Thursday, October 27, 2005

Over 2,000 Firms Paid Saddam Kickbacks, Bribes

By Evelyn Leopold and Irwin Arieff

UNITED NATIONS (Reuters) - Some 2,200 companies, including major concerns like DaimlerChrysler, Siemens and Volvo, made illicit payments totaling $1.8 billion to Saddam Hussein's government under 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, also named politicians in Russia, France, Britain, Italy and elsewhere who were given favors by Saddam in his quest to get U.N. sanctions lifted.

More than half of the 4,000 companies that bought oil or supplied humanitarian goods under the plan were implicated. Only one oil company and 26 suppliers of goods admitted doing so.

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 to pay for food, medicine and other goods.

"It was the mother of all humanitarian programs," Volcker told a news conference.

The companies involved came from 66 nations, including large corporations in the United States, Russia, France, Germany and Switzerland. Russia, then an ally of Iraq, led the list of both legitimate and illegitimate oil contracts, getting $19.3 billion from Iraq, some 30 percent of all oil sales.

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 2,253 paid kickbacks, the report said.

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

Volcker said his latest and last report after 19 months of investigation was meant to explain what happened outside of the United Nation's control. But in an address to the 191-member U.N. General Assembly, he asked why such pervasive corruption "was not perceived and why was action was not taken."


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

Merimee, France's U.N. ambassador until 1995, alone told investigators that Tariq Aziz, Iraq's former deputy prime minister, had offered him the commissions because he was a "fair negotiator." He was at the United Nations until 1995, when the program was first considered and allegedly received $165,725 in 1999. French authorities are investigating him.

Iraq often demanded kickbacks as the cost of doing business. It allowed Saddam to gain hard currency, denied under the sanctions.

The report also found that Marc Rich & Co, a fugitive financier pardoned by former President Bill Clinton, financed the purchase, including the surcharges, of 4 million barrels of oil for the son of a French parliamentarian.

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. Daimler said it had dealt with the charge in its quarterly report and would not comment further. Volvo and Wier had no immediate reaction.

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. BNP said it disagreed with the panel's conclusions.

The report also said the Australian Wheat Board (AWB) paid over $221.7 million to a Jordan-based collection agent for the Iraqi government. The AWB and Alia, the collection agent, both denied the board knew of Iraq's partial ownership of Alia.

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 largest single kickback came from the Malaysian firm Mastek, the report said.

Iraq's oil marketing company, SOMO, took more than $10 million in illegal surcharges from Mastek in 2001-2002. The report said that the Swiss trading firm Vitol financed 33 million barrels of crude through Mastek during that period.

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

"I think there are lessons for all of us to learn," U.N. Secretary-General Kofi Annan said. "We already have proposals for reforms that will ensure that in future we are better equipped to handle this sort of program."

Annan's son Kojo has figured in several reports, although the secretary-general himself was not accused of wrongdoing.

The report says a payment of 20,000 Swiss francs went to the younger Annan from Coctecna, a Swiss-based company that won a lucrative U.N. contract in Iraq.

The Volcker report said it could not draw conclusions from the payment and would refer the information to the appropriate authorities.