Firms Named in Iraq Kickbacks

Well-known firms such as DaimlerChrysler, Volvo Construction Equipment and Siemens are among more than 2,200 companies that “paid to play” with Iraqi President Saddam Hussein’s government, an independent investigation of the U.N. oil-for-food program found.

Some companies acted with the knowledge or even cooperation of their governments, says the report released Thursday, and political figures from several countries are accused of receiving payoffs for using their influence to help Iraq.

Corruption allegedly even ensnared oil-for-food chief Benon V. Sevan, who has denied wrongdoing but resigned. An assistant secretary-general who ran the program in Iraq, Hans von Sponeck, was criticized for dealing with program contractors soon after leaving his post.

The report is the final installment in an 18-month investigation led by former U.S. Federal Reserve Chairman Paul Volcker, and he was careful to say that inclusion in the report is not necessarily evidence of a crime. Most of the companies and individuals named were given a chance to rebut the findings, and many have denied wrongdoing.

In several detailed case studies, the 623-page tome lays out how Hussein subverted the program to gain at least $1.8 billion through surcharges and kickbacks at the expense of Iraqi citizens. He also granted lucrative contracts to curry favor with those he thought could help soften sanctions against Iraq, the report says.

It also blames lax U.N. oversight and complacent Security Council members for allowing the corruption to continue.

The program allowed Iraq to sell oil so it could buy humanitarian goods to ease the effects of sanctions imposed after Hussein’s 1990 invasion of Kuwait.

Volcker urged several reforms to make sure future programs are not as vulnerable, including hiring a chief operating officer and creating an independent oversight body.

Russia was Iraq’s best customer, holding 32% of its oil contracts, and paid more than $52 million in surcharges between March 2001 and December 2002, the report says. France was next; U.S. companies held only a small fraction of the contracts.

Sweden’s Volvo, Europe’s largest truck maker, reportedly paid $535,000 in selling 35 vehicles for $11.8 million, the report says. In a letter to the committee, Volvo denied knowledge of illegal payments.

Three subsidiaries of German-based Siemens, Europe’s largest engineering company, paid $1.6 million in kickbacks in its sale of electrical equipment to Iraq, the report says. A Siemens letter says the allegations were “premature ... and unjustified.”

DaimlerChrysler, also based in Germany, reportedly paid $7,134 to Iraq, 10% of the price of an armored Mercedes truck Iraq bought to transport cash.

A company official said it was against policy to make payments to the Iraqi government for any reason.

The report describes how Banque Nationale de Paris, which held the escrow account for Iraq’s oil sales, appeared to have firsthand knowledge of front companies buying oil at a discount to sell at a premium, but failed to inform the U.N.

BNP said its affiliates could not share confidential information with one another, a defense the investigators found “unpersuasive.”

Money and favors also flowed the other way. Tarik Aziz, Iraq’s deputy prime minister at the time, told investigators that the government handed out oil allocations to reward people who actively opposed the sanctions on Iraq. They allegedly include Jean-Bernard Merimee, France’s ex-ambassador to the U.N., who was arrested last week in Paris.

British antiwar activist and Parliament member George Galloway reportedly received $270,000 through his wife, though he denied receiving “a penny” in testimony before Congress.

The report can be found at www.iic-offp.org. For previous Times coverage, see latimes.com/oilforfood.