OIL-FOR-FOOD: FACTS

Myths & Facts

Myth: The U.S. federal courts gave the UN rights superior to those of the U.S. Congress when they blocked a former IIC investigator from handing documents over to Congress.

Fact: Robert Parton resigned as a senior investigator on the Volcker Commission in April 2005, because he disagreed with the investigation's findings that Kofi Annan had not unduly influenced the Oil-for-Food program procurement process. Upon departing, he signed a declaration that he no longer possessed any documents relating to the IIC investigation. The promise of confidentiality for witnesses is essential to the success of the investigation. When Robert Parton contravened his confidentiality agreement with the IIC by handing over IIC documents that Congress had subpoenaed, Paul Volcker was legitimately concerend that his investigation was jeopardized and the safety of his witnesses was in peril. So the IIC filed a suit in the U.S. District Court for the District of Columbia on May 9, 2005 to prevent Parton from handing over the documents. Siding with the IIC, the court so far has issued five temporary restraining orders, freezing legal issues between the two parties while they try and work out an agreement.

Protection of witnesses and information is guaranteed to the Volcker Commission through the UN Convention on Priveledges and Immunities, to which the U.S. is a party. As former U.S. Attorney General Dick Thornburgh wrote in the Washington Post on May 17th, "The real basis for the Volcker committee's action, and for the temporary restraining order granted by a federal court, is something more important than protecting U.N. officials. It is the need to defend a principle held sacred and regularly exercised by all investigators -- including congressional probers -- namely, confidentiality for witnesses and investigators."

Myth: Kofi Annan steered a lucrative OFFP contract toward Cotecna.

Fact: In its latest interim report released on March 29, 2005, the Independent Inquiry Committee (IIC) explored the process by which Cotecna was selected for the humanitarian goods inspection contract under OFFP. One of the questions that the report focused on was whether the Secretary-General influenced the selection of Cotecna, a company that his son, Kojo Annan, was affiliated with. The IIC found no evidence that the Secretary-General had intervened in the process or even had any knowledge of Cotecna's bid.

In the words of the IIC, "There is no evidence that the selection of Cotecna in 1998 was subject to any affirmative or improper influence of the Secretary-General in the bidding or selection process. Based on the record and lack of evidence of impropriety, it is the finding of the Committee that Cotecna was awarded the contract in 1998 on the ground that it was the lowest bidder. The Committee also notes that, in keeping with normal United Nations policy and practice, the Secretary-General is not involved in procurement decisions."

Myth: The UN treated the OFFP administrative account as a commission.

Fact: At OFFP's inception an account of 2.2% of oil sales under the program was set aside to cover the significant expenses associated with administering the largest humanitarian program in the UN's history. The IIC examined allegations that the account funds were misused. The IIC found that the "ESD account was not treated by the United Nations as a commission, either by design or practice, but rather as a necessary pool of funds dedicated to covering the significant administrative expenses associated with the Programme."

The IIC added that "The budgets and actual expenditures were always significantly less than the amount of funds available, so much so, that $372 million, or twenty-seven percent of the total oil proceeds allocated to ESD and available for the United Nations to spend, was not used, but rather was transferred out of the account to be used directly for the benefit of the Iraqi people."

Moreover, Mr. Volcker remarked following the release of the report that, "I emphasize, we have not found systematic misuse of funds dedicated to the administration of the Oil-for-Food Programme. It was, in fact, careful budgeting, not all the funds budgeted were spent, and the accounting trail is adequate."

Myth: The consensus decision making rule in the 661 Committee prevented the U.S. from addressing the problems of smuggling and kickbacks.

Fact: According to the guidelines for the conduct of work of the 661 Committee, decisions were to be reached by consensus. However, this rule meant that in the absence of consensus, the default position was denial of import or oil sales, not approval. In 1999, then Under Secretary of State Thomas Pickering made this clear to the Senate Committee on Foreign Relations: "Because the Committee operates by consensus, [the U.S.] can hold back or block any contract that is inappropriate or ill advised." By this rule, the United States could have exercised its veto power over contracts once allegations of kickbacks on humanitarian goods surfaced in 2000. However, while the U.S. frequently held up contracts citing "dual-use" concerns, i.e. goods that could be used for military purposes, it never once denied a contract on the basis of pricing-irregularities. In fact, while the U.S. and the UK held up 5,000 contracts over "dual-use," no contract that the OIP experts flagged for potential pricing irregularities was blocked by the 661 Committee. This, despite at least 70 cases were reported to the 661 Committee about potential overpricing between 2000-2001.

In a statement submitted to the House Government Reform Subcommittee on National Security, Emerging Threats and International Relations, Jean-David Levitte, who was the French Ambassador to the UN during OFFP, said, "the rule of unanimity, sharply criticized by some as an obstacle to the adoption of US proposals also served the US, for example for delaying contracts and imposing the mechanism of retroactive oil pricing."

Myth: Saddam Hussein's regime raised over $21.3 billion in illicit revenue by subverting the Oil-for-Food Program (OFFP).

Fact: This figure was initially provided on November 15, 2004 at a hearing of the Senate Subcommittee on Permanent Investigations that is conducting one of the five congressional inquiries into the OFFP. The Subcommittee distributed a chart that showed that while Iraq was under UN Sanctions, between 1991 - 2003, the Saddam Hussein regime obtained illicit revenues of $21.3 billion. The chart clearly indicates that the OFFP was responsible for a small share of this total and that most of the illicit revenue came from other sources.

Since then, the $21.3 billion figure has been used inaccurately by Members of Congress, the media, and even President Bush. All have said at various times that it represents what the Hussein regime obtained by circumventing the OFFP. Most notably, Senator Norm Coleman (R-MN), who chairs the Senate Subcommittee on Permanent Investigations, has used the figure incorrectly multiple times, without being challenged. In his December 1, 2004, op-ed in The Wall Street Journal, Sen. Coleman wrote, "At our hearing on Nov. 15, we presented evidence that Saddam accumulated more than $21 billion through abuses of the Oil-for-Food Program and UN sanctions." Yet Sen. Coleman has linked the entire $21 billion number to Oil-for-Food during various interviews with FOX News, CNN, and CNBC.

Attributing the whole $21.3 billion to circumvention of the OFFP is incorrect on its face. First, the OFFP did not begin until 1996, fully 5 years after the beginning of sanctions on Iraq. Second, the same chart used by the Subcommittee to graphically represent the number shows that only $6.5 billion was related to the OFFP, as only three of the categories in the chart can be directly attributed to the OFFP. They are:

Kickbacks on Humanitarian goods-- $4.4 billion

Oil surcharges-- $241 million

Substandard Goods--$2.1 billion

The other categories in the chart, including oil smuggling, fall outside the purview of the Office of the Iraq Program, the UN entity that administered the OFFP. Of particular note is the $13.6 billion the chart attributes to oil smuggling. There has been a wide misperception that the UN was in charge of policing for the regime's oil smuggling. This is incorrect. The responsibility for preventing smuggling into and from Iraq rested with Member States, specifically with the Multinational Interception Force, mandated by the Security Council in 1991 and led by and predominantly made up of the Fifth Fleet of the U.S. Navy. Additionally, the category the subcommittee calls "substandard goods" is a new category that has not been included in previous estimates of Saddam's illicit revenue, and might warrant further scrutiny.

Furthermore, the recent report issued by the Iraq Survey Group headed by Charles Duelfer notes that nearly ¾ of the illicit revenue (or $8 billion) obtained by the Hussein regime during the sanctions period came from illegal trading with its neighbors (see chart). A third source, the U.S. Government Accountability Office (GAO), reached the same conclusion. The GAO, in its "Observations on the Oil for Food Program" report highlights (submitted as testimony to the Committee on Foreign Relations on April 7, 2004), noted that the 661 Committee did not have oversight of the majority of missing revenues ($5.7 billion) that were attributed to smuggling. Instead, the GAO found that investigations concerning 661 Committee responsibility should focus on the remaining $4.4 billion attributable to kickbacks on humanitarian aid contracts and surcharges on oil sales.

Myth: Oil smuggling was just one of many problems under the OFFP that the UN failed to prevent.

Fact: The UN had neither the authority nor the resources to prevent smuggling. The UN Security Council oversaw the OFFP, and the UN Secretariat's Office of the Iraq Program (OIP) implemented the Council's work on the ground in Iraq. Specifically, it was the role of the Security Council's 661 Committee to monitor all contracts awarded under the OFFP (all members of the UN Security Council, including the U.S., were members of the 661 Committee). The task of policing oil smuggling fell to the Multinational Interception Force (MIF) - which was led by and predominantly made up of the Fifth Fleet of the U.S. Navy.

The MIF was created following the imposition of sanctions in 1990 and was responsible for preventing smuggling from and into Iraq via the Gulf region. Copies of waivers issued by both the current Bush Administration and the Clinton Administration show that the U.S. was aware that Iraq was trading oil with its neighbors, in violation of the UN sanctions, as far back as 1991. Many observers believe successive U.S. administrations allowed the illegal oil trades to continue because stopping them could endanger the support of Iraq's neighbors for UN sanctions.

Myth: The UN never did anything to raise concerns about potential kickbacks and surcharges in the OFFP.

Fact: In many instances, officials from the Office of the Iraq Program (OIP) made the UN Security Council's 661 Committee aware of potential irregularities in contracts. The 661 Committee was composed of all members of the UN Security Council and had sole discretion over approving the OFFP contracts.

Below are a few examples:

UN oil overseers first alerted the Security Council's 661 Committee on November 17, 2000 that the oil pricing formulas proposed by Iraq for the month of December did not represent "fair market value," because the oil appeared to be considerably under-priced. As a result of the alert provided by UN officials, on December 15, the 661 Committee directed oil overseers to advise buyers of Iraqi oil that they should pay no surcharges on oil sales since this would be considered illegal. According to various accounts including the report of the Iraq Survey Group led by Charles Duelfer, this action sparked by diligence on the part of OIP effectively ended Saddam's practice of using oil surcharges to acquire illicit revenue.

In early March, 2001, the issue of oil surcharges was further reported by the Secretary-General in his report to the Security Council.

Regarding oil surcharges, the 661 Committee did not reach consensus as to how to address the problem until October, 2001, when the Committee decided to introduce a "retroactive pricing mechanism" for Iraqi oil in an attempt to eliminate the surcharges on oil.

Throughout 2001 and 2002, hundreds of contracts for humanitarian goods to be sold to Iraq were queried by UN experts for potential over-pricing. At least 70 cases were reported to the 661 Committee and not a single case was placed on hold for pricing issues. Most of these contracts were ultimately approved. Though the U.S. and the UK held up 5,000 contracts over concerns that Iraq was attempting to purchase "dual-use" goods that could be used to build weaponry, no contract that the OIP experts flagged for potential pricing irregularities was blocked by the 661 Committee. (View examples of contracts flagged by OIP over pricing concerns.)

As Fairfield University professor, Joy Gordon, wrote in the December, 2004 issue of Harper's Magazine,

"The Oil-for-Food Program was not some concoction of Kofi Annan's. It was created by a vote of the members of the Security Council. And every aspect of how the program ran - what goods were allowed, the monitoring procedures, the transfer of funds, everything - was explicitly established by the members of the Security Council. Kofi Annan did not have a vote; but the United States and Britain did, and they approved of every resolution and decision that determined how the Oil-for-Food Program worked. Whatever critics may say, 'the UN bureaucracy' did not design a program that handed over cash to Saddam Hussein."

Myth: The Volcker inquiry is not independent, has no subpoena power, and we can't trust the UN to investigate itself.

Fact: The Independent Inquiry Committee (IIC) is independent. Members of the panel, which includes former U.S. Federal Reserve Chairman Paul Volcker, South African Justice Richard Goldstone and Mark Pieth, a Swiss expert on international money-laundering and bribery, are internationally recognized for their integrity.

Mr. Goldstone was the first Chief Prosecutor of the United Nations International Criminal Tribunals for the former Yugoslavia and Rwanda. Mr. Pieth was the Chair of the OECD Working Group on Bribery in International Business. Chairman Volcker also has made it clear that his findings and the evidence to support them will be released to the public. The Secretary-General has publicly instructed all UN staff to cooperate fully with the panel's investigation as a condition of employment. Chairman Volcker has said that he has not had any difficulty with UN cooperation, and said on "The Charlie Rose Show" on November 24, 2004, that his investigation "has a very important power that nobody else has. We have access to the UN material." This power ensures that while the inquiry lacks explicit subpoena power, access to important information is still assured. The UN has never had the ability to subpoena witnesses, because this is a function reserved to Member States only. It is important to note that granting the UN or the independent inquiry subpoena power would infringe on the sovereignty of Member States like the U.S.

The IIC panel has the authority to:

investigate whether the procedures established by the UN for the management and operation of the program were violated;

determine whether any UN officials, personnel, agents or contractors engaged in any illicit or corrupt activities in the carrying out of their respective roles in relation to the Program; and,

determine whether the accounts of the Program were in order and were maintained in accordance with UN procedure.

In a July 7, 2004 op-ed in The Wall Street Journal, Chairman Volcker wrote:

"It is, after all, only the Independent Inquiry Committee that I chair that has the mandate, the international framework and, I believe, access to resources, both human and financial, to provide the kind of comprehensive fact-finding and analysis the investigation requires. We mean to discharge that responsibility as carefully and as expeditiously as possible."

Myth: The Volcker investigation has been dragging its feet on the investigation.

Fact: Since its creation in April 2004, the Independent Inquiry Committee (IIC) has moved swiftly in its investigation, in adherence to an ambitious timeline. The Committee has issued regular briefing papers noting its progress. Responding to concerns from the U.S. Government, the IIC released the UN's internal audit reports ahead of schedule.

On February 3, 2005, the IIC released its first interim report, detailing the investigation's findings on the initial procurement of UN contractors, the internal UN audits, and the administrative expenditures of the Oil-for-Food Program. Following its release, Senator Norm Coleman, Chairman of the Subcommittee on Permanent Investigations, which is leading its own inquiry into the Oil-for-Food Program, declared himself "pleased with the preliminary report presented by Mr. Volcker." The Washington Post praised the Volcker Commission, saying, "The first and most important point to make about the preliminary report on corruption in the United Nations' oil-for-food program is that it is not a whitewash. Despite dark hints that Paul A. Volcker, the former Federal Reserve chairman who led the investigation, was too chummy with the U.N. bosses, Thursday's report did name names. Most notably, it accused Benon Sevan of having received the rights to purchase millions of barrels of discounted oil from Iraqi officials while he was serving as the director of the oil-for-food program." The IIC expects to complete its investigation by mid- to late-summer, 2005. It will continue to release information on discrete parts of the investigation as soon as it is able to draw conclusions.

Myth: The UN is not cooperating with investigations in Congress concerning the OFFP.

Fact: The UN organized and funded an independent inquiry led by former U.S. Federal Reserve Chairman Paul Volcker when allegations arose in early 2004. Chairman Volcker has pledged to share all documents with other investigations once the inquiry has determined that the release of information will not jeopardize his investigation's integrity.

This process ensures that all relevant documents and persons are investigated thoroughly and fairly, without the influence of political agendas. True to its word, the IIC released all internal UN audit reports on OFFP on January 9, 2005. Secretary-General Kofi Annan's Chief of Staff, Mark Malloch Brown, met with Congressional representatives and other officials in Washington, telling them that the UN is willing to work with Congress wherever possible. Once the work of the IIC is completed, the UN will be available to answer any questions that remain. The UN is also making the chief auditor of the Oil-for-Food Program available to U.S. Congressional to answer their questions on the issue of audits.

Myth: The OFFP did not achieve its humanitarian goals.

Fact: In fact, the OFFP enabled the importation of enough food to feed all 27 million Iraqis. During its existence, the average daily caloric intake of the people of Iraq increased 83 percent, from 1,200 kilocalories to 2,200 kilocalories per person per day. In addition, malnutrition rates in 2002 in the central and southern part of the country were half those in 1996 among children under the age of five; in the three northern governorates, chronic malnutrition decreased 56 percent.

According to an article in the November 21, 2004 edition of The Washington Post:

"International aid efforts and the U.N. oil-for-food program helped reduce the ruinous impact of sanctions, and the rate of acute malnutrition among the youngest Iraqis gradually dropped from a peak of 11 percent in 1996 to 4 percent in 2002."

This same article documented that malnutrition rates in Iraq have increased substantially since the end of the Oil-for-Food Program, from 4% to 7.7%.

Between 1997 and 2002, the capacity to undertake major surgeries increased by 40% and laboratory investigations increased by 25% in the center and south of Iraq. Communicable diseases, including cholera, malaria, measles, mumps, meningitis and tuberculosis were reduced in the center/south of Iraq during this period. As of May 29, 2003, there had been no cases of polio in Iraq for more than three years. In the three northern governorates, cholera was eradicated and the incidence of malaria reduced to the 1991 level. Vaccinations reduced measles morbidity considerably.

Preliminary findings indicate that between 1996 and 2002 there was a reduction in the number of underweight children from 23% to 10%; chronic malnutrition decreased from 32% to 24%; and acute malnutrition dropped from 11% to 5.4%. There were also significant improvements made to transportation, water and sanitation treatment facilities, agriculture, telecommunications and education among other infrastructure benefits.

Myth: Saddam Hussein funneled money from the OFFP to fund Palestinian terrorists and/or Iraqi insurgents.

Fact: At this time, no known information suggests that OFFP revenues were diverted to fund terrorists of any kind. The Volcker investigation will consider this and other factors relevant to the OFFP and the UN's role and determine the validity of this and other allegations.

However, should these disturbing allegations prove correct, this does not imply guilt by the UN, which was unaware of this heinous practice and adamantly opposes all forms of terrorism. In fact, the UN helped to negotiate the International Convention for the Suppression of the Financing of Terrorism, which aims to prevent exactly the type of abuse Saddam Hussein allegedly committed. That is one of a dozen treaties or other legally binding pacts that the UN fostered as part of its broad-based international effort to fight international terrorism.