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The Oil-for-Food Scandal

December 3, 2004 at 12:00 AM EDT

KWAME HOLMAN: When it began in 1996, the Oil-for-Food Program gave hope to millions of Iraqi people who had become the unintended victims of international sanctions against Saddam Hussein. It allowed Iraq to sell its oil to finance purchases of humanitarian goods supervised by the United Nations.

But the Iraq war brought the Oil-for-Food Program to a sudden end, and subsequent investigations show the program was poorly managed and riddled with fraud. At a Senate hearing two weeks ago, Minnesota Republican Norm Coleman, who has been leading a seven-month investigation, laid out charges that Saddam Hussein himself pocketed billions of dollars manipulating the oil- for-food program.

SEN. NORM COLEMAN: The failure of the program wasn’t just in providing food, medicine and comfort to the Iraqi people; the failure of the program was also not having strong oversight and checks and balances that would have prevented a small group of people and nations from raping billions — billions — of dollars from the people of Iraq.

KWAME HOLMAN: This week, in an opinion piece in the Wall Street Journal, Sen. Coleman called on U.N. Secretary General Kofi Annan to resign. He wrote: “Mr. Annan was at the helm of the U.N. He must, therefore, be held accountable for the U.N.’s utter failure to detect or stop Saddam’s abuses.”

SEN. NORM COLEMAN: It’s in his interests and it’s in the interest of the U.N. to step down, and I say this without pointing the finger of accusation against the secretary-general. Clearly he knows that people who were under him, people that he put in place allowed this massive fraud and abuse to occur.

KWAME HOLMAN: Coleman was speaking of Benon Sevan, a Cyprus national who directed the U.N.’s Oil-for-Food Program and now is being investigated for possibly taking kickbacks.

Coleman also is troubled by the relationship Kofi Annan’s son, Kojo, had with a Swiss company also under investigation for abuses in the Oil-for-Food Program. This week it was reported that Kojo Annan continued to receive monthly payments from the company for four years after he stopped working as a consultant. Yesterday, during his Oval Office appearance with the president of Nigeria, President Bush declined to endorse Sen. Coleman’s call for Kofi Annan’s resignation.

REPORTER: Do you think questions of fraud at the U.N.’s Oil-for-Food Program have hurt Kofi Annan? Do you think he should resign, as Sen. Coleman has urged?

PRESIDENT GEORGE W. BUSH: On this issue, it’s very important for the United Nations to understand that there ought to be a full and fair and open accounting of the Oil-for-Food Program. In order for the taxpayers of the United States to feel comfortable about… comfortable about supporting the United Nations, there has to be an open accounting, and I look forward to that process going forward.

REPORTER: Should he resign, sir?

PRESIDENT GEORGE W. BUSH: I look forward to the full disclosure of the facts, a good, honest appraisal of that which went on, and it’s important for the integrity of the organization to have a full and open disclosure of all that took place with the Oil-for-Food Program.

KWAME HOLMAN: Norm Coleman is one of three Republican senators who have called for Kofi Annan’s resignation. Meanwhile, leaders from dozens of countries, led by Russia, China, Britain, France and Germany, have spoken out in support of Annan. The secretary-general has commissioned his own investigation of the Oil-for-Food Program headed by former Federal Reserve Chairman Paul Volcker. An interim report is expected in January.

MARGARET WARNER: So should Kofi Annan go now over the Oil-for-Food scandal? To debate that, we turn to Republican Sen. Norm Coleman of Minnesota– as we just saw, he’s chairman of the Senate subcommittee that’s been investigating the Oil-for-Food Program, and this week called on Annan to resign; and Timothy Wirth, a former Democratic senator and former undersecretary of state. He’s now president of the privately funded United Nations Foundation. Welcome to you both.

Sen. Coleman, why now when all these different investigations are still underway do you think Kofi Annan needs to resign?

SEN. NORM COLEMAN: Because the investigations will help us understand the extent of the fraud and the abuse, whether folks like Benon Sevan were involved, whether folks who were connected to high government officials in Russia and France and Germany and China were involved in this. But there’s no dispute that Saddam Hussein perpetrated a massive fraud on the Oil-for-Food Program, stole billions of dollars, used it to fund terrorism, rearm himself and to bribe high-ranking individuals connected to member states and Kofi Annan was the guy at the center. He was the boss at that point in time. And I don’t believe there’s any way for us to credibly investigate all of this if the guy who was in charge of the organization, who had appointed Benon Sevan is the guy who’s going to receive these reports and have responsibility for ferreting out the fraud.

MARGARET WARNER: Sen. Wirth, what’s your view? Is there enough on the table already, enough known already, that Kofi Annan just bears too much responsibility here?

TIMOTHY WIRTH: Well, of course not. I mean, the president, I think, had it right. Let’s get all the information out there. Volcker will have his first report out in January and I think that there’s a very productive place for the Senate and Sen. Coleman’s committee to move ahead, investigate a lot of the smuggling that went on. There are two major streams of money in all of this, Margaret, one of them is the Oil-for-Food, which is probably around $5 billion, according to Sen. Coleman’s committee’s analysis. And then there’s about $15 billion of smuggling that we knew about in the United States, the UK knew about, it was over a long period of time before Oil-for-Food. Let’s get to the bottom of the whole thing and let’s not jump to conclusions. Let’s let Volcker’s committee and I think Sen. Coleman’s committee continue to do their work and let’s find out what the real truth is here.

MARGARET WARNER: Sen. Coleman, explain… let me just ask you to explain to our viewers in layman’s terms how… set aside the smuggling. Let’s talk about the kickback scheme. How did that work under Oil-for-Food?

SEN. NORM COLEMAN: As stated in the early report the Oil-for-Food was set up to help the Iraqi people. Sanctions had taken place. There was difficulty in getting humanitarian goods… the program was set up…

MARGARET WARNER: How was Saddam able to manipulate it?

SEN. NORM COLEMAN: The program was set up that you could sell oil for humanitarian goods for food. It was set up in a way that every transaction was through Saddam. So what he did is he got kickbacks on every single transaction. If you were to place a bid for humanitarian goods, Saddam would… it would add a surcharge into that bid that would go directly to him and to a bank in Jordan, a bank in Syria, a bank in Switzerland. There are a whole range of schemes he had in which every single transaction that took place Saddam got his percentage which he then used for whatever purposes he wanted to use them. And according to the Delpha report, Charles Delpha, from the Iraqi study group, he used them to rearm himself. He used it to fund terrorism. In the end, he used it to bribe key figures involved with Russia France, Germany, and the other member states of the Security Council.

MARGARET WARNER: All right, and let me just follow up by that. This scheme under which Saddam, in fact, had the right to decide who was going to sell the Iraqi oil, so it was just a prescription for fraud; I mean, it was a no brainer to set up kickbacks. Didn’t the Security Council sign off on that? I mean, why is this Kofi Annan’s responsibility that such a system so right for abuse even was allowed to get underway?

SEN. NORM COLEMAN: Well, a couple of reasons. You know, the sad thing here is that Sen. Wirth and I both agree on the goal. We’d like a stronger United Nations, we’d like there to be credibility and we’re arguing about Kofi Annan. In any other organization in the country or in the world, a CIA who oversaw, who was in control when a multibillion dollar fraud took place under his nose and under people that he appointed to oversee the program would step down. In addition, we have today allegations about his son that are growing each and every day, the most recent ones today being that this 25-year-old at the time in 1998 got $50,000 from the company Cotecna which got the bid, replacing another company, a bid to oversee the program and did, obviously, a terrible job in overseeing it. So the bottom line is you have the man who was in charge, who appointed others to take responsibility and what you’ve got now are allegations of fraud allegations of corruption and we’re arguing about Kofi Annan. He should step back, get somebody fresh in there, then we can have the transparency and credibility we need to get to the bottom of this.

MARGARET WARNER: Sen. Wirth, I’m going to get to you in one minute; I just want to make sure I understand what Sen. Coleman’s accusation is here. Are you saying that you have uncovered evidence that Kofi Annan enriched himself or enriched his son or is your criticism that he was at the helm at a time of gross mismanagement?

SEN. NORM COLEMAN: My criticism is that he was at the helm. We do not have evidence today that ties him and so this shouldn’t be about him. But we do have evidence that ties Benon Sevan, his hand-picked person to oversee the program, of taking bribes from Saddam. There is evidence that his son was involved in a relationship with the company which eventually got the contract and that his son received payments from this company up until a few months ago. These revelations keep coming out, new ones, each and every day.

MARGARET WARNER: All right. Sen. Wirth, your turn. Take on those points. I mean, here was Kofi Annan at the helm at a time of gross mismanagement. He hired Benon Sevan, even after the allegations became public. I mean, they were in London newspapers within a month about Kojo Annan. He never either fired Benon Sevan, nor did he do anything about his son. Doesn’t he bear any responsibility?

TIMOTHY WIRTH: Well, the secretary general, of course, bears responsibility, and that’s why he set up the Volcker Commission to look at this, an independent study by probably one of the most prestigious people in the country. That study will be out, first phase, in January.

It will be public, it will go to Sen. Coleman and his committee, it will be public documents and we’ll see what the facts are. I think to suggest that because Kofi Annan was the secretary general at the time and because there was a problem that’s being looked at independently that he should go is a little bit like saying that Don Rumsfeld ought to leave because of the Abu Ghraib scandal or because of what went on with Halliburton or so on. I mean, that’s sort of an absurd jump to make.

The secretary general has made it very clear, you know, he wants all the facts out on this. The facts on Mr. Sevan are still very much up in the air. There are allegations about a list and there are allegations about Sevan being on that list. But nobody’s really seen that. This is a long time very distinguished U.N. civil servant and people really doubt that this happened.

On the son… related to his son, that’s a problem from a public perception as much as anything. There’s not… there’s tiny little bits of money involved in all of this, but that’s not the issue, the issue is the perception and, you know, I think any time family members get into something with political figures it can be a problem. And we think back to Billy Carter or we think about Bill Clinton’s little brother, we think about Neal Bush. I mean, these things always get understood very quickly and people jump to conclusions. I don’t think we ought to jump to a conclusion about Kojo either, the secretary general’s son. Let’s let the facts come out before we make conclusions on all of this.

MARGARET WARNER: Okay. Let me just follow up because you watch the U.N. closely. As I said and I think we all know, these allegations that there were kickbacks going on was not new; the Security Council got reports, the British prepared a report about it. The sanctions committee in which the U.S. sits heard about it. Nobody really did anything. What is your belief, understanding, analysis, of why that was?

TIMOTHY WIRTH: Well, I think that the primary concern there is the so-called 661 Committee, which was set up by the Security Council to watch the Oil-for-Food issue. The UK and the U.S. dominated that committee and their concern was to make sure that none of the funds from the Oil-for-Food Program went to the purchase of weapons of mass destruction. So that was the major emphasis by the 661 Committee, particularly the U.S. and the UK. The evidence there is that they did a very good job and that this funding did not end up purchasing anything that was related to weapons of mass destruction.

That’s what the 661 Committee focused on. Should they have focused on other parts of it? Obviously they should have. But they did not. And it’s getting at what happened elsewhere and why did the committee do it the way they did? You know, what was the secretary doing? That’s what Paul Volcker is looking at.

And let’s wait for that report to come in. We’ll have a first phase of that in January. Both the president and Secretary Powell have said let’s wait for this report to come in and let’s not jump to these conclusions, particularly at a time where the relationship between the U.S. and the U.N. is so important. The U.N. is part of the ticket of the U.S. solving the problems in Iraq, getting through election in January. The U.N. is very important and I think another part of this is to keep in mind that we really don’t want to jump to conclusions and weaken the U.N. I think that would be a big mistake.

MARGARET WARNER: Sen. Coleman? Go ahead.

SEN. NORM COLEMAN: We’re not jumping to conclusions here. The U.N. is important — the United Nations. We fund 22 percent of its operating budget. And so there has to be credibility in these investigations, credibility then in the conclusions. No one is arguing that this massive fraud and abuse took place. The Abu Ghraib comparison is somewhat absurd. Donald Rumsfeld didn’t have his son making money off Abu Ghraib as Kofi Annan’s son is alleged to. And yet the report that Volcker’s going to deliver he will deliver to Kofi Annan. It’s not going in an uncensored or un-reviewed form simply to me. Kofi Annan will get that report first.

In addition to that, Kofi Annan, his responsibility for Benon Sevan, he’s the guy he hired. Donald Rumsfeld didn’t hire the guards at Abu Ghraib. No one is arguing that massive fraud and abuse took place. No one is arguing that, in fact, bribes were paid. No one is arguing, by the way, that Saddam rearmed himself through money both from Oil-for-Food and some of the front companies that he set up in Oil-for-Food.

MARGARET WARNER: Okay. But let me just follow up on –

SEN. NORM COLEMAN: And if we’re going to get to the bottom of it – if he doesn’t have credibility — how do you have the guy who was in charge at the time of the fraud be responsible for ferreting it out?

MARGARET WARNER: So are you suggesting that the Volcker probe which has been going on for months and the interim report is coming out in January is somehow tainted by the fact that the report will go to Kofi Annan? Are you accusing that there’s any kind of collusion here? What are you saying?

SEN. NORM COLEMAN: No. I think by going to Kofi Annan that the credibility of what Paul Volcker does will be undermined. First, remember that Volcker has no subpoena power at this point in time. Volcker then will deliver a report to Kofi Annan and, again, I don’t want to undermine the credibility of what Volcker does. There’s a lot to be done here.

We have to figure out, by the way, what happened to the billions that Saddam took. No one’s talked about that — dollars that may be well fueling insurgency that is killing Americans, coalition members and Iraqis today. There’s a lot to be sorted out. But why are we arguing over Kofi Annan? Why doesn’t he step back, bring someone in there who is not tainted by the allegations, the concerns, the fraud that took place and then let us all work together to get to the bottom of this?

MARGARET WARNER: All right, and Tim Wirth, you keep saying you want the U.N. to be strong and how important it is. Is it hard for (a), the Volcker report to be seen as having credibility and (b), for the U.N. to do its work when the CEO has this hanging over his head?

TIMOTHY WIRTH: Well, first of all, when Sen. Coleman says let’s not argue about Kofi Annan, he’s the person that’s brought it up. I mean, every nation around the world practically has jumped to the support of the secretary general who’s been the finest secretary general I think we’ve ever had.

You know, and then to question the independence of Paul Volcker, you know, that’s to question the independence of somebody… how do you possibly, you know, question somebody who is as remarkable a public figure as Paul Volcker? That’s why he was selected. That’s why so many people were engaged with persuading Paul Volcker to take this job on, independently fund it, independent individual whose report will go to the secretary general but it will also go to Sen. Coleman and his committee as will all the documents.

As the president has said, let’s see what happens in this report before we jump to these conclusions. Volcker is a man of enormous integrity. I believe the secretary general is a man of enormous integrity and leadership as well and if there are doubts about that, let’s find some data, some real evidence about any kind of wrongdoing before jumping to conclusions.

MARGARET WARNER: All right. Senators both, thank you.

TIMOTHY WIRTH: Thank you, Margaret.