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Sources: Volcker panel to criticize Annan

Associated Press
Published March 29, 2005

NEW YORK - A new report by investigators probing the U.N. oil-for-food program for Iraq will not accuse Secretary-General Kofi Annan of corruption but will criticize him for failure to deal with a conflict of interest posed by his son's employment by a contractor, officials said Monday.

The report, expected to be released today, will also censure Annan for failing to detect shortcomings in the U.N. bureaucracy that allowed problems in the program to continue until 2003 when the humanitarian aid program was wrapped up after the U.S.-led war in Iraq, the Associated Press reported, quoting unnamed officials who have seen the report.

The report will criticize the secretary-general's son, Kojo Annan, for concealing information about his dealings with the Swiss company Cotecna Inspection S.A., which won an oil-for-food contract in December 1998, and for deceiving his father, the officials said on condition of anonymity.

While the new report will fault Annan's overall management of the $64-billion oil-for-food program, it will back statements by his chief of staff and spokesman as recently as Monday that "the secretary-general expects to be cleared of any wrongdoing."

The report will be the second issued by the team of investigators led by former U.S. Federal Reserve Chairman Paul Volcker. They are studying allegations of corruption in the oil-for-food program that first surfaced in January 2004 in the Iraqi newspaper Al-Mada.

U.S. congressional investigators say Saddam Hussein's regime may have illegally made more than $21-billion by cheating the oil-for-food program and using other sanctions-busting schemes.

Volcker has promised a final report in midsummer.

The oil-for-food program was the largest U.N. humanitarian aid operation, running from 1996 to 2003. Hussein's government was allowed to sell oil in exchange for humanitarian goods under an exemption from U.N. sanctions imposed after Iraq's 1990 invasion of Kuwait.

In a bid to curry favor and end sanctions, Hussein allegedly gave former government officials, activists, journalists and U.N. officials vouchers for Iraqi oil that could then be resold at a profit.

The Volcker report will state that the secretary-general should have been more aggressive in examining possible conflicts of interest involving his son, the AP reported, quoting the unnamed officials.

Cotecna will be faulted for its failure to make public information about Kojo Annan, the officials said.

Kofi Annan, his son and Cotecna all deny any link between Kojo Annan's employment and the awarding of the U.N. contract to the company.

Volcker will report that his investigation of Kojo Annan is continuing, the AP reported, quoting the unnamed officials.

Kojo Annan worked for Cotecna in West Africa from 1995 to December 1997 and then as a consultant until the end of 1998, when the oil-for-food contract was awarded. He remained on the Cotecna payroll until 2004 on a contract to prevent him from working for a competitor in Nigeria or Ghana.

In November, when it was disclosed that he remained on the Cotecna payroll after 1998, the secretary-general said he was "very disappointed and surprised" that his son continued to receive money.

Cotecna initially said Kojo Annan was employed until only 1998. It released details of his payments only last week, after a report in the Financial Times and the Italian business daily Il Sole 24 said he received more than $300,000, double the amount previously reported.

Cotecna spokesman Seth Goldschlager told the AP on Thursday that Kojo Annan got more than $365,000 from the company: about $200,000 as a full-time employee and consultant from 1995 to 1998 and more than $165,000 from 1999 until February 2004 under the "noncompete" contract.

In Volcker's first report in February, he accused Benon Sevan, the oil-for-food program's chief, of a "grave conflict of interest," saying he "seriously undermined the integrity of the United Nations."

Volcker is still investigating Sevan's activities. Sevan's attorney has said he did nothing wrong.

The United Nations on Monday reversed its decision to pay Sevan's legal fees related to the investigation. The planned payment had stirred controversy because of the seriousness of the allegations against him and because U.N. officials said they would take the money from Iraqi oil sales used to finance the oil-for-food program itself.

[Last modified March 29, 2005, 01:32:11]

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