RAY SUAREZ: Paul Volcker, the former Federal Reserve chairman, has spent the last year-and-a-half investigating the United Nations Oil-for-Food program, and allegations it was mired in corruption and allowed Saddam Hussein to siphon billions of dollars. The final report, delivered today, said the $64 billion program did help feed Iraqis from 1997 to 2003, but the report also concludes: "…the United Nations organization needs thorough reform - and it needs it urgently."
Secretary-General Kofi Annan, himself under scrutiny for his son Kojo's involvement, told the Security Council today he would not resign despite the committee's strong criticism of top U.N. management.
KOFI ANNAN: The findings in today's report must be deeply embarrassing to all of us. The Inquiry Committee has ripped away the curtain, and shone a harsh light into the most unsightly corners of the organization. None of us -- member states, secretariat, agencies, funds and programs -- can be proud of what it has found.
RAY SUAREZ: Two U.N. officials running the program have resigned or been forced to leave their jobs and are the subjects of criminal investigations.
RAY SUAREZ: And joining us now is Paul Volcker, the chairman of the Inquiry Committee.
Chairman Volcker, the system was designed to sell Iraqi oil, take the money and buy supplies for the people of Iraq. Where did your commission conclude the system broke down?
PAUL VOLCKER: Well, the system broke down, I think in a variety of ways. The program was, of course, authorized by the Security Council. The Security Council had some differences of opinion. And the program was to the very tightly designed and implemented and there was some uncertainty as to who was really in charge.
The secretariat had responsibilities and I think they in some respects fell down on the job. And there were difficulties in Iraq. And principally Saddam Hussein was able to manipulate the program to his advantage.
RAY SUAREZ: Well, manipulate how? What were people involved with Oil-for-Food doing that caused you to say in the final conclusion that the system lacked competence, lacked honesty, lacked accountability?
PAUL VOLCKER: Well, the manipulation, principally from Saddam Hussein side came in two directions. There was a lot of smuggling of oil. That was the principal source of elicit funds to Saddam Hussein. And the U.N. sat aside basically and didn't do anything about the smuggling although they increasingly new about it. The responsibility there lies principally, I think, with the members of the Security Council which, of course, includes the United States.
But then there were methods of manipulating the program by designating who could buy the oil at below market prices and profit from that. And people, politicians, officials, journalists, who the Iraqis thought could be influential benefited to some extent from those oil sales.
A similar process went on, on the buying side when Iraq was buying humanitarian goods from abroad, sometimes at too high prices and demanding kickbacks and other payments from the suppliers that went directly illicitly to the Iraqi government.
RAY SUAREZ: So Saddam Hussein and the middlemen were making money off of this.
PAUL VOLCKER: That's right.
RAY SUAREZ: Were the Iraqi people getting goods and medicine as they were supposed to?
PAUL VOLCKER: Well, I think and we commissioned another study on that from some of the best-known experts on humanitarian assistance in the world. And they concluded certainly that a situation that was dire on the nutrition side threatening rather large spread starvation was definitely improved by the shipments of food.
Shipments of medicine and medical supplies helped stabilize that situation. So that in an immediate sense the program worked. But over time, more and more inefficiencies arose and as you indicated earlier, elements of corruption certainly both in Iraq but disturbingly within the United Nations itself.
RAY SUAREZ: Did you find that this corruption touched the secretary-general himself?
PAUL VOLCKER: No, not directly in terms of the secretary-general being paid off or anything like that. But there was this complication that his son was at least marginally involved in helping a group that employed him -- Cotecna -- to get a contract for inspection involving the program.
We did not conclude that the secretary-general knew about that situation. But his son was involved and later we did, have now criticized the secretary-general for not conducting anything like an adequate investigation when his son's involvement became known.
RAY SUAREZ: What about his general oversight of the United Nations as secretary-general, and his involvement in the Security Council as secretary-general in overseeing the operation of the program? You seem to be pretty tough on him in those regards.
PAUL VOLCKER: Yes, well, it fell short of the standards that I think we should expect from the United Nations. I think he should be tested against a high standard and he is the head of the secretariat. And the secretariat fell short of I think effective administration of the program, the kind of thing that should have been expected. Now that is partly the responsibility of how the Security Council defined the program and retained some administrative and operational controls themselves. But nonetheless, the administration secretariat and not just the secretary-general but others have to bear the responsibility.
RAY SUAREZ: What does the United Nations have to do in the view of yourself and the commission to fix the problems you found in this investigation?
PAUL VOLCKER: Well, precisely, I mean, that's the importance of this investigation. This program was large, it was complex, it was complicated, it was difficult to manage. But some of the things that we found I think are symptomatic of more systemic problems in the United Nations that just demand reform and change if the United Nations is going to have the credibility and the sense of competence that should be expected.
There are two key elements. It needs a stronger, more disciplined administration. And we think that requires attention to a chief operating officer, in effect, chief operational officer whose responsibility is to make the program run -- make the ship run efficiently, to diminish the political influences and maximize management efficiency. That's one point.
The other point is the United Nations has been very weak in auditing and control and proper investigatory apparatus for looking at itself. So we suggest that certainly needs more financing, it needs more attention and oversight should be focused on an independent board with authority to insist that it become adequately financed and that auditors and control officials have access to an independent body so they aren't dependent upon the line officials that they are themselves examining.
RAY SUAREZ: Well now, given what you know about the institution and how you have had this intimate look at it, briefly, do you think the United Nations is capable of making the kind of changes you brought forward?
PAUL VOLCKER: That is the acid test. There is a lot of lip service being paid now to the need for reform. You saw that in the Security Council meeting this morning. But whether all that pledge for reform is converted into reality is the acid test.
And we've suggested that the general assembly, which in the end has the authority here, should prepare benchmarks that should be met no later than, not in the current situation -- the near term session of the general assembly -- but in the session in the fall of 2006, they should definitely set some objectives.. And we'll see whether they should be met. And I think the two key items are the ones that I mentioned.
RAY SUAREZ: Chairman Paul Volcker, thanks for being with us.
PAUL VOLCKER: Thank you.