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Inside Politics

Senator alleges oil-for-food 'bribe'

From Phil Hirschkorn

• Interactive: Who's who in Iraq
• Interactive: Sectarian divide
United Nations
Norman Coleman

NEW YORK (CNN) -- A congressional subcommittee investigating the United Nations' defunct oil-for-food program in Iraq alleged in a public hearing Tuesday that an employee of one of the program's major contractors took a bribe that enabled former Iraqi dictator Saddam Hussein to smuggle half a million barrels of oil.

The Senate Governmental Affairs Permanent Subcommittee on Investigations released documents alleging that the inspector for Saybolt, a Dutch company hired to monitor approved Iraqi oil shipments from 1996 to 2003, enabled Saddam's regime to sell $9 million worth of oil outside the program.

"We have found disturbing evidence that one of the U.N. oil monitors -- the individuals hired by the U.N. to inspect the oil exports from Iraq under the OFF Program -- took a bribe," said subcommittee chairman Norm Coleman, a Minnesota Republican.

Coleman named Armando Carlos Oliveira, 46, a Portuguese national, as the rogue inspector who received a $105,819 payment, about 2 percent of the value of the oil smuggled in two illicit shipments in 2001.

Saybolt attorney John Denson told the subcommittee that this is the first time Saybolt learned the specifics of the alleged bribe of Oliveira, who is still a Saybolt employee.

"I don't have anything to say," said Oliveira, reached by telephone in Portugal. "My company has ordered me not to say anything."

The report is the first allegation of personal corruption by a U.N. contractor made by any of the multiple investigations of the embattled program.

The alleged illicit shipments -- each about 250,000 barrels -- occurred as a ship called the Essex loaded oil for the French firm IBEX Energy from Mina al-Bakr in southern Iraq, one of two export locations Saybolt monitored.

In the second instance, on August 27, 2001, after the Essex loaded 1.8 million barrels authorized by the oil-for-food program, the ship "topped off" its load with another 271,000 barrels, according to U.N. documents.

Iraqi Oil Ministry documents obtained by the subcommittee indicate two payments to Oliveira -- $86,119 in September 2001 and $19,700 in March 2002 -- followed by a cash deposit in Banco Totta & Acores for $5,000.

Committee investigators cannot account for the additional $100,000 they allege Oliveira was paid in cash by Baghdad.

Oliveira worked two years in Iraq and was paid $79,200 per year, according to Saybolt documents released by the subcommittee. He led of a team of five inspectors at Mina al-Bakr.

Saybolt President Jan Heinsberoek, in Rotterdam, told CNN that Saybolt could not prove any wrongdoing on the part of Oliveira, but the company reported the "topping off" incidents to the United Nations at the time and subsequently altered its loading procedures, making sure vessels were sealed before departure.

"Saybolt denies having taken a bribe or having been offered anything ever," Heinsberoek said. "We continue to investigate and will take the appropriate steps when necessary."

The oil-for-food program permitted Iraq, while blockaded by international economic sanctions imposed after it invaded Kuwait in 1990, to sell some oil and earmark the revenue for purchases of food, medicine and supplies.

Saddam is believed to have exploited the program by imposing surcharges from 5 cents to 30 cents per barrel on the oil sales and kickbacks on supplies worth 10 percent to 20 percent of those contracts. In all, he siphoned $1.7 billion to $4.4 billion, according to U.S. government estimates.

The program generated $64.2 billion in revenue, as Iraq sold 3.4 billion barrels of oil in more than 2,600 loadings monitored by Saybolt.

An independent committee led by former Federal Reserve Chairman Paul Volcker has concluded that Benon Sevan, head of the U.N. program, engaged in a conflict of interest by soliciting deals for a friend's company, African Middle East Petroleum, which profited an estimated $1.5 million by reselling the Iraqi crude.

Citing Iraq Oil Ministry documents, Senate subcommittee investigators say that Sevan, not AMEP, received allocations for 9.3 million barrels worth $1.2 million.

"Did Benon Sevan personally receive oil allocations from the Hussein regime? A review of the evidence will suggest that the answer to that question is 'yes,'" Coleman said.

"I call upon Secretary-General Kofi Annan to strip Mr. Sevan of his diplomatic immunity so that he will be available for judicial process," Coleman said.

The subcommittee continues to probe the role of the Annan's son, whom the committee first interviewed Friday.

Kojo Annan worked in the 1990s for Cotecna, a Swiss-based firm that, in late 1998, was awarded a multimillion dollar contract to authenticate Iraqi imports.

Cotecna and the younger Annan maintain that he had nothing to do with the firm's U.N. business or negotiations with Sevan or the secretary-general.

"We never mentioned the fact that Kojo Annan worked for us at that time," said Cotecna CEO Robert Massey.

The subcommittee pressed Massey about a September 1998 memo the younger Annan wrote his superiors alluding to "machinery" in New York to "facilitate the continuation of contacts."

"This is a bit of a mystery to us also," said Massey, who added that Kojo Annan was trying to renew contracts with a new government in Nigeria, not Iraq.

"Kojo was a very young man at the time and he was trying to prove himself," said Cotecna's former senior vice president, Andre Pruniaux. Kojo Annan was 24 at the time.

In a written statement Tuesday, Kojo Annan said, "At no time was I involved with any negotiations or lobbying of the United Nations with regard to the oil-for-food program inspection contract. I and others have stated this fact repeatedly. I am not aware of anyone who states otherwise."

The Senate subcommittee also questioned a Kojo Annan expense report from that month, when the U.N. General Assembly met. Kojo Annan, then working as a consultant, billed Cotecna for 15 days relating to "special projects" but did not submit a trip report of his activities.

"In fact, I did not attend a single meeting at the United Nations," Kojo Annan said.

He added, "Based as they are on incomplete and inaccurate facts, one can only assume that the statements made by chairman Coleman were not meant to shed light on concerns regarding the oil-for-food program, but instead were politically motivated and intended to harm my father and the United Nations."

Cotecna spokesman Seth Goldschlager said the hearing showed the firm was contracted by the United Nations "fairly -- on objective grounds" and "performed its contract professionally under extraordinarily difficult conditions on the ground."

The Government Accountability Office reported Tuesday there were 702 instances of program deficiencies identified in the U.N.'s own audits -- about a third of them flaws in contract management and oversight.

The GAO said the United Nations assigned only two to six auditors to oil-for-food, though internal guidelines call for 12 auditors for every $1 billion spent on programs. Thus, the oil-for-food program should have had more than 160 auditors, the GAO said.

CNN's Pamela Boykoff and Erin McLaughlin contributed to this story

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