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Saturday, March 26, 2005

The New York Times > Washington > Report Expected to Fault Kofi Annan's Role in Oil-for-Food Plan Payments to His Son

The New York Times > Washington > Report Expected to Fault Kofi Annan's Role in Oil-for-Food Plan Payments to His Son

March 26, 2005
Report Expected to Fault Kofi Annan's Role in Oil-for-Food Plan Payments to His Son
By WARREN HOGE and JUDITH MILLER

UNITED NATIONS, March 25 - A report from the commission investigating corruption in the United Nations oil-for-food program in Iraq is likely to criticize Secretary General Kofi Annan for failing to perceive the appearance of a conflict of interest posed by his son's employment by a program contractor. It will also say that the son, Kojo Annan, received more than twice the compensation the company had long acknowledged.

According to an investigator and another person who has read the current draft, the report will fault both Mr. Annan for his management practices and his son, who it will say was paid nearly $400,000 between 1996 and 2004 by Cotecna Inspection Services, the Swiss-based company that had a contract to monitor the humanitarian goods that Iraq bought under the $65 billion program.

The report, from the investigative commission led by Paul A. Volcker, a former Federal Reserve chairman, is to be made public Tuesday.

Any conclusions by the commission that Secretary General Annan bears responsibility for the actions of his son will come as a setback for the beleaguered secretary general. He has continually maintained that he knew little about his son's activities and that he was "disappointed" that his son misinformed him.

"We still believe that the secretary general will be cleared of any wrongdoing," Mark Malloch Brown, the United Nations chief of staff, said in a telephone interview on Friday. "The fact is that Kojo has confirmed that he misled his father, and a father cannot be held accountable for the deeds of an adult son that the son has not told his father about."

The $400,000 figure and the Volcker commission's expected findings about Mr. Annan and his son first appeared in The Wall Street Journal on Friday.

The commission has not uncovered any evidence that Mr. Annan benefited financially or intervened in any way to influence selection of contractors in the oil-for-food program. But one investigator said the report faulted Mr. Annan for failing to be sensitive to the perception of nepotism and conflict of interest that inevitably arose from his son's involvement with a United Nations contractor.

"The report will explore in some detail not only Kojo Annan's relationship with Cotecna, but also his relationship with his father," said a person familiar with the document's content. "It will not be pleasant reading for them."

The report will add to the atmosphere of crisis that is buffeting the United Nations at a moment when it is making senior staff changes and proposing structural and management reforms intended to forestall a recurrence of the kinds of abuses that have drawn the critical attention of five Congressional committees as well as calls for Mr. Annan to step down before his term is completed at the end of 2006.

On Monday, Mr. Annan made public a wide-ranging set of changes, including a reconstitution of the Security Council and the restructuring of the Human Rights Commission, which has brought repeated discredit on the United Nations by letting major rights violators become members. On Thursday, a confessional United Nations report proposed a thorough overhaul of the peacekeeping operation, which has been shamed by instances of rape and sexual abuse of minors by blue-helmeted United Nations troops.

But attention has already shifted back to the institution's oil-for-food problems and in particular Mr. Annan's job security in light of his son's activities.

Asked about the higher compensation figure for Kojo Annan, Seth Goldschlager, a spokesman for Cotecna, said in an interview Friday that the company had told the Volcker commission that it paid him at least $366,000 and possibly as much as $400,000 during the 1996 to 2004 period in which he received payments. The amount included payments for health care and to ensure that he not work for competitors after he formally left Cotecna in 1998.

Mr. Goldschlager said the new total was provided to investigators after The Financial Times and Il Sole Ore 24 of Milan jointly reported Wednesday that Kojo Annan had been paid at least $300,000, not just the $175,000 that had been previously disclosed. Mr. Goldschlager said Cotecna was still uncertain exactly how much Mr. Annan had been paid and that as a result of negotiations with the Volcker panel, the company was conducting a new audit of all payments to him.

Congressional investigators have complained that Cotecna has disclosed the widening scope of its dealings with Kojo Annan only after being prodded by news reports and has not fully explained payments made through third parties.

Mr. Goldschlager said Friday that these payments had been made at Kojo Annan's request, but he could not explain why Cotecna had agreed to an arrangement that appeared to disguise the company's involvement.

Echoing previous statements by other Cotecna representatives, Mr. Goldschlager said the continuing payments to Mr. Annan after he left the company were not illegal or inappropriate. He also denied allegations that Cotecna had hired and continued paying Kojo Annan after he left the company to maintain his father's good will or retain its contract.

He said Mr. Annan was paid for his work on behalf of Cotecna in Africa, none of which, he asserted, was related to the oil-for-food program. The noncompetition payments were consistent with what is standard practice in the industry, he added.

Kojo Annan worked for Cotecna from December 1995 until departing at the end of 1998, just as the company gained its oil-for-food contract. As the oil-for-food scandal unfolded, United Nations spokesmen deflected questions about any conflict posed by young Mr. Annan's job by noting that all his work was done in Africa, distant from Iraq, and that he had severed ties with Cotecna at the time it became an oil-for-food contractor.

Subsequent disclosures revealed that Kojo Annan continued receiving payments until February 2004 and that he had attended United Nations-connected meetings in New York and Durban, South Africa. In December 2004 the senior Mr. Annan said that although he and his son had discussed the relationship with Cotecna, he was "disappointed" that he had apparently not been told the full story.

Tuesday's report will be Mr. Volcker's second interim report, with the final accounting due this summer. In its first interim report, on Feb. 4, the commission found that the former head of the program, Benon V. Sevan, had a "grave and continuing conflict of interest" in helping a friend obtain valuable Iraqi oil contracts and said a second United Nations official, Joseph Stephanides, had violated procurement rules. Both men have been suspended and are in the process of answering United Nations charges against them.

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