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Friday, October 28, 2005

UN Oil for Food: world reaction to 'harsh' report

By JIM HEINTZ, Associated Press Writer
8 minutes ago

MOSCOW - A scathing report on corruption in the U.N. oil-for-food program for Saddam Hussein's Iraq drew widespread denials, terse dismissals and protestations of innocence Friday. But there were also pledges to investigate from some of the 2,200 companies cited and countries with citizens named.

Russian officials angrily alleged that documents accusing companies and officials in that country were fake, and the head of the nation's electricity monopoly called for the report's writers to be punished. But in a rare partial admission, Sweden's Volvo AB acknowledged making payments through an agent to Iraqi authorities but said it did not consider that bribery.

The U.N. report issued Thursday rattled reputations around the world with charges of kickbacks in lucrative contracts in the 1996-2003 program, under which Iraq was allowed to sell oil provided the proceeds went to buying humanitarian goods to help offset U.N. sanctions.

Saddam, who could choose the buyers of Iraqi oil and the sellers of humanitarian goods, corrupted the program by awarding contracts to — and getting kickbacks from — favored buyers, according to the report by the Independent Inquiry Committee led by former U.S. Federal Reserve chairman Paul Volcker.

Countries like Russia that opposed sanctions got preferential treatment from Saddam's regime, the report said.

Among those implicated was former Kremlin chief of staff Alexander Voloshin, now board chairman of the state electricity grid UES. Russian Foreign Minister Sergey Lavrov, in remarks reported by domestic news agencies, claimed some of the documents cited by the commission used forged signatures. And UES chief executive Anatoly Chubais said the commission knew Voloshin's signature was faked on oil contracts, adding: "I hope that those responsible for the mistake will be punished."

Volcker's team was extremely cautious on the claim against Voloshin. It noted that Iraqi Oil Ministry records reported about 4.3 million barrels were allocated in his name through a Russian company called Impexoil.

Yet it also acknowledged Russian claims that his signature was forged and said samples of his signatures were "not substantially similar" to the signature that appeared on a letter purportedly written by him. It said it could not find evidence linking Voloshin with Impexoil.

In Sweden, vehicle-maker Volvo AB, whose Brussels-based construction division was among the companies named in the report, acknowledged the company made payments through an agent to Iraqi authorities.

"We did business with an authority in Iraq. The same authority tells our agent that you have to pay a fee to do any business at all," chief executive Leif Johansson was quoted as telling the Swedish news agency TT.

"When authorities said that, we drew the conclusion that this was the way to do business in Iraq," he said. "No one linked that to bribes."

Volvo AB no longer owns carmaker Volvo, which was sold in 1999 to the Ford Motor Company.

Switzerland said it has launched a criminal investigation focusing on four people connected to the oil-for-food program. Swiss authorities already have fined a Geneva-based oil-trading company $40,000 for paying kickbacks under the program, but have not identified the company.

France will study the report and "wants full light to be shed on the embezzlement that took place in the framework of the oil-for-food program," Foreign Ministry spokesman Jean-Baptiste Mattei said. French judges are investigating 10 French officials and business leaders on suspicion they received oil allocations as kickbacks.

Among them is former U.N. ambassador Jean-Bernard Merimee, who held the post from 1991-95, and according to the report received more than $165,000 in commissions from oil allocations awarded to him by the Iraqi regime.

The report also said former French Interior Minister Charles Pasqua, now a senator, was awarded 11 million barrels of oil, an allegation he denied Friday in an interview with The Associated Press.

"I never received anything," Pasqua said, adding that he believed somebody used his name without his knowledge. "It is obvious to me that the Americans want to implicate France."

In Australia, Prime Minister John Howard said he doubted the Australian Wheat Board, which was the single largest supplier of humanitarian goods under the program, would have knowingly made improper payments. The report said the board, which sold $2.3 billion of wheat to Iraq, made "side payments" for transportation of the grain to a Jordanian company that was owned in part by Saddam's government.

Andrew Lindberg, managing director of the wheat board's successor AWB, said "we didn't know that the money, that we believed we were paying for transport, was being diverted to the regime."

An Italian politician named in the scandal, Roberto Formigoni, said he received "neither a drop of oil, nor a single cent." Fiery British lawmaker George Galloway, who founded a charity aimed at fighting the U.N. sanctions against Iraq, told the AP "there is a witchhunt going on" and accused U.S. Sen. Norm Coleman (news, bio, voting record), a Minnesota Republican, of falsifying evidence against him.

Germany's Siemens AG said it found no evidence of kickbacks allegedly paid by its French, Turkish and Middle East subsidiaries. A DaimlerChrysler statement said the company was aware of the report, but declined to comment further. Anglo-Swedish pharmaceutical company Astra Zeneca also denied alleged wrongdoing.

Texas oilman Oscar S. Wyatt Jr., the former chairman of Coastal Corp. who was described in the report as a favorite customer of Iraq, pleaded not guilty Thursday in New York to charges that he conspired to pay several million dollars in illegal kickbacks to Saddam's regime to win oil-for-food contracts. Volcker said Wyatt, 81, was the lone exception to an Iraqi ban on selling oil to American companies.

The report also implicated Lukoil Asia Pacific, a company the report called a subsidiary of Russia's No. 1 producer, Lukoil.

Lukoil's spokesman, Dmitry Dolgov, said he had never heard of the company, adding that investigators had worked with Iraqi documents, which could have been forged.

Dolgov noted that investigator Robert Parton resigned from Volcker's committee in April, reportedly because he believed it ignored evidence critical of U.N. Secretary-General Kofi Annan. "This creates the impression that this report is aimed at distracting attention from the oversights of U.N. officials and laying the blame with certain companies," Dolgov said.

UPDATE: Volcker Panel Cites French, Russian Firms
Volcker panel cites French, Russian firms
By Betsy Pisik

October 28, 2005

NEW YORK -- Russian and French firms dominated the list of companies that made nearly $2 billion in illicit payments to Saddam Hussein's regime in order to win contracts under the Iraq oil-for-food program, according to a massive new report released yesterday in a U.N.-approved inquiry.
More than half the companies that participated in the U.N. oil-for-food program helped Saddam undermine international sanctions by paying kickbacks and fees to the regime, according to investigators, who found that 2,250 firms from 66 nations made illegal payments to Iraq.
"The reports show that Saddam Hussein aggressively manipulated a well-intentioned program so that he could divert to his personal use billions of dollars that belonged to the Iraqi people," said John R. Bolton, the U.S. ambassador to the United Nations.
"But he was only able to accomplish this misdeed 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."
Firms from countries that Iraq deemed sympathetic -- including U.N. Security Council powers France, Russia and China -- were often given preferential treatment, according to the 623-page report compiled by a team of investigators headed by former Federal Reserve Chairman Paul A. Volcker.
Those same governments worked to loosen the sanctions, and also opposed the U.S.-led 2003 invasion of Iraq.
Among the firms that are suspected of paying kickbacks or bribes are DaimlerChrysler AG, Siemens AG, Volvo's construction vehicle unit and a variety of international firms.
Also singled out for criticism is BNP Paribas, the French bank that managed all the oil-for-food escrow accounts and letters of credit. The bank did not adequately scrutinize the accounts, nor cooperate fully with investigators, according to the report.
The final report, also implicates a surprising swath of political figures around the globe ranging from Russian ultranationalist Vladimir Zhirinovsky to British lawmaker George Galloway. A Vatican priest who campaigned against the sanctions received a $140,000 contribution from a French oil importer.
The report also implicates a financial company owned by fugitive American financier Marc Rich, who received a pardon from President Clinton, saying his firm underwrote letters of credit for a French oil firm while trying to keep its role a secret.
Only a handful of U.S. firms were found to be in violation of the oil-for-food program, in part because Washington was emphatically in favor of stern sanctions. Among the U.S. firms named was Reston-based Midway Trading, which paid a $220,000 fine earlier this week to settle grand larceny charges.
The report makes clear that Iraq's hunger for extra revenue began shortly after the program was put into place in 1996, and that many of the secret payments were an open secret, widely known among oil traders and those given humanitarian contracts with Iraq.

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