October 27, 2005

2,200 firms paid Saddam bribes, kickbacks - report

By Evelyn Leopold and Irwin Arieff

UNITED NATIONS (Reuters) - More than 2,200 companies, including major concerns like DaimlerChrysler, Siemens and Volvo, made illicit payments totalling $1.8 billion to Saddam Hussein's government during the U.N. oil-for food program, a report said on Thursday.

The U.N.-established Independent Inquiry Committee, led by former U.S. Federal Reserve Chairman Paul Volcker, named politicians in Russia, France, Britain, Italy and other nations who were given favours by Saddam in his quest to get 1990 U.N. sanctions lifted.

Paul Volcker, committee chair for the Independent Inquiry Committee into the United Nations Oil-For-Food Programme, delivers findings during the presentation of the last report in New York, October 27, 2005. (REUTERS/Jeff Zelevansky)

The program, which began in December 1996 and ended in 2003, was aimed at easing the impact of U.N. sanctions imposed in 1990 after Baghdad's troops invaded Kuwait. It allowed Iraq to sell oil in order to pay for food, medicine and other civilian goods.

"It was the mother of all humanitarian programs," Volcker told a news conference, parodying Saddam's threat that countries who opposed him in the 1991 Gulf War would face "the mother of all battles."

The report said that under the program Iraq sold a total of $64.2 billion of oil to 248 companies, of which 139 paid illicit surcharges.

In turn some 3,614 companies sold $34.5 billion of humanitarian goods to Iraq and the report said 2,253 paid kickbacks. The total that Iraq made from the companies, which were registered in 66 countries, was $1.8 billion.

Volcker said this was far less than the nearly $11 billion Saddam made in smuggled oil sales outside of the program. Some of this was with the knowledge of the U.N. Security Council which was supposed to supervise the operation.

LACK OF UN OVERSIGHT

The report blamed U.N. officials for a lack of oversight and said Security Council members took little action when U.N. oil experts passed on their concerns.

In addition, the BNP-Paribas bank, which held the escrow account for the program, did not disclose evidence of corruption in its possession, the report said.

Preferential treatment was given to companies in France, Russia and China, all permanent members of the Security Council, who were more favourable to lifting the 1990 sanctions compared to the United States, Britain and Japan.

Among those named in the report as receiving oil vouchers that could be sold for a commission were British lawmaker George Galloway, former French U.N. Ambassador Jean-Bernard Merimee, former French Interior Minister Charles Pasqua and Russian ultranationalist leader Vladimir Zhirinovsky.

Top European companies like Germany's DaimlerChrysler AG and Siemens, Britain's Weir Group and the Brussels-based branch of Volvo Construction Engineers were among those reported to have paid kickbacks to Iraq.

DaimlerChrysler was said to have paid $7,134 in kickbacks on a contract with Iraq and Volvo paid $535,000

Under the program, which allowed Iraq to write its own contracts and choose buyers, oil firms including Vitol, Glencore and Bayoil paid out millions in illegal surcharges, the report said.

The 19-month investigation has caused havoc at the United Nations, whose officials say the world body was unequipped to handle a program of that size.

"The need for stronger (U.N.) executive leadership, thoroughgoing administration reform, and more reliable controls and auditing within the U.N. is underscored," the report said.

U.S. Ambassador John Bolton said Saddam was able to manipulate the program people "with the willing cooperation of U.N. officials, the acquiescence of some member states, and, as today's report indicates, the willingness of private companies and individuals to pay huge sums in bribes and kickbacks to the Hussein regime."

He said the management of the United Nations "needs urgent, immediate reform" and that nations "must pursue those people and companies who assisted in the corruption of the sanctions regime."

(Additional reporting by Deepa Babington, Tim Gardner and Daniel Trotta)

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