Saddam & Co.

By Adam Zagorin

Getting caught funneling money to Saddam Hussein is certainly bad for p.r. But beyond that, after former Fed Chairman Paul Volcker issued a report last week on the private sector's role in the U.N. oil-for-food scandal, it isn't yet clear what will happen to the firms that allegedly handed Saddam $1.8 billion under the table:

How many companies are in the hot seat? More than half the 4,500 firms doing business with Iraq as part of the U.N.-administered oil-for-food program. Volcker's 623-page report, which alleges that Russian, French and Chinese companies made the lion's share of illegal payments, fingers some firms with well-known brands in the U.S., including Texaco, Siemens, DaimlerChrysler and a Belgian-based construction division of Volvo. With few exceptions, the accused have denied wrongdoing.

How did Saddam get the cash? Starting in 2000, many buyers of Iraqi oil, often using middlemen, deposited a total of $229 million in illegal surcharges--of 10-c- to 30-c- per bbl.--into bank accounts controlled by the Iraqi government. Meanwhile, exporters of food, medicine and other items paid nearly $1.6 billion in kickbacks, often contracted as "inland transportation" or "after-sales service" fees.

What happens next? A Texas oil trader has been indicted in New York, where grand juries are believed to be considering charges against other individuals and firms. France has accused a number of former officials. But overall few of the alleged wrongdoers are likely to be charged, in part because paying bribes to win foreign business is not illegal in many parts of the world.