U.S. Praises U.N. Scandal Reaction

The State Department on Friday praised U.N. Secretary-General Kofi Annan amid a widening scandal over corruption and flawed management in the $60 billion U.N. oil-for-food program.

Annan holds himself responsible and accountable for management of the program, and has reiterated a commitment to take "appropriate action" against misbehaving U.N. officials, Adam Ereli, a State Department spokesman, said approvingly.

"I think this is a clear statement of concern and commitment and responsibility on the part of the leadership of the United Nations," Ereli said. "And we welcome that."

The U.N. program, which was endorsed by the United States, permitted Iraq to sell oil despite a stiff U.N. economic embargo, provided the proceeds were used to buy food and medicine for Iraqi people suffering under the sanctions.

In fact, worldwide pressure to relieve their plight had led the United States and other nations to devise the program in late 1996. It helped regular Iraqis cope with tough U.N. sanctions imposed after Saddam's 1990 invasion of Kuwait, making the program a lifeline for nearly 90 percent of the population. It continued until 2003.

In a press conference, the permanent Iraq representative to the United Nations condemned the now apparently blatant favoritism toward Saddam.

"We found that, reading this report, that in the early days the Secretariat bent over backwards to please the Saddam regime," H.E. Mr. Samir Sumaidaie, Iraq's representative, said. "At that time it was Boutros Ghali who was the Secretary General and the report asserts that he tried to please the Saddam government by accommodating its requests."

A committee appointed by the United Nations to investigate said Thursday the former head of the program, Benon V. Sevon, had helped a company owned by a friend obtain valuable contracts to sell Iraqi oil.

Sevan has denied he ever received any money.Annan will discipline Sevan and another U.N. official, Joseph Stephanides, who may have used unethical bidding for an oil-for-food contract, Mark Malloch Brown, Annan's chief of staff, said Friday.

The investigation report released Thursday by the panel headed by Paul A. Volcker, a former chairman of the Federal Reserve, described the U.N. program as marred by political favoritism and mismanagement. In the report, Volcker accused Stephanides of "tainting" biddingfor an oil-for-food contract. Stephanides now heads the Security Council Affairs Division in the U.N. Department of Political Affairs.

Ereli, noting another report will follow the interim one issued on Thursday, said the State Department was not in a position "to come into any definitive conclusions until the full accounting is done."

Investigations also are being conducted by five congressional committees and a federal prosecutor in New York.

Sen. Norm Coleman, the Republican who called for Annan's resignation over the oil-for-food allegations, said he was pleased with Volcker's 219-page preliminary report and urged the secretary-general to lift Sevan's diplomatic immunity so the case can be reviewed by U.S. federal prosecutors.

"There is more than enough probable cause to believe Benon Sevan's actions constitute criminal activity," Coleman said.

Volcker disagreed, saying "we are not here to tear down, we are here to restore" the credibility of the United Nations. But he warned that "unless the United Nations maintains high standards of integrity it will not be able to command the support of member states."

Despite Sevan's claims that he never recommended any oil companies, Volcker's Independent Inquiry Committee said it had evidence that Sevan asked Iraq to give a small Swiss-based oil company, African Middle East Petroleum Co. Ltd. Inc., known as AMEP, the opportunity to buy oil. The company received the allocations and earned $1.5 million from them, it said.

Volcker's panel said it is still investigating "the scope and extent of benefits" that Sevan received for his requests.

The report did not say Sevan received kickbacks, but expressed concern at $160,000 in cash, which he said he received from his aunt in his native Cyprus from 1999-2003. The report questioned this "unexplained wealth," noting that his aunt, who recently died, was a retired Cyprus government photographer living on a modest pension.