Fooled for Oil

By Johanna McGeary

The story so far

In December 1998 the U.N. chose the Swiss company Cotecna to monitor imports of humanitarian goods to Iraq under the oil-for-food program. The following month, newspaper reports revealed that the company had employed Kojo Annan, the son of U.N. Secretary-General Kofi Annan, and raised questions about possible conflicts of interest, which the U.N. denied. The scandal grew when evidence emerged that Saddam Hussein had skimmed some $2 billion from the $65 billion program. Last April Annan asked Paul Volcker, a former chairman of the Federal Reserve, to investigate those issues. In February his panel released its first report, accusing the head of the oil-for-food program of "grave conflict of interest" for steering lucrative oil contracts to friends and accepting cash payments. Volcker's second report, issued last week, focused in detail on Annan and his son.

Is Annan culpable?

He says the report exonerates him. Not exactly. The panel clears Annan of any role in securing contracts for Cotecna. But it also spotlights his lax oversight of the corrupt program and makes a strong "adverse finding" that faults him for failing to investigate his son's dealings thoroughly. Annan asked for an in-house probe, which dismissed the issues within a day. An independent inquiry, the report said, would have made it unlikely that Cotecna's contract would have been renewed through 2003.

Other scoundrels

Kojo Annan is the report's heavy. He repeatedly lied to his father and investigators, concealing how long he worked for Cotecna as well as how much he was paid and for what. Cotecna is faulted for hiding Kojo Annan's role and its payments to him. Two U.N. officials who worked for Kofi Annan are accused of destroying relevant documents and using Iraqi oil proceeds improperly.

Next steps Kojo Annan stopped cooperating with the inquiry last October, but Volcker is still probing his dealings. A third report covering that and broader questions of U.N. culpability in Saddam's vast rip-off is due in June. But sources tell TIME that the reports on U.N. mismanagement are already damning enough for longtime U.N. critic Henry Hyde: the Republican Congressman is drafting a bill to make U.S. financial contributions contingent on sweeping U.N. reforms.

Will Annan resign?

His defiant response: "Hell, no."

--By Johanna McGeary