kind of a call now with respect to Iran. I 

would like to know what lessons we have learned from this that 

we can apply and make sanctions much more efficacious in the future. And I yield back to the gentleman. Thank you. 

Mr. DELAHUNT. I thank my friend from California. 

Dr. Gardiner, in response to the questions that were posed to you 

by Mr. Schiff, you did not know whether any document existed relative to establishing the fact that there was illicit revenue generated by government-to-government sales with the knowledge of 

the United States and every single member of the United Nations. 

Mr. Chairman, I would like to submit for the record a letter to 

the former Chairman of the Committee on Foreign Relations on October 17, 2002, from Richard Armitage, the Deputy Secretary of 

State, noticing that a waiver for this illicit sale of oil to Jordan and 

to Turkey has been entered, and this was the notice to Congress 

pursuant to the appropriate statute in the U.S. Code. 

[The information referred to follows:]

82


98601a.eps
83


98601b.eps
84


98601c.eps
85


98601d.eps
86


98601e.eps
87


98601f.eps
88


98601g.eps
89


98601h.eps
90


98601i.eps
91


98601j.eps
92


98601k.eps
93


98601l.eps
94

Mr. DELAHUNT. Mr. Chairman, I would think, at some point in 

time, when these notices come to Ranking Members and to Chair, 

that we ought to maybe look at the language so that all of us receive these notices so that we can be fully informed as to what is 

happening. Because the truth is those billions of dollars were the 

dollars that kept Saddam Hussein in power and continue probably 

today to support the insurgents and clearly have caused a serious, 

serious problem for all of us. 

If I can just conclude with a question to Dr. Lopez. I understand 

that there are policies and that there are policies, but why would 

the Security Council look the other way, given the magnitude of illegal revenue going to Iraq in violation of the sanctions regime? 

Why? 

Mr. LOPEZ. Congressman, that is a question not easily answered, 

but I will give some of the reasons that I think the data of history 

suggest. 

The first, and most important, is in the absence of an adequate 

compensation fund for nations like Turkey and Jordan—who would 

not be reimbursed by the negative impacts of the sanctions on their 

economy—we created this bargain whereby their goods could be 

serviced and processed, and they could buy Iraqi oil, thus generating the revenue back to Saddam. 

If you had a way of getting oil to Turkey and Jordan that did 

not come from Iraq, you could have tightened the squeeze some 

more, but the regional parties were not willing to break that bond 

with the Iraqi regime because, in 1991 and even yet in 1996 when 

Oil-for-Food was formed, the belief was that the sanctions’ end was 

just around the corner. He could not hold on anymore, was the prevailing belief. 

Mr. DELAHUNT. Let me go back to the original thing. Why would 

not nations—such as Saudi Arabia and Kuwait, with vast reserves 

of oil—alleviate the economic distress experienced by Jordan and 

Turkey so that full compliance with the sanctions could very well 

have brought the Saddam regime down at an earlier date and obviated a war? 

Mr. LOPEZ. The second part of this is that it was very much in 

the Security Council’s interest, particularly Britain and the United 

States, to have Jordan and Turkey be vibrant participants in the 

strong military net cast around Iraq’s borders. In order to do that, 

you let Jordan and Turkey dictate some of the terms whereby their 

trade would not be interrupted by this coercive net, and at the end 

of the day, what the Council, and particularly the Anglo-American 

Alliance, was interested in was not the amount of oil bought and 

sold but the military goods. Remember, we reduced the Iraqi economy from a $60 billion-a-year GNP to $13 billion by 1993. Two or 

four billion dollars of oil sales; let them use that for palaces because we knew the other things that we did not want them to have, 

and the general deterioration of the economy was meeting the goals 

of the sanctions. 

What is 2005’s insurmountable problem on that blue area of the 

chart was, in fact, throw-away money that was an easy bargain 

cost for maintaining the military vise that we wanted that was the 

sanctions regime. 

95

Mr. DELAHUNT. Let me suggest, in conclusion, that that was a 

deal with the devil. 

Mr. ROHRABACHER. Well, I think we have had a terrific hearing 

today. I would like to reiterate that the purpose of the hearing was 

to examine the Oil-for-Food scandal and how it relates specifically 

to the United Nations and our faith in the United Nations. I, again, 

recognize that tangentially there is a connection between other decisions that were made concerning the sanctions against Iraq during that time period. 

The major differentiation which makes the investigation today 

relevant as to the nature of the United Nations is that the decisions we are talking about in the Oil-for-Food scandal are decisions 

that were made specifically based on self-enrichment and corrupt 

bases. The decisions by policymakers of elected governments, 

whether it was our Government or others, to let certain countries 

receive Iraqi oil were based on policy considerations and does not 

reflect the integrity of either the governments or the people involved. 

The decisions made in the Oil-for-Food Program reflect directly 

on the integrity of those involved, and until we can say that laws 

were broken and point to them, we have to, again, not treat people 

as people who have broken the law. We have to assume that they 

have not broken the law. Right? That is what we are all about. But 

we certainly call into question decisions and reflect how they, at 

least, demonstrate a lack of standards and a lack of moral decisionmaking. 

The Chairman of the Full Committee has joined me in sending 

this letter, which I will quote a portion of today, to His Excellency 

Kofi Annan, the Secretary-General of the United Nations, and I 

would like to read it, in closing, to put this in the record of the 

hearing. 

The letter states:

‘‘The failures reported in recent released internal audits of the 

Oil-for-Food Program undertaken by the Office of Internal 

Oversight and Services, as well as developments reported in 

The New York Times, portray systematic weaknesses plaguing 

the U.N. that require further investigation. Accordingly, we are 

considering a proposal to expand the scope of the International 

Relations Committee’s inquiry from that of the Oil-for-Food 

Program into a wider examination of the management practices of the United Nations.’’

There is nothing in this hearing that we have had today that 

would indicate that we do not need a further investigation expanding on how the United Nations does its business and whether or 

not the people at the U.N. who now are running the United Nations deserve the trust that has been placed upon them by our Government and by peoples around the world. 

This has been an enlightening hearing. I think the fact that 

there is just so much information here, and there are so many implications to the various things that we have uncovered today, that 

Mr. Hyde and I will, indeed, be expanding the scope of our hearings into the broader area of the United Nations, as well as trying 

to find out specifically what has been going on with some of these 

96

cases where people’s relatives ended up getting those vouchers, and 

banks were chosen when they were obviously not the institutions 

that should have been selected if merit was the deciding factor. 

So with this said, I appreciate Mr. Delahunt. I appreciate the 

fact that we have had people who want to focus on various elements of this situation. Everyone has a right to try to emphasize 

the things that they want to emphasize, but I think when it comes 

down to it, the integrity of the process has been compromised, and 

I will leave it with this, what I told Mark Malloch Brown:

‘‘Something stinks about this situation. Something stinks, and 

the smell is emanating from the executive offices of the United 

Nations. We have got to correct that. We have got to make 

sure that that situation is cleaned up and that if we are going 

to place our faith in the United Nations, it has got to have 

higher standards than what appears to be going on.’’

So with that said, this hearing is adjourned. 

[Whereupon, at 4 o’clock p.m., the Subcommittee was adjourned.] 

(97)

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

PREPARED STATEMENT OF THE HONORABLE DAN BURTON, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF INDIANA

Mr. Chairman, It is fitting that the United Nations Oil-for-Food scandal is the 

subject of the first hearing this newly created subcommittee. The interim report of 

the Volcker Commission details staggering systemic abuses of the Oil-for-Food program, and an equally disturbing breakdown in oversight and fiscal controls. This 

was a massive management failure and it raises troubling questions about the credibility of the UN—an organization that derives 22% of its operating budget from the 

United States. 

The Volcker interim report corroborates much of the evidence uncovered by 

Charles Duelfer, Director of Central Intelligence Special Advisor for Strategy, regarding the Iraqi Weapons of Mass Destruction (WMD) Programs. As such, this is 

the biggest scandal in the history of the United Nations and the biggest financial 

fraud of modern times. The gentleman hand-picked by UN Secretary General Kofi 

Annan to run the program, Benon Sevan, made out like a bandit by soliciting and 

accepting allocations of millions of barrels of oil. While Saddam Hussein, according 

to the Senate Permanent Subcommittee on Investigations, Saddam enriched his regime and fueled his evil ambitions to the tune of $21.3 billion. 

The $67 billion in UN Oil for Food was supposed to provide humanitarian relief 

for the people of Iraq. But as we all discovered when Saddam’s evil regime came 

crashing down, Iraq was a country devastated by decades of neglect. Rather then 

helping the people of Iraq, the money only served to enrich the pockets of Saddam 

and his henchmen. 

The Oil-for-Food framework was suppose to require strict UN oversight But the 

approximately $15 billion a year program, by far the largest program the UN had 

ever administered—in fact, a program worth more than five times the UN’s annual 

core budget was apparently too much for the UN’s to handle. Oil and humanitarian 

contracts were not scrutinized. Internal audits of the program were not made available to member states; and the fifty-five audits prepared by the UN office of internal 

oversight services were not shared with members of the so-called ‘‘661 Committee 

of Oversight.’’

Even more disturbing, a growing body of evidence suggests that proceeds from 

smuggled oil and manipulation of the Oil for Food program may be financing the 

bloody insurgency in Iraq, where radicals are killing Coalition and Iraqi troops and 

civilians alike. Car bombings, abductions, and beheadings are a familiar part of this 

campaign to derail efforts to stabilize and secure the transition from tyranny to freedom. 

We absolutely need to know where all the ill-begotten proceeds of the Oil for Food 

program went, and if in fact these proceeds are fueling the insurgency. Repeated 

requests for access to the UN’s internal audits, in hopes they can shed some light 

on the true scale of this financial disaster, and help investigators follow the money 

trail, have unfortunately been denied by the UN. We must continue to conduct a 

systematic look at whether Saddam robbed his people of the humanitarian aid they 

so desperately needed in order to fund his extravagant lifestyle and his campaign 

of hate and terror. We must ascertain whether the Oil for Food proceeds were diverted to jihadists like Al Qaeda, other extremists, and the insurgency fighting to 

destabilize Iraq and prevent democratization there today. 

The work of the Volcker Commission has only begun. We as a Committee have 

every reason to expect the inquiry to continue in an open, transparent manner with 

unfettered access to all UN documents relating to Oil-for-Food, role of UN officials 

and parties to UN-contracting provisions. Mr. Annan has promised to lift the diploVerDate Mar 21 2002 15:40 Jun 29, 2005 Jkt 000000 PO 00000 Frm 00101 Fmt 6601 Sfmt 6621 F:\WORK\OI\020905\98601.000 HINTREL1 PsN: SHIRL
98

matic immunity of any UN employee charged with a crime in connection with the 

scandal. If that doesn’t happen, I believe that we have a responsibility as a Committee to exert whatever pressure we can on officials at the United Nations until 

they come clean. 

That is why I was a principal co-sponsor of H.R. 4284 introduced by Congressman 

Jeff Flake last spring. H.R. 4284 requires the withholding of US contributions to 

the UN until the President certifies that the UN is cooperating in the investigation 

of the Oil-for-Food program. I co-sponsored this bill because I believe so much more 

could have been achieved had the Oil-for-Food Program been implemented honestly. 

And I believe that it is necessary to withhold payments to the UN until there is 

a full and transparent accounting with full cooperation from the UN because exerting the power of the purse is the only way UN officials will know that we are serious about cleaning up this mess. 

Overall responsibility for the Oil for Food program’s failure—and again this was 

one of the biggest financial scandals of modern times—in my opinion should lie 

squarely with UN Secretary General Kofi Annan. The UN’s inability to successfully 

manage the Oil-for-Food program represents a spectacular failure of leadership on 

the part of Mr. Annan. 

The United Nations was created to solve international disputes before they flare 

into war. For many years, critics, and I have been one of those critics, have argued 

that in discharging this mission, the U.N. has often been feckless and even irrelevant. If the UN is to have any future legitimacy it must address quickly, honestly 

and effectively the administrative and oversight deficiencies that helped to make 

this scandal possible. 

In addition, to whatever reforms the UN needs to implement, and whatever disciplinary steps the United Nations must take against those UN officials and others 

implicated in Volcker’s report, it is the responsibility of this Committee, among others, to uncover the true extent of the problems at the United Nations, and to uncover whether any U.S. or international laws have been broken. 

It is my hope, Mr. Chairman, that under your leadership this new subcommittee 

will lend its good services and shine the light of truth and clarity on this unprecedented scandal. Thank you.

Æ