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U.N. seen slamming Annan in report

From Richard Roth and Phil Hirschkorn

• Interactive: Who's who in Iraq
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United Nations
Kofi Annan

UNITED NATIONS (CNN) -- An independent U.N. investigative committee is expected to clear Secretary-General Kofi Annan of conflicts of interest in the now-defunct oil-for-food program in Iraq.

But it is expected to sharply criticize his oversight of the aid program, a source familiar with the report said Monday.

The committee's 70-page report, due out Tuesday, will find that Annan did not exert any influence on the $10 million annual contract awarded to a Swiss company that employed his son, Kojo.

But the committee, led by former U.S. Federal Reserve Board chairman Paul Volcker, will fault Annan for management lapses and failing to correct bureaucratic flaws in an under-audited program that was exploited by former Iraqi dictator Saddam Hussein to extort billions of dollars from his chosen oil buyers and goods suppliers.

The report will be "pretty difficult for the secretary-general," said someone familiar with the report.

Annan critics have questioned whether he or other U.N. officials might have steered a major oil-for-food contract in 1998 to Cotecna, which employed his son. That contract called on Cotecna to authenticate shipments of food, medicine, and supplies into Iraq as part of the $64 billion humanitarian program -- the largest in U.N. history.

Both Annans have steadfastly denied any favoritism in the deal, and the source said the report's emphasis is less on how Cotecna won the contract than on how it was implemented.

Volcker, with a $30 million budget and a staff of 65, half of which was overseas, was picked by Annan last year to lead the probe. Volcker has had access to U.N. documents and employees so far out of reach to U.S. congressional committees also investigating the oil-for-food program.

Some members of Congress have called on Annan to resign and introduced legislation for the U.S to withhold its dues, which account for 23 percent of the U.N. budget, unless management reforms are implemented.

Tough questions

Volcker and his staff have questioned Annan on at least three occasions and interviewed his son at least twice.

Cotecna and Kojo Annan assert that the younger Annan had nothing to do with U.N. business when he worked for the company on pre-shipment inspections Ghana and Nigeria for two years right out of college and for a third year as a consultant.

The company paid Kojo Annan approximately $200,000 in salary over three years, according to spokesman Seth Goldschlager.

The firm went on to pay Annan at least another $166,000 -- $2,500 a month -- as part of a non-compete agreement that ran from 1999 to early 2004.

Goldschlager said the total payments, including expense reimbursements, approached close to $400,000 over eight years, and some payments were made through companies besides Cotecna owned by the family of its chairman, Elie George Massey.

Cotecna hired Kojo before his father became secretary-general, but did not disclose his employment to the United Nations when it made the low bid for the Iraq inspection contract. The U.N. contracts committee was unaware of the connection at the time.

In 1999 at a Geneva meeting, Massey apologized to Kofi Annan about any embarrassment the non-disclosure caused after it was first reported in the British media. Coetcna had replaced the British-based Lloyd's Register providing inspectors for the Iraq program.

"The company did nothing that could be criticized in the way it got the contract or the way it performed," Goldschlager said.

Massey previously met Annan three times between 1992 and 1998, both Goldschlager and Annan Chief of Staff Mark Malloch Brown have said. Those meetings included a hallway handshake at U.N. headquarters and tea with their wives at the World Economic Forum in Davos, Switzerland.

In 1998, Massey pitched Annan the idea of an international lottery to raise money for U.N. humanitarian programs.

Coetcna employs 4,000 people in 100 countries. The U.N. contract represented 10 percent of its revenue.

Kojo Annan, 31, is one of Annan's two children with his ex-wife. He also has a daughter from that marriage and a stepdaughter with his second wife.

The younger Annan has business interests from Lagos to London, ranging from oil trading and infrastructure development to part-ownership of a nightclub.

Annan, 66, from Ghana, is serving his second, five-year term as secretary-general, a post he took over in January 1997. His term ends on December 31, 2006.

Annan, who won the Nobel Peace Prize with the United Nations in 2001, has spent his career at the institution, starting with the World Health Organization in Geneva in 1962.

The oil-for-food ran from late 1996 until the U.S.-led invasion that toppled Saddam in 2003. Over seven years, 248 companies incorporated in 61 countries bought 3.4 billion barrels of Iraqi crude.

Iraqi revenues, deposited in a U.N.-controlled account at BNP Paribas, were earmarked mainly for food and medicine. One-fourth of the revenue paid reparations to Kuwait for the 1990 invasion that prompted international sanctions, while the United Nations used 2 percent of the money for administrative costs.

Last month, Volcker reported that the program's director, Benon Sevan, repeatedly solicited oil allocations for a small trading company run by a friend. Sevan is a subject the ongoing U.S. federal criminal investigation of the program.

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