GENEVA – The U.N.-ordered probe into oil-for-food corruption is being seriously hampered by an elaborate system of ghost firms set up around the world to cover the tracks of bribes to Saddam Hussein as he cheated the $60 billion program, a top investigator said.
Some front companies in this global oil trading center and elsewhere that dealt with Saddam have been liquidated or have hidden ownership, complicating the search for evidence of financial improprieties, said Swiss criminal lawyer Mark Pieth. He’s one of three commission members leading the probe headed by former U.S. Federal Reserve chairman Paul Volcker.
Major oil trading companies and individuals — from American businessmen to French, Chinese and Russian politicians — are suspected of benefiting from lucrative Iraqi oil contracts that involved kickbacks, according to the independent panel’s initial findings.
Those who profited may have been able to hide behind a web of fiction by making transactions through ghost firms that exist mostly on paper, Pieth told The Associated Press.
Despite the thin trail, Pieth said he was confident investigators would ultimately trace the funds back to those who may have made illicit profits — or allowed Saddam and his regime to profit illegally — during the oil-for-food program, which existed from 1996 until 2003.
“It is a problem. Yes, of course it is, but on the other hand we also have means of finding the beneficial owners,” Pieth said. “There is usually a file, if the banks have done their job.”
Pieth said national authorities and banks in Switzerland and other nations where front companies handled oil-for-food deals should have their own records of who was behind the firms.
“Switzerland and Liechtenstein have promised to help,” Pieth said of the two countries where more than two dozen companies got oil under the program, according to an AP examination of records.
Neither nation is known for having oil reserves of its own. But according to a list Volcker released of 248 companies that “lifted,” or exported, Iraqi oil under the program, companies based in Switzerland took more than those from any other country except France and Russia. The tiny principality of Liechtenstein — which has 33,000 inhabitants — came in eighth on the list.
Volcker has said that being on the list doesn’t necessarily imply guilt in paying kickbacks.
Switzerland and Liechtenstein are among countries whose lax regulations and traditions of discretion in business and banking make them attractive for trading companies.
Front companies registered in other tax havens — such as Cyprus, Jordan, Panama, Curacao in the Caribbean, and Jersey in the Channel Islands off the United Kingdom — also feature in the oil-for-food investigation.
The program, which began in 1996 and ended last year after the U.S. invasion ousted Saddam, allowed Iraq (news – web sites) to trade about $60 billion worth of oil for food, medicine and other necessities that became scarce under strict U.N. economic sanctions imposed after the Gulf War (news – web sites). The program was credited with preventing widespread starvation.
Congressional investigators who also are looking into corruption at the program said in November that they had uncovered evidence Saddam’s government raised more than $21.3 billion in illegal revenue by subverting U.N. sanctions and the oil-for-food program.
Volcker’s independent commission was set up this year at the request of U.N. Secretary-General Kofi Annan (news – web sites) to investigate the program. Pieth is the second commissioner and the third is South African Richard Goldstone, who prosecuted Yugoslav war crimes.
What singles Switzerland out from other countries involved in the oil-for-food affair — including Britain, France, Russia and the United States — is that it has already taken action.
In October Switzerland fined a company $42,250 for paying kickbacks to secure Iraqi oil contracts. Under Switzerland’s confidentiality policies, the Geneva-based company has not been identified publicly.
The Swiss State Secretariat for Economic Affairs, which imposed the fine, intends to investigate the Iraqi dealings of several more trading firms, said spokesman Othmar Wyss.
The names of several Swiss firms have appeared on lists of companies receiving Iraqi oil, among them the country’s largest commodity trader, Glencore International AG, which obtained more than $240 million of oil under the program, according to the Volcker investigation.
A CIA report published in September named Glencore as one of the most prolific purchasers of Iraqi oil and alleged the company paid over $3.2 million in kickbacks to the Iraqi government.
Glencore denied the allegation, stressing it “had had no direct dealings with the Iraqi government outside the U.N. oil-for-food program,” said spokeswoman Lotti Grenacher.
Geneva-based Taurus Petroleum, which is owned by a Swedish parent company, has become the first company to begin oil trading with Iraq after the fall of Saddam’s regime. Taurus denied paying bribes to any Iraqi officials and said it had not done business under the U.N. program, although its name has appeared in unofficial reports on oil-for-food.
Pieth said that more companies around the world will certainly be fined after the Volcker investigation ends. A preliminary report on findings is expected to be released in January, but the $30 million probe isn’t expected to be finished until well into 2005.
“We’re not going to do diplomatic soft talk,” Pieth said. “If there’s something to be said, we are going to name these people involved.”