Corruption at the heart of the United Nations

Aug 9th 2005
From The Economist Global Agenda

An investigation has concluded that the former head of the United Nations’ oil-for-food programme in Iraq took kickbacks to help an oil company win contracts. Another senior UN official is accused of soliciting bribes. The report is a severe blow to the organisation at a crucial time

FOR over a year, investigators have pored over questions of mismanagement and corruption at the United Nations. On Monday August 8th, they produced their firmest—and most painful—conclusions to date. An independent commission has found that Benon Sevan, the former head of the UN’s oil-for-food programme in Iraq, “corruptly benefited” from kickbacks while he was in charge. Another UN official, from the procurement office, is accused of soliciting bribes. The UN’s biggest-ever humanitarian undertaking seems to have become its biggest-ever scandal.

A harsh light began to shine on Mr Sevan after his name appeared on documents found in Iraq after the American-led invasion of 2003. Under the programme he ran, Iraq, though shackled by trade sanctions, could sell oil to buy food and medicine for its people. But the Iraqis negotiated the right to choose buyers and sellers in the programme. This gave Saddam Hussein’s government the ability to use oil concessions as a way to buy friends and influence.
Among those alleged to have been bribed with oil vouchers are several European politicians.

But the charge that corruption may have tainted the top of the UN bureaucracy itself shook the organisation deeply. Mr Sevan denied any wrongdoing when his name hit the headlines. But the UN called for an independent inquiry, headed by Paul Volcker, a former head of America’s Federal Reserve. Mr Volcker’s first report, in February, showed that Mr Sevan had had repeated—and oft-denied—contact with the president of an oil company, AMEP, that received oil vouchers from Saddam. Mr Sevan also had around $160,000 in unusual bank deposits. He insisted that the money had come from an aunt.

This week’s report gives details of repeated meetings not only with AMEP’s president but also with Fred Nadler, a close friend of Mr Sevan’s revealed by the new report to be a director of AMEP as well. Mr Nadler controlled a Swiss bank account in a shell company’s name. Pennies off each barrel of oil sold by AMEP under the oil-for-food scheme went to the Swiss account, says the report, and money was withdrawn from it when Mr Sevan and/or Mr Nadler were in Geneva. Soon after, large sums of cash—mostly $100 bills—were paid into Mr Sevan’s American accounts. The Volcker committee thus claims a “reasonable sufficiency” of evidence that Mr Sevan was on the take. An American criminal investigation may now see if it can indict him. The Volcker committee has asked UN Secretary-General Kofi Annan to strip Mr Sevan of his diplomatic immunity, which he has said he will do. Mr Sevan resigned from his UN post on Sunday but continues to protest his innocence, saying that Mr Annan has “sacrificed” him under political pressure.

Another long section of Monday’s report examines the adventures of Alexander Yakovlev, an officer in the UN’s procurement department. The report charges that Mr Yakovlev solicited a bribe from Société Générale de Surveillance, an inspection contractor, in exchange for confidential bidding information. (There is no evidence that SGS paid any such bribe.) The Volcker committee also says it has evidence that Mr Yakovlev took hundreds of thousands of dollars from other UN contractors. He and Mr Sevan are now the first two UN officials to be directly accused of personally benefiting from corrupt activity.

Rotten timing

The report makes only passing references to Mr Annan, but he is personally connected to another affair still under investigation. The Volcker committee is looking into whether Mr Annan’s son Kojo, who worked for a Swiss inspection-services firm called Cotecna, used his UN connections to help Cotecna win a bid.

The committee’s last report, in March, accused Kojo of concealing the length and depth of his involvement with Cotecna. But the committee had no conclusive evidence that Mr Annan senior knew his son was currently being paid by a company bidding for a UN contract. Since then, in an e-mail that has appeared in press reports, a Cotecna vice-president at the time, Michael Wilson, tells of a useful meeting with the secretary-general “and his entourage” shortly before Cotecna won its bid. Mr Wilson denies that the e-mail is genuine. The Volcker committee promises a “definitive” report on the affair in September.

If direct links are drawn between the UN’s head and the oil-for-food scandal, Mr Sevan’s fall would seem comparatively trifling in its consequences for the world body. But even if Mr Annan is cleared of wrongdoing, the Volcker team has already highlighted extensive management failures that let so many things go wrong with oil-for-food on his watch. And all of this comes at a crucial time for the UN, as it begins to consider how to reform itself.

America has just sent John Bolton, a fiery critic of the UN in the past, to be its ambassador there. Those Americans backing the hard-charging Mr Bolton say that he is the ideal man right now, as the UN needs a good shake-up. Only someone not afraid to slaughter sacred cows, they say, can get the job done.

But the UN, rightly, turns some of the criticism over oil-for-food back to America (and its ally, Britain). First, while quite a bit of money went missing in the kickbacks and bribes detailed in Mr Volcker’s reports, much more misdirected cash went elsewhere. Saddam supported himself by selling oil illegally to neighbours including Jordan and Turkey. UN defenders say America turned a blind eye to this, since these two countries were its allies. And UN backers remind America that the UN Security Council, through its sanctions committee, approved every contract awarded under oil-for-food. That means that America and Britain could have vetoed any of the dodgy deals involving Mr Sevan and the others accused. But they appear to have been more concerned with potentially weapons-related “dual use” Iraqi imports than they were about corruption. A later Volcker committee report will look into the Security Council’s oversight failures.

So Mr Bolton’s arrival and the mutual acrimony over oil-for-food mean tense times between the UN and its most powerful member—all the more so given that this comes just before the world body is set to consider proposals to keep it relevant after the war in Iraq. These include adding new permanent members to the Security Council, defining terrorism more clearly, helping the UN to react more robustly to humanitarian disasters, and more. A high-level summit in September is meant to tackle these questions.

The big reforms require a two-thirds majority in the UN’s general assembly, and no veto by any of the five permanent members of the Security Council (America, Britain, China, France and Russia). But not even the claimants to new Security Council seats—including Japan, Brazil and India—can agree among themselves who, exactly, should get a place at the table. They now seem unlikely to convince America, grouchier than ever about the UN, to take their side. Some of the other worthy goals of September’s reform conference could also be caught in the crossfire. The exploits of Messrs Sevan, Yakovlev and others may have done more than just a terrible disservice to the wretched people of Iraq they were paid to help.

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