US and Iraq spar over who should run corruption inquiry into oil-for-food program

Susan Sachs and Judith Miller
New York Times
May 17, 2004
Iraq’s political leaders are sparring with the American occupation administration over who should investigate possible official and corporate corruption in the United Nations oil-for-food program.

The dispute pits L. Paul Bremer III, the American administrator of Iraq, against the Iraqi Governing Council, whose members Mr. Bremer appointed last year. As the June 30 date for an American power transfer approaches, the two sides have increasingly been at odds over the future political setup.

It is not clear whether the present Governing Council will retain any power in a transitional government.

Governing Council members said they wanted to supervise any Iraqi inquiry into the oil-for-food program, and had asked the American accounting firm KPMG International in February to assemble possible evidence of alleged kickbacks and bribes paid under the now-defunct oil-for-food program.

Mr. Bremer has refused to release money to pay KPMG and instead has now approved the hiring of a different company, Ernst & Young, to conduct a $20 million investigation on behalf of a different agency of Iraq’s transitional government.

An adviser to the Governing Council, Claude Hankes-Drielsma, said Friday in a interview from Baghdad that those actions had resulted in “a serious delay in the inquiry.”

The United Nations began the oil-for-food program in 1997 to ease the constraints of economic sanctions imposed on Iraq after its invasion of Kuwait in 1990. The program permitted Iraq to sell oil in order to buy Iraqis food and medicines, all under United Nations supervision.

But the program was rife with corruption. The New York Times, citing Iraqi documents and the accounts of Iraqi officials, disclosed in February that Mr. Hussein’s government had skimmed billions of dollars from the program by collecting kickbacks from suppliers and illegal surcharges from purchasers of its oil.

Earlier, a Baghdad newspaper had published a list of hundreds of world political figures, companies, writers and others whom it said had received coupons from Mr. Hussein’s government entitling them to sell Iraqi oil under the program. The coupons could be sold at a profit to oil traders.

Mr. Bremer has said responsibility for an investigation should rest with the Board of Supreme Audit, a group of Iraqi judges, and he named the board as the sole agency to assemble and delve into documents that could be relevant.

The board is a holdover from Saddam Hussein’s reign, but has been reconstituted by the Americans to serve as an oversight body to monitor government spending and uncover corruption.

“All Iraqis we hear from agree that the investigation must be comprehensive, independent, and transparent,” said Dan Senor, a spokesman for Mr. Bremer, in a telephone interview yesterday from Baghdad. “This is best left to a body that is politically impartial.”

The board, after taking bids, decided last week to hire Ernst & Young, a move that was immediately denounced by the Governing Council’s British adviser, Mr. Hankes-Drielsma, a former executive of the accounting firm Price Waterhouse.

He said the decision was intended to “undermine the sovereignty” of the Governing Council. Mr. Hankes-Drielsma also suggested that the hiring of a different firm could prevent the prompt disclosure of any embarrassing information about the United Nations at a time when Washington was seeking its help in managing the crisis in Iraq.

“It is essential that the I.G.C. is allowed to continue with its investigation without any further delay and without any further stalling by the C.P.A.,” Mr. Hankes-Drielsma wrote in a letter to Mr. Bremer last week. A copy was given to The Times.

The disagreement over which agency should run Iraq’s investigation raises questions about the effectiveness of any inquiry.

Beyond the political question of who should run a potentially explosive investigation, there is the practical question of access to thousands of documents that remain in the hands of individual Governing Council members like Ahmad Chalabi.

Mr. Chalabi, a former exile who returned with the strong backing of many senior Pentagon officials, has strongly objected to Mr. Bremer’s decision to bypass the council on the oil-for-food inquiry.

Mr. Bremer now controls the spending of Iraqi money. Presumably, control over the purse strings would pass to Iraqis after the transfer of sovereignty, and the transitional government, with or without the current Governing Council members, could decide who should investigate the oil-for-food program.

In addition to the two Iraqi investigations, a third investigation has been authorized by the United Nations Security Council in response to allegations that United Nations employees profited from the sale of Iraqi oil during Mr. Hussein’s last years in power.

Secretary General Kofi Annan set up a panel of outside experts, led by Paul A. Volcker, a former Federal Reserve chairman. Panel members met last week in Baghdad with members of the Iraqi Board of Supreme Audit.

Each of the three sponsors of the separate inquiries has a political stake in the outcome.

While the Bush administration has disregarded the United Nations in the past, the administration is banking on United Nations help now to devise a plan for a credible Iraqi administration to run the country until elections can be held.

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