U.N. Oil-for-Food Inquiry Findings Surprised Volcker

Times Staff Writer

When former U.S. Federal Reserve Chairman Paul Volcker agreed to look into allegations of corruption in the U.N.’s $64-billion Iraq oil-for-food program, he knew it was going to be “a mess.”

But he had no idea how much the 18-month investigation would expose the vulnerabilities of the U.N. and how close he would come to toppling Secretary-General Kofi Annan as its leader.

“It had that potential from the start,” Volcker said. But when it came to the moment when he realized that Annan’s job hung on his words, “I felt uncomfortably,” he said in an interview with the Los Angeles Times on Thursday.


Hours before the publication of Volcker’s report in September assessing Annan’s culpability, the U.N. chief and his lawyer asked Volcker to change language about business dealings by Kojo Annan that they thought could force his father’s resignation.

Volcker agreed. It was merely a part of the due process, he said. Asked Thursday whether he thought the U.N. chief knew about his son’s attempts to use the elder Annan’s connections for his company’s benefit, Volcker said, “To this day, I still don’t know.”

Annan selected Volcker to lead the oil-for-food investigation because of his reputation for being tough but fair. Volcker also respected the United Nations but was willing to criticize it harshly to make it better. “The U.N. is an important institution, and it had a problem,” he said.

Volcker ended up hiring about 70 investigators based in Baghdad, Paris, London and New York for the $34-million inquiry that concluded this week after a review of 12 million pages of documents.

The Security Council resolution provided his investigators with total access to U.N. records and personnel, including the hard drives of the world body’s computers and e-mails.

The main conclusion of eight briefing papers and interim reports was that the U.N.’s management and oversight were severely flawed and urgently needed reform. Volcker found that the program that was meant to soften the effect of international sanctions on ordinary Iraqis was so poorly designed and managed that it actually strengthened dictator Saddam Hussein’s political power.

But there was another key issue: whether Kofi Annan influenced the award of a lucrative inspection contract to his son’s employer, Cotecna Inspection. After news reports raised the question when Cotecna won the bid, Annan commissioned an aide to look into a possible conflict of interest. That initial inquiry took a day, and the answer was no. But the question continued to haunt Annan for years.

Volcker understood that clarifying what Annan knew about his son’s dealings was central to the investigation, and he devoted months to following leads. He concluded that Kojo Annan dealt in a shady world of many bank accounts, false contracts and friends of convenience. But there was no evidence, he said, that Annan influenced the award of the contract, or even definitively knew that his son’s company was bidding for it.

“Nobody disagrees that there were four or five times when you raise your eyebrows and say, ‘Didn’t it dawn on Kofi that Cotecna was involved?’ But then you say, ‘Then again, maybe not,’ ” Volcker said.

One of Volcker’s staffers, former FBI investigator Robert Parton, thought differently about Annan’s culpability after interviewing him. He quit the team to protest what he saw as Volcker pulling punches.

Parton kept thousands of pages of documents in violation of a confidentiality agreement, and later handed them over to a congressional panel, claiming protection as a whistle-blower.

Before releasing the September report on Annan, Volcker met with the U.N. chief and his lawyer to discuss the harsh conclusion.

“The wording we had was that Annan’s performance did not meet the standards of the United Nations,” Volcker said. “And there was more, along the same vein.”

A U.N. official with knowledge of the meeting said the conclusions cited a failure by Annan in management and oversight, together with a failure to keep close tabs on his son’s questionable business dealings.

Annan’s reaction, said another person with knowledge of the meeting, was that the way the conclusions were phrased implied that he favored Cotecna’s bid, and made him look so bad that it might force his resignation. Annan’s lawyer, Gregory Craig, asked that the findings be dealt with separately, because Annan took responsibility for the management issues, but not for his son’s behavior, of which he says he had no knowledge.

“We presented the facts, and they spoke for themselves,” Annan told The Times about the meeting.

Volcker agreed. Even if he had doubts that Annan was unaware of Cotecna’s bid, he was convinced that Annan had not influenced the contract. It was not worth toppling a secretary-general.

“No one ever said he had influenced the process, and that was an important consideration,” Volcker said. “That he did not do a proper investigation [of his son’s possible conflict of interest] was the key point. It would have saved him a lot of trouble.”