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CNN LIVE EVENT/SPECIAL

Volcker Previews Oil-For-Food Report

Aired February 3, 2005 - 15:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


KYRA PHILLIPS, CNN ANCHOR: Talking now Oil-for-Food, recipe for corruption? Well, in the eyes of Paul Volcker, who has just stepped up to the podium, he has written his first report on the Saddam era U.N. program. It's now being made public. Let's listen in to what he has to say.
PAUL VOLCKER, CHAIRMAN, U.N. INDEPENDENT INQUIRY COMMITTEE: Welcome, quite a few people here. Let me say, first of all, I'm delighted to be here with my two committee members who bring an enormous amount of experience to the investigatory process.

And I think they also reflect in their person the fact that this is an international investigation, which sometimes those of us in the United States seem to forget.

We are here, of course, because we are issuing our first interim report. That report has certain findings. Before we get to the specifics of the findings I want to emphasize a few background points. I think these points shouldn't be lost when you're considering our work.

First of all, this is an interim report. It is not the whole story by a long shot. It is divided into two parts. One is essentially background and summary, and then behind the orange sheet or whatever it is there, there is a very detailed investigatory record.

Now, it does cover some interesting and pertinent questions, and I think it does reveal some institutional vulnerabilities, particularly in the area of procurement of certain U.N. contractors. That is part of the subject of the report.

We have also carefully reviewed the record of Mr. Benon Sevan, the executive director -- or was the executive director of the Office of Iraq Program.

Secondly, we amplify our earlier comment on the auditing process. And we analyze the administrative funds that were made available to the U.N. as part of the oil-for-food program, the so-called 2.2 percent account. They got 2.2 percent of the oil revenues for administrative purposes.

That's what the report covers. But let me emphasize what the report does not cover.

It does not cover the performance, the actual operating performance of the U.N. contractors. We talk about their procurement, but not their performance. It does not attempt to judge the validity of particular audit findings. Again, we discussed the auditing process, but not the particular auditing findings.

It does not cover the activities of U.N. agencies and U.N. operations in the field in Iraq. It was a big part of the process.

It does not cover oversight by the Security Council and its 661 Committee.

Those are all matters for the comprehensive report, what I like to think of as the definitive report, on the oil-for-food program that we are aiming for in mid-summer.

Now, this report also does not go deeply into investigation of possibly corrupt or corrupted Iraq contractors. I'm now talking about the people who bought the oil or supplied the humanitarian goods. That is activity, strictly speaking, outside the U.N., but it's an activity that, of course, we are interested in and what responsibility the U.N. had for surveillance.

It is an area in which there will be opportunities for mutual cooperation with national investigatory authorities.

I just told you what's not in the report. Let me tell you several things I think the report does demonstrate.

For one thing, I think it does illustrate the range and depth of our investigative mandate and our authority. It certainly illustrates we're dealing with a problem of international scope. And I think it reflects the work of a really dedicated and skilled professional staff happens to be drawn from 28 different countries. More than half the staff is from outside the United States.

Now, I do hope the report will help put to rest some of the concerns I repeatedly hear about the committee's absence of subpoena power. Now, obviously, in some circumstances subpoena power can be useful.

But I have to remind you this is primarily an investigation into the U.N. The U.N. is an international institution with diplomatic immunity. National subpoena power does not reach into foreign countries, nor to international institutions.

The fact is, we are uniquely placed to have access to U.N. records and to U.N. staff. I have to tell you, we've had instances of remarkable cooperation, I really suspect unique cooperation from some foreign authorities who do respond to the Security Council resolution, which calls for the cooperation of all member states.

I also want to mention we've appended to part one of the report a very brief section on magnitude.

You know, several estimates have been made of the illicit payments to the old Iraqi regime. Those estimates differ. I think there's been quite a lot of confusion. Now, we're not yet prepared to provide what we believe to be the definitive estimate, an estimate we will develop. There is one exception to that in the value of surcharges required by oil purchases by Iraq. We essentially confirmed the figure that is from matching U.N. records that Mr. Duelfer reported in his recent ISG report.

But it's clear -- and I think it should be clear to everybody -- that the major source of illicit funds to Iraq and the Iraqi regime resulted from sanction violations that were outside the framework of the oil-for-food program smuggling, so-called smuggling, to Jordan, to Turkey, eventually to Syria, and then to Egypt.

So much for the background. Let me just touch upon the specific findings of the report. You will have them in the press release. You will have them in the summary record of part one.

Now, first, and obviously the most disturbing finding, is the accumulation of evidence that the director of Office of the Iraq Program, Mr. Benon Sevan, in fact, did repeatedly solicit oil allocations for a small trading company called AMEP.

The Iraqi government, in providing such allocations, certainly thought they were buying influence. But whatever the result in terms of actual behavior, I think it is a fact that Mr. Sevan placed himself in a grave and continuing conflict of interest situation that violated explicit U.N. rules and violated the standards of integrity essential to a high-level international civil servant.

This is a painful episode, I think, for everybody in the life of the United Nations. At the same time, I think it's one of the signals for review and renewal.

And secondly, the evidence amply demonstrates that a tainted procurement process took place in 1996 when the program was just getting under way. That, of course, was a time of large challenge. There were pressures to get the program started in a hurry. There were political sensitivities. And I have to tell you, you will see from the record, there was a lot of internal debate.

But in the end, the prescribed rules and regulations for procurement were overridden, and they certainly were importantly influenced by essentially political considerations.

Now, third, it seems clear the audit functions simply had too few resources, too often those resources were ineffectively deployed, and too frequently there was too little discipline followed.

But I would also say, we have not -- and in this case, I emphasize, we have not -- found systematic misuse of funds dedicated to the administration of the oil-for-food program. It was, in fact, careful budgeting, not all the funds budgeted were spent, and the accounting trail is adequate.

There is at least one clear lapse from discipline and we are, of course, will pursue that and other possible lapses. In these and other areas, the committee is continuing its broad effort to identify maladministration and corruption within the program.

Now, the questions concerning possible conflicts of interest of the secretary-general himself, Mr. Kofi Annan, related to the alleged involvement of his son in certain program activities, is going to be addressed in a subsequent report that, obviously, is an area where we want to take extreme care in making sure we know what the answer is.

Now, permit me one final point.

Questions have been raised for a few years about my membership, for a few years, on the board of something called the UNAUSA. I have to say that's no secret. It's always been disclosed in the public record, as you would expect, in publications of the UNAUSA. It's also never been a part of my standard bio for a simple reason: It was not a particularly active relationship, to say the least. I am embarrassed to be able to say -- or to say, upon inquiry, that I have not attended a meeting of the organization for the last two years.

But let me say also: the fact of my membership, the fact that I lent my name to this organization, does reflect something. It reflects the importance I attach to the U.N. as an international institution.

Now, let me say it also reflects my concern that the U.N. be reformed, and that unless it maintains high standards of integrity, it will not be able to command the support of member states and the world's public.

It may also be relevant that, 12 or 13 years ago, I co-chaired a Ford Foundation study of U.N. finances.

So I went back and looked at it. My conclusion at that time was, and I quote, "The future credibility of the U.N. will depend on the effectiveness of its management, on the quality of its staff, and on improvements in its structure and administration."

So here I am 13 years later with an opportunity to do something about it. And as they said in the op-ed piece this morning -- and I think I speak for my colleagues here as well -- we're not here to tear down; we're here to restore. It's our hope to see professionalism, competence, most of all, integrity in the administration of the U.N. beyond a serious doubt, because it is an important institution.

With that, let me turn to my colleagues and ask them for what word they might want to give you at this time.

PHILLIPS: You've been listening to Paul Volcker, the head of the independent panel investigating the now defunct Saddam-era U.N. program.

The oil-for-food program is what we've been talking about, a program that Volcker said did not make for pleasant reading. His interim report is what he calls it. He said the program was tainted by conflict of interests, subpar auditing and an overall lapse from disciplined judgment.

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