Human institutions are by nature flawed because they are composed of imperfect human beings. Although talented and honest people are necessary for the long-term success of any institution, internal checks and balances are also essential. Lately, it has become apparent that the United Nations is not populated with a sufficient number of people of character and integrity and the honest ones that remain are not buttressed by sufficient institutional mechanisms to protect them.

When called upon to administer the Oil-for-Food Program, the UN not only allowed former Iraqi dictator Saddam Hussein to skim money off the top — money intended to provide food and medical supplies to Iraqi children — but skimmed some of it off for themselves. Not managing to keep Hussein from surreptitiously stealing from his own people may be slightly mitigated as amazingly negligent incompetence. Participating in the theft represents corruption of the highest order.

It all started in the aftermath of the first Gulf War. Hussein was required to make a full accounting of the destruction of his weapons of mass destruction as well as forgo his aid to foreign terrorist organizations. The international community concluded that the Iraqi regime had not complied with the terms of the armistice. As a way to apply pressure to the regime, most trade with Iraq was prohibited. Although some humanitarian aid was permitted, the Iraqi regime and human rights organizations complained that though the sanctions were aimed at Hussein, the children of

To alleviate the problem, the United Nations started the Oil-for-Food Program. Iraq would be permitted to sell portions of its oil in exchange for food and other humanitarian supplies. Administering such a large program is admittedly difficult, but it is something for which the UN ought to exhibit particular competence. If it can not manage to do this, it is hard to understand what else they could be good at. Inexplicably, the UN permitted Iraq to pick both the companies it sold oil to and the companies from which it would purchase supplies. Hence, Hussein was able to skim money off both ends.

It worked this way. Iraq would sell oil at below market rates to companies it selected. After the re-sale of the oil, these companies would then kickback funds directly to the Iraqi government. Similarly, the Iraqi government would purchase food and supplies at above market rates from hand-picked companies and would later receive a kick back. As a consequence, the General Accounting Office reports that the Iraqi regime skimmed at least $10 billion intended for Iraqi children. All this was happening while the UN’s Food and Agricultural Organization as well as the UN Children’s Emergency Fund (UNICEF) reported that 200 children were dying everyday (more than 5000 per month) due to sanctions.

Investigative reporting by the Wall StreetJournal and Commentary Magazine has documented that one of the beneficiaries of skimmed money was Benon Sevan, the UN Executive Director of the Oil-for-Food Program. In the first year of the program, most of the transactions were open, but after Sevan took over a veil of secrecy was drawn over the program for “proprietary” reasons. It has been reported that Iraq was using a Panamanian firm to send money directly to Sevan. Moreover, a Swiss-based firm, Cotecna Inspections, with ties to Kojo Annan, son of UN Secretary General Kofi Annan, was in charge of inspecting shipments bound for Iraq. There were no declarations or even considerations of an apparent conflict of interest. Among items that were approved for humanitarian aid by the company were a Mercedes Benz and equipment for the Iraqi Departments of Justice and Information.

Other evidence indicates that much of the Oil-for-Food funding was routed through the French bank now known as BNP Paribas and that French and Russian firms were favorite choices of Hussein for below market price oil sales. Conclusive evidence is still out on the French and the Russians. However, the fact that the French and the Russians were both benefactors of Iraqi largesse and the French and Russians made sure the Security Council would never endorse the use of force against Iraq deserves greater scrutiny. If it turns out that the French and Germans acted in the Security Council for largely pecuniary purposes, it would damage the prestige and moral authority, such as it is, of French and Russian and the UN. It is hard to argue that the UN is an honest broker when it is taking payoffs on the side.

Embarrassed by the scandal, Kofi Annan now has asked Paul Volcker, former Chairman of the US Federal Reserve, to lead an investigation. However, it is not clear where all the records are and if Volcker will be able to come to some definitive conclusions about the scandal.

The Bush Administration is trying to broaden the international participation in the reconstruction of by enlisting the UN to help in the transition to Iraqi authority. While this is probably a wise move, we should be careful of what we wish for. We may get it.

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