Paul Sampson / Energy Compass – 2005-01-20 12:19:38
DUBAI (September 17, 2004) — As investigations continue in Baghdad, New York and London into the alleged embezzlement of billions of dollars from the UN oil-for-food program in Iraq, the US has begun “naming and shaming” some of the supposed culprits. But as sleuths sift through mountains of documents and interview hundreds of people involved in the scheme, which ran for seven years until Iraq was invaded in March 2003, observers claim this is just the tip of a very large iceberg.
The US Treasury Department certainly seems to think so. “We are unmasking the financial facade of the former Iraqi regime,” deputy assistant Treasury Secretary for terrorist financing and financial crimes Juan Zarate said recently. Former Iraqi leader Saddam Hussein “and his cronies used a global network of agents and businesses to pilfer from the Iraqi people and to underwrite their tyranny.”
Last month, the US Treasury filed money-laundering charges against Infobank, a privately-owned bank from Belarus. An affiliate, Belmetalenergo, was a major participant in the oil-for-food program, both in the delivery of machinery and spare parts, and in the sale of Iraqi oil to traders.
According to the Treasury, Belmetalenergo paid illegal surcharges on the oil it bought from Iraq’s State Oil Marketing Organization (Somo), and inflated the price of the goods it sold to Iraq. In both cases, the US government alleges that the excess was laundered through Infobank and various offshore-registered shell companies, and either returned to the Iraqi government or used to buy weapons or finance military training.
One Western trader who recalls being offered Iraqi barrels by Belmetalenergo says the company “seemed perfectly reasonable and co-operative,” but he turned the cargo down.
Infobank, which has equity in a number of Belarussian companies, has denied the charges, and says it was “very surprised and sorry” to learn of them. Nonetheless, Belmetalenergo’s involvement in Iraq had been under scrutiny for several years, partly because the Belarus government reportedly trained Iraqi officers at the Minsk military academy. Infobank is believed to have the backing of Belarus President Alexander Lukashenko, whom Washington regards as a pariah who provides military material to rogue regimes in the Middle East.
The US has also taken action against Syria. In the three or so years preceding the invasion, Syria, much to Washington’s ire, cultivated close ties with Baghdad that proved very lucrative for both sides.
In April, the Treasury blacklisted, or designated a primary money-laundering concern, Commercial Bank of Syria, claiming it had funneled up to $1 billion a year to Damascus from the illegal sale of Iraqi oil, although Syria consistently denied it. According to the Treasury, most of the money is still sitting in bank vaults and has not been transferred to the Development Fund for Iraq, as requested. The fund is financed by Iraqi oil revenues and frozen assets.
In addition to the banks and firms suspected of diverting money for the former Iraqi regime, the Treasury released a list this spring of front companies it claimed were “doing business in support of the fallen Saddam Hussein regime.”
These include Dubai-based trading outfit Al Wasel and Babel General Trading, part of the Lootah group of companies. According to the Treasury, Al Wasel was controlled by former senior Iraqi officials, including deputy prime minister and finance minister Hikmat Mizban Ibrahim al-Azzawi. It accuses Al Wasel of playing a key role in soliciting kickbacks from the oil-for-food program and of involvement in a secret project to build a missile system.
As investigators try to clear the murk surrounding the oil-for-food deal, some companies are openly co-operating in a bid to clear their names. They include Saybolt, the Dutch inspection firm that had the contract to inspect all oil shipped under the program, and Geneva-based Cotecna, which was for several years in charge of inspecting the humanitarian goods entering Iraq.
Saybolt has been in the spotlight since January, when it appeared on a list published in an Iraqi newspaper of 290 companies and individuals awarded contracts to export Iraqi oil. Sources say the list, which included the head of the humanitarian program, Benon Sevan, was leaked by Ahmed Chalabi, the disgraced head of the Iraqi National Congress, who was at one stage close to the Pentagon and supplied it with much of its intelligence.
Cotecna has been the focus of mud-slinging in the right-wing US press, which claims that it only won its contract because it hired Kojo Annan, the son of UN Secretary-General Kofi Annan, as advisor. But the company, which says it has been “fully cooperating” with the UN independent enquiry headed by former Federal Reserve chief Paul Volcker and with various congressional probes, has rubbished such claims. Annan Jr., it says, was an assistant liaison officer for Cotecna’s operations in Lagos, Nigeria, from 1995-97 and was kept on as a consultant until 1998, the year before Cotecna was awarded the contract.
(c) 2004 Energy Intelligence Group. All rights reserved.
Posted in accordance with Title 17, US Code, for noncommercial, educational purposes.
$20 Billion Audit Splits US and UN
Christopher Cooper and Greg Jaffe / Wall Street Journal
WASHINGTON (September 17, 2004) — Probes of how Iraq’s former governing authority distributed billions of dollars for reconstruction and other projects are stoking new friction between the US and the United Nations.
Almost since it handed authority over to Iraqis and disbanded in June, the Coalition Provisional Authority has come under fire for the way it handled a $20 billion account intended for payroll and finance projects. In July, the CPA’s inspector general prepared a draft report saying the CPA had failed to document $8.8 billion in this spending, according to people who have seen it. The findings, which are under review by Pentagon officials who oversaw the CPA, followed two other inspector general audits critical of the CPA’s accounting practices.
The account, known as the Development Fund for Iraq, was largely comprised of Iraqi oil revenue, including money from the U.N. oil-for-food program, and assets seized from the Saddam Hussein regime. When the CPA took control of the money in 2003, it pledged to follow a U.N. mandate to spend the money in a “transparent” fashion.
The International Advisory and Monitoring Board, a U.N. group charged with making sure the development-fund money was spent correctly, is conducting its own audits and has taken the CPA to task several times for what they call noncooperation.
This month, the U.N. group issued a statement that “expressed its strong concern” that the CPA’s delays in tendering accounting documents associated with the account could “hamper fulfillment” of its own mandate to ensure the money was spent transparently.
Privately, IAMB officials say the CPA did little to ensure that Iraq’s new government can justify its spending. A spokesman for the now-defunct CPA referred questions to the Pentagon.
The Pentagon has declined to comment on its inspector-general audit, saying it was a preliminary draft. James Mitchell, a spokesman for CPA Inspector General Stuart W. Bowen Jr., said the final version could differ markedly, depending on the Pentagon’s input, but declined to comment further.
The Bush administration and the U.N. have clashed repeatedly over the Iraq invasion and the subsequent rebuilding of the war-torn country. On Wednesday, U.N. Secretary General Kofi Annan said in an interview with BBC World Service that the war violated international law. “I have indicated it was not in conformity with the U.N. Charter from our point of view,” he said. “From our point of view, and from the Charter point of view, it was illegal.”
People who have seen the Pentagon’s draft audit say it found that the occupation government was unable to say for sure whether the money it disbursed was spent properly or even spent at all. That money went toward projects ranging from a victims compensation fund to giant electrical projects.
Though the CPA could demonstrate that it disbursed the unaccounted-for $8.8 billion from the development fund to various Iraqi ministries, it couldn’t show how the ministries spent the money, these people say. A former CPA budget official said the Pentagon’s objections boiled down to an argument over the definition of transparency. The CPA holds that it is enough to show that the money was given to Iraq’s ministries.
A former CPA official who was recently given a copy of the draft for review said he didn’t agree with the main thrust of the audit, saying it highlights the $8.8 billion in undocumented expenses but doesn’t put those expenditures in context of the insurgency that the CPA faced in Iraq. This former official and several others say they could have exerted more financial control over the money, but that it was more important to move cash to Iraqi citizens who were coping with the aftereffects of war.
Auditors say the CPA hasn’t demonstrated it kept much control over any of the Iraqi assets it seized following the war. In the waning days of its existence, the CPA’s Program Review Board, a 12-member panel of American and coalition officials charged with dispensing money from the account, ramped up its spending.
On May 15, for instance, the board approved 10 projects costing $1.9 billion. According to board minutes, the projects approved included $25 million to establish a fund to compensate victims of the Hussein regime, $65 million for vocational training centers and $65 million to help develop the private business sector.
The Imbalance Sheet
The Coalition Provisional Authority has come under fire for some $8.8 billion designated for ministry budgets that hasn t been accounted for.
Below, a look at its finances: Cash Inflow since inception Oil for Food $8,100,000
Proceeds from oil exports (in millions)
Repatriated funds 1,014.8
Interest income 41.5
UNWorld Food Program 145.9
Vested assets (including interest) 16.3 Transactional deposits from public sector entities 163.0
Other deposits 4.3
TOTAL INFLOW $20,597.4 Cash outflow since inception Ministry budgets -$8,825.9
Payments for projects -3,348.9
Transactional withdrawals — public sector entities -886.8
Miscellaneous transactions -32.1
TOTAL OUTFLOW -$13,093.7
NET CASH POSITION $7,503.6 Outstanding contractual commitments Total approved $19,697.9
TOTAL OUTSTANDING $4,619.6
MONEY RETURNED TO IRAQI GOVERNMENT $2,884.1
(Copyright (c) 2004, Dow Jones & Company, Inc.)
Posted in accordance with Title 17, US Code, for noncommercial, educational purposes.