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Public Statements

Oil-For-Food Program

Floor Speech

Location: Washington, DC


Mr. SMITH of New Jersey. Mr. Speaker, I thank my good friend for yielding and join him in this very strong concern about one of the biggest scandals known in history and thank him for his good work as chairman of the subcommittee in trying to get to the truth as to what happened.

Mr. Speaker, tonight, we are discussing the recent disclosures about problems with the U.N.'s Oil-for-Food program. As my colleagues know, in 1995 the U.S. worked with the U.N. to create a program to allow Saddam Hussein to sell his country's oil in what was purported to be a controlled manner in return for shipments of humanitarian goods for the Iraqi people. Tragically, we now know that this noble effort was grotesquely undermined by scandal. The GAO estimates that some $10 billion in oil revenue was stolen from the people of Iraq.

The laudable purpose of the Oil-for-Food program was to alleviate massive human suffering by innocent Iraqi civilians whom Saddam Hussein was deliberately starving in order to generate international support and sympathy for lifting U.N. Security Council sanctions against Iraq. The system to be implemented by the U.N. and by member states was supposed to carefully monitor all sales of oil and make sure that these petrol dollars were placed in a trust fund at the French Bank, the PNB-Paribas.

The system was supposed to be transparent. It was supposed to be above board. It was supposed to be open, but it was anything but. As the coverup and the lack of transparency crippled efforts that continue to this day, efforts to establish all of the facts and to hold the corrupt to account.

New York Times columnist William Safire noted in June of 2004 that there are some 5,000 Oil-for-Food file folders stored at BNP-Paribas storage facilities in New York and in my home State of New Jersey with documentation on the letters of credit, the notice of arrival documents, descriptions of the contracts; and yet the U.S. investigators are not being allowed access to these vital documents.

In theory, Mr. Speaker, the trust funds were supposed to be out of the Hussein regime's control and were to be used to purchase civilian consumer goods and basic infrastructure. The justified fear manifested in the 1990s by the United States and the United Kingdom was that Hussein's agents would try to misuse oil funds to purchase banned weaponry and luxury items for the regime. History has proven these fears to be well founded. Unfortunately, the United Nations apparently presided over a system that was rife with loopholes and opportunities for Hussein and his thugs to corrupt and bribe their way towards enrichment at the expense of the very people he was to feed, clothe, and provide health care for.

For example, the Clinton administration estimated in the year 2000 nearly $2 billion of the Oil-for-Food assistance was diverted to build nine lavish palaces for Saddam Hussein and his Baath Party supporters, all of this while children went hungry and without medicines. The Congressional Research Service, Mr. Speaker, in April 2004 did an analysis of the various estimates to try to get a handle on the scale of the Iraqi sanctions cheating and the U.N. failure to stop them. CRS notes said, "There are no authoritative figures for the value of illicit trade with Iraq. However, the most widely cited estimates come from a study released in May 2002 by the GAO. According to the GAO study, Iraq earned $6.6 billion in illicit revenue from oil smuggling and surcharges during 1997 to the year 2001. Of that total, GAO estimates that $4.3 billion was from illicit oil sales and $2.3 billion from surcharges on oil and commissions from its contracts to buy civilian goods (kickbacks). The study estimated that during 2001, Iraq earned $1.5 billion from illicit oil sales from Jordan, Syria, Turkey, and the Persian Gulf; and about $700 million from surcharges and contract kickbacks."

Mr. Speaker, as we all know, Congress and the Bush administration are actively investigating allegations of large-scale U.N. corruption in complicity with Iraqi sanctions violations. But we have not been allowed the access to information that would make these efforts successful. One problem, Mr. Speaker, with the U.N. program, and I would underscore this, is that it seems that the firm which signed the contracts with the U.N. to inspect the humanitarian aid shipments, Cotecna, appears to not have had enough inspectors at their posts to make sure that the transactions were handled properly.

According to internal U.N. audits, Cotenca overcharged the U.N. while understaffing the inspection positions. In other words, part-time work for full-time pay. This particular allegation was included in a report written by auditors from the Office of Internal Oversight at the U.N. This report, we are now told, is one of 55 that the U.N. auditors did on the Oil-for-Food program. Amazingly and shamefully, all 55 audits were kept from the U.N. membership, including the United States mission. This is just plain wrong; and to the best of my knowledge, no one in the Congress has seen the other 54 reports.

At the very least, these reports should be released immediately by the United Nations to the U.S. and other interested governments, and this stonewalling must end.

I would point out to my colleagues that the distinguished chairman of the House Committee on International Relations, the gentleman from Illinois (Mr. Hyde), wrote to Secretary General Annan: "The U.S. Congress, which provides 22 percent of the U.N.'s budget and which has publicly requested copies of the 55 internal audits, should not be required to depend on media leaks for source documents."

The report on Cotecna, I would point out, was leaked and was placed on the Internet. If it were not for the bravery of one unnamed official, we would not even have this one report.

Mr. Speaker, let me just conclude by noting that while the United Nations looked the other way, or worse was complicit and corrupt, Saddam Hussein was underselling his oil in return for kickbacks and providing commercial favors to the companies from countries which did his bidding in his ongoing propaganda war against the United States. The scheme was rotten to the core. In my mind, it also raises some very serious questions about two of our Security Council countries which most adamantly opposed the U.S. multinational coalition military commitment, and they were France and Russia. They were among those getting the greatest sweetheart deals during the Oil-for-Food situation.

For example, the Russia diplomatic representatives, we are told, were instructed to do everything they could to push for contracts with Russian companies. There are hundreds of Russian companies dealing in Iraq. Some were even front companies for Iraqi officials steering the proceeds into offshore bank accounts. Some companies took open bribes. One Russian company, Lakia, paid bribes to Iraqi officials to get their contracts through; but when the contract fell apart, Lakia asked for its bribe money to be paid back and even complained to the U.N. about the situation.

What did Benon Sevan, director of the U.N. office overseeing the Oil-for-Food program do about this? He notified Saddam's officials before he even told the U.N. about it.

Investigators are now hearing that the U.N. officials were open to bribes by suppliers if those vendors wanted their contracts to move up in priority for consideration there. They are hearing that U.N. officials would disclose the details behind the holes that U.S. officials were placing on contracts in return for the right amount of money. They are hearing that inspectors at Iraq's posts were also open for bribes and overfilling oil tankers beyond the contracted amount and then selling the extra oil and lining their pockets with the profits.

Under pressure, Mr. Speaker, as we all know, in April 2004 the U.N. appointed a commission headed by Paul Volcker, the former Chairman of the U.S. Federal Reserve, to independently investigate this massive scandal.

Mr. Volcker is currently assembling his staff and beginning his inquiry. That sounds good, because Mr. Volcker enjoys a great deal of respect. But even with the best of intentions, if he is not given all the tools to unearth the truth, the probe will fall short. I will point out to my colleagues that Mr. Volcker and his commission do not have subpoena power, a deficiency in his powers that will undoubtedly cripple his access to information. How is he going to compel U.N. officials to provide the hard evidence of corruption?

Let us face it, Mr. Speaker, corrupt officials are not going to voluntarily hand over boxes of files filled with incriminating evidence. Instead, those boxes are likely to be shredded or redacted. Without subpoena power, the U.N.'s internal investigation will be stymied and will likely raise more questions than it answers, and the hard truths about this mother of all scandals are likely to be lost and remain elusive.

Secretary General Kofi Annan says he will fire any U.N. employee who does not cooperate. Sounds good. Let us see. We will see. How do we define cooperate? How do we know what remains secret when we do not have that ability to compel evidence? Mr. Annan's own son may be involved in this scandal since he was Cotecna's consultant, and that raises serious questions as well.

These are tough questions, Mr. Speaker; and I understand that the answers will not come overnight, and under the current glideslope, perhaps they will never come.

Congress needs to demand real answers, as we are doing; and there needs to be real and meaningful reforms made at the United Nations.

Mr. Speaker, I am glad we organized this very important night to focus on this terrible scandal. I thank my good friend, the gentleman from Connecticut (Mr. Shays), for yielding to me.

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