Former Fed. Chairman Volcker Discusses U.N. Oil-for-Food Scandal Report

MARGARET WARNER:

Longtime UN diplomat Kofi Annan won the secretary-general's job eight years ago with strong backing from the United States.

But now Annan finds himself under pressure, including calls for his resignation, partly because his tenure has seen the largest-ever financial scandal in UN history in its $60 billion Oil-for-Food program in Iraq. The secretary-general's exposure is compounded bid the fact that his son, Kojo Annan, worked for one of the companies implicated in the fraud.

The Oil-for-Food program began in 1996 to relieve the suffering of ordinary Iraqis from international sanctions imposed after the Gulf War. It allowed Iraq to sell oil to buy food and medicine only, with all transactions to be monitored by the UN

But after the 2003 Iraq War, documents came to light suggesting massive fraud had occurred in the program. Specifically, that Iraqi President Saddam Hussein had imposed surcharges on the oil sales and pocketed the money, with the complicity of corrupt companies and that the UN had failed to stop it.

Last year the Security Council hired former Federal Reserve Chairman Paul Volcker to investigate the charges. His first interim report last month found that the oil procurement part of the program had been riddled with fraud and conflicts of interest.

Today Volcker presented his eagerly awaited second interim report on possible conflicts of interest involving Kofi Annan and his son, Kojo. Kojo's Swiss employer, Cotecna, had won the UN contract in 1998 to verify goods coming into Iraq.

The Volcker Committee found there is no evidence that Cotecna won the 1998 contract because of any influence exerted by Kofi Annan. Cotecna won the contract, the report found, because it submitted the lowest bid.

Kofi Annan was faulted for what he did and failed to do when a January 1999 newspaper piece disclosed his son Kojo's connections with Cotecna. The report found the inquiry ordered by the secretary-general through his chief of staff, which lasted just one day, to be inadequate and said he should have referred it to an independent arm of the UN for a thorough investigation.

The report also found that Kojo Annan and Cotecna actively concealed from Kofi Annan both their ongoing relationship and payments to Kojo that totaled as much as $485,000 over five years.

Immediately after Volcker's report, Kofi Annan's office issued a statement saying, "The inquiry has cleared me of any wrongdoing." Later this afternoon, Annan elaborated:

KOFI ANNAN:

I was well aware that among the most serious allegations was the insinuation that I myself might have improperly influenced the process, the procurement process in favor of Cotecna inspection services because that company employed my son.

But I knew that to be untrue, and I was therefore absolutely confident that a thorough inquiry would clear me of any wrongdoing.

I love my son and have always expected the highest standards of integrity from him. I am deeply saddened by the evidence to the contrary that has emerged and particularly by the fact that my son failed to cooperate fully with the inquiry. I have urged him to cooperate.

REPORTER:

Do you feel it's time, for the good of the organization, to step down?

KOFI ANNAN:

Hell no.

MARGARET WARNER:

Paul Volcker joins us now. Mr. Volcker, welcome.

You heard Secretary-general Annan say that he believes your inquiry – he said – "cleared me of any wrongdoing." Is that a fair reading?

PAUL VOLCKER:

Well, it cleared him of any intervention in the procurement process that you've described. We did not clear him in terms of the actions that he took after the news reports of a potential conflict of interest.

We felt that he should have, and I think in hindsight it's clear, should have had a more active, thorough, professional investigation. And if that had been done, the continuing employment and connections of his son with Cotecna would have been revealed.

And I think that would have saved a lot of agony for the secretary-general himself and for the United Nations.

MARGARET WARNER:

Let me ask you a little bit more about the Cotecna contract. As you document in the report. Kofi Annan had connections with some Cotecna officials.

That's partly how Kojo Annan got the job. What persuaded you that nonetheless Kofi Annan had exerted no influence whatsoever to get Cotecna the contract?

PAUL VOLCKER:

Well, so far as the influence is concerned, we obviously looked very carefully, electronically at all written material, a great deal of intensive interviewing. And we could find no evidence that he had taken any action to influence that contract.

That has been a clear finding of our investigation, that we have no evidence that he influenced the contract. The question that arose is whether he knew that Cotecna was even involved in the bidding for the contract. He indicated consistently, has indicated consistently he was not the aware that Cotecna was even bidding for the contract.

There have been a number of occasions and allegations that contacts that he had may have provided an opportunity for him to know that Cotecna was bidding. At the end of the day, we did not find sufficient evidence to say that he did know Cotecna was bidding.

MARGARET WARNER:

And when you say instances in which he could have known, give us just one example.

PAUL VOLCKER:

Well, one example is he met with the patriarch of Cotecna in September of 1998, shortly before the bidding process started. His son was employed by Cotecna. He knew his son was employed by Cotecna.

That would have been an opportunity for him to learn that they were interested possibly in bidding. Later he knew that there would have to be some process for replacing the then-existing contractor, and again, it was an opportunity to raise questions but apparently was not done.

There has been one conversation, one bit of testimony in an interview by a son of an old friend of his who worked for Cotecna that indicated he might have known, but it was a rather confused interview, and it was later retracted.

So we did not have any documentary evidence and we didn't have any reliable third-party evidence, so at the end of the day, we could not conclude that he knew Cotecna was involved, which is the position he's consistently taken.

MARGARET WARNER:

Sorry. Go ahead.

PAUL VOLCKER:

His son has also taken that position.

MARGARET WARNER:

Now, turning to the issue where you did find fault, which, as you said, his inquiry was inadequate once these conflict of interest allegations surfaced in the press.

PAUL VOLCKER:

Right.

MARGARET WARNER:

Tell us a little more about what made it inadequate in your finding.

PAUL VOLCKER:

Well, there was a newspaper report in January shortly following the contract that raised two questions: One was whether there was a problem with a conflict of interest because it said in the newspaper report that his son was employed by Cotecna, which is accurate, and which the secretary-general knew.

And the other allegation was that the UN had not taken some measures that they should have taken in terms of the eligibility of Cotecna to have the contract. That had to do with the financial position of Cotecna and a criminal charge that had been brought in Switzerland against the president of Cotecna in an entirely different matter involving bribery in Pakistan.

MARGARET WARNER:

I gather what he did is he just asked his chief of staff to look at it?

PAUL VOLCKER:

Well, he didn't ask his chief of staff technically to look into it. He asked his chief of staff to ask Mr. Connor, who was in charge of the procurement division at that point, to look into it.

And within a day, they got an answer which is a little confused because there were two separate memoranda, but they got an answer that his son no longer worked for Cotecna in one of those memoranda anyway and that, in any event, his son had not influenced the process and that he had not influenced the process, according to people in the procurement division.

Well, that was partly right, but it was not a full disclosure of the continuing relationship of his son with Cotecna.

MARGARET WARNER:

Tell us this: You said that Kofi Annan did cooperate with you and was available to be questioned whenever you wanted to.

PAUL VOLCKER:

Absolutely.

MARGARET WARNER:

How did he explain his failure to immediately when the conflict of interest potentially involved him to send this whole thing to a completely independent or a somewhat independent arm of the UN, rather than having someone so close to him look into it?

PAUL VOLCKER:

Well, again, it was not his chief of staff that actually did the inquiry. The chief of staff passed it on, got a very quick answer and sent it on to the secretary-general.

But I think his response to your question is that he asked the question, he got a comforting answer; he thought that was the end of it and he didn't have to look any further.

MARGARET WARNER:

You also said — I think you've already referred to it and we did in the piece, that Kojo Annan definitely misled his father and misled investigators and so on.

PAUL VOLCKER:

Yes.

MARGARET WARNER:

Were you able to ascertain whether you feel or whether you conclude that Kofi Annan did enough to press his son to really look into it, or was he looking in the words you just used in another instance, the comforting answer and was he too quick to accept what his son told him?

PAUL VOLCKER:

Yes, I think that is a conclusion we reached. It was not a real investigation. It was a rather informal inquiry. He got a quick answer. He was comforted and didn't want to carry it any further. That turned out, I think, clearly to be a mistake.

MARGARET WARNER:

There was a lot of discussion today and there is in your report about a chief of staff no longer with Mr. Annan who shredded documents when his secretary said the files were crowded or something.

PAUL VOLCKER:

That's correct.

MARGARET WARNER:

The thing I really wanted to ask was: Are you satisfied that you got, a, all the documents you needed, and, b, the cooperation from the people involved that you needed to really get to the bottom and resolve this Kofi Annan-Kojo Annan issue once and for all?

PAUL VOLCKER:

We generally have had very good cooperation in the UN, of course, including orders and requests from the secretary-general himself to the staff not to destroy any documents, certainly not to destroy any relevant documents.

And that's why it was rather surprising to find that the chief of staff had approved his secretary's request to destroy his chron files, so called, the chronological files he had in his office at about the time the committee I chair was appointed and the investigation got underway.

And we felt we had to report that fact. The chief of staff says, of course, it was innocent and his secretary made an innocent request and he responded innocently and that these papers would have copies elsewhere.

I'm sure many of them did. But there is no guarantee all those papers had copies elsewhere. So I think it was an unfortunate incident.

MARGARET WARNER:

And then on the question of Kojo Annan, you said today that he and the report says that he's only talked to you all I think once last fall and has declined to be available since then.

How much of an impediment was that to you to getting to the bottom of this? And is there anything you can do about it?

PAUL VOLCKER:

Well, I don't think it was an impediment in obviously delivering the report that we delivered. We know that he continued to have a connection with Cotecna. We know quite a lot about that connection. We know he got paid a fair amount of money over some years, although he's still a matter of pinning down how much and when.

But it's an impediment in following through his further alleged anyway, and there's some evidence for it, contacts with other parts of the Oil-for-Food program.

MARGARET WARNER:

All right. Well, Mr. Volcker, thank you very much. And we'll look forward to your next and final report.

PAUL VOLCKER:

Thank you very much.