Oil-for-food probe finds 'gross mismanagement' by UN agency

Investigators probing the United Nations oil-for-food programme have found evidence of “gross mismanagement” and possible corruption by the agency that oversaw compensation for victims of Iraq’s 1990 invasion of Kuwait, Iraq’s deputy UN ambassador said early today.

Investigators with the Independent Inquiry Committee had been investigating hundreds of millions of dollars in questionable expenditures by the UN Compensation Commission for months. The commission had denied any wrongdoing.

But Fesial al-Istrabadi said the investigators believed some of the allegations were legitimate, particularly in how the commission handled currency exchange rates with the Iraqi dinar.

“There appear to have been some irregularities that are at the very least gross mismanagement at the level of currency exchange,” al-Istrabadi said.

The line of inquiry comes as the probe, led by former US Federal Reserve chairman Paul Volcker, examines whether several other United Nations agencies overcharged Iraq for their work under the oil-for-food programme. The committee is considering if the Iraqi government should be compensated.

Those agencies helped implement humanitarian operations in Iraq under oil-for-food, a €50.9bn programme created in 1996 to alleviate the suffering of ordinary Iraqis caused by UN sanctions imposed on Iraq after the Kuwait invasion. It was dismantled in 2003.

The executive director of the probe, Reid Morden, refused to confirm al-Istrabadi’s claim but said investigators had long wanted to scrutinise the UN Compensation Commission.

“It’s a programme which so far has submitted itself to very little in the way of transparency,” Morden said.

The compensation commission, a subsidiary body of the UN Security Council, was founded in 1991, well before oil-for-food. UN audits released in January concluded that the commission overpaid various parties more than €3.9bn, a claim the commission disputed.

The Volcker committee’s first interim report, released in February, described a turf war between the internal UN watchdog and the commission, which objected to the watchdog’s audits and repeatedly rejected its findings.

For example, the Office of Internal Oversight Services said that the commission should pay claims according to the exchange rate at that time of payment. But the commission had decided that payments should be made based on the exchange rate from the time when the losses occurred.

UN spokeswoman Marie Okabe said the United Nations would have no comment on the latest allegations until the final Volcker report came out. It is expected in September.