May 5, 2005

Somehow Volcker Missed It

We're learning more about the degree of corruption, and the methods by which Saddam Hussein exploited the very U.N. program that was set up to sanction and restrain him, and to feed the Iraqi people with their own oil revenue. Little by little, the workings of the financial machinery used to circumvent the program are being examined, and what they reveal shows that the inmate was running the asylum, and that the U.N. leadership was complicit or incompetent, or both.

Dana Rohrabacher's Congressional committee is doing what Paul Volcker's investigation would not. He's digging into the practice by BNP Paribas, the French bank contracted by the U.N. to dispense contract payments in the Oil-For-Food program, of violating the U.N.'s own rules by internally diverting hundreds of millions of dollars in contractor payments to third party companies and organizations.

And Claudia Rosett is scooping the rest of the media with her determined reporting and clarification of the committee's findings. Here's an earlier Rosett article on the probe of BNP. Excerpted from yesterday's NY Sun article:

...the documents provided by BNP under congressional subpoena and examined by The New York Sun suggest to congressional investigators that some of these mistakes involved the rerouting of money through a global web of companies linked not only to terrorist funding and arms trafficking but also to anti-sanctions campaigning and front operations for the Iraqi regime itself.

Even in the context of an oil-for-food program that encompassed more than $110 billion of Saddam's oil sales and relief purchases, these payments to third parties were not small change. Payments rerouted inside BNP - against U.N. rules but evidently without protest from Turtle Bay - totaled at least $470 million, documents in the possession of Congress indicate.

Rosett proceeds to follow the money, and it leads to some familiar names:

The number of companies involved was relatively small, a few dozen out of the more than 3,000 contractors tapped by Saddam under U.N. terms that let him choose, subject to U.N. veto, his own business partners. Among several of this band, the rerouted payments were copious. In some cases, they form a latticework of disturbing associations. These include such U.N.-approved dealers as Al Wasel & Babel General Trading, based in Dubai, United Arab Emirates, which sold $384 million of goods to Saddam under oil for food.

Last April, the U.S. Treasury designated Al Wasel & Babel as a front for officials of the Saddam regime. According to the Treasury, Al Wasel & Babel - under the guise of selling Saddam humanitarian goods - not only tried to buy a surface-to-air missile system for Iraq when it was under U.N. sanctions, but also "played a key role in the former Iraqi regime's schemes to obtain illicit kickbacks in goods purchased through the oil-for-food program."

As it turns out, BNP, by its own account, rerouted more than $5.7 million due to Al-Wasel & Babel to another company, Al Douh, in 2002. BNP's report to Congress describes this company as a Jordanian company with U.N.-approved affiliates, although Al-Douh itself was not a U.N.-approved dealer. But Al-Douh had other connections: BNP's roster of third-party payments shows that in the final year of oil for food, just before the American-led coalition overthrew Saddam in April, 2003, Al-Douh received more than $29 million redirected by BNP from funds that Saddam's regime owed to a South African company, Falcon Trading.

Falcon Trading belonged to a Detroit businessman, Shakir al-Khafaji. According to a Wall Street Journal report last year, Mr. al-Khafaji, a campaigner against U.N. sanctions on Iraq, not only brought American and South African political delegations to Baghdad to denounce American policy, but also funded an anti-sanctions documentary by a former U.N. weapons inspector, Scott Ritter.

Millions in "food" funds were diverted to companies in the arms business, to firms controlled by members of the Saudi royal family, but much of the money just seems to have lined the pockets of Saddam and his loyal business partners:

At least half a dozen of the companies involved in the rerouted payments were among the biggest 40 suppliers selected by Saddam under oil for food - all doing well over $100 million of business. That alone should sound alarms because Saddam's regime doled out contracts as favors, overpaying for relief supplies in order to skim funds by way of kickbacks. At least two of the U.N.-authorized companies from which payments were redirected, Al-Riyadh International Flowers and Pacific Inter-Link, showed up in a 2003 Pentagon study as having sold overpriced goods to Saddam - vegetable ghee overpriced by 28% or more, and palm oil overpriced by 15%.

Another Congressional committee, this one chaired by Henry Hyde, has received subpoenaed documents from Robert Parton, former investigator with the Volcker's Independent Inquiry Committee investigation. Parton resigned from the Volcker investigation last month in protest of what he said was the commission's downplaying (whitewashing?) of Kofi Annan's role in the Oil-For-Food fraud. This Fox News report says some of the documents supplied by Parton demonstrate inconsistencies in Annan's story about his role in the scandal. Stay tuned.

Posted by dan at May 5, 2005 4:52 PM