The Volcker Oil-for-Food Commission: Is It Credible?

The Volcker Oil-for-Food Commission: Is It Credible?
by Nile Gardiner, Ph.D., and James Phillips
WebMemo #569
September 20, 2004

It has been almost six months since United Nations Secretary-General Kofi Annan announced the appointment of the U.N.’s commission of inquiry, headed by Paul Volcker, into the Oil-for-Food scandal.[1] So far, few details have emerged regarding the Commission’s modus operandi, its staff, or its overall effectiveness. The Commission’s operations are shrouded in secrecy, with little transparency or external oversight. For a commission designed to unearth corruption and malpractice on a huge scale, it is strikingly opaque. Its spartan official website contains little information of value, not even a mailing address.[2]

The Volcker Commission is likely to issue its report in a year’s time (though no firm deadline has been set). Its investigation could cost $30 million in all.[3] The Commission bears all the hallmarks of a toothless paper tiger, with no subpoena power, and is clearly open to U.N. manipulation. It bears no enforcement authority (such as contempt) to compel compliance with its requests for information and has no authority to discipline or punish any wrongdoing it discovers.[4]

Who Is Staffing the Commission?

The “Independent Inquiry Committee into the U.N. Oil-for-Food Program,” as it is officially termed, is top-heavy with distinguished luminaries but short on detail regarding its actual workforce.

Former Federal Reserve Chairman Paul Volcker heads a three-person committee, which includes South African judge Richard Goldstone and Mark Pieth, a professor from the University of Basel in Switzerland. So far, the names of ten senior staff have been released, including Reid Morden, former Director of the Canadian Security Intelligence Service, and Swiss magistrate Laurent Kasper-Ansermet.[5]

However, no details have thus far been released regarding the remaining staff (currently around 40 in number, and likely to rise further) that will actually be doing the investigating and handling the huge volumes of documents. The key questions remain: How many U.N. staff and former staff are involved with the Commission? What assurances are there that U.N. officials implicated in the Oil-for-Food scandal will not interfere with or unduly influence this supposedly independent investigation? A truly independent inquiry into U.N. corruption should not be staffed by U.N. employees, former U.N. employees, or those with any significant ties to the U.N.

It is therefore surprising to discover that the official spokesman for the Commission, Anna Di Lellio, is a former United Nations official. Moreover, Ms. Di Lellio, who is Director of Communications for Paul Volcker, has publicly expressed contempt for the U.S. president. In an interview with the London newspaper The Guardian on the first anniversary of the September 11 terrorist attacks, Ms. Di Lellio launched into a vicious tirade against the U.S. and Italian governments, implicitly comparing President George W. Bush and key U.S. ally Prime Minister Silvio Berlusconi to Osama bin Laden:

What I do feel is a sense of powerlessness against the changes which are potentially lethal for our civilization. But I see the major threats coming from ourselves, rather than the east. I find deeply unsettling both the ascendance of George Bush and his puppeteers to the U.S. government, and the mix of self-serving hypocrisy and incompetence prevailing in European governments.

I don’t like it that the two nations whose citizenship I hold, Italy and the U.S., have leased their institutions to a couple of families. With defenders like W and Berlusconi, largely unchecked by a sycophantic media, who needs Bin Laden to destroy culture, personal freedom, respect for other human beings, integrity, and the rule of law—all the things that make our lives worthwhile?[6]

Such extreme opinions do not sit well with the Volcker Commission’s claim to impartiality and will impede the establishment of a constructive relationship between the Commission, the U.S. Congress, and the executive branch of the United States.

Anna Di Lellio’s appointment brings into question the judgment of the Volcker Commission in hiring its staff. It casts a shadow of doubt over the Commission’s ability to provide what Mr. Volcker refers to as “the truly definitive report on the administration of the Oil-for-Food program.” Di Lellio’s appointment raises serious questions regarding the role of current and former U.N. officials in an inquiry that is purported to be completely free of influence from the U.N. It also strongly suggests that the U.N. is, in effect, controlling the message being communicated by the Volcker Commission to the world media.

Volcker’s Refusal to Cooperate with Congressional and Federal Investigations

In meetings on Capitol Hill on July 13, Paul Volcker “rejected requests from members of Congress for access to review documents and to interview United Nations officials being scrutinized by his panel,” reports the New York Times.[7] Congressional sources have confirmed that the Volcker Commission refuses to grant access to internal reports on the Oil-for-Food program produced by the U.N.’s Office of Internal Oversight Services and is unwilling to share documentation that it holds in Baghdad. It also refuses to guarantee that it will release documents relating to the Oil-for-Food program even after it has filed its final report. This hostile approach seriously undermines the credibility of the Independent Inquiry Committee.

Four congressional entities are investigating the U.N.’s administration of the Oil-for-Food program: the Senate Subcommittee on Government Affairs (chaired by Sen. Norm Coleman), the House Subcommittee on Government Reform (chaired by Rep. Christopher Shays), the House International Relations Committee (chaired by Rep. Henry Hyde), and the House Committee on Energy and Commerce (chaired by Rep. Joe Barton). In addition, there are three federal investigations underway: by the General Accounting Office (GAO), the Department of Justice, and the U.S. Treasury.[8] The Volcker Commission has so far refused to cooperate significantly with any of these investigations.

What Congress Should Demand

Congress has a vital role to play in forcing the Volcker Commission to operate in an open, transparent manner. Moreover, it is likely that Congressional and federal investigations will be far more effective ultimately than the U.N.’s own commission of inquiry. Congressional leaders and the Bush Administration should demand:

Full access to all U.N. documents relating to Oil for Food.

There should be no monopoly over documentation held by the U.N. The U.N. should also provide a full list of documents currently in its possession that relate to Oil for Food.

Freedom to interview U.N. officials implicated in the scandal.

Federal and Congressional investigators should be able to question U.N. officials under investigation by the Volcker Commission.

A complete list of names of all staff working on the Volcker Commission.

The Volcker Commission should be completely independent of the U.N., and there should be no conflicts of interest involving its staff.

External oversight of the workings of the Volcker Commission.

The Commission should be open to public scrutiny and should include third-party representatives seconded from bodies such as the FBI and Interpol.

Monthly progress reports from the Volcker Commission to Security Council members.

All members of the U.N. Security Council should be furnished with regular updates on the investigation.

A firm date for publication of the Volcker Report.

The final date of publication must not be open to political manipulation by the U.N. in an attempt to limit potential damage.

Conclusion

The Volcker Commission’s refusal to share documentation with congressional investigators demonstrates not only breathtaking arrogance but also complete disrespect for Congress and the American public that helps fund the Commission through the United Nations. If it is to be treated seriously and respected as something other than an elaborate but costly whitewash exercise, the Commission will need to implement major changes, both in its operations and in its approach. Above all, transparency and accountability will be needed if the Independent Commission is to avoid becoming yet another example of mutual back scratching at the U.N.

Nile Gardiner, Ph.D., is Fellow in Anglo-American Security Policy, and James A. Phillips is Research Fellow in Middle Eastern Affairs, at The Heritage Foundation.
--------------------------------------------------------------------------------

[1] For background on the Oil for Food issue, see Nile Gardiner Ph.D., James A. Phillips, and James Dean, “The Oil for Food Scandal: Next Steps for Congress,” Heritage Foundation Backgrounder no. 1772, June 30, 2004, at http://www.heritage.org/Research/
InternationalOrganizations/bg1772.cfm.

[2]http://www.iic-offp.org/index.html

[3] Susan Sachs and Judith Miller, “Under Eye of UN, Billions for Hussein in Oil for Food Plan,” The New York Times, August 13, 2004.

[4] The authors are grateful to Paul Rosenzweig, Senior Legal Research Fellow at the Heritage Foundation, for his observations on the legal powers of the Commission.

[5] Paul A. Volcker, “A Road Map for our Inquiry,” The Wall Street Journal, July 7, 2004.

[6] The Guardian, “Interview with Anna Di Lellio,” September 11, 2002, at http://www.guardian.co.uk/september11
/oneyearon/interview/0,12385,787426,00.html.

[7] Judith Miller, “UN and Congress in Dispute Over Iraq Oil for Food Inquiries,” The New York Times, July 28, 2004.

[8] For further detail, see Thomas Caton, “Investigators Crawl Over Iraq’s Oil Billions,” Financial Times, July 6, 2004.

Chirac: U.S. Impeding Effort Against Poverty

Chirac: U.S. Impeding Effort Against Poverty
Monday, September 20, 2004

UNITED NATIONS — As world leaders gathered Monday for the annual U.N. General Assembly, French President Jacques Chirac — already deeply at odds with the Bush administration over the war in Iraq — accused Washington of obstructing a worldwide campaign to eradicate poverty.

Chirac spoke after the U.S. administration declined after two high-level meetings to endorse a final declaration that was supported by 110 countries. The nonbinding document called for a "renewed political mobilization" to help more than 1 billion people trying to eke out a living on less than $1 a day.

"However strong the Americans may be, in the long term, you cannot successfully oppose a position taken by 110 countries," Chirac told a news conference. "You can't oppose that forever."

Chirac planned to return to Paris Monday night, making it impossible for him to meet with President Bush who speaks before the General Assembly when it officially opens Tuesday. Bush did not attend the Monday meetings.

Chirac said he and and Brazilian President Luiz Inacio Lula da Silva would propose new approaches to fund the alleviation of poverty, although the preparatory meetings resulted in no specific proposals.

"The price of selfishness is rebellion," he warned. "We should ensure that the world's unprecedented wealth becomes a vehicle for the integration, rather than exclusion, of the most underprivileged.

"It is up to us to give globalization a conscience," he said.

Bush has said his speech will emphasize international humanitarian concerns as the world body begins two weeks of meetings in the midst of an upsurge of violence in Iraq and a massive humanitarian crisis in western Sudan.

The document adopted after Monday's meetings, but not signed by the Americans did not make specific anti-proverty proposals but said the time had come "to give further attention to innovative mechanisms of financing — public of private, compulsory and voluntary, of univeral or limited membership" to raise funds to fight poverty.

U.S. Agriculture Secretary Ann Venemen rejected the idea of a global tax proposed in a February U.N. report and favored by some of the participants, including France, saying it was impossible to impose.

"A global tax is inherently undemocratic," she said.

Silva said overwhelming hunger and unemployment in developing nations was contributing to international violence.

"How many more times will it be necessary to repeat that the most destructive weapon of mass destruction in the world is poverty?" he asked during a speech at a session that focuse on a U.N. report about the growing divided between the world's haves and have-nots.

Asked later whether he was concerned by the lack of U.S. support for the declaration, Silva told journalists that the United States had taken an important step by sending a representative.

The report said the income gap between the richest and poorest countries has widened over the past four decades and the vast majority of the world's population could fail to see the benefits of globalization.

"Fair globalization must begin with the right of everyone to a job," Silva said, stressing that "dignified work, like the fight against hunger, cannot wait."

Bush, who has focused on Iraq in his last two speeches to the General Assembly, is making a dramatic shift this year. He said in his radio broadcast Saturday he would "talk about the great possibilities of our time to improve health, expand prosperity and extend freedom in the world."

Monday's meetings were aimed at setting the stage for a General Assembly summit next year to assess progress toward meeting the goals of the 2000 Millennium Summit. Those goals include halving the number of people living in dire poverty from 2000 levels, ensuring that all children have an elementary school education, that all families have clean water and that the AIDS epidemic is halted — all by 2015.

"Progress in eradicating extreme poverty has been uneven," U.N. Secretary-General Kofi Annan said. "With creativity and political will, we could do much better."

The World Commission on the Social Dimension of Globalization, which was established in 2002 by the International Labor Organization, a U.N. agency, urged policy-makers in the February report to set fairer rules for trade and immigration so that millions of people can benefit — not suffer — from globalization. More than 1 billion people were living on less than $1 per day in 2000, the report said.

Tanzanian President Benjamin Mkapa, who chairs the commission with Finland's President Tarja Halonen, said the disparities between the world's rich and poor countries was politically unsustainable.

"For me and for the people of Africa, the status quo is not an option," he said. "It is verily unacceptable."

Finland's U.N. Ambassador Marjatta Rasi said a resolution was being drafted to put the issue on the General Assembly's agenda.

Other proposals put forward in Monday's debates were reduction of trade barriers and elimination of agricultural subsidies.

Oil-for-Food Scandal Draws Scrutiny to U.N.

Oil-for-Food Scandal Draws Scrutiny to U.N.
Monday, September 20, 2004
By David Asman

NEW YORK — It began as a U.N. humanitarian aid program called "Oil-for-Food," but it ended up with Saddam Hussein pocketing billions to become the biggest graft-generating machine ever and enriching some of America's most forceful opponents at the United Nations.

Plus, some evidence suggests that some of the money ended up in the hands of potential terrorists who are opposed to the United States.

The roots of the scandal date back to 1991, when a U.N.-backed and U.S.-led coalition expelled Saddam from Kuwait following his hostile takeover of the neighboring country. Although Saddam lost the war, he walked away with one important victory -- he got to stay in power in Iraq.

Thirteen years later, a second U.S.-led coalition made of a smaller group of nations than the first effort finally knocked Saddam out of business. And it did so without the help of the United Nations, which failed to pass a resolution backing the U.S. effort.

As the death toll rises in Iraq -- the number of U.S. military casualties is now above 1,000 and Iraqi citizens continue to die daily from insurgent attacks -- the question arises: Can the United Nations help now?

A new FOX News poll finds that 54 percent of the U.S. public believes the United Nations does not reflect the values of average Americans. Only 29 percent say that U.N. policies reflect said values.

“I believe the U.N., parts of it, have been corrupt for years. But this went to a whole new level,” said Rep. Christopher Shays, R-Conn., chairman of the House Subcommittee on National Security, Emerging Threats and International Relations.

Shays is leading one of several Oil-for-Food probes by the federal government. The General Accountability Office has already pegged Saddam’s Oil-for-Food take at $10.1 billion. It could end up being a lot more.

Shays says Iraqis aren't the only victims -- Americans are too.

“We're talking about American lives that are being lost in an attempt to bring democracy to Iraq,” Shays said. If France, Russia, China and Germany had told Saddam it was time to back down and honor his commitments, Shays said it’s possible the United States may not have needed to go to war against Saddam.

But why did these countries really object to a second U.S.-led war against Iraq?

Some evidence suggests that those countries that said they were opposing the Bush administration on principle were actually making billions from Oil-for-Food.

“I think clearly, American blood is in the hands of a number of European countries, who could have put pressure on Saddam, who could've looked him in the eye and said, ‘the United States is coming in,'" Shays said. “And to me, some of the explanation clearly has to be the Oil-for-Food program.”

Shays added that there is a chance some of the insurgents now operating against the United States and the new Iraqi government are using Oil-for-Food money in their terror campaign.

“I think it's not only possible that insurgents are using Oil-for-Food money -- I think it's very likely,” Shays said.

One casualty was Ihasan Karim, the Iraqi official heading an inquiry into the Oil-for-Food program. On July 1, a bomb placed under his car exploded in Baghdad, killing him, and U.S. officials in Iraq told FOX News that they believe Oil-for-Food was the motive in the assassination. That wouldn't surprise Shays.

“I don’t know who murdered him. But I can tell you this: There are a lot of people who don't want this story to come out,” Shays said.

Shays places part of the blame on people inside the United Nations, even though U.N. officials authorized an independent investigation into the scandal.

“They’re doing this investigation, but only after they were outed by an Iraqi free press, and a government leak from the Iraqi governing council,” Shays said.

Shays said the man heading up the probe, former Federal Reserve Chairman Paul Volcker, has a tough job ahead.

“Paul Volcker is going to succeed or fail based on his power of persuasion and the good will of the U.N., but you're basically asking the member states to sign their own death warrant, and so it's kind of hard for me to imagine he's going to get the cooperation he wants,” Shays said.

Volcker said it will take until at least next spring to finish his report, and in the meantime, he doesn't seem willing to give Congress the cooperation it wants.

"There is a lot of smoke," Volcker told FOX News on June 23, when asked if he thinks the Oil-for-Food program was corrupt. "There are obviously big problems, and we want to see how big they were and why did they happen. Why did all this happen, in some sense, under everybody's noses?"

Shays and Sen. Norm Coleman -- leaders of two of at least five federal Oil-for-Food investigations -- have started firing off subpoenas.

“We have just begun this process,” said Coleman, R-Minn. “But we’re trying to sort out this hornet's nest of corruption, of evil. And it’s going to take a little bit of time [and] patience.”

The problems at the United Nations have led some to question its value. A FOX News poll found that 64 percent of Americans say the United Nations has not been an effective partner in the War on Terror.

Yet Shays and Coleman both said in interviews they believe a role exists for an organization like the United Nations.

“I think we need the U.N. But we need it to be an honest institution,” Shays said. “When there are mistakes made, you have to uncover them and deal with them.”

Shays said that the very least, a major shakeup needs to take place.

“The U.N. is so important, we’ve been willing to look the other way when we see things we don't like. I think the Oil-for-Food program busted that.”

Coleman said he believes the United Nations had redeemable qualities, and he hoped the investigation would lead to greater transparency and more credibility for the world body.

“I’m not willing to kind of cash it in … they’re not the Evil Empire, the United Nations,” Coleman said.

For more information — including government documents, U.N. audits and past stories — click here.

U.N. Meets Amid Suspicion, Sour Sentiment

U.N. Meets Amid Suspicion, Sour Sentiment
Monday, September 20, 2004
By Sharon Kehnemui Liss

WASHINGTON — Security is already being stepped up in New York as the city prepares for the 59th United Nations General Assembly gathering, where President Bush is expected to soften his tone from last year's opening address and speak Tuesday about his vision for a "better world."

In this year's remarks to the opening session, the president is pushing the fight against AIDS and the pursuit of economic progress as an alternative to terror.

"Our country is determined to spread hope and economic progress and freedom as the alternatives to hatreds, resentments and terrorist violence," Bush said, previewing his speech during his weekly radio address on Saturday. "In hopeful societies, men and women are far less likely to embrace murderous ideologies.

"For the sake of our common security, and for the sake of our common values, the international community must rise to this historic moment. And the United States is prepared to lead," he said.

Also on this year's list of speakers is interim Iraqi Prime Minister Iyad Allawi, who is scheduled to visit Washington, D.C., on Thursday after intensive diplomacy at the United Nations. While making his way to the United States for the opening session, Allawi stopped in London where he met with British Prime Minister Tony Blair, a staunch U.S. ally that has been at the forefront trying to secure peace in Iraq.

Blair and Allawi discussed security in advance of the scheduled January election in Iraq, which terrorists have suggested they plan to obstruct. Allawi is expected to ask for U.N. support to ensure the election takes place on time and without problems.

U.N. Secretary-General Kofi Annan recently told the British Broadcasting Corporation that if the security environment does not improve in Iraq, it would be "very difficult" if not impossible for the nation to hold a credible election. Annan's remarks, which included the sentiment that the war in Iraq was "illegal," drew criticism from many inside the United States as well as some world leaders who said such a statement should not come from the head of the United Nations.

"I think that was an uncalled-for remark," Sen. Ben Nelson, D-Neb., a member of the Senate Armed Services Committee, told FOX News. "Regardless of what his opinion is, he can't step aside from that position he holds with the United Nations, so I don't think that's particularly helpful at this point in time."

"We have seen great progress being made by the interim government," Sen. Thad Cochran, R-Miss., said — dismissing suggestions that Iraq's elections would be postponed. "The fact that Prime Minister Allawi is coming to speak to a joint session of Congress is indication that progress is still being made. We're supporting his government's success."

Still, national security analyst and FOX News contributor Harlan Ullman said that the president must acknowledge that the security situation in Iraq is perilous and changes cannot wait until after the U.S. presidential election in November.

"Obviously, President Bush doesn't want to impeach his policies, but look ... I think what the president has to say is, 'I recognize things are not proceeding as well as they have to, and we have to do three more things and here's what they are.' But I think he's got to take a more realistic stance, because if not, I am afraid we're going to be in irons until after the election and I don't know we have that opportunity to waste that time," Ullman said.

Bush's speech to the General Assembly last year focused on a plea for assistance in Iraq, which he did not receive. Since then, the U.S. relationship to the United Nations has frosted as several analysts and even the U.S. public have questioned the body's legitimacy. A FOX News-Opinion Dynamics poll taken in August showed that of those surveyed, 40 percent said that U.N. policies are anti-American compared to 31 percent who said they are pro-American. Another 54 percent said U.N. policies do not reflect the values of average Americans.

Adding to doubts about the international body's legitimacy are several events that have unfolded over the last year suggesting that the United Nations has been deliberately silent on crucial matters or even outright involved in a growing scandal about the body's complicity in an Oil-for-Food scandal. That scandal, which resulted in the disappearance of $10 billion, allegedly benefited individuals inside and close to the United Nations, including supposedly Annan's son and Benon Sevan, the U.N. overseer of the Oil-for-Food program, as well as Russia, France and China, three member nations on the U.N. Security Council who opposed the coalition effort in Iraq.

"[France was] steeped in this corrupt process that enabled them to make billions of dollars. I think [former Iraqi President Saddam Hussein] bought them off and made a heck [of] a lot of money in the process," said Rep. Chris Shays, R-Conn., who heads the House subcommittee investigating the Oil-for-Food scandal. "This is such an outrageous thing, and the U.N. was making 3 percent on total sales, and they were making that supposedly legitimately, but then there were all these rip-offs that occurred as well."

Shays said that the United Nations essentially shut its eyes to a system in which Hussein "undersold the oil and got huge kickbacks and then he overpaid for commodities and he got huge kickbacks." Shays said almost undoubtedly some of that money ended up in the hands of terrorists.

"I think it's definitely possible and it is probably very likely," he told FOX News. "Money went in lots of different directions, and Saddam took the money wherever he could get it and he gave it wherever it benefited him."

"There's a strong sense within the American government that the Security Council of the United Nations is not on our side. French President [Jacques] Chirac, for example, his political career has actually been funded by Saddam Hussein. His RPR party was literally a creation of the Iraqi Ba'ath Party. That's where the money was laundered," said national security analyst John Loftus. "In terms of the Soviet Union, now Russia, their oil interests and Saddam's oil interests went hand-in-hand. Russia was probably one of the larger countries involved in the oil-for-fraud program, along with the French. The French, Russia and Chinese were the main exploiters."

Iran's Nuke Dreams Unchecked

Aside from the brewing scandal over illicit Oil-for-Food money, lawmakers and other national security analysts say Bush also needs to address Iran's continuing pursuit of nuclear weapons. While the Islamic government in Tehran claims that it is pursuing nuclear energy — despite its massive oil deposits — Iran has refused to comply with demands from the U.N.'s nuclear energy watchdogs that it disclose its nuclear ambitions.

"I suppose they're looking at the situation with Iraq where there were a lot of resolutions and there was a lot of activity but no real serious repercussions," Nelson said, explaining that Iran continues to hear demands for denuclearization or a status report of its plans, but sees no penalty for noncompliance. "I think Iran is just seeing that probably is working and will continue to do that until the member nations start insisting even more forcefully that they come clean with the information."

"We do think that their program for nuclear weapons is really serious, a serious threat not only to the security of that region but to the entire world. And they need to come clean with what they're doing, open their facilities up for inspections, and the president, I hope, will make that point," Cochran said.

Loftus added that China's sale of nuclear weapons is also a problem that has been overlooked by the United Nations. But with the replacement this weekend of military chief Jiang Zemin, who is purported to have sold blueprints for nuclear weapons to Libya and elsewhere, with his presidential successor Hu Jintao, reformers may be winning the day in China.

"Maybe there's hope that we will be able to get a handle on this, controlling this international sale of nuclear arms. But right now, it looks as if the Security Council is one of the worst violators of the nuclear charter," he said.

Loftus said he expected the president to exchange some sharp words with Annan behind the scenes this week. In the meantime, however, the president must also put on display his compassionate side, the two senators said.

"I think there's a great opportunity for all [of] us to join together and I applaud the fact the president is taking that message to the member nations because we all ought to be joined together in that fight," Nelson said.

"I think it's a very important opportunity for the president to remind the United Nations that the United States intends to continue its leadership role in addressing world health concerns, peace and security issues as well as moving the world along economically, improving economic opportunity for individuals worldwide," added Cochran.

Also expected to speak at this week's opening session is Afghanistan President Hamid Karzai, who will discuss his country's post-Taliban successes. Afghanistan is expected to hold its democratic elections next month. On the sidelines of the world forum, two leaders — Indian Prime Minister Singh and Pakistani President Pervez Musharraf — are slated to sit down for the first time and discuss relations between the longtime adversaries and two nuclear rivals.

Other hot topics during the opening session include the Middle East peace process, the voluntary disarmament of opposition groups in Haiti and human rights violations in Sudan.

Loftus said the Oil-for-Food scandal most likely helped perpetuate the crisis in Sudan, where Arab gangsters are killing black Christians in the Sudanese state of Darfur. Secretary of State Colin Powell has called the monthslong purge a genocide.

"After the fall of Saddam Hussein, France, Russia and China were big losers so China especially does not want to lose its market in Sudan. So what if a little genocide was occurring? It's not the first time there has been blood mixed with oil," he said.

FOX News' Anne Woolsey contributed to this report.

Possible Saddam-Al Qaeda Link Seen in U.N. Oil-for-Food Program

Possible Saddam-Al Qaeda Link Seen in U.N. Oil-for-Food Program
Monday, September 20, 2004
By Claudia Rosett and George Russell

LUGANO, Switzerland — Did Saddam Hussein use any of his ill-gotten billions filched from the United Nations Oil-for-Food program to help fund Al Qaeda?

Investigations have shown that the former Iraqi dictator grafted and smuggled more than $10 billion from the program that for seven years prior to Saddam's overthrow was meant to bring humanitarian aid to ordinary Iraqis. And the Sept. 11 Commission has shown a tracery of contacts between Saddam and Al Qaeda that continued after billions of Oil-for-Food dollars began pouring into Saddam's coffers and Usama bin Laden declared his infamous war on the U.S.

Now, buried in some of the United Nation's own confidential documents, clues can be seen that underscore the possibility of just such a Saddam-Al Qaeda link — clues leading to a locked door in this Swiss lakeside resort. (To review a series of documents, audits and other stories related to Oil-for-Food, click here.)

Next to that door, a festive sign spells out in gold letters under a green flag that this is the office of MIGA, the Malaysian Swiss Gulf and African Chamber. Registered here 20 years ago as a society to promote business between the Gulf States and Asia, Europe and Africa, MIGA is a company that the United Nations and the U.S. government says has served as a hub of Al Qaeda finance: A terrorist chamber of commerce.

[Editor's Note: This is the first in a series of articles about the U.N. Oil-for-Food program. Check back Sunday for the next installment and watch FOX's "Breaking Point" on Sunday at 9 p.m. EDT for an hour-long special on the Oil-for-Food program.]

In a recent interview, U.S. Assistant Treasury Secretary Juan Zarate described MIGA as "a very good example of an investment company that is used as a shell to hide and move money."

As is typical of terrorist financial webs, the details surrounding MIGA quickly become bewildering — part of the point being to camouflage the illicit flow of funds with legitimate business. Part of the problem in finding the truth is that cross-border transactions out of such financial havens as Switzerland are smothered in banking secrecy.

But even with that secrecy — and shortly after the Sept.11, 2001, attacks on the United States — both MIGA and its chief founder and longtime president, Ahmed Idris Nasreddin, landed on the U.N. watchlist of entities and individuals belonging to, or affiliated with Al Qaeda.

Nasreddin is a member of the terror-linked Muslim Brotherhood.

Nasreddin's longtime business partner, Egyptian-born Youssef Nada, also of the Muslim Brotherhood, likewise appears on the U.N.'s Al Qaeda watchlist, as do a slew of both Nasreddin's and Nada's enterprises. Former Treasury Secretary Paul O'Neill in August 2002 described Nada and Nasreddin as "supporters of terrorism" involved in "an extensive financial network providing support to Al Qaeda and other terrorist-related organizations."

Far less attention has been paid to the small, select band of MIGA's other charter members. But one of them, Iraqi-born Ahmed Totonji, set up shop years ago just outside Washington, D.C., and is now among those named by U.S. federal authorities in an investigation into a cluster of companies and Islamic non-profits based in Herndon, Virginia, suspected of having funneled money to terrorist groups.

MIGA had other founders as well. One of them, who does not appear on the U.N. terror list, is an Arab businessman now in his early 60s, Abdul Rahman Hayel Saeed.

Described by an acquaintance as urbane, polite and fluent in English, Hayel Saeed was born into one of Yemen's most prominent business clans, owners of a family-held global conglomerate based in the Yemeni capital of Taiz and named for its founding patriarch: the Hayel Saeed Anam Group of Companies, or HSA.

From Yemen, the HSA group boasts a far-flung business empire, including a Yemen-based Islamic bank, and a host of business subsidiaries, affiliates and regional trading offices in places ranging from the United Kingdom to Egypt, Morocco, Nigeria, Ethiopia, Malaysia, Indonesia, Russia and China.

Abdul Rahman Hayel Saeed sits on the HSA board of directors, and ranks high in the management — he is currently running HSA's regional office in Jeddah, Saudi Arabia. In MIGA, Hayel Saeed holds a prominent spot, as one of four co-founders who back in 1984 delegated power of attorney to the terrorist-linked Nasreddin, giving him authority to run the company.

Swiss registry documents show that Hayel Saeed has never resigned from MIGA, nor revoked that power of attorney. Queried about this link to MIGA, neither Hayel Saeed nor the HSA Group's chairman of the board, Ali Mohamed Saeed, has made any response.

HSA is unquestionably a company involved in legitimate business. But given the involvement of Abdul Rahman Hayel Saeed, it is striking that between 1996 and 2003, while the United Nations ran its Oil-for-Food relief program in Iraq, the HSA Group — via U.N.-approved Oil-for-Food contracts — sold at least $400 million worth of goods to Saddam.

That might be unremarkable, had the United Nations ran Oil-for-Food with enough integrity and transparency to prevent Saddam and many of his business partners from plundering oil earnings meant to help the people of Iraq. The original United Nations plan was to let Saddam sell oil solely to buy humanitarian goods such as food and medicine, with the U.N. Secretariat collecting a 2.2 percent commission on Saddam's oil sales to supervise the integrity of this process.

As the Oil-for-Food program actually worked, however, the United Nations let Saddam choose his own business partners. The world body also kept secret the details of those contracts and the identities of the contractors, and it let Saddam graft at least $4.4 billion out of the program through manipulated contract prices, by estimates of the U.S. General Accountability Office.

Saddam's standard scam was to underprice oil sales and overpay for relief supplies, thus generating fat profits for his business partners. Many of those contractors would kick back part of the take to Saddam's regime — or divert it to whatever uses Saddam might fancy. By various accounts, those uses ranged from building palaces to buying arms to supplying Saddam's sadistic son Uday with equipment for torturing Iraqi athletes.

One of the big questions is whether any of the money skimmed from Oil-for-Food also slopped into terrorist-financing ventures such as MIGA.

It's important to note that in tracking terrorist financing, the simplest starting points are the visible links, the potential connections through which money might most easily have flowed. Proving that funds actually coursed through those conduits is far more difficult.

In the case of Hayel Saeed, MIGA and the HSA Group, there is no public information available about the precise flow of funds, and no proof that Saddam's money made its way to MIGA. But in looking for patterns that beg for further investigation — especially by authorities with access to detailed U.N. records and information on MIGA accounts — some items here stand out.

Most simply, there is the question of why HSA was among those companies favored by Saddam for such a fat slice of business. It is increasingly clear that Saddam did not, on average, choose his contractors either at random, or because they were the most cost-efficient suppliers of relief for the people of Iraq. While some of the deals may have been entirely legitimate, many melded payments for humanitarian goods with illicit kickbacks and payoffs. In such cases, it was a lucrative privilege to be tapped as an Oil-for-Food contractor by Saddam's regime.

The lingering question, for any individual case, becomes: Was there a quid pro quo?

For reasons still unknown, Saddam clearly smiled upon the HSA Group. Not only does HSA account for the bulk of all Saddam's business with Yemen, but dozens of deals that appear in the United Nation's generic public records to originate elsewhere were in fact signed with HSA companies in countries such as Egypt, Malaysia and Indonesia.

Within that HSA empire, one company in particular stands out: A trading house called Pacific Interlink, based in Kuala Lumpur, Malaysia. Abdul Rahman Hayel Saeed also sits on Pacific Interlink's board of directors.

From leaked copies of secret U.N. Oil-for-Food records, it appears that Pacific Interlink alone accounted for more than half the HSA group's sales of relief supplies to Saddam, with contracts for such goods as soap, ghee and construction materials totaling at least $246 million. Pacific Interlink also belonged to the select set of companies chosen by Saddam and approved by the United Nations as authorized to buy Iraqi oil under Oil-for-Food — though whether Pacific Interlink actually got any of Saddam's fat oil contracts is something the United Nations has so far managed to keep secret. FOX News attempted to reach Pacific Interlink for comment, but to date has received no reply.

And though there is no public proof that Pacific Interlink took part in Saddam's kickback scams, there is an intriguing item in a study of Oil-for-Food pricing methods released last year by the U.S. Defense Contract Management Agency (DCMA).

Just after Saddam fell, the DCMA, together with the U.S. Defense Contract Audit Agency, looked at the terms of 759 sample contracts out of the tens of thousands of deals done by Saddam's regime under Oil-for-Food. In that sample, Pacific Interlink pops up as a purveyor of $20 million worth of palm oil to Saddam, via a contract approved by the United Nations under Oil-for-Food in mid-2001. By DCMA estimates, Saddam overpaid Pacific Interlink on that contract, to the tune of about 15 percent above market price, which would work out to some $3 million in funds diverted from relief on that deal alone.

If similar arrangements went on within other Pacific Interlink Oil-for-Food contracts, which totaled close to a quarter of a billion dollars, then even at the more modest rate of what has been widely described as Saddam's typical 10 percent over-pricing scam, that would suggest well over $20 million diverted from relief.

If so, where did it go? The question is vitally important, because much of the money grafted out of Oil-for-Food by Saddam remains unaccounted for.

Both HSA's and MIGA's offices overlap in locations that are hubs of normal commerce, but also served as hotspots of Al Qaeda meetings and finance, such as Dubai (where Hayel Saeed reportedly ran an HSA company, Frimex, in the late 1990s) or Kuala Lumpur (where some of the Sept. 11 hijackers gathered for a planning conference in January 2000). Pacific Interlink boasts offices or agents in places thick with terror networks, such as Algeria, Sudan, and Syria. MIGA, on its Lugano sign, lists offices in places such as Italy, Turkey, Syria, Nigeria and Kuwait, and both HSA and MIGA list offices in Morocco, Malaysia and Jeddah, Saudi Arabia, where Hayel Saeed is now based.

MIGA is now under active investigation by the U.S. Treasury and prosecutors in Switzerland and Italy. But there is no sign that any of these investigations have been tracking funds specifically via Oil-for-Food contracts or that any of the multiple investigations into Oil-for-Food have zeroed in on possible terror connections. It's not even clear that the United Nations has allowed terrorist-tracking authorities full access to its records.

And though MIGA's door in Lugano may be locked, and its president and some of his associates posted on the U.N. terror watchlist, none of these figures has been arrested. Nasreddin, long a resident in Lugano and neighboring Milan, Italy, is believed by Italian investigators to have moved about two years ago to Morocco. From there, says an Italian state investigator who asked to stay anonymous, Nasreddin maintains a global business network that includes some 2,000 links so far identified to businesses and individuals worldwide, some tied to terror, and some not.

It is precisely that mix of legitimate and sinister business that makes it so difficult to prosecute Nasreddin, or shut down his businesses, says this Italian investigator. Among Nasreddin's holdings, for instance, is a four-star hotel in Milan, Hotel NASCO, which opened — ironically enough — in September 2001, at the same address as Nasreddin's longtime residence. That is also the same address used by a precursor of MIGA, an outfit called the Arab Gulf Chamber. Hotel NASCO remains open for business, serving tea and crescent-moon shaped sugar cookies at its non-alcoholic lobby bar. MIGA remains active in the Lugano business registry, and listed in the Lugano phone book.

A recent phone call to MIGA's shuttered office in Lugano, Switzerland, was answered by someone who picked up the phone in Milan, Italy — in the Hotel NASCO. MIGA's network, it seems, migrates as needed.

Nasreddin's longtime partner, Al Qaeda-linked Youssef Nada, still lives in his plush hillside villa in a small Italian enclave on Lake Lugano, just a short drive from MIGA's office. Right next door to MIGA's Lugano office, on the same floor of the same building, is the Islamic Center of the Canton of Ticino, founded by Nasreddin in 1992 - and operated initially out of his former Lugano residence a few blocks away. The Islamic Center later moved next door to MIGA.

Swiss registry documents show that in 2003, after Nasreddin made it onto the U.N. terror watchlist and moved to Morocco, he resigned as president of his Lugano Islamic center. He was replaced this year by the center's current president, a man called Ali Ghaleb Himmat, who attended one of MIGA's founding meetings 20 years ago, and since 2002 has been designated by the United Nations as affiliated with, or belonging to Al Qaeda.

At that Lugano Islamic Center, which also serves as a mosque, a spokesman denies that the center has any links to Al Qaeda, and says of Nasreddin: "He was a Muslim rich man, and he prays, and he loved God, and that's it." Just down the road, Swiss businessman Fulvio Passardi, who at one point served as corporate secretary for MIGA, says he knew nothing about the chamber, saying it was "an empty box."

According to U.S. officials and the United Nations itself, MIGA is less an "empty box" than a container of Al Qaeda-related mysteries. One of those mysteries appears to be Abdul Rahman Hayel Saeed, with his charter MIGA membership and his prominent part in a Yemen conglomerate doing hundreds of millions worth of business with Saddam.

Unraveling the mystery requires much greater access to Oil-for-Food records than the United Nations currently allows.

Claudia Rosett is a consultant to FOX News and Journalist-in-Residence at the Foundation for the Defense of Democracies.

George Russell is a consultant for FOX News.