Federal News Service - Panel One of a Hearing of the National Security, Emerging Threats & International Relations Subcommittee... - Transcript

Federal News Service October 5, 2004 Tuesday

SECTION: CAPITOL HILL HEARING

HEADLINE: PANEL ONE OF A HEARING OF THE NATIONAL SECURITY, EMERGING THREATS & INTERNATIONAL RELATIONS SUBCOMMITTEE OF THE HOUSE GOVERNMENT REFORM COMMITTEE

SUBJECT: UNITED NATIONS OIL-FOR-FOOD PROGRAM

CHAIRED BY: REP. CHRIS SHAYS (R-CT)

PANEL I WITNESS: PATRICK KENNEDY, U.S. REPRESENTATIVE TO THE UNITED NATIONS FOR MANAGEMENT REFORM;

STATEMENT PROVIDED BY: CHRISTINE GRENIER (PH), REPRESENTING THE FRENCH EMBASSY

LOCATION: 2154 RAYBURN HOUSE OFFICE BUILDING, WASHINGTON, D.C.

BODY:

REP. SHAYS: A quorum being present, the Subcommittee on National Security, Emerging Threats and International Relations hearing entitled "The U.N. Oil-for-Food Program: Cash Cow Meets Paper Tiger" is called to order.

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REP. DIANE WATSON (D-CA): Mr. Chairman, thank you. I think it's critical for Congress to address the serious questions surrounding the Bush administration's deficit management of Iraqi oil proceeds and other funds in the development fund for Iraq. We made a commitment to the Iraqi people, a promise that we would spend their money for their benefit-and we do have to remember that it is their money. We also promised to spend it in a transparent manner, so the entire world would know that we were managing their funds properly, and not allowing graft, corruption and mismanagement to infiltrate our mission there.

Unfortunately, Mr. Chairman, it appears that the Bush administration has failed to live up to these commitments. Auditors at the CPA's own inspector general's office have issued a report that is extremely critical of the administration's management of Iraqi funds in the development fund for Iraq. In particular, the inspector general's report criticizes actions by the administration's contracting activity office in Iraq. If I may, I'd like to read you just a short portion of the report. "The CPA contracting activity had not issued standard operating procedures or developed an effective contract review, tracking and monitoring system. In addition, contract files were missing or incomplete. Further, contracting officers did not always ensure that contract prices were fair, reasonable, contractors were capable of meeting delivery schedules and payments were made in accordance with contract requirements.

"This occurred because the CPA contracting activity did not provide adequate administrative oversight and technical supervision over the contracting actions completed by procuring contracting officers as required. As a result, the CPA contracting activity was not accurately reporting the number of contracts actually awarded by the CPA contracting activity. This hindered the CPA contracting activity's ability to demonstrate the transparency required of the CPA when it awarded contracts using DFI funds."

Mr. Chairman, this is an indictment of the administration's entire management approach to the funds of the Iraqi people. The inspector general went on to warn that because contract files were not adequately maintained they could not be relied upon to ensure compliance, or to be used as a source for congressional reporting. How are we in Congress supposed to be able to conduct our oversight responsibilities when the information is not reliable?

The inspector general's report found that of the contracts they analyzed 67 percent had incomplete or missing documentation -- 67 percent, Mr. Chairman-this is a horrendous record.

Finally, the inspector general provided its fundamental conclusion about the administration's stewardship of these Iraqi funds. The inspector general reported: "We do not believe that transparency can be achieved when pertinent data is unavailable or inaccurate."

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REP. WATSON: Thank you, Mr. Chairman. I'm a bit confused-thank you, Mr. Chairman-because I just heard you say that every time you saw something that appeared abusive that there would be some response. However, we've been told how Saddam Hussein had taken the money intended for the people and food and built magnificent palaces. It seems to me that there would be the time that some action should have been taken. Can you respond, please?

MR. KENNEDY: There is no doubt, Madam Ambassador, that Saddam Hussein received kickbacks. That is a fact. We moved to counter those kickbacks. But during this period of time, while he was making kickbacks-and as I testified before this committee several months ago-what he did was on very large quantities of goods. And, remember, he was feeding a nation of some 23 to 25 million people. He would attempt to get very small kickbacks on very large sums, but the sums mount up over that kind of volume. He was receiving those funds. Yet the medicines and the food stuffs were still going in. I am not defending what he was doing by any means. What he was doing is wrong. But the food and medicines were going in, and he was getting the kickbacks while we and our United Kingdom allies moved to cut off either his attempt to manipulate oil prices or attempt to add surcharges, or attempt to add after-sales service contracts. And so we took steps to block him as soon as we discovered it. And, as we discussed earlier, we were not successful in blocking all his activities.

REP. WATSON: And I know, Mr. Ambassador, how difficult this is. I've been there, too. However, I think you're the only one that can help our understanding of what went wrong so long. And so I understand that the oil-for-food program helped provide food for 27 million Iraqi residents, it prevented malnutrition, it reduced communicable diseases, it eradicated polio and was a major success for a period of time. We're focus on $4.4 billion of a $67 billion humanitarian success story. So do you believe that this program met its objectives, and do you believe that we as the United States and the monitors who were participating, were on the job? I need to know out in the field what it was that was lacking and how we lost so much of the fund to corruption. What was it that should have been done beyond what you've just described?

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REP. WATSON: If I may continue, and if you want to continue to respond to my last question, fine, but let me raise another issue. What other U.N. bilateral or multilateral mechanisms, besides the 661 Committee, could the United States have utilized to publicize and put an end to these practices. I am concerned that too much of the oil monies were diverted in other directions and those who suffered were the Iraqi people. With the coalition, what could have been done to end this misuse?

MR. KENNEDY: With Saddam Hussein as the figure here, I don't know that anything would have stopped Saddam Hussein from attempting to get around any activity.

REP. WATSON: Let me just ask you this, what would have stopped the flow of funds into the program Oil For Food?

MR. KENNEDY: The only thing that would have stopped it would have been if you had had a different sanctions regime. But the sanctions regime that was put into place was the one that was the result of long, extensive, and arduous negotiation with other member states to achieve that sanctions regime. If you had had a regime in which, again, hypothetically, a company had pumped all the oil, sold all the oil, and brought all the goods and sent them in, then there might not have been any leakage as you describe. However, there was not the political will on the part of nations to impose that kind of a sanctions regime.

REP. WATSON: What of our political will here? Did we make a strong enough effort Security Council in the U.N. to bring their attention and get a focus on possibly changing the kind of structure that we had? What was being done from within?

MR. KENNEDY: I was not-I only arrived at the United Nations, the U.S. Mission to the United Nations in the fall of 2001, but my preparation for this, my reading of a very extensive record indicate that the U.S. government made extensive efforts to get the most teeth into sanctions that it could, and met resistance from other member states who were unwilling to accept that.

REP. WATSON: I understand how difficult it is when you're coming in and programs like this have been running. That is the reason why we were concerned on this committee with our oversight, and we wanted to see what records, what documentation, what facts there are held by other departments and branches. I understand that there were 60 staffers in five different U.S. agencies who reviewed each of the Oil For Food contracts. If we had that information, then my questions might be answered. And I want to thank you for your service, and I want to thank you for coming here, being on the hot seat, but I think there should be some others that are on the hot seat so we can find where we went wrong, where it went wrong. We know that Saddam Hussein was wrong, but that doesn't excuse this whole thing. And so we would just like to get to the bottom of it. I appreciate your service, and I thank you so much for trying to explain what happened before your duty started. But we're trying to seek truth.