Next up in the U.N. oil-for-food scandal is a trip down the money trail, by way of the French bank tapped by the United Nations - in cahoots with Saddam Hussein - to handle the main escrow account of the graft-laden U.N. program. Tomorrow, the House Subcommittee on Oversight and Investigations will hold a hearing delving into some of the oil-for-food banking details. Rep. Dana Rohrabacher, a Republican of California who will lead the hearing, expects that with some of the material due to be disclosed, "heads will turn."
At the United Nations itself, heads have already been rolling, as one scandal after another has bubbled up from the oil-for-food morass. Several high-ranking U.N. officials close to Secretary-General Annan have been forced to "step aside" - as U.N. lingo has it. Federal prosecutors are investigating allegations that Saddam sent millions in bribes to two as-yet-unnamed high-ranking U.N. officials to help shape the program in his favor. But all the investigating so far has barely begun to expose the full extent of the corruption and mismanagement involved in oil for food, under which Saddam grafted billions out of more than $110 billion in U.N.-approved oil sales and relief purchases meant to help the people of Iraq. "Follow the money," says Mr. Rohrabacher, who adds, "Sometimes it's easy to miss the fact that the bank is right in the middle of it."
That bank is the New York branch of the French bank, BNP Paribas (formerly the Banque Nationale de Paris). Asked to answer questions related to BNP's role in oil for food and its handling of such matters as letters of credit and banking fees, BNP officials responded via a public relations firm, saying they "really don't want to talk to anybody before the hearing."
Among questions the subcommittee is likely to pursue is why BNP, straying outside its contract with the United Nations, reassigned letters of credit - meaning that payments from the Iraq escrow account guaranteed to one contractor approved by the United Nations for a given deal were instead sent to an unapproved third party. Under a U.N. sanctions regime, in which the basic aim of oil for food was to monitor Saddam's deals, such rogue payments, running right through the bank entrusted with the account, should have raised red flags. But the United Nations made no complaint. According to the U.N.-authorized inquiry led by Paul Volcker, the world body did not even bother to review BNP's handling of the letters of credit. And, like most of the more telling details of oil for food, the specifics of BNP's activities under the program were kept secret by the United Nations.
Three instances of reassigned oil-for-food letters of credit have already come to light, disclosed last November at a hearing of the House International Relations Committee, where members questioned BNP's chief executive officer for North America, Everett Schenk, who did not provide an explanation. In all three cases, the letters of credit - totaling millions - guaranteed funds from the Iraq account meant to pay one of Saddam's U.N.-approved suppliers of relief, the Saudi Arabia-based firm Al Riyadh International Flowers. Instead, BNP reassigned the letters of credit to a Malaysia-based firm, East Star Trading Company. Why?
The reasons for this switch have yet to be disclosed. But it should raise alarms that in a program by now infamous for graft, kickbacks, front companies, and business partners selected by Saddam for often dubious reasons and routinely approved by the United Nations, Al-Riyadh International Flowers was evidently favored enough by Saddam to rank as the 10th-largest out of more than 3,500 relief suppliers, which entailed selling more than a quarter of a billion dollars' worth of goods to Iraq. Al-Riyadh also figures on the 2003 Pentagon list of oil-for-food suppliers selling grossly overpriced goods to Baghdad, which was a prime setup for kickbacks to the Saddam regime. Al-Riyadh, for instance, was named by the Pentagon as selling millions' worth of vegetable ghee, overpriced by 28% or more.
Congressional investigators are now looking at many more cases of letters of credit reassigned by BNP under oil for food. It is to be hoped that tomorrow we will hear some explanations.
It is also to be hoped that BNP will provide some insight regarding Saddam's oil sales and the associated letters of credit, with which oil buyers sent payments into the oil-for-food account. In a substantial sampling of such letters of credit, seen by The New York Sun, BNP handled both sides of the transaction - meaning the buyer used BNP-related accounts in various countries to open the letters of credit guaranteeing payment to the BNP account in New York. That would mean BNP was responsible for due diligence regarding many of the oil buyers under the program, a group that turns out to have been rife with front companies, many of them dealing openly in kickbacks to Saddam from about 2000 on. Many of these transactions were handled in Switzerland, famous for a degree of banking secrecy that should have raised yet more flags about the need for due diligence.
Beyond that, it would be useful for the public - and particularly for the intended beneficiaries, the people of Iraq - to receive a full accounting of the fees charged and total income earned by BNP, including earnings on the huge balances kept by the United Nations at BNP in the Iraq account. During the final years of the program, these balances topped $12 billion.
BNP was picked in 1996 for the role of chief oil-for-food banker by the former U.N. secretary-general Boutros Boutros-Ghali. The U.N. inquiry into oil for food led by Mr. Volcker has reported that in choosing BNP, Mr. Boutros-Ghali bypassed U.N. procedure for competitive bidding. Mr. Boutros-Ghali has also been described in a recent Associated Press dispatch as "the subject of speculation" regarding likely targets of the federal bribery investigation. The AP further described him as "good friends" with the accused bagman for Saddam, South Korean Tongsun Park.
While serving as banker for the U.N. treasury, during the 1996-2003 oil-for-food program, BNP handled tens of billions in letters of credit. The bank, says Mr. Rohrabacher, was "part and parcel of what went wrong."
Ms. Rosett is Journalist-in-Residence at the Foundation for the Defense of Democracies.