Colum Lynch
The Washington Post
July 15, 2004

A House committee has issued a subpoena for financial records from a French bank that managed billions of dollars in Iraqi oil revenue through a U.N.-administered humanitarian program.

The move represented an escalation in a campaign by congressional Republicans to obtain documents related to an investigation of alleged corruption in the United Nations’ largest humanitarian program.

Democrats, meanwhile, are pressing to expand the investigation to cover the U.S.-led coalition’s stewardship of Iraq’s oil revenue, particularly its decision to award $1.4 billion in contracts without competitive bidding to Halliburton, a Texas oil services company that was once run by Vice President Cheney.

The U.N. Oil-for-Food program was set up in late 1996 to allow Iraq to sell oil to purchase food, medicine and other humanitarian goods. But it also provided wide latitude for corruption, allowing Saddam Hussein’s government to pocket more than $4.4 billion in illegal payoffs before the United Nations relinquished control of the program to the United States-led coalition in May 2003, according to the U.S. Government Accountability Office.

Rep. Thomas M. Davis III (R-Va.), chairman of the House Committee on Government Reform, ordered Banque Nationale de Paris to turn over “all records relating” to its handling of Iraqi funds. The documents are to be given to Rep. Christopher Shays (R-Conn.), chairman of the subcommittee on National Security, Emerging Threats and International Relations, who is leading a probe into the Oil-for-Food program.

U.N. officials have limited the release of documents to a U.N.-appointed investigator, Paul Volcker, the former chairman of the U.S. Federal Reserve Bank, who is investigating alleged corruption and U.N. mismanagement. In April, the United Nations notified the bank and the two companies that a confidentiality agreement with the United Nations prohibited them from providing sensitive documents to congressional investigators.

Robert S. Bennett, a lawyer at the firm Skadden, Arps, Slate, Meagher & Flom who is acting as BNP Paribas’s lead counsel, said the French bank has received the subpoena and is prepared to begin discussions with congressional staff members on the release of their documents. “We are going to fully cooperate and give them whatever they want,” Bennett said. “We are not the target of any investigation.”

U.S. and U.N. officials have concluded that Iraq profited illegally from the Oil-for-Food program by requiring companies to deposit illegal payoffs into secret government bank accounts in exchange for the opportunity to purchase discounted Iraqi oil or to sell humanitarian goods to the government.

Rep. Henry A. Waxman (Calif.), ranking Democrat on the Committee on Government Reform, urged Davis in a July 9 letter to “investigate potential mismanagement” of Iraq’s oil revenue by the United States. He also pressed Davis to subpoena documents from the Federal Reserve Bank of New York, which was hired by the U.S.-led coalition to handle Iraq’s oil revenue.

Waxman cited a preliminary audit by the accounting firm KPMG charging that the coalition’s management of Iraq’s oil revenue was “open to fraudulent acts” and that its accounting practices were “prone to error.” The final audit, which was commissioned by the International Advisory and Monitoring Board, is scheduled for release Thursday. The auditing board was established by the U.N. Security Council in May 2003 to monitor Iraq’s oil exports under the U.S. occupation of Iraq.

But the preliminary findings noted that KPMG’s auditors “encountered resistance” from coalition authorities, particularly their refusal to turn over “special audit reports” related to contracts awarded without competitive bidding to Halliburton and other companies.