[Senate Hearing 109-43]
[From the U.S. Government Publishing Office]




                                                         S. Hrg. 109-43

   THE UNITED NATIONS' MANAGEMENT AND OVERSIGHT OF THE OIL-FOR-FOOD 
                                PROGRAM

=======================================================================

                                HEARING

                               before the

                PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

                                 of the

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               ----------                              

                           FEBRUARY 15, 2005

                               ----------                              

       Printed for the use of the Committee on Homeland Security
                        and Governmental Affairs

              THE UNITED NATIONS' MANAGEMENT AND OVERSIGHT

                      OF THE OIL-FOR-FOOD PROGRAM


20-172 PDF

2005

                                                         S. Hrg. 109-43

   THE UNITED NATIONS' MANAGEMENT AND OVERSIGHT OF THE OIL-FOR-FOOD 
                                PROGRAM

=======================================================================

                                HEARING

                               before the

                PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

                                 of the

                              COMMITTEE ON
                         HOMELAND SECURITY AND
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                           FEBRUARY 15, 2005

                               __________

       Printed for the use of the Committee on Homeland Security
                        and Governmental Affairs


                    U.S. GOVERNMENT PRINTING OFFICE
20-172                      WASHINGTON : 2005
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
Fax: (202) 512ï¿½092250 Mail: Stop SSOP, Washington, DC 20402ï¿½090001

                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                   SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska                  JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
NORM COLEMAN, Minnesota              DANIEL K. AKAKA, Hawaii
TOM COBURN, Oklahoma                 THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island      MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah              FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico         MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia

           Michael D. Bopp, Staff Director and Chief Counsel
   Joyce A. Rechtschaffen, Minority Staff Director and Chief Counsel
                      Amy B. Newhouse, Chief Clerk


                PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

                   NORM COLEMAN, Minnesota, Chairman
TED STEVENS, Alaska                  CARL LEVIN, Michigan
TOM COBURN, Oklahoma                 DANIEL K. AKAKA, Hawaii
LINCOLN D. CHAFEE, Rhode Island      THOMAS R. CARPER, Delaware
ROBERT F. BENNETT, Utah              MARK DAYTON, Minnesota
PETE V. DOMENICI, New Mexico         FRANK LAUTENBERG, New Jersey
JOHN W. WARNER, Virginia             MARK PRYOR, Arkansas

       Raymond V. Shepherd, III, Staff Director and Chief Counsel
                      Leland B. Erickson, Counsel
                      Mark L. Greenblatt, Counsel
                       Stephen A. Groves, Counsel
        Elise J. Bean, Minority Staff Director and Chief Counsel
                   Dan M. Berkovitz, Minority Counsel
         Zachary I. Schram, Minority Professional Staff Member
                     Mary D. Robertson, Chief Clerk


                            C O N T E N T S

                                 ------                                
Opening statement:
                                                                   Page
    Senator Coleman..............................................     1
    Senator Levin................................................     9
    Senator Collins..............................................
  2
    Senator Domenici.............................................    14
Prepared statement:
    Senator Pryor................................................    67

                               WITNESSES
                       Tuesday, February 15, 2005

Robert M. Massey, Chief Executive Officer, Cotecna Inspection 
  S.A., Geneva, Switzerland......................................    16
Andre E. Pruniaux, former Senior Vice President, Africa and 
  Middle East Division, Cotecna Inspection S.A., Geneva, 
  Switzerland....................................................    18
Arthur Ventham, former Inspector for Cotecna Inspection S.A., 
  Western Australia..............................................    20
Vernon P. Kulyk, former Deputy hief Customs Expert, United 
  Nations Office of the Iraq Program (OIP), Dar es Salaam, 
  Tanzania.......................................................    22
John Denson, General Counsel, Saybolt Group, Houston, Texas......    24
Milan Radenovic, Contract Manager, Cotecna Inspection S.A........    41
Joseph A. Christoff, Director, International Affairs and Trade, 
  Government Accountability Office, Washington, DC...............    45
Stafford Clarry, former Humanitarian Affairs Advisor, United 
  Nations Oil-for-Food Program, Syracuse, New York...............    47
Hon. Patrick F. Kennedy, Ambassador to the United Nations for 
  Management and Reform, United States Mission to the United 
  Nations, New York, New York....................................    54

                     Alphabetical List of Witnesses

Christoff, Joseph A.:
    Testimony....................................................    45
    Prepared statement...........................................   147
Clarry, Stafford:
    Testimony....................................................    47
    Prepared statement with attachments..........................   165
Denson, John:
    Testimony....................................................    24
    Prepared statement...........................................   139
Kennedy, Hon. Patrick F.:
    Testimony....................................................    54
    Prepared statement...........................................   188
Kulyk, Vernon P.:
    Testimony....................................................    22
    Prepared statement...........................................   127
Massey, Robert M.:
    Testimony....................................................    16
    Prepared statement with attachments..........................   168
Pruniaux, Andre E.:
    Testimony....................................................    18
    Prepared statement with attachments..........................   188
Radenovic, Milan:
    Testimony....................................................    41
Ventham, Arthur:
    Testimony....................................................    20
    Prepared statement...........................................   110

                                EXHIBITS

 1. Iraqi Memo Estimating Sevan's Profits at $1.2 Million.......   202

 2. Benon Sevan's Oil Allocations for Phase IV..................   204

 3. Sevan's Oil Allocations for Phases V, VII, VIII, X, XI and 
  XII............................................................   206

 4. Iraqi Chart Indicating Allocations to Benon Sevan in Phases 
  VI & VII.......................................................   216

 5. State Oil Marketing Organization (Baghdad, Iraq) Invoices 
  for Iraqi Crude Oil sold to IBEX Energy France, dated June and 
  September 2001.................................................   220

 6. Iraqi Memo Describing The Bribe of a U.N. Oil Inspector.....   222

 7. Letter Of Iraqi Oil Minister Ordering Payment Of Bribe To 
  U.N. Oil Inspector.............................................   225

 8. Iraqi Accounting Spreadsheet Showing Bribe Payments To U.N. 
  Oil Inspector..................................................   227

 9. Letter From Iraqi Oil Minister Describing Bribe Of U.N. Oil 
  Inspector......................................................   228

10. Copy of Portuguese Passport of Armando Carlos Costa 
  Oliveira, Number F-504464, issued July 4, 2000, and related 
  documents......................................................   231

11. Documents establish that Armando Carlos Costa Oliveira was 
  an oil inspector for Saybolt in Iraq...........................   241

12. Documents establishing that Armando Carlos Costa Oliveira 
  was a U.N. oil inspector at the unauthorized loading in Mina Al 
  Bakr in May 2001...............................................   249

13. Documents establishing that Armando Carlos Costa Oliveira 
  was a U.N. oil inspector at the unauthorized loading in Mina al 
  Bakr in August 2001............................................   261

14. Saybolt email, dated February 23, 2002, informing the Iraqi 
  government and the U.N. that Oliveira would travel from Basra 
  to Baghdad on March 3, 2002, from Baghdad to Amman on March 5, 
  2002...........................................................   270

15. Saybolt email, dated January 24, 2002, discussing the travel 
  schedules of various employees. Notably, Oliveira is listed to 
  leave from Amman, Jordan to Frankfurt on March 7, 2002.........   272

16. Oliveira's Bank Statement (March 2002)......................   273

17. Deposit slip reflecting cash deposit into Oliveira's account 
  in March 2002..................................................   274

18. Cotecna Fax from Kojo Annan to Robert Massey, dated 
  September 14, 1998, regarding Non Aligned Movement (NAM) 
  Summit, Durban-South Africa....................................   275

19. Cotecna Fax from Kojo Annan to Robert Massey, dated October 
  26, 1998, regarding Outstanding Consultancy Expenses...........   276

20. Cotecna correspondence from Andre Pruniaux to Neville 
  Brunnetta, dated December 4, 1995, regarding Kojo Annan joining 
  Cotecna. (One copy produced to the Permanent Subcommittee on 
  Investigations on August 28, 2004, from the Cotecna files 
  located in Geneva, Switzerland; second copy produced to the 
  Permanent Subcommittee on Investigations on December 22, 2004, 
  from the Cotecna files located in Lagos, Nigeria.).............   277

21. Cotecna Memorandum from Michael Wilson to Elie Massey, 
  Robert Massey, Andre Pruniaux, et al., dated December 4, 1998, 
  regarding Mission To The UN-Iraq Oil for Food Programme--1-2 
  December 1998..................................................   278

22. Cotecna Fax from Kojo Annan to Elie Massey, dated August 28, 
  1998, regarding Consultative Status for IFIA with the United 
  Nations........................................................   279

23. Cotecna document prepared for Kojo Annan titled 1998 Meeting 
  of the UN General Assembly.....................................   280

24. Cotecna Fax from Michael Wilson to Kojo Annan, dated August 
  28, 1998, regarding Ghana, Current Situation...................   281

25. Cotecna Letter from Elie Massey to Joseph Connor, U.N. Under 
  Secretary-General for Management, and Kofi Annan, U.N. 
  Secretary-General, dated October 6, 1998, regarding Possible 
  Additional Funding.............................................   282

26. Resume of Kojo Annan........................................   283

27. Cotecna meeting minutes, dated December 23 [1998], regarding 
  the Oil-for-Food Program and the role of Independent Inspectors   284

28. Cotecna Memo, dated February 18, 1999, regarding UMMQASR 
  Situation......................................................   286

29. Cotecna faxes, dated February 1999, regarding lab analysis--
  ``fit for human consumption''..................................   288

30. Cotecna email, dated April 1999, regarding G3 06--medical 
  samples--waiting in fr (procedures--no testing)................   291

31. Cotecna email, dated June 1999, regarding G3 06 Sampling--
  medical samples--new (concerns with quality)...................   292

32. a. Cotecna fax to UN O.I.P.-N.Y., dated March 1999, 
  regarding Claims From Iraqi Receivers..........................   293

   b. Cotecna fax to Cotecna UMM QASR, dated March 1999, 
  regarding Claims From Iraqi Receivers..........................   297

   c. Cotecna fax to Cotecna UMM QASR, dated June 1999, 
  regarding Delays In Authentications............................   302

33. Cotecna Notes from meeting with Cotecna 23-25 March 1999, 
  regarding Jonas Larsen's Mission Report and Cotecna's concerns 
  with level of inspections......................................   204

34. Cotecna email, dated April 1999, regarding G2 07 Larsen 01--
  answer to report--10...........................................   308

35. Cotecna fax to UN O.I.P.-New York, dated April 1999, 
  regarding Response to J. Larsen's Mission Report...............   316

36. Cotecna fax, dated March 1999, regarding Confidential: J. 
  Larson's Report. Mission Report [prepared by Jonas Larsen, 
  Customs Officer]--The purpose of the visit was to evaluate the 
  services provided by Cotecna, the new Independent Inspection 
  Agents and to attend the monthly meeting between UNOHCI and 
  Cotecna........................................................   322

37. United Nations Office of the Iraq Programme (OIP) fax to 
  Cotecna, dated April 25, 1999, regarding Outstanding matters (. 
  . . would first however like to address the question that 
  continues to be the cause of the majority of correspondence 
  between Cotecna and the UN, that is the question of quantity 
  and quality inspections and Cotecna's liability arising there 
  from.).........................................................   328

38. United Nations Office of the Iraq Programme (OIP) fax to 
  Cotecna, dated May 1999, regarding Letter from Mr Sevan to the 
  Permanent Mission of Iraq (. . . letter . . . from Benon Sevan 
  . . . in regards to quality inspection of goods arriving to 
  Iraq.).........................................................   331

39. Cotecna fax, dated May 1999, regarding Sites' Sampling 
  Methods........................................................   334

40. Cotecna fax, dated June 1999, regarding Report On A Visit to 
  UMM QASR, May 1999.............................................   344

41. Cotecna email from UN OIP, dated March 2000, regarding 
  Authentications of missing cargos..............................   363

42. Cotecna email from UN OIP, dated November 2000, regarding 
  Continued--Umm Qasr inspection procedures......................   367

43. Cotecna email, dated January 2001, regarding Craig Airey's 
  fax on containers leaving the port without inspection (SOMO is 
  intentially creating delays.)..................................   369

44. Cotecna email, dated April 2001, regarding Greenlight to 
  reduce backlog in Umm Qasr.....................................   371

45. Cotecna email, dated July 2002, regarding Visit of UNOHCI 
  Deputy Humanitarian Coordinator (questions . . . related to 
  smuggling of cargo.)...........................................   372

46. Cotecna letter of recommendation on Cotecna employee Arthur 
  William Ventham, dated September 24, 2003......................   374

47. Cotecna email and Arthur Ventham resignation memo, dated 
  September 29, 2003.............................................   375

48. Oil-for-Food Contract between the Ministry of Irrigation, 
  Baghdad, Iraq [Government of Iraq] & Shanghai Machinery, Imp & 
  Exp (Group) Corp., Ltd, China, dated November 12, 1998, with 
  related documents..............................................   378

49. Summary of the UN Oil-for-Food Program Audits Conducted by 
  the Office of Internal Oversight Services, prepared by the 
  Permanent Subcommittee on Investigations Majority Staff........   412

50. Financial Losses Resulting from Waste, Abuse or 
  Mismanagement Identified by OIOS Audits, prepared by the 
  Permanent Subcommittee on Investigations Majority Staff........   423

51. Illicit Iraqi Revenue 1991-2003, chart prepared by the 
  Permanent Subcommittee on Investigations Minority Staff........   426

52. BBC News, March 25, 1998, Despatches, Iraq's illegal trade 
  in oil.........................................................   427

53. Documents relating to exports from Kohr al-Amaya, Iraq......   429

54. Iraq Military Expenditures 1980-2002, chart prepared by the 
  Permanent Subcommittee on Investigations Minority Staff........   434

55. Supplemental Submission of Arthur Ventham...................   435

56. Letter of Personal Reference--Arthur Ventham, dated January 
  14, 2005.......................................................   440

57. Responses to supplemental questions for the record for 
  Joseph A. Christoff, Government Accountability Office..........   441

 
   THE UNITED NATIONS' MANAGEMENT AND OVERSIGHT OF THE OIL-FOR-FOOD 
                                PROGRAM

                              ----------                              


                       TUESDAY, FEBRUARY 15, 2005

                                   U.S. Senate,    
              Permanent Subcommittee on Investigations,    
                      of the Committee on Homeland Security
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 9:31 a.m., in 
room 342, Dirksen Senate Office Building, Hon. Norm Coleman, 
Chairman of the Subcommittee, presiding.
    Present: Senators Coleman, Collins, Stevens, Domenici, 
Warner, Levin, Carper, and Pryor.
    Staff Present: Raymond V. Shepherd, III, Staff Director; 
Mary D. Robertson, Chief Clerk; Joseph V. Kennedy, Chief 
Counsel; Leland Erickson, Counsel; Mark Greenblatt, Counsel; 
Steven Groves, Counsel; Jay Jennings, Investigator; Katherine 
Russell, Detailee (FBI); Phillip Thomas, Detailee (GAO); 
Gregory Coats, Detailee (IRS); Jeffrey James, Detailee (IRS); 
Richard Fahy, Detailee (ICE); Mike Williams, Intern; Erin 
Brannigan, Intern; Elise J. Bean, Staff Director/Chief Counsel 
to the Minority; Dan Berkovitz, Counsel to the Minority; Laura 
Stuber, Counsel to the Minority; and Merril Springer, Intern.

             OPENING STATEMENT OF CHAIRMAN COLEMAN

    Senator Coleman. This hearing of the Permanent Subcommittee 
on Investigations will be called to order. Good morning and 
welcome. This is the second in a series of hearings that the 
Permanent Subcommittee on Investigations will hold to address 
the abuses of the U.N. Oil-for-Food Program.
    That noble program was established by the United Nations to 
ease the suffering of the Iraqi people, who were languishing 
under Saddam's iron-fisted rule and because of the economic 
sanctions imposed on Iraq by the United Nations after the 
Persian Gulf War. While sanctions were designed to speed the 
removal of Saddam Hussein from power, or at least render him 
impotent, the Oil-for-Food Program was designed to support the 
Iraqi people with food and other humanitarian aid under the 
watchful eye of the United Nations. Instead, Saddam Hussein 
manipulated the program to generate billions of dollars in 
illegal revenue.
    At our first hearing in November, we detailed the methods 
used by Saddam Hussein to abuse the Oil-for-Food Program. The 
Hussein regime bought influence and favors by granting oil 
allocations to its friends and allies and made money on the 
deal by demanding surcharge payments on the actual oil sales. 
As Secretary of State Condoleezza Rice testified at her 
confirmation hearing, Saddam Hussein was ``playing the 
international community like a violin.''
    On contracts for humanitarian goods, Hussein demanded that 
suppliers inflate their contracts and pay the difference into 
secret regime accounts. These ill-gotten gains may be funding 
the insurgency in Iraq against our troops and allies today. All 
of this misconduct occurred under the supposedly vigilant eye 
of the United Nations.
    The weaknesses in the Oil-for-Food Program raise serious 
questions about the U.N.'s ability to enforce sanctions and 
administer a humanitarian aid program in the future. American 
taxpayers pay close to 22 percent of the U.N.'s operating 
costs. They need assurance that their tax dollars are well 
spent, especially in light of the fact that sanctions will 
likely be imposed upon rogue nations in the future. I believe 
the credibility of the United Nations to monitor any future 
sanctions programs hangs in the balance unless the corruption 
and mismanagement in Oil-for-Food is identified and rooted out.
    Our hearing today focuses on U.N. oversight of the program 
in the hope of revealing whether mismanagement by the United 
Nations aided or abetted Saddam's abuses of the program. 
Despite multiple entreaties by the Subcommittee and public 
statements of cooperation, the United Nations has not permitted 
the Subcommittee access to relevant U.N. documents or 
personnel, with the sole exception of the public release of 58 
internal audit reports last month. Given the U.N.'s 
intransigence, our inquiry is limited to information that we 
have uncovered from other sources.
    While the U.N. publicly asserts it is cooperating with 
Congressional investigations, in fact, this Subcommittee 
continues to be frustrated by the United Nations' refusal to 
make witnesses and documents available. On June 1 and November 
9, Senator Levin and I requested that the U.N. provide 
documents and make U.N. personnel available for interviews. To 
date, neither the documents nor the key U.N. players involved 
in the scandal have been provided to the Subcommittee. It is 
often said of governments that sunshine is the best antiseptic. 
The United Nations should move towards greater transparency.
    Just a few days ago, the Independent Inquiry Committee, 
headed by Paul Volcker, released its interim report. In that 
report, the committee revealed a significant amount of evidence 
exposing serious problems in the United Nations' management of 
the Oil-for-Food Program. It is clear that the Volcker 
Committee arrived at these findings after diligent 
investigation. I applaud their efforts and hope they will 
continue their work.
    Some of the committee's most important findings addressed 
the actions of the head of the Oil-for-Food Program, a senior 
U.N. official named Benon Sevan. Mr. Sevan was the head of the 
U.N.'s office that oversaw the Oil-for-Food Program. Mr. Sevan, 
according to Mr. Volcker's report, solicited lucrative 
allocations of Iraqi crude oil for an acquaintance, an Egyptian 
oil trader named Fakhry Abdelnoor. Mr. Abdelnoor owned an oil 
trading company called African Middle East Petroleum, or AMEP 
for short. According to Mr. Volcker's report, Sevan requested 
that the Hussein regime grant AMEP the right to buy oil under 
the Oil-for-Food Program. The Volcker panel determined that 
Sevan's solicitations on behalf of African Middle East created 
a ``grave and continuing conflict of interest, were ethically 
improper, and seriously undermined the integrity of the United 
Nations.''
    While I agree with Mr. Volcker's conclusions that Mr. 
Sevan's actions amounted to grave misconduct, I believe the 
evidence goes further than just a conflict of interest. As a 
former prosecutor, I believe that clear and direct evidence 
establishes probable cause that Benon Sevan broke the law. I 
arrive at this conclusion not only from the evidence that Mr. 
Volcker presented in his report, but also documents obtained by 
this Subcommittee that Mr. Volcker did not use, documents 
created by the Iraqi State Oil Marketing Organization, commonly 
called SOMO, which controlled the export of Iraqi crude oil 
under the Oil-for-Food Program. These documents provide further 
evidence that Benon Sevan received oil allocations from the 
Hussein regime. Each Iraqi oil allocation is worth hundreds of 
thousands of dollars. As a result, if Sevan was granted oil 
allocations, it is reasonable to infer that Sevan received a 
substantial amount of money from them.
    So the question becomes, did Benon Sevan personally receive 
oil allocations from the Hussein regime? A review of the 
evidence will suggest the answer to that is yes.
    The first document we will analyze is created by SOMO after 
the fall of Saddam Hussein, which we have labeled Exhibit 1.\1\ 
Written in Arabic, this chart is entitled ``Estimate of 
Financial Proceeds Achieved by a Sample of People Benefiting 
from the Crude Oil Allocations.'' The chart clearly states that 
it explains the estimates achieved by some individuals and 
other parties as a result of obtaining oil allocations from the 
former regime. The chart lists the ``Allocated Party,'' which 
identifies the person that received the precious oil 
allocations. Next to the allocated party appears ``Total Crude 
Oil Lifted in All Phases,'' which indicates the amount of oil 
lifted in connection with those allocations. Last, we see an 
``Estimate of Financial Proceeds for All Lifted Quantities,'' 
in which SOMO estimated the amount of money that the selected 
allocation recipients earned through selling their high-priced 
allocations.
---------------------------------------------------------------------------
    \1\ See Exhibit No. 1 appears in the Appendix on page 202.
---------------------------------------------------------------------------
    I will direct your attention to the last entry on the 
chart, which indicates that one of the selected allocated 
parties was Benon Sevan. Next to Sevan's name, the chart 
indicates that 9.3 million barrels of oil was lifted in 
connection with Mr. Sevan's allocations. The last column next 
to Mr. Sevan's name estimates that Mr. Sevan made $1.2 million 
from oil allocations under the Oil-for-Food Program. It is 
worth emphasizing that this chart makes no reference to Fakhry 
Abdelnoor or his company, African Middle East Petroleum. 
Therefore, this document makes a strong case that Benon Sevan 
received many oil allocations under the Oil-for-Food Program 
and made a significant amount of money from those allocations.
    Exhibit 2 is another SOMO chart illustrating that Benon 
Sevan received allocations.\2\ Like the previous chart, this 
exhibit was created after the fall of the Hussein regime. It 
identifies every person, official, or company that received an 
oil allocation in the fourth phase of the Oil-for-Food Program. 
Those people are listed under the heading, ``Allocated Party.'' 
In the next column, the chart identifies the company that 
purchased the allocation from the allocated party, listed as 
the ``Contractual Company.'' The last two columns indicate the 
amount of oil allocated and the amount ultimately exported.
---------------------------------------------------------------------------
    \2\ See Exhibit No. 2 appears in the Appendix on page 204.
---------------------------------------------------------------------------
    In the highlighted section of the chart, we see Contract 
Number M-04-60, which lists the allocated party as Mr. Benon 
Sevan, the United Nations. Moving to the next column, we see 
that African Middle East Panamanian Company is listed as the 
contractual company, meaning that it was the party that bought 
the oil allocated to Benon Sevan. It is important to emphasize 
that this document clearly suggests that Benon Sevan was 
granted the allocation and that African Middle East was simply 
buying the oil set aside for Mr. Sevan.
    Exhibit 3 indicates that Sevan was granted allocations in 
at least six other phases.\1\ For the sake of brevity, I will 
not walk through every chart one by one, but suffice it to say 
that each of the other charts clearly identifies the allocated 
party, that is the party receiving the allocation, as Benon 
Sevan.
---------------------------------------------------------------------------
    \1\ See Exhibit No. 3 appears in the Appendix on page 206.
---------------------------------------------------------------------------
    The exhibits we have seen so far were written after the 
fall of the Hussein regime, but Exhibit 4,\2\ however, presents 
documents that were created by SOMO during the life of the 
program. The excerpt on the upper left of the exhibit is a 
handwritten chart that shows oil allocations for Phase Six of 
the Oil-for-Food Program. The principal column headers indicate 
``Country,'' which relates to the country of the oil purchaser, 
``Allocations of for the Period Phase (5),'' ``Allocations of 
Phase (6),'' and the ``Proposed Allocations for the Period 
Following Phase (6).'' Under the header ``Country,'' we see 
Panama, which is the country of incorporation for Africa Middle 
East. Under the country, we see ``Regular Requests'' and 
``Special Requests.'' The meaning of these headings remains 
unclear and the Subcommittee is attempting to determine 
precisely what those headings mean. The key, however, is below 
those words. There appears the name, ``Mr. Sevan.'' Next to Mr. 
Sevan's name, under the heading ``Allocations for Phase (6),'' 
we see ``2 million barrels.'' Thus, this document confirms that 
oil lifted in Phase Six by the AMEP, the Panamanian company, 
was allocated to Benon Sevan. In addition, this chart indicates 
that SOMO proposed allocating 1.5 million barrels of oil to Mr. 
Sevan for Phase Seven.
---------------------------------------------------------------------------
    \2\ See Exhibit No. 4 appears in the Appendix on page 216.
---------------------------------------------------------------------------
    The document on the lower half of the exhibit is the same 
type of chart, but it deals with Phases 6 and 7. The key is the 
lower part of the table, in which Mr. Sevan's name is 
prominently displayed. This excerpt indicates that Mr. Sevan 
was allocated 2 million barrels in Phase 6, 1.5 million barrels 
in Phase 7, and was poised to receive another 1.5 million 
barrels after Phase 7.
    The final document on this exhibit appears on the right-
hand side of the chart. That document is yet another chart 
created by SOMO during the Hussein regime. The date on the 
chart appears to be July 12, 1999, which fell in Phase 7 of the 
program. Under the header, ``Quantity allocated and expected to 
be allocated,'' we see Mr. Sevan yet again. The chart indicates 
that Sevan was allocated or expected to be allocated 2 million 
barrels from Kirkuk, a region in the northern part of Iraq.
    Although we are releasing just four charts from the Hussein 
regime, the Subcommittee has additional documents written by 
the Hussein regime that are similar to these exhibits, 
indicating that Benon Sevan received oil allocations under the 
Oil-for-Food Program.
    Previously, some have questioned whether Mr. Sevan himself 
received oil allocations. The documents we have presented here 
today are considerable evidence that the answer is an 
unmitigated yes, that Sevan did, in fact, receive oil 
allocations from the Hussein regime.
    This evidence begs the question, how did the fact that the 
head of the Oil-for-Food Program receive lucrative oil 
allocations from Iraq affect the Oil-for-Food Program? How did 
the receipt of oil allocations affect Mr. Sevan's 
decisionmaking? There have been recent press reports that Mr. 
Sevan blocked an audit by the U.N. auditors into his own 
office. Was that a result of his oil allocations?
    In April 1998, which is roughly the same time Mr. Sevan 
received his first oil allocation, he instructed U.N. oil 
inspectors to delete information concerning Iraqi smuggling 
activities in a report to the U.N. Security Council. He later 
instructed those inspectors not to be ``detectives,'' with 
respect to Iraqi oil smuggling. Did Mr. Sevan turn a blind eye 
because of the oil allocations? The Iraqis believed Mr. Sevan 
would assist their efforts with respect to the import of spare 
parts for oil machinery as a result of the oil allocations. Did 
those allocations affect his support for the spare parts 
importation? All of these questions and many others remain 
unanswered.
    As a result, I believe that Mr. Sevan's misconduct goes 
well beyond a mere conflict of interest. Instead, these 
documents, when combined with the evidence presented in the 
Volcker Report, certainly establish probable cause that Mr. 
Sevan's actions rose to the level of criminal liability. 
Accordingly, I call upon Secretary-General Kofi Annan to strip 
Mr. Sevan of his diplomatic immunity so that he will be 
available for judicial process and can be called to testify 
before this Subcommittee about the evidence we have gathered.
    Over the course of our bipartisan investigation, this 
Subcommittee has uncovered evidence of even more corruption in 
the U.N. Oil-for-Food apparatus. In particular, we have found 
disturbing evidence that one of the U.N. oil monitors, the 
individuals hired by the United Nations to inspect the oil 
exports from Iraq under the Oil-for-Food Program, took a bribe. 
In doing so, the inspector helped Saddam Hussein generate $9 
million in under-the-table cash.
    Other evidence establishes the following facts. The bribed 
oil inspector was a Portuguese man named Armando Carlos 
Oliveira. We have matched up Iraqi documents to Mr. Oliveira's 
passport and other documents to confirm his identity. According 
to the documents, Mr. Oliveira participated in the 
falsification of shipping papers related to two purchases by a 
French company called IBEX Energy. We have accumulated 
significant evidence proving that Mr. Oliveira was at the oil 
terminal for both illegal loadings.
    With the help of the falsified documents, the two shipments 
took a total of 500,000 barrels of oil worth $9 million in 
excess of what was approved by the United Nations. Iraqi 
documents indicated that Saddam Hussein personally ordered the 
falsification of the documents. Iraqi documents also indicate 
that Mr. Oliveira had agreed to falsify the documents in 
exchange for 2 percent of the value of the smuggled oil. In the 
end, however, Mr. Oliveira received far less than that, only 
$105,819.
    Internal SOMO accounting spreadsheets indicate that 
$105,819 was paid to Saybolt for ``added value.'' The $105,819 
was spread over two payments. One was for $86,119 in September 
2001 and the other for $19,700 in March 2002. The entry on the 
spreadsheet for the $19,700 payment in March 2002 to Saybolt 
complements was a handwritten note to the Iraqi Minister of 
Oil, which reveals that Mr. Oliveira received $19,700 in March 
2002. The note indicates that the $19,700 payment was in cash 
at the Ministry of Oil in Baghdad on March 4, 2002.
    We have further documentation to indicate Mr. Oliveira's 
presence in Baghdad. We have letters written from the Minister 
of Oil to the Central Bank requesting approval. We have 
documentation when Mr. Oliveira left Iraq, and that on his 
return from Portugal, he deposited $5,000 into a cash account 
in Portugal within days after returning.
    We have released the evidence that the Subcommittee has 
uncovered related to these facts and we invite you to review 
these documents.
    In addition, we will hear testimony describing the role of 
Cotecna, the U.N. independent inspection agent for humanitarian 
goods imported into Iraq under the Oil-for-Food Program. 
Cotecna was charged with authenticating the arrival of goods 
into Iraq upon which the United Nations would authorize payment 
of those goods from the escrow account at BNP Paribas. This 
escrow account was funded by U.N. approved oil sales by Iraq 
under the program.
    Looking into the role of Cotecna is important because 
Saddam Hussein was able to receive kickbacks on humanitarian 
goods sold under the program. For example, as raised in our 
earlier hearing, the Weir Group paid $8 million in kickbacks to 
a Swiss account under the Oil-for-Food Program. In addition, 
using substandard goods was another form of kickback known to 
have occurred under the program, where lesser-quality goods 
were shipped into Iraq, allowing for the former regime and the 
complicit supplier to pocket the difference between the lesser-
quality goods and the higher-quality goods specified under the 
goods contract. It is essential to understand if Cotecna's 
duties were to verify the price or quality of the goods coming 
into Iraq, or merely to just verify the arrival of humanitarian 
goods into Iraq. I will note that the U.N. Secretary-General 
and the Office of the Iraq Program were responsible for 
overseeing the price, quality, and quantity of goods coming 
into Iraq, and were responsible for overseeing Cotecna's 
operations and duties.
    I am also looking forward to hearing testimony from a 
former employee of the U.N.'s Office of the Iraq Program. The 
Office of the Iraq Program would review humanitarian contracts 
between the former regime and suppliers around the world. It is 
important to determine whether this review would identify 
price-inflated contracts that could be used for kickbacks as 
well as fraudulent contracts.
    I have a number of concerns about the procurement of goods, 
particularly as they regard the Northern Kurdish regions. There 
have been widespread reports from the Kurdish regions that they 
did not receive all the goods they were entitled to, which was 
supposed to be 13 percent of all humanitarian goods under the 
program.
    Another serious allegation that has been hanging over the 
United Nations concerns Secretary-General Kofi Annan and his 
son, Kojo. This allegation involves improprieties in the U.N.'s 
award of a multi-million-dollar contract to a Swiss company 
called Cotecna Inspection during the time when Kojo Annan was 
employed by Cotecna as a paid consultant. Our concerns are 
heightened due to the fact that the Volcker Commission's 
recently released interim report revealed major improprieties 
in the U.N.'s award of contracts in 1996 to Saybolt and 
Lloyd's, and revealed the direct intervention of then-
Secretary-General Boutros Boutros-Ghali in the selection of BNP 
Paribas. To date, the Subcommittee has reviewed thousands of 
documents produced by Cotecna and has interviewed a half-dozen 
current and former Cotecna officers and employees, including 
Kojo Annan himself.
    Our investigation of these allegations has revealed a 
disturbing pattern of information gaps and memory lapses. For 
example, despite Cotecna's assertions to the contrary, we have 
learned that Kojo Annan's activities were not strictly limited 
to Nigeria and Ghana and that he lobbied many other countries 
while in New York during the 1998 session of the U.N. General 
Assembly. Particularly troubling is a report written by Mr. 
Annan relating to some kind of network he was setting up in New 
York City, and I think if we have Exhibit 18,\1\ we could 
display that.
---------------------------------------------------------------------------
    \1\ See Exhibit No. 18 appears in the Appendix on page 275.
---------------------------------------------------------------------------
    In his report dated September 14, 1998, Kojo Annan stated 
the following: ``As we discussed with you on Sunday, PM and 
myself put in place a `machinery' which will be centred in New 
York that will facilitate the continuation of contacts 
established and assist in developing new contacts for the 
future. This `machinery', due to its global nature and its 
longevity, is as important overall as any other contacts 
made.''
    Subcommittee staff interviewed Kojo Annan this past Friday, 
but he could not recall what he was referring to when he 
described a machinery that he had put into place, why it was 
centered in New York, or why it was of a global nature, or how 
the machinery might ultimately prove to be beneficial for 
Cotecna's long-term marketing strategy. In short, Mr. Annan 
cannot recall what his own words meant. This memory lapse is 
troubling. Subcommittee staff also interviewed Cotecna's 
officers about this report, but they, too, could shed no light 
on Mr. Annan's statements. Our suspicions are further raised 
due to the fact that there is no report regarding Mr. Annan's 
activities while in New York during the U.N. General Assembly, 
and I would note that we have substantial documentation of 
other reports by Mr. Annan when he was doing other activities 
at other times. Memory lapses combined with an absence of trip 
reports is not only troubling, it strains credibility.
    The Subcommittee has invited Mr. Annan to appear today to 
address these matters further and afford him an opportunity to 
explain his statements, but he has declined.
    Our second panel will address the 58 U.N. audits of the 
Oil-for-Food Program. I can say at the outset that I find a 
great many red flags in these audits. The gross mismanagement 
of almost every aspect of the Oil-for-Food Program is simply 
inexcusable and wasted over $690 million.
    Every organization has its shortcomings, but I cannot 
recall any organization where the scope of its problems 
encompassed every basic management skill needed to ensure an 
effective program. The Office of Internal Oversight Services' 
audits identified problems with budget planning and execution, 
coordination, strategic planning, communication, procurement, 
inventory control, cash management, accounting for assets, 
documenting and/or justifying expenditures, information 
technology, and human resources management. This represents the 
complete panoply of required management skills.
    In our third panel, we will hear testimony from the Hon. 
Patrick F. Kennedy, U.S. Ambassador to the United Nations for 
Management and Reform at the U.S. Mission to the United 
Nations. Ambassador Kennedy will address a variety of issues 
pertaining to the management and oversight of the U.N. Oil-for-
Food Program, including the pervasive oil smuggling that 
occurred under the program.
    In our November 15, 2004, hearing, Subcommittee Majority 
staff estimated that the magnitude of fraud perpetrated by 
Saddam Hussein in contravention of U.N. sanctions from 1991 to 
2003 was over $21.3 billion, of which $13.6 billion, 64 
percent, was a result of the Iraqi oil smuggling. The 
Subcommittee believes that the Oil-for-Food Program provided 
Saddam Hussein with an enhanced opportunity to circumvent 
sanctions and amass a greater amount of illicit funds. This was 
particularly the case with oil smuggling.
    The export of Iraqi oil under the U.N. Iraq sanctions 
program was strictly forbidden. It is clear that from the onset 
of sanctions in 1991, members of the U.N. Security Council were 
aware of Iraqi oil being exported through the protocols in 
contravention of the sanctions. Security Council members in the 
661 Sanctions Committee took note of Iraqi oil being exported 
to Jordan under the protocols and did not respond to Turkey's 
request. The United States and the United Kingdom tried 
unsuccessfully in the Security Council to tighten controls on 
oil smuggling. Russia, a veto-holding permanent member of the 
Security Council, consistently blocked such initiatives. 
However, other Security Council members did not initiate any 
other significant action to prevent the flow of Iraqi oil to 
Jordan and Turkey, nor did they provide financial relief to 
countries like Jordan and Turkey, who were adversely affected 
by Iraqi sanctions and had petitioned the Security Council for 
relief. I look forward to discussing these issues related to 
smuggling with Ambassador Kennedy, and I suspect so will 
Senator Levin.
    I know that was a very long statement. We have a lot of 
information and this is just the second in a series of 
hearings, so I thank my Subcommittee Members for their patience 
as I walked through that and appreciate their presence today.
    I turn to my distinguished Ranking Member, Senator Levin.

               OPENING STATEMENT OF SENATOR LEVIN

    Senator Levin. Mr. Chairman, thank you for holding these 
hearings, and for your leadership. As you mentioned, today, the 
Permanent Subcommittee on Investigations is conducting its 
second hearing on the United Nations Oil-for-Food Program.
    Today's focus is on the process used by the United Nations 
to monitor Iraq's oil sales and inspect goods imported by Iraq 
with the proceeds from those sales. U.N. employees, U.N. 
contractors, and U.N. member states all had roles to play in 
inspecting goods, monitoring oil sales, and enforcing U.N. 
sanctions. Their failures, as well as their successes, hold 
important lessons for future U.N. sanctions programs.
    The U.N. recently released 58 audit reports on the Oil-for-
Food Program that were prepared by the U.N.'s internal auditor, 
the Office of Internal Oversight Services. The release of these 
reports set an important new precedent in U.N. auditing, opened 
the door to greater U.N. oversight, and contributed to the 
culture of increased transparency and accountability that needs 
to take hold at the United Nations. It is a positive omen.
    The U.N. audit reports show that the Office of the Iraq 
Program lacked basic financial controls and exercised 
inadequate oversight of the Oil-for-Food Program. The U.N.'s 
Independent Inquiry Committee, also known as the Volcker 
Committee, also shows that the U.N.'s auditing efforts 
themselves were inadequate. The Volcker Report found, for 
example, that the audits of the Oil-for-Food Program were 
understaffed and underfunded. The audit's scope was often too 
narrow, and the follow-up process to correct identified 
problems was flawed.
    The Volcker Report also presented disturbing evidence that 
the head of the U.N.'s Office of the Iraq Program, Benon Sevan, 
may have personally profited from oil allocations made by Iraq, 
and the Chairman in his statement a moment ago outlined 
significant additional evidence which supports allegations of 
wrongdoing by Benon Sevan.
    In addition, the Volcker Report identified problems with 
how the U.N. selected Saybolt, Lloyd's Register and BNP for key 
Oil-for-Food contracts. The Volcker Report noted that it was 
continuing to investigate the U.N.'s decision to award an 
inspection contract to Cotecna in 1998 to determine whether 
favoritism played a role. This Subcommittee, as our Chairman 
has outlined, is examining that issue at great length and that 
will be a subject of the discussion today.
    Kojo Annan denies any wrongdoing. Kojo Annan has cooperated 
with the Subcommittee by voluntarily submitting to an 
interview, but we have been unable to reach a judgment about 
the contract award due primarily to the Subcommittee's lack of 
access to relevant documents and personnel at the United 
Nations. For that reason, questions remain unanswered about how 
the Cotecna contract was awarded and about Kojo Annan's 
activities.
    The United Nations has responded to the Volcker Report by 
expressing a determination to remedy identified deficiencies 
and strengthen its management, procurement, and auditing 
functions. The U.N.'s comments suggest that the U.N. staff has 
gotten the Volcker Committee's message and is willing to embark 
on real change. I hope so. To bolster public confidence, it is 
essential that the United Nations fully implement the Volcker 
Committee's recommendations.
    A key concern about the Oil-for-Food Program is the extent 
to which it was manipulated by Saddam Hussein to obtain illicit 
revenues for his regime. We know that some of Saddam Hussein's 
revenue from sales of oil came from kickbacks that he got from 
contractors involved in the Oil-for-Food Program. But the bulk 
of his illicit oil sale revenue, as the Chairman has just 
pointed out, actually came from the money he received from 
unregulated sales of Iraqi oil entirely outside of the Oil-for-
Food Program to Turkey, Jordan, and Syria. That is sometimes 
called oil smuggling, but these are the open sales of Iraqi oil 
to those three countries. We in the world looked the other way 
from those sales, even though they were prohibited by the 
U.N.'s sanctions regime.
    The Volcker Report states, ``There can be no question that 
bribes and other abuses provided many opportunities for illicit 
gain, often as part of a deliberate effort by Iraq to reward 
friends or cultivate political influence.'' What is not clear 
is the extent to which those illicit financial gains benefited 
middlemen and corrupted individual Iraqi officials rather than 
the Iraqi regime.
    What does appear clear is that the major source of external 
financial resources for the Iraqi regime resulted from 
sanctions violations outside the Oil-for-Food Program's 
framework, and that is shown on the chart which is up here now 
showing that,\1\ in our computations, about 73 percent of the 
money which went to Saddam Hussein from oil sales came through 
those open oil sales primarily to those three countries, 
principally to Jordan, but also to Syria and Turkey. That was 
the open oil sales, the dark blue. I think the Chairman's 
estimated percentage was about 67 percent as I remember, but 
that is the same oil sales that he referred to as oil smuggling 
and that I refer to as open oil sales.
---------------------------------------------------------------------------
    \1\ See Exhibit No. 51 appears in the Appendix on page 426.
---------------------------------------------------------------------------
    Using numbers provided by the Duelfer Report, it appears 
that Saddam Hussein's abuse of the Oil-for-Food Program 
provided about one-sixth of Iraq's total illicit income, while 
nearly three-quarters of this illicit income came from those 
open oil sales which weren't supposed to take place because 
they were outside of the Oil-for-Food Program. They occurred 
with the knowledge and acquiesence of the world community, 
including the United States.
    As a matter of fact, as we have dug into the historical 
record, we found evidence suggesting that Iraq may have 
obtained even more illicit revenue from its oil trade with 
Turkey than previously estimated. The Duelfer Report, for 
example, states that from 1991 to 1998, Iraq obtained at most 
$30 million per year from illegal oil sales outside of the U.N. 
Oil-for-Food Program with its neighbors. However, the evidence 
now suggests that Iraq's illegal oil trade with Turkey alone 
during these years generated far more revenue for Saddam 
Hussein than that, perhaps hundreds of millions of dollars each 
year.
    These were openly made sales. The press reported big 
profits were being made from Iraq's oil sales to Turkey in 
1992. The New York Times report noted that, ``The Western 
allies and just about everybody else seem ready to avert their 
gaze from this illegal smuggling.'' Three years later, the New 
York Times estimated that Iraq was illegally selling about 
200,000 barrels of oil per day through Turkey, obtaining 
illicit revenue for Saddam Hussein totaling between $700 
million and $800 million per year.
    The oil sales that we in the world tolerated were open and 
obvious, despite their being in violation of the U.N. sanctions 
that we helped put in place. For example, in March 1998, the 
BBC posted a photograph purporting that it had found, ``clear 
evidence that Iraq is breaking U.N. sanctions by exporting 
hundreds of millions of dollars worth of oil across its borders 
into the Gulf and Turkey.\1\ Huge convoys of trucks and many 
ships carry the fuel out of Iraq, where it is sold on the black 
market,'' and that is a copy of that BBC news report showing 
those lines of trucks going into Turkey.
---------------------------------------------------------------------------
    \1\ See Exhibit No. 52 appears in the Appendix on page 427.
---------------------------------------------------------------------------
    The Administration acknowledged the illegal trade in a 
quote in the New York Times of June 1998, saying that, ``the 
tendency has been to turn a blind eye because the Turks are 
benefiting from it at a time when they are complaining anyway 
about sanctions on Iraq.'' It is clear that the whole world, 
including the United States, knew about Iraq's oil sales to 
Turkey, Jordan, and Syria.
    In the case of the United States, we not only knew about 
the oil sales, we actively stopped the U.N. Iraq Sanctions 
Committee, known as the 661 Committee, from acting to stop 
those sales. Beginning in 1996, Turkey formally asked the 
United Nations through the 661 Committee for permission to 
increase its oil trade with Iraq. The United States expressly 
and repeatedly objected to the 661 Committee's consideration of 
Turkey's application instead of voting to simply turn it down. 
The United States could have voted to end the sales. Instead, 
it stopped the United Nations from acting. The result was that 
illegal oil sales to Turkey continued unabated. Hundreds of 
millions of dollars went into the pockets of Saddam Hussein as 
a result.
    Both the Clinton and Bush Administrations demonstrated in 
other ways an awareness and implicit approval of Iraq's oil 
sales to Turkey and Jordan. Both Administrations repeatedly 
sent to Congress waivers from U.S. laws prohibiting U.S. 
foreign aid to any country that violated U.N. sanctions on 
Iraq. Each year since 1994, Congress has prohibited foreign aid 
to any country violating U.N. sanctions on Iraq. Both the 
Clinton and Bush Administrations repeatedly issued waivers for 
Turkey and Jordan. Oil sales by Iraq to Turkey and Jordan 
continued apace in violation of U.N. sanctions with our 
knowledge and implied consent.
    Now, the U.N. sanctions, despite all the leakage, abuses, 
and looking the other way to violations, were stopping Saddam 
Hussein from rearming Iraq. In testimony to Congress in 2001 
about the sanctions, Secretary of State Colin Powell said the 
following, ``I think credit has to be given for putting in 
place a sanctions regime that has kept him pretty much in 
check.''
    As a matter of fact, the sanctions were working 
sufficiently well that Saddam Hussein used every tactic at his 
disposal to circumvent and to corrupt them. He was intent on 
undermining the U.N. sanctions regime precisely because they 
were working so well. U.N. sanctions represent one of the few 
available non-military tools to control the behavior of 
threatening nations. Helping sanctions work more effectively is 
an important goal, and fixing responsibility when they are 
allowed to be circumvented or corrupted will hopefully prevent 
that from happening in the future.
    I commend the Chairman for his determined efforts to 
achieve those goals through these hearings and I commend our 
staffs for the way they have worked together in carrying out 
the investigation on which our hearings are based. Thank you, 
Mr. Chairman.
    Senator Coleman. Thank you, Senator Levin.
    We are pleased to have with us the Chairman of the full 
Homeland Security and Government Affairs Committee, Senator 
Collins.

             OPENING STATEMENT OF CHAIRMAN COLLINS

    Chairman Collins. Thank you, Mr. Chairman. I know that 
everyone is very eager to hear from the witnesses today, so I 
would ask unanimous consent that my full statement be entered 
into the record and I am just going to make a very few 
comments.
    Senator Coleman. Without objection.
    Chairman Collins. First, let me commend you for leading 
this much-needed investigation into the U.N. Oil-for-Food 
Program. This is a matter of extraordinary complexity and of 
great importance.
    The Subcommittee's first hearing last November established 
that Saddam Hussein systematically looted the Oil-for-Food 
Program and turned what should have been one of the greatest 
humanitarian aid programs in history into one of history's 
greatest frauds. We know that Saddam Hussein used some of his 
illicit proceeds to buy international support for his regime 
and to undermine numerous U.N. resolutions. We know that some 
of the proceeds were used to buy the weapons that Saddam 
Hussein needed to remain in power. Some of these weapons are 
now being used by terrorists against our troops and against the 
Iraqi people.
    The question before the Subcommittee now is how was Saddam 
Hussein able to do this. The interim report of the Volcker 
Commission provides part of the answer. Indeed, its findings 
confirm some of our worst suspicions. In the critical 
components of the Oil-for-Food contracting, the inspections of 
oil exports, the inspections of humanitarian imports, and the 
banking arrangements, the report finds that political 
considerations, favoritism, and expediency seems to take 
precedence over integrity, transparency, and accountability.
    In the area of internal program audits, the words used by 
the Volcker Commission--inadequate, erroneous, and 
unsatisfactory--are, if anything, an understatement as the 
Subcommittee's own investigation demonstrates. The clear lack 
of anything resembling diligent oversight for a program worth 
some $64 billion is, to use another word, unconscionable.
    As the Chairman has outlined, the Subcommittee's own 
investigators have uncovered very disturbing information 
suggesting improprieties and possible fraud at many levels of 
the Oil-for-Food Program. This investigation, as well as the 
investigations by five House Subcommittees, has been hampered 
considerably by the U.N.'s reluctance to cooperate fully. I 
believe that we have only explored what appears to be an 
iceberg. We have only explored the tip of it. As we go deeper, 
this lack of full cooperation will become increasingly 
unacceptable.
    Accountability is vital for all institutions. This is 
especially true for public institutions. It is clear that 
something went terribly wrong with the Oil-for-Food Program, 
and those responsible must be held accountable.
    Again, Mr. Chairman, thank you for your leadership.
    Senator Coleman. Thank you, Chairman Collins.
    [The prepared opening statement of Senator Collins 
follows:]

             PREPARED OPENING STATEMENT OF SENATOR COLLINS

    Thank you, Senator Coleman. I commend you for leading this much-
needed investigation of the United Nations' Oil-for-Food Program. This 
is a matter of extraordinary complexity, and of great importance.
    The Subcommittee's first hearing on this program last November laid 
a solid foundation for the work ahead. As a result of our inquiry and 
others, we know that Saddam Hussein systematically looted the Oil-for-
Food program and turned what should have been one of the greatest 
humanitarian-aid programs in history into one of history's greatest 
frauds. We know that Saddam Hussein used some of his illicit proceeds 
to buy international support for his regime, and to undermine the 
numerous U.N. resolutions demanding compliance with the Gulf War cease-
fire agreement.
    We know that some proceeds were used to buy the weapons the brutal 
dictator needed to remain in power. We also know that some of those 
weapons--the ammunition and rocket-propelled grenades--now are being 
used by terrorists against our troops and against the Iraqi people.
    The question before us now is, how was Saddam Hussein able to do 
this? The interim report of the Volcker Commission provides part of the 
answer. It reviews the way this program was set up and operated. Its 
findings confirm some of our worst suspicions.
    In the awarding of contracts to get the program under way, the 
interim report finds that the U.N. not only failed to follow generally 
accepted practices, but also failed to follow its own internal 
policies. In the critical components of Oil-for-Food contracting--the 
inspections of oil exports, the inspections of humanitarian imports, 
and the banking arrangements--the report finds that political 
considerations, favoritism, and expediency seemed to have taken 
precedence over integrity, transparency, and accountability.
    In the area of internal program audits, the words used by the 
Volcker Commission--inadequate, erroneous, and unsatisfactory--are, if 
anything, understatement. The clear lack of anything resembling 
diligent oversight for a program worth some $64 billion is, to use 
another word, unconscionable.
    It is only in the area of administrative expenditures that the 
findings are merely disturbing. The report noted that payments were 
made for expenditures that were not sufficiently documented or 
explained. In addition, given the widespread allegations of fraud and 
corruption in this program, the decision to reduce administrative 
expenditures by shortchanging internal inspections and audits is a 
glaring example of being penny-wise and pound-foolish.
    Finally, we come to the findings regarding Benon Sevan, the former 
Executive Director of the U.N.'s Office of the Iraq Program, the so-
called ``ambassador'' of the Oil-for-Food Program. The Commission's 
finding that Mr. Sevan engaged in, ``a grave and continuing conflict of 
interest'' regarding extremely lucrative oil allocations speaks for 
itself. Mr. Sevan's explanation for his unexplained wealth--a gift from 
an elderly aunt on a modest pension--fails anyone's straight-face test.
    As the Chairman has outlined, this Subcommittee's own investigators 
have uncovered very disturbing information suggesting improprieties at 
many levels of the Oil-for-Food program. This investigation, as well as 
the investigations by five House committees, has been hampered 
considerably by the U.N.'s reluctance to cooperate fully. These 
investigations so far have only explored the tip of what appears to be 
an iceberg. As they go deeper, this lack of full cooperation will 
become increasingly unacceptable.
    Accountability is vital for all institutions. This is especially 
true for public institutions. It is clear that something went terribly 
wrong with the way the Oil-for-Food program was set up and 
administered, and those responsible must be held accountable. I look 
forward to the evidence the PSI investigators have uncovered and will 
be presenting today.

    Chairman Coleman. Senator Domenici.

             OPENING STATEMENT OF SENATOR DOMENICI

    Senator Domenici. Mr. Chairman, first, I want to say to you 
that I have been here a long time, longer than many people 
believe I should have been, but frankly, I have not seen a new 
Senator take an issue of this magnitude and do the kind of job 
you have done with it. I have no doubt that many people were 
skeptical of your first comments with reference to what was 
going on, but I believe before we are finished that you will 
prove that you were right and that you found something that is 
terribly important to what has gone on in the Middle East.
    From my standpoint, I always wondered how Saddam Hussein 
could remain so strong when sanctions indicated to the world 
that he was depleted of resources that would permit him to 
remain such a strong power with reference to military might and 
control over his people. The sanctions were intended to 
diminish his power, but it seems like something else was 
happening. I think we might find out when we are finished with 
these hearings that this is what happened, this is where he got 
his support. If that is the case, I believe the U.S. Congress 
has uncovered something that is truly important to our country 
as we look at what we have tried to do. We have been misled. We 
have been put upon, without any question, by those who have 
done this in a very serious way.
    And last and almost more important, and we don't know the 
extent of this, but I am very suspicious of countries that 
seemed to be questioning resolutions that would have led to a 
conclusion that we should intervene in Iraq. Somehow it seems 
certain countries decided not to continue down that line, and 
the question is, were they affected by the transactions that 
occurred here, directly or indirectly? Were they biased because 
of the monetary receipts that were coming in to either them or 
their friends, friends of that government?
    I think you have talked about that and around that, and I 
don't know that we have proof yet, but I think these hearings 
will at least put on the table that something else was 
happening that might have had an impact on why countries didn't 
support us with votes in the United Nations when the time came 
to finally decide enough was enough in Iraq. I hope you 
understand what I am saying, and I hope the people understand 
what I am saying.
    I don't want to openly accuse these countries, but it seems 
to me very close to a logical conclusion that there was some 
impact and it might have come from the resources that were 
siphoned into those countries or people close to the leadership 
in those countries. If that is the case, and it may very well 
be so, then these hearings will have proven something far 
beyond what you started out talking about and far beyond what 
our people in America were thinking when these U.N. votes were 
occurring.
    I thank you for your diligence and I hope we can conclude 
with facts that you were right from the beginning and that this 
is a terrible set of actions on the part of the United Nations. 
If so, something has to happen. Thank you, Mr. Chairman.
    Senator Coleman. Thank you, Senator Domenici.
    I would like to welcome our first panel of witnesses for 
today's important hearing. This morning, we will hear from 
Robert Massey, the Chief Executive Officer for Cotecna 
Inspection; Andre Pruniaux, a former Senior Vice President of 
the Africa and Middle East Division for Cotecna Inspection; 
Arthur Ventham, a former Inspector for Cotecna; Vernon Kulyk, a 
former Customs Officer for the United Nations Office of the 
Iraq Program; and finally, John Denson, the General Counsel for 
Saybolt Corporation.
    I welcome all of you to today's hearing and look forward to 
hearing your views on the United Nations' handling of the Oil-
for-Food Program as well as discussing the role of Saybolt and 
Cotecna as independent inspectors for the Oil-for-Food Program. 
Cotecna was the independent inspecting agent for the 
humanitarian goods imported into Iraq under the program. 
Saybolt Group was the independent inspection agent for Iraqi 
oil exports under the program. I think it is important to 
understand how you carried out your duties and whether these 
duties were consistent and appropriate with the purpose of the 
Oil-for-Food Program and U.N. sanctions.
    I want to take this opportunity to thank all of you for 
coming such a long distance to be at this hearing. It is 
important that you are with us this morning and we do 
appreciate your being here.
    Before we begin, pursuant to Rule 6, all witnesses who 
testify before the Subcommittee are required to be sworn. At 
this time, I would ask you to please stand and raise your right 
hand.
    Do you swear that the testimony you are about to give 
before this Subcommittee is the truth, the whole truth, and 
nothing but the truth, so help you, God?
    Mr. Massey. I do.
    Mr. Pruniaux. I do.
    Mr. Ventham. I do.
    Mr. Kulyk. I do.
    Mr. Denson. I do.
    Senator Coleman. We will be using a timing system today. 
Please be aware that approximately one minute before the red 
light comes on, you will see the lights change from green to 
yellow. It will give you an opportunity to conclude your 
remarks. Your written testimony will be printed in the record 
in its entirety. We ask that you limit your oral testimony to 
no more than 5 minutes.
    Mr. Massey, we will have you go first, followed by Mr. 
Pruniaux, Mr. Ventham, Mr. Kulyk, and we will end up with Mr. 
Denson. After we have heard all the testimony, we will turn to 
questions. Mr. Massey, you may proceed.

  TESTIMONY OF ROBERT M. MASSEY,\1\ CHIEF EXECUTIVE OFFICER, 
          COTECNA INSPECTION S.A., GENEVA, SWITZERLAND

    Mr. Massey. Thank you, Mr. Chairman. Mr. Chairman and 
distinguished Members, good morning. My name is Robert Massey. 
From 1993 to the present, I have been the CEO for Cotecna 
Inspection S.A. in Geneva, Switzerland. Cotecna served as 
independent inspection agent for humanitarian goods entering 
Iraq in the U.N. Oil-for-Food Program between 1999 and 2003. 
Thank you for this opportunity to address the Subcommittee.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Massey with attachments appears 
in the Appendix on page 168.
---------------------------------------------------------------------------
    You have received my written statement. Therefore, my 
prepared oral statement will make only four points.
    First, Cotecna was selected fairly on objective grounds, 
including price, responsiveness to the RFP, and expertise.
    Second, we performed our limited and technical role 
professionally under extraordinarily difficult circumstances.
    Third, we had no role whatsoever in the financial aspect of 
the program.
    Finally, the employment of Kojo Annan was in connection 
with the company's substantial work in West Africa exclusively 
and had absolutely no relationship to Cotecna's selection for 
the Oil-for-Food Program.
    I will elaborate on these four points in no particular 
order.
    Between 1992 and 1996, the inspection mission in the U.N. 
humanitarian programs for Iraq changed, becoming much more 
limited. In 1992, Cotecna was competitively selected in the 
first international call for tender for a U.N. program to 
monitor Iraq's purchase of humanitarian goods. The company's 
1992 draft contract would have provided for Cotecna to perform 
price verification, pre-shipment inspection, and post-landing 
inspection. The 1992 program was never implemented, however, 
because the United Nations and Iraq did not reach agreement.
    In 1996, Cotecna participated in a new U.N. call for 
tender, this time merely for the authentication of goods. 
Authentication, a service unique to the U.N. program, compares 
the shipping documents accompanying the goods and the goods 
themselves against U.N. documents and database, confirming the 
goods actually arrived. Authentication was developed by the 
United Nations as one of the several steps in the process for 
paying suppliers under the Oil-for-Food Program.
    Cotecna did not begin to authenticate shipments in 1996 
because the United Nations awarded the contract to another 
company. This leads me to my next point. Cotecna's limited 
technical role under the 1998 contract did not place us in a 
position to detect illegal payments by suppliers.
    I can best explain our role by specifying what we did and 
did not do. Cotecna was contracted to, and did, compare the 
U.N. documents and database with the shipping documents 
accompanying all Oil-for-Food goods crossing the Iraqi borders 
at specified locations, did visually check 100 percent of these 
goods and more closely examined a 10 percent random subset, and 
did test whether 100 percent of foodstuff was fit for human 
consumption.
    Cotecna was not contracted to, and did not, verify that 
foodstuff shipped was of the grade contracted, did not assess 
the value of the goods, did not interdict prohibited goods 
outside the program, did not perform any task with respect to 
goods not voluntarily presented, and did not select the goods 
imported, establish their specifications, choose suppliers, 
negotiate or verify prices, designate sales intermediaries, 
establish sales commissions, or handle funds for the payment of 
goods.
    Your invitation asks me to describe my or my company's 
knowledge, if any, of illegal payments by suppliers to either 
U.N., Cotecna, or Iraq officials. My company and I have no 
knowledge of any such payments to anyone. We as inspectors with 
a limited and technical role were in no position to have such 
knowledge.
    My third main point is that Cotecna performed its job well 
and fully in accordance with its mandates. My colleague Andre 
Pruniaux will explain this point in more detail. Let me make 
only two related observations.
    First, while limited and technical, Cotecna's mission was 
difficult and sometimes ambiguous. There were, for example, 
ambiguities concerning how and whether Cotecna was to test the 
quality of foodstuffs and how extensive Cotecna's physical 
inspection for all goods should be. Largely, our role was 
clarified over time through communications with UNOIP people, 
although formal contract amendments did not always follow.
    After 1998, Cotecna asked the United Nations to expand the 
company's scope of work to include services supporting price 
verification. The United Nations declined because it saw itself 
as solely responsible for this task.
    My final point is that the United Nations properly awarded 
Cotecna its contract. Before I discuss the 1998 U.N. 
procurement, let me say that Kojo Annan played no role in 
helping Cotecna obtain the U.N. contract. A detailed timeline 
provided with my written statement places his work for us in 
its proper African context. His employment with us had nothing 
to do with Iraq and everything to do with West Africa.
    Cotecna hired him in late 1995 to work in Lagos, Nigeria, 
on Cotecna's government pre-shipment inspection contract there. 
He resigned in December 1997, some months after the Nigerian 
administration terminated Cotecna's contract. Because of his 
marketing skills in Nigeria and Ghana, Cotecna subsequently 
hired him to work under a 10-month consultancy agreement, which 
included a non-compete clause. In January 1999, after 
completion of this consultancy agreement, we negotiated a new 
and enforceable non-competition agreement providing 
compensation, as required under Swiss law.
    There was a clear business rationale for these 
arrangements. In 1999 and 2000, Cotecna was pursuing inspection 
contracts in Nigeria and Ghana and did not want Kojo Annan 
available to the competition. As reflected in the provided 
timeline, the intense competitive environment in Nigeria and 
Ghana continues until this day.
    Cotecna was awarded a U.N. contract in 1998 based on our 
proposal, which offered the lowest cost and highest technical 
expertise, as well as experience working in harsh conditions. 
Along with the handful of other inspection companies worldwide, 
Cotecna learned of the U.N.'s October 9, 1998, RFP per standard 
procurement procedures. Cotecna had in the past been awarded 
U.N. contracts, had been selected for the unimplemented 1992 
program, and had been invited to bid on the new Oil-for-Food 
Program in 1996.
    Mr. Chairman, under the unusual and restrictive conditions 
I have described, Cotecna fully met its obligation to the 
United Nations. I am proud of Cotecna's performance in this 
program.
    From the outset, Cotecna has cooperated fully with this 
Subcommittee's investigation.
    This concludes my prepared statements and I would gladly 
answer any questions.
    Senator Coleman. Thank you, Mr. Massey. Mr. Pruniaux.

     TESTIMONY OF ANDRE E. PRUNIAUX,\1\ FORMER SENIOR VICE 
PRESIDENT, AFRICA AND MIDDLE EAST DIVISION, COTECNA INSPECTION 
                   S.A., GENEVA, SWITZERLAND

    Mr. Pruniaux. Mr. Chairman and distinguished Members of the 
Subcommittee, thank you for inviting me to speak today. My name 
is Andre Pruniaux. I served as Senior Vice President of Cotecna 
Inspection S.A. between 1998 and 2004. As such, I managed 
Cotecna's operations in Africa and the Middle East, including 
its work as independent inspection agent for humanitarian goods 
in the U.N. Oil-for-Food Program.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Pruniaux with attachments appears 
in the Appendix on page 88.
---------------------------------------------------------------------------
    Today, I will describe, first, our negotiation of the 1998 
Oil-for-Food Program contract with the United Nations, then how 
we performed our duties, then our working relationship with the 
UNOIP.
    We worked on this program from early 1999 to late 2004, so 
there is a great deal of information for me to cover in a short 
time. Everything I describe today is detailed in my written 
testimony and the extensive records that Cotecna has produced 
to investigators.
    Cotecna received the Oil-for-Food tender in late 1998. We 
found that the tender was broadly worded and did not provide 
detailed technical and process specifications. We found the 
lack of detail surprising, as the program had already been in 
operation for 2 years.
    Although not mentioned in the tender, the United Nations 
imposed Cotecna the use of their existing Lotus Notes system 
during the negotiations. We had proposed using our in-house IT 
and communication system and had fixed the contract price on 
this assumption. At the time, we did not know that much about 
Lotus Notes, but our IT team understood that communication 
costs would be higher and the system less efficient. To 
accommodate their Lotus Notes requirement, the United Nations 
agreed to a price increase even before finalization of the 
original contract.
    When we arrived on the ground in Iraq, the conditions were 
worse than anticipated. The inspection sites had recently been 
evacuated and were in disarray. There was a huge backlog of 
documents to be processed. We had only 1 month's lead time from 
contract award to implementation. No standard operating 
procedures existed when we assumed responsibility, although 
procedures unique to the Oil-for-Food Program were demanded of 
us.
    An example of the initially vague scope of work concerns 
the testing of foodstuffs to ensure only that they were fit for 
human consumption. This is not a recognized concept within our 
industry. We had to work out what the United Nations wanted by 
making suggestions that they would accept or reject until we 
knew exactly what they intended our mandate to be. These 
clarifications were not documented in formal contract 
amendments, but were agreed ad hoc and then reflected in the 
standard operating procedures we developed for the program and 
which were approved by the United Nations
    If there was any doubt about whether or not we should 
authenticate a shipment because the paperwork was incomplete or 
a shipment arrived at the wrong crossing, we would consult with 
the United Nations in New York and get their decision. These 
frequent consultations resolved many of our mandate's 
ambiguities. However, it still seems to have left room for 
confusion amongst outside observers, such as the U.N. auditors, 
as to our performance as well as to the scope of our work.
    We also found that in reality, the U.N. Lotus Notes system 
was cumbersome and unsuited for the authentication purpose. 
Replicating data between our servers in Iraq and the U.N.'s 
servers in New York often took days and the system often 
crashed. Then we would start the data replication process over, 
causing us to expend many more man hours. The Lotus Notes 
system was controlled by the United Nations and was the only 
way supplier contract information was electronically 
transmitted to us.
    The system's shortcomings greatly impacted upon the 
workload of inspectors, who had to work long hours, often 
through the night. For example, the system meant that we had 
manually to fax often 2,000 or more authentication sheets from 
Iraq through to New York each night.
    Due to the design of the system, the audit trail was 
manual. It could take hours to track a single delivery. Think 
of this in terms of over 30,000-plus contracts, some of which 
involved several thousand individual deliveries.
    As you can see, the program presented significant 
challenges. I will now explain how we worked with the UNOIP 
staff to overcome these challenges.
    Cotecna developed standard operating procedures for every 
aspect of the mandate. We established a three-level internal 
oversight and audit process. These were carried out by a team 
leader at each site, the contract manager in Amman, and our 
head office in Geneva. The contract manager position was 
introduced by Cotecna at our own cost to ensure efficiency and 
compliance. We also would hire technical experts as required, 
for example, customs specialists and financial auditors. The 
contract manager would be in daily contact with inspectors on 
the ground and would also conduct detailed field audits at each 
site on average every 2 months. I would also personally conduct 
my own on-site reviews twice a year, and there were semi-annual 
management meetings in Amman and Baghdad which the UNOIP staff 
would attend when possible.
    We communicated with the UNOIP daily, providing them with 
detailed reports as to the precise level of authentication 
activity at each site. We also provided reports on the pending 
authentications. The UNOIP regularly visited and audited our 
sites, and I would visit New York two or three times a year for 
working sessions with the UNOIP.
    In conclusion, Cotecna met the terms of its mandate in 
full. In order to develop the best service possible, we 
insisted on 100 percent visual inspection of all imports. We 
also put in place a contract manager and we hired up to 30 
surplus inspectors to allow for strenuous shift demands and 
sufficient rest and recuperation for our inspectors in Iraq. We 
took these steps at our own expense. We developed clear SOPs 
that the United Nations approved.
    Mr. Chairman, I am confident that Cotecna met and exceeded 
its obligations under the U.N. mandate and we did so under very 
difficult circumstances.
    This concludes my prepared statement and I would be happy 
to answer any questions.
    Senator Coleman. Thank you very much, Mr. Pruniaux. Mr. 
Ventham.

 TESTIMONY OF ARTHUR VENTHAM,\1\ FORMER INSPECTOR FOR COTECNA 
              INSPECTION, S.A., WESTERN AUSTRALIA

    Mr. Ventham. Mr. Chairman and Members of the Subcommittee, 
my name is Arthur Ventham and I am here at your request to 
testify about my experiences as an inspector with Cotecna 
Inspections S.A., the independent inspection and authentication 
contractor for the Oil-for-Food Program.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Ventham appears in the Appendix 
on page 110.
---------------------------------------------------------------------------
    Before I begin my testimony, I want to thank you and the 
Subcommittee for giving me the opportunity to travel to your 
Nation's capital to provide assistance to your investigation 
into the United Nations Oil-for-Food Program and I hope my 
testimony assists with your endeavors.
    I would like to iterate that my intent is not to denigrate 
my fellow inspectors employed by Cotecna Inspections but to 
provide the insight into what occurred on the ground in Iraq at 
the sites that I spent time at, namely Ar'Ar, Al-Waleed, Um 
Qasir, and Zakho, and Iskenderun in Turkey.
    The period that I spent with Cotecna in Iraq, Turkey, and 
Jordan was an experience I would not have missed. I went to 
Iraq to try and do something for the people of that country as 
well as assisting an organization that I had a lot of time for, 
namely the United Nations. Before answering the Subcommittee's 
questions, let me give you a brief description of my background 
and role at Cotecna.
    From 1977 to 1994, I was employed in various capacities 
with the Australian Customs Service. During my 18 years there, 
I served in senior positions including their Training Officer, 
Customs Commercial Systems and Investigations Section; Senior 
Operations Officer, Investigations and Compliance Section; Duty 
Manager, Compliance and Passenger Processing Section; and 
Senior Investigator, Inland Revenue Section.
    From 1994 to 1995, I was contracted as a Manager, Tariff 
and Trade Section of Coopers and Lybrand, which is one of the 
big four accounting firms in Australia.
    From 1995 to 1998, I was employed in private industry as 
the Managing Director, Business and Development, Tariff and 
Trade Section of ArMar Holdings International, an international 
boutique consulting agency, and as the Chief Executive Officer 
of Business Development of Power Management Australasia, a 
specializing accounting, CPA, and business consulting agency 
for major projects both onshore and offshore Australia.
    In 1998, I returned to the public service as a contract 
employee for the West Australia State Government, where I 
worked until December 2002, when I was hired as an inspector 
for Cotecna. Upon terminating my employment with Cotecna, I 
returned to public service work for the State of West 
Australia, where I work at the present time.
    As for my employment with Cotecna, I landed the job through 
a former colleague with the Australian Customs Service who had 
himself worked for Cotecna as an inspector in Iraq. He 
suggested that I apply for the inspector position, which I did. 
I was subsequently hired. I actually departed Australia on 
December 20, 2002, for service in Iraq. I served as an 
inspector at the Ar'Ar inspection station on the Saudi Arabian 
border until the end of January 2004.
    In mid-January, I volunteered to visit the Al-Waleed 
inspection station on the Syrian border for the purpose of 
observing and learning the inspection process so that I could 
prepare a standard operating procedure for the Ar'Ar site at 
the request of the team leader. After approximately 1 week at 
Al-Waleed, I returned to Ar'Ar, where I learned that I was 
being transferred to Um Qasir inspection station near the 
Kuwait border and the Persian Gulf.
    I remained at Um Qasir as an inspector until March 17, when 
we were evacuated to Jordan due to hostilities associated with 
Operation Iraqi Freedom. I remained in Jordan until April 7, 
when I was transferred to Iskenderun, Turkey, as an inspector.
    While at Iskenderun, I rotated through a satellite site in 
Mersin, Turkey, and also visited other inspection sites in the 
area on an as-needed basis. Eventually, I was promoted to the 
position of Administrative Deputy Team Leader, which meant that 
I was responsible for administration, accounts, and other 
activities associated with the Mersin site.
    In late June, I accepted an opportunity to become the Site 
Leader of the Zakho inspection station on the Turkish border--
--
    Senator Coleman. Mr. Ventham, if I may, rather than going 
through your history of assignments, can you focus on your 
observations to help the Subcommittee?
    Mr. Ventham. Prior to being accepted as an inspector, my 
understanding of the Oil-for-Food Program was somewhat limited 
and I was of the opinion that all goods entering Iraq were 
subject to the same strict inspection services to ensure that 
no unlawful or inappropriate goods, such as military, 
chemicals, or other potential dangerous goods were brought into 
the country illegally. From the procedures and processes I 
witnessed as an inspector, this did not appear to be the case, 
as we were only interested in those goods that complied with 
U.N. SCR 986 sanctions.
    As an ex-military officer and business consultant, I am 
aware of and have been trained in logistics, security, and 
service delivery. The activities that I undertook while 
employed with Cotecna was contrary to everything that I have 
been taught, be that through the university, the military, or 
customs. As a professional customs manager and business 
consultant, I was somewhat surprised at how Cotecna operated 
when dealing with a major U.N. activity such as the Oil-for-
Food Program.
    To my dismay, I found that the inspections being performed 
by Cotecna, inspections which I found to be inadequate were, in 
fact, appropriate based on the instructions provided to them by 
the OIP U.N. I could not allow myself to continue to be part of 
such an inspection program or to be associated with a company 
who conducted the inspection business in that manner.
    While I am disappointed that I was unable to work with the 
United Nations to achieve a desired outcome, I am not sorry to 
have left Cotecna when I did, as I believe that the way they 
operated was contrary to best practice.
    I am now available to answer your questions.
    Senator Coleman. We will enter your full statement into the 
record, Mr. Ventham. Thank you very much. Mr. Kulyk.

 TESTIMONY OF VERNON P. KULYK,\1\ FORMER DEPUTY CHIEF CUSTOMS 
   EXPERT, UNITED NATIONS OFFICE OF THE IRAQ PROGRAM, DAR ES 
                        SALAAM, TANZANIA

    Mr. Kulyk. Good morning, Mr. Chairman, Ranking Member 
Levin, and Subcommittee Members. Thank you for this opportunity 
to testify before this inquiry into matters concerning the 
Office of the Oil-for-Food Program, United Nations.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Kulyk appears in the Appendix on 
page 127.
---------------------------------------------------------------------------
    In July 1998, I joined the United Nations Office of the 
Iraq Program, UNOIP, as a customs expert. Eventually, I became 
the Deputy Chief Customs Expert and my responsibilities 
included reviewing contracts for humanitarian aid to be shipped 
into Iraq under the program as well as monitoring the 
performance of the independent inspection contractors in the 
program.
    I am a Canadian citizen, and prior to my arrival at the 
United Nations Office of the Iraq Program, I had in excess of 
30 years of experience as a customs officer with the Government 
of Canada and I also had substantial experience enforcing 
sanctions in a sanctions environment, working in the Balkans in 
1993 and 1994.
    This Subcommittee's invitation requested that I address 
several topics in my prepared remarks. However, in my opening 
statement, I will focus on the humanitarian goods contract 
review and approval process.
    There were two main categories of contracts that the UNOIP 
was responsible for reviewing under the program, contracts for 
humanitarian goods and contracts for agency goods. For the 
purpose of explanation, humanitarian goods were sometimes 
referred to as the 53 percent account because 53 percent of the 
revenues from the sale of Iraqi oil were used to purchase these 
goods. Likewise, the agency goods were sometimes called the 13 
percent account, because 13 percent of the oil revenues went to 
their purchase.
    The government of Iraq was permitted to contract directly 
for the purchase of humanitarian goods with suppliers. Agency 
goods, on the other hand, were purchased directly by the United 
Nations agencies for use in the three northern governates 
because it was felt that the government of Iraq could not be 
trusted to deliver humanitarian goods to that region.
    I will first discuss the contract review and approval 
process for humanitarian goods, which had several distinct 
steps which I believe demonstrate a reasonably comprehensive 
review process.
    First, at the beginning of each phase of the program, the 
Program Management Division, or PMD, of the UNOIP was 
responsible for creating a list of goods that could be 
purchased, and this was called the distribution plan, which in 
essence essentially was a large shopping list.
    Second, the government of Iraq negotiated directly with 
suppliers for the purchase of the goods that were included in 
the distribution plan.
    Third, the supporting mission of the supplier would submit 
the contract to the United Nations, because suppliers were not 
allowed to submit their contracts directly to UNOIP.
    Fourth, customs experts at the UNOIP's Contracts Processing 
Monitoring Division, or CPMD, as it is referred to, where I 
worked, reviewed the contracts presented by the missions on a 
first come, first served basis.
    It is important to note that the review process is not 
simply a paper exercise. We reviewed the contracts for 
completeness, box by box, line by line, and clause by clause to 
assess the following criteria: One, whether the goods being 
purchased fell into a category of goods on the distribution 
plan; two, whether the goods being purchased were appropriate 
and/or suitable for the approved purpose in the sector; three, 
whether the goods were reasonably priced under the 
circumstances; and four, whether contracts included prohibited 
clauses that were outside of the scope of the program, such as 
preferred payment clauses or performance guarantees or 
commissions, if you may wish.
    To assess the reasonableness of prices, we attempted to 
obtain the transactional value of the goods by various methods. 
These methods included cross-checking the prices on similar 
goods from different phases of the program, checking catalogs 
of different suppliers for price comparisons, researching price 
information available on the Internet, and contacting suppliers 
via the permanent missions. It should be noted that customs 
experts were not allowed to meet with suppliers without mission 
representatives being present to reduce potential offers or 
bribes or other financial incentives that suppliers may extend.
    Following this thorough review of the application and the 
contract, the customs officer compiled his or her findings in 
an officer's comment or report, which included the expert's 
assessment of whether the contract price was reasonable, 
slightly high, or excessive.
    Fifth, the Chief Customs Expert or the Deputy Chief Customs 
Expert conducted another supervisory level of compliance review 
of each written contract report. Thus, while I was serving as 
the Deputy Chief Customs Expert, I reviewed most of the 
contracts and written contract reports compiled by customs 
experts.
    Finally, the 661 Committee reviewed each contract and each 
report, including whether the contract complied with the 
relevant U.N. resolutions, in particular Resolution 986, and 
the 661 Committee had the option of approving the contract, 
denying the contract, or putting the contract on hold pending 
clarification.
    Agency goods, or 13 percent account goods, had a slightly 
different contract review and approval process and it is 
important for the members of the panel to note that while the 
authentication of agency goods was not a trigger to payment for 
suppliers, it was facilitative to the extent of gathering 
statistics and to some degree of reconciliation of the arrival 
of agency goods. It was not a trigger to payment.
    I worked with a group of highly qualified and committed 
customs experts in the Contracts Processing Management 
Division, who I believe were dedicated to doing their best to 
report overpricing and suspected fraud to the 661 Committee. To 
my knowledge, the 661 Committee was fully aware of all 
suspected overpricing and fraud detected and reported.
    In conclusion, the stated goal of the program was to get 
the humanitarian goods to the Iraqi people who were suffering 
as a result of the U.N. sanctions while ensuring that the 
government of Iraq did not manipulate the program to rearm its 
military. I believe the program was successful in achieving its 
goal in spite of the limitations placed on it.
    Mr. Chairman, I am now happy to answer any questions you 
may have.
    Senator Coleman. Thank you, Mr. Kulyk. Mr. Denson.

 TESTIMONY OF JOHN DENSON,\1\ GENERAL COUNSEL, SAYBOLT GROUP, 
                         HOUSTON, TEXAS

    Mr. Denson. Chairman Coleman, Ranking Member Levin, 
distinguished Members of the Subcommittee, thank you for the 
opportunity to testify before you today. My name is John 
Denson. I am General Counsel of Saybolt. You have asked me to 
speak today about the activity of Saybolt in its capacity as 
independent inspection agent for the United Nations during the 
Oil-for-Food Program.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Denson appears in the Appendix on 
page 139.
---------------------------------------------------------------------------
    I would like to make a personal observation, if I might, 
and that is that Saybolt had both the blessing and the curse of 
playing a very pivotal role in one of the most politically 
charged international programs in history. We ourselves are not 
political, and that may be one of the reasons we were chosen 
for that role. We welcome the opportunity to uncover the truth 
about what went right and what went wrong in this program, and 
for that reason, we have worked very closely with your 
Subcommittee and with all the official investigators to bring 
things out into the open and have them clearly understood by 
everybody that needs to learn from and look at this program.
    Going back to my prepared oral testimony. I have submitted 
a detailed written statement, so I will keep my oral comments 
brief, focusing on only a few key points which I hope will help 
the Subcommittee evaluate the information it has received 
regarding Saybolt, including almost 300,000 pages we have 
already provided to the Subcommittee during the last several 
months.
    I would like to take a moment to put our performance and 
our duties as a U.N. contractor in Iraq in some context. Over 7 
years of the Oil-for-Food Program, Saybolt inspected some 2,700 
loadings at two inspection points designated by the United 
Nations, the Ceyhan, Turkey, and the Mina Al-Bakr, Iraq, 
loading terminals. Saybolt also monitored the flow of oil 
through the pipeline connecting Iraq to the Ceyhan port, in 
addition to inspecting some oil industry equipment imports and 
coordinating three expert studies on the Iraqi oil industry for 
the United Nations.
    The United Nations extended our contract every 6 months 
between 1996 and 2000, and in 2000, the United Nations renewed 
our contract, which was further extended through the end of the 
program in 2003. These extensions and renewals are a reflection 
of the quality of work we did under very difficult 
circumstances.
    On the subject of the selection of Saybolt to be a 
contractor for the United Nations, I would like to emphasize 
one point. The manner in which the United Nations conducted 
this process, which is described further in my written 
testimony, elicited some criticism in the interim report 
produced earlier this month by the U.N. Independent Inquiry 
Committee, also known as the Volcker Commission. In particular, 
the interim report found that the United Nations did not adhere 
to some of its internal rules in conducting that process.
    However true that finding may be, it is not a finding about 
Saybolt. Saybolt was not made aware of any such rules. Further, 
the rules are not even made publicly available, as far as we 
know. The only guideline that the United Nations made known to 
Saybolt at the time is that it reserved the right to conduct 
the procurement process in whatever manner it deemed to be in 
the best interest of the United Nations.
    In order to compete in the bidding process, Saybolt 
therefore had to tailor its efforts to the concerns expressed 
by U.N. officials, such as the need for a lower price, and to 
make the various bids an apples-to-apples comparison rather 
than the apples-to-oranges comparison it started out being. In 
the end, as detailed in my written testimony, we are confident 
that Saybolt was the most qualified bidder and that we offered 
the most competitive price.
    At Saybolt, we are proud of our performance under the U.N. 
contract. Although living and working conditions were extremely 
tough and the Iraqi infrastructure was also found wanting in 
critical ways, Saybolt inspectors carried out their duties with 
a very high level of dedication and professionalism. Saybolt 
always worked in close coordination with the United Nations and 
always responded promptly to difficulties it encountered in the 
field.
    I won't take up the Subcommittee's time with an exhaustive 
list of the challenges we face in Iraq. Suffice it to say that 
Iraq under the Hussein regime was not very welcoming to foreign 
contractors.
    One operational challenge does bear mention here because it 
has been periodically discussed at hearings on the program, the 
lack of functioning metering equipment in Mina Al-Bakr. This, 
like some of the other issues we will discuss today, reflects 
some of the inherent flaws in how the program was structured to 
operate. Although Saybolt alerted the United Nations to this 
problem from the onset of the program, and to some extent even 
before the program started, Iraq did not undertake to put into 
place functioning meters at the Mina Al-Bakr platform. As a 
result, Saybolt could not measure the flow of oil into 
individual tankers. Instead, Saybolt had to rely on an 
alternate method of measurement. This method, while compliant 
with commercial standards, was not as foolproof as a meter or 
as accurate as a meter would be.
    This lack of proper metering equipment was also a 
contributing factor in the 2001 topping-off incidents involving 
the oil tanker Essex. As noted in my written testimony, Saybolt 
immediately investigated this problem and we detailed our 
findings to the 661 Committee. Our investigation found no 
evidence at the time to suggest that the company knew of these 
two topping-off incidents before they happened. The available 
evidence indicates that the Essex loaded additional oil, 
approximately 230,000 barrels each of the two times, after the 
Saybolt inspectors had already certified the loading amount and 
left the vessel to return to the living quarters.
    Saybolt immediately instituted several additional 
safeguards to prevent any recurrence of this. Under the new 
procedures, our inspectors stayed on board ships until their 
departure. If their departure was delayed, Saybolt placed 
numbered, sealed caps on the vessel loading valves, which we 
again inspected prior to departure to make sure they had not 
been removed. These additional measures were effective and we 
are aware of no further incidence of topping off.
    Furthermore, Saybolt prepared a report for the U.N.'s 611 
Committee to analyze the likelihood that there were prior 
incidents of topping off. This report concluded that it was 
extremely unlikely that there were other incidents of topping 
off.
    As you may know, documents obtained from Iraq last year 
have led to an allegation that Iraq tried to bribe one of the 
Saybolt inspectors on the platform in connection with the Essex 
loadings. I have personally overseen our recent investigation 
into that allegation. We have sought to gather evidence on a 
global scale and are in the process of evaluating the evidence 
we have been able to obtain.
    In addition, I have cooperated with this Subcommittee and 
have kept it fully informed of everything that we have been 
able to do on this investigation and we look forward to 
continuing to do so. I understand that the Subcommittee has 
obtained additional documents from Iraq relating to this 
allegation and that these documents will be placed in the 
record today. Saybolt will review these documents very 
carefully. Saybolt does not take allegations of bribery of 
company employees lightly. If there is any credible evidence to 
support the allegation, Saybolt will take appropriate 
disciplinary action.
    The other point of clarification should be made as it 
relates to the scope of our duties as a U.N. inspector. As I 
have mentioned, our inspectors worked at two locations, the 
Ceyhan-Zakho pipeline between Iraq and Turkey, and the Mina Al-
Bakr loading platform in Southern Iraq. Saybolt's mandate was 
not to inspect all of Iraq oil exports, nor was it to act as a 
police force. We were not tasked with monitoring exports of oil 
by Iraq from all locations other than the two I just mentioned. 
Nonetheless, when we became aware of instances of exports 
outside of the Oil-for-Food Program, we alerted authorities.
    For example, in November 2000, Saybolt informed the United 
Nations of rumors that the pipeline to Syria had been put into 
operation. In March 2001, Saybolt informed the United Nations 
of information indicating that there was smuggling into Turkey 
via tankers, avoiding the Iraq-Turkey pipeline at which our 
inspectors were stationed. In addition, we informed both the 
United Nations and the MIF about illegal loadings that we 
understood were taking place at Khor Al Amaya, a terminal about 
ten kilometers to the north of Mina Al-Bakr.
    Finally, I would like to clarify how our contract with the 
United Nations for inspecting oil exports was priced. As you 
know, last month, the IIC released an audit report on the 
management of the Saybolt inspection contract. In its annex to 
the briefing paper, the IIC summarized certain conclusions from 
that report. What the IIC did not mention or take into account 
was that the U.N. Office of Iraq Program, the OIP, and Saybolt 
had informed the auditors that several of their conclusions 
were based on a misunderstanding of the nature of Saybolt's 
contract with the United Nations.
    Specifically, auditors in the U.N. office had misunderstood 
the contract as a cost-plus contract rather than a fixed-price 
contract. In fact, the price of the contract was fixed on a per 
man, per day rate. In negotiating this rate, Saybolt assumed--
--
    Senator Coleman. Mr. Denson, could you sum up? You are 
about 4 minutes over, and I am trying to let you say everything 
you need to say----
    Mr. Denson. Sorry.
    Senator Coleman [continuing]. But if you can please sum up, 
and we will submit that statement for the record.
    Mr. Denson. All right. We have produced to the Subcommittee 
documents regarding the audit and the correspondence following 
the audit and we would encourage their release as other things 
are being put in the public record.
    Let me close by saying that Saybolt has been in close 
contact with the Subcommittee staff through this investigation, 
has worked hard to be responsive to all requests by the 
Subcommittee, and we will continue to do so. I hope the 
Subcommittee has found the information Saybolt has provided 
useful, and again, I thank you for the opportunity to testify 
and I would be happy to respond to any questions you may have.
    Senator Coleman. Thank you, Mr. Denson.
    I would note, we are going to do 8-minute rounds of 
questions to start, and I would presume we are going to have 
more than one round.
    I would note that Saybolt has been very cooperative with 
the Subcommittee and we do appreciate that.
    You indicated that you informed the United Nations in 
November 2000 about the pipeline into Syria. Do you know if any 
action was taken on that issue?
    Mr. Denson. As far as we know, no action was taken.
    Senator Coleman. And you also informed the United Nations 
in March 2001 about the smuggling into Turkey. Do you know if 
any action was taken on that?
    Mr. Denson. As far as we know, no action was taken.
    Senator Coleman. Do you know whether Mr. Sevan's office 
ever inspected your oil monitoring activities in Iraq?
    Mr. Denson. You mean other than the audits, Senator?
    Senator Coleman. Yes.
    Mr. Denson. Mr. Sevan's office, I don't think, physically 
inspected our operations in Iraq.
    Senator Coleman. Let me just, for the record, in my opening 
statement, we talked about an Armando Carlos Oliveira, who our 
records indicate was a Saybolt employee in Iraq under the Oil-
for-Food Program. Can you confirm that he was, in fact, a 
Saybolt employee?
    Mr. Denson. He was, in fact, a Saybolt employee.
    Senator Coleman. One other issue for now, Mr. Denson. In 
Charles Duelfer's report, the name Saybolt appears as a 
recipient of an oil allocation Phase 12, though it says no oil 
was ever lifted. Would you confirm under oath that Saybolt 
never requested or received any allocation of Iraqi crude oil?
    Mr. Denson. Absolutely. Saybolt did not request and did not 
receive an oil allocation and we have no idea how our name 
ended up on that list.
    Senator Coleman. I wonder if we could put Exhibit 52,\1\ 
Senator Levin's exhibit, actually, it is the picture, it is 
right back there. I would ask Mr. Ventham, since you were on 
the ground, just looking at the picture of trucks that were 
lined up, is that a site that you are familiar with?
---------------------------------------------------------------------------
    \1\ See Exhibit No. 52 appears in the Appendix on page 427.
---------------------------------------------------------------------------
    Mr. Ventham. Yes.
    Senator Coleman. Now just to make it clear, you were 
focused on what we call 986 goods?
    Mr. Ventham. That is correct, yes.
    Senator Coleman. Can you explain the difference between 986 
goods and other goods?
    Mr. Ventham. Well, basically, we were only told to inspect 
goods that complied with the U.N. Security Council Resolution 
986. Anything else, we weren't interested in talking about.
    Senator Coleman. So if someone had papers but the papers 
weren't relating to 986, those trucks would just go through?
    Mr. Ventham. As far as I was concerned, yes.
    Senator Coleman. And we are talking about--could you give 
me an estimate of the number of trucks that passed through Al-
Waleed border station during the week you spent there prior to 
Operation Iraqi Freedom?
    Mr. Ventham. I saw approximately 400 to 500 trucks, I think 
it was.
    Senator Coleman. And how many of those trucks were 986 
trucks that you inspected?
    Mr. Ventham. I inspected three.
    Senator Coleman. Three?
    Mr. Ventham. Three.
    Senator Coleman. Thank you. I wonder if we can turn to Mr. 
Massey. I want to focus a little bit on Kojo Annan and the 
filing of reports. We interviewed one of your former employees, 
Michael Wilson. I think, in fact, he is currently one of your 
consultants. Do you know Mr. Wilson?
    Mr. Massey. Yes.
    Senator Coleman. At least he indicated to us it was 
standard practice for Cotecna employees to write trip reports 
detailing what was accomplished on a particular trip, is that 
correct?
    Mr. Massey. This is correct.
    Senator Coleman. We were not supplied with any trip report 
for the time, apparently there were 15 days that Mr. Annan was 
in New York for the General Assembly. Do we have Exhibit 19? 
\1\ I believe on that exhibit, he is submitting a request for 
consultancy expenses, 15 days in New York, for work for the 
General Assembly and various meetings relating to other special 
projects. Do you have any trip report for those 15 days?
---------------------------------------------------------------------------
    \1\ See Exhibit No. 19 appears in the Appendix on page 276.
---------------------------------------------------------------------------
    Mr. Massey. We haven't found any trip report. We looked 
into our files. We also looked into the archives in Lagos, 
where he was residing at that time, to see whether there was 
any trip report. We haven't found any.
    Senator Coleman. So in spite of the fact that you have a 
practice and procedure that calls for trip reports, for this, 
for what he is being reimbursed for for 15 days in New York, 
the General Assembly, you have no documentation of what he did 
during that period of time?
    Mr. Massey. No, and it may very well be that he hasn't 
written any trip reports. What may have happened is that soon 
after the General Assembly meeting, which was attended by 
himself and Mr. Pierre Mouselli, we met again, he and I, in 
Washington, early October, I think, on the occasion of the IMF 
World Bank annual meeting. Maybe we have discussed his meetings 
that he had had during the General Assembly. So that may 
explain why we haven't found any original reports. This is the 
only explanation that we can come up with to explain the lack 
of reports in our archives.
    Senator Coleman. Mr. Pruniaux, I believe the Subcommittee 
requested Exhibit 20.\2\ Can you put Exhibit 20 up there, 
please? Exhibit 20 is a letter from you, Mr. Pruniaux, dated 
December 4. The original one was produced on August 28 to the 
Subcommittee, and in that, I believe, there are actually two 
documents. We have an original document received August 20, and 
then as we were going through our investigation, we asked for 
some other documents, and the document refers to, ``I refer to 
our telephone conversation of Friday, 1 December 1995. Attached 
is Mr. Annan's CV.''
---------------------------------------------------------------------------
    \2\ See Exhibit No. 20 appears in the Appendix on page 277.
---------------------------------------------------------------------------
    We also then got another copy of that document with a 
series of papers just a little while ago, on December 22, 2004. 
It appears that the original document that was sent to us in 
August, there is information that is redacted. In other words, 
what we got in our first request in August there is apparently 
no reference to the ``P.S.'' that is apparently in the original 
document. It was supplied to us in December of this year. As a 
``(P.S.: Attached is also copy of a recent article in newsweek 
on Kojo's father, Kofi Annan).''
    Can you explain to me why the document that was originally 
sent to the Subcommittee in August had that information 
redacted?
    Mr. Pruniaux. No. I recognize my own document, the one I 
produced on the 4th of December 1995, and the other one which 
comes from the files in Lagos.
    Senator Coleman. Do you recall whether the--I am trying to 
understand why a document that was submitted to this 
Subcommittee in August has information that was apparently 
redacted from what was the original. The original document made 
specific reference to Secretary-General Annan.
    Mr. Pruniaux. Yes. There is no evidence that it was 
redacted again, but I can recognize the writing of Mr. 
Bunnetta, who was the Chief Liaison Officer in Lagos at that 
time.
    Senator Coleman. I am deeply concerned, Mr. Pruniaux, that 
the documents that we received in August apparently had 
information that was removed. Can you shed any light on how 
that was removed or why it was removed or why that reference 
was not seen on the copy that was presented to this 
Subcommittee?
    Mr. Pruniaux. It was not removed.
    Senator Coleman. Well, apparently it was removed. I mean, 
the documents that we got on August 28 do not have that 
reference, and I am just trying to understand how that 
occurred, who would have been responsible, who might have taken 
that action. You have no information?
    And I turn to Mr. Massey about this. There are no public 
references. When you were negotiating working with the United 
Nations, talking to the United Nations about the contract on 
December 28, was there any discussion with U.N. officials about 
the fact that the Secretary-General's son had a relationship 
with Cotecna?
    Mr. Massey. Never, ever. Absolutely, 100 percent 
affirmative. We never mentioned the fact that Mr. Annan, Kojo 
Annan, worked for us at that time.
    Senator Coleman. If we can go to Exhibit 21?\1\ Exhibit 21 
is a memorandum from Michael Wilson, again, who worked for 
Cotecna and is presently a consultant, and I believe Exhibit 
21, Mr. Wilson's memo indicates that in December 1998, Cotecna 
believed it had to win the approval of Benon Sevan, Kofi Annan, 
and the 661 Committee. Can you tell me, were there any efforts 
made to approach either Mr. Sevan or Mr. Annan about the 
Cotecna contract?
---------------------------------------------------------------------------
    \1\ See Exhibit No. 21 appears in the Appendix on page 278.
---------------------------------------------------------------------------
    Mr. Massey. Never.
    Senator Coleman. In the Wilson memo, I believe it talks 
about Cotecna had the active backing of the Swiss mission as 
well as there was quiet lobbying within diplomatic circles in 
New York. Can you explain what quiet lobbying was done within 
diplomatic circles in New York?
    Mr. Massey. That was an initiative that Mr. Wilson took and 
I was not informed of the details of the people he met, but he 
reported to us that he had met several people that could have a 
say or could be--could help us in promoting the name and the 
project that we were presenting.
    Senator Coleman. Exhibit 18,\2\ just one more series of 
questions for you, Mr. Massey. This is a memo from Kojo Annan 
to yourself, and in that memo, and I discussed it in my opening 
statement, it says, ``As discussed with you Sunday, PM and 
myself put in place a `machinery' which will be centered in New 
York that will facilitate the continuation of contacts 
established and assist in developing new contacts for the 
future. This `machinery,' due to its global nature and its 
longevity, is as important overall as any other contacts made. 
For certain reasons, PM was integral to creating the 
aforementioned structure.'' Can you tell me what this machinery 
was?
---------------------------------------------------------------------------
    \2\ See Exhibit No. 18 appears in the Appendix on page 275.
---------------------------------------------------------------------------
    Mr. Massey. I am sorry to say, but this is a bit of a 
mystery to us, also. I remember that Kojo tried to elaborate on 
a system that he could develop in New York to have access to 
different ambassadors of different countries where we had a 
specific interest in promoting our abilities, mainly African 
countries.
    I think there is also another aspect that needs to be taken 
into consideration. We are in September here in 1998 and we are 
6 or 7 months down the line with this consultancy agreement. 
Kojo had gone already to the NAM Summit, the Non-Aligned 
Movement Summit, and very little achievement, very little 
results, had come out of his different missions and visits. But 
the main project had given him to really focus on was the 
Nigerian project, which has been and still is one of the most 
important projects for Cotecna.
    Senator Coleman. Now, this is December 1998. This is a few 
months before Cotecna gets the contract for the Oil-for-Food 
Program. That was in December 1998----
    Mr. Massey. Yes, but this has nothing to do with the U.N. 
Oil-for-Food Program. I am trying to explain to you what is 
this machinery about and the way he put it to us. I think in 
August 1998, the Nigerian administration changed because the 
then-president died. So suddenly, you find a new Nigerian 
administration. We had lost a contract a year before in 
Nigeria. For us, it was an opportunity to reopen doors with the 
newly formed or caretaker government in Nigeria, the Nigerian 
administration.
    The fact that you see the letters mention PM, this PM 
stands for Pierre Mouselli, who is the Lebanese origin, but 
based in Nigeria and Lagos, I think. They were introduced and I 
won't say they were close friends, but a business relation to 
Kojo Annan. I had agreed for Kojo to work together with Pierre 
Mouselli to try to establish a relation with the newly-formed 
government.
    Now, Kojo, I think, reading this document, is trying to 
convince me that he has a good idea on how to penetrate the 
different governments through the ambassadors or through the 
missions in New York thanks to his relations and so on and so 
forth. This is what I perceived when reading this document.
    Senator Coleman. I know my time is up and I am going to 
turn to my Ranking Member, Senator Levin. The memo does talk 
about global nature?
    Mr. Massey. Yes, global nature in the sense of having 
different approaches to different contracts and countries. But 
just to finish my statement, Kojo was a very young man at that 
time. He was trying to prove himself. We were disputing--I was 
disputing him, the type of fees he was charging us with and he 
was trying to prove to me that he was, if not already yet now, 
soon to become efficient in trying to reach out to contacts and 
make his effort efficient.
    Senator Coleman. How old is he at this time?
    Mr. Massey. Maybe late 20's--28, 27, something like that.
    Senator Coleman. Senator Levin.
    Senator Levin. Thank you, Mr. Chairman.
    Just on the questions, some additional questions related to 
Kojo Annan. When did you hire him?
    Mr. Massey. OK. When looking at the file, what we saw is, I 
think--I will turn to Andre Pruniaux because he was the one to 
really hire and he has a better memory than I do.
    Mr. Pruniaux. Yes. Kojo was graduated in the U.K. and he 
approached our company in London. He was looking for training 
in 1995 and it was--the first person in Geneva who heard of him 
was my colleague who was in charge of the London office. When 
he saw the background of the gentleman and that he was African, 
he spoke several languages, he immediately turned to me and 
said, ``Andre, are you interested?'' and I said, ``Why not. Let 
him come to Geneva.'' I have always been looking for young 
Africans who could take over the positions of chiefs of our 
offices in Africa.
    He came to Geneva. I interviewed him. He spoke English, 
French, and a couple of local languages. I said, let us not 
hire him for a junior position in London just for summer. Let 
us train him, and this we did. Sometimes that irritated even 
the General Manager of the British company.
    He got 2 months training, after which he was sent to 
Nigeria at the end of the year because he had the capacity and 
the background to be of assistance in Lagos.
    Senator Levin. And he was hired in 1995?
    Mr. Pruniaux. Ninety-five, yes.
    Senator Levin. And was his father the Secretary-General at 
that time?
    Mr. Pruniaux. No.
    Senator Levin. Now, I think that Cotecna bid on a contract 
in 1998, and I want to just make clear that I think I heard 
your answer to the Chairman's question, but I want to make sure 
that I am clear on this. Did anyone at Cotecna talk to Kofi 
Annan about that contract during the negotiations of that 
contract?
    Mr. Pruniaux. Never.
    Mr. Massey. Never.
    Senator Levin. Not just you, but as far as you know, nobody 
at Cotecna?
    Mr. Pruniaux. Nobody.
    Mr. Massey. Nobody.
    Senator Levin. Did the Secretary-General have any role, as 
far as you know, in the selection of a company to authenticate 
the goods that were going into Iraq?
    Mr. Massey. I don't believe so, no.
    Senator Levin. Exhibit 18 \1\ is the memo that the Chairman 
referred to as the memo from Kojo Annan to you, Mr. Massey, and 
you have referred to it already, but is this where he is giving 
you a country-by-country breakdown of, what, his efforts on 
behalf of the company?
---------------------------------------------------------------------------
    \1\ See Exhibit No. 18 appears in the Appendix on page 275.
---------------------------------------------------------------------------
    Mr. Massey. Correct.
    Senator Levin. So he made efforts in Mozambique, Tanzania, 
Uganda, Malawi, Zimbabwe. Is that the entire document, or is 
that page----
    Mr. Massey. It is the second page, I think.
    Senator Levin. This is the only page?
    Mr. Massey. No. There is a second page, I believe.
    Senator Levin. There is an additional page, as far as you 
know? So there may be additional countries?
    Mr. Massey. Yes, I think----
    Senator Levin. He was working on behalf of the company?
    Mr. Massey. No. What happened is that when--OK. The main 
goal of--the main objective of Kojo Annan during this 
consultancy agreement with us in 1998 was to get us back in 
Nigeria. That was the very first top priority, I think.
    Senator Levin. All right.
    Mr. Massey. The second job was to also help us in 
strengthening our presence in Ghana, because as you know, Kojo 
Annan is a dual national, Ghanaian and Nigerian. But we also 
used this young man to represent the company in different 
seminars and meetings, and this is an example of one of the 
meetings he had attended in Durban and the Non-Aligned Movement 
Summit.
    Senator Levin. So that was not his primary responsibility. 
Nigeria was the main effort----
    Mr. Massey. Absolutely.
    Senator Levin [continuing.] But there were additional 
things----
    Mr. Massey. But what he would do during that few days he 
would spend there would just be to go from one mission to the 
other mission and trying to introduce himself and present the 
company and so on and so forth, and this is a report----
    Senator Levin. I understand. Thank you.
    Mr. Denson, the employee of Saybolt that has been referred 
to already, is it Mr. Oliveira, is that his name?
    Mr. Denson. Yes, sir.
    Senator Levin. Does he still work for Saybolt?
    Mr. Denson. He does, pending completion of our 
investigation, which is ongoing, and with the information that 
the Subcommittee has now made public, we will revisit his 
situation at that time.
    Senator Levin. Now, that information of the Subcommittee, 
you have that information? Has that been given to you before 
today, or----
    Mr. Denson. We have seen----
    Senator Levin. You have seen that before today?
    Mr. Denson. We have seen bits and pieces of it, but this is 
the first time we have had this type of access to it.
    Senator Levin. And so you are saying that you are going to 
get back to the Subcommittee based on what is in those 
documents that you have seen the full documents for the first 
time today?
    Mr. Denson. Absolutely. We, in fact, have already talked to 
the Subcommittee staff about how closely we can cooperate in 
conducting the rest of our investigation----
    Senator Levin. The Chairman has made reference to your 
cooperation and it is appreciated, I know, by all of us as well 
as by our staffs. It has been very good on your behalf, and I 
think the same thing is true, may I say, for our other 
witnesses here today. Mr. Chairman, I perhaps shouldn't say 
that. That would be up to you to make an assessment on, but I 
think our witnesses have all cooperated with us and the staff 
today.
    Is there any other instance that you know of besides this 
one where there is any allegation of a bribe brought to your 
attention?
    Mr. Denson. In connection with the Oil-for-Food Program?
    Senator Levin. Yes.
    Mr. Denson. No, sir.
    Senator Levin. So this is the only one that you know of so 
far?
    Mr. Denson. That is correct.
    Senator Levin. OK. Mr. Pruniaux, I would like to talk to 
you, or someone who I think is maybe with you today, if you are 
unable to answer these questions about the trucks, and I wonder 
if we could get the pictures of those trucks up there again.\1\ 
These are oil trucks. These are oil trucks which are taking 
Iraqi oil to Turkey outside of the Oil-for-Food Program. All 
oil that was supposed to be sold was supposed to be sold inside 
the Oil-for-Food Program so the proceeds would go to buy 
humanitarian goods for the Iraqi people. But at least with 
three countries, and probably four, all the countries closed 
their eyes, including us, to massive sales of oil by Saddam 
Hussein to Turkey, to Jordan, to Syria, and slight sales to 
Egypt.
---------------------------------------------------------------------------
    \1\ See Exhibit No. 52 appears in the Appendix on page 427.
---------------------------------------------------------------------------
    Did you personally see those lines of oil trucks leaving 
Iraq for Turkey?
    Mr. Pruniaux. Oh, yes. I came to Iraq for the first time in 
early January 1999, just before the start of our contract, and 
to enter into Iraq, you had to go through Amman and get the 
visas from the Iraqi embassy in Amman, and then you had to 
drive all the way. There was only one way for inspectors, other 
persons, to enter Iraq. It was to drive from Amman to Baghdad 
or other places.
    Senator Levin. I just want to, because of the time limits, 
I just want to ask you, did you personally see these lines of 
trucks----
    Mr. Pruniaux. Oh, yes.
    Senator Levin [continuing.] Leaving Iraq for Turkey outside 
of the Oil-for-Food Program?
    Mr. Pruniaux. Absolutely.
    Senator Levin. It was common knowledge. Now, my last 
question. Mr. Kulyk, you made an assessment, I believe, in your 
testimony that in your judgment, the Oil-for-Food Program 
worked well and I would like to ask you to amplify that 
statement.
    Mr. Kulyk. I think it is important----
    Senator Levin. In spite of all the difficulties and so 
forth, why did you reach that conclusion?
    Mr. Kulyk. Of course, Senator Levin. I think it is 
important to bring our thinking back to the fact that the Oil-
for-Food Program was a humanitarian effort. It was not intended 
to be nor was it viewed, in my opinion as someone who had 
worked in a sanctions environment, as a sanctions mission. It 
was in no way an effort to control the movement of goods 
outside of the 986 program. So authentication is not sanctions 
monitoring. I think that needs to be said.
    So within that context, whether or not the Oil-for-Food 
Program met its goals and objectives, I think it did. The goals 
and objectives were to provide humanitarian relief, and on my 
visits to Iraq--I made three such visits--I did see 
improvements in terms of quality of life, improvements in the 
availability of goods, improvements in terms of food and 
nutrition, and also improvements in two different industries, 
whether it was the electrical sector or the oil sector. These 
did happen.
    There were introductions through the 986 program of these 
goods into Iraq and that was essentially the mandate of the 986 
program, not to control sanctions. None of the independent 
inspection agencies, whether it was Lloyd's or Cotecna, were 
tasked or responsible or authorized to monitor sanctions. We 
were aware of it. I saw it personally myself from my visits as 
well, and it was reported as asides and in mission reports to 
the 661 Committee.
    Senator Levin. All right. On that line of questioning----
    Senator Domenici. Senator Levin, could I just ask a 
question?
    Senator Levin. Of course.
    Senator Domenici. What does it mean to monitor sanctions?
    Mr. Kulyk. That is a good question. Perhaps the best way I 
can answer that is to give you a little bit of an idea of what 
I did in the Balkans as a sanctions monitor.
    Senator Domenici. Thank you. I just wanted the Chairman not 
to charge this against Senator Levin's time.
    Senator Levin. I am over my time.
    Senator Coleman. You may answer the question.
    Senator Domenici. Mr. Chairman, thank you.
    Senator Levin. Thank you, Senator Domenici.
    Mr. Kulyk. In my experience in my role, and I will speak 
about my time in the Balkans during the early years, 1993 and 
1994, as a sanctions monitor, there were resolutions in place 
that indicated that sanctions were to be imposed upon Serbia 
and the former Yugoslavian Republic, and in those missions, 
actually, customs officers participated and had a presence at 
the border, customs officers who looked at the passage of goods 
across the borders with a reference to what was considered to 
be acceptable as humanitarian relief. And when we saw things 
which were not considered to be within the humanitarian scope 
of the relief crossing the border, those occurrences were 
identified and reported to the United Nations as a sanction.
    No such monitoring took place in respect of the Oil-for-
Food Program. Oil-for-Food was a humanitarian effort. It was 
not a sanctions enforcement regime.
    Senator Coleman. Senator Levin.
    Senator Levin. Thank you. You made reference in your 
prepared testimony to Cotecna's, ``demonstrated outstanding 
performance.'' You also said that Cotecna had been a very 
dependable contractor under difficult circumstances and often 
did more than they were contractually obligated upon request 
from you, or your office.
    Mr. Kulyk. Yes, sir.
    Senator Levin. Is that correct? Is that your testimony?
    Mr. Kulyk. Yes, it is.
    Senator Levin. Thank you, Mr. Chairman.
    Senator Coleman. Senator Domenici.
    Senator Domenici. Mr. Chairman, I just have one line of 
questioning. I am interested in finding out from the two of you 
as consultants what your job did and didn't include. As I 
understand it, the authority that you had did not permit you or 
charge you with determining if there was any price manipulation 
that was occurring, is that correct?
    Mr. Pruniaux. Absolutely.
    Senator Domenici. So we have a consulting firm that on the 
surface is supposed to determine that the transactions were 
honest and the pricing and all other things were above board 
and were visible. That was your job. But as to manipulation, 
you were not given that authority.
    Mr. Pruniaux. With due respect, it is not exactly like that 
that I would phrase the----
    Senator Domenici. Phrase it as you would like.
    Mr. Pruniaux. OK. In 1996, the Security Council decided 
that the price verification--the verification of price would be 
done by UNOIP.
    Senator Domenici. By who?
    Mr. Pruniaux. By UNOIP, by the United Nations itself.
    Senator Domenici. Yes.
    Mr. Pruniaux. This is what Mr. Kulyk explained. And it was 
not the duty of the independent inspectors, who had been hired 
for other things, to look into the valuation of the goods 
presented to them.
    Senator Domenici. So as I understand it, there were similar 
consulting agreements in the region that had the authority to 
determine whether or not there was price manipulation. I 
understand that is correct. In fact, wasn't the first proposal 
submitted, didn't it include as part of a task the authority to 
determine price manipulation?
    Mr. Pruniaux. The very first proposal you mentioned 
referred to 1992. At that time, the tender, the technical--the 
scope of work covered by the tender clearly indicated pre-
shipment inspection and price verification, but that proposal 
and that contract that Cotecna was selected, but the contract 
was never signed, as explained before.
    Senator Domenici. I understand.
    Mr. Pruniaux. By 1996, the scope of the contract was of--
the tender was totally different. As I said, the United Nations 
decided to keep for itself at the UNOIP level the price 
verification but to select independent inspectors, independent 
meaning also that these inspectors would not be permitted to do 
commercial inspections. A commercial inspection is an 
inspection that a supplier and an importer would agree on so 
that before shipment, the quality of the goods or the quality 
of the goods would be clearly specified and that upon arrival, 
there would be discrepancies, commercial discrepancies, then 
the receiver would act against the supplier. That was--that is 
a commercial inspection. And we, as independent inspectors, we 
were strictly forbidden from entering into this.
    Senator Domenici. But the United Nations decided that you 
wouldn't do it but somebody else would?
    Mr. Pruniaux. Well, you have to realize that for the 
contracts, the Iraqis were sovereign. They could select--as 
long as the goods were in the--were acceptable----
    Senator Domenici. I understand.
    Mr. Pruniaux [continuing.] They could select whatever 
supplier they wanted in any acceptable country. It was--we 
recommended very often, and I know UNOIP also at the highest 
level repeatedly told the Iraqi authorities that in order to 
reduce the amount of disputes on commercial grounds, they 
should appoint professional inspection companies to inspect 
before shipment and possibly match the inspections upon arrival 
of the goods in Iraq.
    Senator Domenici. So if you repeatedly suggested that to 
them, that indicates that----
    Mr. Pruniaux. The Iraqis did not.
    Senator Domenici [continuing.] The Iraqis did not do that.
    Mr. Pruniaux. No.
    Senator Domenici. So there is a vacuum as to who would do 
that, or if it was done at all.
    Mr. Pruniaux. Yes. That was more a commercial dispute, as I 
said, than----
    Senator Domenici. Couldn't that be, if--I am not suggesting 
that you know it was, but wouldn't that be an easy way, if 
somebody intended, wouldn't that be an easy way to arrive at 
conclusions that would lead to some manipulation for the 
benefit of a people or institution that were not intended to 
benefit? It could happen, couldn't it?
    Mr. Pruniaux. Manipulations might not be the right word. In 
my opinion----
    Senator Domenici. Well, why did you suggest that it should 
be done? What was the reason?
    Mr. Pruniaux. Because this is normal practice when you do--
--
    Senator Domenici. Why is it the normal practice? It isn't 
the normal practice just to do it----
    Mr. Pruniaux. Well, you have to pay for that. Maybe the 
Iraqis did not want to pay for the commercial inspections by 
another inspection company.
    Senator Domenici. But are they useless?
    Mr. Pruniaux. No, they are not useless, but it is the 
privilege of the importer to decide to appoint or not to 
appoint.
    Senator Domenici. I understand.
    Mr. Pruniaux. I believe that--they did that on a lot of 
shipments, but on certain shipments, they did not do that. I am 
talking of the Iraqis. That would give them some leverage on 
the suppliers, you see, from--but maybe not manipulations of 
prices, but just to put some pressure on them to get some 
incentives upon arrival of the goods in Iraq. You claim that 
you have a commercial dispute, whether it is true or not is to 
be confirmed, and you put pressure on the supplier.
    Senator Domenici. Thank you, Mr. Chairman.
    Senator Coleman. Thank you. We are going to do a 5-minute 
follow-up round, and I have a lot more questions, but we have 
other panels.
    First, to Mr. Massey and Mr. Pruniaux, you have indicated 
in response to Senator Levin's questions that the Secretary-
General did not have any role in selecting the Cotecna 
contract?
    Mr. Pruniaux. Yes.
    Senator Coleman. If I refer you to Exhibit 21, which is 
Michael Wilson's memorandum to Cotecna, this is dated December 
4, 1998.\1\ This is shortly before you were awarded the 
contract, and I note that Mr. Massey and Mr. Pruniaux are both 
individuals who received a copy of this. In that memo on the 
``next stages,'' the very end, Mr. Wilson says, ``The current 
contract with Lloyd's ends in December 1998. The OIP would make 
its recommendations to the Procurement Division within days to 
enable them to present it to the U.N. Contracts Committee after 
approval has been obtained from B. Sevan and the SG.'' I take 
it SG relates to the Secretary-General?
---------------------------------------------------------------------------
    \1\ See Exhibit No. 21 appears in the Appendix on page 278.
---------------------------------------------------------------------------
    Mr. Massey. This is his own statement, but I don't think 
that that was the case. I think the contract was being 
negotiated with the Procurement Division and we don't know 
exactly at which level the contract was being eventually 
awarded, but we have never imagined that the contract would 
have gone as high as the SG office itself.
    Senator Coleman. My concern is, first of all, this memo was 
sent to you. Did you receive it?
    Mr. Massey. Right. Yes.
    Senator Coleman. And did you ever correct Mr. Wilson in 
saying the Secretary-General has no role in this?
    Mr. Pruniaux. But Mr. Chairman, with due respect, the way I 
read it--maybe I misunderstood your question. It does not say 
that he has got to talk to the Secretary-General. He is just 
explaining the machinery for contract approval at the level of 
the United Nations. In fact, this is wrong. I believe that the 
Secretary-General has no word to say in the awarding of such a 
contract. It goes to the Contract Committee.
    Senator Coleman. But Mr. Wilson was under the impression 
that the Secretary-General had an approval role, is that 
correct?
    Mr. Pruniaux. Yes, which is not true.
    Senator Coleman. But he was under the impression, and he 
sent this to you.
    Mr. Massey. This is what he wrote, right.
    Senator Coleman. Let me also ask you, and my concern is 
that you have a 23-year-old kid--that is, I believe, how old 
Kojo was--in 1998. He is submitting to you in October 1998, 
submitting outstanding consultancy expenses 2 months before you 
get the contract. He is getting $500 a day.
    Mr. Massey. Right.
    Senator Coleman. He spends 15 days at the General Assembly, 
of which you have no reports of what he talked about, nothing 
in writing.
    Mr. Massey. We haven't found any report, no.
    Senator Coleman. And yet at this point in time, you are 
negotiating a contract with the United Nations of which your 
own consultant says it needs the approval of ``B. Sevan'' and 
Secretary-General, and you are saying that you never mentioned 
his employment to anybody in the United Nations.
    Mr. Massey. Absolutely true.
    Mr. Pruniaux. But he was 28 in 1998.
    Senator Coleman. I will check the record on that. I will 
stand corrected if that is the case.
    Mr. Kulyk, by the way, and I appreciate your kind words 
about Cotecna, do you work for Cotecna right now?
    Mr. Kulyk. Yes, I do. That is mentioned in my tendered 
written statement.
    Senator Coleman. I just want to clarify that for the 
record. You are presently employed by Cotecna?
    Mr. Kulyk. Yes, I am.
    Senator Coleman. Did you have any concerns about member 
states putting pressure on inspectors at the time you were 
working for the OIP Program?
    Mr. Kulyk. Concerns or experiences? I think I witnessed 
some experiences.
    Senator Coleman. Could we get Exhibit 48?\1\ One of them 
involved a Chinese contract for diesel dredges worth about $12 
million? Can you look at Exhibit 48. Does this look like the 
Chinese contract you were dealing with, and can you tell me the 
events and circumstances surrounding it?
---------------------------------------------------------------------------
    \1\ See Exhibit No. 48 appears in the Appendix on page 378.
---------------------------------------------------------------------------
    Mr. Kulyk. Mr. Chairman, it appears to be familiar to me.
    Senator Coleman. Were you reviewing this contract?
    Mr. Kulyk. Initially, I did. If this is the one that, in 
fact, turns out to be the one, I did have some impact in terms 
of reviewing the contract.
    Senator Coleman. Now, did you get a fax stating that--that 
appeared on your desk--the contract was fraudulent, was for 
used road graders and various people getting kickbacks?
    Mr. Kulyk. Yes, I recall that.
    Senator Coleman. And can you tell us what happened with 
that fax and the circumstances surrounding it?
    Mr. Kulyk. I can tell you the circumstances at the time. I 
don't know where the fax is. It does not appear to be in this 
package. But in essence, Mr. Chairman, the circumstances were 
that this contract appeared on my desk. It was early in the 
contract review phase. There was nothing initially unusual 
about it. At some point in time, perhaps a couple of days 
later, an anonymous fax came through relating specifically to 
this contract. My recollection is that it was sufficiently 
specific to draw attention to the fact that it was this 
particular contract.
    It's been 4 years since I have left OIP, so I am working 
from memory. My recollection is that there were allegations 
with respect to the fact that the road graders were, in fact, 
not new, they were used and refurbished, and also my 
recollection is that there were suggestions that the contract 
was, in fact, I guess we can call it put up. It was a false 
contract with false valuations and that there would be, upon 
payment, that the proceeds from this contract would be shared 
amongst a number of different parties.
    When that fax came to my desk, I took it to my Chief 
Customs Expert, Jeremy Owen. We discussed it in the office 
amongst a number of the customs officers. I think at that time 
we were about five or six customs officers. It was early in the 
program. I think it was late 1998. My recollection is that this 
contract was resubmitted in 1999 because it was not proceeded 
with in 1998.
    The discussion essentially was that, well, we should take a 
look at the pricing issues very closely and see what we could 
dig up. The fax was in itself simply an anonymous fax, and as a 
point of law, it had certain weight as evidence, but was not 
necessarily true. But it did raise sufficient concerns that we 
should have special scrutiny on this.
    The circumstances were that after this discussion, I went 
back to my office and I left the contract on my desk, went 
outside to have a cigarette, came back, and the contract was 
gone, disappeared from my desk. I looked for it, came back 
after lunch, and it had reappeared. Being a customs officer, I 
wanted to know where it was during the time it was missing. I 
went around and I polled each of the fax machines in the office 
and I found a corresponding fax to the Chinese mission for the 
same number of pages that were in the fax. I went back with 
this information to the Chief Customs Expert, Mr. Owen, who 
eventually confronted the Chinese customs officer that was 
working in the program who admitted that he had faxed it to the 
Chinese mission. His explanation was that he didn't want his 
mission to be involved in any illegal activity.
    Senator Coleman. Do you know if any disciplinary action was 
taken against the individual that was involved?
    Mr. Kulyk. No, not really.
    Senator Coleman. Not really? You don't know whether it was 
taken or you just don't----
    Mr. Kulyk. Well, I know his duties changed, Mr. Chairman. I 
don't know whether it was the result of any disciplinary 
action, but I know his duties changed at some point in time to 
essentially only reviewing agency contracts.
    Senator Coleman. And also, just two other follow-up 
questions. A Russian customs officer----
    Mr. Kulyk. I think it is fair, Mr. Chairman, to say that 
every customs officer in the program had some contact with 
their missions. This was not in itself unusual. However, it was 
on some occasions, and the Russian customs officer who I knew 
quite well at one point in time complained that he had been 
receiving pressure from his mission. I think it is fair to say 
that many of the missions considered what we were working in as 
more than a humanitarian program, I think they considered it as 
a commercial opportunity. So it was a very commercial 
atmosphere. So, the emphasis was on pushing contracts.
    Senator Coleman. Mr. Ventham, just to clarify the testimony 
regarding Exhibit 52, that picture may actually have been of 
oil trucks going out, but your testimony is focused on trucks 
coming into Iraq, is that correct?
    Mr. Ventham. That is correct, yes.
    Senator Coleman. And so during the week you were there, how 
many trucks did you see coming into Iraq, bringing goods in?
    Mr. Ventham. About 400 or 500.
    Senator Coleman. And I presume they weren't bringing oil.
    Mr. Ventham. No, no different----
    Senator Coleman. And you inspected how many of those?
    Mr. Ventham. I inspected three.
    Senator Coleman. Three. And do you have an idea what was in 
those trucks?
    Mr. Ventham. They were fire trucks. Nothing was in them. 
They were actually fire trucks themselves.
    Senator Coleman. Bringing trucks in. What about the other 
hundreds of fire trucks?
    Mr. Ventham. Fire engines.
    Senator Coleman. Fire engines. And the other hundreds of 
trucks, do you have an idea what they were carrying?
    Mr. Ventham. Some were carrying different pieces of wood, 
piping, machinery components, and agricultural equipment.
    Senator Coleman. But because they didn't have documents 
relating to the specific program that Cotecna was responsible 
for, they simply went into Iraq?
    Mr. Ventham. Well, yes, but there were other shifts working 
at the same time. They may have been processed through those 
but I didn't see them.
    Senator Coleman. Mr. Pruniaux, do you want to add anything 
to that?
    Mr. Pruniaux. I would be pleased to introduce the contract 
manager who worked for us 5 years in Iraq and he was based in 
Amman. Before that, he was the Team Leader in Trebil, to 
explain in practical words what happened at the border when the 
trucks would arrive and those which would come to Cotecna to be 
authenticated.
    Senator Coleman. We need the witness to be sworn.
    Please raise your right hand. Do you swear the testimony 
you will give before the Subcommittee is the truth, the whole 
truth, and nothing but the truth, so help you, God?
    Mr. Radenovic. I do.
    Senator Coleman. Would you please identify yourself?

    TESTIMONY OF MILAN RADENOVIC, CONTRACT MANAGER, COTECNA 
                        INSPECTION S.A.

    Mr. Radenovic. Mr. Chairman, Ranking Member, distinguished 
Members of the Subcommittee, my name is Milan Radenovic. I 
served most of my time as contract manager, initially in Geneva 
and then in Amman.
    In the very beginning of the program, I was hired by 
Lloyd's Register and served for 6 months in Iraq and then was 
continued with Cotecna once the contract was awarded to Cotecna 
Inspection.
    In regards to the cargo passing through the land borders, I 
can say that Iraqi authorities, Iraqi government exercised its 
complete sovereignty on the borders in terms of customs. To my 
knowledge, there were no other international presence or 
customs enforcement on the borders apart from our mandate, 
which is absolutely away from any customs enforcement or any 
anti-smuggling reporting mandate.
    So on every border crossing--talking about the land 
borders, we had virtually two streams of traffic. One stream of 
traffic is traffic going straight to Iraq, and only trucks 
which are voluntarily presented to Cotecna team in order that 
the authentication will be condition, triggering payments later 
on, would stop for the inspection at Cotecna office. The proof 
is that it very often happened that some of the truck drivers, 
especially those who are either new in the trucking route, 
would simply continue in a normal flow towards Iraq and then by 
Iraqi customs would be instructed to divert and to come to the 
parking lot of Cotecna and to present their cargo and documents 
for inspection.
    It means that I leave to your assessment even the 
qualification of the smuggling concept. It was a daylight, 
normal traffic into Iraq, so whoever wanted to--whatever cargo 
is subject to authentication by Cotecna has to stop by Cotecna 
premises. Otherwise, it would easily, normally come to Iraq.
    What I normally noticed and what was concern for our 
inspectors traveling to and from Iraq is the frequency of 
traffic of the oil tankers. Whatever arrangement might be, 
either bilateral government or whatever, but anyway, as I was 
always concerned about the security of people on the road, they 
normally, very often, they had to overtake or to be careful 
driving behind the trucks, especially on the route between 
Amman and Iraqi border. However, in Iraq, the truck, the oil 
trucks, the tankers were directed and they were usually driving 
on the former dual carriage way, which was parallel to the 
highway Trebil, it means the Jordanian border--Baghdad.
    We completely focused on our mandate on the inspection of 
cargo pertaining to 986 program. It means maybe 53, later 59, 
or 13 percent. So any other observation or remark on other 
traffic would be outside the mandate or entirely at the 
internal interest of individual over there, but absolutely 
there were no mandate and there were no requirement to report 
anything else apart from outlined system of reporting, it means 
authentication and either electronic or faxing means of 
confirming the arrival of cargo in Iraq.
    Senator Coleman. Senator Levin.
    Senator Levin. I just have one other question of Mr. Kulyk. 
You said that you had a favorable impression, or you have a 
favorable impression of Cotecna. And you work for Cotecna now. 
You also said in your testimony that others, I guess of your 
colleagues at the U.N. office, also had a favorable impression 
of Cotecna at that time, is that correct?
    Mr. Kulyk. Yes, I did. I think it is important, first of 
all, and let me state something for the record. I have been 
asked to come and testify in my capacity as the former Deputy 
Chief Customs Expert in the Iraq Program. It is a matter of 
record in my statement that I currently do work for Cotecna. I 
left the Office of the Iraq Program in March 1998. I have never 
had any input into any RFPs, was not involved in any 
decisionmaking process. And when I joined Cotecna, I joined in 
the capacity of liaison officer in Tanzania. There had been 
discussion and a decision was taken by Cotecna management that 
I not be involved in any activities related to their contract 
with the Office of the Iraq Program to avoid any perceived or 
real conflict of interest.
    So in my capacity here, I am a former law enforcement 
officer. I am someone that believes in testifying and 
testifying truthfully under oath. So it is for you to decide 
whether or not my comments or observations bear any weight.
    But I think it is a general impression, sir----
    Senator Levin. That was my question.
    Mr. Kulyk [continuing.] That Cotecna's services--and I 
would be saying the same thing if I was working for SGS or 
Bureau Veritas--it was a general impression that Cotecna, as a 
service provider, was extremely responsive, and the Office of 
the Iraq Program, whenever they saw a deficiency or needed 
something done, they never had to fight for it.
    An example is, of course, the agency goods, and I don't 
want to belabor that point, but at some point in time there was 
a decision made that Cotecna, they wanted Cotecna to assist in 
authenticating the arrival of agency goods, which I have 
explained were never subject to--it wasn't a prerequisite for 
payment. And Cotecna, it was outside the scope of their 
contract and they did it.
    Senator Levin. Thank you, Mr. Chairman.
    Senator Coleman. Thank you. Just one, if I can, a quick 
follow-up. Were you aware of Cotecna's concerns about staff 
shortages that were presented to OIP?
    Mr. Kulyk. I don't know if there were specific concerns 
with respect to staff shortages. I think there were times early 
on in the process where there may not have been a very clear 
indication as to the expectations that the United Nations had 
with respect to Cotecna's role and responsibilities and their 
activities. I think it is fair to say, Mr. Chairman, that 
Cotecna was approaching this authentication process from a 
point of commercial inspection, and as the program evolved, it 
became clear that their activities were not going to be 
consistent with a commercial level of inspection.
    Senator Coleman. Just to clarify, and I think it is Exhibit 
35.\1\ I am not sure who wrote that, but maybe Mr. Pruniaux or 
Mr. Massey could, but Cotecna did raise concerns to the United 
Nations saying that our site ``staffing does not allow to 
fulfill our contractual responsibilities, and we further 
believe that these have not been comprehensively fulfilled in 
the past, either.'' So you raised these to the United Nations.
---------------------------------------------------------------------------
    \1\ See Exhibit No. 35 appears in the Appendix on page 316.
---------------------------------------------------------------------------
    Mr. Pruniaux. Yes, we did.
    Senator Coleman. And did the United Nations increase your 
staffing? Did they--particularly, by the way, at Um Qasir, did 
they respond to the concerns there?
    Mr. Pruniaux. Not during the first phase. For the other 
phases, it was a commercial move to get more money from the UN-
OIP. However, the opinion was that we could handle with the 
staff that had been allocated by contract.
    Senator Coleman. Nothing further.
    Senator Levin. Thank you.
    Senator Coleman. Thank you. This panel is excused. Thank 
you, gentlemen, very much. Very appreciative. Thanks.
    Mr. Massey. Mr. Chairman.
    Senator Coleman. Mr. Massey.
    Mr. Massey. Mr. Chairman, if you would allow me, I would 
like to make a comment and a request. My company has been 
working with this Subcommittee in a fully cooperative basis 
since early July last year when our counsel first met with you. 
We have gone to extreme effort and expense to provide you with 
every document you have asked for and to facilitate interviews 
with any and all individuals you have asked to interview, 
regardless of where we had to bring them from around the world. 
Again, we have been nothing but cooperative.
    Last week, our counsel met with your Staff Director and 
investigators and were told that this is a professional 
proceeding. We were told that there would be no surprises, and 
yet here we sit with this surprise witness, a disgruntled 
former employee who quit after he was demoted and was refused a 
raise.
    Mr. Chairman, in further supporting the fact finding 
objective of this Subcommittee and in light of the decision not 
to share the details of Mr. Ventham's absurd and 
unsubstantiated testimony, I would respectfully request the 
opportunity to supplement my written statement with a response 
to his assertions as well as the previously undisclosed 
document you showed with two versions.
    Senator Coleman. Mr. Massey, the record will remain open 
and I would love to have a further explanation from you as to 
why this Subcommittee received documents that are apparently 
different from the original documents, and I would love to have 
further explanation from you as to whether, in fact, there are 
written documentation regarding Kojo Annan's participation and 
work at the United Nations during the 14 days in question. The 
record will remain open and we certainly appreciate that.
    And let me say, we do appreciate your cooperation, but this 
Subcommittee has concerns and this Chairman has concerns. And 
so certainly if you have anything additional to add, it will be 
made part of the record.
    Mr. Massey. Thank you.
    Senator Coleman. Thank you. This panel is excused.
    I would now like to welcome our second panel of witnesses. 
It is my pleasure to welcome Joseph A. Christoff, the Director 
of the International Affairs and Trade Team of the Government 
Accountability Office, GAO; and Stafford Clarry, a former 
Humanitarian Affairs Advisor for the United Nations Oil-for-
Food Program.
    I would ask if Dileep Nair is in the Subcommittee hearing 
room today. Noting that he is not here, I would like to note 
that we invited U.N. Under-Secretary-General for Internal 
Oversight Services Dileep Nair to testify at this hearing. I am 
saddened that the United Nations did not see fit to allow Mr. 
Nair to appear today, despite assurances from the United 
Nations that it would cooperate closely with our investigation.
    Our research indicates that U.N. witnesses have appeared at 
no less than 64 Congressional hearings in the past, including 
an appearance before this Subcommittee in 1996. We informed the 
United Nations that we would waive the Subcommittee's customary 
practice of swearing in our witnesses in order to secure the 
testimony of Mr. Nair, but that does not seem to have made a 
difference.
    I regret that we will not be afforded the opportunity to 
discuss the audits with Mr. Nair and share his insights. 
Further, I am deeply troubled when representations of 
cooperation result in empty witness chairs.
    Mr. Christoff and Mr. Clarry, I welcome you to today's 
hearing and look forward to your views on the U.N.'s management 
and oversight of the Oil-for-Food Program and on the audits of 
that program.
    Before we begin, pursuant to Rule 6, all witnesses before 
the Subcommittee are required to be sworn in. Will you please 
raise your right hand.
    Do you swear the testimony that you are about to give 
before this Subcommittee is the truth, the whole truth, and 
nothing but the truth, so help you, God?
    Mr. Christoff. I do.
    Mr. Clarry. I do.
    Senator Coleman. Thank you, gentlemen, very much.
    We have a timing system here that I think we are going to 
try to use in this panel. When the amber light goes on, turns 
from green to amber, you have a minute to sum up. Then when the 
red light goes on, your testimony should end. We will submit 
your written statements for the record.
    We will start with Mr. Christoff, who will go first, 
followed by Mr. Clarry, and then after we have heard all the 
testimony, we will proceed with questions. Mr. Christoff.

 TESTIMONY OF JOSEPH A. CHRISTOFF,\1\ DIRECTOR, INTERNATIONAL 
    AFFAIRS AND TRADE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Christoff. Mr. Chairman, Members of the Subcommittee, 
Senator Levin, thank you. Thank you for inviting GAO to this 
important hearing.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Christoff appears in the Appendix 
on page 147.
---------------------------------------------------------------------------
    In January, the Volcker Commission released 58 internal 
audits of the Oil-for-Food Program and I am here today to 
present our analysis of these audits, which were completed by 
the U.N.'s Office of Internal Oversight Services. First, I just 
wanted to begin with a brief history about OIOS.
    Before OIOS was established, the United States and other 
member nations criticized the United Nations for not having an 
internal audit function. In 1993, the U.S. proposed an 
Inspector General position within the United Nations and 
withheld funds until that office was established. In 1994, the 
General Assembly created OIOS to conduct audits, 
investigations, and inspections of U.N. programs and funds. Its 
124 professional staff have access to all U.N. records and 
documents.
    During the Oil-for-Food Program, OIOS generally provided 
its reports only to the heads of the agencies it audited. 
Accordingly, member states were not aware of ongoing problems 
with the program and these problems included flaws in the 
procurement of contracts, weak safeguards over financial and 
fixed assets, and poor planning and coordination among U.N. 
agencies. The audit reports focused on projects in Northern 
Iraq, the U.N. Compensation Commission, and the inspection 
contracts, and I would like to highlight some of their key 
findings.
    In the North, nine U.N. agencies implemented the Oil-for-
Food Program. With almost $5 billion, they built houses, 
schools, health clinics, and power stations. The auditors found 
numerous problems with coordination, planning, procurement, and 
asset management in the 26 reports they completed. For example, 
an audit in 2000 found that the U.N. Habitat program had no 
asset inventory system. As a result, materials worth $1.6 
million were still on hand at the end of a construction 
project. In November 2002, OIOS reported that a $38 million 
procurement of equipment was not based on a needs assessment. 
As a result, 51 generators were unused for nearly 2 years.
    OIOS also completed 19 audits of the U.N. Compensation 
Commission. The Commission was established to pay for losses 
resulting from Iraq's invasion of Kuwait. As of December 2004, 
the Commission had resolved nearly 2.6 million claims and paid 
out almost $19 billion. In its audits, OIOS identified 
duplicate payments, insufficient evidence to support losses, 
and inconsistent methods for computing the claims. Overall, 
OIOS documented overpayments of more than $500 million in 
claims. In response, the Commission reduced claims by $3.3 
million and the Commission also challenged the auditors' 
authority to review the claims.
    OIOS also completed audits of contracts the United Nations 
let for the inspection of commodity imports and oil exports. A 
July 1999 audit found problems with the U.N.'s oversight of the 
Lloyd's contract. Lloyd's was contracted to verify the quantity 
and quality of goods imported into Iraq. However, the United 
Nations certified the Lloyd's payments without any on-site 
verification or inspection of the contractors' services. A July 
2002 audit found problems with the U.N.'s management of 
Saybolt's contract. The company was contracted to oversee the 
export of oil from Iraq. The auditors found that the United 
Nations paid $1 million more than necessary for equipment 
already included in the contract. And finally, an April 2003 
report found that the United Nations had increased Cotecna's 
contract by $356,000 4 days after the contract was signed. The 
amendment included costs for communications equipment and 
operations that the auditors asserted were already in the 
contract.
    Now, let me turn to what the audits did not cover. OIOS did 
not examine certain headquarters functions, particularly the 
oversight of the contracts for Central and Southern Iraq that 
accounted for almost $40 billion in Oil-for-Food proceeds. The 
Iraqi government used these funds to purchase humanitarian 
goods and collect illicit commissions. The Volcker Commission 
contends that the auditors would have uncovered these illicit 
commissions if they had reviewed the contracts for humanitarian 
goods.
    However, the Commission also noted several reasons why OIOS 
did not audit these contracts. First, OIOS did not believe it 
had the authority to review the contracts because the Sanctions 
Committee approved them. Second, the head of the Office of the 
Iraq Program steered the auditors toward programs in the field 
rather than headquarters. Third, the auditors' independence was 
limited because they relied on funds from the audited agency to 
conduct their reviews. And finally, U.N. management prevented 
the auditors from reporting their results directly to the 
Security Council.
    Mr. Chairman, that concludes my statement and I am prepared 
to answer any of your questions.
    Senator Coleman. Thank you very much, Mr. Christoff. Mr. 
Clarry.

 TESTIMONY OF STAFFORD CLARRY,\1\ FORMER HUMANITARIAN AFFAIRS 
  ADVISOR, UNITED NATIONS OIL-FOR-FOOD PROGRAM, SYRACUSE, NEW 
                              YORK

    Mr. Clarry. Thank you, Mr. Chairman, Senator Levin. Thank 
you for inviting me. I am honored to be here.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Clarry with attachments appears 
in the Appendix on page 165.
---------------------------------------------------------------------------
    I have been in Iraq since 1991. I was a U.N. liaison 
officer with Operation Provide Comfort and the Kurdish refugee 
situation, and then I followed the refugees back into Iraq and 
was based in Baghdad, but I served most of my time in the 
Kurdistan region. I will use the term ``Kurdistan region'' 
because Northern Iraq includes more than the current Kurdistan 
region that is separately administered by the Kurdistan 
regional government. That is my bias and that is my focus.
    I am here to help you understand the workings of the 
program, to the extent of my experience and knowledge on the 
ground in Kurdistan. I have been there throughout the 1990's. I 
am still there. I will go back next week or the week after.
    There is tremendous experience there and tremendous lessons 
that have not been learned. Our experience with the Oil-for-
Food Program. I am going to try to just focus on what is in my 
prepared remarks and that is the 13 percent account. I think 
any of us would like to know how much money do we have in our 
personal account? How much has been spent, and how much is left 
over?
    After 7 years of the Oil-for-Food Program, which concluded 
over a year ago, we still do not know, and that is part of my 
campaign and part of my mission, is that we should know and why 
don't we know. I suggest to you that one way of going about 
investigating this, this is just an additional contribution, is 
that you have two sets of transactions, earnings and 
expenditures.
    I would suggest taking each of the earning transactions and 
look at what you received, what the program received, and what 
the market prices were available at that time, because the 
undercharges are losses. Similarly, look at expenditures and 
each transaction and compare it to the market prices at that 
time and you will see overcharges. Those are losses. But who 
suffered those losses? Those losses were suffered by the Iraqi 
people. But who caused the losses?
    This is what I believe this investigation and other 
investigations have to get to, because once it is determined 
how much those losses are and who is responsible for those 
losses, then someone should pay, and it is that pinch of 
penalty and compensation which may drive improvement in the way 
the United Nations goes about its business, because many of us 
have been involved with the United Nations over many, many 
years. I have only been a direct employee with the United 
Nations in Iraq. We are very proud to work with the United 
Nations, but we are unsatisfied with the way the U.N. functions 
and goes about its business and it is about time that this be 
cured.
    The Oil-for-Food Program probably offers the last grant 
opportunity to do that because it is just so massive that it is 
the whole U.N. system pretty much except UNOOSA. UNOOSA is the 
U.N. Office of Outer Space Affairs. There is a U.N. office for 
everything.
    But you have the Security Council directly involved in this 
program. You have the U.N. Secretariat. You have nine U.N. 
agencies. You have many governments. We can almost say everyone 
is culpable.
    The audits are part of that process of examining what went 
wrong. The next step is to assign responsibility. Now, looking 
at the 13 percent account, which is my bias and my focus, I 
think it is--let me just interject here, but I think it is 
important that there be conflict and competition amongst the 
investigations, because already one thing I missed earlier, and 
I just happened to see last night, is that the ICC interim 
report states that $6.1 billion was spent from the 13 percent 
account. I just heard $5 billion. My calculations from December 
2002 is $4 billion.
    We need some conflict and competition amongst the 
investigations in order to get at the final figure, because 
once we get those, then we can determine what the losses are, 
who is to pay, and how were those losses incurred, and what 
needs to be done to prevent those losses occurring in the 
future.
    In my written testimony, I gave you various points of 
departure. I have had contact with virtually, let me say, all 
entities with the exception of Cotecna. I had contact with 
their predecessor, Lloyd's Register. I have had contact with 
pretty much all the U.N. agencies, with New York, with Baghdad, 
and with the local authorities. Thank you very much.
    Senator Coleman. Thank you very much, Mr. Clarry.
    We will do 8-minute rounds of questions here.
    Mr. Christoff, I believe in your testimony, you indicated 
that had the headquarters functions been examined, oversight of 
contracts with Central and Southern Iraq accounting for 59 
percent, almost $40 billion of Oil-for-Food proceeds, is it 
your sense that the kickbacks and other things could have been 
uncovered if those activities had been audited?
    Mr. Christoff. I think the one area that I would have 
thought that the auditors could have covered was looking at the 
roles and responsibilities of the Office of the Iraq Program. I 
have heard over the past couple years that we have looked into 
this program an unclear understanding of what they were tasked 
to do. They were tasked with looking at the price and value of 
the contracts. I am still unclear, even after listening today 
to the previous panels, how they went about looking at the 
contracts for the price reasonableness of the contracts. If the 
auditors would have at least placed some focus on the roles and 
responsibilities in Mr. Sevan's shop, maybe we would have had 
some early attention about the contracts.
    Senator Coleman. In your testimony, your written testimony, 
you indicated OIP management steered the OIOS toward program 
activities in Iraq rather than headquarters functions where OIP 
reviewed the humanitarian contracts. In your oral testimony, 
you were more specific. You indicated that the head of the OIP 
steered the audit function away from the headquarters 
functions, is that correct?
    Mr. Christoff. Correct. In fact, that is the Volcker 
Commission's finding, as well.
    Senator Coleman. And we are talking about Benon Sevan?
    Mr. Christoff. Correct.
    Senator Coleman. Could you give me an overall assessment, 
then, of the--I mean, the audits deal with a lot of minutiae, a 
lot of minutiae, but the overall body of audit work, what kind 
of picture does that paint of U.N. management of Oil-for-Food 
and other programs in Iraq?
    Mr. Christoff. I think it does two things. First, it sheds 
some light on some of the programs that haven't gotten much 
attention, the 13 percent account that Mr. Clarry refers to, 
the 25 percent of the money that went to this U.N. Compensation 
Commission. But it also shows that there really was a lack of a 
basic foundation of financial asset management, procurement 
management, that you really need in any type of a program. And 
if you don't have that foundation, then it can lead to fraud, 
waste, and abuse.
    Senator Coleman. What role does Benon Sevan have, then, in 
the oversight and management of these kinds of programs, be it 
the Oil-for-Food, the compensation, things that were going on 
in Iraq?
    Mr. Christoff. The Office of the Iraq Program had a 
critical role. In fact, some of the concerns that the auditors 
mentioned was the fact that there was lack of on-site kinds of 
oversight occurring within Iraq itself. It was oversight that 
was occurring from New York rather than on the field.
    Senator Coleman. Mr. Clarry, we didn't get at this in your 
oral testimony, but I think your written testimony talks about 
it. Can you talk to me a little bit about any problems with 
quality of goods that were delivered into Northern Iraq under 
the 13 percent program, medicines out of date, food not fit for 
human consumption, as described in the audits?
    Mr. Clarry. Mr. Chairman, there were always chronic 
complaints about the quality of food and medicines. These were 
supplied by the Baghdad regime. I would like to interject here 
that 40 percent of the 13 percent account, 40 percent of that 
account was actually under the control of the Saddam Hussein 
regime, not under control of the U.N. agencies procuring goods 
and services for the North.
    There were some expired medicines. There were some 
medicines that were thought to be defective. There were always 
chronic shortages of the medicines, even though there were 
substantial funds available. There was $340 million allocated 
during the first 11 phases, of which by August 2002 only $100 
million had been supplied, and there were shortages. The 
Kurdistan regional government had to go out, use their own 
funds on occasion to procure urgent and important medical 
supplies.
    Food, many local people would not use the vegetable oil, 
for instance. It may be a matter of taste. It was all certified 
fit for human consumption. But certainly with the amount of 
funds available, and if you could command the best market 
prices in the world, you could serve steak and eggs for 
breakfast every single day of the year to everybody. There was 
plenty of funds available, and some of the food money was, let 
me say, wasted. Just look at how many people in the world could 
eat 20 kilograms, 20 pounds of wheat flour a month, but that 
was the program.
    Senator Coleman. Were you aware of any kickback schemes in 
humanitarian goods when you were there?
    Mr. Clarry. It was just felt, because the contracts were 
negotiated in Baghdad or by the U.N. agencies themselves. We 
were plugged into the system after that. So in Northern Iraq or 
in the Kurdistan region, we were unaware of any specifics 
regarding kickbacks.
    Senator Coleman. Mr. Christoff, the draft report on the 
activities of OIOS said it is OIOS's view that the overall 
management of the Oil-for-Food Program was not fully 
satisfactory. It certainly got an assessment from one of the 
witnesses earlier that they seemed to be satisfied with the 
work of Cotecna and the inspectors. Can you reflect on what the 
audits showed regarding Lloyd's, Cotecna, and the other folks 
responsible for overseeing the program?
    Mr. Christoff. Yes. The audits that OIOS performed placed a 
lot of emphasis on the lack of oversight on the part of the 
United Nations and the Office of the Iraq Program. For Cotecna, 
for example, they questioned an amendment to that contact 
occurring 4 days after the contract was signed that increased 
that contract price by $356,000. So a lot of the thrust of 
those internal audit reports placed a picture on the extent to 
which any oversight was being conducted on the part of the 
Office of the Iraq Program.
    Senator Coleman. What kind of response did you see within 
the United Nations to the audit reports?
    Mr. Christoff. It varied. I think if you look at some of 
the audits that were done on the U.N. programs in the north, 
you found that the audited agencies appeared to be receptive to 
the recommendations. However, in some of the audits, a few 
follow-up audits that were conducted, OIOS often found that 
even though the agencies agreed to implement the 
recommendations, they didn't do it. You look at the audits of 
the U.N. Compensation Commission, the U.N. Compensation 
Commission responded to the auditors by challenging their legal 
authority.
    Senator Coleman. What responsibility does the top 
management have to kind of pull everyone together to respond to 
audits in an appropriate fashion?
    Mr. Christoff. Well, it is imperative. You can't have 
change implemented unless you have buy-in by top management.
    Senator Coleman. And is there any sense that there was buy-
in by top management in terms of managing this program well, 
responding to audits, keeping things clean?
    Mr. Christoff. Again, I think it varied by the different 
programs. You had the auditors constantly being challenged. I 
think there was probably a lot of wasted time debating the 
merits of what the auditors found and not fixing the problems.
    Senator Coleman. Senator Levin.
    Senator Levin. Thank you. Mr. Christoff, in 2002, the GAO 
issued a report called ``U.N. Confronts Significant Challenges 
in Implementing Sanctions Against Iraq,'' and I think you are 
familiar with that report, and may have contributed to it at 
the time.
    Mr. Christoff. Yes, sir.
    Senator Levin. Now, we introduced a chart from that report 
at the last hearing. This is the chart that we put up.\1\ The 
GAO found in 2002 that, ``Sanctions may have constrained Iraq's 
purchases of conventional weapons. There is no indication that 
Iraq has purchased large-scale weapons systems such as 
aircraft, ships, or armor.''
---------------------------------------------------------------------------
    \1\ See Exhibit No. 54 appears in the Appendix on page 434.
---------------------------------------------------------------------------
    As I understand your conclusion, it was primarily because 
of U.N.'s control of Iraq's oil revenues that, ``Iraq's 
military expenditures have dropped dramatically.'' Is that what 
that chart shows?
    Mr. Christoff. That is correct.
    Senator Levin. That was after the imposition of the U.N. 
program that the military expenditures of Iraq dropped 
significantly, and that was in--what year is that? I can't read 
it from here.
    Mr. Christoff. It begins with when the sanctions were 
implemented in 1991.
    Senator Levin. And then it shows, after that massive drop 
in 1991, it shows a level spending at a very much lower level--
--
    Mr. Christoff. Correct.
    Senator Levin [continuing.] Right through your report in 
2002, is that correct?
    Mr. Christoff. Yes, that is correct.
    Senator Levin. The Duelfer Report found in 2004 that the 
U.N. sanctions stopped Saddam Hussein from rearming Iraq with 
either large-scale conventional weapons or weapons of mass 
destruction. Is that a fair reading, also, of your report?
    Mr. Christoff. I think what we found in our report was that 
the sanctions were effective in limiting some of the major arms 
shipments that had been going to Iraq prior to the sanctions.
    Senator Levin. You said also in your 2002 report that one 
of the challenges in implementing the sanctions was the 
``illicit revenue outside of U.N. control obtained from oil 
sales through neighboring states.'' Your report noted that most 
recent U.N. resolutions did not address those oil sales to the 
neighboring states and that the omission was a significant 
challenge to the enforcement of the sanctions. Is that correct?
    Mr. Christoff. That is correct.
    Senator Levin. Did the U.S. Government take action to 
address the oil trade from Iraq to those neighboring states 
following your report?
    Mr. Christoff. Following the report?
    Senator Levin. Yes.
    Mr. Christoff. I don't know following the report. I know 
during the sanctions program, the United States did bring 
information to the Security Council about neighboring nations 
that were violating the sanctions.
    Senator Levin. And did they take action to stop those 
sales?
    Mr. Christoff. We know that the United Nations, ``took note 
of the smuggling that was occurring to Jordan,'' but we don't 
know what additional actions, if anything, were undertaken.
    Senator Levin. So other than that, as far as you know, 
other than bringing it to the attention of the Security 
Council, the Security Council taking note of the sales, it did 
nothing beyond that?
    Mr. Christoff. Not to my knowledge.
    Senator Levin. And subsequent to your report?
    Mr. Christoff. I do recall at least in public statements 
that former Secretary of State Colin Powell noted that he was 
putting pressure on the Syrians to stop the oil pipeline that 
was being constructed and then the oil shipments that were 
going through Syria, as well.
    Senator Levin. And any reference to putting pressure on the 
Turks or the Jordanians?
    Mr. Christoff. No.
    Senator Levin. Mr. Clarry, are you now a consultant for--
what do you do now?
    Mr. Clarry. I am a consultant to the Kurdistan regional 
government.
    Senator Levin. And the claims that you say that they have, 
and this is, as you put it, your bias and your focus to try to 
get those claims resolved, they relate to money which you 
believe--or goods which should have been delivered to that 
region, is that correct?
    Mr. Clarry. Yes, a little bit of the goods, and mostly the 
remaining unspent funds, yes.
    Senator Levin. And were some of those unspent funds 
delivered to the region?
    Mr. Clarry. Yes.
    Senator Levin. It was in cash?
    Mr. Clarry. Cash.
    Senator Levin. Do you know about how much that was?
    Mr. Clarry. About $2 billion.
    Senator Levin. Two billion?
    Mr. Clarry. Yes.
    Senator Levin. And when was that?
    Mr. Clarry. Last June.
    Senator Levin. Is that included in your figures?
    Mr. Clarry. Yes, I do mention it in a written statement. We 
are looking for the other three.
    Senator Levin. So that is included in your bottom line----
    Mr. Clarry. Yes.
    Senator Levin [continuing.] As to what you believe is still 
owing?
    Mr. Clarry. Yes.
    Senator Levin. Thank you. Thank you, Mr. Chairman.
    Senator Coleman. Mr. Christoff, have you had a chance to 
review the Duelfer Report?
    Mr. Christoff. I have read it, yes.
    Senator Coleman. As I recall, the Iraq Survey Group, they 
indicated that the Iraqi Military Industrialization Committee 
budget grew substantially post-implementation of Oil-for-Food. 
Do you recall that?
    Mr. Christoff. From the Duelfer Committee report? Yes.
    Senator Coleman. I think the figures were--I am trying to 
get a copy of the report--that their budget grew from about 
$7.8 million per year to $500 million per year by 2003, and as 
I recall Duelfer's testimony before this Subcommittee, he 
indicated that, in fact, as a result of the Oil-for-Food 
Program, that Saddam Hussein was able to get around the 
sanctions and to rearm himself. Do you recall that in the 
Duelfer Report and is that inconsistent with the chart that we 
just saw?
    Mr. Christoff. The information that we presented in our 
report in 2001 was information that was provided to us by the 
State Department in terms of what the arms sales were and what 
they were back in 1980 going through 2001.
    Senator Coleman. So the Duelfer Report, the information 
that the Iraq Survey Group provided, was certainly more recent 
information and more thorough information----
    Mr. Christoff. It is more recent, definitely.
    Senator Coleman. And, in fact, I believe that Mr. Duelfer 
indicated that the Iraqi military budget actually grew a 
hundred-fold under the Oil-for-Food Program.
    Senator Levin. Was that consistent with your report, that 
their budget for equipment grew a hundred-fold under the 
program?
    Mr. Christoff. No. In 2001, when we completed our report, 
we were basing the information on what we had received from the 
State Department--it is not there--but which showed that the 
high peak of armament sales that had occurred before sanctions 
were imposed declined as a result of the sanctions.
    Senator Levin. Thank you.
    Senator Coleman. I just want to follow up. At the time of 
that report, 2001, were you aware of the kickbacks, the extent 
of the fraud under the Oil-for-Food Program?
    Mr. Christoff. Yes.
    Senator Coleman. Nothing further.
    Senator Levin. I am all set. Thanks.
    Senator Coleman. This panel is excused. Thank you very 
much.
    I would now like to welcome our final witness, the Hon. 
Patrick F. Kennedy, the Ambassador to the United Nations for 
Management and Reform at the U.S. Mission to the United 
Nations.
    Ambassador Kennedy, I appreciate your appearance at today's 
hearing and look forward to your views on U.N.'s management and 
oversight of the Oil-for-Food Program, U.S. awareness of fraud 
and abuse in the program, including oil smuggling, and U.S. 
actions to prevent use of the program by the regime of Saddam 
Hussein.
    Before we begin, pursuant to Rule 6, all witnesses before 
this Subcommittee are required to be sworn in. Will you please 
raise your right hand.
    Do you swear the testimony you are about to give before the 
Subcommittee is the truth, the whole truth, and nothing but the 
truth, so help you, God?
    Ambassador Kennedy. I do, sir.
    Senator Coleman. Thank you very much.
    I think you know the system here, Ambassador. When the 
light turns from green to amber, if you can conclude. We will 
have your written statement submitted in its entirety for the 
record. Ambassador Kennedy, you may proceed.

  TESTIMONY OF HON. PATRICK F. KENNEDY,\1\ AMBASSADOR TO THE 
UNITED NATIONS FOR MANAGEMENT AND REFORM, UNITED STATES MISSION 
           TO THE UNITED NATIONS, NEW YORK, NEW YORK

    Ambassador Kennedy. Thank you very much, Mr. Chairman. Mr. 
Chairman, distinguished Members of the Subcommittee, I welcome 
the opportunity to appear before you to discuss the U.N. Oil-
for-Food Program and to answer your questions on various 
aspects of the management and execution of the program.
---------------------------------------------------------------------------
    \1\ The prepared statement of Ambassador Kennedy appears in the 
Appendix on page 188.
---------------------------------------------------------------------------
    Mr. Chairman, I want to reiterate three points regarding 
the context in which the Oil-for-Food Program was established 
and implemented. First, I want to emphasize that the United 
States was fighting an often uphill battle. The very 
establishment of the program was the result of arduous 
negotiations among 15 Security Council members, some of whom 
were arguing for the complete lifting of sanctions. As a result 
of this political context, the ability of the United States and 
the United Kingdom to take measures to counter or address 
noncompliance during the life of the program was often 
countered by other members' desires to, in fact, ease sanctions 
on Iraq.
    Second, sanctions have always been an imperfect tool, but 
given the United States's national goal of restricting Saddam's 
ability to obtain new materials of war, sanctions offered an 
important and viable approach short of the use of force to 
achieve this objective.
    Third, the United States made decisions and took actions 
relating to the Oil-for-Food Program and the comprehensive 
sanctions on Iraq also to achieve overarching national security 
goals within the larger political and economic context of the 
region.
    Mr. Chairman, given this general context, I would like to 
attempt to outline some of the issues relating to the 
responsibility for implementing the program and for sanctions 
in general.
    The Oil-for-Food Program was established to address the 
serious humanitarian crisis that Saddam Hussein had inflicted 
on the Iraqi civilian population while concurrently maintaining 
strict enforcement of sanctions on items that Saddam Hussein 
could use to rearm or reconstitute his weapons of mass 
destruction or other military programs.
    We believe the system the Security Council devised by and 
large met these two specific objectives. The Oil-for-Food 
Program did have measurable success in meeting the day-to-day 
needs of Iraqi civilians. The daily caloric intake of Iraqi 
citizens increased and health standards in the country 
improved. And as Mr. Duelfer testified before this Subcommittee 
on November 15 last year, ``U.N. sanctions curbed Saddam's 
ability to import weapons, technology, and expertise into 
Iraq.''
    Investigations over the past year have uncovered 
significant sanctions-busting activity that arose both from 
Saddam Hussein's manipulation of the program and from his and 
others' abuse of the sanction regime for financial gain.
    In the end, the Oil-for-Food Program reflected three 
factors: A collective international desire to assist and 
improve the lives of Iraq's civilian population; a desire by 
the United States and others to prevent Saddam Hussein from 
acquiring materials of war and from posing a renewed regional 
and international threat; and a decision by some companies, 
member states, and individuals to pursue their own financial 
interests at the expense of the international community.
    Mr. Chairman, this final point about actors who colluded 
with Saddam Hussein in breaching sanctions and violating the 
rules of the Oil-for-Food Program leads me to the issue of 
responsibility.
    The United Nations, first and foremost, is a collective 
body comprised of its 191 members. A fundamental principle 
inherent in the U.N. charter is that all member states will 
uphold decisions taken by the Security Council. The 
effectiveness of the sanctions regime against Iraq and the 
integrity of the Oil-for-Food Program depended completely on 
the ability and willingness of member states to implement and 
enforce the sanctions. In this regard, member states held the 
primary responsibility for ensuring that their national 
companies and their citizens complied with states' 
international obligations.
    Through the Treasury Department, the United States, for 
instance, took measures to establish a vetting process for U.S. 
companies seeking to do business in Iraq. We also implemented a 
comprehensive process to review the contracts for humanitarian 
goods going to Iraq in order to ensure that dual-use items were 
not being supplied to Iraq through the Oil-for-Food Program.
    In addition to the responsibilities of member states, the 
Security Council also established a subsidiary body of the 
Council, the 661 Committee, to monitor the sanctions on Iraq, 
and once it was established--the Oil-for-Food Program--the 661 
Committee discussed issues related to violation of the 
sanctions between 1990 and 2003 and issues related to the Oil-
for-Food Program between 1995 and 2003. Action, however, could 
only be taken to address those issues if there were political 
will and a consensus of all the members of the committee to do 
so. Although the United States and the United Kingdom 
repeatedly raised concerns within this context and often 
offered solutions to mitigate abuses, consensus in the 661 
Committee continually proved elusive as we faced opposition 
from one or more members of the committee.
    The Security Council also authorized the Secretary-General 
and the U.N. Secretariat, under Security Council Resolution 986 
in 1995 and subsequent resolutions, to implement and monitor 
the Oil-for-Food Program. The Office of the Iraq Program staff 
was hired to devise a system whereby oil revenues from the 
program could be used to pay for humanitarian supplies for 
Iraq. To be clear, Mr. Chairman, the Secretariat, OIP, and the 
U.N. agencies were given the authority and they had the power 
to implement the program only within the mandate given to them 
by the Security Council. They were not empowered to monitor or 
enforce implementation by member states of the overall 
sanctions on Iraq or act as a border patrol.
    To make the division of responsibilities clear, Mr. 
Chairman, let me offer two examples. The first regards oil 
flowing out of Iraq. The former Iraqi regime, through the State 
Oil Marketing Organization, proposed prices for various markets 
and grades of crude for review by the U.N. Oil Overseers and 
for approval by the 661 Committee. The U.N. Oil Overseers and 
661 Committee members verified that the purchase price of the 
petroleum and the petroleum products were reasonable in light 
of prevailing market conditions.
    The U.N. contracted monitoring group, Saybolt, provided on-
site inspection agents who keep 661 Committee members informed 
of the amount of petroleum exported from Iraq. Saybolt 
inspectors also monitored the arrival of oil industry spares 
under the Oil-for-Food Program. A U.N. escrow account 
administered by Banque Nationale de Paris received payments for 
such liftings. Oil flowing out of Iraq through other means--
smuggling, trade protocols, and the voucher system--was outside 
the mandate of the U.N. Secretariat. Member states were 
responsible for monitoring these activities.
    My second example involves goods coming into Iraq. Again, 
there was a clear division of responsibility. While Iraqis 
retained the authority to contract with specific suppliers 
under the Oil-for-Food Program, the 661 Committee was tasked at 
ensuring that the contracted goods were appropriate for export 
to Iraq under the conditions set out in Security Council 
Resolution 986. Once a contract was approved by the 661 
Committee and the goods shipped, the U.N. inspection agent, 
Lloyd's Register and later Cotecna, were responsible for 
authenticating the arrival of these goods into Iraq. 
Separately, it was the responsibility of member states to 
prevent sanctioned goods from entering into Iraq.
    Mr. Chairman, I offer these examples to illustrate exactly 
where responsibility lay. These were, in hindsight, substantial 
problems related to all these areas of responsibility. Some 
members did not take their international obligations seriously 
and either directly or indirectly facilitated sanction-busting 
activities by the Saddam Hussein regime. The 661 Committee was 
mired in a political debate with regard to Iraq that often 
impeded it from taking action against violators of the embargo. 
As the recent Volcker Independent Inquiry Committee Report 
indicates, there were serious charges that U.N. officials may 
have allowed Saddam Hussein to further undermine their system.
    I stated earlier that the United States has made every 
effort to address violations within the 661 Committee, even 
though we were often impeded by other committee members.
    Violations with respect to the Oil-for-Food Program 
manifested themselves in two key areas, manipulation of oil 
pricing and kickbacks on the Oil-for-Food Program.
    In late 2000, U.N. Oil Overseers reported that Iraqis were 
attempting to impose excessive premiums on oil exports. The 661 
Committee, led by the United States and the United Kingdom, 
agreed to a statement on December 15, 2000, making clear that 
additional fees above the selling price approved by the 661 
Committee were not acceptable.
    Despite circulation of this message to all companies 
approved to lift Iraqi oil, evidence of the illicit surcharges 
continued during the spring of 2001. The United States, working 
in close coordination with the British delegation, raised the 
issue of excessive oil price premiums in a series of more than 
40 formal and informal 661 Committee and Security Council 
meetings during that period.
    After months of stalemate within the 661 Committee, the 
U.S. and British experts made creative use of the consensus 
rule governing decisions in the 661 Committee by withholding 
support until the end of the month on oil pricing proposals 
submitted at the beginning of the month by the Iraqis. This 
retroactive price analysis gave the U.S. and British experts 
the opportunity to compare oil prices sought to the actual 
market price of similar crude oils to determine if SOMO's 
prices reflected fair market value, a requirement under 
Resolution 986.
    Beginning in October 2001, the United States and the United 
Kingdom regularly employed the retroactive pricing mechanism to 
evaluate SOMO's prices until the suspension of the Oil-for-Food 
Program in 2003. The retroactive oil pricing we imposed had the 
intended effect. By the spring of 2002, the U.N. Oil Overseers 
reported that the oil price variation from market levels had 
been reduced from as much as 50 cents per barrel to an accepted 
industry variation of three to five cents.
    Separately, allegations of kickbacks to the Oil-for-Food 
Program began to surface in late 2000. U.S. and British experts 
raised this issue with the 661 Committee experts and the Office 
of the Iraq Program representatives in 2002 and early 2001 and 
formally submitted proposals to address this issue during a 661 
Committee meeting in March 2001. However, no documentary 
evidence was available at the time to support these 
allegations. Consequently, our proposals received no support. 
Committee members claimed that absent evidence indicating that 
such kickbacks existed, no action could be taken.
    Important measures taken to address this issue occurred 
after the fall of Saddam's regime, when the United States, 
through the Coalition Provisional Authority, was informed of 
the kickback scheme by Iraqi ministry representatives in 
Baghdad. With the fall of the Hussein regime in the spring of 
2003, and with the subsequent authorities granted under U.N. 
Security Council Resolution 1483, CPA officials, in 
coordination with U.N. officials and Iraqis, took steps to 
eliminate surcharges in the remaining Oil-for-Food contracts.
    In addition to eliminating and countering surcharges and 
kickbacks, the United States also took initiatives to provide 
members of the 661 Committee and the Security Council with 
information and evidence of violations by the Saddam Hussein 
regime during various briefings. The United States briefed 
Security Council members in 2000 on the various ways the Saddam 
Hussein regime was diverting funds to benefit Iraq's elite, 
including through the use of diverted funds to build and 
furnish Saddam's palaces. The U.S. again briefed Security 
Council's ambassadors in the spring of 2002 on Saddam's 
noncompliance with U.N. Security Council resolutions and 
Saddam's attempts to procure WMD-related materials.
    In March 2002, a U.S. interagency team briefed the 661 
Committee on the regime's diversion of trucks. The U.S. 
commanders of the Multilateral Interception Force in the Gulf 
also briefed the committee each year, starting in 1996, on the 
MIF's activities in combating the illegal smuggling of Iraqi 
crude oil.
    Mr. Chairman, I know that an issue of concern to this 
Subcommittee is our relationship with Jordan and Turkey with 
respect to the imports of oil from Iraq during the Oil-for-Food 
period and why we felt the need to treat these nations 
differently.
    Beginning in 1991 and extending through 2003, the annual 
Foreign Operations Appropriation Act contained restrictions on 
U.S. assistance to any country not in compliance with U.N. 
Security Council resolutions against Iraq. In 2002, the Foreign 
Operations Appropriation Act, as carried forward in the 2002 
Supplemental, for example, enacted such legislation as Section 
531. The restrictions under 531 and its predecessors could be 
waived if the President determined and certified to the 
Congress that providing assistance was in the national 
interest.
    In the case of Jordan, as we explained to then-Senate 
Foreign Relations Committee Chairman Biden in a letter dated 
October 2, 2002, the restriction had been waived each year 
since its enactment in 1991 by three successive 
Administrations.
    Jordan was and remains a critical partner with the United 
States in bringing stability and a lasting peace to the Middle 
East. By ensuring that Jordan was not strangled by a lack of 
critical resource, the Jordanian government was able to pursue 
policies of critical importance to U.S. national security in 
the region. The Jordanians made clear to us that their trade 
would not aid Saddam's weapons procurement programs. We 
understood that they were sending manufactured products to Iraq 
in exchange for oil. The U.S. determination and certification 
were solely in recognition of Jordan's lack of economically 
viable alternatives. The U.N. Sanctions Committee, with U.S. 
support, took note of Jordan's imports of Iraqi oil and its 
lack of economic alternatives.
    As we also explained in the October 2002 letter, similar 
consideration was given to Turkey, a close ally of the United 
States, a NATO partner, and host of Operation Northern Watch. 
Turkey cooperated closely with the U.S. nonproliferation 
efforts against Saddam's regime. Our approach was to encourage 
Turkey to bring its trade with Iraq into conformity with the 
U.N. Security Council resolutions.
    Turkey claimed that its cumulative losses from the Gulf War 
and ensuing sanctions against Iraq amounted to about $35 
billion, and throughout the 1990's pushed for ways to expand 
its trade with Iraq. From 1991 to the start of Operation Iraqi 
Freedom, the United States worked with Turkey to discourage 
trade out of the U.N. sanctions regime. For instance, the 
United States did not support a Turkish request for relief from 
sanctions under Article 50 of the U.N. Charter. In addition, 
the United States sought to ensure that the U.N. Security 
Council resolutions did not legitimize trade with Iraq outside 
the Oil-for-Food Program.
    Senator Coleman. Ambassador Kennedy, if you could sum up.
    Ambassador Kennedy. Yes, sir.
    Senator Coleman. I am sure Senator Levin will follow up on 
some of these issues.
    Ambassador Kennedy. Yes, sir. The last issue I would like 
to address is the accusations of impropriety, mismanagement, or 
abuse by U.N. personnel, contractors, or agencies. The recently 
released U.N. Office of Internal Oversight Services audits and 
the Independent Inquiry Committee interim report paint a very 
disappointing and disturbing picture.
    The lack of transparency on the part of the United Nations 
with regard to OIOS has long been a particular concern. The 
United States mission has continually sought access to OIOS 
reports. These were initially denied, as access was deemed 
outside of the General Assembly rules. Our staff worked 
tirelessly since last summer to get these particular OFF 
reports released, both from the Secretary and the Volcker 
Commission, which both denied.
    Therefore, last fall, the United States put forward 
language for inclusion in General Assembly resolutions that 
required that the United Nations make all OIOS audit reports 
available to U.N. member states on their request. The General 
Assembly adopted this U.S. initiative during the evening of 
December 23. Within an hour, the United States formally 
requested copies of the OIOS reports covering the Oil-for-Food 
Program. Two weeks later, these audits were made available, 
thanks to our efforts, and these are the reports that your 
staff has reviewed.
    Mr. Chairman, I convey this information to you because we 
at the United States mission take our responsibility to make 
the United Nations a more transparent body very seriously and 
we intend to continue this initiative in order to ensure 
adequate follow-up of auditors' recommendations.
    The Oil-for-Food Program was a unique endeavor, and 
although it was essential to the Iraqi people, it was also 
manipulated by Saddam Hussein and his cronies to undermine the 
sanctions. We will go forward, Mr. Chairman, and take the 
lessons we have learned from this experience very seriously and 
apply them to all future U.N. endeavors.
    I now stand ready to answer any questions the Subcommittee 
might have.
    Senator Coleman. Thank you, Ambassador Kennedy. I 
appreciate that very extensive statement.
    I also want to say I appreciate the efforts to get us 
access to the--in the end, I think it was the 58 internal 
audits. I know we had been promised them at some later time, 
but it wasn't until the resolution that you discussed was 
passed that caused us to get them when we did, so I want to 
thank you for those efforts.
    In the Duelfer Report, the Iraqi Survey Group noted, and I 
am going to quote here, and I will have the portion submitted 
to the record, ``Although Saddam had reluctantly accepted the 
U.N. Oil-for-Food Program by 1996, he soon recognized its 
economic value and additional opportunities for further 
manipulation and influence of the UNSC,'' U.N. Security 
Council, ``Iraq 661 Sanctions Committee member states. 
Therefore, he resigned himself to the continuation of U.N. 
sanctions, understanding that they would become a paper tiger, 
regardless of continued U.S. resolve to maintain them.'' The 
report goes on then to detail the significant increases in 
military funding. It goes on to detail individuals with 
connections to member states receiving vouchers which then were 
actually bribes.
    My question to you is at what point in time were folks in 
our delegation aware of vouchers being handed out to folks with 
influence in member states? At what point in time were our 
folks aware that kickbacks that have been detailed before this 
Subcommittee by the Weir Group? I am trying to get a sense of 
what the thinking was as this stuff is going on and the massive 
way in which it was happening. Were we simply blind at the time 
it was happening, or were we aware but unable to do anything?
    Ambassador Kennedy. Mr. Chairman, if I can divide your 
question into three parts, no one became aware of the voucher 
program until after the fall of Baghdad. The voucher program 
was kept very secret by Saddam Hussein. He ran, as you are well 
aware, sir, an extremely brutal regime and he was able to keep 
secrets.
    However, we were certainly aware, and became aware in 2000, 
of his efforts to subvert the activities, both through the 
first--the premium pricing on oil and then by kickbacks and we 
moved to counter this. It was, in fact, a chess game, sir. 
Saddam Hussein was always on the lookout for a way to get 
around the sanctions, and as information came to our attention, 
the United States, and always allied with the United Kingdom, 
were looking for ways to combat that.
    The example I laid out in my opening statement about how 
once we discovered, because the U.N. Oil Overseers reported to 
us his attempts to put premiums on sales, we moved in the 
committee. We met resistance from other nations in the 
committee, something we faced at all times. And then we 
employed the consensus mechanism, as I said, in a reverse way 
to end the sanctions.
    So 2001, 2002, we began to hear a variety of rumors and we 
then moved to take whatever steps we could to counter them.
    Senator Coleman. And specifically, you talked about the 
retroactive pricing. That is the issue described where Saddam 
Hussein could manipulate price, but once you instituted this 
retroactive pricing mechanism, that took away his ability to do 
that.
    Ambassador Kennedy. It took it away, yes, sir.
    Senator Coleman. Who was resisting--first of all, how long 
did it take, from the time we first became aware of this and 
wanted to change the policy, to actually change the policy?
    Ambassador Kennedy. I think it took somewhere around 6 to 9 
months. We met resistance within the committee. Other members 
of the committee were always saying, bring us proof positive, 
and we said, we don't need proof positive. The rumor on the 
street is sufficient that we must pursue this in order to 
maintain the integrity of the sanctions system. Other nations 
resisted.
    Senator Coleman. Which other members of the 661 Committee 
were most resistant to changing the retroactive pricing 
mechanism?
    Ambassador Kennedy. We received inquiries and challenges to 
our efforts from the Russians, from the Chinese, from the 
French, from the Syrians, from others, because the composition 
of the 661 Committee was the permanent five plus others as they 
changed.
    Senator Coleman. Was there ever any concern raised about 
the value of Oil-for-Food contracts going to these specific 
member nations and somehow that relating to the measure of 
their resistance?
    Ambassador Kennedy. No, sir. I mean, obviously, there may 
have been colleagues who had speculated on that, but if you go 
back to the beginning of the program, in 1995, the sanctions 
had been in place on Iraq for 5 years. Because of Saddam's 
total lack of care for his own people, his people were simply 
starving. Child mortality was up. Maternal mortality was up. 
And the public perception in the world was not that Saddam 
Hussein was causing this but that the sanctions regime was 
causing it.
    The U.S. national goal was to maintain those sanctions, and 
therefore, we were looking for a way to keep the sanction 
regime in place but overcome this public perception that the 
sanctions were causing great harm to the Iraqi people. 
Therefore, as we worked to implement the Oil-for-Food Program 
to work it out, that was our dilemma.
    Our primary goal was to maintain the sanctions. If we could 
not have a solid wall, then we wanted a screen, and we needed 
to construct a screen that was as tight as possible within the 
context. But when we negotiated, the ability to write contracts 
had to be left to Saddam Hussein. That was the only way to get 
the program implemented.
    Senator Coleman. Wasn't there concern that by giving him 
that ability, that you were giving him the power to manipulate, 
which obviously he ultimately did?
    Ambassador Kennedy. It was anticipated, yes, that Saddam 
Hussein would do anything he could to manipulate the program. 
We tried to put in means to counter the manipulation, to limit 
the manipulation, but at the same time, faced with Saddam 
Hussein manipulating something versus the loss of sanctions as 
they dissipated, that other countries in the world did not 
implement the sanctions as aggressively as we felt the United 
Nations required, the U.N. Security Council resolutions 
required them to, we did not want the sanctions to fritter 
away.
    Senator Coleman. You talked a number of times about the 
responsibility of ``member states'' to do certain kinds of 
enforcement. Can you explain what you meant by that?
    Ambassador Kennedy. Yes, sir. A resolution passed by the 
U.N. Security Council is, under international law, binding on 
all member states. So if sanctions are put by the United 
Nations on Xanadu or Iraq, it is the responsibility of all 
other 190 members of the United Nations to enforce those 
sanctions. They are required to bar the movement of goods, to 
only ship goods into Iraq under the program.
    But the enforcement mechanism is the court of world public 
opinion. There is no sanctions mechanism absent going back to 
the Security Council for another resolution to attempt to take 
military action against a violator.
    Senator Coleman. But in this case, where you have an 
incredibly wide pattern of abuse of contracts, kickbacks, 
manipulation of contracts, oil smuggling, topping off, a whole 
range of things, it is difficult for me sitting here to 
understand how we somehow would not be aware all this is going 
on when it is going on.
    Ambassador Kennedy. As I said, sir, we became aware in 2002 
of his attempts to manipulate oil pricing, and then as we 
tamped that down, he moved to kickbacks, moving from one 
activity to--we were aware of it and we constantly moved to 
counter it. As I said earlier, Mr. Chairman, I am not here to 
tell you that sanctions are a perfect tool, but sanctions are a 
tool. They were a tool that were available to us, and as Mr. 
Duelfer says several times in his report, they did have an 
effect on limiting Saddam Hussein's ability to acquire 
materials.
    There are other examples in his statement, in his report, I 
would say, where he talks about the Iraqis, for example, 
attempting to purchase aluminum powder by setting up massive 
front companies, and a year later, he never was able to obtain 
that aluminum powder, which is one of the components of 
building weapons.
    So sanctions were having an effect. A perfect effect, 
absolutely not. But the United States felt it was very 
important to maintain that screen in place for the value of 
keeping out as much as was possible.
    Senator Coleman. Thank you, Ambassador. Senator Levin.
    Senator Levin. The way Secretary Powell put it was, I 
think, credit has to be given for putting in place a sanctions 
regime that has kept Saddam Hussein pretty much in check. Is 
that what you basically are saying?
    Ambassador Kennedy. Yes, sir.
    Senator Levin. And you stick to that?
    Ambassador Kennedy. Yes, sir.
    Senator Levin. Even knowing of the abuses that we have 
heard of, do you still stick to that conclusion?
    Ambassador Kennedy. Sir, the program, Senator, was 
certainly not perfect, but it kept Saddam Hussein basically in 
check, as the Secretary said.
    Senator Levin. If we could put that chart up,\1\ that 
revenue that was going to Iraq, you made reference to what we 
didn't know until 2002. That is what we didn't know. That is 
only a quarter of the money that he was getting for oil sales 
that he shouldn't have gotten if the Oil-for-Food Program was 
working and applied to everybody, including Turkey and Jordan, 
because what we did know was that big segment of that pie, 
which is 73 percent of the revenue that he got, and that was 
all outside of the U.N. Oil-for-Food Program. Are you familiar 
with that?
---------------------------------------------------------------------------
    \1\ See Exhibit No. 51 appears in the Appendix on page 426.
---------------------------------------------------------------------------
    Ambassador Kennedy. Yes, sir.
    Senator Levin. Does that look like about the right 
proportions?
    Ambassador Kennedy. Yes----
    Senator Levin. That was the Duelfer----
    Ambassador Kennedy. Yes, sir. I think those numbers are 
good numbers.
    Senator Levin. So what we did know in terms of what he was 
doing outside of the program was that he got a huge amount of 
revenue from oil sales to our allies, at least in the case of 
Turkey, Jordan, and Egypt. Obviously, Syria is not an ally, but 
in terms of the major recipient, which was Jordan, we knew that 
he was selling that oil outside of the program, in other words, 
in ways that the U.N. resolution did not contemplate, did not 
provide for.
    Now, the question is, we decided basically not to object. 
We could say rhetorically we didn't agree. We could tell 
Jordan, as we did, that we were aware--we took note at the 
United Nations of these sales to Jordan, and that was about it.
    We took note, I guess, that Turkey--we didn't even take 
note. We didn't even let their application for approval of that 
direct sale to be considered by the United Nations. We 
prevented that from coming to U.N. consideration for reasons 
which are not clear to me, but probably because they may have 
been vetoed, would be my guess.
    Essentially, looking at this honestly, is it not accurate 
to say that the majority of that illicit revenue that Duelfer 
identified, about three-quarters of the illicit revenue went to 
Iraq with our implicit knowledge? Is that fair to say? We knew 
about it?
    Ambassador Kennedy. Yes, sir, we were aware of it.
    Senator Levin. And for these strategic reasons you gave or 
these national--what you call national security reasons, we 
decided that we were going to basically allow that to continue 
without trying to stop it, is that fair?
    Ambassador Kennedy. In the case of Jordan and Turkey, not 
in the case of----
    Senator Levin. Obviously.
    Ambassador Kennedy [continuing.] Not in the case of Syria. 
And in the case of Jordan, for example, we worked with the 
Jordanians to constantly emphasize to them that this should be 
a barter arrangement.
    Senator Levin. Right.
    Ambassador Kennedy. The receipt of oil and its swapping for 
material that would be acceptable under the sanctions regime 
writ large. We urged the same with Turkey.
    Senator Levin. We urged them to do that, is that correct? 
We urged them to barter?
    Ambassador Kennedy. We urged the--yes, sir. We urged them 
to barter.
    Senator Levin. We don't know whether they got cash or not, 
do we?
    Ambassador Kennedy. No, sir, we do not.
    Senator Levin. All right.
    Ambassador Kennedy. We do not.
    Senator Levin. So when we talk about the Oil-for-Food 
Program and the efforts to get around the Oil-for-Food Program 
and the sanctions regime which he made, without any doubt, he 
would use any tactic he possibly could to get around the 
sanctions, and one of the ways he did it was with kickbacks and 
with surcharges and with what is called smuggling up there. The 
major way he got around that sanction program was through sales 
of his oil to countries, to neighboring countries which were 
not stopped by the international community, and at least in the 
case of Jordan and Syria, we acquiesced in and did not attempt 
to stop. Is that a fair summary?
    Ambassador Kennedy. With one, if I might apologize, a 
correction. You said Syria----
    Senator Levin. Did I say Turkey?
    Ambassador Kennedy. No, sir.
    Senator Levin. Let me correct that, obviously. In the case 
of Jordan and Turkey, we knew those sales were taking place and 
we acquiesced in them. Is that a fair summary?
    Ambassador Kennedy. We notified the Congress every year----
    Senator Levin. And notified us.
    Ambassador Kennedy [continuing.] Under the exception of the 
Foreign Assistance Act that Jordan and Turkey were--actions 
were in violation of the sanctions regime, yes, sir.
    Senator Levin. You notified us. As a matter of fact, you 
notified us, because under our law, aid to those two allies, 
Jordan and Turkey, could not take place unless you notified 
Congress and waived the restrictions of the law, is that 
correct?
    Ambassador Kennedy. Yes, sir, that is under the Foreign 
Assistance Act.
    Senator Levin. Because I do think it is important that when 
we assess responsibility, that we also look at our own actions 
and decide--we can look retrospectively and decide they were 
the right actions, by the way. As far as I am concerned, I 
didn't object to them at the time and I think that there was 
good cause to do what we did.
    But it is not good enough to point the finger at other 
countries such as Russia, France, and so forth for stopping 
things at the 661 Committee. They did it for their strategic 
reasons. We looked the other way when it came to putting money 
into Saddam's pocket for oil sales outside of the sanctions 
program that we had approved and worked so hard to get in 
place. We did it for what we considered to be good reasons, and 
may have been good reasons, by the way. They may have been good 
reasons. I am not arguing with that. But we looked the other 
way when large amounts of money, three-quarters of the illicit 
revenue, was going to Saddam Hussein under those direct sales 
and we ought to acknowledge it.
    That is my only argument here with your testimony, it is 
important that we acknowledge it and we be straightforward 
about what the implications of that were. Jordan was an ally. 
Turkey is an ally. They had economic problems, and so we 
acquiesced in, we didn't try to stop those direct sales from a 
bitter enemy of ours, in violation of a sanctions program that 
we had helped put in place.
    Ambassador Kennedy. What I would say, Senator, is I would 
not use the phrase ``look the other way,'' because we 
constantly engaged with the Jordanians----
    Senator Levin. Did we try to stop it? Let us be honest.
    Ambassador Kennedy. We engaged with them to mitigate it to 
the maximum extent possible and to encourage them to use barter 
so that the exchange would not be any materials of war.
    Senator Levin. And as you testified, we don't know that 
they engaged in barter. They may have just paid in cash to 
Iraq. We don't know whether they did or not.
    Ambassador Kennedy. I would have to get back to you for 
that for the record, sir.

                  INFORMATION PROVIDED FOR THE RECORD

    Official Jordanian representations to the U.S. Government indicate 
that no cash was provided to Iraq under the protocol arrangement, 
although the Duelfer Report quotes several Iraqi sources as indicating 
that a small amount of the trade was in cash. We understand the 
arrangement between the two countries was to have been one of straight 
barter, with nothing from the Jordanian government to have been paid 
directly to the Government of Iraq. Rather, the Government of Jordan 
was to have paid into a clearing account at the Central Bank of Jordan 
an amount equal to the price of oil that Iraq was shipping to Jordan. 
Jordanian companies, under contract to Iraqi government ministries, 
exported goods to Iraq and were to have drawn down the price of the 
goods they exported from the clearing account at the Central Bank of 
Jordan.

    Senator Levin. All right. And when I say looked the other 
way, we did not try to stop it.
    Ambassador Kennedy. As we notified, sir, we----
    Senator Levin. As you notified Congress. I said ``we.''
    Ambassador Kennedy. I am not shifting the----
    Senator Levin. No.
    Ambassador Kennedy. I am just saying, this was a public 
position taken by three successive Administrations----
    Senator Levin. Absolutely.
    Ambassador Kennedy [continuing.] That the U.S. national 
interest was best served by taking this action.
    Senator Levin. I couldn't agree with you more. When I said 
``we,'' I mean America. I am not pointing at this 
Administration. I am saying, we as a country, decided, this 
Administration, the previous Administration. We, the Congress, 
that got the notice decided that all that money or equipment, 
whatever it was, and we didn't know, would be going to Saddam 
Hussein, a bitter enemy of ours, in violation of a program that 
we fought to put in place for reasons that this country thought 
were good and sufficient. That is all I am saying, and we ought 
to be honest about it.
    One other question and then I am done. You didn't react to 
that, but I assume you would agree we ought to be 
straightforward in acknowledging that was the facts, is that 
fair enough? Were those facts that I stated an accurate summary 
of the facts?
    Ambassador Kennedy. The sales--the trade was going on and 
we were aware of it, yes, sir.
    Senator Levin. OK, final question. About 10 days ago, 
Ambassador, we asked the State Department for two dozen 
documents, roughly, which is a very specific number and they 
all were identified, I believe, by specific Bates numbers. This 
morning, after the hearing began, we got about half of those 
documents. What was the holdup in getting us those documents, 
and second, can we get the other dozen?
    Ambassador Kennedy. We had some trouble locating the 
documents because of their age and my staff in New York 
personally put in a great deal of time. We were able to locate 
them by searching our files. The other half are so old that we 
have been unable to locate them in our active files and we have 
an all points search out for them, including consulting with 
the U.N. central archives in order to obtain them. As soon as 
we obtain them, sir, they will be immediately delivered.
    Senator Levin. I appreciate that, and Mr. Chairman, I would 
ask that we make part of the record a number of documents which 
I will ask the Ambassador to comment on for the record relative 
to some ship deliveries to specific ports which apparently 
were--this is of Iraqi oil to Jordanian ports, or for Jordan, 
which apparently were escorted by American ships. There have 
been a number of press reports on those deliveries and I would 
ask that we make part of the record at this time a number of 
documents which we have received by subpoena in the record.\1\
---------------------------------------------------------------------------
    \1\ See Exhibit No. 53 appears in the Appendix on page 429.
---------------------------------------------------------------------------
    Senator Coleman. Without objection.
    Senator Levin. Thank you. Thank you, Mr. Chairman.
    Senator Coleman. Thank you, Senator Levin. Thank you, 
Ambassador Kennedy.
    I will leave the record open for 10 days to accommodate 
both the requests of the individuals from Cotecna and the 
records that Senator Levin has asked for.
    We will continue with these hearings, the issue of why were 
certain actions taken by member states, whether it was 
strategic reasons or whether it was because of bribery or 
influence or issues that still have to be reviewed further. I 
reiterate my concern about the need for greater cooperation 
from the United Nations and for the United Nations to make 
available certain witnesses and documents to this Subcommittee, 
to Members of Congress, so that these investigations may 
proceed.
    With that, this hearing is now adjourned.
    [Whereupon, at 1:02 p.m., the Subcommittee was adjourned.]


                            A P P E N D I X

                              ----------                              


                  PREPARED STATEMENT OF SENATOR PRYOR

    Senator Coleman, I'd first like to thank you for your leadership on 
this subcommittee. Today's hearing, the second into the management of 
the Iraqi Oil-For-Food Program, is important in furthering our 
understanding of both the failures of the program but also how the 
program worked. In November, we heard testimony regarding how Saddam 
Hussein abused the Oil-For-Food Program. As I noted during that first 
hearing on November 15, the U.N. sanctions against Iraq will likely not 
be the last time the international community attempts sanctions against 
a country; it is therefore important that we understand the ways in 
which there were breakdowns in the Iraq sanctions and the Oil-For-Food 
Program. In much the same vain, I look forward to today's testimony 
regarding the United Nations' management and oversight of the Iraqi 
Oil-For-Food Program.
    There is not doubt that there are many lessons to be learned from 
the Oil-For-Food Program. I am deeply concerned to hear of troubles 
this subcommittee has had in its attempts to gain access to some 
records and personnel at the United Nations in New York, and I would 
urge Secretary General Kofi Annan to cooperate with the U.S. Government 
and this Congressional Committee as it attempts to piece together the 
truth about the Oil-For-Food Program. It is in the best interest of the 
international community, all of us, that we know exactly where Oil-For-
Food Program and United Nations policies went awry because we all have 
an interest in seeing that future sanctions and humanitarian programs 
are successful.
    I thank today's witnesses for taking the time to be here today as 
this Subcommittee attempts to provide a clearer picture of the 
shortcomings of the Oil-For-Food Program, and I look forward to their 
testimony. Again, Chairman Coleman, thank you for your important 
leadership.

[GRAPHIC] [TIFF OMITTED] T0172.001

[GRAPHIC] [TIFF OMITTED] T0172.002

[GRAPHIC] [TIFF OMITTED] T0172.003

[GRAPHIC] [TIFF OMITTED] T0172.004

[GRAPHIC] [TIFF OMITTED] T0172.005

[GRAPHIC] [TIFF OMITTED] T0172.006

[GRAPHIC] [TIFF OMITTED] T0172.007

[GRAPHIC] [TIFF OMITTED] T0172.008

[GRAPHIC] [TIFF OMITTED] T0172.009

[GRAPHIC] [TIFF OMITTED] T0172.010

[GRAPHIC] [TIFF OMITTED] T0172.011

[GRAPHIC] [TIFF OMITTED] T0172.012

[GRAPHIC] [TIFF OMITTED] T0172.013

[GRAPHIC] [TIFF OMITTED] T0172.014

[GRAPHIC] [TIFF OMITTED] T0172.015

[GRAPHIC] [TIFF OMITTED] T0172.016

[GRAPHIC] [TIFF OMITTED] T0172.017

[GRAPHIC] [TIFF OMITTED] T0172.018

[GRAPHIC] [TIFF OMITTED] T0172.019

[GRAPHIC] [TIFF OMITTED] T0172.020

[GRAPHIC] [TIFF OMITTED] T0172.021

[GRAPHIC] [TIFF OMITTED] T0172.022

[GRAPHIC] [TIFF OMITTED] T0172.023

[GRAPHIC] [TIFF OMITTED] T0172.024

[GRAPHIC] [TIFF OMITTED] T0172.025

[GRAPHIC] [TIFF OMITTED] T0172.026

[GRAPHIC] [TIFF OMITTED] T0172.027

[GRAPHIC] [TIFF OMITTED] T0172.028

[GRAPHIC] [TIFF OMITTED] T0172.029

[GRAPHIC] [TIFF OMITTED] T0172.030

[GRAPHIC] [TIFF OMITTED] T0172.031

[GRAPHIC] [TIFF OMITTED] T0172.032

[GRAPHIC] [TIFF OMITTED] T0172.033

[GRAPHIC] [TIFF OMITTED] T0172.034

[GRAPHIC] [TIFF OMITTED] T0172.035

[GRAPHIC] [TIFF OMITTED] T0172.036

[GRAPHIC] [TIFF OMITTED] T0172.037

[GRAPHIC] [TIFF OMITTED] T0172.038

[GRAPHIC] [TIFF OMITTED] T0172.039

[GRAPHIC] [TIFF OMITTED] T0172.040

[GRAPHIC] [TIFF OMITTED] T0172.041

[GRAPHIC] [TIFF OMITTED] T0172.042

[GRAPHIC] [TIFF OMITTED] T0172.043

[GRAPHIC] [TIFF OMITTED] T0172.044

[GRAPHIC] [TIFF OMITTED] T0172.045

[GRAPHIC] [TIFF OMITTED] T0172.046

[GRAPHIC] [TIFF OMITTED] T0172.047

[GRAPHIC] [TIFF OMITTED] T0172.048

[GRAPHIC] [TIFF OMITTED] T0172.049

[GRAPHIC] [TIFF OMITTED] T0172.050

[GRAPHIC] [TIFF OMITTED] T0172.051

[GRAPHIC] [TIFF OMITTED] T0172.052

[GRAPHIC] [TIFF OMITTED] T0172.053

[GRAPHIC] [TIFF OMITTED] T0172.054

[GRAPHIC] [TIFF OMITTED] T0172.055

[GRAPHIC] [TIFF OMITTED] T0172.056

[GRAPHIC] [TIFF OMITTED] T0172.057

[GRAPHIC] [TIFF OMITTED] T0172.058

[GRAPHIC] [TIFF OMITTED] T0172.059

[GRAPHIC] [TIFF OMITTED] T0172.060

[GRAPHIC] [TIFF OMITTED] T0172.061

[GRAPHIC] [TIFF OMITTED] T0172.062

[GRAPHIC] [TIFF OMITTED] T0172.063

[GRAPHIC] [TIFF OMITTED] T0172.064

[GRAPHIC] [TIFF OMITTED] T0172.065

[GRAPHIC] [TIFF OMITTED] T0172.066

[GRAPHIC] [TIFF OMITTED] T0172.067

[GRAPHIC] [TIFF OMITTED] T0172.068

[GRAPHIC] [TIFF OMITTED] T0172.069

[GRAPHIC] [TIFF OMITTED] T0172.070

[GRAPHIC] [TIFF OMITTED] T0172.071

[GRAPHIC] [TIFF OMITTED] T0172.090

[GRAPHIC] [TIFF OMITTED] T0172.091

[GRAPHIC] [TIFF OMITTED] T0172.092

[GRAPHIC] [TIFF OMITTED] T0172.093

[GRAPHIC] [TIFF OMITTED] T0172.094

[GRAPHIC] [TIFF OMITTED] T0172.095

[GRAPHIC] [TIFF OMITTED] T0172.096

[GRAPHIC] [TIFF OMITTED] T0172.097

[GRAPHIC] [TIFF OMITTED] T0172.072

[GRAPHIC] [TIFF OMITTED] T0172.073

[GRAPHIC] [TIFF OMITTED] T0172.074

[GRAPHIC] [TIFF OMITTED] T0172.075

[GRAPHIC] [TIFF OMITTED] T0172.076

[GRAPHIC] [TIFF OMITTED] T0172.077

[GRAPHIC] [TIFF OMITTED] T0172.078

[GRAPHIC] [TIFF OMITTED] T0172.079

[GRAPHIC] [TIFF OMITTED] T0172.080

[GRAPHIC] [TIFF OMITTED] T0172.081

[GRAPHIC] [TIFF OMITTED] T0172.082

[GRAPHIC] [TIFF OMITTED] T0172.083

[GRAPHIC] [TIFF OMITTED] T0172.084

[GRAPHIC] [TIFF OMITTED] T0172.085

[GRAPHIC] [TIFF OMITTED] T0172.086

[GRAPHIC] [TIFF OMITTED] T0172.087

[GRAPHIC] [TIFF OMITTED] T0172.088

[GRAPHIC] [TIFF OMITTED] T0172.089

[GRAPHIC] [TIFF OMITTED] T0172.098

[GRAPHIC] [TIFF OMITTED] T0172.099

[GRAPHIC] [TIFF OMITTED] T0172.100

[GRAPHIC] [TIFF OMITTED] T0172.101

[GRAPHIC] [TIFF OMITTED] T0172.102

[GRAPHIC] [TIFF OMITTED] T0172.103

[GRAPHIC] [TIFF OMITTED] T0172.104

[GRAPHIC] [TIFF OMITTED] T0172.105

[GRAPHIC] [TIFF OMITTED] T0172.106

[GRAPHIC] [TIFF OMITTED] T0172.107

[GRAPHIC] [TIFF OMITTED] T0172.108

[GRAPHIC] [TIFF OMITTED] T0172.109

[GRAPHIC] [TIFF OMITTED] T0172.110

[GRAPHIC] [TIFF OMITTED] T0172.111

[GRAPHIC] [TIFF OMITTED] T0172.112

[GRAPHIC] [TIFF OMITTED] T0172.113

[GRAPHIC] [TIFF OMITTED] T0172.114

[GRAPHIC] [TIFF OMITTED] T0172.115

[GRAPHIC] [TIFF OMITTED] T0172.116

[GRAPHIC] [TIFF OMITTED] T0172.117

[GRAPHIC] [TIFF OMITTED] T0172.118

[GRAPHIC] [TIFF OMITTED] T0172.119

[GRAPHIC] [TIFF OMITTED] T0172.120

[GRAPHIC] [TIFF OMITTED] T0172.121

[GRAPHIC] [TIFF OMITTED] T0172.122

[GRAPHIC] [TIFF OMITTED] T0172.123

[GRAPHIC] [TIFF OMITTED] T0172.124

[GRAPHIC] [TIFF OMITTED] T0172.125

[GRAPHIC] [TIFF OMITTED] T0172.126

[GRAPHIC] [TIFF OMITTED] T0172.127

[GRAPHIC] [TIFF OMITTED] T0172.128

[GRAPHIC] [TIFF OMITTED] T0172.129

[GRAPHIC] [TIFF OMITTED] T0172.130

[GRAPHIC] [TIFF OMITTED] T0172.131

[GRAPHIC] [TIFF OMITTED] T0172.132

[GRAPHIC] [TIFF OMITTED] T0172.133

[GRAPHIC] [TIFF OMITTED] T0172.134

[GRAPHIC] [TIFF OMITTED] T0172.135

[GRAPHIC] [TIFF OMITTED] T0172.136

[GRAPHIC] [TIFF OMITTED] T0172.137

[GRAPHIC] [TIFF OMITTED] T0172.138

[GRAPHIC] [TIFF OMITTED] T0172.139

[GRAPHIC] [TIFF OMITTED] T0172.140

[GRAPHIC] [TIFF OMITTED] T0172.141

[GRAPHIC] [TIFF OMITTED] T0172.142

[GRAPHIC] [TIFF OMITTED] T0172.143

[GRAPHIC] [TIFF OMITTED] T0172.144

[GRAPHIC] [TIFF OMITTED] T0172.145

[GRAPHIC] [TIFF OMITTED] T0172.146

[GRAPHIC] [TIFF OMITTED] T0172.147

[GRAPHIC] [TIFF OMITTED] T0172.148

[GRAPHIC] [TIFF OMITTED] T0172.149

[GRAPHIC] [TIFF OMITTED] T0172.150

[GRAPHIC] [TIFF OMITTED] T0172.151

[GRAPHIC] [TIFF OMITTED] T0172.152

[GRAPHIC] [TIFF OMITTED] T0172.153

[GRAPHIC] [TIFF OMITTED] T0172.154

[GRAPHIC] [TIFF OMITTED] T0172.155

[GRAPHIC] [TIFF OMITTED] T0172.156

[GRAPHIC] [TIFF OMITTED] T0172.157

[GRAPHIC] [TIFF OMITTED] T0172.158

[GRAPHIC] [TIFF OMITTED] T0172.159

[GRAPHIC] [TIFF OMITTED] T0172.160

[GRAPHIC] [TIFF OMITTED] T0172.161

[GRAPHIC] [TIFF OMITTED] T0172.162

[GRAPHIC] [TIFF OMITTED] T0172.163

[GRAPHIC] [TIFF OMITTED] T0172.164

[GRAPHIC] [TIFF OMITTED] T0172.165

[GRAPHIC] [TIFF OMITTED] T0172.166

[GRAPHIC] [TIFF OMITTED] T0172.167

[GRAPHIC] [TIFF OMITTED] T0172.168

[GRAPHIC] [TIFF OMITTED] T0172.169

[GRAPHIC] [TIFF OMITTED] T0172.170

[GRAPHIC] [TIFF OMITTED] T0172.171

[GRAPHIC] [TIFF OMITTED] T0172.172

[GRAPHIC] [TIFF OMITTED] T0172.173

[GRAPHIC] [TIFF OMITTED] T0172.174

[GRAPHIC] [TIFF OMITTED] T0172.175

[GRAPHIC] [TIFF OMITTED] T0172.176

[GRAPHIC] [TIFF OMITTED] T0172.177

[GRAPHIC] [TIFF OMITTED] T0172.178

[GRAPHIC] [TIFF OMITTED] T0172.179

[GRAPHIC] [TIFF OMITTED] T0172.180

[GRAPHIC] [TIFF OMITTED] T0172.181

[GRAPHIC] [TIFF OMITTED] T0172.182

[GRAPHIC] [TIFF OMITTED] T0172.183

[GRAPHIC] [TIFF OMITTED] T0172.184

[GRAPHIC] [TIFF OMITTED] T0172.185

[GRAPHIC] [TIFF OMITTED] T0172.186

[GRAPHIC] [TIFF OMITTED] T0172.187

[GRAPHIC] [TIFF OMITTED] T0172.188

[GRAPHIC] [TIFF OMITTED] T0172.189

[GRAPHIC] [TIFF OMITTED] T0172.190

[GRAPHIC] [TIFF OMITTED] T0172.191

[GRAPHIC] [TIFF OMITTED] T0172.192

[GRAPHIC] [TIFF OMITTED] T0172.193

[GRAPHIC] [TIFF OMITTED] T0172.194

[GRAPHIC] [TIFF OMITTED] T0172.195

[GRAPHIC] [TIFF OMITTED] T0172.196

[GRAPHIC] [TIFF OMITTED] T0172.197

[GRAPHIC] [TIFF OMITTED] T0172.198

[GRAPHIC] [TIFF OMITTED] T0172.199

[GRAPHIC] [TIFF OMITTED] T0172.200

[GRAPHIC] [TIFF OMITTED] T0172.201

[GRAPHIC] [TIFF OMITTED] T0172.202

[GRAPHIC] [TIFF OMITTED] T0172.203

[GRAPHIC] [TIFF OMITTED] T0172.204

[GRAPHIC] [TIFF OMITTED] T0172.205

[GRAPHIC] [TIFF OMITTED] T0172.206

[GRAPHIC] [TIFF OMITTED] T0172.207

[GRAPHIC] [TIFF OMITTED] T0172.208

[GRAPHIC] [TIFF OMITTED] T0172.209

[GRAPHIC] [TIFF OMITTED] T0172.210

[GRAPHIC] [TIFF OMITTED] T0172.211

[GRAPHIC] [TIFF OMITTED] T0172.212

[GRAPHIC] [TIFF OMITTED] T0172.213

[GRAPHIC] [TIFF OMITTED] T0172.214

[GRAPHIC] [TIFF OMITTED] T0172.215

[GRAPHIC] [TIFF OMITTED] T0172.216

[GRAPHIC] [TIFF OMITTED] T0172.217

[GRAPHIC] [TIFF OMITTED] T0172.218

[GRAPHIC] [TIFF OMITTED] T0172.219

[GRAPHIC] [TIFF OMITTED] T0172.220

[GRAPHIC] [TIFF OMITTED] T0172.221

[GRAPHIC] [TIFF OMITTED] T0172.222

[GRAPHIC] [TIFF OMITTED] T0172.223

[GRAPHIC] [TIFF OMITTED] T0172.224

[GRAPHIC] [TIFF OMITTED] T0172.225

[GRAPHIC] [TIFF OMITTED] T0172.226

[GRAPHIC] [TIFF OMITTED] T0172.227

[GRAPHIC] [TIFF OMITTED] T0172.228

[GRAPHIC] [TIFF OMITTED] T0172.229

[GRAPHIC] [TIFF OMITTED] T0172.230

[GRAPHIC] [TIFF OMITTED] T0172.231

[GRAPHIC] [TIFF OMITTED] T0172.232

[GRAPHIC] [TIFF OMITTED] T0172.233

[GRAPHIC] [TIFF OMITTED] T0172.234

[GRAPHIC] [TIFF OMITTED] T0172.235

[GRAPHIC] [TIFF OMITTED] T0172.236

[GRAPHIC] [TIFF OMITTED] T0172.237

[GRAPHIC] [TIFF OMITTED] T0172.238

[GRAPHIC] [TIFF OMITTED] T0172.239

[GRAPHIC] [TIFF OMITTED] T0172.240

[GRAPHIC] [TIFF OMITTED] T0172.241

[GRAPHIC] [TIFF OMITTED] T0172.242

[GRAPHIC] [TIFF OMITTED] T0172.243

[GRAPHIC] [TIFF OMITTED] T0172.244

[GRAPHIC] [TIFF OMITTED] T0172.245

[GRAPHIC] [TIFF OMITTED] T0172.246

[GRAPHIC] [TIFF OMITTED] T0172.247

[GRAPHIC] [TIFF OMITTED] T0172.248

[GRAPHIC] [TIFF OMITTED] T0172.249

[GRAPHIC] [TIFF OMITTED] T0172.250

[GRAPHIC] [TIFF OMITTED] T0172.251

[GRAPHIC] [TIFF OMITTED] T0172.252

[GRAPHIC] [TIFF OMITTED] T0172.253

[GRAPHIC] [TIFF OMITTED] T0172.254

[GRAPHIC] [TIFF OMITTED] T0172.255

[GRAPHIC] [TIFF OMITTED] T0172.256

[GRAPHIC] [TIFF OMITTED] T0172.257

[GRAPHIC] [TIFF OMITTED] T0172.258

[GRAPHIC] [TIFF OMITTED] T0172.259

[GRAPHIC] [TIFF OMITTED] T0172.260

[GRAPHIC] [TIFF OMITTED] T0172.261

[GRAPHIC] [TIFF OMITTED] T0172.262

[GRAPHIC] [TIFF OMITTED] T0172.263

[GRAPHIC] [TIFF OMITTED] T0172.264

[GRAPHIC] [TIFF OMITTED] T0172.265

[GRAPHIC] [TIFF OMITTED] T0172.266

[GRAPHIC] [TIFF OMITTED] T0172.267

[GRAPHIC] [TIFF OMITTED] T0172.268

[GRAPHIC] [TIFF OMITTED] T0172.269

[GRAPHIC] [TIFF OMITTED] T0172.270

[GRAPHIC] [TIFF OMITTED] T0172.271

[GRAPHIC] [TIFF OMITTED] T0172.272

[GRAPHIC] [TIFF OMITTED] T0172.273

[GRAPHIC] [TIFF OMITTED] T0172.274

[GRAPHIC] [TIFF OMITTED] T0172.275

[GRAPHIC] [TIFF OMITTED] T0172.276

[GRAPHIC] [TIFF OMITTED] T0172.277

[GRAPHIC] [TIFF OMITTED] T0172.278

[GRAPHIC] [TIFF OMITTED] T0172.279

[GRAPHIC] [TIFF OMITTED] T0172.280

[GRAPHIC] [TIFF OMITTED] T0172.281

[GRAPHIC] [TIFF OMITTED] T0172.282

[GRAPHIC] [TIFF OMITTED] T0172.283

[GRAPHIC] [TIFF OMITTED] T0172.284

[GRAPHIC] [TIFF OMITTED] T0172.285

[GRAPHIC] [TIFF OMITTED] T0172.286

[GRAPHIC] [TIFF OMITTED] T0172.287

[GRAPHIC] [TIFF OMITTED] T0172.288

[GRAPHIC] [TIFF OMITTED] T0172.289

[GRAPHIC] [TIFF OMITTED] T0172.290

[GRAPHIC] [TIFF OMITTED] T0172.291

[GRAPHIC] [TIFF OMITTED] T0172.292

[GRAPHIC] [TIFF OMITTED] T0172.293

[GRAPHIC] [TIFF OMITTED] T0172.294

[GRAPHIC] [TIFF OMITTED] T0172.295

[GRAPHIC] [TIFF OMITTED] T0172.296

[GRAPHIC] [TIFF OMITTED] T0172.297

[GRAPHIC] [TIFF OMITTED] T0172.298

[GRAPHIC] [TIFF OMITTED] T0172.299

[GRAPHIC] [TIFF OMITTED] T0172.300

[GRAPHIC] [TIFF OMITTED] T0172.301

[GRAPHIC] [TIFF OMITTED] T0172.302

[GRAPHIC] [TIFF OMITTED] T0172.303

[GRAPHIC] [TIFF OMITTED] T0172.304

[GRAPHIC] [TIFF OMITTED] T0172.305

[GRAPHIC] [TIFF OMITTED] T0172.306

[GRAPHIC] [TIFF OMITTED] T0172.307

[GRAPHIC] [TIFF OMITTED] T0172.308

[GRAPHIC] [TIFF OMITTED] T0172.309

[GRAPHIC] [TIFF OMITTED] T0172.310

[GRAPHIC] [TIFF OMITTED] T0172.311

[GRAPHIC] [TIFF OMITTED] T0172.312

[GRAPHIC] [TIFF OMITTED] T0172.313

[GRAPHIC] [TIFF OMITTED] T0172.314

[GRAPHIC] [TIFF OMITTED] T0172.315

[GRAPHIC] [TIFF OMITTED] T0172.316

[GRAPHIC] [TIFF OMITTED] T0172.317

[GRAPHIC] [TIFF OMITTED] T0172.318

[GRAPHIC] [TIFF OMITTED] T0172.319

[GRAPHIC] [TIFF OMITTED] T0172.320

[GRAPHIC] [TIFF OMITTED] T0172.321

[GRAPHIC] [TIFF OMITTED] T0172.322

[GRAPHIC] [TIFF OMITTED] T0172.323

[GRAPHIC] [TIFF OMITTED] T0172.324

[GRAPHIC] [TIFF OMITTED] T0172.325

[GRAPHIC] [TIFF OMITTED] T0172.326

[GRAPHIC] [TIFF OMITTED] T0172.327

[GRAPHIC] [TIFF OMITTED] T0172.328

[GRAPHIC] [TIFF OMITTED] T0172.329

[GRAPHIC] [TIFF OMITTED] T0172.330

[GRAPHIC] [TIFF OMITTED] T0172.331

[GRAPHIC] [TIFF OMITTED] T0172.332

[GRAPHIC] [TIFF OMITTED] T0172.333

[GRAPHIC] [TIFF OMITTED] T0172.334

[GRAPHIC] [TIFF OMITTED] T0172.335

[GRAPHIC] [TIFF OMITTED] T0172.336

[GRAPHIC] [TIFF OMITTED] T0172.337

[GRAPHIC] [TIFF OMITTED] T0172.338

[GRAPHIC] [TIFF OMITTED] T0172.339

[GRAPHIC] [TIFF OMITTED] T0172.340

[GRAPHIC] [TIFF OMITTED] T0172.341

[GRAPHIC] [TIFF OMITTED] T0172.342

[GRAPHIC] [TIFF OMITTED] T0172.343

[GRAPHIC] [TIFF OMITTED] T0172.344

[GRAPHIC] [TIFF OMITTED] T0172.345

[GRAPHIC] [TIFF OMITTED] T0172.346

[GRAPHIC] [TIFF OMITTED] T0172.347

[GRAPHIC] [TIFF OMITTED] T0172.348

[GRAPHIC] [TIFF OMITTED] T0172.349

[GRAPHIC] [TIFF OMITTED] T0172.350

[GRAPHIC] [TIFF OMITTED] T0172.351

[GRAPHIC] [TIFF OMITTED] T0172.352

[GRAPHIC] [TIFF OMITTED] T0172.353

[GRAPHIC] [TIFF OMITTED] T0172.354

[GRAPHIC] [TIFF OMITTED] T0172.355

[GRAPHIC] [TIFF OMITTED] T0172.356

[GRAPHIC] [TIFF OMITTED] T0172.357

[GRAPHIC] [TIFF OMITTED] T0172.358

[GRAPHIC] [TIFF OMITTED] T0172.359

[GRAPHIC] [TIFF OMITTED] T0172.360

[GRAPHIC] [TIFF OMITTED] T0172.361

[GRAPHIC] [TIFF OMITTED] T0172.362

[GRAPHIC] [TIFF OMITTED] T0172.363

[GRAPHIC] [TIFF OMITTED] T0172.364

[GRAPHIC] [TIFF OMITTED] T0172.365

[GRAPHIC] [TIFF OMITTED] T0172.366

[GRAPHIC] [TIFF OMITTED] T0172.367

[GRAPHIC] [TIFF OMITTED] T0172.368

[GRAPHIC] [TIFF OMITTED] T0172.369

[GRAPHIC] [TIFF OMITTED] T0172.370

[GRAPHIC] [TIFF OMITTED] T0172.371

[GRAPHIC] [TIFF OMITTED] T0172.372

[GRAPHIC] [TIFF OMITTED] T0172.373

[GRAPHIC] [TIFF OMITTED] T0172.374

[GRAPHIC] [TIFF OMITTED] T0172.375

                                 
