Gulf War victims overpaid by $5 billion‚ UN auditors

Stephanie Nebehay
January 9, 2005

Geneva: The United Nations may have overpaid up to $5 billion to individuals, companies and Gulf states for losses in Iraq’s 1990 invasion and occupation of Kuwait, auditors’ documents showed on Sunday.

The 19 internal audits of the U.N. Compensation Commission (UNCC) were posted on its Web site a day before a total of 56 audits were to be made public by an independent panel led by former U.S. Federal Reserve chairman Paul Volcker.

Senior UNCC officials strongly denied any overpayment.

Volcker’s panel is investigating the oil-for-food programme that the United Nations operated for Saddam Hussein’s Iraq when the country was under international sanctions. The U.S. Congress is probing alleged corruption in the programme.

The 19 audits of the Geneva-based UNCC, carried out by the U.N. Office of Internal Oversight Services (OIOS) from July 1997 to December 2004, do not identify any corruption.

But the audits suggest some claimants were overpaid after raising questions, mainly about evidence in approving awards for damages. Along with exchange rate and other issues, the audits implied a total overpayment of some $5 billion, officials said.

The UNCC said it had issued the audits after being tipped the Volcker panel was going to make them public without including the UNCC’s responses to each audit’s findings.

“Our goal is to show that the Office of Internal Oversight Services’ audits have been easily rebutted,” said UNCC deputy executive secretary Mike Raboin.

“Since we are not part of oil-for-food, we are at a loss as to why these documents were given to the Volcker committee.”

“Beyond auditors’ scope”

The UNCC also posted a confidential decision by U.N. legal counsel Hans Corell, who ruled in November 2002 that the U.N. auditors had gone “beyond the proper scope of audit” by trying to reopen legal issues.

The UNCC was set up by the U.N. Security Council in 1991 to compensate individuals, companies and governments for losses from Iraq’s invasion and seven-month occupation of Kuwait.

It has received claims totalling $350 billion and to date has approved $51.8 billion in compensation.

Compensation is awarded after neutral panels of experts examine claims and make recommendations on payment. These amounts must be endorsed by the UNCC’s Governing Council, comprising the same 15 member states as the Security Council.

“The Governing Council has consistently taken the position that substantive decisions are not within the purview of the OIOS auditors,” said UNCC spokesman Joe Sills.

A diplomatic source who closely follows the UNCC said: “This is a most unfortunate development . . . It would be a shame if the UNCC were unfairly tainted and becomes an innocent collateral victim of the real scandal – what happened at oil-for-food.”

The UNCC was never part of the oil-for-food programme, set up in 1996 to ease the impact of U.N. sanctions by allowing Baghdad to sell limited amounts of oil and buy relief items.

But Iraqi oil revenues were used to fund both the UNCC and the programme.

Volcker said in an interview published in the New York Times on Friday that the internal audits, while professionally done and very detailed, “don’t prove anything”.

Staff of the U.S. Senate’s Permanent Subcommittee on Investigations estimated Saddam had pocketed $21 billion by cheating over the oil-for-food deal.

Volcker has rejected the figure, saying most of the money came from oil smuggling outside the U.N. programme.

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