Committee on International Relations
U.S. House of Representatives
Henry J. Hyde, Chairman

CONTACT: Sam Stratman, (202) 226-7875, December 6, 2005

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Report of HIRC’s Findings
on UN Oil-for-Food Program

Hyde Says Results Lend Urgency to UN Reform Efforts
 

            (WASHINGTON) – United Nations member states must act decisively to reform the world body’s outdated management, audit and investigatory practices or face a growing marginalization of the UN’s work, U.S. Rep. Henry J. Hyde (R-IL) said Wednesday.

            Hyde’s comments come in the wake of approval and release of the House International Relations Committee’s (HIRC) report on the ill-fated and corrupt UN Oil-for-Food Program (OFFP). The HIRC report details how lax, and sometimes nonexistent, UN oversight of the OFFP allowed Saddam Hussein’s regime to corrupt the program using various bribery and kickback schemes.

The earliest iteration of what would become the Oil-for-Food Program dates from 1991.  The UN designed the program to feed and care for Iraqis suffering as a result of Saddam Hussein’s continued noncompliance with provisions of the cease-fire that ended the Gulf War the previous year. Humanitarian goods supplied to Iraq were paid for with proceeds from the controlled sale of its oil. Under UN auspices, the oil was to be sold, the proceeds would be deposited with Banque National de Paris-Paribas (BNP), and then humanitarian goods would be supplied to Iraq. Once the arrival of the goods was authenticated, the goods could be paid for.

            “Evidence obtained in the course of our inquiry paints a depressing picture of management blunders, bribery and outright graft that fatally undermined the Oil-for-Food Program,” Hyde said. “As a founder of the UN and its largest donor, the U.S. has a vested interest in seeing the institution thrive and live up to its founding principles. Sadly, all of the management and oversight weaknesses that contributed to an environment of impunity and lawlessness at the highest ranks of the UN continue to this day,” Hyde continued. “Critics of reform within the UN and member states which contribute little or nothing in budget support are now engaged in rearguard actions to protect the status quo. By doing so, they imperil the UN’s long-term viability,” Hyde added. 

            The following is a Summary of Findings of The Oil-for-Food Program: The Systematic Failure of the United Nations:  

Senior Management of the United Nations – The Committee finds that senior UN management failed to:

bulletEnsure the ethical and proper conduct of themselves and their subordinates within the UN Secretariat and keep the UN Security Council informed of allegations of kickbacks in the Oil-for-Food Program (OFFP);
bulletCooperate with internal and external investigative and oversight bodies; and
bulletAdhere to the UN’s own staff rules and regulations governing conduct of officials of the U.N.

Oversight Bodies of the United Nations – The Committee finds that:

bulletThe Office of Internal Oversight Services, because of political interference from the UN Senior Management, was prevented from providing an adequate degree of oversight of the OFFP and other issues;
bulletOIOS officials allege that there was resistance to investigations of the OFFP from the Office of the Secretary-General and the General Assembly;
bulletOIOS investigators were denied resources and forced to borrow from other departments; plans were curbed for some audits and simply dropped for others; one investigator explained that whole functions of the program, such as diversions of goods, were not examined due to a lack of funding and resources;
bulletThe Joint Inspection Unit of the UN failed to undertake a single audit report during the entire duration of the OFFP;
bulletThe External Board of Auditors of the UN failed to undertake adequate audits of the Secretariat, funds, programs, or independent agencies of the UN system associated with the OFFP; and
bulletThere was no independent oversight authority within the UN capable of withstanding political interference from senior UN officials. 

 The United Nations Procurement Department – The Committee recommends that an independent body investigate corruption within the UN Procurement Department.   

IHC Services, Inc., Eurest Support Services, Inc., and Compass Group – The Committee finds that all three companies must be further investigated for the roles they played with respect to their work with the UN. 

The Committee finds that:

ESS, or Eurest Support Services, regularly updated IHC on its progress with contracts with the UN – In at least two instances, a field logistics official with a branch of ESS’s parent company, Compass Global Transit Centre in Holland (an ESS Official), told his company about bidding information he received from a UN Rations Contracts Officer in Sudan.   

BNP-Paribas failed to adequately monitor transactions within OFFP:

bulletBNP made at least 400 unauthorized payments to unapproved third parties involved in  the humanitarian side of the OFFP; and
bulletThe Committee recommends that an independent body examine the bank’s role, and the role of its European branches and subsidiaries, in the OFFP.

Saybolt created a conflict of interest by working as agents both for the UN and the oil buyer – According to a UN Board of External Auditors report of November 14, 1998 to the Office of Iraq Programs, Saybolt had been working at the same time for the UN and the buyer in inspecting the oil shipments during the first phase of the Oil-for-Food Program.   

Compliance with the Arab League Boycott of Israel – Some companies chose to abide by a boycott of Israel as a condition of doing business in the OFFP:

bulletBayoil, an American company with a subsidiary company in the Bahamas, signed a statement in 1999 that was required by the Hussein regime attesting that the company had never sold to Israel and would refuse to do so in the future.  August Giangrandi, signing on behalf of Bayoil Supply and Trading Limited, had the document notarized; and
bulletBayoil’s Houston representative, Ludmil Dionossiev, assured an unidentified Russian oil contact, Sergei Sharapov, that the Bayoil vessel, “World Champion,” had never traded in Israel.

Additional investigations should also be undertaken to explain the roles of:

bulletFormer UN Secretary-General Boutros Boutros-Ghali and his family, and his role in formulating the OFFP;
bulletCotecna executives Robert and Elie Massey, as well as Michael Wilson, for their respective roles in obtaining the award of the UN contract for the humanitarian inspection of goods as part of the OFFP; and
bulletMaurice Strong should be examined for his role in the OFFP; and UN officials Diana Mills-Ayree, Iqbal Riza, and Giandomenico Picco.

Robert Parton – The Committee, upon consideration, makes no findings regarding the disagreement between Mr. Parton and the IIC. 

Final Disposition of the files of the IIC should be open to the public - The Committee recommends that the IIC place all of its work papers, documents and records in public custody rather than turn them back to the UN.  To the extent possible, the archives of the IIC should be accessible on the Internet. 

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