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WebMemo #641 on International Organizations

January 19, 2005

The Volcker Oil-for-Food Investigation: Is There a Conflict of Interest?

By

The Independent Inquiry Committee into the United Nations Oil-for-Food Program (IIC), headed by Paul Volcker, is due to release its interim report at the end of January. The Volcker report undoubtedly has the potential to bring about the downfall of U.N. Secretary-General Kofi Annan. The leadership of the United Nations has placed so much political capital on its findings that the stakes are extremely high. Damning words from the former Federal Reserve Chairman regarding Mr. Annan's personal role in the scandal would almost certainly seal the fate of the embattled U.N. leader.

 

But those expecting a hard-hitting expose of U.N. corruption and feckless leadership could well be disappointed by Mr. Volcker's findings. As Volcker told The New York Times, his report will produce no "smoking gun."[1] While the IIC interim report will probably contain valuable information of considerable interest to congressional investigators, some of which may be damaging to the U.N.'s reputation, it is unlikely to paint a detailed picture of corruption and mismanagement at the highest levels of the world body. Still, the flurry of interest that will undoubtedly arise when the report is released, whatever its contents, may well be overshadowed by new information indicating that Mr. Volcker himself has an apparent conflict of interest that threatens his credibility as head of the Committee.

 

Kofi Annan appointed the Independent Inquiry Committee in April 2004 following calls for a Security Council-backed inquiry into the Oil-for-Food scandal. Paul Volcker heads a three-member committee consisting of Volcker, South African Justice Richard Goldstone, and Mark Pieth, a Swiss law professor. The Committee's 60 staff, including three support personnel on loan from the U.N., operate on a $30 million budget drawn from the U.N. Oil-for-Food escrow account.

 

Its interim report will be published at an extremely sensitive time for the United Nations. There is little doubt that the scandal has done immense damage to the reputation of the world organization. Kofi Annan is coming under increasing fire for what has become the biggest scandal in United Nations history and the biggest financial fraud of modern times.

 

The Volcker Committee may fail to deliver an exhaustive account of U.N. failings and possible criminal activity by U.N. officials for several reasons, including its lack of investigative power and the absence of real independence from the U.N. Indeed it is far more likely that the five congressional investigations[2] now underway will prove more effective than the Volcker Committee in uncovering the full story of the Oil-for-Food fraud that allowed the Saddam Hussein regime to enrich itself at the expense of the Iraqi people.

 

Paul Volcker and an Apparent Conflict of Interest

It should be an issue of concern that Mr. Volcker's own outlook may be influenced by past associations. It is vitally important that any independent inquiry into the extremely serious allegations leveled against the United Nations-which could have far-reaching implications for the reputation of the world organization-be seen as completely independent of the U.N. It is just as important that the person charged with heading such an inquiry be seen as completely unbiased and objective in his approach toward the organization he is investigating. In the corporate world, for example, it would be inconceivable for an independent inquiry into fraud and corruption to be headed by someone with strong ties and loyalties to the corporation under investigation.

 

But in the case of Paul Volcker and the Independent Inquiry Committee, there is an apparent conflict of interest that brings into question whether the Committee can objectively investigate the United Nations. When Volcker was appointed to head the Oil-for-Food investigation in April 2004, it was not widely known to the general public, the world's media, or the U.S. Congress that he was at the time a director of the United Nations Association of the United States of America (UNA-USA) and the Business Council for the United Nations. Mr. Volcker is listed as a director in the 2003-2004 UNA-USA annual report,[3] as well as the annual reports for 2001-2002 and 2000-2001.[4]

 

There is no mention of Paul Volcker's involvement with UNA-USA in his biography on the Independent Inquiry Committee's website,[5] a rather striking omission considering the fact that he is charged with a highly sensitive investigation into the U.N.'s operations. Volcker does disclose his other institutional affiliations-such as the Trilateral Commission, the Institute of International Economics, the American Assembly, and the American Council on Germany-but is seemingly shy about his work with the United Nations Association.

 

The United Nations Association of the United States of America is a pro-U.N. advocacy group that "supports the work of the United Nations." In the grateful words of Kofi Annan,

 

There are United Nations Associations in many other countries, but this one is unique-both in the challenges it faces and in the energy and resources it devotes to tackling them. From our perspective, it is hard to think of any work more valuable than what you do to improve the understanding of United Nations issues in our host country.[6]

 

A key goal of the United Nations Association is to "greatly expand and contribute to Americans' understanding of the U.N. and its importance to the U.S. by increasing the channels through which we inform Americans, particularly opinion-makers, elites, UNA-USA members and students."[7] It is also a forceful advocate of U.S. membership of the International Criminal Court.

 

UNA-USA has played a lead role in defending the U.N.'s response to the Oil-for-Food scandal and the embattled leadership of U.N. Secretary-General Kofi Annan. It has also prominently defended the reputation of the Oil-for-Food Independent Inquiry Committee. To a great degree, UNA-USA has acted as the U.N.'s and the Volcker Committee's chief cheerleader with regard to the Oil-for-Food controversy. According to its "Talking Points on the Oil for Food Program," UNA-USA firmly believes the Volcker report "will be objective, thorough and fair" and states that "the U.N. Security Council-not the Secretary General or his staff-had ultimate oversight authority for the Oil for Food Program." UNA-USA has criticized the "politically motivated attacks" on the U.N. over Oil for Food and the calls for Annan's resignation that, it says, "constitute an effort to undermine the U.N., which is a real objective for many of those who are distorting the facts on this complex issue."[8]

 

The UNA-USA's partner organization, the Business Council for the United Nations (BCUN), works to "advance the common interests of the U.N. and business in a more prosperous and peaceful world." One of its chief underwriters was BNP Paribas, the French bank that held the escrow account for Oil-for-Food funds.[9] BNP donated more than $100,000 to UNA-USA and BCUN in 2002 to 2003.[10] BNP's role in the Oil-for-Food scandal is currently being investigated by the House International Relations Committee,[11] as well as by the Volcker Committee.

 

Conclusion

The Independent Inquiry Committee into the Oil-for-Food scandal has been hailed by its supporters as a huge step forward for the United Nations in terms of increasing accountability and transparency. It has been held up as an example of a new spirit of openness supposedly sweeping through the world body and as a powerful symbol of Kofi Annan's stated objective to restore the reputation of the U.N.

 

In reality however, the Volcker Committee suffers from a huge credibility problem of its own. It is hard to see how a team of investigators hand-picked by the U.N. Secretary-General, whose own son is a subject of investigation, could be considered truly independent. There is also a major question mark over its Chairman's neutrality. After Mr. Volcker's several years as a director of the United Nations Association and Business Council for the United Nations, it is difficult to see how he could cast a critical, objective eye over the U.N.'s leadership.

 

Nile Gardiner, Ph.D., is Fellow in Anglo-American Security Policy at The Heritage Foundation. William Schirano, Research Assistant in Foreign Policy at The Heritage Foundation, assisted with research for this paper.



[1] Warren Hoge, "No 'Smoking Gun' in the Inquiry Into Iraq's Prewar Oil Sales ," The New York Times, January 7, 2005.

[2] The Senate Foreign Relations Committee, the Senate Permanent Subcommittee on Investigations, the House International Relations Committee, the House Subcommittee on National Security, Emerging Threats and International Relations, and the House Committee on Energy and Commerce are all conducting investigations. In addition, there are three U.S. federal investigations underway-by the Government Accountability Office (GAO), the Department of Justice, and the U.S. Treasury.

[4] UNA-USA, 2001-2002 Annual Report, at /static/reportimages/40ED314B85448EFFCF62E58CA1BC0F01.pdf; UNA-USA, 2000-2001 Annual Report, at /static/reportimages/9AF3D751F27FAECAC1D6A8E7E74AB318.pdf.

[6] U.N. Secretary General Kofi Annan, May 2002, at /static/reportimages/40ED314B85448EFFCF62E58CA1BC0F01.pdf.

[8] UNA-USA, Talking Points: The Oil for Food Programme, at http://www.unausa.org/.

[9] UNA-USA, 2001-2002 Annual Report, at /static/reportimages/40ED314B85448EFFCF62E58CA1BC0F01.pdf.

[11] See "Bank Lapses Cited in Oil for Food Program", The Washington Times, November 18, 2004, at http://www.washtimes.com/national/20041118-120331-8156r.htm.

 

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