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Oil probe faults Annan over son

From CNN's Phil Hirschkorn, Liz Neisloss and Richard Roth

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Kofi Annan: Describes the report as "deeply embarrassing."

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Iraq
United Nations
Kofi Annan
Paul Volcker

NEW YORK (CNN) -- The latest report by the independent panel investigating the U.N. oil-for-food program in Iraq reiterates its finding that U.N. Secretary-General Kofi Annan did not personally engage in unethical behavior.

But the report criticizes him for failing to properly investigate an apparent conflict of interest involving a U.N. contractor that employed his son, Kojo.

The report also finds that Kojo Annan lied about his work for that contractor, Swiss inspection company Cotecna, by denying over the past year that he had no involvement in securing the company's $10 million-a-year deal with the United Nations.

"In contrast to earlier denials, there is now evidence that Kojo Annan did in fact make inquiries to the U.N. purchasing department in a time frame relevant to the award of the Cotecna contract. He thus appears to be at least marginally involved in the bidding process," Paul Volcker said at a Manhattan news conference Wednesday.

The conference unveiled the voluminous report from Volcker's Independent Inquiry Committee which was appointed by the United Nations last year to probe the oil-for-food program.

Kojo Annan was on the Cotecna payroll from the mid-1990s until 2004, but he and the company have maintained his work was limited to his native Ghana and Nigeria, and that Annan was not involved in any U.N. business. After reviewing phone records and e-mails and conducting interviews, Volcker's team found otherwise.

"Kojo Annan placed several calls to the United Nations procurement department at critical times in the bidding process during the fall of 1998," the report says.

"It is clear that he obtained access from United Nations sources to information that he in turn passed on" to Cotecna CEO Robert Massey "for the purposes of Cotecna's positioning itself to make a contract bid," according to the report.

However, the committee said the evidence "does not suggest that Kojo Annan also was speaking with his father about these efforts or about Cotecna's general interest in the contract."

Kofi Annan told the committee that he was unaware of the calls and he did not learn Cotecna had won the bid until early 1999.

"The finding we made was that there's insufficient evidence to establish that his father knew. So it was really a not-proven finding rather than a complete exoneration," said committee member Richard Goldstone in an interview with CNN.

'False pretenses'

The report also disclosed that Kojo Annan "used false pretenses" to buy a $39,000 Mercedes in his father's name in late 1998, obtaining a 15 percent U.N. staff discount for the car in Switzerland and prevailing on a U.N. official to ship the car duty-free to Ghana, where he used it.

Speaking to reporters at U.N. headquarters, Kofi Annan said of his son's behavior, "I think the report speaks for itself and he will have to speak for himself."

London-based attorneys for Kojo Annan called the evidence of his contacts with the U.N. procurement department "flimsy at best" and said it "rests largely on our client's relationship with people he has known since childhood."

Kojo Annan said in the written statement, "I never attempted to influence the awarding of the contract and the IIC's report confirms that Cotecna was awarded the contract on the basis of its submission of the lowest bid."

As for the car purchase, Kojo Annan said, "I was young and I just didn't think it through. It was an indiscretion but one for which I hope I can be forgiven."

Kofi Annan described the report, which runs over 1,000 pages, as "deeply embarrassing" but told the U.N. Security Council he was "glad" it reaffirmed its previous finding that "I did not influence, or attempt to influence, the procurement process."

Recommendations

Annan endorsed Volcker's call for a new top post at the United Nations, a chief operating officer to focus on the world body's administrative responsibilities.

The report also recommends the United Nations create a new independent auditing board to oversee U.N. finances.

"The organization requires stronger executive leadership, thoroughgoing administrative reform, and more reliable controls and accounting," the report says.

John Bolton, the U.S ambassador to the United Nations, told the Security Council, "This report unambiguously rejects the notion that "business as usual" is acceptable.

"We need to reform the U.N. in a manner that will prevent another oil-for-food scandal. The credibility of the U.N. depends on it."

The United States and the other four permanent members of the U.N. Security Council -- Britain, Russia, France and China -- were also blamed for mismanagement, having approved oil-for-food contracts.

The program lasted from 1996 to 2003, when Iraqi dictator Saddam Hussein was deposed, and generated $64 billion in U.N.-monitored oil sales.

Exploited to advantage

The money was spent mostly on food, medicine and supplies for Iraq, which was under international sanctions for its invasion of Kuwait. The money also paid reparations and financed weapons of mass destruction inspections.

The report acknowledges the oil-for-food program's success in delivering humanitarian goods that improved the health of Iraq's 26 million people, but identified its Achilles heel: Saddam Hussein got to choose his own vendors, a point that was his condition for permitting the United Nations to operate in Iraq.

"As the program expanded and continued, Saddam Hussein found ways and means of turning it to his own advantage," the report said.

Significantly, Volcker's report offered new figures tabulating the total illicit revenue earned by Saddam by exploiting the program.

The committee concluded that Saddam earned $11 billion in smuggling -- unauthorized sales of Iraqi oil to friendly regimes in neighboring Jordan, Turkey, Egypt and Syria -- after economic sanctions went into effect in 1991, and that $8.4 billion of that money was earned during the oil-for-food years, 1996 to 2003, and was paid for oil representing about 12 percent of Iraq's output.

The Volcker committee said its final report, due in October, will detail "wholesale corruption" that "took place among private companies manipulated by Saddam Hussein's government."

The committee has mailed letters seeking a response from more than 2,000 companies worldwide suspected of paying surcharges and kickbacks.

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