US: Investigators of the United Nations oil-for-food programme in Iraq said yesterday there was not enough evidence to show secretary general Kofi Annan knew of a suspicious contract bid by his son's Swiss employer, and cleared him of any wrongdoing.
However, in a report, they strongly criticise Mr Annan's son Kojo for "intentionally deceiving" his father over his role in the company, known as Cotecna Inspection, and his attempt to hide from the inquiry secret payments from Cotecna amounting to some $400,000.
The report also accuses Cotecna and its top officials of making false statements to the public, the UN and the investigation.
It criticises former UN secretary general Joseph Connor for failing to properly investigate the fitness of Cotecna to do business with the UN, and the secretary general's former chef de cabinet, S. Iqbal Riza, for shredding documents that could have been pertinent to the inquiry.
Cotecna was the family-owned Swiss firm hired by the UN in 1998 to conduct inspections of humanitarian goods entering Iraq under the oil-for-food programme.
At the time the firm was embroiled in a criminal investigation involving allegations of money laundering and illegal payments to former Pakistani prime minister Benazir Bhutto.
The 93-page report is the second interim report of an inquiry headed by Paul Volcker, former head of the US federal reserve. It set out to address three questions:
was the selection of Cotecna by the UN properly conducted?
did the conduct of the secretary general involve a conflict of interest? and
were the actions of other persons free from impropriety?
It finds "no evidence that the selection of Cotecna was subject to any affirmative or improper influence of the secretary general in the bidding or selection process".
The contract went to Cotecna because it was the lowest bidder when it came to calculating man-hours for its inspectors in Iraq. However, UN procurement rules were not followed in the failure by the UN to get Cotecna to submit a financial statement, and "no account was taken of a Swiss criminal investigation against the chief executive officer of Cotecna, Robert Massey".
The inquiry finds "no satisfactory explanation" for this. Mr Anan's son Kojo was an employee of Cotecna when it was bidding for the UN contract in 1998. The report notes there was not "reasonably sufficient" evidence to show whether the secretary general knew that Cotecna was bidding for the contract in 1988 while his son worked there.
But when the Sunday Telegraph raised the question of conflict of interest in an article in 1999, the inquiry initiated by Mr Annan was "inadequate". He asked his chef de cabinet, Mr Riza, to look into the matter. Mr Riza in turn asked Mr Connor to make a report. Mr Connor responded the same day that the Cotecna bid had been competitive and that those handling it at the UN did not know of Kojo's relationship with the Swiss company.
The Volcker inquiry turned up two versions of the Connor memo, one unsigned. The unsigned version stated, incorrectly, that Kojo had resigned from Cotecna on October 9th, 1998.
The inquiry could not establish who drafted the memos, and concludes that if the secretary general had properly referred the matter for investigation, it was unlikely that the contract would have been allowed to continue.
After the contract was awarded, Kojo Annan said he resigned from Cotecna to avoid conflict of interest.
However, he then actively participated in efforts by Cotecna to hide his continuing relationship. He also "intentionally deceived" his father about his continuing financial relationship with the firm. He was not forthcoming to the inquiry about the money channelled to him through companies controlled by the Massey family, which owned Cotecna, between 1999 and 2004.
Kojo received $31,887 through a company called Meteor, $8,925 through Confinter, $121,940 through Westemix, and a possible further $306,305 through unnamed sources. Mr Massey testified that Kojo got $2,500 a month for two years to keep him from working for a rival company.
The Volcker inquiry finds "most problematic" Kojo's inability to explain why he got these payments. Cotecna also continued to pay corporate credit card payments for Kojo, many for international flights.
Kojo refused to attend a second interview with the Volcker inquiry, which concludes that "significant questions remain" about "the integrity of his business and financial dealings" with respect to the oil-for-food programme.
Cotecna provided documentation to the UN but falsely stated that Kojo Annan had resigned when asked in 1999 by the Sunday Telegraph. The report states Mr Massey falsely told the inquiry that Cotecna had no business or financial dealings with Kojo from 1998, and he was "not truthful" when telling the inquiry at one point that he had forgotten about the relationship.
It says he had stopped payment personally to Kojo shortly before a meeting with the inquiry in June 2004, when he claimed not to remember the payments.
Mr Volcker's report singles out for criticism a number of UN officials. Mr Riza acted "imprudently" in permitting the shredding of "chronological files for the years 1997, 1998 and 1999" from the office of the chef de cabinet. The timing was "striking" as it came one day after the Security Council passed a resolution to appoint the Volcker inquiry.
The report dwells at length on the relationship between Kofi Annan and his son.
The secretary general knew Kojo had started work for Cotecna in 1995. Mr Annan called Cotecna executive Michael Wilson when the conflict of interest issue was raised, and was falsely told Kojo had left the firm.