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Analysis:Fight looms in oil-for-food probe

By SHAUN WATERMAN, UPI Homeland and National Security Editor   |   April 30, 2004 at 7:29 AM
WASHINGTON, April 30 (UPI) -- A bureaucratic wrestling match over who is in charge of a Baghdad-based investigation into the oil-for-food scandal threatens to provoke a dispute between Iraq's U.S. administrator and the Iraqi Governing Council over control of a small number of documents underlying the most controversial charges.

L. Paul "Jerry" Bremer, the U.S. administrator of Iraq is determined that there should be an independent audit of the $10 billion network of illegal financial translations surrounding the U.N. oil-for-food program, and wants to take the probe "out of the hands of politicians," the CPA official who oversees the program told United Press International.

But members of the U.S.-appointed Iraqi Governing Council insist they will continue to supervise an inquiry they regard as already underway, conducted by a team from accounting giant KPMG and London law firm Freshfields, hired by the council's finance committee and overseen by an adviser to Ahmed Chalabi the committee's chairman.

"The governing council is going ahead with its inquiry," the adviser, Claude Hankes-Drielsma told UPI, "that was agreed unanimously" at an April 18 meeting attended by CPA representatives. Hankes-Drielsma acknowledged they were "awaiting confirmation from Ambassador Bremer that he will release funds" to pay for the investigation.

But James B. Warlick, the official in Bremer's Coalition Provisional Authority responsible for the oil-for-food program, says that no decision has been made on who will be hired to conduct the probe, which will be overseen by the Iraqi Board of Supreme Audit, a professional oversight agency modeled on the General Accounting Office in the United States.

Warlick, who still has responsibility for the 3,500 contracts -- worth a total of $7 billion -- that survived the program's closure last November, says the investigation must be like Caesar's wife -- above even the hint of suspicion. "To make sure that the process is impartial, and seen to be impartial, we need to make sure there is no perception -- whether right or wrong -- of people acting from political motives. That's why it is best that the investigation be taken out of the hands of politicians," he said.

He said Bremer had ordered the audit board to identify and preserve documents and personnel relevant to the program, which allowed Iraq to sell its embargoed oil and spend the proceeds on humanitarian supplies. Some $5 million has been allocated to hire professional forensic auditors after an open bidding process.

Hankes-Drielsma responded by accusing Bremer of "high-handedness" and said his insistence on putting the job of conducting the inquiry out to tender had cost vital weeks in a race against the clock to reconstruct the complex web of financial transactions and corporate entities through which billions and billions of dollars were siphoned off by Saddam and his cronies.

Chalabi aide Entifadah Qanbar, visiting Washington, told UPI that there would have to be an accounting for the delay. "The Iraqi people are going to want to know why we didn't move more quickly."

Warlick said the authority had gone to great lengths to conduct an open and transparent tender process "so that no one can say later that anyone was excluded (from consideration)." He said the tender closed April 20 and a technical review by supreme audit board officials of the proposals submitted was under way.

"A decision expected within a few days," he told UPI this week.

"I don't know which firms have tendered, and it may well be that KPMG will be chosen," he said. He brushed aside the fact that the governing council had issued its own tender and already decided on KPMG.

"There is one route to appointing the investigators," he said. "There is one set of funds. There will be one investigation."

He added that it was "unclear" what role, if any, Hankes-Drielsma might play in that inquiry. For his part, Hankes-Drielsma said that the Iraqi Board of Supreme Audit was a "very new idea" and that "no one knows much about it." He also said that $5 million would pay only for a "half-baked" investigation, arguing that the cost of a thorough probe would two to four times that.

At the heart of the questions about who conducts the inquiry and who oversees it is the issue of access to the documentation underlying a list, published by an Iraqi newspaper, of the names of about 270 individuals, companies and organizations said to have received oil vouchers.

The vouchers, which guaranteed the right to buy Iraqi oil at a certain low price, were used when sales under the oil-for-food program were made to middlemen or traders. They could be cashed in or traded and were worth between 5 and 50 or more cents on the barrel. Some of those on the list -- like the U.N. official who ran the program, Bevon Savan -- have no legitimate connection to the oil business and the paper accused them of accepting the vouchers as bribes.

Savan has denied receiving "oil or monies from the former Iraqi regime."

Allegations that Saddam was earning illicit cash by smuggling oil out of the country, or that his inner circle were profiting from kickbacks paid by companies keen to get the lucrative business are nothing new. But the publication of the list in January was the first time that charges were leveled at people outside the regime, including former ministers in France, political parties in Russia, Arab journalists, British politicians and dozens of companies domiciled in Switzerland, Liechtenstein or Cyprus.

Republican lawmakers and administration officials in Washington (who have between them several of their own inquiries into the affair) have suggested that votes on the U.N. Security Council may have been influenced by the voucher scheme, and some have hinted darkly at a web of corruption that reaches all the way to Secretary-General Kofi Annan.

In an unusually aggressive response, Annan on Wednesday said some of the charges against the United Nations were "misinformation," and that some of the things said about the program were "outrageous and exaggerated."

Indeed there is a sense among U.N. supporters -- palpable in a hearing this week -- that the launch of the United Nation's own inquiry draws a line under a period when leaked documents and anonymous sources provided a rich vein for the organization's critics.

"The free ride is over," said John G. Ruggie, a professor at Harvard University's Kennedy School of Government who was formerly assistant secretary general under Annan. "Up until now, these allegations have not faced adequate scrutiny. The Volcker investigation changes that."

This week, the U.N. Security Council voted unanimously to empanel a three-member inquiry team headed by former Federal Reserve Chairman Paul Volcker, with wide ranging power.

Warlick says Volcker and his staff will have access to all the documents collected for the Iraqi Board of Supreme Audit investigation, and hopes that Iraqi auditors will likewise have access to whatever they need from the United Nations.

But Warlick says the auditors don't have the most sensitive documents of all: the ones implicating Savan: "I'd like to know exactly who does have those documents ... because they should be handed over (to the board of supreme audit )... To my knowledge those documents have not been turned over."

Hankes-Drielsma said the Savan documents had been made available to the United Nations and that the governing council has been asked for -- and has granted -- permission to pass them to Volcker's team. He added that Volcker and the KPMG team leader Alan Bates had worked together in the past and expected to get along fine.

But he warned that the council expected guarantees of reciprocity if it was to share the fruits of its investigation so far. "The governing council needs to wait a formal response from the secretary general before deciding" how to proceed, he said, adding that, "what we're hearing (about the response) is not encouraging."

No one from the Volcker inquiry, which U.N. officials said was still attempting to ramp up, was able to confirm whether they had the Savan documents, and no one would comment more generally, but some involved are known to fear being caught in political crossfire.

Hankes-Drielsma said that KPMG had some documents in its possession, as did Freshfields and the governing council itself.

Warlick said all documents were being collected for storage in a centralized facility by the supreme audit board. Eventually, he explained, they would be transferred to a store at the headquarters of the special tribunal which will be prosecuting Saddam and his cronies.

He said the inquiries biggest challenge would be finding the paperwork that would enable them to follow the dozens of rivulets of money spilling from the program.

"Some documents were destroyed by the fighting in Baghdad. Others were deliberately destroyed, then or later, but many were kept. Some civil servants took documents home to ensure they wouldn't be destroyed," he said.

"It's going to be an enormous job to bring all those documents together, and the greatest challenge is going to be the most sensitive ones which are in private hands... If they're being held legitimately, to preserve them, I'm confident that they will be turned over.

"We will have to count on Iraqis who want to see justice done coming forward," he said.

"It's going to be very difficult for any investigation to uncover how the corruption worked and exactly who benefited ... It's going to be hard to get the complete picture."

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(Please send comments to nationaldesk@upi.com.)

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