UN needs overhaul to stop fraud says probe

UNITED NATIONS - A year-long investigation found the United Nations urgently needs sweeping financial controls to avoid the "illicit, unethical and corrupt behaviour" uncovered in the US$64 ($91.32) billion oil-for-food programme for Iraq.

The investigation by the Independent Inquiry Committee, headed by Paul Volcker, the former US Federal Reserve chairman, to be released in full this week, says the United Nations was ill-equipped to handle a programme of that magnitude "or even programmes of a lesser scope."

"An adequate framework of controls and auditing was absent," said the report's preface, released on its website.

"There were, in fact, instances of corruption among senior staff as well as in the field."

The report is expected to run to nearly 1000 pages and is an analysis of the UN-established investigation of the now-defunct programme that allowed Saddam Hussein's government to sell oil and buy food, medicine and other goods to offset the impact of 1990 sanctions on ordinary Iraqis.

But the report said a major problem was that no one was in charge -- neither the Security Council, meant to supervise the programme, nor the UN secretariat, the semi-independent UN aid agencies and the General Assembly. Therefore when problems arose decisions "were delayed, bungled or simply shunned."

Consequently, ex-President Saddam Hussein was able to exploit the programme and its "wholesale corruption" among private companies, which will be detailed in an October report.

But the report's timing could not be worse as it comes out days before UN Secretary-General Kofi Annan presides over the largest world summit in history on Sept. 14-16. One proposal would give the secretary-general more power to move around staff, investigate wrongdoings and hire outside auditors.

"At stake is the UN ability to respond promptly and effectively to the responsibilities thrust upon it by the realities of a turbulent and often violent world," said the report.

"It is precisely those qualities that too often were absent in the administration of the oil-for-food programme."

The inquiry has revealed "serious instances of illicit, unethical and corrupt behavior, but the administrative difficulties are not only, or even primarily, a case of personal malfeasance," the introduction says.

The oil-for-food programme began in December 1996 and ended in 2003, a few months after the US-led invasion toppled Saddam.

Despite its criticisms, the report said the programme, which provided a lifeline for some 90 per cent of Iraq's 26 million people, had some "real accomplishments."

"They were achieved despite uncertain, wavering direction from the Security Council, pressures from competing political forces in Iraq," the Volcker committee report says.

But the report is not expected to come up with any "smoking gun" against Annan personally, although it will probably fault his son Kojo, for using his father's name for personal profit in purchasing a Mercedes under diplomatic cover.

The younger Annan worked for the Swiss firm Cotecna, which received a lucrative contract to inspect goods and there is no evidence so far the secretary-general influenced the contract bidding. Federal prosecutors have already indicted one UN procurement officer for taking kickbacks on contracts.

Annan, who has seen report, told the BBC he accepted responsibility for "inadequacies and failures" in some areas. But he said large parts of the programme were outside his control, including companies who bought oil and sold Iraq goods and were approved by the Security Council.

Without giving any details on Annan's behaviour, the report's forward said the United Nations ignored executive oversight when forming the secretary-general's office.

Annan, the report said, was viewed as the chief diplomatic and political agent of the United Nations and was "widely respected for precisely those qualities," which were "all consuming and led to "administrative failures."

Nevertheless the report said that its conclusions were unambiguous. The world body urgently required "stronger executive leadership, thorough going administrative reform and more reliable controls and auditing."

- REUTERS