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Oil-for-Food Report Says U.N. Needs Total Overhaul
New York Times
September 7, 2005

UNITED NATIONS, Sept. 7 - Secretary General Kofi Annan andthe members of the Security Council received an 860-page report todayexcoriating their management of the oil-for-food program and saying the UnitedNations must be extensively overhauled if it is to earn global credibility andmeet its 21st-century obligations.

"The organization requires stronger executive leadership, thoroughgoingadministrative reform and more reliable controls and auditing," thereport, compiled by a committee led by Paul A. Volcker, a former chairman ofthe Federal Reserve Bank, said.

"At stake is the United Nations' ability to respond promptly andeffectively to the responsibilities thrust upon it by the realities of aturbulent, and often violent, world," said the report, the result of ayearlong, $34 million investigation.

"In the last analysis, that ability rests upon the organization'scredibility - on maintaining a widely held perception among member states andtheir populations of its competence, honesty and accountability."

Addressing the Security Council today in a special session at which Mr.Volcker presented the report, Mr. Annan said that while it was "painfulfor all of us," he accepted the personal criticism of him and would acturgently on the need for reforming the world organization.

"The findings in today's report must be deeply embarrassing to usall," he said. "The inquiry committee has ripped away the curtain,and shone a harsh light into them most unsightly corners of our organization.

He asked, "Who among us can now claim that U. N. management is not aproblem, or is not in need of reform?"

The four-volume report examined in detail the history, conduct andunraveling of the $64 billion oil-for- food program in Iraq and said that the faultsfound were representative of the United Nations as a whole. It made hundreds ofrecommendations for tightening up financial and management practices to makethe United Nations accountable, transparent and efficient.

It faulted Mr. Annan for not curbing the corruption and mismanagement in theprogram, but said it had found no evidence to support charges that heinfluenced a contract awarded to Cotecna Inspection Services, the Swiss companyfor which his son, Kojo, had worked.

It rejected claims in a memo that surfaced this June by an executive of thecompany that he had had conversations with the secretary general in Paris in1998 at which the contract was discussed. The committee said it investigatedthe claim and interviewed all the principals and ended up believing that theexecutive, Michael Wilson, was "bluffing" to make himself seemimportant. The extent of their meeting, the committee said, was a shouted helloacross a hotel corridor.

It said that the secretary general should have been more diligent ininvestigating the activities of his son and the possibilities of conflict ofinterest that it posed.

The committee said it found no evidence that Kofi Annan knew about the contract,but did find instances where Kojo Annan tried to influence it with calls to theUnited Nations procurement office. It also said that Kojo Annan exploited hisfather's name without his father knowing it.

In one incident, the report reveals, Kojo Annan bought a Mercedes limousineusing his father's name, which yielded him a 15 percent diplomatic discount andenabled him to import the vehicle to Ghana without paying importduty. In all, he saved $20,644, the committee said.

The oil-for-food program scandal has deeply undermined the reputation of Mr.Annan, once thought of as the most outstanding secretary general since DagHammarskjold, and brought calls from Republican lawmakers in Washington for hisresignation. Mr. Annan's spokesman, Stephane Dujarric, said Tuesday that thesecretary general intended to fill out his term, which runs until the end of2006.

The committee credited the program with "important successes"despite the abuses and corruption it generated. The report noted that theprogram helped keep the sanctions in place that it said deprived Saddam Husseinof the ability to acquire or develop weapons of mass destruction and that,thanks to the food and medicine that got to the 27 million Iraqis,"minimal standards of nutrition and health were maintained in the face ofpotential crisis."

It said these successes were achieved "despite uncertain, waveringdirection from the Security Council, pressures from competing political forcesin Iraq and endemic corruption on the ground."

However, it said, the structuring of the program gave too much leeway to theIraqi regime and dangerously divided power between the Security Council and theSecretariat, which shared responsibilities for running it.

"That turned out to be a recipe for the dilution of Secretariatauthority and evasion of personal responsibility at all levels," thereport said.

It said that the program's instances of corruption, its easy exploitation byMr. Hussein and its cutthroat national rivalries ended up discrediting theUnited Nations.

"As a result, serious questions have emerged about the United Nations'ability to live up to its ideals," it said.

The report also blamed the Security Council and its sanctions committee fortolerating smuggling that went on outside the oil-for-food program and thatbenefited countries like Turkey, Jordan and Syria. "Turning a blindeye to smuggling surely undercut a sense of discipline in conducting theprogram," the report said.

The report blamed the permanent council members, Britain, China, France, Russia and the United States - forbullying the other countries on the sanctions committee.

It estimated that Mr. Hussein skimmed $1.8 billion in kickbacks andsurcharges from the United Nations-run program but that Mr. Hussein made $10.99billion in illicit profits from smuggling outside the program.

Recognizing that the United Nations was not up to handling the incrementalnature of the program's unanticipated growth, the hiring of thousands ofpeople, the exchange of large amounts of money, the unaccustomed responsibilitiesfor monitoring activities and the need to build infrastructure, the committeesaid it had asked itself if the world organization should "simply puttheir collective feet down and refuse to take on such costly and complicatedoperational programs for which it is ill-prepared?"

The committee said it reasoned that, whatever the United Nations' problems,no other international organization existed to take on such tasks.

"Most notable among the United Nations' structural faults is a grievousabsence of effective auditing and management controls," it said.

It recommended four principal management reforms:

Clarifying the purpose and criteria of programs at the outset andestablishing clear lines of responsibility.

Creating the new post of chief operating officer, part of whose job would beto guarantee personnel practices that would "emphasize professional andadministrative talent over political convenience."

Establishing a new independent auditing board with wide ranging powers.

Coordinating programs that extend over many United Nations agencies withmemoranda of understanding and common accounting standards.

The report was made public a week before more than 170 presidents and primeministers take up the issue of reforming the United Nations at a summit meetingto update the principles and goals of the millennium declaration of 2000.

Saying the United Nations charter did not equip a secretary general with thepowers needed to meet modern-day expectations of the job, it urgedstrengthening the office and broadening its authority.

That is a recommendation that has been opposed by many developing nations inthe current crisis talks over what shape next week's reform proposals shouldtake. They believe that ceding additional power to the Secretariat and the SecurityCouncil dilutes the authority of the 191-member General Assembly, where theirvoices can be heard.