Senate Oil-for-Food Probe Points Finger at Foreign Officials, Corporations

MARGARET WARNER:

Just who reaped illegal profits in the United Nation's Oil-for-Food program with Iraq? A number of congressional committees are pursuing that question, and the circle of suspects keeps widening, from Houston to Moscow.

Caught in the net of suspicion: A British member of parliament, a former French interior minister, several Russian political figures, and a Texas-based oil company.

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

But after the 2003 Iraq War, documents came to light in Iraq suggesting serious fraud had occurred: Specifically, that Iraqi President Saddam Hussein had imposed surcharges on the oil sales and pocketed the money himself with the complicity of private companies and individuals and that the U.N. had failed to stop it.

Last February a U.N. investigation led by former Federal Reserve Chairman Paul Volcker found the oil procurement part of the program indeed had been riddled with fraud. He found even some U.N. officials involved were themselves tainted by conflicts of interest.

But who were the private parties who profited from this alleged scheme? Over the past week, a Senate subcommittee has issued several reports naming names of companies and individuals who allegedly got valuable vouchers, known as "allocations," to sell Iraqi oil in return for kickbacks to Saddam Hussein.

MARGARET WARNER:

At a hearing to lay out the findings yesterday, Subcommittee Chairman Norm Coleman explained how the operation worked.

SEN. NORM COLEMAN:

Saddam used oil to his geopolitical and strategic advantage. The plan was simple: Rather than granting allocations to traditional oil purchasers, Iraq gave priority to foreign officials, journalists and even terrorist entities.

The central purpose of this tactic, according to senior officials of the Hussein regime interviewed by the subcommittee, was to engender international support for the Hussein regime and against the U.N. sanctions.

By allocating the oil to favored people or entities, the regime forced oil purchasers to obtain allocations from those favored few. Those allocation holders essentially became the gatekeepers to Iraqi oil.

MARGARET WARNER:

Among the alleged gatekeepers: Several Russian political figures including, ultra-nationalist Vladimir Zhirinovsky, a member of the Russian parliament and a frequent visitor to Baghdad. The report said he got $8.7 million worth of oil allocations. He denies the charges.

VLADIMIR ZHIRINOVSKY (Translated):

I did not sign a single contract; I did not receive a single cent from Iraq, and was never involved in any commercial activities there.

MARGARET WARNER:

President Vladimir Putin's former chief of staff, Alexander Voloshin. He allegedly received $16 million worth of vouchers. Former French Interior Minister Charles Pasqua; the report said he got vouchers for 11 million barrels of oil. He has also denied the charges.

CHARLES PASQUA (Translated):

I do not know Saddam Hussein and I have nothing to do with Iraq.

MARGARET WARNER:

And British MP George Galloway, a vociferous critic of U.N. sanctions on Iraq, and of the Iraq War, who met frequently with Iraqi officials, including Saddam Hussein. When his name leaked out, Galloway asked for a chance to rebut the charges. Yesterday, the subcommittee obliged.

GEORGE GALLOWAY:

Senator, I am not now, nor have I ever been an oil trader and neither has anyone on my behalf. What counts is, where's the money, senator? Who paid me hundreds of thousands of dollars of money? The answer to that is nobody. And if you had anybody who ever paid me a penny, you would've produced them here today.

MARGARET WARNER:

Democratic Sen. Carl Levin pressed Galloway on his involvement with businessman and contributor Fawaz Zureikat whom the report accuses of being a go-between between Galloway and the Iraqi regime.

SEN. CARL LEVIN:

My question is: Would you be troubled if you knew that Mr. Zureikat paid a kickback in order to get an allocation of an oil contract? That's a very simple question.

GEORGE GALLOWAY:

I took the view, I can be criticized for it, have been criticized for it, that I would fundraise from the kings of Arabia whose political systems I have opposed all my life in order to raise funds for what I thought was an emergency facing a disaster. And I did not ask Mr. Zureikat which part of his profits from his entire business empire he was making donations to our campaign from.

SEN. CARL LEVIN:

That wasn't my question. My question was: Would it trouble you if you found that out? And it's okay. You're not going to answer it, it's clear to me. I want to go to my next question. You're just simply not going to answer.

MARGARET WARNER:

The subcommittee report also added new details about the activities of Bayoil, a Houston-based oil company whose owners were indicted in April for paying illegal kickbacks to Iraq.

The report said Bayoil imported some 200 million barrels of Iraqi oil over two years, and paid Hussein $37 million in kickbacks. There is more to come on this angle, not only from Capitol Hill, but the U.N. as well.

As part of his ongoing investigation, Paul Volcker also is looking into which private companies and individuals profited from the alleged scheme.

MARGARET WARNER:

For more on all of this we turn to two reporters who've been following this complicated story. Yochi Dreazen of the Wall Street Journal; and Adam Zagorin of Time Magazine. Welcome to you, both.

Adam, first of all, is there any doubt that there were at least some private companies and individuals who participated in this scheme?

ADAM ZAGORIN:

I don't think there's any doubt, based on the fact that, not only the Senate documentation that came out this week and last, but also previous reports.

Paul Volcker's own U.N. investigation has confirmed this to some degree, and so has an investigation run by Charles Duelfer, who as sent over by the administration to look into it. So there's really no doubt about that general proposition at all.

MARGARET WARNER:

He was the author — running the investigative team into WMD. And Yochi Dreazen, how many private companies and individuals are believed to have been involved? I mean, are we talking about a handful, dozens, hundreds?

YOCHI DREAZEN:

Margaret, it is a very good question, and one of the ones that is most unanswered so far. The Americans have so far named about six individuals. They have named Bayoil.

In addition to Bayoil, they named a series of Russian companies that Bayoil allegedly worked with to sell oil and then pass money back and forth to the people who had received the vouchers. Iraqis say the number may be in the hundreds, as far as individuals, as far as companies. My sense is that it's probably somewhere between the two.

MARGARET WARNER:

All right. So Adam, how would the scheme work; how would getting one of these so-called allocations from the Saddam Hussein regime enable an individual or company to make illegal profits, and also pay a kickback to Saddam?

ADAM ZAGORIN:

Well, just to take a hypothetical example, let's say that the price of oil is $100 a barrel. And the Iraqi government will sell it to the favored people at $80 a barrel.

So those people who get that allocation at $80 a barrel can immediately resell it at $100, yielding a potential profit of $20. A portion of that profit would be kicked back to the Iraqi regime, and a portion would be retained by the individual who did the quick flip with the sale.

MARGARET WARNER:

And how much in the way of kickbacks do the investigators think was kicked back to the regime?

ADAM ZAGORIN:

Well, it's not just individuals. It's companies, also that got these allocations. And the figure that they use is $228 million.

MARGARET WARNER:

So, Yochi, how much evidence is there for the second point that Sen. Coleman made, or allegation, that some of the individuals and companies, some of the favored few, as he said, were specifically chosen by the Iraqi regime in hopes or belief that they would have political influence back on their home governments in terms of what that government's policy would be, vis-à-vis Iraq and vis-à-vis the U.N. sanctions?

YOCHI DREAZEN:

A lot of the evidence is based on two things: One are interviews with former members of the Iraqi government who are now in American custody who have said, at least in interviews as related by the American investigators who conducted them, that the recipients were chosen specifically either because they were friends of Iraq and people who believed in Iraqi policy, or as a reward for past support.

Additionally, they have cited documents recovered in Iraq that purport to show these people's names as recipients. And they say that on the one hand, here's officials saying that they were chosen for a specific reason as a reward for their support, and on the other hand, here are documents showing in fact oil was allocated and given to them.

MARGARET WARNER:

And so, Yochi, then how would those individuals go about actually realizing the profits? I mean, if you're an individual like a George Galloway or Interior Minister Pasqua, and you get allegations to sell millions of gallons of oil, and you're not an oil trader, how would they go about making the money, anyway?

YOCHI DREAZEN:

That's where Bayoil and companies like it, but Bayoil, most specifically, and the American reports come into the picture. Bayoil would have allegedly contracted under the table with the recipients to handle the actual picking up of the oil and selling it to other companies, which would monetize it.

Bayoil would then send a portion of those profits back to people who received it. So at least if you read the American reports, Bayoil was very central, because they handled the picking up of the oil and all the sort of back office functions of selling it.

MARGARET WARNER:

So this private individual, whoever he might be, he'd get a cut, Bayoil would get a cut, and Saddam would get a cut?

YOCHI DREAZEN:

Exactly.

MARGARET WARNER:

All right now, Adam, how good is the evidence– you heard for instance, George Galloway say, "Well, where is the money? If I'd gotten money, you would know that."

In these reports, had the Senate investigators or the U.S. investigators been able to get more than simply Iraqi documents? Do they have bank records that show that any of these individuals got large deposits, whether they were from Bayoil or anyone else?

ADAM ZAGORIN:

Well, for example, in the case of George Galloway that you just mentioned, his whole point is that they do not have those records. They're not in the reports and so you see him cited continually in terms of being a recipient of these allocations.

You do not see the documentary record with respect to him getting the money and putting it in his bank account. And I should mention that this was the very point that he used some months ago when the Daily Telegraph, a British newspaper, published essentially many of the same claims about him as the Senate has put forward.

He brought a libel action against them. He prevailed in that action by making the point that we have just been discussing. Now, obviously, British libel law favors sometimes the person bringing the case, in this case, George Galloway, but your point is on target.

MARGARET WARNER:

And what about the French official and the Russian officials, again if they don't have this evidence, is it because they can't get the bank records or because they do have the bank records and there's no evidence?

ADAM ZAGORIN:

I think that had they had the records and the records had shown that they got the money, there is no question in my mind — but this is, of course, hypothetical– that the Senate and the other parties would have produced this evidence. They appear not to have it.

MARGARET WARNER:

I guess what I'm asking is do these committees have the authority to get these records, especially from foreign banks?

ADAM ZAGORIN:

I'm not sure if they do have the authority. I mean, they have not done it. And it would have made their case somewhat stronger had they produced it, and they did not.

MARGARET WARNER:

So Yochi Dreazen, let's say this was a plan by Saddam Hussein, as we heard Sen. Coleman lay out, and he chose the individuals that we've just reported on, how influential did these people actually turn out to be? Has any evidence been developed on that in terms of on their home governments?

YOCHI DREAZEN:

No, but there has been evidence — one of the reports cites a case specifically, in which a specific policy appears to have been rewarded by oil. There's a case cited in one of the reports in which Russia, on the Security Council, fought back a measure that had been supported by the U.S. and vehemently opposed by Iraq.

And at least according to the reports, Saddam Hussein almost immediately afterwards said, "Let's reward Russia by increasing their oil allocations." One of the defenses that people like Alexander Voloshin have made is that people trying to do business with Iraq may have overstated their connections to Russian officials and may have also overstated the importance of the officials they knew.

So, for instance, Iraq may have realized that George Galloway was a friend of theirs, someone trying to do business — this is part of Galloway's defense — might have come to Iraq and said, "I can get you access to Galloway, and as you know, he's a friend of Iraq."

And because of naiveté or because of just carelessness, they might have given allocations without realizing that Galloway has always been and is now a maverick with very little power on British public opinion or on British foreign policy.

MARGARET WARNER:

Are the British, French, and Russian governments looking into this?

YOCHI DREAZEN:

The French government certainly is. In fact, one of the Charles Pasqua's top aides was arrested a short time ago as part of a French investigation into the Oil-for-Food program.

The British government has followed Galloway for quite some time. I think they've been somewhat scared off by the fact that he has perpetually been accused and continually, as Adam mentioned, beaten back press inquiries.

Russia is a different story. Investigators who we've spoken to who work both Paul Volcker and for the Senate have said that Russia is almost unique among countries tied to the scandal for the lack of cooperation it's so far given.

MARGARET WARNER:

Adam, you said that in this whole scheme, sometimes three-sided, Saddam got it's believed some $228 million. How does that compare to what the private individuals made and how do either of those amounts compare to the whole size of the Oil-for-Food scandal?

ADAM ZAGORIN:

Well, some numbers: It's in excess of — it's about $64-some billion of oil that was sold over the life of the program.

The individuals, allegedly like Mr. Pasqua, who has denied it and others, Mr. Galloway — who has also denied it — would have probably gotten, if the allegations are proven in the several millions of dollars. Companies would have gotten more. For example, Bayoil allegedly would have gotten quite a bit more, in the 10s of millions of dollars.

You've got all of these individuals and companies each making a certain piece, and then paying kickbacks, if you will, to the Saddam regime. Their aggregate kickbacks in forms of these surcharges then bring you up to $228 million, which is the figure that is usually attached to that.

Then you have a whole other category here which are open public shipments of Iraqi oil through pipelines and tanker pickups, and so forth, that went through gulf ports, through Syrian pipelines, through Turkey, through Jordan, and some to Egypt. And that is a much larger figure. It's actually about 40 times bigger, in excess of $8 billion.

MARGARET WARNER:

And finally, Yochi, briefly if you can, Sen. Levin also issued a minority report saying it's not only U.N. officials that failed to monitor and stop some of this, say with the private individuals, but it was the U.S. government, the Treasury Department, is that right?

YOCHI DREAZEN:

It is. His point was that questions about Bayoil and companies like it are not new. These have existed for several years and he wondered why did the U.S. Government do so little to investigate it.

His main point was it's somewhat easy now to look back and say this is all the fault of the U.N. But he wondered perhaps if some of that blame should be directed inwards at our own government as well.

MARGARET WARNER:

All right. Yochi Dreazen and Adam Zagorin, thank you both.