U.N. Oil for Food Program Probed

SPENCER MICHELS:

After the United Nations imposed economic sanctions on Iraq for invading Kuwait in 1990, the country's economy shrank dramatically and its citizens suffered from lack of food and medicines. In 1995, in an effort to ease the sanctions, the U.N. Security Council authorized the oil-for- food program.

The idea was to create a swap: Saddam Hussein's government could use oil revenue only to buy humanitarian supplies. From 1996, when the program went into effect, until Nov. 2003, when it ended, Iraqis exported 3.4 billion barrels of oil worth about $65 billion.

But now, seven separate investigations are underway into allegations that Hussein smuggled oil, paid kickbacks and skimmed more than $10 billion from the oil-for-food program.

The bribes allegedly went to politicians and companies in 52 countries, including all five permanent members of the Security Council. U.N. staffers, including the administrator of the program, Benon Sevan, reportedly profited from kickbacks, as well. All have denied wrongdoing.

SPENCER MICHELS:

Three of the investigations are underway in Congress.

REP. TOM DAVIS:

I'll be blunt. This scandal threatens the U.N.'s reputation and effectiveness and raises serious questions for those who portray the world body as a ready, willing and able route of retreat for U.S. forces.

SEN. RICHARD LUGAR:

The U.N. mechanisms for controlling oil-for-food contracts were inadequate. Transparency went by the wayside and effective internal review of the program did not occur.

SPENCER MICHELS:

Secretary General Kofi Annan has come under fire, as has his son who worked for a Swiss company involved in the program. Annan said neither he nor his son had anything to do with the contract, and he defended the program.

KOFI ANNAN:

We had no mandate to stop oil smuggling. There was a maritime task force that was supposed to do that. They were driving the trucks through northern Iraq to Turkey. The U.S. and the British had planes in the air. We were not there. Why is all this being dumped on the U.N.?

SPENCER MICHELS:

In April, with the Security Council's approval, Annan named the U.N.'S own investigative commission, appointing former U.S. Reserve Chairman Paul Volcker, a longtime economist, as its chairman.

GWEN IFILL:

Paul Volcker joins us now. Welcome.

PAUL VOLCKER:

Thank you.

GWEN IFILL:

At this stage in your investigation, it's early yet, what is it that you would like to know? What is it that you do know and what don't you know?

PAUL VOLCKER:

We don't know a lot. We know a lot of accusations and allegations have been made. We want to chase down those allegations. You refer… the program referred to a lot of investigations.

We'd like to think that our investigation is "the" investigation. We want to find out what went on in this program from beginning to end and give as complete a story as you can as to what went wrong and what went right if something went right.

GWEN IFILL:

How would you describe the scope of the alleged fraud that you're trying to investigate?

PAUL VOLCKER:

We will make some estimates of that at the end of the day. But from all informal reports, not at a result of our investigation, there was a considerable amount of fraud, kickbacks, overcharges, undercharges involved both in the oil sales and problems with humanitarian, so-called humanitarian, purchases that were made with the proceeds of the oil money.

We want to look at all of that. We want to look at, first of all, as a matter of priority is what happened with the U.N. management. What kind of a job did they do? There are actual allegations of corruption within the U.N. and that's a priority for us.

GWEN IFILL:

There were audits that the U.N. Has been conducting of the program over the years. I'm assuming you'll be scrutinizing those audits.

PAUL VOLCKER:

We certainly will.

GWEN IFILL:

If there were audits every year or every few months of this program how did so much of this happen under the radar?

PAUL VOLCKER:

We're not so sure how far below the radar it was and why there was no response to the blips that may have appeared on the radar. That is the core of the questions we have to answer in this investigation.

GWEN IFILL:

So you're an independent commission but you're appointed by Kofi Annan. Is there a conflict there?

PAUL VOLCKER:

I don't think so. We are really pretty independent minded people. My two associate committee members have had experience in investigations. They are not carrying any banner for the U.N. or against the U.N. I think we will be quite independent.

GWEN IFILL:

If the first thing you want to do is look inside the U.N. To see if there's any culpability there, who would be the first folks you'd want to talk to?

PAUL VOLCKER:

Well, we will talk to a lot of the staff at the U.N., and I would say here, we invite anybody that has some information, some allegations, some complaints, to talk to us. We need people to talk to us. We will reach out obviously and talk to those people but we're ready, willing and able to respond in confidence to people that come in and want to talk to us.

GWEN IFILL:

The gentleman who ran the oil-for-food has said as part of his defense that he only did what the member states allowed. That's pointing the finger right back at the Security Council. What do you say to that?

PAUL VOLCKER:

Well the Security Council had oversight of this program to — and exercise it through something called a 661 committee which is made up of members of the Security Council, their deputies.

One of the focuses of our investigation will be what kind of reports did they get, how did they respond. Was Mr. Sevan and his people giving them accurate reports. To what extent did they know what was going on? What was the response? What was the implementation?

GWEN IFILL:

Did they ever say at any point along the way hey, wait a minute this isn't adding up, any of these member states.

PAUL VOLCKER:

I will answer that question at the end of the investigation.

GWEN IFILL:

Do you have access as well to Iraqi records assuming that…

PAUL VOLCKER:

Well, Iraqi records are a big potential problem for us. There are a lot of records in Iraq. We want to obviously if not take control of the records understand what's going on. We have an agreement with the coalition authorities, which obviously is still there but they're not going to be there forever, and maybe more importantly with the supreme auditor of Iraq who has been given the authority to get these records together to preserve them, with the help and really administration of Ernst & Young, a major auditing firm.

We have had I think a lot of talks with them. The atmosphere is very cooperative. It is very important that it remain cooperative when the changeover takes place. We've had some limited contacts with the new government people; so far, so good. They indicate cooperation. We want to see that in practice.

GWEN IFILL:

But it sounds like a fairly complicated paper trail that you're trying to knit together. You have the Iraqi records and the U.N. records.

PAUL VOLCKER:

No question. We want to match those up against each other. It is a very big paper trail. It is a very big job to get those records together. In Baghdad that may be the most expensive single part of this investigation, but massive records within the U.N. too.

GWEN IFILL:

At what point with so many other organizations… so many other investigations going on, on this very same issue do you all begin to overlap and trip over each other?

PAUL VOLCKER:

Well, there is that danger. We would like to maintain to the extent possible control over the U.N. records. We consider those our records. A lot of that is eventually going to become public but it should be at the pace that our investigation… consistent with our investigation. You can't have too many cooks in this particular…

GWEN IFILL:

Say congressional committees will not be immediately getting access to U.N. records?

PAUL VOLCKER:

Well they will have access perhaps to some records but not to the U.N. records. We want to maintain our ability to examine those records and do a proper investigation without it leaking out in bits and pieces and undermining what may be the success of the investigation.

GWEN IFILL:

Have you been in conversation with members of Congress about that?

PAUL VOLCKER:

We have, yes.

GWEN IFILL:

And you've come up with an agreement?

PAUL VOLCKER:

Well, we have no formal agreement with them but the members of the Congress I've talked to, the main chairmen of the committees involved have indicated a willing… they have an interest in seeing us succeed. I believe they have an interest in seeing us succeed. They say they have an interest. And I hope that they will help create the conditions that makes that possible.

GWEN IFILL:

Do you report to Kofi Annan on this or is he strictly hands off?

PAUL VOLCKER:

He's hands off. We will be obviously interviewing him along with a lot of his subordinates about what went wrong with the program.

GWEN IFILL:

So you report to who?

PAUL VOLCKER:

We report to ourselves. We are independent. We'll submit our report to Kofi Annan. He will submit it to the Security Council — but the report is going to be public in the end.

GWEN IFILL:

Is there anyway to explain to the American people — we talked earlier about the scope of the fraud but I guess the scope of the lost opportunity for Iraqi people who are counting on this program to give them food and medicines. Is there any way to gauge that at this stage?

PAUL VOLCKER:

I think we will make some attempt to review whatever evidence there is. I don't think the core of our investigation is to decide precisely how many calories were diverted and how many calories went to feed Iraqis and so forth. But I think we will reach some judgment on that on the basis of what evidence exists. We are interested in following the people who were corrupt in the process or simply mal- administering the program. I think there was something of both.

GWEN IFILL:

Given all the tasks you have just explained to us here, laid out for yourself, how long is it going to take before we start to see some results? Will there be interim reports along the way?

PAUL VOLCKER:

Well, we will have interim reports. We will have an interim report this summer. It's not going to be conclusive by any means unless I am very surprised that some evidence suddenly falls in our lap that would permit a conclusion in some part of this report but we will have an interim report. I would like to see a definitive report on the U.N.'s administration of the program I said in six to eight months.

I hope that's possible. I don't know whether it is yet. But then there's a whole part of the report, what happened to… what happened in Iraq? What happened to all the contractors that had the money? What happened to all the kickbacks? What happened to the overcharges and undercharges? Tracing that down to individuals and individual companys is going to take time.

GWEN IFILL:

And individual countries as well.

PAUL VOLCKER:

Individual countries, absolutely.

GWEN IFILL:

Okay. Paul Volcker, thank you very much for help us out.

PAUL VOLCKER:

Thank you. It's nice being here.