July 8, 2004

Mr. Chairman, distinguished members of the Subcommittee: Thank you for the opportunity to testify here today.

In the long, secretive, and unfortunately sordid saga of the United Nations Oil-for-Food program, we have arrived at an important juncture. Not only is Oil-for-Food finally under investigation; by some counts it is now the subject of at least eight or nine investigations — and that's before we even get to the private inquiries and media coverage. Given that U.N. Secretary-General Kofi Annan, in wrapping up the U.N.'s role in Oil-for-Food last November, was content simply to praise the program and close the books — with no investigation whatsoever — this is progress.

Certainly Oil-for-Food needs investigating, for three basic reasons:

1. To bring to account any individuals who profited illicitly to the collective tune of billions filched from what was supposed to be a relief program for the tyrannized and impoverished people of Iraq.

2. To trace, and return, as far as possible, funds illicitly diverted from the program. There are reasons to be concerned that these funds not only went to pay for Saddam's lavish lifestyle (Oil-for-Palaces), but that significant amounts may have been directed toward corrupting the U.N.'s own debates over Iraq (Oil-for-Influence), as well as — quite possibly — to terrorist-linked enterprises, or even to terrorist groups. This last item (Oil-for-Terror) may still be a menace. The bulk of Saddam's ill-gotten gains remains unaccounted for, at least in our books.

3. To explore and remedy the basic flaws in the U.N. setup and system that not only allowed the corruption of Oil-for-Food, but in some ways positively invited and even encouraged it — and that, if not remedied, are highly likely to do so again. The transgressions here against honesty and common sense have been particularly egregious, with perverse incentives and U.N. secrecy combining in this instance to enable fraud and theft totaling at least $10 billion, carried out in a manner that helped shore up the totalitarian government of Saddam Hussein while quite probably corrupting a significant array of political figures and businessmen worldwide. But the basic problems that allowed a U.N. program to be thus warped did not in fact reside solely in Saddam's regime, and they will not be fixed solely by addressing specific instances of misconduct that may come to light regarding Oil-for-Food.

To understand the deeper problem, and to grasp why we are only now seeing investigations begun — well over a year after the fall of Saddam, and almost eight months after the official end of the U.N.'s role in Oil-for-Food — it helps to note that getting straightforward answers from the U.N. about specifics of the program, or fixing its most glaring faults, has been at almost every turn quite oddly difficult. Not that the basic contours of the huge flaws that bedeviled Oil-for-Food are much of a mystery. In reports, press accounts, and hearings going back years at this point, the fraudulent outlines of Oil-for-Food have been much explained already. On May 14, 2003, for example, the House Committee on Energy and Commerce held a hearing on Oil-for-Food at which there was reference to Treasury's findings — even then — of Saddam's success in "skimming and kickbacks on oil legitimately sold through the Oil-for-Food program." There was also reference — and I would again note that this was more than a year ago — to Iraq awarding Oil-for-Food contracts to "potentially sympathetic members of the U.N. Security Council, primarily Russia, France, and China." Nor was it news even then that the political tilt to U.N.-approved relief contracts often led to the Iraqi people — the intended beneficiaries of all those billions — receiving substandard rations, including rotten medicines.

I cite that hearing as merely one example of how much we have already known for some time about the corruption of the Oil-for-Food program. There were reports from Reuters as far back as 2000 on the oil-sale kickback schemes; there were congressional rumblings, and complaints from contractors to the executive director of Oil-for-Food, Benon Sevan. There was abundant anecdotal evidence, which should have been obvious to the more than 800 U.N. international monitors on the ground in Iraq. Massive corruption within the program should also have been obvious to Mr. Sevan, who dealt directly with the Iraqis, and to Mr. Annan, who devoted considerable attention to Oil-for-Food — initially, as under-secretary-general, negotiating the terms under which the oil would be sold, and then as secretary-general, signing off on Saddam's distribution plans urging the expansion of the program, and overseeing the secretariat's use of its 2.2 percent commission on Saddam's oil revenues to cover U.N. costs.

There was an excellent, lengthy, and detailed study published back in September 2002, by the Coalition for International Justice, chronicling "Sources of Revenue for Saddam & Sons," which focused heavily on Oil-for-Food and the accompanying sanctions-busting smuggling of oil from Iraq. (The U.N. has tried to disown the smuggling as outside the control of the Oil-for-Food program. But it was the oil-industry equipment approved, supplied, and monitored via Oil-for-Food that allowed for the production of the extra oil that Saddam then smuggled out under the U.N.'s nose).

And there were the astounding lists of contractors selected by Saddam, approved and kept confidential by the U.N. Among the supposed end-users authorized to buy oil, for example, were some 75 companies in the oil-rich United Arab Emirates, 65 in Switzerland, 45 in Cyprus, seven in Panama, and four in Liechtenstein. Did anyone privy to these secret lists, either on the Security Council Sanctions Committee, or within the U.N. — from Mr. Annan on down — imagine that the world's financial havens were sopping up Iraqi oil contracts mainly for the purpose of local home heating?

I'll suggest an answer. The corruption was obvious. But to prove it in any particular instance, to seriously do something about it, someone had to be both willing and able to name names, to produce evidence, to question strongly enough — and publicly enough — the setup in which U.N. confidentiality and lack of accountability gave Saddam cover to steal at least $10 billion.

Those willing to speak up have not as a rule had access to much of the vital, specific evidence. Those with access have been, by and large, part of the U.N. system, and have been unwilling to step forward and spill the beans, at least in ways one can attribute. In some cases, the venal interests involved are on the scale of entire nations — France, Russia, China, Jordan, Syria, and Egypt, for instance — milling Saddam's deals through their country missions with no apparent concern over the corruption involved. In others, such as the U.S. and U.K., backroom diplomacy seems to have outweighed the need to hold the U.N. to any reasonable standard of integrity — which is at best a perilous habit, bad for both the U.N. and the U.S. And, on a far more individual scale, there is great reluctance among U.N. employees to come forward, lest they lose their jobs and pensions in a system where one of the U.N.'s own surveys found recently that 46 percent of the staff members fear reprisals for speaking up. The U.N. off-the-record is far too different a world from the U.N. as officially attributed; and while some gap must be expected with any institution, in the U.N.'s case, it is extraordinarily large.

On this matter of whistle-blowing, while noting that the entire Security Council was complicit in covering up Oil-for-Food, I would add that it is the secretary-general whose job rightfully requires that he rise above the particular interests of individual member states in order to protect the integrity of the U.N. as an institution. Not only did Mr. Annan fail, but he has simply declined to accept responsibility. Instead, he has kept senior members of his staff busy deflecting blame toward to the Security Council, where it then dissipates among the assorted member states. And having earlier this year denied that Oil-for-Food needed investigating, Mr. Annan would now have us believe that the secretariat was aware of serious problems all along, but did not dare confront the same Security Council to which he would now affix the blame.

Further complicating any inquiry is the sheer danger of peering too deeply into Oil-for-Food. The murder by car bomb in Baghdad last week of Ihsan Karim, who was in charge of the Iraqi end of the Oil-for-Food investigation, may have been coincidence. But the apparent extent of the bribes and kickbacks, the billions involved, the potential prosecutions should details truly begin to emerge in quantity, and the nature of some of Saddam's select U.N.-approved business partners, is daunting — on the basic level of physical safety.

Accompanying all this is the great and absurd document chase that has been going on for months now, if not years. I refer to the charade in which the U.N. has continued to clutch to itself the kind of basic information about Oil-for-Food contracts that should have been available to the public all along. The best protection would always have been to maximize the program's transparency. The U.N. churned out plenty of information, and if you want to read about estimates of calories consumed and barrels of oil produced, you will not lack for tonnage. But on crucial financial details, there is still astoundingly little official information available to the public. The particulars of Saddam's deals were not released, for the reason that this was not how the U.N. chose to handle the program — which was no good reason at all. Then, as allegations mounted, nothing could be released — as the U.N. over Benon Sevan's signature reminded at least three contractors back in April — because a U.N. investigation was pending. Now, even less can be released, because the U.N. investigation is underway. The U.S. administration has unfortunately compounded this secrecy by imposing similar rules on the extensive documentation found in Baghdad. That might all make more sense were we not being asked to trust in the investigative powers and determination of the same U.N. club that brought us Oil-for-Food in the first place.

Former Federal Reserve Chairman Paul Volcker, now heading the U.N.-authorized inquiry into Oil-for-Food, wrote in the Wall Street Journal yesterday that his committee "has the mandate, the international framework and, I believe, access to resources, both human and financial , to provide the kind of comprehensive fact-finding and analysis the investigation requires."

It does not seem extreme to suggest that we trust, but as far as possible, verify. Mr. Volcker has the U.N. mandate. But that is hardly where the public trust, or interest, ends. And while his U.N.-authorized inquiry may have access — thanks to U.N. rules not only current, but past — to documents that this Congress, or the public, cannot get, there are some highly valuable aims [[that]] to be served [[I imagine she may have had "that could be served," and then changed it to "to be served," and forgot to cut the "that." The latter is stronger than the former, and since the "to be served" is the more wholly formed statement, I imagine that's what she meant to keep... ]] by other investigations. Not least, important policy involving the U.N. is being made even now; to suspend all inquiry, analysis, or judgment for months, while awaiting the report of a late-in-the-day U.N. investigation, would be unwise.

Beyond that, it would help to put some markers out there, as to what kind of information we should expect from the U.N.'s own investigations, and should hope that others might elaborate upon. At a bare minimum, the public should receive from the U.N. investigation, with background documents that allow verification, full information about the dollar amounts, quantities of goods, and specific contractors who were involved with Oil-for-Food. That would allow, for example, clear totals of the amount of business that went to such countries as Security Council members Russia, France, and China — disclosing who did the deals, and on what precise terms. There is an enormous amount of local information within particular countries, or industries, that a centralized investigative team may not possess, and which cannot be brought to bear as a resource unless such details are disclosed.

The bills now surfacing in this Congress to withhold U.N. funding until the president certifies U.N. cooperation in the investigation are a good start. But that kind of pressure alone cannot begin to address the basic flaws. Even beyond the large shortcoming that the U.N. in "democratic" fashion offers votes to even the world's most undemocratic governments — thus lending itself more to the model of a club of rulers serving their own interests, not those of the populations they claim to represent — there are a number of immediate flaws that allowed the corruption of Oil-for-Food, and are now particularly well-placed to be explored and fixed.

If there is one message I can send today, it is that the basic flaw that might most easily be remedied is the U.N.'s extreme lack of transparency. This includes basic financial and book-keeping information. And in the case of Oil-for-Food, it should have included full details of Saddam's deals — and I see no good reason why such information could not, even now, be released, not only to various investigative bodies now pounding on the U.N.'s closed doors, but to the general public that the U.N. in theory exists to serve. Whatever custom may dictate, there is no good reason to keep such information confidential. The U.N. practice of secrecy in these matters invites graft, waste, and abuse. Nor has the U.N. so far succeeded in offsetting that problem with assorted auditing arrangements. Oil-for-Food provides a vivid illustration of the problem. Despite Oil-for-Food having been, in the words of one U.N. spokesman, "audited to death" — and by the U.N.'s own account, one of its most extensively audited programs — evidently neither the "external" not the internal audits served to expose enough of the major damage, at least not enough to stop it.

And while I would be glad to discuss details of specific investigations now underway, the most useful move at the moment might be to stop taking as a given the ground rules of continuing confidentiality on all fronts laid down by the U.N., and require that the U.N. enlist not only its select panel of investigators to get to the bottom of the problem (asking us to trust that this time they really will), but also open its books so as to employ the resources of both specific information and general ingenuity so broadly available in the marketplace of ideas, and so necessary at this late date not only for piecing together the full picture on Oil-for-Food, but to reforming the U.N. itself. To be quite practical about it, if Oil-for-Food allowed Saddam to funnel money to murderers who may yet pose a danger to us all, it seems foolish to wait upon the ceremony of yet more U.N. confidentiality and self-investigation. They need all the help they can get. We do too.

Claudia Rosett is a senior fellow with the Foundation for the Defense of Democracies, and an adjunct fellow with the Hudson Institute. This testimony originally appeared on National Review Online and Foundation for the Defense of Democracies’ website.