Panel Says Annan Didn't Intervene in Iraq Contract

By WARREN HOGE

New York Times

march 30, 2005

UNITED NATIONS, March 29 - The commission investigating the oil-for-food program in Iraq reported Tuesday that Secretary General Kofi Annan had not influenced the awarding of a contract to the company that employed his son. But it faulted him for not looking more aggressively into the company's relationship with the United Nations once questions were raised.

The panel also criticized two of Mr. Annan's closest advisers, Iqbal Riza and Dileep Nair, for their conduct.

Mr. Annan said at a news conference that he viewed the conclusions about him as an exoneration, which he said he welcomed with "great relief" after "so many distressing and untrue allegations." Asked if he thought the report's criticisms of him for management failures meant he should step down for the good of the organization, he replied bluntly, "Hell, no."

But the commission, led by Paul A. Volcker, rather than explicitly vindicating Mr. Annan, said that it had based its judgments on an inability to find enough evidence to support charges against him. That could leave Mr. Annan open to continuing criticism from Washington.

While spokesmen at the White House and the State Department offered support to Mr. Annan and his pledges to bring change to the United Nations, Senator Norm Coleman, a Minnesota Republican who has called on Mr. Annan to quit, said he was not persuaded by the new report. "His lack of leadership, combined with conflicts of interest and a lack of responsibility and accountability point to one, and only one, outcome: his resignation," he said.

The report came as an internal review at the United Nations found a string of management abuses, including misuse of funds and tolerance of sexual harassment, at the agency that promotes and monitors elections.

Mark Malloch Brown, the new chief of staff, said the Volcker panel report should be accepted as an exoneration. "Mr. Volcker looked under every stone," he told reporters. "He put $3 million of investment in this and he concluded, 'No story.' "

In the report, the committee was harshest in its judgment of Mr. Annan's son, Kojo, 31, and the Geneva-based company he worked for, Cotecna Inspection Services. It said they both conspired to conceal the duration of their business and professional relationship and that the younger Mr. Annan deceived his father about it. In addition, it said he had been uncooperative with the Volcker panel's investigators.

Secretary General Annan expressed pain about the findings on his son, saying: "I love my son, and I have always expected the highest standards of integrity from him. I am deeply saddened by the evidence to the contrary that has emerged, and particularly by the fact that my son had failed to cooperate fully with the inquiry. I had urged him to cooperate, and I urge him to reconsider his position and cooperate."

The report is a second interim accounting from the commission, which will deliver its final verdict this summer. The panel was commissioned by Mr. Annan a year ago to investigate how Saddam Hussein managed to skim billions of dollars from the $65 billion program and whether there had been corruption in addition to mismanagement on the part of United Nations officials.

The first report on Feb. 3 accused Benon V. Sevan, the former head of the program, of a "grave conflict of interest" that "seriously undermined the integrity of the United Nations." The conclusion was based on evidence that he had steered deals to a friend and on his inability to explain where he got $166,000 in cash. A second official, Joseph Stephanides, was accused of violating procurement regulations.

The new report questioned the conduct of two more of Mr. Annan's closest advisers: Mr. Riza, his chief of staff until his retirement in December, and Mr. Nair, head of the United Nations' watchdog group, the Office of Internal Oversight Services.

Mr. Riza was criticized for ordering the shredding of personal files from the startup period of the oil-for-food program. He said Monday that he had had told aides to do it three months before Mr. Annan ordered all documentation about the program to be saved. The report noted, however, that the actual destruction happened after Mr. Annan's order.

Mr. Nair was faulted for appointing a person to a high-level post with oil-for-food responsibilities who did almost no work on the program.

But the centerpiece of the report was the awarding of the $10 million-a-year contract for aid inspections to Cotecna, whether Kojo Annan's employment by the company influenced the United Nations' choice of Cotecna, and whether Kofi Annan knew a crucial contract had been won by the company where his son worked.

While the commission accepted that Mr. Annan had no knowledge of the awarding of the contract, it faulted him for not acting to curb suspicions of a conflict of interest when a report in The Sunday Telegraph of London raised the issue in 1999.

Mr. Annan commissioned an in-house investigation that dismissed the matter in a single day. "What we think he should have authorized, insisted upon, was an independent, thorough-going professional investigation," said Mr. Volcker, a former chairman of the Federal Reserve.

Such an investigation would have turned up difficulties in Cotecna's recent business dealings, Mr. Volcker said, making it unlikely that the contract would have been awarded.

Kojo Annan worked for Cotecna in Africa starting in 1995 and continuing until the end of 1998, when it won the United Nations contract. Both he and the company led the United Nations and investigators to believe that he had ended his association then, but subsequent disclosures showed that he continued to receive payments until February 2004. They were described as health-care reimbursements and payments to keep him from joining a competing firm.

The commission faulted Cotecna and Mr. Annan for attempting to disguise the duration of this association through third-party payments. The report concluded that while Cotecna "generally has cooperated" with the investigation, it had made "false statements" to the public, the United Nations, and the committee about Kojo Annan's period of service.

In Geneva, Robert Massey, the company's chief executive officer, put out a "preliminary statement" saying only that the committee had confirmed that Cotecna had won its contract fairly.

The report said that there were occasions where the father and son were in contact during the time Kojo Annan worked for Cotecna and the contract was awarded. It noted that on the day of the award, young Mr. Annan was a guest in his father's official residence in New York. But Mr. Volcker said that Mr. Annan did not participate in contract decisions and that there were no indications that he knew Cotecna was a program bidder.

"Our investigation has disclosed several instances in which he might, or could have become aware, of Cotecna's participation in the bidding process," Mr. Volcker said at a news conference in a Midtown hotel. "However, there is neither convincing testimony to that effect nor any documentary evidence."

"Taking all this into account, the committee has not found the evidence is reasonably sufficient to show that the secretary general knew that Cotecna had participated in the bidding process in 1998," Mr. Volcker said.

"The commission found that both Cotecna officials and Kojo Annan acted to disguise their continuing business and financial relationship, misleading the secretary general himself, other U.N. officials and the public in the process," Mr. Volcker said. "It is the failure of the U.N. officials to discover and of Cotecna and Kojo Annan not to have fully disclosed these relationships that has contributed so heartily to the questions about the integrity of the U.N.'s administration, and indeed to the need for this particular report."

A letter in the report's appendix from Kojo Annan's lawyer, William R. Taylor, admitted that his client had not been truthful with his father but rejected the accusation that he had uncooperative. "He regrets the embarrassment that omission caused to his father and to the United Nations and accepts responsibility for it," the letter said.