August 19, 2004 | Commentary on International Organizations

U.N. Shareholders Due Oil-for-Food Answers

It was an image many investors yearned to see: Former Enron executive Ken Lay in handcuffs, facing civil and criminal charges stemming from the collapse of the company he led for 15 years.

He wasn't alone. John Rigas was sentenced to as many as 30 years in prison for using the company he founded, Adelphia, as his personal piggy bank. And former WorldCom head Bernard Ebbers faces trial on fraud and conspiracy charges later this year.

These people are all former CEOs, accused of -- or convicted of -- financial misdeeds. And let's make no mistake: The government is doing the right thing by pursuing incidents of corporate malfeasance. Capitalism doesn't work without the rule of law.

However, while a series of "crooked CEO" stories has played big in headlines, talk shows and op-ed pages, surprisingly little media attention has been given to a much bigger scandal: the United Nations Oil-for-Food program.

For example, the New York Times has mentioned it only 56 times, compared to the more than 3,000 stories the Times carried about Enron in 2002.

Oil-for-Food was established a decade ago with the admirable goal of providing humanitarian aid to the Iraqi people. But it didn't work.

While his people continued to starve, Iraqi dictator Saddam Hussein embezzled billions from the program through oil smuggling and systematic thievery. He also demanded illegal payments from companies buying Iraqi oil, and pocketed billions of dollars in kickbacks. The U.S. General Accounting Office estimates Saddam's illegal take exceeded $10 billion.

But he wasn't the only one who allegedly profited from this supposed humanitarian program. Some U.N. employees stand accused of rank incompetence and mismanagement. In fact, some may even have worked along with the Iraqi regime to defraud the program.

And this is a scandal, like those involving corporate CEOs, that goes right to the top. Benon Sevan, the former executive director of the Oil-for-Food program, appeared on an Iraqi Oil Ministry list of 270 individuals, political entities, and companies allegedly receiving oil vouchers as bribes from Saddam Hussein's regime.

That doesn't prove that Sevan did anything wrong, of course. But he raised additional suspicions when American congressional committees opened investigations of Oil-for-Food. Sevan -- who retired from the United Nations at the end of May -- wrote letters on official U.N. stationery warning some of the companies implicated in the scandal that they must first seek U.N. approval before releasing documents to investigators. In the corporate world, we might call that suppression of relevant documents.

Investigators also will have to puzzle out what U.N. Secretary General Kofi Annan knew and when he knew it. For example, an internal U.N. office audited the Oil-for-Food program in 2003, before the liberation of Iraq. That investigation reportedly criticized the world body's dealings with the Swiss company Cotecna Inspection SA.

Annan's son Kojo worked for Cotecna in the 1990s, and was a consultant for the company until just before it was awarded a $4.8 million contract to oversee the operations of the Oil-for-Food program. Even after the critical report, Cotecna captured another $9.8 million contract. Was Kojo Annan a factor in the awarding of those contracts?

The U.N. conducted 55 other in-house investigations of Oil-for-Food over the years. The world body should release all those reports to congressional investigators, so we can determine exactly what Kofi Annan knew about the rampant structural problems within Oil-for-Food and what he did, if anything, to fix those problems.

Former Federal Reserve Chairman Paul Volcker is leading a U.N.-sanctioned investigation of Oil-for-Food. He's a fair-minded and dogged investigator, but his panel lacks subpoena authority -- it will have to rely on voluntary cooperation from governments, U.N. employees, and current and former Iraqi leaders.

That's why it's critical that U.S. lawmakers also continue their own investigations -- to keep the pressure on the U.N. and to uncover documents that can be obtained only with a subpoena.

Taxpayers worldwide deserve to know everything there is to know about Oil-for-Food. After all, relatively few of us were investors in Adelphia, Enron or WorldCom. But we're all stakeholders in the United Nations, whether we like it or not. The U.S. taxpayer is far and away the largest "investor" in the U.N.

After the corporate scandals in 2002, Congress passed the Sarbanes-Oxley Act, which in part makes companies CEOs responsible for any financial misdeeds that happen during their tenure. It's time to hold Kofi Annan and the United Nations to the same standards we now apply to our corporate leaders.

Ed Feulner is president of The Heritage Foundation (heritage.org), a Washington-based public policy research institute.

About the Author

Edwin J. Feulner, Ph.D. Founder, Chairman of the Asian Studies Center, and Chung Ju-yung Fellow
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