Wednesday, April 27, 2005

New House Oil-For-Food Investigation Starting

In The New York Sun, Claudia Rosett reports on the latest investigation of the oil-for-food scandal. Link.
Next up in the U.N. oil-for-food scandal is a trip down the money trail, by way of the French bank tapped by the United Nations - in cahoots with Saddam Hussein - to handle the main escrow account of the graft-laden U.N. program. Tomorrow, the House Subcommittee on Oversight and Investigations will hold a hearing delving into some of the oil-for-food banking details. [...]

Federal prosecutors are investigating allegations that Saddam sent millions in bribes to two as-yet-unnamed high-ranking U.N. officials to help shape the program in his favor. But all the investigating so far has barely begun to expose the full extent of the corruption and mismanagement involved in oil for food, under which Saddam grafted billions out of more than $110 billion in U.N.-approved oil sales and relief purchases meant to help the people of Iraq. "Follow the money," says Mr. Rohrabacher, who adds, "Sometimes it's easy to miss the fact that the bank is right in the middle of it."

That bank is the New York branch of the French bank, BNP Paribas (formerly the Banque Nationale de Paris). [...]

Among questions the subcommittee is likely to pursue is why BNP, straying outside its contract with the United Nations, reassigned letters of credit - meaning that payments from the Iraq escrow account guaranteed to one contractor approved by the United Nations for a given deal were instead sent to an unapproved third party. Under a U.N. sanctions regime, in which the basic aim of oil for food was to monitor Saddam's deals, such rogue payments, running right through the bank entrusted with the account, should have raised red flags. But the United Nations made no complaint. According to the U.N.-authorized inquiry led by Paul Volcker, the world body did not even bother to review BNP's handling of the letters of credit. [...]

It is also to be hoped that BNP will provide some insight regarding Saddam's oil sales and the associated letters of credit, with which oil buyers sent payments into the oil-for-food account. In a substantial sampling of such letters of credit, seen by The New York Sun, BNP handled both sides of the transaction - meaning the buyer used BNP-related accounts in various countries to open the letters of credit guaranteeing payment to the BNP account in New York. That would mean BNP was responsible for due diligence regarding many of the oil buyers under the program, a group that turns out to have been rife with front companies, many of them dealing openly in kickbacks to Saddam from about 2000 on. Many of these transactions were handled in Switzerland, famous for a degree of banking secrecy that should have raised yet more flags about the need for due diligence.

"Follow the money" is almost always a good rule in an investigation. A foreign bank with branches in the US is subject to US justice for crimes committed here. Just like the banks that aided the major corporate scandals here, the individuals involved should face criminal prosecution and the institution should be subject to civil liabilities to the parties harmed by their actions. In this case, that would be the people of Iraq, as represented by their now representative government.


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