|
Mr. Faraj, I think you already have this, but attached is a
transcript of D. Robert Smego’s testimony in the Shemami case.
Also, Mr. Smego has a contract with the U.S. Attorney’s Office for providing
consultation on this case. The contract provides for Mr. Smego to receive
$150 per hour for consulting services, up to a total of $6,000. Mr. Smego also testified before Congress about former Iraqi
government documents. His testimony is attached and is also available on
the internet at: Michael C. Martin Assistant United States Attorney Eastern District of Michigan 211 West Fort Street, Room 2268 Detroit, MI 48226 (313) 226-9670 From: Haytham Faraj
[mailto:haytham@puckettfaraj.com] Mr. Martin: I have changed my address. I updated it in the ECF but you
may want to make a note of it for your records. Puckett & Faraj PC 6200 Schaeffer Road Suite 202 Dearborn MI 48124 (313)457-1390 Office My cell phone number remains the same and it is the best means
to get a hold of me. Have a happy Memorial Day From: Martin, Michael C.
(USAMIE) [mailto:Michael.C.Martin@usdoj.gov] Mr. Faraj, attached is a
cover letter and discovery
regarding a witness who’s testimony I intend to proffer during the
hearing next week. Also, I would like an opportunity after the hearing to
meet with you and Mr. Hamama. I don’t intend to ask him any questions
at the meeting, I simply want a chance to talk to him about the
government’s plea offer and how we might be able to resolve the
case. Perhaps we could do it immediately
after the hearing or,
if he is staying the night, sometime on Wednesday. <<Letter
to Counsel May 28 2010.pdf>> <<Order
from NDIL.pdf>> <<Al-Dani Giglio Disclosure.pdf>>
<<Latchin transcript 04 03 07a.1.pdf>> <<Latchin transcript
04 04 07a.1.pdf>> <<Latchin transcript 04 05 07a.1.a.pdf>>
<<Latchin transcript 9 15 2006 am.pdf>> <<Latchin transcript
9.15.2006 pm.pdf>> <<Latchin transcript 9.22.2006 am a.pdf>> Michael
C. Martin Assistant
United States Attorney Eastern
District of Michigan 211 West
Fort Street, Room 2268 Detroit,
MI 48226 (313)
226-9670 |
Attachment:
United States v Shemami (Smego Transcript).pdf
Description: United States v Shemami (Smego Transcript).pdf
[House Hearing, 109 Congress]
[From the U.S. Government Printing Office]
THE UNITED NATIONS OIL-FOR-FOOD PROGRAM: SADDAM HUSSEIN'S USE OF OIL
ALLOCATIONS TO UNDERMINE SANCTIONS AND THE UNITED NATIONS SECURITY
COUNCIL
=======================================================================
HEARING
before the
SUBCOMMITTEE ON
OVERSIGHT AND INVESTIGATIONS
of the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
----------
MAY 16, 2005
----------
Serial No. 109-29
----------
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
THE UNITED NATIONS OIL-FOR-FOOD PROGRAM: SADDAM HUSSEIN'S USE OF OIL
ALLOCATIONS TO UNDERMINE SANCTIONS AND THE UNITED NATIONS SECURITY
COUNCIL
U.S. GOVERNMENT PRINTING OFFICE
21-637 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) 512�091800
Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001
THE UNITED NATIONS OIL-FOR-FOOD PROGRAM: SADDAM HUSSEIN'S USE OF OIL
ALLOCATIONS TO UNDERMINE SANCTIONS AND THE UNITED NATIONS SECURITY
COUNCIL
=======================================================================
HEARING
before the
SUBCOMMITTEE ON
OVERSIGHT AND INVESTIGATIONS
of the
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
MAY 16, 2005
__________
Serial No. 109-29
__________
Printed for the use of the Committee on Energy and Commerce
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
COMMITTEE ON ENERGY AND COMMERCE
JOE BARTON, Texas, Chairman
RALPH M. HALL, Texas JOHN D. DINGELL, Michigan
MICHAEL BILIRAKIS, Florida Ranking Member
Vice Chairman HENRY A. WAXMAN, California
FRED UPTON, Michigan EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia FRANK PALLONE, Jr., New Jersey
ED WHITFIELD, Kentucky SHERROD BROWN, Ohio
CHARLIE NORWOOD, Georgia BART GORDON, Tennessee
BARBARA CUBIN, Wyoming BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois ANNA G. ESHOO, California
HEATHER WILSON, New Mexico BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona ELIOT L. ENGEL, New York
CHARLES W. ``CHIP'' PICKERING, ALBERT R. WYNN, Maryland
Mississippi, Vice Chairman GENE GREEN, Texas
VITO FOSSELLA, New York TED STRICKLAND, Ohio
ROY BLUNT, Missouri DIANA DeGETTE, Colorado
STEVE BUYER, Indiana LOIS CAPPS, California
GEORGE RADANOVICH, California MIKE DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire TOM ALLEN, Maine
JOSEPH R. PITTS, Pennsylvania JIM DAVIS, Florida
MARY BONO, California JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon HILDA L. SOLIS, California
LEE TERRY, Nebraska CHARLES A. GONZALEZ, Texas
MIKE FERGUSON, New Jersey JAY INSLEE, Washington
MIKE ROGERS, Michigan TAMMY BALDWIN, Wisconsin
C.L. ``BUTCH'' OTTER, Idaho MIKE ROSS, Arkansas
SUE MYRICK, North Carolina
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
MARSHA BLACKBURN, Tennessee
Bud Albright, Staff Director
David Cavicke, Deputy Staff Director and General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Oversight and Investigations
ED WHITFIELD, Kentucky, Chairman
CLIFF STEARNS, Florida BART STUPAK, Michigan
CHARLES W. ``CHIP'' PICKERING, Ranking Member
Mississippi DIANA DeGETTE, Colorado
CHARLES F. BASS, New Hampshire JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon JAY INSLEE, Washington
MIKE FERGUSON, New Jersey TAMMY BALDWIN, Wisconsin
MICHAEL C. BURGESS, Texas HENRY A. WAXMAN, California
MARSHA BLACKBURN, Tennessee JOHN D. DINGELL, Michigan,
JOE BARTON, Texas, (Ex Officio)
(Ex Officio)
(ii)
C O N T E N T S
__________
Page
Testimony of:
Anderson, Gerald C., Director, Office of Peacekeeping,
Sanctions and Counterterrorism, U.S. Department of State... 62
Fawcett, John, Author, Report for Sources of Revenue for
Saddam and Sons............................................ 11
Gordon, Joy, Professor of Philosophy, Fairfield University... 17
Smego, D. Robert, Arabic Linguist, one of the authors of the
Duelfer Report............................................. 16
Additional material submitted for the record:
Fawcett, John, Author, Report for Sources of Revenue for
Saddam and Sons, response for the record................... 84
(iii)
THE UNITED NATIONS OIL-FOR-FOOD PROGRAM: SADDAM HUSSEIN'S USE OF OIL
ALLOCATIONS TO UNDERMINE SANCTIONS AND THE UNITED NATIONS SECURITY
COUNCIL
----------
MONDAY, MAY 16, 2005
House of Representatives,
Committee on Energy and Commerce,
Subcommittee on Oversight and Investigations,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:04 p.m., in
room 2123, Rayburn House Office Building, Hon. Ed Whitfield
(chairman) presiding.
Members present: Representatives Whitfield, Stearns,
Burgess, Blackburn, Barton (ex officio), Stupak, Inslee, and
Waxman.
Also present: Representative Norwood.
Staff present: Mark Paoletta, chief counsel; Andrew
Snowdon, majority counsel; Tom Feddo, majority counsel; Chad
Grant, clerk; Edith Holleman, minority counsel; Voncille Hines,
research assistant; and Alec Gerlach, minority staff assistant.
Mr. Whitfield. At this time the committee will come to
order. Today's hearing for the Subcommittee on Oversight and
Investigation of the Energy and Commerce Committee is the
United Nations' Oil for Food program, Saddam Hussein's use of
oil allocations to undermine sanctions, and the United Nations
Security Council.
At this time I would like to ask unanimous consent to move
documents contained in the binder into the record. And, without
objection, so ordered.
I will begin the hearing with an opening statement, and
then we will proceed with opening statements.
The United Nations Oil-for-Food program was initiated to
ease the suffering of the Iraqi people. As we have learned in
recent months from various reports, this program became a
mechanism for the former Iraqi regime of Saddam Hussein to
siphon off billions of dollars in illicit revenues, money that
rightfully should have gone to the citizens of Iraq. Saddam's
regime used oil contracts to influence foreign officials and
well-connected individuals in an effort to undermine
international economic sanctions, thereby keeping him in power.
These allegations are not new, but the picture of how this
could have happened under the oversight of the United Nations
Security Council has been murky. Today the subcommittee will
hear testimony and examine a variety of documents, many of
which have been recently translated for the committee, to
better understand the abuses of the Oil-for-Food program. The
hearing will allow members to see how Hussein used oil
allocations to undermine U.N. sanctions and manipulate
political divisions within the Security Council and better
understand the weaknesses in the U.N. Oversight of the program.
The hearing will also serve the committee's longstanding
interest in the workings of the United Nations. We will learn
more today about the inner workings of the U.N.'s operation,
and how France, Russia, and China in the 661 Committee
supported the Hussein regime to the detriment of the Iraqi
people. Saddam Hussein and his supporters found ways to exploit
loopholes in the Oil-for-Food program to enrich themselves and
to strengthen Iraq's military capabilities.
Surcharges and kickbacks, both on oil and humanitarian
goods contracts soon became the norm under the program. For
instance, the committee has uncovered a handwritten form
agreement signed by Iraq's former oil minister which shows
that, beginning sometime after June 2000, each oil purchaser in
the program had to agree to pay kickbacks to the regime, either
in cash or by wire, into an Iraqi bank account outside of the
program. Equally troubling are the allegations that Saddam
Hussein may have been able to use the Oil-for-Food program to
exploit divisions within the U.S. Security Council.
We will hear today from Dr. Robert Smego, an outside
consultant retained by the committee to review and translate
numerous documents, including documents from the Iraqi
Intelligence Service and State Oil Marketing Organization. Mr.
Smego will present a series of documents that suggests a
calculated strategy on the part of the regime to target
influential businessmen, companies, and government officials
who could advance Iraq's interests.
When the names of many prominent political figures, most
notably those of Russia and France, appeared in the Duelfer
Report last fall, there were cries of outrage and denial.
However, the documents presented here today appear to confirm
that some of these individuals were indeed using the Oil-for-
Food program for their own purposes. I can think of no
legitimate reason for any politician or government official of
any nation to receive oil from Saddam Hussein.
Ironically, every dollar that these people took out of the
program was money that should have gone to help the Iraqi
people.
Could these abuses have been prevented? Perhaps not
entirely, but there's little doubt that lax oversight on the
part of the U.N. Secretariat and internal divisions within the
so-called 661 Committee permitted them to continue.
Let me note here that I can only imagine the political and
logistical difficulties involved in running such a massive
program. However, these difficulties do not justify the
failures in oversight responsibilities.
We will also hear today from John Fawcett who, for the past
decade, has been tracking the financial assets of major human
rights abusers, such as Slobodan Milosevic, Saddam Hussein, and
the al Qaeda network.
Finally, we will hear from Mr. Gerald Anderson of the U.S.
State Department who will provide some insights into the inner
workings of the 661 Sanctions Committee, the committee within
the U.N. That ran the Oil-for-Food program.
Let me welcome all the witnesses, and thank them for what
promises to be a most informative hearing.
[The prepared statement of Hon. Ed Whitfield follows:]
Prepared Statement of Hon. Ed Whitfield, Chairman, Subcommittee on
Oversight and Investigations
The United Nations (U.N.) Oil-for-Food Program (Program) was set up
to ease the suffering of the Iraqi people. But unfortunately, it also
may have prolonged their suffering. As we've learned in recent months
from various reports, this Program became a mechanism for the former
Iraqi regime of Saddam Hussein to siphon off billions of dollars in
illicit revenues--money that rightfully should have gone to the
citizens of Iraq. Saddam's Regime also used oil contracts to influence
foreign officials and well-connected individuals in an effort to
undermine international economic sanctions, thereby keeping him in
power.
None of these allegations are new, but the picture of how this
could have happened under the oversight of the United Nations Security
Council has been murky. Today, the Subcommittee will take testimony and
examine a variety of documents--many of which have been recently
translated for the Committee--to gain a clearer view into the abuses of
the Oil for Food Program. The hearing will allow members to examine how
Hussein used oil allocations to undermine U.N. sanctions and manipulate
political divisions within the Security Council and apparent weaknesses
in U.N. oversight of the Program.
The hearing will also serve the Committee's long-standing interest
in the workings of the United Nations--particularly at the intersection
of national security and world energy markets and trade. We will learn
more today about the inner workings of the U.N.'s operations, and how
actions there might have prevented such abuses.
There is no doubt at this point that Saddam Hussein and his cronies
found ways to exploit loopholes in the Oil-for-Food Program to enrich
themselves and to strengthen the Iraq's military capabilities.
Surcharges and kickbacks, both on oil and humanitarian goods contracts,
soon became the norm under the Program. For instance, the Committee has
uncovered a handwritten form agreement, signed by Iraq's former Oil
Minister, which shows that, beginning sometime after June 2000, each
oil purchaser in the Program had to agree to pay kickbacks to the
Regime, either in cash or by wire into an Iraqi bank account outside of
the Program.
Equally troubling are the allegations that Saddam Hussein may have
been able to use the Oil-for-Food Program to exploit divisions within
the U.N. Security Council. We will hear today from D. Robert Smego, an
outside consultant retained by the Committee to review and translate
numerous documents gathered from various Iraqi sources, including
documents from the Iraqi Intelligence Service and State Oil Marketing
Organization, or SOMO. Mr. Smego will present a series of documents
that suggest a calculated strategy on the part of the Regime to target
influential businessmen, companies, and government officials who could
advance Iraq's interests--particularly within the Security Council.
When the names of many prominent political figures, most notably
those of France and Russia, appeared in the Duelfer Report last Fall,
there were cries of outrage and denial. However, the documents
presented here today appear to confirm that some of these individuals
were indeed using the Oil-for-Food Program for their own purposes. I
can think of no legitimate reason for any politician or government
official--of any nation--to get oil from Saddam Hussein. Ironically,
every dollar that these people took out of the Program was money that
should have gone to help the Iraqi people--the very people that they
claimed to be helping.
Could these abuses have been prevented? Perhaps not entirely, but
there is little doubt that lax oversight on the part of the U.N.
Secretariat, and internal divisions within the so-called 661 Committee,
permitted them to continue. Let me note here that I can only imagine
the political and logistical difficulties involved in running such a
massive Program. However, these difficulties do not justify the
failures in oversight responsibilities.
We will hear today from John Fawcett, who, for the past decade, has
been tracking the financial assets of major human rights abusers, such
as Slobodan Milosevic, Saddam Hussein, and the al Qaeda network. Mr.
Fawcett will provide some perspective how these problems could have
been avoided, including (1) vetting all contracts for price and
quality, and (2) performing due diligence on the parties that Saddam
was contracting with, and (3) increasing transparency in the hiring of
inspectors.
Finally, we will hear from Mr. Gerald Anderson of the U.S. State
Department, who will provide some insights into the inner workings of
the 661 Sanctions Committee, the Committee within the U.N. that ran the
Oil-for-Food Program. Let me welcome all of the witnesses and thank
them for what promises to be a most informative hearing.
Much of the dispute today involves a lack of transparency in the
oversight deployed by the United Nations. If we are going to restore
some trust in that institution as it delves into other matters
affecting our international energy markets, public health, and welfare,
the United States--and indeed the entire international community--
deserves a clearer picture of precisely how those important matters are
being handled. Today's hearing should help us understand how some trust
might be restored.
Mr. Whitfield. At this time I will call on the ranking
minority member, Mr. Stupak, for his opening statement.
Mr. Stupak. Well, thank you, Mr. Chairman. This is an
unusual hearing for an investigative subcommittee. In fact, it
seems to me that this is a hearing in search of an
investigation. If you take a look at this morning's Washington
Post, the lead article gave an astounding level of detail from
documents collected by the Senate Committee on Saddam Hussein's
use of oil allocations to influence Russian politicians. This
story is not new. In September 2002, The New York Times stated,
``Baghdad owes Moscow $8 billion in debt incurred before the
Gulf War, and has used trade under the Oil-for-Food program to
curry Moscow's favor.'' Last year, the Duelfer Report gave the
names of Russian politicians who received oil allocations. But
the level of detail about these deals obtained after months of
investigation is new, and that is what was intriguing about
this Washington Post story. It involves weeks of overseas
travel, interviews with former Iraqi officials, and
international businessmen, and a review of U.S. Government
investigative documents.
Frankly, Mr. Chairman, this committee has done--has not
done anywhere near that level of work and has very little to
add. There are four other congressional committees focused on
the United Nations and the Oil-for-Food program. They are all
far ahead of this committee in their level of investigation and
knowledge. But there are areas that this committee can
investigate and no one else seems to want to look at. No one
seems to want to talk about the United Nations' sanctions and
oil trading regime which was approved by the Security Council
of which the United States is a member, or the role of the
Sanctions Committee, another committee the U.S. was part of
that oversaw the program and what it knew about the manner in
which the oil allocations were used by Iraq.
No one seems to want to know about the relationship of U.S.
oil companies to the shady middlemen and the oil traders who
actually lifted oil from Iraq.
This is not a simple criminal or ethical matter as it is
often portrayed. It was a system built by geopolitical
realities that everyone was aware of and either condoned or
chose to ignore at the time.
Seventy-five percent of Iraqi oil, regardless of who
initially purchased it and whether or not they paid illegal
surcharges, ended up in the United States at U.S. refineries.
How did it get there? What did the U.S. companies know about
the illegal surcharges and when did they know it? Some small
U.S. oil dealers have been indicted. But despite this requests
from this side of the minority to subpoena documents from those
companies, it has not been done.
Some bigger U.S. Oil companies are also being investigated,
but once again, this committee hasn't even talked to them
despite staff requests from the minority. No one seems to want
to talk about the massive smuggling of oil through Jordan,
Turkey, Syria, and Egypt that was going on. Both the Volcker
and the Duelfer reports found that the largest sum of the
illegal revenue obtained by Saddam Hussein came through these
well-known illegal oil purchases. These oil purchases were
openly discussed in the press at the time. The Sanctions
Committee--again, the U.S. was a member of that committee--
discussed it frequently but refused to stop it.
The International Relations Committee of both the House and
the Senate received notice every year stating that it was in
the national interest of the United States to continue foreign
aid to Jordan and Turkey, even though they were in violation of
the U.N. Sanctions. Why hasn't the committee looked at the
United States' role in this massive violation of U.N.
Sanctions?
It seems that many in Congress are comfortable with just
calling this foreign aid and bashing the U.N. But are not
interested in holding those in the U.S. who may have violated
these sanctions accountable. Press reports in January of this
year indicated that the office of foreign assets in the United
States Treasury actually promised that they would not prosecute
a U.S. company for breaking the sanctions in early 2003 to
provide oil to a Jordanian company. Minority staff drafted
letters to the U.S. Company in February requesting documents
and interviews, but again, we couldn't get a signature or
approval from the majority.
I would ask, Mr. Chairman, instead of joining in the chorus
of the committees howling at the United Nations to obtain
diplomatically protected documents, that we head in a different
direction. This subcommittee should investigate the U.S. oil
companies who allegedly and knowingly worked around the U.N.
Sanctions to supply oil to certain countries with the apparent
knowledge and consent of the U.S. Government.
Mr. Chairman, we have a choice. We can waste taxpayer
dollars by duplicating the work of other committees in Congress
that they have already done by investigating foreign sources,
or we can be leaders and investigate and expose the domestic
abuses of the Oil-for-Food program here at home. It is my hope
that, under your leadership, we will do the latter. With that,
Mr. Chairman, I would yield back the balance of my time.
Mr. Whitfield. At this time, the Chair will recognize the
chairman of the full committee, the full energy and commerce
committee, Mr. Barton of Texas.
Chairman Barton. Thank you, Mr. Chairman. I want to commend
you for holding this hearing. I think we need to put in the
record that this is the first subcommittee to hold a hearing on
the U.N. Oil-for-Food scandal, and we did it when I was
subcommittee chairman back in the Clinton Administration. We
were also the first subcommittee to hold a hearing in this go-
around, and we have been at the full committee level
investigating this for the last several years and will continue
to do so.
In the last year, we have learned much about the program's
mismanagement and its manipulation. We know today, for example,
that Saddam Hussein's officials deliberately underpriced Iraq
oil so that the middleman and oil traders could kick back
profits into Saddam's personal bank accounts. We also know the
regime would overpay merchants for humanitarian goods so that
the excess money could be diverted to those bank accounts. This
is something that we learned on a trip that I personally led to
Iraq last fall and met with some of the Iraqi officials in
person that were responsible for those particular bank
accounts.
We now know that the U.N. Oil overseers identified these
activities, brought them to the attention of the program's
leadership, and even proposed mechanisms to prevent the illicit
activity. Yet nothing was done. Finally, we know that the
regime perverted the program to influence politicians around
the world and leaders inside the United Nations by giving them
personally valuable oil vouchers.
Today's hearing will examine new documents that illuminate
influence peddling. Undoubtedly, Saddam's regime hoped that
these bribes would erode and eliminate the sanctions. I would
not be surprised if we eventually uncover evidence of quid pro
quos directly related to these vouchers.
It seems clear that under Saddam, Oil-for-Food became oil
for influence. This mismanagement mess, if you will, is a stain
on the United Nations and its current leaders. If the U.N.
Leadership had its way, this mess would have been swept under
the rug. But the U.N. Is not going to have its way today. The
U.S. Government funds most of the U.N.'s operating budget. We
are the largest contributor to the U.N. Operating budget. And
at this moment, our soldiers are risking and giving their lives
to defend the fledgling democracy in Iraq.
We must not forget that, if the U.N. Had had its way,
Saddam Hussein would still be in power, Saddam Hussein would
still be dispensing bribes, Saddam Hussein would still be
controlling his Army, Saddam Hussein would still be threatening
his people, and Saddam Hussein would still be threatening to
invade his neighbors in the Middle East. But before Iraq was
liberated, the only program that was meant to bring relief to
the Iraqi people instead brought Saddam Hussein the key to
unlocking the greatest threat to his power, economic sanctions.
We will hear today how the Oil-for-Food program allowed
Saddam Hussein to enrich his regime, bribe world leaders, and
begin to build an infrastructure that could 1 day be used to
reconstruct an arsenal for intimidation and aggression.
In the meantime, the suffering of the average Iraqi family
continued. The U.N. 661 Committee watched this scam unfold but
was paralyzed by bureaucratic infighting. In the end, the Oil-
for-Food program was a profound and dangerous failure.
I look forward to hearing from our witnesses today. I wish
to thank them for their attendance. This committee--and I want
to reiterate. This committee, the Energy and Commerce
Committee, is not opposed to anything that the other committees
of the House and Senate are doing. I think collectively all the
efforts of this committee and the other committees in both
bodies will get to the bottom of this scandal, but this
committee is going to be a part of that and in many ways is
going to lead that effort.
I also want to begin to investigate the possibility of
recovering as much of the billions and billions of dollars that
was looted from the Oil-for-Food program and use that money to
reinvest in the Iraq of today to try to help the Iraqi people
today as they fight for their freedoms.
Thank you again, Mr. Chairman, for your leadership on this
issue. I look forward to working with you and others of this
subcommittee to continue this investigation.
[The prepared statement of Hon. Joe Barton follows:]
Prepared Statement of Hon. Joe Barton, Chairman, Committee on Energy
and Commerce
Thank you Chairman Whitfield. This afternoon we continue this
Committee's examination of the United Nations Oil-for-Food Program.
Since last year, we have learned much about both the program's
mismanagement and manipulation. We know, for example, that Saddam
Hussein's officials deliberately under-priced Iraqi oil so that
middlemen and oil traders could kick back profits into Saddam's bank
accounts. Also, the regime would overpay merchants for humanitarian
goods so that the excess money could be diverted to those bank
accounts, outside UN scrutiny. We now know that UN ``oil overseers''
identified these activities, brought them to the attention of the
program's leadership, and even proposed mechanisms to prevent this
illicit activity. And yet nothing was done.
Finally, the regime perverted the program to influence politicians
around the world and leaders inside the United Nations by giving them
valuable oil vouchers. Today's hearing will examine new documents that
illuminate influence peddling. Undoubtedly, Saddam's regime hoped these
bribes would erode and eliminate the sanctions. I would not be
surprised if we eventually uncover evidence of quid pro quos directly
related to these vouchers. It seems clear that under Saddam, oil-for-
food became oil-for-influence.
This mismanagement--this mess--is a stain on the United Nations and
on its leaders. If the UN leadership had its way, this mess would have
been swept under the rug, but the UN is not going to have its way
today. Americans fund most of the UN's operating budget, and at this
moment, America's warriors are risking and giving their lives to defend
the fledgling democracy in Iraq. We must not forget that if the UN had
its way, Saddam would still be dispensing bribes, building his army,
threatening his people, and invading his neighbors.
But before Iraq was liberated, the only program that was meant to
bring relief to the Iraqi people instead brought Saddam Hussein the key
to unlocking the gravest threat to his power--economic sanctions. We
will hear today how the Oil-for-Food Program allowed Saddam Hussein to
enrich his regime, bribe world leaders, and begin to build an
infrastructure that could one day be used to reconstruct an arsenal for
intimidation and aggression. In the meantime, the suffering of the
average Iraqi family continued. The UN's 661 Committee watched the scam
unfold, but was paralyzed by bureaucratic infighting. In the end, the
Oil for Food Program was a profound and dangerous failure.
I look forward to hearing from our witnesses today, and thank them
for their attendance. We intend to get to the bottom of this scandal.
Thank you, Mr. Chairman. I yield back the remainder of my time.
Mr. Whitfield. Thank you, Mr. Chairman.
At this time, I will recognize Mr. Waxman of California.
Mr. Waxman. Thank you very much, Mr. Chairman. And I
appreciate you calling the hearing today. I support the
committee's investigation and believe Congress should determine
the full extent of Saddam Hussein's efforts to divert
humanitarian Oil-for-Food funds that were intended for the
benefit of the Iraqi people. Although I support the committee's
goal, I do have a concern with its approach. Today's hearing is
the 13th congressional hearing about the Oil-for-Food program.
Tomorrow's hearing by Senator Coleman will be the 14th. My
concern is that while Congress is actively investigating the
Oil-for-Food program, we are ignoring our Nation's own actions
on the development fund for Iraq, the successor to the Oil-for-
Food program run by the Bush administration. The administration
has failed to properly manage and account for billions of
dollars in the Iraqi funds, and the committee is doing nothing
to investigate this.
I would like to have in the record two charts. The first
one shows the finding of our own auditors and investigators
looking into the DFI. First, in January, the special inspector
general for Iraqi reconstruction, a U.S. Government official,
concluded that the Bush administration failed to properly
account for $8.8 billion of Iraqi oil proceeds in the DFI. The
inspector general concluded that the administration did not
implement adequate managerial controls, did not implement
adequate financial controls, and did not adequately control DFI
contracting actions.
Second. Just 2 weeks ago the inspector general found that
the administration failed to account for $96.6 million in cash
from the Iraqi funds that were supposed to go to local
reconstruction projects. The IG found that, instead of helping
the Iraqi people, U.S. officials tried to launder these funds.
The IG referred these officials for criminal prosecution.
And, third. The defense contract audit agency, the
Pentagon's own auditors, concluded that Halliburton has
overcharged by at least $212 million under its oil contract in
Iraq. The Bush administration awarded Halliburton's no bid
monopoly oil contract in secret, and then funded it with Iraqi
oil proceeds from the DFI.
My other chart shows findings by U.S. Government officials
and other independent auditors who conclude that the
administration has not complied with U.N. Security Council
Resolution 1483, which requires the administration to use Iraqi
funds in a transparent manner for the benefit of the Iraqi
people. On January 30, 2005, the special inspector general for
Iraq reconstruction concluded that the administration violated
Resolution 1483 requirement to use DFI funds in a transparent
manner.
On April 29, 2005, the international advisory and
monitoring board, which is charged with monitoring the
administration's compliance under the resolution, concluded
that, ``use of DFI resources that is not for the benefit of the
Iraqi people is in conflict with U.N. Security Council
Resolution 1483.'' and members can also review a series of
official Pentagon audits that the administration submitted to
the United Nations after blacking out more than 460 references
to overcharges to the DFI.
Mr. Chairman, Congress should investigate allegations about
the Oil-for-Food program, but we should also investigate our
own administration's failure to properly account for Iraqi
funds. Our commitment in both cases is the same: To ensure that
the Iraqi people who have been oppressed for decades receive
the full benefit of their own Nation's funds. Thank you, Mr.
Chairman.
Mr. Whitfield. Mr. Waxman, were you asking unanimous
consent that those documents be entered into the record?
Mr. Waxman. Yes, I would like to ask unanimous consent.
Mr. Whitfield. I asked a minute ago to enter some documents
into the record that were made available to your side last
Wednesday, about 6, 7 days ago. I have not had an opportunity
to see that. Could I see this document that you are referring
to?
Mr. Waxman. Sure. If you prefer, Mr. Chairman, why don't I
withhold that unanimous request consent until later in the
hearing so you would be able to see it.
Mr. Whitfield. And I would also like to ask, was this a
study conducted by the Federal Government? Who conducted this
study?
Mr. Waxman. We are talking about six reports that are all
cited in my statement.
Mr. Whitfield. And who conducted those studies?
Mr. Waxman. Let me go through. The special inspector
general for Iraq reconstruction is one. The International
Advisory and Monitoring Board, two. The Defense Contract Audit
Agency, which is the Pentagon's own auditors. And there are
multiple reports by each of them.
Mr. Whitfield. If you would give me a copy of that. And I
would just like to reserve a point of order. But, in the
meantime, I am going to go on and call on----
Chairman Barton. Mr. Chairman, could you yield to me on
that point?
Mr. Whitfield. Yes.
Chairman Barton. This subcommittee always works in a
bipartisan fashion. And if the gentleman from California shared
the documents so that we know before the fact what is in them,
we are almost always willing to put them into the record. My
understanding is they have not been shared with the staff. And
I am sure he is willing to share those so we can look at them.
Mr. Waxman. Well, let me point out, these are not hidden
documents. They were furnished to all the committees by the
Inspector General. But I would be happy to have you look at
them. I wasn't trying to withhold any documents from you. These
are documents that have been submitted to the Congress, and
they have been out in the public domain. And so we would like
to have them as part of the record after you feel comfortable
enough to admit them into the record.
Mr. Whitfield. Well, I think that this would probably be
fine. But what I think we ought to do is just submit the entire
report, reports in their entirety.
Mr. Waxman. I have no problem with that. There are multiple
reports. I think there are six separate reports. If you want to
have all of them in their entirety, then that is certainly
fine.
Mr. Whitfield. I would prefer that we just submit the
entire report rather than just excerpts from the reports. So,
if there is no objection to having the entire reports placed
into the record, that would be fine.
[The material referred to is retained in subcommittee
files.]
Mr. Waxman. Okay.
Mr. Whitfield. At this point I would call on Mr. Norwood of
Georgia for his opening statement. I am sorry. Mr. Burgess, you
are on the subcommittee. Go ahead.
Mr. Burgess. Mr. Chairman, I have an opening statement I
will just submit for the record in the interest of time so we
can get on to examining the witnesses.
Mr. Whitfield. Thank you. Ms. Blackburn, do you have an
opening statement? Mr. Norwood?
Mr. Norwood. Thank you very much, Mr. Chairman.
I must admit that this stuff that has just been handed out,
it looks to me like they are headlines out of The New York
Times rather than any report that anybody has produced. But I
think it equally important we find out exactly who produced it
and consider the source.
I thank you today for allowing me to join you. I sincerely
appreciate the courtesy. I have been very concerned about this
issue of corruption at the United Nations, and that as I
understand is what this hearing is about. Though there are
those who would divert it to another subject, I think today is
about the corruption at the U.N., and with the Oil-for-Food
program in Iraq. I wanted to be here simply to learn more.
I would like to start by commending you for continuing to
focus some attention on the corruption at the U.N. Oil-for-Food
program. There is plenty to discuss and scrutinize as we have
seen, and there is plenty being discussed back home in all of
our districts. I think the American people want to have an
understanding of this. It is no secret that during my tenure in
Congress, I have not particularly been a fan of the U.N. I
think there are some pretty good reasons for that. And this
committee needs no reminder that for a decade the U.N. allowed
Saddam Hussein to blatantly defy 18 U.N. Resolutions. The
United States spends millions, if not billions, of dollars a
year on U.N. programs and policies that are often totally
contrary to the principles of freedom that most Americans hold
dear. That is why people back home where I am from want to know
what is going on.
It is truly unfortunate that we do not have the opportunity
today to question a representative of the U.N. Perhaps that
opportunity will present itself in the future, Mr. Chairman.
Regardless, the U.N. is not the topic of the hearing today; the
U.N. Oil-for-Food program is. As we all know, the Oil-for-Food
program was established in 1995, April, to strike a balance
between enforcing compliance of all relevant U.N. Security
Council resolutions, and alleviating hunger, suffering, human
suffering in Iraq. Unfortunately, what we all now know is that
the program was riddled with corruption in many ways.
What should have been a humanitarian program ended up
funding Saddam Hussein's dictatorship and possibly terrorist
groups. The GAO estimates that from 1997 through 2002, the
former Iraqi regime acquired $10.1 billion in illegal revenues.
This includes $5.7 billion from oil smuggling and $4.4 billion
from illicit surcharges on oil sales and after-sale charges on
suppliers. Numerous United Nations, independent, and Iraqi
investigations have been directed into these illicitly diverted
funds. As has been pointed out earlier, major doubts exist
about the U.N.'s ability to investigate this level of fraud,
and I am highly suspicious of their resistance to the facts.
After all, it was under their watch that their own program was
abused.
I look forward to the hearing. I look forward to hearing
the testimony of the witnesses today. And, again, I thank you
for the opportunity to join you.
Mr. Whitfield. Thank you. Is there anyone else wishing to
give an opening statement at this time? If not, then we will
call panel one, the witness Mr. John Fawcett, Mr. Robert Smego,
and Dr. Joy Gordon.
I want to thank the three of you for being with us this
morning. We look forward to your testimony. You are aware that
the committee is holding an investigative hearing, and, when
doing so, has had the practice of taking testimony under oath.
Do any of you this morning or this afternoon have any objection
to testifying under oath? Okay. The Chair then advises you
that, under the rules of the House and the rules of the
committee, you are also entitled to be advised by counsel. Do
you desire to be advised by counsel during your testimony
today? In that case, if you would please rise and raise your
right hand, I will swear you in.
[Witnesses sworn.]
Mr. Whitfield. You are now under oath, and you may give
your 5-minute summary of your written statement. And, Mr.
Fawcett, we will begin with you.
TESTIMONY OF JOHN FAWCETT, AUTHOR, REPORT FOR SOURCES OF
REVENUE FOR SADDAM AND SONS; D. ROBERT SMEGO, ARABIC LINGUIST,
ONE OF THE AUTHORS OF THE DUELFER REPORT; AND JOY GORDON,
PROFESSOR OF PHILOSOPHY, FAIRFIELD UNIVERSITY
Mr. Fawcett. Thank you for inviting me here before the
committee in today's hearing. I have worked internationally----
Mr. Whitfield. Would you turn your microphone on, please.
Mr. Fawcett. Okay. I have worked internationally for the
past 25 years, I spent 10 years in oil exploration in the
Middle East and Africa, after which I spent the next 10 years
involved in humanitarian and human rights work largely in the
Balkans and Iraq. Over the last 5 years I have been tracking
the financial assets of major human rights abusers, including
Slobodan Milosevic, Saddam Hussein, and al Qaeda. I began
looking at the Oil-for-Food program in 1998 and was a co-author
with Susan Blaustein of Sources of Revenue for Saddam & Sons.
The paper was published in 2002 by the Coalition for
International Justice, and they graciously agreed to sponsor my
appearance today.
The Oil-for-Food program cannot be viewed separately from
the history of corruption under Saddam Hussein. Saddam Hussein
began his financial rip-offs in the late 1960's with the
establishment of his first shell companies in Milan and Lugano,
and continued until he was toppled in 2003. My written
statement goes into more detail on this topic.
When the U.N. Began negotiating with Iraq in 1991 to
establish the Oil-for-Food program, and the first negotiations
were led by then Assistant Secretary General Kofi Annan, no one
dealing with Iraq could credibly say they were not aware of the
potential for corruption. U.N. Secretary General Perez de
Cuellar knew. His successor Boutros Boutros Ghali knew. Kofi
Annan knew. The members of the Security Council certainly knew.
All the permanent members, with the exception of China, had
been active participants in arms embargo busting with Saddam
throughout the previous decade, that is, the 1980's.
By the time the program began in late 1996, the U.N. Had
ceded to Saddam the authority to choose his business partners
from both the sale of Iraqi oil and the purchase of
humanitarian supplies. This crucial decision laid the
groundwork for the ensuing corruption.
There were two major methods of illicit profiting: Oil
vouchers were given to favored individuals or organizations
that provided Iraq with political support. The vouchers were
then sold to official U.N. Approved contractors. The illicit
profit in this scheme amounted to up to $1 million per tanker
load.
Two Oil-for-Food contractors who were very adept at this
were the shady Swiss Liechtenstein firms of Alcon and Fenar.
These companies were created in the haven of corporate secrecy,
Liechtenstein, for the sole purpose of doing illicit business
with Saddam Hussein's Iraq. Aside from kickbacks, the political
services they provided to Saddam are as yet unknown.
To this point, the Swiss and Liechtenstein authorities have
failed to publicize the beneficial owners of either company
despite these firms having been identified as suspicious as
early as January 2001. Between them, Alcon and Fenar did nearly
$2.5 billion worth of business under the program, of which some
$400 million was done in the last few months of Saddam's reign.
One wonders whether this money is funding the car bombs that
are tearing apart men, women, and children in Iraq on a daily
basis.
The other major scam in the Oil-for-Food program involved
overcharging or invoice padding for goods sold to Iraq. One
commodity in which this practice took place was baby formula.
It normally sells for about $2,000 per ton, but a corrupt
supplier under the Oil-for-Food program would charge the U.N.
On behalf of Iraq 2,500. The difference was, again, split with
Iraqi officials.
While the U.N. Children's agency UNICEF and others mounted
public campaigns decrying the suffering and deaths of Iraqi
children due to sanctions, price gouging was taking place on
the very product that could help these children. If there is
anything that UNICEF knows how to do, it is to procure,
transport, and distribute baby formula. They do so in war zones
and disasters worldwide. While UNICEF continually published
Iraq government statistics on child mortality related to
sanctions, not once did they raise a voice about the baby
formula rip-off.
The inspection procedures for oil exports as well as for
humanitarian imports were toothless from the beginning. The
inspectors had no mandate to prevent smuggling of oil out of
Iraq or smuggling of goods into Iraq. The inspectors have no
mandate to check the quality of food or medicines entering
Iraq, and usually failed to check even the quantity of goods
being imported. At the Jordanian, Syrian, and Turkish border
crossings, hundreds of trucks entered Iraq daily with
sanctions-busting goods and left Iraq carrying sanctions-
busting oil. The inspectors could do nothing more than tip
their hat and wave their clip board, and literally that is what
they did.
Knowing the nature both in cruelty and corruption of the
regime they were dealing with, why would international
officials allow such a system to come into place? First, there
is a certain anti-American predisposition that has built up
over decades within the U.N. Second, there was a perception
that it was a catastrophic humanitarian situation in Iraq, and
that the population was on the verge of starvation. Third,
international officials also stood to gain financially.
Officials of over 100 countries either profited illicitly from
the Oil-for-Food program, failed in their oversight duties to
prevent corruption, or both.
What made the graft under the Oil-for-Food program
different from other international financial scandals was the
use of the illicit gains by Saddam Hussein. He did not just
fatten the Jordanian and Swiss bank accounts of his family and
cronies, though there was plenty of that; the illicit funds
were also used to create a political slush fund of global
proportions. He bought presidents, prime ministers,
legislators, Ambassadors, media, and NGO officials, and
actively funded the anti sanctions campaign.
Mr. Whitfield. Mr. Fawcett, you are about a minute and 30
seconds over.
Mr. Fawcett. All right. Maybe in the questioning I could go
in, then, to what I think the U.N. Could have done in the midst
of all of these problems. Though I would like to say, the
primary importance for the U.N. To act was that it had to be
led by honest and courageous officials. And I will leave it at
that.
[The prepared statement of John Fawcett follows:]
Prepared Statement of John Fawcett
INTRODUCTION
Thank you for inviting me to appear before the committee at today's
hearing. I have worked internationally for the past 25 years. I spent
ten years in oil exploration in the Middle East and Africa. The
following ten years I was involved in humanitarian and human rights
work largely in the Balkans and Iraq. Over the last five years I have
been tracking the financial assets of major human rights abusers,
including Slobodan Milosevic, Saddam Hussein, and al Qaeda. I have
contracted to a variety of governmental, non-governmental, and for
profit organizations. I began looking at the Oil for Food program in
1998, and was a co-author with Susan Blaustein of Sources of Revenue
for Saddam and Sons. The paper was published in 2002 by the Coalition
for International Justice and they have graciously agreed to sponsor my
appearance today.
HISTORY OF SADDAM'S CORRUPTION
The Oil for Food program can not be viewed separately from the
history of corruption under Saddam Hussein. Saddam began his financial
rip-offs in the late 1960s with the establishment of his first shell
companies in Milan and Lugano. In the mid 70s he instituted a 5% rake-
off on all Iraqi oil exports, with the proceeds being sent to Swiss
bank accounts via major US banks in New York City. Shortly after
seizing the Iraqi presidency in 1979 he invaded Iran and an arms
embargo was imposed. He actively violated the embargo with the
assistance of many countries in what came to be known as Iraqgate.
Within days of his invasion of Kuwait in August 1990, comprehensive
international sanctions were imposed. Within hours an energetic
campaign of sanctions busting began. After surviving the first Gulf
War, he directed that the sanctions busting be greatly expanded.
When the UN began negotiating with Iraq in 1991 to establish the
oil for food program, (and the first negotiations were led by then
Assistant Secretary General Kofi Annan) no one dealing with Iraq could
credibly say they were not aware of the potential for corruption. UN
Secretary General Perez de Cuellar knew. His successor Boutros Boutros
Ghali knew. Kofi Annan knew. The members of the Security Council
certainly knew. All the permanent members, with the exception of China,
had been active participants in embargo busting with Saddam throughout
the previous decade. The embargo busting involved both kickbacks to
Saddam as well as invoice padding, two methods of illicit activity that
were later widely used during the Oil for Food Program.
TWO TYPES OF RIP-OFFS
By the time the program began in late 1996, the UN had ceded to
Saddam the authority to choose his business partners for both the sale
of Iraqi oil and the purchase of humanitarian supplies. This crucial
decision laid the groundwork for the ensuing corruption. There were two
major methods of illicit profiting by the regime and a host of minor
schemes.
Oil vouchers were given to favored individuals or organizations
that provided Iraq with political support. The vouchers were then sold
to an official UN approved contractor. This contractor received the oil
at a discount and then sold it on to other traders and eventually to
major refiners. The illicit profit in this scheme amounted to up to $1
million per tanker load. Two oil for food contractors who were very
adept at this were the shady Swiss-Liechtenstein firms Alcon and Fenar.
These companies were created in the haven of corporate secrecy,
Liechtenstein, for the sole purpose of doing illicit business with
Saddam Hussein's Iraq. Alcon and Fenar were official UN contractors as
well as voucher recipients. Aside from kickbacks the political services
they provided to Saddam are as yet unknown. To this point the Swiss and
Liechtenstein authorities have failed to publicize the beneficial
owners of either company, despite these firms having been identified as
suspicious as early as January 2001. The Liechtensteiners, who for a
fee, put their names to the corporate registry documents were; for
Alcon, Rainer Marxer and Martin Batliner; for Fenar, Patrick Hilty and
Horst Buchel. Between them, Alcon and Fenar did nearly $2.5 billion
worth of business under the program, of which some $400 million was
done in the last few months of Saddam's reign. One wonders whether this
money is funding the car bombs that are tearing apart men, women and
children in Iraq on a daily basis.
The other major scam in the oil for food program involved over
charging or invoice padding for goods sold to Iraq. One commodity in
which this practice took place was baby formula. It normally sold for
about $2000 per ton, but a corrupt supplier would charge the UN on
behalf of Iraq, $2500. The difference was again split with the Iraqi
officials. While the UN and others mounted public campaigns decrying
the suffering and deaths of Iraqi children, price gouging was taking
place on the very product that could help these children. If there is
anything that UNICEF knows how to do, it is to procure, transport and
distribute baby formula. They do so in war zones and disasters
worldwide. While UNICEF continually published Iraqi government
statistics on child mortality related to sanctions, not once did they
raise a voice about the baby formula rip-off.
SHAM INSPECTIONS
The inspection procedures for oil exports as well as for
humanitarian imports were toothless from the beginning. The inspectors
had no mandate to prevent smuggling of oil out of Iraq, or smuggling of
goods into Iraq. The inspectors had no mandate to check the quality of
food or medicines entering Iraq and usually failed to check even the
quantity of goods being imported. At the Jordanian, Syrian and Turkish
border crossings, hundreds of trucks entered Iraq daily with sanctions
busting goods and left Iraq carrying sanctions busting oil. The
inspectors could do nothing more than tip their hat and wave their
clipboard. This was an exercise in futility and many inspectors sunk
into frustration or inebriation.
After studying and thinking about this program for several years, I
have come to the conclusion that the inspections regime established by
the UN was window dressing only. To be clear, I believe that UN
officials set up the procurement as well as the inspection regime of
the Oil for Food program in such a manner as to allow Saddam Hussein to
personally profit from it. The Security Council was fully aware of the
potential for corruption under the program at every step of the
negotiations.
WHY WAS IT ALLOWED TO HAPPEN?
Knowing the nature, both in cruelty and corruption of the regime
they were dealing with, why would these international officials allow
such a system to come into place? First there is a certain anti-
American predisposition that has built up over decades within the UN.
This tends to look skeptically at US positions on issues and more
sympathetically at US opponents. This is not an unhealthy posture by
itself. Second, there was a perception that there was a catastrophic
humanitarian situation in Iraq and that the population was on the verge
of starvation. All of the data upon which the assessments of the
humanitarian situation in Iraq were made was generated by the Iraqi
government. It was also in the financial interest of the UN
humanitarian agencies to increase the amounts of funds allocated to
Iraq. These factors contributed towards fostering an international
public perception of impending disaster. The third reason why
international officials would agree to a system that profited Saddam
Hussein is that they also stood to gain financially. Officials of over
100 countries, either profited illicitly from the Oil for Food program,
failed in their oversight duties to prevent corruption, or both.
What made the graft under the oil for food program different from
other international financial scandals was the use of the illicit gains
by Saddam Hussein. He did not just fatten the Jordanian and Swiss bank
accounts of his family and cronies, though there was plenty of that.
The illicit funds were also used to create a political slush fund of
global proportions. He bought presidents, prime ministers, legislators,
ambassadors, media and NGO officials, and actively funded the anti-
sanctions campaign.
COULD THE UN HAVE DONE ANYTHING?
With an Iraqi regime very experienced in corruption, a weak
Security Council, and officials and businessmen from dozens of
countries eager to put their hands into Saddam's pockets, was it
possible for the United Nations to do anything except acquiesce to
corruption? The answer is yes. In the face of all these cards stacked
against it, there was one essential ingredient to assist the Iraqi
people as well as battle corruption. The UN had to be lead by honest
and courageous officials.
From 1996 to the end of the program in 2003, had the UN been led by
honest and courageous officials, they would have done the following.
Instead of awarding the first major monitoring and banking contracts
via a secretive back-door process, senior UN officials would
have insisted on adhering to their own competitive bidding
regulations and opened the process to public scrutiny. Had they
done so the weak monitoring effort would have been exposed
before the program began and the allegations of conflict of
interest by the Secretary General and his son would have been
addressed.
An aggressive effort would have been made to vet all contracts for
price and quality. The Security Council had instructed the UN
to do so, but they made token efforts at best. Even the few
contracts which UN officials found to be overpriced were never
acted upon by the Security Council. However, UN officials did
not have to be satisfied with just passing the buck to the
Security Council. There was nothing stopping them from
releasing all contract data publicly. There would have been
some embarrassed businesses and member states, but the practice
of invoice padding would have been nipped in the bud.
The whole process of selecting oil buyers should have been exposed to
the light of scrutiny with the public release of oil contract
information and an insistence by the UN that all oil purchasers
publish shareholder or beneficiary lists. UN officials again
excused themselves by claiming that Iraq could choose its own
customers as long as those customers were also approved by the
relevant member state. As a result the UN found itself involved
in financial transactions with weapons dealers, money
launderers, organized crime and terrorists. This was
inexcusable.
UN monitors should have acted like the weapons inspectors and been
far more aggressive. UN personnel had the right and obligation
to monitor any distribution of goods inside Iraq. The great
majority of them never left their office and relied exclusively
on the government of Saddam Hussein to tell them where and to
whom the goods were distributed.
WE WILL BE PAYING FOR THIS FOR A LONG TIME
Even though the oil for food program was shut down nearly two years
ago, the scandal is not receding into history. The oil for food program
took place during the former Soviet Bloc's transition from a command to
a competitive economy. It took place during a generational change in
many of the ruling families in the Middle East. It took place during
the emergence of new economic powerhouses China and India. During times
of political and economic ferment, these countries were major players
in the oil for food scandal. Officials from all of these countries, who
may be in power for decades to come, took away a clear lesson. The
ground rules of the new global economy have not yet been written in
stone. While some argue for transparency, accountability and a level
playing field, others maneuver for insider advantage and see bribery
and corruption as acceptable business tools. The oil for food program
gave a tremendous boost towards the institutionalization of corruption
within the global economy, the repercussions of which have barely begun
to emerge.
Mr. Whitfield. Thank you very much.
Mr. Smego.
TESTIMONY OF D. ROBERT SMEGO
Mr. Smego. Good afternoon, Mr. Chairman. My name is D.
Robert Smego. I was retained by the House Energy and Commerce
Committee earlier this year to review, identify, and translate
documents it provided to me. I am an Arabic linguist
knowledgeable--excuse me. I'm a linguist knowledgeable in the
Arabic language.
The House Energy and Commerce Committee's majority counsel
asked me to identify by topic and translate documents regarding
Oil-for-Food, in particular, Iraqi State Oil Marketing
Organization documents that had been scanned on to DVDs and
memoranda prepared by the Iraqi Intelligence Service.
With the assistance of a native Iraqi linguist, I
translated 49 documents from more than 23,000 pages that I have
reviewed for this committee. The translated documents presented
today accurately reflect the original text. I have not
corrected the English translations of grammatical errors such
as run-on sentences, indefinite pronouns, and sentence
fragments that result from the melodious flow and verbose
nature of Arabic. I avoided summarizing, paraphrasing, or
making analytic substitutions for the original language. Any
redactions in the original documents were maintained in the
translations.
I was asked to translate and interpret specific documents;
I was not tasked to perform any broader analysis or develop a
professional judgment about the broader context of these
documents. The guidance of the majority counsel was to sift
through large volumes of material looking for references to
particular topics and to translate the documents selected for
presentation to the committee. The documents presented here
today provide useful insight into the activities of the former
Iraqi regime.
Thank you, Mr. Chairman. I am pleased to appear before this
subcommittee, and will be glad to address the questions within
the scope of the work I performed for the committee. This
concludes my opening statement.
[The prepared statement of D. Robert Smego follows:]
Prepared Statement of D. Robert Smego
Good afternoon, Mr. Chairman. My name is D. Robert Smego. I was
retained by the House Energy and Commerce Committee earlier this year
to review, identify and translate documents it provided to me. I am a
linguist knowledgeable in the Arabic language.
The House Energy and Commerce Committee's Majority Counsel asked me
to identify by topic and translate documents regarding Oil-For-Food, in
particular Iraqi State Oil Marketing Organization documents that had
been scanned onto DVDs and memoranda prepared by the Iraqi Intelligence
Service. With the assistance of a native Iraqi linguist, I translated
49 documents from more than 23,000 pages that I reviewed for this
Committee.
The translated documents presented today accurately reflect the
original text. I have not corrected the English translations of
grammatical errors, such as run-on sentences, indefinite pronouns, and
sentence fragments that result from the melodious flow and verbose
nature of Arabic. I avoided summarizing, paraphrasing, or making
analytic substitutions for the original language. Any redactions in the
original documents were maintained in the translations.
I was asked to translate and interpret specific documents. I was
not tasked to perform any broader analysis or to develop a professional
judgment about the broader context of these documents. The guidance of
the Majority Counsel was to sift through large volumes of material
looking for references to particular topics and to translate the
documents selected by the Majority Counsel for presentation to the
Committee. The documents presented here today provide useful insight
into the activities of the former Iraqi regime.
Thank you, Mr. Chairman. This concludes my opening statement. I am
pleased to appear before this Subcommittee and will be glad to address
questions within the scope of the work I performed for the Committee.
Mr. Whitfield. Thank you, Mr. Smego.
Dr. Gordon, you are recognized for 5 minutes.
TESTIMONY OF JOY GORDON
Ms. Gordon. I appreciate the opportunity to speak before
this committee. My background is in political philosophy and
law. I have been doing research on economic sanctions for 7
years. Over the last 5 years, I have published on the Iraq
sanctions in the Yield Journal of International Human Rights
Law, Ethics and International Affairs, Middle East report, Le
Monde Diplomatique, and Harper's Magazine. I am currently
completing a book on the Iraq sanctions regime for Harvard
University Press.
I would like to begin by mentioning a crucial distinction
between the U.N. Taken broadly and the Security Council. Many
of the accusations that have been lobbied against the United
Nations regarding the Oil-for-Food program, in fact, go to
decisions on the part of the Security Council itself or actions
or failures to act on the part of the member states of the
Security Council. I would like to briefly address a common
misconception. It is often said that there was no oversight or
monitoring or accountability in the Oil-for-Food program.
That's incorrect. There were, by my count, seven levels of
oversight and monitoring. All of these are publicly available.
At the first level was something called distribution plan;
before Iraq could contract for a single item, it had to submit
an itemized list of every single item it wished to contract for
in the next 6 months. Those distribution plans are and have
always been posted on the OIP Web site. They are not a secret.
Every item was approved.
The next thing was that once Iraq contracted, the contract
initially went through the OIP and then to every single member
of the Security Council. Every single member of the 661
Committee had the right to block or delay or question any
contract indefinitely for any reason. In those cases where
there were concerns, for example, the U.S. was primarily
concerned with security issues, the U.S. could block a
contract, and it did so for $5.4 billion of contracts. The U.S.
and to some extent the U.K. Could delay contracts by asking for
information, and in many cases those requests for information
delayed contracts by as much as 2 years. So it was more than
possible for the United States to intervene in blocking or
delaying any contract that raised any concern to the U.S. in
any form.
Next, once the goods were purchased, all funds went
directly through an escrow account. There were no legal funds
that went through the Iraqi government at all. Funds were--oil
proceeds went to an escrow account; contracts were paid from
the escrow account. There were onsite inspectors Cotecna and
Lloyds Register, for the goods' arrival. And, finally, there
were hundreds of U.N. Staff on the ground in Iraq to document
of the distribution of goods, the use of goods, whether they
arrived at the end user, whether they were consumed by the end
user correctly.
Oil sales similarly had multi levels of supervision. The
Iraqi government it is sometimes said was free to pick prices
and to set prices low. That is patently incorrect. It had no
such authority. SOMO had the authority to propose a price. The
pricing formula for each month period was reviewed by the oil
overseers. If the oil overseers found it to be consistent with
fair market value, it recommended approval to the 661
Committee. The 661 Committee, again, every member had the right
to block the approval of that formula at any time. It did not
require consensus, it did not require agreement of any others.
The companies who were contracting for oil sales similarly
went through the same process. Every company had to be
registered. Registration did not mean that OIP reviewed them;
it meant simply that the permanent nation--the permanent
mission of that nation to the United Nations submitted a list,
information about that company, its name and address. Once it
did that, then any member of the 661 Committee could refuse to
have that company on the list. If the price was approved by the
661 Committee and the company had been approved by the 661
Committee, then the oil overseers went forward with the
approval of the oil contract. Any member of the 661 Committee,
including the U.S., could stop the pricing if it ever looked
unfair or for any other reason. And it could block any company
if that company looked corrupt or for any other reason.
Let me address some of the concerns that have come up
repeatedly over the last year. There have been a lot of
discussion about the kickbacks, that contracts were routinely
inflated by 5 to 10 percent, and that that amount was received
in cash under the table by the Iraqi government. In fact--and
it is often--the U.N. Is often charged with a failure to
supervise or negligence in permitting this to take place.
That is not correct. In those cases where the price
irregularities were clear, U.N. Staff, the OIP staff went to
the 661 Committee and said: Here is a contract where the
pricing is clearly improper. Do you want to block it? It was
not within the authority of the United Nations' personnel to
stop the contract; it was only within their authority to
provide information to and to advise the members of the 661
Committee.
It was the responsibility of the members of the 661
Committee to block a contract for that reason or for any other
reason. On those more than 70 occasions where OIP staff
identified such extreme price irregularities as to clearly
indicate kickbacks, it went to the 661 Committee. On none of
those occasions did any member state, including the United
States, choose to take action to block that contract. In cases
where the--and those were in cases where the irregularities
were glaring. In cases where the irregularities were 5 to 10
percent, they were difficult to detect, but even if they had
been detected we have to assume that the members of the
Security Council would not have been inclined to act any
differently for minor increases of 5 to 10 percent if they were
not prepared to block contracts where the price irregularities
were very extreme.
Let us look quickly at oil surcharges.
Mr. Whitfield. Dr. Gordon, you are also about a minute and
15 seconds over. So if you could summarize, we would appreciate
it.
Ms. Gordon. Okay. As I said before, for the oil surcharges,
what's--it is the case that for all oil sales--I'm sorry.
Again, it was the oil overseers, it was the staff of the U.N.
That brought the oil surcharges to the attention of the 661
Committee as soon as they became apparent. That was in the fall
of 2000. In that case, unlike with the import contracts, the
Security Council chose to respond and to put in place a very
Draconian measure. However, you cannot lay blame on the U.N.
Staff. In both cases, they advised the Committee correctly. In
one case, the committee chose to take action; in the other
case, it did not.
I would like to emphasize that the smuggling was by far the
largest amount of the illicit funds that went to Iraq by any
measurement, whether it is the GAO, the Volcker report, or the
Duelfer Report. And of the smuggling, about three quarters was
through Jordan and Turkey combined. That again, we now well
know was with the approval and full knowledge of the United
States in particular. And I--and I will just end my statement
there.
[The prepared statement of Joy Gordon follows:]
Prepared Statement of Joy Gordon, Professor of Philosophy, Fairfield
University
Mr. Chairman and distinguished members of the committee: Thank you
for this opportunity to testify before this committee. In taking on the
difficult endeavor of unraveling the complexities of the Oil for Food
Program, this committee is undertaking a tremendously important task,
and it is a pleasure to be invited to contribute to that work. This
program, its successes and its failures, has broad implications for
future US foreign policy, as well as for the future of the United
Nations.
My testimony today is based on the research I have done in the
field of economic sanctions over the last seven years, including a
close study of the Iraq sanctions process from 1990 to 2003. In the
course of my research I have become familiar with the scholarly work on
economic sanctions in general and on the Iraq sanctions in particular,
as well as much of the extensive body of documents generated in the
course of the Oil for Food Program. Over the last five years I have
also interviewed many of those involved in the 661 Committee--the
committee of the Security Council charged with overseeing the sanctions
regime imposed on Iraq--and the OFF program.
Over the last year we have heard much about the failures of the Oil
for Food Program. A great deal has been blamed on the Secretary-General
for what is seen as an institutional failure on the part of the United
Nations. As many have noted, there have been failures on the part of
nearly everyone involved with the program. Most recently the Volcker
Committee has explored the ethical problems involving Cotecna; the
possibility of serious improprieties on the part of Benon Sevan, the
director of the program; and a critical concern about the scope of the
program's audits.
But in recent months there has been growing recognition of the
extent to which the Oil for Food Program, as well as much of the
oversight, was in fact in the hands of the Security Council and its
member states--including the United States--not the Secretariat.
In my testimony today I'd like to address a number of issues
concerning the Oil for Food Program and the accusations against it:
1. The effectiveness of the program
2. The magnitude of the accusations
3. Transparency and oversight
Monitoring of import contracts
Monitoring of oil sales
Transparency
4. Sources of illicit funds
Overland smuggling
Maritime smuggling
Kickbacks on import contracts
Oil surcharges
Iraq's freedom to choose its trade partners
5. The Volcker Committee reports
6. Who was responsible?
The consensus decision making rule
The US role
The State Department's defense of US support for Iraq's illicit
trade of Jordan and Turkey
7. Conclusions
1. The effectiveness of the program
I think it is important to begin by recognizing that the Oil for
Food Program, and the UN staff involved, were in fact tremendously
successful at raising the quality of life for the Iraqi population, in
very measurable ways. The nutritional intake nearly doubled, and acute
malnutrition in children dropped by half. The health care system was
much better able to meet the population's needs--surgical operations
increased by 40%; polio was eliminated, and communicable diseases were
substantially reduced. Water and sanitation improved considerably, and
electricity became much more reliable.
We should be particularly conscious of the significance of these
accomplishments as we see how difficult it is been in the last two
years for the US occupation authority and the interim Iraqi government
to achieve similar standards. This has been particularly true as the
security situation has deteriorated, and will probably worsen as funds
for reconstruction are reallocated to security costs.
The fundamental goal of the Oil for Food Program was to improve the
lives of the Iraqi population through the import of critical
humanitarian goods, and that was unquestionably achieved.
The magnitude of the accusations
While it is common to hear that Saddam Hussein's regime received
$11 billion in illicit funds through the Oil for Food Program (or more
recently, $21 billion), in fact the credible accusations are much more
limited: that the former Iraqi regime obtained somewhere between $2
billion and $4.4 billion through oil surcharges and import contracts.
According to both the GAO reports from 2004 and the CIA's report
from last September, the bulk of the illicit funds that entered Iraq
came from oil smuggling--which took place prior to the Oil for Food
Program, and after 1996 occurred entirely outside the program. As
earlier congressional hearings have made clear, Iraq had ongoing trade
with Jordan, Turkey, and Syria for many years.
The major GAO report maintained that from 1997 through 2002, the
former Iraqi regime acquired $10.1 billion in illegal revenues related
to the Oil for Food Program.'' <SUP>1</SUP> $5.7 of this came from oil
smuggling and $4.4 billion from illicit surcharges on oil sales and
commissions on imports.<SUP>2</SUP> The report of the CIA's Iraq Study
Group maintains that the bulk of Iraq's illicit funds came from
``government to government protocols''--ongoing trade agreements
between Iraq and other countries, in violation of the sanctions. Iraq's
income from these, according to the report, came to some $8 billion,
while kickbacks from import contracts were estimated to be $1.5
billion, surcharges from oil sales were $229 million, and private
sector smuggling was estimated at $1.2 billion.<SUP>3</SUP>
---------------------------------------------------------------------------
\1\ ``United Nations: Observations on the Oil for Food Program,''
Statement of Joseph A. Christoff, Director, International Affairs and
Trade. Testimony before the Committee on Foreign Relations, U.S.
Senate. GAO-04-65IT, p. 2.
\2\ ``United Nations: Observations on the Oil for Food Program,''
Statement of Joseph A. Christoff, Director, International Affairs and
Trade. Testimony before the Committee on Foreign Relations, U.S.
Senate. GAO-04-65IT, p. 2
\3\ ``Comprehensive Report of the Special Advisor to the DCI on
Iraq's WMD,'' 30 September 2004, Regime finance and procurement
section, p. 23.
---------------------------------------------------------------------------
Thus, the most credible accusations--the GAO and ISG reports--
maintain that the Iraqi regime illicitly received at most $4.4 billion
via some aspect of the Oil for Food Program.
3. Transparency and Oversight
I'd like to address some common misconceptions about the program.
Over the last year we've heard people say many times that the Oil for
Food program had no system of oversight or monitoring, and that there
was no transparency. It in fact had an elaborate system of oversight,
and there was an enormous amount of information about the program and
its operations that was not only available to the UN and the member
states, but in fact was maintained for the public on the web site of
OIP (Office of Iraq Programme), the agency established within the UN to
house the Oil for Food Program and the UN's other Iraq programs.
It is important to understand that to the extent there were
kickbacks or improprieties within the program, this occurred not
because of a lack of systematic monitoring; but rather took place in
spite of an elaborate monitoring system. This monitoring system
involved detailed oversight by members of the Security Council,
including extensive participation by the United States and the United
Kingdom, each of which received copies of all contracts made by the
government of Iraq for every purchase of humanitarian supplies and oil
spare parts.
It was OIP staff--customs officers--who notified the 661 Committee
of possible kickbacks on import contracts, on more than seventy
occasions. No member of the 661 Committee, including the US, then
exercised its right to block or delay the contract.
It was OIP staff--the oil overseers--who notified the 661 Committee
of oil surcharges in October 2000. The US and UK then began withholding
pricing approval in response.
A. Monitoring of import contracts
Briefly, the multi-tiered monitoring structure for south/center
Iraq <SUP>4</SUP> was:
---------------------------------------------------------------------------
\4\ Note that in northern Iraq the UN executed the program on
behalf of the government of Iraq, and in that capacity took over some
governmental functions. In south/center Iraq, the Iraqi government
continued to perform normal governmental functions, but was monitored.
---------------------------------------------------------------------------
1. Distribution plan: Before an application could be submitted that
would allow Iraq to import goods, Iraq was required to submit an
exhaustive list of every single item it wished to import, identifying
quantities and sectors where goods would be used, and the justification
for prioritizing these goods. The Distribution Plan then had to be
reviewed and approved by UN staff, often with modifications.
2. OIP review: Once a contract was negotiated between the Iraqi
government and the supplier, it was submitted to OIP. OIP staff
reviewed it to see that it contained all the information required by
the 661 Committee, and corresponded to the Distribution Plan
3. UNSCOM/UNMOVIC: The contract was also sent to UNSCOM (later
UNMOVIC) and IAEA, to determine if there were any military or dual use
goods
4. 661 Committee review: The contract was circulated to every
member of the 661 Committee.<SUP>5</SUP> Each member had the option of
delaying the contract, asking for more information, or simply vetoing
it.
---------------------------------------------------------------------------
\5\ Some goods that the Security Council considered uncontroversial
were eventually put on a ``green list'' that bypassed the committee
(pursuant to Security Council Resolution 1409) but went through all the
other monitoring stages. However, where OIP staff found irregularities
in ``green list'' contracts, they then presented those to the
661Committee.
---------------------------------------------------------------------------
5. Escrow account: Under the terms of the program as designed, no
program funds ever went directly through the hands of the Iraqi
government. All proceeds from legal oil sales went into a UN-held
escrow account, and all import contracts were paid for from this
account.
6. On-site inspectors: Upon arrival in Iraq, the goods were
inspected by Lloyd's Register (later Cotecna) to see that the
quantities conformed to the contract
7. End use monitors: Once the goods were in Iraq, staff from the UN
agencies conducted thousands of site visits, surveys, and spot checks
to determine if the goods were being distributed equitably and
efficiently, and to gauge the adequacy of the program.
B. For oil sales:
1. The Iraqi government proposed pricing formulas, which were then
reviewed by oil overseers and submitted to the 661 Committee for
approval.
2. Every oil contract, including the prices, delivery
specifications, and all contract terms, was reviewed by ``oil
overseers''--consultants from the oil industry, hired by the Secretary
General, with the approval of the members of the Security Council. They
advised the 661 Committee of any irregularities.
3. Every member of the 661 Committee had the opportunity to review
any contract. Any oil contract could be vetoed by any member of the 661
Committee.
C. Transparency
In many ways the program was highly transparent. There was a
considerable amount of information easily available to the general
public at all times, and there was even more information available to
the members of the Security Council, which was overseeing the program.
The Distribution Plans, showing every item that the UN permitted Iraq
to contract for, for every phase of the program, were (and for
phases 5-13 continue to be) posted on the OIP web site
The Secretary General provided reports every ninety days on the
program, including detailed information on both oil sales and
import contracts, and on the situation in every sector of the
Iraqi economy and society, including health, agriculture and
nutrition, education, electricity production,
telecommunications, transportation, de-mining. All of these
reports were (and still are) posted on the OIP web site
For every 6-month phase, OIP posted charts showing the status of both
oil contracts and import contracts: for every sector of the
economy, how many contracts had been submitted, how many
approved, how much had been delivered, etc. All of these were
posted for each phase on the OIP web site.
OIP issued weekly updates with details of oil liftings, status of
holds on particular contracts, and other items. All of these
were (and are) posted on the OIP web site.
The OIP web site also listed every Security Council resolution,
Secretary-General report, and every other major report on the
program. These were (and still are) posted on the OIP web site.
The transparency of the Oil for Food Program stands in marked
contrast with the way that the sanctions program had operated in the
first half of the 1990s. From 1990-1995, Iraq was permitted to apply to
the 661 Committee for permission to purchase humanitarian goods
(although it could not sell oil to generate funds). However, the 661
Committee was extremely inconsistent in what items it would permit and
what it would not; refused to generate any guidelines or criteria that
would allow suppliers or the government of Iraq to know what was
permitted and what was not; was often inconsistent, permitting a
contract for certain goods, such as ambulance tires, on one occasion,
and then a few months later denying a contract for similar goods; and
once it denied a contract, it would not provide the government of Iraq
or the supplier with any information as to why the goods were denied.
4. Who was responsible?
For many months now we've heard accusations leveled against ``the
UN'' for allowing Saddam Hussein to garner illicit funds through the
Oil for Food Program. There are some in Congress and elsewhere calling
for Kofi Annan's resignation. Yet the Secretariat had no decision
making role in setting the terms of the Oil for Food Program. The
program itself was a product of a Security Council resolution; all
subsequent modifications to the program were established through
Security Council resolutions; and implementation of the program,
including OIP, was overseen by the 661 Committee, which made the
decisions regarding implementation.
Under Article 41 of the UN Charter, it was the responsibility of
the Security Council, not the Secretariat, to enforce the sanctions
regime. The role of the Secretariat was limited to execution of the
program, as the program had been designed by the Security Council; as
well as providing the Council members with information, and performing
administrative functions. The Security Council and its members,
including the United States, played critical roles in allowing
smuggling and kickbacks to take place.
A. Smuggling
The bulk of Iraq's illicit income, according to the GAO and the
CIA's Iraq Study Group, was from smuggling: $5.7 billion according to
the GAO, and $8 billion according to the ISG.
According to the ISG report, the majority of this trade--$4.4
billion--was with Jordan. A significant amount of illicit trade ($710
million) was with Turkey. According to the ISG report, in 1991 Jordan
informed the Council of its intention to continue trading with Iraq,
and the Council ``took note,'' but took no measures to reprimand or
prevent Jordan from going forward with large-scale, prohibited trade.
Similarly, in the case of Turkey, the Council turned a blind eye to
large-scale illicit trade. This included the US, which had a strategic
alliance with Turkey. All three US administrations over the course of
the sanctions regime sent waivers to Congress, asking that aid be
continued to Jordan and Turkey despite their illicit trade with Iraq.
B. Maritime smuggling
In addition to overland smuggling, there was substantial maritime
smuggling as well. The Multinational Interception Force (MIF) was
charged with interdicting ships engaged in illegal trade with Iraq. The
MIF was created by Security Council Resolution 665, which called upon
member states with naval forces in the area to intervene to enforce the
sanctions.
According to its reports, the MIF was quite active, boarding
hundreds of ships each year,<SUP>6</SUP> and there is no reason to
suggest that it was incompetent or poorly run. However, it makes little
sense to blame the UN for failing to stop Iraq's illicit oil smuggling.
There was no authorization for any UN entity to take actions to
intervene; SCR 665 only invited member states to take these measures.
---------------------------------------------------------------------------
\6\ From 1994 to 2001, there were several hundred boardings per
year; in 2002 and 2003, there were over 3000 boardings per year.
---------------------------------------------------------------------------
The MIF involved some participation, at various points, from twenty
or so different nations. But it was overwhelmingly dominated by US
naval forces. The commanders at every point in the MIF's history were
US naval rear admirals or vice admirals in the US Fifth
Fleet.<SUP>7</SUP> The force itself consisted overwhelmingly of US
ships. In 2000, for example, the US contributed 86 vessels; the UK
seven vessels; Canada contributed one vessel for two months, and the
Netherlands contributed one vessel for one month.<SUP>8</SUP> MIF
commanders periodically reported to the 661 Committee.
---------------------------------------------------------------------------
\7\ The commanders of the MIF were Rear Admiral A.K. Taylor (1991-
1992); Vice Admiral D.J. Katz (1992-1994); Vice Admiral J.S. Redd
(1994-1996); Vice Admiral T.B. Fargo (1996-1998); Vice Admiral C.W.
Moore Jr. (1998-2002); and Vice Admiral T.J. Keating (2002-2003).
\8\ In 2001, the US contributed 90 vessels, the UK contributed
four, and all other participating countries contributed one or two. In
2002, the US contributed 99 vessels, five nations contributed ten or
more, and several other countries contributed less than ten.
---------------------------------------------------------------------------
Kickbacks on import contracts
OIP has been accused of failing to stop illegal kickbacks. However,
OIP had no authority to block improper contracts. It was authorized to
request clarification in the case of irregularities, and provide that
information to the 661 committee. Only the members of the Security
Council had the power to block contracts. Where price irregularities
were clear, the customs officers of the OIP staff did in fact inform
the 661 Committee, giving each member the opportunity to block the
contract, or to ask for further information before approving. On over
70 occasions, this was done. On none of those occasions did any member
of the Council--including the US--seek to delay or block the contract
for pricing irregularities.
D. Oil surcharges
In October 2000, while reviewing Iraq's proposed pricing formulas,
the oil overseers noted that the proposed formulas did not reflect fair
market value. In their contacts with potential oil buyers, they learned
that the Iraqi authorities had started requesting payment of a
surcharge of up to 50 cents per barrel. The oil overseers reported both
of these facts to the 661 Committee. In March 2001, the Secretary
General drew attention to this problem in a public report to the
Security Council.
In response to this information, the US and UK implemented a
``retroactive pricing policy.'' The normal practice in the industry,
and for the Oil for Food Program, was to set the price for the coming
month. Under retroactive pricing, the US and the UK withheld their
approval for the price until the month had passed. This meant that
buyers literally were required to sign contracts for oil purchases
without knowing what the price was until after they were committed. The
US and UK took the position that this allowed the committee to
determine retroactively what the fair market value of the oil had been
the previous month, and charge buyers accordingly. Thus, the argument
went, Iraq was receiving no more nor less than fair market value; that
eliminated the premia that went to middlemen; and consequently
eliminated the possibility that the middlemen would pay Iraq illicit
surcharges.
The new pricing policies did in fact eliminate any margin for
surcharges. But it had another result as well: that oil sales were
substantially compromised. Predictably, few buyers were prepared to
purchase Iraqi oil without knowing the price. It did not help much to
provide assurances that the price they were ultimately charged would be
``fair market value,'' as determined by the 661 Committee. As a result,
the retroactive pricing mechanism created a financial crisis in the OFF
program from 2001-2003. In 2001, oil exports averaged 1.7 million
barrels per day. In 2002, the average was 1.1 million BPD. By September
2002, that number had dropped to 400,000 BPD. The result was a dramatic
shortfall in funding for humanitarian contracts. As of February 2002,
there were nearly 700 fully approved contracts, with a value of $1.6
billion, for which there was no funding; and another $5.3 billion of
contracts on hold, awaiting approval; for a total potential shortfall
of $6.9 billion. One member of the 661 Committee noted that ``exports
are now so low that the program is on the verge of collapsing.''
<SUP>9</SUP> Income remained at this reduced level for the duration of
the program.<SUP>10</SUP>
---------------------------------------------------------------------------
\9\ In June 2001 Iraq stopped producing oil in protest against a US
proposal to modify the sanctions regime, and in April 2002 Iraq again
declared a moratorium, to protest Israel's treatment of Palestinians.
However, the retroactive pricing mechanism was by far the major factor
in the financial crisis of the OFF program from 2001-2003.
\10\ Income from oil exports increased steadily for the first eight
phases, from $2.1 billion in Phase 1 to $9.6 billion in Phase 8, which
ended in December 2000. For Phase 9, the oil exports fell to $5.6
billion; Phase 10, $5.4 billion; Phase 11, $4.6 billion; Phase 12, $5.6
billion; Phase 13, $4.4 billion.
---------------------------------------------------------------------------
E. Iraq's freedom to choose its trade partners
The CIA's report makes much of the ``secret oil voucher'' system,
by which Iraq designated oil purchasers. However, this appears for the
most part to be simply Iraq's record-keeping system for exercising the
rights it had under the terms of the OFF program to select its trading
partners. While it may be said that particular purchasers should not
have been approved, the fundamental decision to allow Iraq to choose
its oil buyers and import contractors--and the political leverage that
accompanied that--was a decision made by the Security Council, with the
participation and agreement of the United States. It may be that the
Council felt that the elaborate system of monitoring and the multi-
tiered approval process would serve as a sufficient mechanism of
oversight. But the decision to allow Iraq to select its trading
partners was not a failure of judgment or oversight on the part of the
Secretariat. It was a decision of the Security Council, with the
agreement of the United States.
5. The Volcker Committee Reports
In its February report, the overall finding of the Volcker
Committee regarding the account discussed (the 2.2% account) was that
it was run carefully and well. The reports generated by the Independent
Inquiry Committee chaired by Paul Volcker have been by far the most
rigorous and careful studies of the accusations against the Oil for
Food Program to date. Of the accusations addressed in the IIC's reports
thus far, some concern the operation of the program; some concern
individual acts which did not have significant effects on the program;
some improprieties served the interests of the Iraqi government, and
some did not.
The most significant issue concerning the program's structure was the
claim that the OFF program should have conducted internal
audits. This issue raised by the Volcker Committee goes to one
of the fundamental problems in the basic structure of the
program: that it was a program created, designed, and enforced
by the Security Council under its powers in Chapter VII, but
administered by the Secretariat. There is no provision in the
UN Charter for the Secretariat to override or modify any
decision by the Security Council, in any form.
Under the terms of the program's mandate, contained primarily in
Security Council Resolution 986 and the Memorandum of
Understanding, only external audits were authorized. According
to the February report of the Volcker Committee, these were
conducted and submitted to the Security Council, as required.
Under standard UN practice, contracts to which the UN is a
party are audited; but the import and export contracts in the
OFF program took place between Iraq and commercial enterprises.
While we may now say that internal audits should have been
conducted, or that the import and export contracts should have
been audited, that was not how the Security Council chose to
design the program, and the Secretariat did not have authority
to override the Security Council on these or any other aspects
of the OFF program.
The other major issues discussed in the Volcker Committee reports
released to date do not indicate that program's basic structure or
operations were fundamentally compromised:
A great deal has been said about the claim that Kofi Annan's son may
have been involved in the decision to award an inspection
contract to Cotecna. But while this issue has gotten enormous
attention from the media, it is not a significant factor in the
operation of the Oil for Food Program. The Cotecna contract
involved a minor part of the program (the 2.2% account).
Further, the accusation is that the contract was improperly
awarded to Cotecna; not that Iraq's humanitarian imports were
compromised by any practices of Cotecna.
The improprieties in contracting identified by the Volcker Committee
in the February report indicate that the program was subject to
a series of manipulations for political purposes, but that
these generally did not in fact serve the interests of the
Iraqi government. The report of February 3 notes that of the
three major contracts under the 2.2% account, only one (the
banking contract) was awarded with the agreement of the Iraqi
government; and that arrangement had the support of the US and
UK. The Saybolt contract was improperly awarded to a Dutch
company, on the grounds that the Netherlands supported the
enforcement of sanctions against Iraq. The inspection contract
to Lloyd's Register was improperly awarded to a British
company, through the influence of the British Mission to the
UN.
The Volcker Committee gives evidence for serious concerns that Benon
Sevan improperly received $160,000 through his involvement with
one company that bought Iraqi oil through the program. If true,
Sevan's actions would clearly be improper and may be illegal as
well. However, it is not clear that Sevan in fact used his
position to serve illicit interests on the part of the Iraqi
government. The Volcker report indicates that the Iraqi
government wanted Sevan to use his influence to persuade the
Security council members to lift holds on oil spare parts and
equipment. The Volcker report notes that the Iraqi government
was disappointed that Sevan did not do so, and cancelled
further oil allocations. In fact, Sevan did argue for lifting
holds on oil spares parts and equipment, on the grounds that
these were necessary for oil extraction. But that was also the
position held by the oil overseers, as well as most members of
the Security Council.
6. Who was responsible?
A. The consensus decision making rule
Prior witnesses at these hearings have suggested that the consensus
requirement of the 661 Committee made it difficult to establish
effective oversight of the Oil for Food program. However, for the most
part the consensus requirement in fact operated in exactly the opposite
way: in the absence of consensus, the default position was denial of
import or oil sales, not approval. In most contexts, the consensus
requirement did not prevent unilateral US action. It was in fact the
structure that enabled the US to impose many policies and decisions
unilaterally.
Import contracts: All contracts (except those eventually included on
the Green List) were circulated to every member of the 661
Committee, and required the approval of every member of the
Committee. Thus, any single member could block any contract,
regardless of whether other members objected.
The United States unilaterally blocked massive quantities of
import contracts, citing security concerns. It was occasionally
joined by the UK, but the overwhelming majority of the holds
(typically 90-95% at any point in time) were imposed by the US
and the US alone.
Oil contracts: the US, joined by the UK, used the consensus rule to
delay approval of oil pricing, and did so over the objections
of others in the Council until October 2001, when the 661
Committee finally agreed to retroactive oil pricing.
The negotiation of ``rollover'' resolutions (the Security Council
resolutions extending the program for an additional six months)
were occasions for dispute. On one hand, there was considerable
controversy over US holds on humanitarian goods; on the other
hand, the US and UK would raise the issue of smuggling, and
seek to include stronger measures against smuggling in the
rollover resolution. On these occasions, France and Russia
opposed such measures, arguably because of their own interests.
However, it appears that the US also had little credibility on
this issue with the committee, since the US did not want to
enforce such measures against its allies, Jordan and Turkey,
but only against other nations.
B. What was the US role?
The history of the program does not support the claim that the US
was concerned about illicit funds entering Iraq, or would have done
more if it had not been stymied by other members of the council. By all
accounts, and based upon the US policies and decisions, the US was
singularly preoccupied with military concerns, in particular WMD.
The US blocked billions of dollars of import contracts--$150 million
as of November 1998, then growing to $5 billion as of July
2002. All of these were blocked on the grounds that they
contained items that could have military applications, or else
contributed to Iraq's infrastructure, thereby creating the
possibility of rebuilding its military capacity.
There was nothing in the 661 Committee's procedures that
prevented the US from blocking questionable contracts, for
either imports or oil sales. To the contrary, the consensus
rule was the mechanism that allowed the US to impose far
greater restrictions on import and oil sales than other members
of the Security Council supported.
The US declined to block any of the import contracts presented, on
the more than seventy occasions on which the US and the other
member states were explicitly informed by UN staff of pricing
irregularities suggesting possible kickbacks.
US officials did on occasion report rumors of kickbacks and ask for
investigations. However, when asked to provide specifics that
could be investigated, US officials failed to provide any
information on which to base an investigation.
All three US administrations explicitly permitted large-scale illicit
overland trade between Iraq and Jordan, and between Iraq and
Turkey, throughout the history of the sanctions regime.
To the extent that there was maritime smuggling, this occurred not
through failures on the part of the UN, but rather on the watch
of the US Fifth Fleet. The MIF fleet was overwhelmingly made up
of vessels from the US Fifth Fleet, and was at all times
commanded by US naval officers.
The US approved the hire of every oil overseer hired by the
Secretariat
When the oil overseers--UN staff--informed the 661 Committee of
pricing irregularities in oil sales, the US and UK implemented
a harsh policy of retroactive pricing. Far from being stymied
by other members on the Council, this practice began despite
the objections of others on the Council.
The US voted for Security Council Resolution 986 and agreed to the
Memorandum of Understanding, which gave the government of Iraq
the right to select its trading partners. This was crucial in
permitting Iraq to use the OFF program to generate political
support.
The US voted for Security Council Resolution 986, which only required
the OFF program to be subject to external audits, not internal
audits.
C. The State Department's defense of US support for Iraq's illicit
trade with Jordan and Turkey
In the congressional hearings that have taken place over the last
several months, it has become known publicly what research specialists
have known for the entire Iraqi sanctions episode--that all three US
administrations turned a blind eye to this smuggling, and in fact took
efforts to prevent the imposition of penalties under US
law.<SUP>11</SUP> Despite more than a year of harsh attacks on the
United Nations--particularly the Secretariat--for claimed mismanagement
of the Oil for Food Program, the fact is that the bulk of the illicit
funds that the Iraqi regime acquired in fact had nothing to do with the
Oil for Food Program.
---------------------------------------------------------------------------
\11\ As Mr. Schweich explained in his testimony, since 1991, under
federal law there have been restrictions on US assistance to countries
not in compliance with Security Council sanctions against Iraq.
However, all three administrations filed waivers with Congress
throughout the history of the sanctions regime, finding that it was in
the national interest to provide aid despite these violations.
---------------------------------------------------------------------------
It is clearly a matter of some embarrassment to the State
Department that the United States itself knew, approved of, and took
efforts to protect the ongoing smuggling which generated the majority
of these funds, specifically in regard to Turkey and Jordan. The
current response of the State Department is that this smuggling was
legitimate and transparent, unlike that smuggling, done by Syria, or
other corrupt practices such as kickbacks and bribery. Such a claim
seems quite absurd in light of the actual history of US policy choices.
In light of the research conducted by Dr. Paul Conlon, who testified
before Congress last month, it is not correct to portray Jordan
as being honest and above-board, when there was evidence from
nearly the beginning that Jordan misrepresented its activities
to the Committee on an ongoing basis. Indeed, it was Dr. Conlon
himself who wrote the report informing the 661 Committee of
this.<SUP>12</SUP>
---------------------------------------------------------------------------
\12\ ``Data on Iraqi Trade/Rev.3,'' memorandum dated 1 December
1993 from Paul Conlon to James C. Ngobi
---------------------------------------------------------------------------
In the case of Turkey, it was precisely the fault of the United
States that Turkey's ongoing illicit trade was not granted any
legitimacy. Whereas other countries on the 661 Committee
repeatedly asked that Turkey's appeal for relief under Article
50 be considered, and Turkey placed this on the Committee's
agenda over a dozen times, it was the United States
(occasionally joined by the UK) that blocked the Committee from
considering Turkey's request.
The State Department's current position
In his testimony on April 12 before the House Committee on
Government Reform, Thomas Schweich of the State Department maintained
that the large-scale ongoing illegal trade that Iraq maintained with
Jordan and Turkey was ``in no way comparable to the kind of corruption,
bribery, or kick backs'' that have been investigated by congressional
committees.<SUP>13</SUP>
---------------------------------------------------------------------------
\13\ All quotes from Mr. Schweich are from the Federal News Service
transcript of his testimony (unpaginated).
---------------------------------------------------------------------------
According to Mr. Schweich, the 661 Committee's decision to turn a
blind eye to Jordan's smuggling was ``not a back room deal.'' Rather,
he said, in 1991 Jordan sought relief under Article 50 of the UN
Charter, and the Committee never acted. Consequently, Jordan informed
the Committee that a loss of trade with Iraq would cause considerable
damage to its economy, and simply notified the Committee that it
intended to continue importing oil from Iraq. The Committee ``took
note'' of this without objection, and asked Jordan to report on its
trade. Thus, according to Mr. Schweich, ``it wasn't really secretive.''
Similarly, according to Mr. Schweich, in 1996 Turkey requested Article
50 relief, also because of the consequences of sanctions on the
economy. He stated:
The Jordanian and Turkish protocols were done to alleviate
economic hardship, it was an exception to the sanctions regime
because of the severe consequences that a failing Jordanian and
Turkish economy might have on the world, it was done
transparently, openly with the knowledge of the entire 661
Committee and the international community and for a valid
purpose.
And to allow countries and individuals to equate that with
the type of corruption that went on could seriously undermine
our efforts to reform the UN that are going on now.
Other countries, such as Syria, did not receive similar relief,
according to Mr. Schweich; Turkey and Jordan, by contrast, ``came hat
in hand, asked for Article 50 relief, and really did it by the book.
Syria just engaged in massive fraud . . .''
Contrary to the State Department's claims, the open smuggling was
never considered legal. There was clear favoritism based upon US
strategic alliances, not altruism or international law; and the US in
fact blocked attempts to grant proper, transparent, legal relief under
Article 50.
Jordan
In his 1996 article ``How Legal Are Jordan's Oil Imports from
Iraq?''' <SUP>14</SUP>, Dr. Paul Conlon wrote about this issue in great
detail. He noted that:
---------------------------------------------------------------------------
\14\ Florida State University Journal of Transnational Law &
Policy, vol. 6 (Fall 1996).
When India made a similar request, citing the Security Council's
approval of Jordanian trade, it was rejected. In a formal
opinion ``of considerable precision and clarity'' from the
office of the UN's Legal Counsel, ``the Committee concluded
that an exemption would be illegal.'' <SUP>15</SUP>
---------------------------------------------------------------------------
\15\ Ibid., p. 112.
---------------------------------------------------------------------------
Although Jordan provided annual reports to the 661 Committee
concerning its Iraq trade, by 1993 it was apparent that these
reports were not truthful. Jordan's official reports to the UN
data base on world trade reported much higher
amounts.<SUP>16</SUP> An internal report regarding these
discrepancies was circulated to multiple members of the 661
Committee, but the committee declined to discuss
it.<SUP>17</SUP>
---------------------------------------------------------------------------
\16\ Ibid., p. 115.
\17\ Ibid., p. 116.
---------------------------------------------------------------------------
Research conducted in 1994 indicated that ``considerable manipulation
was involved'' in Jordan's reports to the 661 Committee:
Jordan's actual oil imports from Iraq--according to Jordan's
own reports to other UN bodies--were 81% greater (in dollar
value) than the amount it reported to the 661
Committee.<SUP>18</SUP>
---------------------------------------------------------------------------
\18\ Ibid., p. 117.
---------------------------------------------------------------------------
There in fact was no transparency on this issue. Some countries
believed that the committee had actually granted Article 50
relief.<SUP>19</SUP> While the illicit trade was widely known,
``[o]riginally, the pseudo-agreement's existence was held to be
a secret. It was never mentioned in any published UN
document.'' <SUP>20</SUP>
---------------------------------------------------------------------------
\19\ Ibid., p. 118.
\20\ Ibid., p. 115.
---------------------------------------------------------------------------
The practice of ``taking note'' of Jordan's practices, which occurred
each year, had no basis in any relevant legal authority, either
Article 50 or paragraph 23 of Resolution 687.<SUP>21</SUP>
---------------------------------------------------------------------------
\21\ Ibid., p. 114.
---------------------------------------------------------------------------
This arrangement continued well past any legitimate concerns with
Jordan's inability to obtain substitute oil supplies. Far from
seeking alternate sources of oil, Jordan actually increased its
dependence on Iraqi oil during the sanctions
regime.<SUP>22</SUP>
---------------------------------------------------------------------------
\22\ Ibid., p. 116.
---------------------------------------------------------------------------
In the case of Jordan, there was no transparency. An open secret of
improper activities is not ``transparency.'' Nor could the 661
Committee view this as legal, in light of the legal opinion stating
strongly that it was not.
Turkey
In a letter dated August 5, 1996, Turkey submitted a formal request
to the 661 Committee for relief, citing the economic hardship due to
trade disruption with Iraq resulting from the sanctions. Turkey sought
permission to resume oil imports, and to in turn provide Iraq with
goods for the civilian population. Far from supporting Turkey's appeal
for Article 50 relief, the US delegate on the 661 Committee said in an
August 1996 meeting (meeting no. 142) that Turkey's request would
compromise the integrity of the sanctions regime, and that the matter
should be postponed to a later time. The issue was raised again, and
again, and again--in meeting 143 (August 28, 1996); meeting 144
(October 14, 1996); meeting 145 (December 3, 1996); meeting 146
(December 18, 1996); meeting 148 (January 28, 1997); meeting 150
(February 21, 1997); meeting 151 (March 17, 1997); meeting 152 (March
24, 1997); meeting 155 (May 14, 1997); meeting 157 (June 11, 1997);
meeting 159 (July 17, 1997); meeting 160 (August 27, 1997); meeting 166
(January 4, 1998); meeting 171 (May 12, 1998); meeting 172 (June
18,1998); and meeting 176 (December 1, 1998).
As the issue dragged on for years, the US position remained
unchanged. Again and again, the US delegate reiterated the same
position: that the view of the United States had not changed, thus
blocking any possibility of considering Turkey's appeal for relief in a
public, legal, and transparent form.
It was the US who maintained that the Committee did not have
authority to grant a sanctions exemption to Turkey--over the opposition
of others on the 661 Committee. In one instance, the US objected to a
French proposal that the Secretariat provide a report on the effects of
the sanctions on neighboring states.<SUP>23</SUP> The delegates from
China and Bahrain spoke in support of the proposal. However, the US
(joined by the UK) refused to agree, thus preventing consensus
(effectively vetoing) even a request to the Secretariat to provide
information on the impact of sanctions on Turkey and other nations.
---------------------------------------------------------------------------
\23\ Meeting 171, May 12, 1998.
---------------------------------------------------------------------------
Conclusion
In the cases of Jordan and Turkey, the State Department currently
maintains that the US did not approve of or participate in any
impropriety, on the grounds that these arrangements were transparent
and honest. They were not.
7. Conclusions
The bulk of the illicit funds that arrived in Iraq over the course of
the sanctions regime had no relation to the Oil for Food
Program. They occurred through large-scale ongoing smuggling,
which began well before the OFF program, and had no relation to
the program at all.
Contrary to common views, the Oil for Food Program did not ``give
Saddam Hussein a free hand'' to use oil proceeds as he wished,
without oversight or monitoring. Rather, the OFF program had
multiple levels of oversight for both import contracts and oil
sales, involving scrutiny by UN staff and by every member of
the Security Council, of nearly every aspect of every
transaction. To the extent that there were kickbacks or other
improprieties in the program, these occurred not for lack of
oversight; but rather occurred despite an elaborate system of
oversight.
Contrary to common views, the Oil for Food Program was not
characterized by an absence of transparency. In many regards
the program was highly transparent, not only to the members of
the Security Council--which authorized and supervised the
program--but to the general public as well.
Contrary to common views, the UN Secretariat was not responsible for
what are seen as the major failures of the program: the ability
of Iraq to choose its trade partners; the kickbacks on import
contracts; the surcharges on oil contracts; the large-scale
smuggling. The design of the program, and the enforcement of
the sanctions, was in the hands of the Security Council and its
members, not the Secretariat.
Contrary to common views, the US did not show significant concern
regarding smuggling and kickbacks. Rather, the US was
preoccupied with blocking military goods from entering Iraq.
The US generally showed a lack of interest in stopping illegal
funds from entering Iraq, and this was particularly true where
US strategic allies were involved in illicit trade with Iraq.
It is not plausible to attribute the poor humanitarian situation in
Iraq to the failures of oversight of the Oil for Food program.
These kickbacks and oil surcharges are estimated to be at most
$4.4 billion, over the seven-year course of the program. What
was far more damaging to Iraq's economy and society were the
limitations that compromised oil sales (including retroactive
oil pricing) and large-scale holds on equipment and goods
necessary for infrastructure and for the operation of an
industrialized society--electricity production, water and
sewage treatment, telecommunications, transportation,
construction, industrial production, agriculture. These were
imposed almost entirely by the United States. US holds on
critical humanitarian and infrastructure supplies at just one
point in time--July 2002--totaled some $5 billion. In the end,
the total goods that actually arrived in Iraq from the
program's inception through May 2003 came to only $4.6 billion
per year, or about $191 per person per year. The extreme
impoverishment of the Iraqi population would not have been
significantly affected if that amount were increased to $200
per person per year, which is approximately the difference that
$4.4 billion would have made.
We may be shocked that as much as $4.4 billion in illicit funds
slipped through the oversight structures of the Oil for Food
Program. But the reality is that in the face of such severe,
longstanding, and widespread impoverishment, the actual impact
of the kickbacks and surcharges that have been denounced by
many as a scandal of historic proportions was in fact
negligible in comparison to the economic sanctions themselves,
and the additional strictures imposed by the US and the UK.
Mr. Whitfield. Dr. Gordon, thank you very much. And I
appreciate the testimony of all of you. I might say that Gerald
Anderson will be testifying on the next panel, and I do know
that in his testimony he is going to say that the U.S. and
Britain made 40 attempts in formal and informal meetings with
the 661 Committee to address the oil surcharge problem.
Now, Mr. Smego, you testified that you reviewed more than
23,000 pages of documents or DVDs equivalent of 23,000 pages.
Is that correct?
Mr. Smego. That is correct, sir.
Mr. Whitfield. And these are documents from the Iraqi
Intelligence Service or the state oil ministry?
Mr. Smego. The 23,000 pages were actually from a larger
amount of 60,000 pages from the Iraqi State Oil Marketing
Organization, otherwise known as SOMO.
Mr. Whitfield. And did you translate Iraqi Intelligence
Service memos?
Mr. Smego. Yes. I also did translate nine documents from
Iraqi Intelligence Service.
Mr. Whitfield. And, now, you were with the Iraqi survey
group for a period of time. When was that?
Mr. Smego. That is correct. I was there from April 2004 to
January 2005.
Mr. Whitfield. Now, it appears that in some point in 2000,
Saddam Hussein began demanding a surcharge on Iraqi oil
contracts. During the course of your work, did you uncover any
documents pertaining to those oil surcharges?
Mr. Smego. Absolutely, sir.
Mr. Whitfield. And which exhibit is that?
Mr. Smego. Exhibit 1.
Mr. Whitfield. And what does that say?
Mr. Smego. Exhibit 1 is a handwritten document in English
regarding contracts under the eighth phase of the Oil-for-Food
program stating that the buyer--it is between the seller and
the buyer--for the purchase of however many barrels of crude
oil, and that a payment of so much dollars per barrel would be
charged as a surcharge.
Mr. Whitfield. And paid either directly in cash or to a
SOMO bank account?
Mr. Smego. That is correct.
Mr. Whitfield. And who signed that document?
Mr. Smego. At the first page, at the top left of the
document it is signed by Amer Mohammed Rasheed, who was the
minister of oil at that time.
Mr. Whitfield. Okay. Now, during the course of your work
for the committee, did you examine any documents that purport
to show that Saddam Hussein and members of his regime used, or
at least attempted to use oil allocations under the program to
influence individuals and entities?
Mr. Smego. Absolutely. Certain documents within the Iraqi
Intelligence Service, for example, document 3--excuse me,
Exhibit 3 in 1998 states that Iraq was planning to take a
portion of its oil during the phase and distribute it to
friendly companies and distinguished personalities.
Approximately 80 million barrels ``to the friendly nations,
companies, and political establishments,'' at the rates
specified.
Mr. Whitfield. Okay. And that was Exhibit 2 or 3?
Mr. Smego. That was Exhibit 2. I stand corrected.
Mr. Whitfield. And Exhibit 2, does it also mention Russia,
France, and China?
Mr. Smego. Yes. At the rates of Russia receiving 40
percent, France 15 percent, and China 11 percent of the
approximately 80 million barrels.
Mr. Whitfield. And then on Exhibit 3, does it specifically
mention those countries as being a part of the permanent
membership of the Security Council?
Mr. Smego. Absolutely. Exhibit 3 is a disclosure of the oil
allocations after the sixth phase. It is subtitled Special
Orders.
Mr. Whitfield. Now, they refer I believe in that exhibit
also to standard oil--standard orders and specific orders or
special orders. What's the difference in those two?
Mr. Smego. Underneath special orders, the committee can see
that certain entities and individuals are listed. They are
nonstandard--they are not oil companies themselves. So one
could certainly draw the conclusion that the standard orders
were for the oil companies, whereas the special orders were for
those entities that were not standard purchasers.
Mr. Whitfield. Now, is my understanding correct that, under
a special order, you can literally walk away from the
contractual obligation?
Mr. Smego. I would not be qualified to answer that.
Mr. Whitfield. Okay. Now, I want to ask you a few questions
about this Iraqi Intelligence Service documents. You mentioned
that you translated I think nine of those; is that correct?
Mr. Smego. Yes. Nine documents, sir.
Mr. Whitfield. Does it appear from those documents that
Saddam Hussein attempted to implement a strategy of improving
relations with the French government?
Mr. Smego. Certainly. By January 2002, under Exhibit 4, a
memorandum from the Office of the Secretary of the President
Abed Hamid al-Hattab, stated, and I quote: ``the present
leader, God bless him, ordered the improvement of dealing with
France.''
Mr. Whitfield. And did the IAS subsequently take steps to
carry out that directive from Saddam Hussein?
Mr. Smego. Yes, sir. The Exhibit 5 states, with the subject
of Iraqi-French relations, to prepare an Iraqi delegation to
France in exchange for an invitation of French delegations to
Iraq. And that specifically, under point number 5, economic
privilege such as oil and trade was to be given to French
political and economic individuals close to the center of
political decisionmaking.
Mr. Whitfield. Okay.
Mr. Smego. There was also allegations of support--or at
least, I should say, number 7 specifies the study, the
possibility to support one of the candidates in the French
Presidential elections.
Mr. Whitfield. Okay. Now, let me ask you. On exhibit 11--or
I want to call your attention to that a minute. This document
purports to show that the regime, the Saddam Hussein's regime
subsequently refined their strategy on influencing French
companies or delegations, et cetera. Could you discuss for us
what that says?
Mr. Smego. Absolutely, sir. By April 2002, point 2 approves
the granting of contracts to the French companies which are the
most important and influential in the French field. However,
point 3 of the document refines it in saying that: Regarding
the subject of doing business with the small French companies,
it is understood that the small companies are not beneficial to
the country. Meaning Iraq.
Mr. Whitfield. So they focused on large French companies?
Mr. Smego. Absolutely. The small companies apparently did
not pan out for them.
Mr. Whitfield. Now, did you find any documents during your
work for the committee that identified specific individuals
that the regime sought to target?
Mr. Smego. Yes, sir. Examples 6 and 7 are the best--
Exhibits 6 and 7 are the best examples of such.
Mr. Whitfield. Now, Exhibit 6, what does it say in Exhibit
6?
Mr. Smego. The subject of the memorandum, it's dated in
February 2002 from the assistant director of the Iraqi
Intelligence Service to the director regarding Iraqi-French
relations. They named 12 French individuals of influence, among
them the former French president Valery Giscard d'Estaing,
Charles Pasqua, Jean-Pierre Chevenement. Please forgive my
pronunciation of French names. Jacques DeLors. And other
individuals.
Mr. Whitfield. Now, did you find any documents showing that
any payments were made, for example, to Charles Pasqua?
Mr. Smego. The documents that I have presented here today,
I do not have anything that directly denotes a payment to Mr.
Pasqua. However, there were several documents regarding--or
that at least mentioned Mr. Pasqua in them. Among them, the
first would be Exhibit 13.
Mr. Whitfield. And according to the Duelfer Report, Mr.
Pasqua received allocations for 11 million barrels of oil, of
which 10.75 was actually lifted. But would you walk us through
Exhibit 13?
Mr. Smego. Certainly. Exhibit 13, the first bullet under
which states that: First of all, the subject is the French
individual or dignitary, Charles Pasqua, that Saddam Hussein
personally approved designating 3 million barrels of oil to
Charles Pasqua. And that the Frenchman Bernard Guyet, who
represented Charles Pasqua also visited and requested the
contract be under Genmar Company. It was a Swiss company.
However, when the Iraqi side made it clear that it was
necessary to choose a French company, apparently Mr. Bernard
Guyet stated that it was not possible for political reasons.
Mr. Whitfield. And was there any additional information on
that page?
Mr. Smego. Absolutely. When the Iraqi State Oil Marketing
Organization requested from Mr. Guyet a letter of authorization
from Mr. Charles Pasqua to Genmar for Genmar to lift the crude
oil, Mr. Guyet refused and clarified that they could not
provide that because of a fear of political scandal.
Mr. Whitfield. Okay.
Mr. Smego. Subsequently, a few days later, Exhibit 14, a
letter from the office of the deputy prime minister reminds the
SOMO executive director that Mr. Bernard Guyet is the
diplomatic and political adviser for Mr. Pasqua, and he
represents him to receive the oil allocation.
Mr. Whitfield. Okay. Now, are you familiar with a company
called Ibex Energy?
Mr. Smego. Yes, sir, I am.
Mr. Whitfield. During the course of your work, did you find
any documents relating to Ibex?
Mr. Smego. Yes, sir, I did.
Mr. Whitfield. Is Ibex a French company?
Mr. Smego. I would not be qualified to answer that.
Mr. Whitfield. Okay.
Mr. Smego. Exhibit 37, if you would, please. Now, the Iraqi
document does specify that Ibex Energy is a French company, but
I have not validated such.
Mr. Whitfield. Okay.
Mr. Smego. Exhibit 37 is a letter from the Iraqi vice
president Taha Yassin Ramadan, who addressed the letter to the
minister of oil approving the supply of Ibex with a quantity of
1.8 million--or, excuse me, 1.8 million barrels of oil to be
included in phase 5 specifically ``as the beginning of doing
business with this company as well as to know the potential of
advantage from their activities in other fields.''
Mr. Whitfield. And then I notice on Exhibit 38 a payment of
$19,700 was made to a Portuguese citizen named Armando Carlos
for services rendered. Is that correct?
Mr. Smego. Yes, that is correct, it did appear on Exhibit
38.
Mr. Whitfield. And who is Mr. Carlos?
Mr. Smego. Mr. Carlos is apparently an oil inspector as
reviewed in Exhibit 39.
Mr. Whitfield. And what does Exhibit 39 point out?
Mr. Smego. Exhibit 39 is a letter from the minister of oil
in April 2002 to the deputy prime minister stating that two
additional quantities of oil had been loaded from the Min al
Bakar terminal with the coordination of the oil inspector, the
agreement with the oil inspector for his share of 2 percent of
the profit of the additional quantity in exchange for his
services. And point 3 specifically names that Armando Carlos
has been paid $105,819 for both aforementioned shipments.
Mr. Whitfield. Okay. I see my time has expired. So at this
point, I would recognize Mr. Stupak for 10 minutes of
questioning.
Mr. Stupak. Mr. Smego, in your testimony you were requested
to look for documents that referred to particular topics. Is
that correct?
Mr. Smego. That is correct, sir.
Mr. Stupak. What were those topics?
Mr. Smego. The majority counsel specified that we would be
searching the oil documents for transactions that would be from
entities or regarding individuals or entities from the United
Nations permanent Security Council member nations that did not
appear to have an established history in the oil trading
industry.
Mr. Stupak. So if an oil company would be an established
entity that had traded in the oil world market, you wouldn't
look at those?
Mr. Smego. We generally went over the companies that did
not have a specific influence or any signs of outside influence
or use of oil for influence.
Mr. Stupak. Well, did you look for things like Coastal Oil?
Did you look for that entity.
Mr. Smego. Coastal Oil did appear. Coastal Oil documents
were very lightly referenced in those pages.
Mr. Stupak. But they were referenced.
Mr. Smego. But we do not have anything that was presented
here today.
Mr. Stupak. Why not?
Mr. Smego. It was not the discretion--or, excuse me; it was
at the discretion of the majority counsel.
Mr. Stupak. What about Bay Oil?
Mr. Smego. Again, that would be at the discretion of the
majority counsel.
Mr. Stupak. Did you see Bay Oil in there, though?
Mr. Smego. I do not recall any specific documents.
Mr. Whitfield. Mr. Stupak, I might just mention, in the
binder there are some letters from Oscar Wyatt of Coastal that
was translated by Mr. Smego. I just would point that out to
you. It is Exhibits 40 and 41.
Mr. Stupak. So the documents you looked at, you were really
directed by the majority counsel to look at these documents and
you didn't go much further than that?
Mr. Smego. There were 21 DVDs containing 60,000 pages. We
certainly had our hands full with the amount of pages, and to
quickly triage or at least have gone through 23,000, we hit
what we could.
Mr. Stupak. Okay. I guess what I am trying to focus on, how
did you focus your investigation; on what majority counsel told
you, or were you trying to get at companies that dealt with
Iraqi Oil-for-Food program that looked questionable?
Mr. Smego. I brought documents to the attention of the
majority counsel. It was upon his approval that documents would
be translated and presented.
Mr. Stupak. Okay. Besides looking at these documents as far
as them being accurate, would you have any personal knowledge
of them being accurate?
Mr. Smego. Would you be saying authentic, or the
translation?
Mr. Stupak. Authentic. I am sure your translation is
correct. The authenticity.
Mr. Smego. I am not sure if I would be qualified to provide
an answer, based that I have not inspected the original
document itself.
Mr. Stupak. Okay. Do you know whether the statements
contained in these documents like Exhibit 4 and 5 and 11 and 6
and 7, do you know if they are true?
Mr. Smego. I can simply state that the documents were
written by, or at least from the perspective of the Iraqi side,
whether the author of the Iraqi document put fact in there I am
not aware. I cannot confirm the facts. I can simply tell you
what the document states.
Mr. Stupak. Should we assume, then, that only the people
who wrote them and those who received them can really testify
as to their truthfulness or accuracy?
Mr. Smego. Well, I can simply tell you what the language
states. Whether to be confirmed or not, no in-depth analysis
was performed.
Mr. Stupak. Okay. When you look at so many of these
documents, some of these dates just seem to be off base. One
date, and then it is a year later you see another date. Like,
take document 2 and 3, the ones you pointed out here. Take a
look at No. 2. The date on that document, if I am reading this
right, is November 22, 1998. And then you look at document No.3
which you reference as part of it, and that is a year later.
Mr. Smego. Yes, those dates are accurate.
Mr. Stupak. So how do you tie these two into each other is,
I guess, what I am trying to figure out. On Document 2 you say
Russia gets 40 percent, France 50, and China 11. And then you
go to document No.3 here and it is a whole year later.
Mr. Smego. That is correct, sir. In November 1998 the
decision was made to withhold a portion of the oil during that
phase and split it as we have--the document states. Exhibit 3
shows that a year later, that the Iraqi State Oil Marketing
Organization had put together a spreadsheet outlining No. 1, 2
and 3, being Russia, China and France, under the subheading of
``countries of permanent membership.''
Mr. Stupak. Okay. In this whole deal here, when you talk
about individual profits, these individuals again, this, for
Mr. Pasqua and all that, whether they received that money you
have no idea; right?
Mr. Smego. I do not have access, or I was not presented
with any documents regarding that. I can simply have the
documents from the State Oil Marketing Organization.
Mr. Stupak. Okay.
Dr. Gordon, if I can ask you this question. In your
testimony you seem to put all the blame on the problems with
the Oil-for-Food program on the Security Council and 661
sanctions committee. I call it the sanctions committee. Do you
believe that the U.N. staff and the Office of Iraqi Programs
were aggressive enough in identifying the problems and bringing
them to the sanctions committee attention?
Ms. Gordon. Yes. From everything I have seen I think that
is quite true. If you look at what is called the customs
officer within the OIP, they absolutely did find several dozen
instances of clear price irregularities and all of those
occasions brought them directly to the 661 committee. In the
case of the oil overseers it was the same. They noted very
quickly when the oil prices were not consistent with fair
market value, immediately brought these to the attention of the
661 committee. That is correct.
Mr. Stupak. Mr. Fawcett, do you agree with that?
Mr. Fawcett. No, I don't. I think out of the 20,000
contracts for the U.N. officials, to find 70 that were a
problem, I think they could have done that by the end of
breakfast. The fact that these were----
Mr. Stupak. What would make a contract out of order, then,
other than price?
Mr. Fawcett. I think price, the fact that there was no
competitive bidding, should have shown to anyone looking at
this--to see a company from a country that is closely allied
with Iraq would immediately raise the attention of an inspector
or of a customs official. Also, the great majority of the goods
going in were commodities. They were not difficult to price. It
was not difficult to work out what was the standard world price
for a commodity; therefore, what should the price actually be.
Mr. Stupak. You said one of the things you look at is
countries closely aligned with Iraq. But 75 percent of that oil
ended up back here in the United States, and the United States
really isn't closely aligned with Iraq.
Mr. Fawcett. Correct. But we are talking about the
contractor, the first contractor. The game with the oil
purchases was to allow someone else to pay the kickbacks, not
the major oil companies of the world, not the refiners.
Clearly, the end user would know there is a problem, but they
would not be the one paying the kickback themselves.
Mr. Stupak. And everyone knew there were kickbacks going
on.
Mr. Fawcett. Absolute, without a doubt.
Ms. Gordon. Mr. Stupak, I wonder if I might address this
notion that only 70 of the 20,000.
Mr. Stupak. Sure.
Ms. Gordon. I understand Mr. Fawcett to be suggesting that
they weren't working that hard to come up with that 70. I think
what is important to understand is that the Iraqi Government
was not stupid. If they had had extreme price irregularities
and frequency, that would have been noted. What they did do was
pad the contracts, for the most part, in fairly small amounts,
5 to 10 percent, where the result of padding was often in
contracts that were made to order, that were built to
specifications, for which there were not in fact standard oil
prices.
I think what we see is not a failure to discern extreme
pricing irregularity, but in fact consistence in finding those.
And no one is seeing the irregularities when they were
marginal, 5 to 10 percent.
I would also point out that by the history of what we have
seen so far, there is no reason to think that the Security
Council would have responded any differently if in fact OIP had
presented more contracts with price irregularities.
Mr. Stupak. Mr. Fawcett, let me ask you this. In your
longer report, you stated that although the major oil companies
stopped buying Iraqi crude from middlemen after Saddam imposed
a surcharge, BP and Exxon began to buy again after just a
couple of months and claimed they did not deal with companies
that did pay surcharges. Do you think their claims should be
investigated? And wasn't the surcharge just passed on to the
end user, basically the American people?
Mr. Fawcett. From all appearances, that is correct.
Mr. Stupak. Do you think it should be investigated?
Mr. Fawcett. I think someone should investigate, whether
it's this committee or not. And if you do, I am glad to help.
Mr. Stupak. Thank you. It looks like my time's expired Mr.
Chairman.
Mr. Whitfield. Thank you Mr. Stupak.
At this time I will recognize the chairman of the
committee, Mr. Barton, for 10 minutes.
Chairman Barton. Thank you, Mr. Chairman. I have got some
general questions. Then I am going to have some specific
questions about the documents that are before the subcommittee
this afternoon.
My first general question is to Mr. Fawcett. Do you have
any estimation of how many billions of dollars were skimmed
from the Oil-for-Food program?
Mr. Fawcett. I think the estimates have continually risen.
In 2002 we estimated it was about 2.1 or 2.2 billion. However,
we have not looked at the humanitarian supply side. So clearly
it is higher. I think the latest is up to 4, 4.5. And whether
that is the end or not, I doubt it. The one thing I've seen
about this program is it's always worse than you think.
Chairman Barton. Well, let me ask you a question.
Regardless of how many billions were taken off the top, how
much of that money, say we got a--if it could be proven that
one of these officials got a personal voucher--and the one that
is referenced in one of the documents is this Mr. Pasqua--be
allocated 3 million barrels, well at $15 a barrel, that is $45
million. At $20 a barrel that's $60 million. If we could locate
those funds, could they be recovered and remitted to the
current Iraqi Government?
Mr. Fawcett. Well, the vast majority of that money actually
went to the U.N. Account. We are only looking, on the kickback
you're looking at maybe 50 cents a barrel, maybe less. So the
type of money there would be $1 million, $1.5 million.
However----
Chairman Barton. So the fact that he got the voucher, he
didn't get the total proceeds.
Mr. Fawcett. No, not at all.
Chairman Barton. Even if we could prove it, nobody alleges
that he got the full value of those 3 million times whatever.
Mr. Fawcett. Not at all.
Chairman Barton. He got some sort of a commission.
Mr. Fawcett. That's correct. However, to address your point
of the bigger picture of recouping Iraqi assets, let's not
forget that over history and over time, over the last three
decades, Saddam has ripped off tens of billions of dollars,
long beyond the Oil-for-Food. The highest estimate we have
heard is $140 billion. The Oil-for-Food program is really only
the latest, and that is what makes it important because it
provides a window into Saddam's manipulation over the last 30
years. And the most recent information that we have, and this
is why I think these investigations are very important, is they
might lead us toward the money that he stole over time.
Chairman Barton. Well that's my point. You made it better
than I could through questioning. That at some point in time,
all the investigations by all the various committees, various
international bodies, not just the U.S. Congress, hopefully
will result in an identification of recoverable assets.
Mr. Fawcett. Absolutely. And that's--again, the Oil-for-
Food is important because it is more recent. The old rip-offs
have now been turned into investments, into real estate, into
stocks, into bonds, into things that wealthy individuals invest
in, much more difficult to find. But if we see in the Oil-for-
Food, we find the same mechanisms, the same people involved
that helped Saddam launder his money back in the seventies and
eighties, so instead of separating this out and saying, well,
he only ripped off this amount in the Oil-for-Food and he
smuggled this amount, actually the stories should be merged in
order to do the best for finding the ripped-off assets and
returning them to the Iraqi people.
Chairman Barton. Well, step one is to identify the theft.
Step two is to recover the goods if we can identify where the
stolen goods were. And unfortunately, and it is frustrating and
I think members on both sides of the aisle share the
frustration. We are still in step one. I'd rather be in step
three, going after the goods and trying to get them back to the
Iraqi people.
I want to ask Mr. Smego a question. The documents that you
reviewed for this committee and that you have translated, is
there any reputable authority that disputes your translation?
Mr. Smego. I would encourage that if there is any doubt
about a personal--or a certain section of the translation, by
all means you can certainly seek a second opinion.
Chairman Barton. No. I am just saying since you have done
the translations and they have been available, at least for
review by staffs and I would assume others in official
capacities, is there anybody out there that says you
mistranslated them? Or can we stipulate that your translation
is the correct translation?
Mr. Smego. There is no indication to me, no one has
approached me to say that these translations aren't correct.
Chairman Barton. As far as this subcommittee is concerned,
your translation can be considered to be a correct translation.
Mr. Smego. That's correct. If another linguist were to
translate the context or the substance, the message would not
change.
Chairman Barton. I know, Dr. Gordon, you are not a
translation expert, but do you have any reason to doubt the
veracity of the translations?
Ms. Gordon. No, sir. I don't speak Arabic.
Chairman Barton. Okay. Well, I just wanted to try to assert
that our translations are the correct translation.
Mr. Smego. One thing that I can suggest, sir, that with the
assistance of the native Iraqi linguist, when you pair a native
Iraqi speaker and a native English speaker and having actually
two linguists work on the document, you produce a far superior
translation than any one individual could produce.
Chairman Barton. Okay. On document No. 5 in our binder,
what--when we talk about the implications of this document,
could you enlighten us a little bit on the implication of this
document No. 5 that the present leader, Saddam Hussein--God
bless him and protect him--has ordered the improvement of
dealing with France, and then Iraq is going to send official
political and social delegations to France; they are going to
organize a roundtable in Baghdad and Paris to develop the
relationship between both countries. The Foreign Minister is
going to visit Paris, and tasking the International Council and
Office of Foreign Relations of the party to approach the most
influential parties in France and the French Parliament?
And then item No. 5 on the second page of this document, do
not consider granting economic privilege, oil and trade, to
those who are not effective or do not have leverage. However,
these privileges will be given to French political and economic
individuals close to the center of the political
decisionmaking. What does that imply, this document taken as a
whole, in your opinion?
Mr. Smego. Well, while I cannot specify as to what it
implies, I can reassure you that these are recommendations from
the assistant director of the Iraqi Intelligence Service, made
to his boss, the director of the Iraqi Intelligence Service, on
how possibly relations could be improved. Of note would be the
director's margin note that is listed under the first margin
note. The director questioned, how do we begin? Where do we go
with this? He is basically questioning how to implement this
plan and who the targets would be to influence. This memorandum
followed subsequently Exhibit----
Chairman Barton. Well, if I wanted to imply--having read
the documents, if I wanted to imply that this would be
considered an official document of Saddam Hussein's regime,
that they wanted to find out the people that counted in France
and try to bribe them, would that be a wrong implication? I'm
not saying it's a fact, but if I were to read this document, do
not consider granting economic privilege to those who are not
effective or do not have any leverage, the fact that it says
granting economic privilege would indicate to me that at least
somebody was thinking about bribing somebody in the French
Government if they thought they had leverage. Would I be wrong
to imply that?
Mr. Smego. I wouldn't be qualified to judge that.
Chairman Barton. Mr. Fawcett, would I be wrong to imply
that?
Mr. Fawcett. Well, without having seen the document it's
hard for me to say. However, there is a lot of other
corroborating evidence to show that that was----
Chairman Barton. And I'm not saying it's a fact. I'm just
saying a person of normal intelligence, if we assume that these
documents are correctly translated--and nobody apparently is
asserting that the gentleman to your left has improperly
translated them--if you just read the language and the plain
meaning of it, it would imply to me that Saddam Hussein was
thinking about bribing people in France if they were in a
position of power. That is my implication.
Mr. Fawcett. They also publicly went on the record long
ago, back in the late nineties, saying that they were going to
skew the contracts toward those political supporters
internationally. So this is not strange at all. This fits
exactly in with their policy.
Chairman Barton. Well, my time is about to expire. My last
question on this document 13, where the French dignitary
Charles Pasqua says the present leader, Saddam Hussein, God
bless him, approved designating 3 million barrels to him, the
French dignitary. Why in the world would the Iraqi Government
give Mr. Pasqua the concession for 3 million barrels? He's not
an oil trader, that I am aware of. I mean, Mr. Stupak has
pointed that out. So why would they do that? Why didn't they
pick Congressman Joe Barton, or you, or the good professor to
your left? Why did they pick him?
Mr. Smego. Is that question directed to me, sir?
Chairman Barton. It is a question, yeah. Just out of the
blue, why did he get picked? Did he have any ability to
influence things in the French Government or maybe be an
influence maker himself? If I were trying to influence the
French Government, might I pick him?
Mr. Smego. One might go back to Exhibits 6 and 7, No.2 of
Exhibit 6, subparagraph (b). The French Charles Pasqua was the
former Minister of the Interior and the French candidate for
Presidential elections in the current period. And it references
that it would be possible to approach Mr. Pasqua through the
relationship of Tarik Aziz.
Chairman Barton. So he might be able to influence the
French decision on these sanctions, the position the French
Government might take in the U.N. regarding these sanctions and
regarding lifting the sanctions, mightn't he?
Mr. Smego. That is what Exhibit 6 might mean.
Chairman Barton. It might be money well spent if you were
Saddam Hussein. Might be. I think it would be. If I decided I
wanted to bribe somebody in France, he'd be a good target.
Mr. Chairman, I yield back my time.
Mr. Whitfield. Thank you, Mr. Chairman. Mr. Waxman is
recognized for 10 minutes.
Mr. Waxman. Thank you, Mr. Chairman. It seems that what we
have here is a story of smuggling going on, even though there
was an embargo and kickbacks, in the sale of oil, the proceeds
of which were supposed to provide food for the Iraqi people.
Mr. Fawcett, is that what we are looking at?
Mr. Fawcett. Yes, that's right.
Mr. Waxman. Okay. And the kickbacks, from what we know from
these documents and otherwise, were to whom? To countries, to
individuals, to oil companies?
Mr. Fawcett. The kickbacks were sent back to bank accounts
in Jordan largely. And the accounts were, depending on the
humanitarian side, the accounts were registered to the relevant
ministry. And my understanding of the mechanism, that the
signators from that ministry, as soon as the money was
received, sent it on to another bank account of which they
didn't know much about, implying that it was going to either
Saddam's family or to the Iraqi intelligence.
Mr. Waxman. I see.
Dr. Gordon, was the U.N. supposed to be monitoring this
whole program to provide some kind of transparency?
Ms. Gordon. The whole program meaning the Oil-for-Food
program?
Mr. Waxman. The Oil-for-Food program.
Ms. Gordon. Again, I think you have to start by not
speaking of the U.N. as a whole. I think that it is easy to not
see how things function if you only look at, quote, the U.N.
What is really important is to look at what were the
obligations and responsibilities of the Secretariat, which
included the OIP, the Office of Iraq Programs, and what were
the responsibilities and obligations of the Security Council.
Obviously both are within the United Nations, but as we talk
these days about whether Kofi Annan should step down or what
the failures were on the part of Secretariat or whether the
U.N. as a whole needs to be reformed, what is really crucial is
to say who exactly made what decisions, when. Who exactly had
what oversight responsibilities?
Mr. Waxman. What was the committee, the 661?
Ms. Gordon. It was a committee of the Security Council that
mirrored the Council. There were 15 members, one from each
member state of the Security Council. It operated by consensus,
so any member of 661 committee could veto any matter at any
point for any reason.
Mr. Waxman. And so they were supposed to oversee the
program.
Ms. Gordon. That's correct.
Mr. Waxman. And the U.S. was part of that?
Ms. Gordon. Yes, of course.
Mr. Waxman. And this committee signed off on all the deals?
Ms. Gordon. That's correct. More than signed off. Had full
knowledge at every point. That was what the U.N. staff of the
Secretariat did, and did very well. They provided information.
They provided advising. If I could identify one particular
decision of the Security Council, as the Congressman before was
looking at Mr. Smego's documents--and we have heard a great
deal about the vouchers that went to Russians, the vouchers
that went to French officials, and it is as though this is new
information or somehow surprising that Saddam Hussein would use
oil sales to garner political leverage. In fact, that was an
explicit decision on the part of the Security Council when it
passed Security Council Resolution 986 on the memorandum of
understanding, which is, it was an explicit decision to give
Iraq the right to choose its trade partners both for import
contracts and for oil sales. It was understood at that time
that Iraq was likely to use that to get--for political
leverage.
As we see, the memo consisted of vouchers and secret
vouchers. In fact, as far as I can see, those vouchers are
nothing other than the bookkeeping device by which the Iraqi
Government exercised the right that the Security Council gave
it to choose its trade partners.
Mr. Waxman. Would the U.S. have known about this?
Ms. Gordon. Of course.
Mr. Waxman. And so the U.S. Government, as part of the
Security Council committee 661, was aware that they were giving
Saddam Hussein the power to do the kinds of things he had done
in the past: provide corruption and kickbacks and such.
Ms. Gordon. Of course. I mean----
Mr. Waxman. Let me just settle with that, of course,
because I wanted to pursue another matter with Mr. Smego, and
maybe someone else will follow up on this. Mr. Smego, the
committee asked you to review several documents from SOMO, the
Iraqi State Oil Marketing Organization. And I'd like to ask you
to review another SOMO document which was handed to you by my
staff, if I may. First, could you please verify for the
committee that this document is on or purports to be on SOMO
letterhead and is signed by the General Manager of SOMO,
Mohammad al Jabari?
Mr. Smego. No, I cannot.
Mr. Waxman. You cannot. In looking at it, does it appear to
be on SOMO letterhead?
Mr. Smego. I have never seen such letterhead.
Mr. Waxman. Okay. Have you ever seen SOMO letterhead?
Mr. Smego. Yes, I have.
Mr. Waxman. And this is different letterhead than SOMO
company letterhead?
Mr. Smego. It is different from all of the other SOMO
letterhead that I have seen.
Mr. Waxman. It is different. Okay. Could you look at the
highlighted text of this letter and verify that it says, SOMO
purchased gasoline to import into Iraq for approximately $1 per
gallon. I believe the text reads quote, ``U.S.D. 347 per metric
ton delivered to Baghdad, which is about $0.98 per gallon,''
end quote.
Mr. Smego. I can verify that it is not in Arabic nor that I
have translated the document. It is the first time that I have
ever seen it.
Mr. Waxman. But you can verify that's what it says on this
piece of paper.
Mr. Smego. In English, I see that; yes, sir.
Mr. Waxman. Okay. So SOMO, according to this document, was
importing gasoline into Iraq for less than $1 per gallon. And,
Mr. Chairman, I am going to ask that this letter be made part
of the hearing record.
Mr. Whitfield. I would ask the gentleman where did this
letter come from?
Mr. Waxman. Well, let me withdraw my request because I
don't want to use up my time for questions.
Ms. Gordon, let me turn to you. Suppose a French company
had a separate contract to bring gasoline into Iraq, that this
French company was being paid out of Oil-for-Food funds and
that that French company charged not $1 per gallon but more
than $2.50 per gallon. Would you agree that someone at least
ought to examine that discrepancy and figure out why a French
company was allowed to charge 250 percent higher than normal
Iraqi price?
Ms. Gordon. I'm sorry. A French company to import----
Mr. Waxman. If we found out a French company was charging
250 percent higher than normal Iraqi price, wouldn't that
discrepancy call out for some examination?
Ms. Gordon. I suppose so.
Mr. Waxman. If I also told you this French company got this
contract in secret and that no other companies were allowed to
bid on it, wouldn't that be a factor for someone to look into?
Wouldn't that raise suspicion?
Ms. Gordon. I would expect so.
Mr. Waxman . Well, Mr. Chairman, this is not a hypothetical
example I invented. This is a real case. But it didn't happen
under the Oil-for-Food program. It happened under the
Development Fund for Iraq under the Bush administration. And it
wasn't a French company, it was an American company; it was
Halliburton. The administration gave Halliburton its contract
in secret, in a no-bid process. It excluded all other
companies. The Pentagon's own auditors have now determined that
Halliburton overcharged by more than $212 million under this
contract. And even though the administration paid Halliburton
with Iraqi funds from the DFI, it intentionally concealed these
overcharges from the United Nations.
My point is not to detract from the Oil-for-Food
investigation, but to demonstrate that if these actions had
been committed by a French company or by the French Government
under the Oil-for-Food program, we undoubtedly would have had
dozens of hearings by now. But presumably because it is
Halliburton and the Bush administration, we have had none. This
hampers the legitimacy of all our efforts, and I hope the
committee will remedy that disparity very soon.
Dr. Gordon, how would you compare the transparency of the
American handling of the Iraqi oil funds with the transparency
of the U.N. handling or the Security Council handling the Iraqi
oil funds?
Ms. Gordon. Well, as I said earlier, there are seven levels
of oversight just for import contracts, and another set of
separate controls for oil sales. What is the case is that with
the Oil-for-Food program, to the extent that there were
improprieties, they happened not because of an absence of
oversight or accountability, but, in fact as large as these
numbers sound to us, they happened at a marginal level. They
happened around the edges. They happened on isolated occasions
and they happened despite an elaborate, consistently
implemented system of oversight at least on the part of U.N.
personnel.
By contrast, if you look at Security Council Resolution
1483, which is the resolution that recognized that the
occupation authority systematically eliminates all of the forms
of oversight that were in place under the Oil-for-Food program,
it replaces them with certain other forms of transparency in
some cases, and some forms of oversight are not replaced at
all. And as I believe you mentioned earlier, we have already
seen a huge spate of reports coming out from the inspector
general of the CPA itself, from the Defense Contract Auditing
Agency, and from KPMG Bahrain, which is the auditor retained by
the International Advisory Monitoring Board, all of which
indicate a level of corruption and mismanagement that quite
frankly dwarfs the most extreme of the accusations against the
Oil-for-Food program.
Mr. Waxman. Thank you. Mr. Chairman, I want to renew my
request to put the letter in. And you asked where I obtained
the letter. The letter was----
Chairman Barton. Mr. Chairman, I object.
Mr. Waxman. I thought the chairman of the full committee
indicated that we work on a bipartisan basis and take
documents----
Chairman Barton. I will do that. But I am objecting to this
request because it has not been done on a bipartisan basis.
Mr. Waxman. Well, we did furnish it to the majority staff.
And if I might further tell you about this document, this was
sent to the staff.
Chairman Barton. You can tell me about it off the record.
But I am going to object and I want to make a statement as soon
as your time has expired.
Mr. Waxman. Well, if you want to make a statement, then I
want to make a statement; because I don't know what you are
going to say, but it sounds to me like a pretty negative one
about even trying to find out that SOMO has indicated to us
through a document they sent to us, that they were angry about
Halliburton getting so much more money than they were in
providing gasoline to Iraq.
Chairman Barton. Mr. Chairman, I think the gentleman's time
has expired.
Mr. Whitfield. I might also just add that on this document,
in and of itself, I see no mention of Halliburton in here at
all. I mean the name Halliburton does not appear anywhere in
this document. And I guess because the chairman has objected,
so----
Mr. Waxman. Well, Mr. Chairman, the other audits we
provided DCAA, the auditor for the Pentagon, has indicated that
Halliburton was paid from Iraq funds run by the U.S.
administration in Iraq, and they also indicated that there may
be as much as $200 million that have been overpaid in excess of
what the gasoline would have charged.
Mr. Whitfield. The other reports have been entered into the
record in their entirety and not by excerpt. But the
gentleman's time has expired. And at this point I would call on
the gentleman from Texas.
Mr. Waxman. Point of order, Mr. Chairman.
Mr. Whitfield. Yes.
Mr. Waxman. The gentleman from Texas has had his time for
questioning. If he is going to be recognized, and I certainly
don't object to it----
Mr. Whitfield. No, I was getting ready to recognize----
Mr. Waxman. If he is going make a statement that pertains
to anything that I have asked about, are you going to out of
order allow me to----
Chairman Barton. Parliamentary inquiry, Mr. Chairman. Does
the Chair have the right of recognition?
Mr. Whitfield. Yes.
Chairman Barton. Has the Chair recognized the gentleman
from Texas?
Mr. Waxman. I asked a point of order, which is a higher
form of parliamentary inquiry.
Mr. Whitfield. Just a minute. I was getting ready to
recognize Dr. Burgess of Texas for his question-and-answer
period. So does anyone object? If not, I am going to call on
Dr. Burgess for his 10 minutes.
Chairman Barton. Well, Mr. Chairman I thought you had
recognized me. Did you not recognize me?
Mr. Whitfield. I was recognizing the gentleman from Texas
for his questions. But I would be happy to recognize the
chairman of the committee.
Chairman Barton. Okay. And I will yield to Mr. Waxman. But
I have a statement that I want to make and then I will be happy
to yield to the gentleman from California.
Mr. Whitfield. Okay.
Chairman Barton. We have operated this subcommittee, as far
as I know, for the last 20 years under both Democrat and
Republican, in a bipartisan fashion when it came to document
presentation. Now, I am told that the documents in the binder
have been shared with the minority staff for at least a month.
If that is in error, I need to be told that.
The documents the gentleman from California has twice tried
to get into the record have not been shared with anybody until
they showed up at this hearing. Now, if the gentleman from
California has documents that he wishes to be put into the
record, if he would share them with the majority staff in an
appropriate fashion, in all likelihood they would be entered
into the record. But showing up at a hearing and having these
surprise documents asked to be put into the record by unanimous
consent is not going to be tolerated. If you have got
documents, share them with the majority staff and we will work
it out and we will put them in the record.
That is what I am objecting to. I am not objecting that you
have a document. And if it is a legitimate document, and is a
part of the hearing record it will be put in. But this is the
second time, Mr. Waxman, in one hearing that you have presented
documents to go into the record that I am told we have not seen
until hearing. That is what I am objecting to, and I will be
happy to yield to my friend from California.
Mr. Waxman. Well, Mr. Chairman, I have no knowledge when
you provided our staff with this binder, but we are told it was
last Thursday. But that is not the point for me. We, as part of
the investigation on the Government Reform Committee, received
the documents from SOMO--which is of two pages--before this
hearing was ever called. The other documents----
Chairman Barton. Reclaiming my time. When did you share it
with the majority staff?
Mr. Waxman. Well, when we walked into the hearing.
Chairman Barton. Today?
Mr. Waxman. Yes.
Chairman Barton. Today. And how long have you had it?
Mr. Waxman. Well, let me finish what I am saying to you,
because I think you are misreading what we are doing here. I
had some questions about the other documents that I put into
the record which are already out, and I am sure each of these
witnesses has heard about them. And that is the Special
Inspector General Stuart Bowen's report of maybe $9 billion
having been lost from the Iraq funds since the U.S. took over
the Oil-for-Food funds. This is not a surprise I have pulled on
the committee. These are documents that have been well reported
in the press. And maybe if the chairman would permit----
Chairman Barton. Well, reclaiming my time.
Mr. Waxman. Let me finish my thought.
Chairman Barton. I have the time. I have yielded to you
because I believe in a full and fair debate.
Mr. Waxman. And you have cut me at least two times.
Chairman Barton. But it's my time.
Mr. Waxman. You've cut me off two times.
Chairman Barton. It's my time. Now, you have been a valued
member of the full subcommittee since before I was even in the
Congress, I think. Now I don't know how long you've been on the
subcommittee, but you have been on the subcommittee a long
time. You were a former subcommittee chairman of this committee
when your party was in the majority. You, more than anybody,
know that to have these investigations and these hearings,
documents and materials need to be shared. You, more than
anybody, should know that you don't walk into a hearing the day
of the hearing, if you're trying to be cooperative, and spring
documents.
Now, if they are legitimate documents, they deserve to be a
part of the record. My objection is not whether these documents
are good, bad. My objection is that twice in one hearing, a
senior member of the minority, who's a former subcommittee
chairman when you were in the majority, has tried to put
documents in the record without vetting them through the normal
process. That's my objection. If you're willing to stipulate
that you'll use the normal procedure with the minority staff
and Mr. Stupak and his staff on this subcommittee, we won't
have a problem.
Mr. Waxman. Will the gentleman yield to me?
Chairman Barton. I'll be happy to yield.
Mr. Waxman. I want to point out the essential point that I
made in the very beginning. This is the 13th hearing on the
Oil-for-Food program from Iraq. And I am critical of the fact
that we have had zero hearings on the U.S. use of the Iraqi oil
funds. And therefore, I have raised the issue because it is an
investigation that I and my staff have been pursuing without
any cooperation from this committee.
Now, I appreciate your berating me on an issue of whether I
shared these documents in time, which are already in public
record. But I am going to berate you because I think the
Republican leadership should be looking into both issues, the
Oil-for-Food mismanagement and the mismanagement by the U.S.
Government of billions of dollars, $9 of which have been lost
or laundered or absconded with under the direct jurisdiction of
the U.S. Government.
So I hope you would take it into your thought process that
perhaps we ought to expand our investigation, and I'd be happy
to work with you on that.
Chairman Barton. Well, reclaiming my time. I am not aware
of one instance the gentleman from California has come up to me
and asked for my help or cooperation in anything you just said.
Mr. Waxman. Well, consider yourself asked.
Chairman Barton. Maybe you have and I've just got a bad
memory, which is quite possible. But I don't recall it. Now,
are you----
Mr. Waxman. I recall that we have had another hearing of
this committee on this issue, and at that time I raised the
concern that we were looking at the Oil-for-Food program and
not paying any attention to the U.S. administration of the Iraq
oil funds. That was on the record and we can get the transcript
for it. You maybe didn't pay attention to it because I am only
a Democratic member of the committee. That may be true. But I
think it's worth investigating.
Chairman Barton. Reclaiming my time, this member of the
majority is the person who, on the House floor during the
energy bill, asked unanimous consent that you could offer your
amendment, when you weren't on the floor to offer it. That is
who this member is. That is who this member is who has tried to
go above and beyond to make sure that regardless of the
majority or minority, if you're a member of this committee, all
your rights are adhered to. The gentleman well knows that.
Mr. Waxman. And I appreciate that and thank the gentleman
for it. But this is not a personal matter. This is a matter of
public concern, and if we are going to look at the kickbacks
and corruption and use of funds that should be directed to
helping the Iraqi people, I think we are not only looking at
one side of it, perhaps for political purposes, justifiably so,
because I think it is worth pursuing, but we also ought to look
at the $9 billion that have been lost or unaccounted for when
the U.S. Government was in charge directly, and the failure of
the U.S. Government to handle in a transparent manner, or even
provide the U.N. the information about what was happening there
when we were operating pursuant to a U.N. resolution.
I thank the gentleman for allowing the further discussion
of this matter. And if you still object for my document which I
questioned the witness to be in the record, I will accept that
fact. But the gentleman did have it before him and we will make
it available to anyone.
Chairman Barton. I just want the documents vetted by the
majority staff. And if the staff says they are acceptable, I am
not opposed at some point in time to them being in the record.
But I do strenuously object to the process, and if we don't get
agreement on the process, then there will be an objection every
time on process.
Mr. Stupak. Mr. Chairman, if I may.
Mr. Whitfield. Yes, Mr. Stupak.
Mr. Stupak. Mr. Chairman, if I may, I would request that,
No. 1, we give Mr. Waxman some time to lay a foundation on
where this document came from. If it's part of a public record,
I don't know why it would not be admitted into the record. And
I would ask that we give him 3 days or so to at least be
allowed to submit this for the record, provided a foundation
can be established.
Mr. Whitfield. Well, I would ask that he vet it through our
staff. And then I would also just like to reiterate what
Chairman Barton said; and that is we do--have had a policy of
sharing documents, maybe not months in advance, but I know that
this binder on the Oil-for-Food program was provided 6, 7 days
ago. And I do think that it is not fair to bring documents up
here that day, that we have never seen, and start testifying
from them. And particularly in this document, there is nothing
on this document whatsoever relating to Halliburton.
Halliburton is not in any way referenced.
But at your request, I think that we will get the document
and work with the staff and make some decision. But at this
point, an objection has been made to admitting it into the
record.
Mr. Waxman. Mr. Chairman, might I just point out that we
are talking about two pages? You have a binder of many other
documents. I wonder what happens next. Are we supposed to
submit our intended questions of the witnesses to the
Republican staff as well, to see if those are going to be
permitted to be asked? Because it seems to me that that is the
direction in which this committee is going. And I certainly
hope that is not the case.
Mr. Whitfield. I don't think that's necessary.
Mr. Waxman. But I had asked about it, this document. I
would be pleased to write a letter to the chairman and he can
include it in the record or not. But this is a document that we
received from the State Oil Marketing Organization that works
for the Iraqis in dealing with their oil, and they were getting
paid a lot less than what we were paying Halliburton to bring
in gasoline into Iraq at the same time, and that ought to be
investigated. I wish the committee would investigate that as
well.
Mr. Whitfield. Okay. Mr. Waxman, thanks for your comments.
Now, I want to call on the gentleman from Texas, Dr. Burgess,
for his 10 minutes of questions.
Mr. Burgess. Thank you, Mr. Chairman.
Dr. Gordon, in reading through your testimony on paragraph
1, the effectiveness of the program, you write, ``I think it is
important to begin by recognizing that the Oil-for-Food program
and the U.N. staff involved were in fact tremendously
successful at raising the quality of life for the Iraqi
population.'' I'm sorry, I just find that an incredible
statement to make. I'm astonished by that. But you back it up
with measurement and I guess what I would like to ask, if I
could, is that you will provide us some documentation for the
statements that then follow.
Is this something that you have personal knowledge of,
something that has been provided to you by the U.N. or UNICEF?
Because it just doesn't square at all with what I saw myself
when I was in the country of Iraq in August. You said the
health care system was much better able to meet its
population's needs. I was in Al Majar Hospital in August 2003.
That place was physically decrepit. There was no reliable
running water. The sewer system was just open into the
courtyard . Flies were everywhere. The doctors complained that
the medicine they had under Saddam were worthless, and, in
fact, they'd have suffered greatly if Kuwait hadn't started a
massive humanitarian influx of medication to the country of
Iraq shortly after Saddam fell.
I was in their NICU. There wasn't any piped-in medical gas
nor was there any provision for any medical gas. There was an
infant there, clearly a premature infant, probably small for
gestational age as well, who clearly had what I would
characterize as rather significant respiratory distress
syndrome and had no oxygen on. I suspect that that child was
probably dead before nightfall.
I'm sorry, but I don't see that that is a good system that
was brought to the people of Iraq under the Oil-for-Food
program. And mind you, at the same time the palaces that we
went into, granted there was some damage from the combat phase,
but the palaces that we went into were absolutely spectacular,
with marble overlays on everything, marble floors, certainly
comparable to anything we have here in the United States
Capitol. So can I ask you to just discuss that statement a
little bit?
Ms. Gordon. Well, sir, I would be happy to do you the
dubious favor of giving you more than you would ever want to
read on this. You could start, if you want to, by going to the
Web site for the Office of Iraq Program. And you can at that
spot download reports, more reports than I promise you will
want to read by UNICEF----
Mr. Burgess. Well, reclaiming my time, because I do have
several things I want to get to. It certainly doesn't square
with what I saw on the ground, and I'll believe my eyes before
I'll believe a U.N. Report. Mr. Fawcett----
Ms. Gordon. Sir, I wonder if I could answer your question
with 1 minute, which is to say what happened between 1996 and
2003 was that the situation, which was far far worse prior, was
significantly improved. Remember, there had been a collapse
from 90 to 96. From 96 to 2003 the level of food, nutrition,
nearly doubled. The level of improvements in the health care
system from 96 increased significantly. Electricity
availability increased significantly. Availability of potable
water increased significantly.
I'm not saying it's a good system. I'm not claiming that at
all. I am saying, by every measurement of every humanitarian
agency there, between 96 and 2004, under the Oil-for-Food
program, there were substantial improvements in the quality of
life.
Mr. Burgess. Reclaiming my time, probably those are
Saddam's statistics. But I'll just tell you, what I saw in the
palaces was a significant investment of capital. And if one-
tenth of that capital had been put into those hospitals, those
children wouldn't be suffering.
Mr. Fawcett, I'd like to ask you for your response to that.
Mr. Fawcett. All of the statistics upon which these
judgments are made are Iraqi Government statistics. The U.N.
reports in the late- or the mid-1990's that were used to raise
the public awareness of all the children dying and build the
fear of the Security Council that allowed that, forced them to
give in to Saddam on these, were later proved to be false.
These U.N. reports were retracted because they were based upon
phony Iraqi Government statistics. That continued up till the
time Saddam left.
Mr. Burgess. Well, Mr. Fawcett, when you were giving your
testimony, you ran out of time. And I believe you made the
statement that you would like to talk about what the U.N. could
have done, and perhaps you could take a minute and just tell us
that.
Mr. Fawcett. I think the first thing they could have done
was not to circulate bad standards, circulate the Iraqi
Government statistics aggressively, using them in a PR campaign
to ease sanctions. They knew the statistics were bad. Maybe
they couldn't do anything about that, about the gathering of
the statistics. But they did not have to actively disseminate
them, knowing they were false. So that is No. 1.
Second, the whole program should have had transparency.
There was none. There's a lot of documents that were published,
virtually all of them are useless if you're trying to look into
who's making money here and how are they making it. It's--the
U.N. is great at putting out reports. But there's no detail in
that report. There's no company names. There's no pricing of
the commodities, things that the U.N. could have published
anytime they wished. They did not need Security Council
approval to do so. They could have been very transparent. In
fact, when the Security Council was obstructive to the United
Nations, as they were, as I absolutely agree they were, the
U.N. could have gotten around that by just publishing documents
and saying this is wrong. This is wrong. They failed to do so.
They kept saying this is proprietary information, when this was
a humanitarian program in a country under sanctions. The normal
business rules should not have applied as far as keeping data
secret. They could have published documents at any time. And
had they done so, they would not be in the bind they are now.
All the allegations of corruption against the Secretary General
would have been dealt with long ago.
Mr. Burgess. I guess I do find it odd that the costs for
baby formula could be inflated by 25 percent in an organization
that has as its mission disseminating that product around the
world. I mean, how do you miss a 25 percent overcharge for
Similac?
Mr. Fawcett. That one puts me through the roof. It
absolutely does.
Mr. Burgess. Well, let me just ask you a question that I
know is on the minds of my folks back home. Did the Secretary
General have no decisionmaking role in setting the terms of
this program?
Mr. Fawcett. I'm sorry. I didn't understand.
Mr. Burgess. Did the Secretary of the United Nations have
no role in setting the parameters for this program?
Mr. Fawcett. The current Secretary General was the first
one to begin negotiations. The Iraqis actually liked him. He
was replaced in 92 with another series of people that took a
little bit harder line, and the Iraqis didn't like them. The
Secretary General at the time that the program came into play
was clearly a friend of the Iraqis, and that is another of the
problems that we have seen early in the program. They should
have gone to a far more competitive bidding process for the
monitors and the banking. And now as we see from the Volcker
Commission, it was the Secretary General himself that was
manipulating the system.
Mr. Burgess. Well, can you estimate the percentage of the
kickbacks that might have been prevented had more thorough
price checking been performed?
Mr. Fawcett. I think at least half; without too much
problem, half of the kickbacks could have been prevented. And I
base that upon the fact that most of the goods going in are
commodities. We know that some of the most difficult ones, gas-
fired turbines from China, would be difficult to determine the
price. Absolutely. But wheat from Australia, baby formula,
milk, medicines from Pakistan or Switzerland, that's easy to
do.
Mr. Burgess. Well, besides just the dollars, were there any
other warning signs that Saddam was charging kickbacks on the
goods or contracts under the program?
Mr. Fawcett. Shady operations. Companies with no backing,
no background. While it's correct to say that it's the member
states that put those companies forward, the U.N. Could have at
any time said this one looks shady to us. But instead, they
found themselves dealing with money launderers, with organized
crime, and with terrorists.
Mr. Burgess. And as my time is about expire, any other
issues that the United Nations might have taken up to prevent
this from going as far as it did?
Mr. Fawcett. Courage, which they failed at.
Mr. Burgess. Mr. Chairman, I'll yield back.
Mr. Whitfield. Thank you, Dr. Burgess. At this time I will
recognize Ms. Blackburn for 10 minutes.
Mrs. Blackburn. Thank you, Mr. Chairman.
Dr. Gordon, I think I'd like to come to you first. I want
to--you've talked a lot about the Oil-for-Food program and the
comments and the responses that you have made. And so the
question I would like to ask you is if you feel like, if I am
understanding you right on this, do you feel like--do you
think--is it your opinion that the Oil-for-Food program was
adequately run, adequately and properly managed and given
appropriate oversight? And if so, would you recommend that the
United States participate in such programs in the future?
Ms. Gordon. Again, I need to break it into which parts of
the U.N. had responsibilities.
Mrs. Blackburn. Go ahead. Very quickly.
Ms. Gordon. So specifically the decision to allow Iraq to
choose its trade partners. It was understood at the time that
that would give Iraq considerable political leverage. If the
Security Council members had not wanted to do that, it would
have been easy enough to design the program without that.
If you go to the other side of the fence, as it were, the
U.N. staff, whose only responsibility under the Secretary
General was to monitor, to provide information, to advise the
661 committee, not to make substantive decisions and not to
design the program itself, by every account I've seen they did
their job and they did their job well. The program was not
designed or created by the Secretary General. It was created
pursuant to Chapter 7 of the charter, which puts it directly
under the control of the Security Council.
Mrs. Blackburn. Okay. So I'm going to interrupt here. In
other words, what you're telling me, then, is with the
monitoring and the advice mechanisms, it is your opinion that
it was adequately run and adequately and properly managed.
Ms. Gordon. I would say the flaws that we have identified
have to do with----
Mrs. Blackburn. Okay. And would it be your advice that we
embark on such programs in the future?
Ms. Gordon. Well, I think comprehensive sanctions on any
country are destructive.
Mrs. Blackburn. All right. Okay. What do you know of the
Iraq steering committee and its administration of the Oil-for-
Food program?
Ms. Gordon. By the Iraq steering committee you mean the 661
committee? I am fairly familiar with how the 661 committee
operates.
Mrs. Blackburn. Do you think we ought to bring them before
Congress? Do you think we should bring them before this
committee to answer questions?
Ms. Gordon. My understanding is that so far the State
Department has declined to provide any of its participants on
the 661 committee.
Mrs. Blackburn. Okay. Let me ask you something else then.
Do you think that there should be independent storage
facilities to store U.N. documents in order to investigate
further occurrences? Or, as we heard today, getting in behind
this one might help lead us to others and other abuses and
things. So do you think we need to set aside a facility to hold
all of these documents?
Ms. Gordon. I have no opinion on the mechanics of where you
want to store documents.
Mrs. Blackburn. All right, thank you. You know--and I
appreciate your answers to my questions. I will have to tell
you in my district in Tennessee, if you want to talk about
something that gets the dander up of a lot of my constituents,
it is talking about the waste, the fraud, the deceit, the
despicable acts that took place with the formula program. That
is, those are all things that really cause people to be
incredibly, incredibly upset. And I appreciate your answering
our questions.
Mr. Fawcett I would like to come to you, if I may, please,
sir. How extensive do you think the ties were between Sevan and
Saddam at the time that all of this was beginning to take
place, and how do you think it was that Sevan ended up being
picked as the OIP director?
Mr. Fawcett. That's a good question which I don't think we
know the answers to.
Mrs. Blackburn. Okay. Do you have insight that you can
provide me?
Mr. Fawcett. No further than what the Volcker Commission
has come out with. However, I have encouraged the Volcker
Commission to continue going down that path because I do not
think we have gotten to the end of it. One of the trails that
needs to be pursued is what is the money flow to Benon Savan,
because I think if we start to peel that one back, we may end
up shedding light again on longer-running money laundering
structures of Saddam Hussein.
Mrs. Blackburn. Okay. Let's go, at the same point, to Chief
of Staff Riza and the relationship with Sevan. And do you think
that they collaborated and worked together on much of this, and
on some of the oil allocations?
Mr. Fawcett. I haven't seen anything that shows that they
collaborated. My understanding of the way Mr. Sevan ran his
operation was that he was very insular and was not out going
and collaborating with a lot of other senior U.N. officials.
Mrs. Blackburn. What role do you think that Chief of Staff
Riza might have played in the management of the program?
Mr. Fawcett. I don't really know.
Mrs. Blackburn. You don't know. Okay. Do you think Kofi
Annan was aware of much of Sevan's activities?
Mr. Fawcett. I wouldn't go as far as to say he was aware of
the illicit activities that have been alleged. However, he was
fully aware of the potential for that, fully aware that the
Iraqis would attempt to do just what they did, attempt to bribe
senior public officials around the world and in the U.N. . So I
think he is culpable of not exerting executive authority over
that program.
Mrs. Blackburn. Okay. And then Boutrus Boutros-Ghali, what
ties do you think exist between him and Saddam and
administration of the Iraq escrow account; or do you think
there were any?
Mr. Fawcett. Certainly he had an awful lot of influence on
the selection of the bank. That has become clear from the
Volcker investigation, which showed no transparency process
whatsoever. It was a manipulated process between the French and
the Iraqis.
Mrs. Blackburn. Do you think the French Government played a
role in that?
Mr. Fawcett. Yes, they did.
Mrs. Blackburn. Let's see, I have got a couple of minutes.
Mr. Chairman, I yield back. Thank you.
Mr. Whitfield. You have no further questions?
I call on Dr. Norwood for 10 minutes.
Mr. Norwood. Thank you very much, Mr. Chairman.
I would like to tell you something about this hearing. It
is the most partisan one I've seen in a long time, and it is
hard for grownups to understand and solve a problem when half
the group is trying to change the subject. This is about the
Oil-for-Food program, and we do need to understand it, and our
people at home want to understand it.
Dr. Gordon, you are an associate professor, are you not?
Ms. Gordon. Correct.
Mr. Norwood. Are you a lawyer?
Ms. Gordon. I am both. I have a Ph.D. In philosophy and a
J.D. In law.
Mr. Norwood. How long have you been teaching?
Ms. Gordon. In a faculty capacity since 1993. I taught as a
graduate assistant prior to that.
Mr. Norwood. Do you get up to the U.N. a lot, spend a lot
of time up there?
Ms. Gordon. I conduct some interviews from time to time.
Mr. Norwood. Do you go up once a month or are you there
annually? I am impressed with your knowledge of the U.N. It
sounds like you are there every day.
Ms. Gordon. I'm not there every day.
Mr. Norwood. You are getting it from the Internet, I guess.
Ms. Gordon. I get documents from all sorts of sources.
Mr. Norwood. But you are having some pretty strong opinions
on documents from all sources, and I'm sort of curious about
that.
Ms. Gordon. I'm also familiar with all of the scholarly
literature in this area. I have conducted dozens of interviews
with U.N. officials and diplomats.
Mr. Norwood. Do you spend a lot of time up at the U.N. that
led you to believe some of the things that you have been saying
today? My understanding was you just decided to come testify
Friday morning, is that about right?
Ms. Gordon. I was called on Friday morning and invited to
testify, and I accepted.
Mr. Norwood. Do they offer to let you see these documents
that have been translated?
Ms. Gordon. No.
Mr. Norwood. You haven't had an opportunity to read these?
Mr. Norwood. I would love it if you would and report back
if you have changes in attitude or thoughts about what your
testimony is.
Ms. Gordon. These are the documents that Mr. Smego
translated in the binder?
Mr. Norwood. Yes. The minority has that, and it would be
helpful for you to read it. I would like to ask you if you
think economic sanctions are a good thing anytime, anywhere.
Ms. Gordon. In general, what the studies on economic
sanctions demonstrate is the most optimistic, which is the
Huffnauer-Shartenelli data base from the 1980's and more
recently the 1990's, that in about a third of the cases they
are a factor in changing and influencing the behavior of the
target state.
Mr. Norwood. Did that lead to the document, Using a Pick
Axe for Brain Surgery, that you wrote?
Ms. Gordon. The title, which was----
Mr. Norwood. No, the subject.
Ms. Gordon. The title is a little inflammatory. The subject
of that particular paper is the notion that because economic
sanctions necessarily impact the civilian population that there
is no way of, let's say just in war doctrine, discriminating
between civilians----
Mr. Norwood. Let me ask you--I can't tell where you are on
this exactly. It seems to me that you believe everything in the
Oil-for-Food program worked perfectly and the U.N. acted
correctly, or are you saying all of the things stated actually
have happened, things that we are hearing today, things that
none of us would be very much for, but all of that could have
been stopped if only the United States would have stopped them?
Where are you?
Ms. Gordon. I think it is probably not either of those two
positions.
Mr. Norwood. Your testimony implies the first one. Your
statements and some of the things you said imply the second
one.
Let me go to Mr. Fawcett.
Ms. Gordon. I wonder if I could have a chance to answer
that.
Mr. Norwood. Hold it for a minute. I am watching the clock.
I will get back to you. Let me----
Some people--Dr. Gordon is a good example--claim that the
Oil-for-Food program was tremendously successful in helping the
Iraqi people. Do you agree with that assessment?
Mr. Fawcett. I don't think we have any data to show how
many people it has helped and to what degree and qualitatively
it has. I would point out one survey that was done in the last
year by the U.N. in which the amount of people that they claim
are totally dependent upon their aid has dropped from 60
percent of Iraq to 25 percent, which means 35 percent of Iraq,
7 to 8 million people, are now far better off. So either this
invasion was the greatest humanitarian act----
Mr. Norwood. The Oil-for-Food program is what I am asking,
though. Has that been successful?
Mr. Fawcett. I don't think we have any data to show what
success or failures it has had.
Mr. Norwood. What you are saying is you believe nobody
could actually determine that at this point?
Mr. Fawcett. No one could determine it.
What the U.N. has constantly said is 60 percent of the
Iraqi people were totally dependent. In my experience in the
humanitarian field for 10 to 15 years, I have not seen any
population of which 60 percent will sit in their homes waiting
for food to be delivered. It doesn't happen.
Mr. Norwood. Dr. Gordon went on to state that the U.N.
provided considerable information and data about the Oil-for-
Food program. Do you agree with that?
Mr. Fawcett. The data that was essential to stop any of the
corruption was not released. The only data that came out was
inadvertently leaked from the U.N. on occasion. This is the
data that mentions company names and mentions pricing. None of
the other data is relevant to preventing corruption.
Mr. Norwood. Well, it appears to me that we are not getting
the information or at least Congress is not getting the
information as required. Dr. Volcker would be a good example of
that. So it couldn't very well be said that we are getting
correct information, at least in my opinion, from the U.N. Is
it true that the Secretary had no decisionmaking roles in
setting the terms of the Oil-for-Food program?
Mr. Fawcett. That is not true. The Secretariat had ongoing
daily decisionmaking capacity. The oversight was by the
Security Council, and they could step in at any time. But all
the data that was being passed to the Security Council, the
options for the program, how it would change, were being
provided by the U.N. itself.
Mr. Norwood. Is the Secretary a hands-on kind of fellow?
Does he delegate and just sort of didn't know what was going on
or do you think he knew what was going on?
Mr. Fawcett. I think he knew what was going on, yes.
Mr. Norwood. Do you think the oil voucher system was mostly
a benign recordkeeping system of Saddam's regime?
Mr. Fawcett. Absolutely not. The recordkeeping system of
graft, of corruption and political slush fund, I don't believe
all members of the Security Council knew of the existence or
the details of the voucher regime. I believe that only came out
after the toppling of Saddam.
Mr. Norwood. Do you think we can prove that today? Do we
have enough information out and documentation out that we could
prove that?
Mr. Fawcett. The existence of the voucher system or that--
--
Mr. Norwood. The voucher system actually worked and was
honest.
Mr. Fawcett. When it first came out, there was skepticism
because it came out in the Iraqi newspaper and maybe was pushed
by some of the Iraqi political factions. But the fact that the
Duelfer or ISG report came out and looked at that in some depth
gave me more confidence to believe it is correct. We are now
seeing many investigations around the world, not just here in
Washington, that are starting to prove that this original
document was correct.
Mr. Norwood. I will ask you one last one and perhaps a few
in writing, but this one is important to me. Did the
retroactive pricing of oil contracts cause oil exports to
collapse as suggested by Dr. Gordon and ultimately harm the
Iraqi people?
Mr. Fawcett. No.
Mr. Norwood. I am interested in that.
Mr. Fawcett. You have to look at the time line. Iraqi
smuggling was ongoing at that period. It was really taking off.
Iraq was not as interested in exporting through the Oil-for-
Food program as they were making far more money from the
smuggling through the pipeline. So the retroactive pricing,
they could afford to stall, hedge and wait. So I don't think
that that had a negative impact upon the Iraqi populous; and,
once again, if it did, we have no data, reliable data to show
it.
Mr. Norwood. Why did we do retroactive pricing?
Mr. Fawcett. In order to cut out the cutback or the premium
on the oil sales.
Mr. Norwood. Explain that.
Mr. Fawcett. The manipulation of pricing--oil was
underpriced. So if oil was supposed to be at $20 a barrel, the
Iraqis and the oil overseers would agree to $19.50 a barrel,
which would be another $.50 to fiddle around. Doesn't sound
like much, but on a tanker load that is a million dollars.
Retroactive pricing meant that the buyer didn't know what they
were going to pay for it until after they delivered it or at
least after they lifted the oil. So it eliminated that
maneuvering of pricing.
Mr. Norwood. Do you think that was a proper thing to do to
stop that kickback scheme?
Mr. Fawcett. I think that was one of the options they had
and had to go with it.
I want to point out that for 2 years under this program the
oil overseers were a French expert and a Russian expert and for
1 year only the Russian was the oil overseer. When the new oil
overseers were appointed, a Danish man and a Dutch, within 1
month was when the Iraqis insisted upon having an overt
premium.
Mr. Norwood. Thank you, Mr. Chairman.
Mr. Whitfield. Thank you.
First panel has been here a couple of hours. I have about
two or three more questions to complete the record from my
perspective, and I will recognize Mr. Stupak. He has a few
additional questions as well.
First, Mr. Fawcett, under the voucher system, what the 661
Committee would see, it is my understanding, was a contract
between SOMO and the oil company that did the lifting, but they
would not see or be aware of the underlying grant of oil to the
individual that Iraq wished to influence?
Mr. Fawcett. That is correct. Not only would the 661
Committee not see it but most likely U.N. officials would also
not see it.
Mr. Whitfield. Now, Mr. Smego, originally I was talking to
you about Exhibits 6 and 7 and Saddam's efforts to influence
the French. One of the individuals that was identified was
Roselyn Bachelot. Did you find any documents that purportedly
chronicled meetings between the Iraqi intelligence service and
Mrs. Bachelot?
Mr. Smego. Yes, Ms. Bachelot was noted in Exhibit 9, for
example.
Mr. Whitfield. What does it state in there?
Mr. Smego. In April 2002, a representative in Paris World
wrote a memo regarding his meeting with the French parliament
member, Ms. Bachelot.
Mr. Whitfield. What was her title or position?
Mr. Smego. Her position was the--she was the national
assembly deputy and spokeswoman for Chirac's 2002 Presidential
campaign. The documents state as such, and the committee staff
confirmed that as well.
Mr. Whitfield. Exhibit 12, would you walk us through that
quickly.
Mr. Smego. Exhibit 12 was a memorandum from May 2002
regarding the meeting of the French representative in Paris
with Ms. Bachelot stating that, number 2--point 2, she assured
that the French position opposed any American tax on the
nation, and France used the right of opposition. In parentheses
following that was a veto within the Security Council against
any American decision regarding the attack on Iraq and that
Iraq issued its statement that it is prepared to offer
financial support to Chirac for his election campaign. The
message was passed on to the financial official of the election
campaign.
But I do want to make clear that the offer of campaign
contribution was declined by the----
Mr. Whitfield. No record of the campaign contribution?
Mr. Smego. There is no record within that document, but it
says the official declined it.
Mr. Whitfield. And then one other question. Vladimir
Zhirinovsky, I know there is some documentation of him. He is a
member of the Russian duma. From your translations, did he
receive any oil vouchers?
Mr. Smego. Yes, Mr. Zhirinovsky received quite a few oil
allocations. Specifically, Exhibits 23 through 30 specify the
majority of the Russian oil allocations to Mr. Zhirinovsky, who
was the head of the Russian liberal democratic party.
Mr. Whitfield. Thank you very much.
At this time, I recognize Mr. Stupak.
Mr. Stupak. Thank you, Mr. Chairman.
Mr. Fawcett, are you the author of this Exhibit Number 42
in our book, Sources of Revenue for Saddam and Sons: A Primer
of the Financial Underpinnings of the Regime in Baghdad?
Mr. Fawcett. Yes.
Mr. Stupak. Are you the sole author?
Mr. Fawcett. There are two of us.
Mr. Stupak. Have you done subsequent writing since then?
Mr. Fawcett. I haven't done much writing but a lot of
research.
Mr. Stupak. On this?
Mr. Fawcett. On the Oil-for-Food.
Mr. Stupak. Because I'm looking at some of these statements
in here, and what you are testifying to really looks a little
different. Like on page 13 when we talked about the overseers
and Russia was in control and sort of insinuated that they had
complete control, but the Dutch in the fall of 2000 were the
overseers?
Mr. Fawcett. By the fall of 2000, there were three.
Mr. Stupak. Are you alleging that the oil overseers were in
on the oil surcharges?
Mr. Fawcett. I am alleging--certainly not by the fall of
2000. I don't believe they were. Earlier than that, under the
French and Russian watch, I think there was an awful lot of
underpricing of oil. It had not yet gone out into the public. I
do not have any documentation to show that the French or
Russian oil overseers were taking money.
Mr. Stupak. You didn't state that in the report. You talked
about the three overseers, one being the United States in there
for awhile, and then they resigned.
Mr. Fawcett. When the U.S. oil overseer resigned after
about 18 months of the program, it was the next month that the
first fight began on oil pricing between the Security Council
and Iraq.
Mr. Stupak. You didn't say that in your report, and that's
what we relied upon, and now your testimony is a lot different
here today.
Mr. Fawcett. The report is 3 years old.
Mr. Stupak. About 2 years old. Just over 2 years. That is
why I asked you if you have any subsequent writings to try to
clarify what you are saying.
Mr. Fawcett. No. I think the oil overseers when they came--
the new oil overseers came in in the fall of 2000 is exactly
the same period of time when two other things were happening,
the opening of the Syrian pipeline and the Iraqis demanding an
overt kickback.
Mr. Stupak. On page 23 of your report, you said the second
half of 2000. Because France only went so far in advocating
reform of U.N. sanctions, rather than Iraq's preferred option
of lifting them entirely, the French company saw their market
share slashed dramatically.
Mr. Fawcett. That is right.
Mr. Stupak. The Oil-for-Food program, Saddam Hussein
leveraged it for political gain and also for trying to lift
sanctions?
Mr. Fawcett. Correct. And he would try to leverage the
French, and one way of leveraging them was to pull away the
support he was giving them.
Mr. Stupak. In this report, you talked a lot about the U.N.
oversight and the lack of oversight and the 661 Committee or
the standing committee. Nowhere did you mention the Secretary
General, but you talked a lot about him today.
Mr. Fawcett. Right. This was a portion of the report that
we did not--or a topic we did not go into.
Mr. Stupak. The stuff you said about the Secretary General,
do you have documents to back that up?
Mr. Fawcett. Most of the allegations against the Secretary
General have come out in the last year, the allegation about
the improprieties of his son.
Mr. Stupak. To make allegations is one thing, but to be
able to factually back them up is another thing. Do you have
any documents to back them up?
Mr. Fawcett. The documents against the Secretary General in
the Volcker Commission are the worst. I have gone back in the
history and the public record and found the activities of the
Secretary General vis-a-vis Iraq. Did not do it in 2002.
Mr. Stupak. Do you have any documents?
Mr. Fawcett. Plenty of documents.
Mr. Stupak. We will ask you to produce those for the
committee.
Since you are the author of this report, can you explain
this to me? The first year the Oil-for-Food program is found,
page 17. 1997, U.S. Only took 13 percent of the Oil-for-Food
program of the oil, still the largest end user. By 1999, the
U.S. portion had climbed to 35 percent; and since September 11
the U.S. has been purchasing well over 50 percent of all the
Iraqi oil sold under the Oil-for-Food program.
And you go on to say, and I am not clear either, not clear
why the U.S. purchased such large quantities of Iraqi oil in
the wake of September 11 and amid the heightened threats toward
the Baghdad regime emanating from Washington and this
administration. If we know the program isn't working at solving
what it is supposed to solve and give humanitarian aid to Iraq
and we are threatening war against them and trying to blame
them for September 11, even though they had nothing to do with
September 11, why would we continue to buy oil to fill the
coffers of Saddam Hussein? That are the questions my
constituents ask me, not this other stuff about the U.N.
Mr. Fawcett. We could not explain it. We had no explanation
for why we were doing it, which is why we reported that.
Mr. Stupak. Dr. Gordon, I only have a few minutes left, but
every time you tried to answer a question, you got cutoff. Any
of those questions you want to explain from Dr. Burgess, Mr.
Norwood or Ms. Blackburn? And you didn't ask this committee to
testify? You were invited to testify.
Ms. Gordon. Yes, sir.
Mr. Stupak. You were asked by this committee to testify.
You didn't ask us to testify?
Ms. Gordon. I certainly didn't do that.
If I could address a few points very briefly, and if I
could address a couple of statements Mr. Fawcett made for
clarification.
When Mr. Fawcett and maybe someone else was talking about
the oil overseers after the American and Norwegian left and
there was only the French and Russian and there was implication
there that then they were being self-serving, that is
incorrect. That's not how that committee worked. The way it
worked for the oil overseers is that two oil overseers had to
sign off on every contract, and no oil overseer could sign off
on any contract of his own nation.
Mr. Stupak. Russia has their own oil and basically bought
this oil for food and sold it back to the United States?
Ms. Gordon. I am not familiar with that.
When it was down to two or when it was even at three or
when it was at two, then any time that a French contract came
up or a Russian contract came up, since there were not two oil
overseers from non-French or non-Russian countries to sign off
on that, then that was circulated to the entire 661 Committee.
That is what happened when that occurred. There was a control
in place. It's incorrect to suggest that there wasn't, which
specifically prevented self-dealing in that form.
Second, I would like to comment on the representative from
Tennessee's comment about the baby formula. With all due
respect, an increase in baby formula is not a major factor in
child death in Iraq. I will tell you what is a major factor, a
lack of potable water. That's what spikes child mortality.
If you want to know what was responsible for the lack of
potable water, it was the absence of sewage and water treatment
equipment and, specifically, electricity to generate them. If
you want to look at what particular goods the United States
blocked systematically throughout the sanctions regime
including the Oil-for-Food program, it was the electricity
sector, communications sector, transportation.
If you want examples of what, in fact, caused large-scale
child mortality in Iraq, it was such things as the U.S.
blocking $200 million of child vaccines. It was the U.S.
blocking water tankers during a period of drought in a country
with high mortality from water-borne diseases. It was the U.S.
agreeing to approve a sewage treatment plant in Iraq and
blocking the generator to run it.
If I could address the issue of data, Mr. Fawcett has said
there was no reliable data on either the humanitarian situation
or the severity of it prior to the Oil-for-Food program. That
is incorrect. If you look at the scholarship of the leading
medical demographers and public health experts from Harvard,
Columbia, and Johns Hopkins, published in the leading public
health and medical journals, you will see something very
different. You will see measurements, fresh data,not based on
the Iraqi government, not based on the Iraqi government's data,
which demonstrates both the severity of the humanitarian
situation as of 1996 and substantial improvements that happened
in the humanitarian situation under the Oil-for-Food program.
And, last, I would like to address the claim that the
Secretary General had an ongoing daily decisionmaking process
in the Oil-for-Food program. That is incorrect. At every point
the structure of the program was determined by Security Council
resolutions and decisions made by the 661 Committee. The
Secretary General had no decisionmaking role in that. That was
something because it was a program under the auspices of
Chapter 7 of the U.N. charter that was entirely the creation
and under the supervision and monitoring of the Security
Council.
Thank you for giving me the opportunity.
Mr. Stupak. Mr. Fawcett, smart sanctions, which was U.N.
Resolution 1409, that sort of lifted any kind of control that
was left in this whole program, right, that was implemented May
14 to the smart sanctions? Can you explain how that sort of
lifted any international control?
Mr. Fawcett. No. I am not up to speed on the smart
sanctions approach.
Mr. Stupak. It's found on page 20 of your report. Because
you said here, the new sanctions regime will actually weaken
international control and facilitate increased hard currency
opportunities for the Hussein regime in two ways. First, all
efforts to increase international monitoring or oversight of
sanctions busting trade with Iraq were abandoned in the course
of negotiations leading to the passage of the resolution; and,
second, the streamlined procedures will make it much easier for
Iraqi officials to insist upon kickbacks, on contracts
supplying goods to the Oil-for-Food program.
Mr. Fawcett. I am with you now. That was a process by which
the oversight from the Security Council was lessened and more
responsibility was actually put onto the Secretariat, upon the
U.N. officials, to approve contracts without having them go
through the Security Council. So whatever limited oversight the
Security Council had been providing previously, which was
limited, was decreased.
Mr. Stupak. No way in the Security Council or any form in
the U.N. does the Secretary General have a vote on the Security
Council or anything?
Mr. Fawcett. No.
Mr. Whitfield. Gentleman's time has expired.
Mr. Stupak and I had two opportunities. If there is anyone
else who wants to ask a question, then we will terminate this
panel. Mr. Burgess was recognized first. Mrs. Blackburn.
Mrs. Blackburn. Thank you, Mr. Chairman. I did have just a
couple more questions that I wanted to come back to now that we
are through this, and I know we are all ready to hear from Mr.
Anderson.
Dr. Gordon, I would like to come back to you. You have a
great deal of knowledge of the inner workings of the U.N. and
seem very supportive of what you saw carried out in this
program. It had been reported and we had heard that Chief of
Staff Riza had shredded some documents that were related to the
program. Do you know if he had the authority to shred those
documents and who may have given him that authority? Do you
know anything about that situation?
Ms. Gordon. The only small amount I know about is the
documents were redundant. They were a second set. Other than
that, I don't know anything about that event.
Mrs. Blackburn. And then talking again about Mr. Sevan, my
question--and since you have knowledge of the workings of the
U.N. in this program, my question to you would be, how did he
manage to seemingly disobey U.N. rules and not really raise any
suspicions, just kind of work, you know, on his own framework
or maybe on his own timetable or maybe under his own direction,
if you will? Do you have any insight you could offer to that?
Ms. Gordon. Your question is----
Mrs. Blackburn. How is he able to do it without raising
suspicions within the U.N. Organization?
Ms. Gordon. You are referring specifically to the claim
that he received an oil voucher?
Mrs. Blackburn. Uh-huh.
Ms. Gordon. I assume in the same process as has been
described before. The way the Security Council designed this
program is that the company names were registered and the
company names, as long as they were sold--as long as those
companies corresponded to the contracts and the contracts
conformed to the formulas approved by the 661 Committee, that's
what took place. What happened with the vouchers was entirely
outside that system. None of the vouchers at any point would
have come through that system.
Mrs. Blackburn. So then what you are saying is you don't
think there was oversight of his activities in that regard and
that would not have been abnormal for there not to have been
oversight of his activities?
Ms. Gordon. There is enormous oversight of his activities.
If you look at the reports he presented----
Mrs. Blackburn. Within a certain framework.
Ms. Gordon. If you want to know whether the voucher came
through, obviously, it did not.
Mrs. Blackburn. Mr. Chairman, I yield back.
Mr. Whitfield. Mr. Burgess.
Mr. Burgess. Thank you, Mr. Chairman.
Just a couple of additional questions for Mr. Smego.
On the documents that have been provided to us in the
binder, I believe it is document number 7, in that your
translation work showed you that there was opportunity to
discuss the political fortunes of Mr. Chirac of France and Mr.
Putin of Russia, is that correct?
Mr. Smego. Yes, specifically the people through whom the
French President Jacques Chirac and Russian President Vladimir
Putin could be approached by the Iraqi intelligence service.
Mr. Burgess. Are there other documents then that show that
Russian political figures received oil allocations from Saddam
Hussein?
Mr. Smego. Certainly. There were some documents from the
Russian Asbecht. For example, Exhibit 30, which is a
spreadsheet, handwritten, that outlines the different oil
allocations during phase 7, specifically, the second
handwritten point at the bottom for Mr. Zhirinovsky and the
third for Ms. Sazhi in the political Science Committee. Ms.
Sazhi was identified as the head of the peace and unity party
of Russia.
Mr. Burgess. I know Mr. Waxman has pointed out this is our
13th hearing, but bear with me because this is my first. Who is
Vladimir Zhirinovsky?
Mr. Smego. Vladimir Zhirinovsky was the head of the Russian
liberal democratic party.
Mr. Burgess. And could you walk us through the documents
that show that Mr. Zhirinovsky received oil allocations from
Saddam Hussein?
Mr. Smego. I believe starting off at 26--starting off at
Exhibit 23, Mr. Zhirinovsky requested some cooperation in
contracting.
Exhibit 24 discusses the subject of the special quantity of
crude oil to Mr. Vladimir Zhirinovsky, and the company
belonging to Mr. Zhirinovsky has not registered itself in the
United Nations until now.
Exhibit 26 would be a memorandum from Tariq Aziz to the
minister of oil regarding a Russian delegation that was going
to arrive in October 1997 to complete the special contracts
regarding the Oil-for-Food products and that the Saddamco
company is registered in Iraq and the United Nations to
purchase oil on behalf of that Russian liberal democratic
party.
Subsequent Exhibit 27 mentions 1.8 barrel contract during
phase 2 for Saddamco. That is on October 7, approximately 2
days after that delegation was to arrive.
Mr. Burgess. Thank you, Mr. Chairman. I yield back.
Mr. Whitfield. Thank you, Dr. Burgess.
I thank this panel for their testimony today, and at this
time you are dismissed.
We will call our second panel: Mr. Gerald C. Anderson, who
is the Director of the Office of Peacekeeping, Sanctions and
Counterterrorism, U.S. Department of State. Mr. Anderson, good
afternoon. You are aware that the committee is holding an
investigative hearing and when doing so we have had the
practice of taking testimony under oath. Do you have any
objection to taking testimony under oath or giving it under
oath?
Mr. Anderson. No objection.
Mr. Whitfield. The Chair then advises you that under the
rule of the House and the rules of the committee you are
entitled to be advised by counsel. Do you desire to be advised
by counsel during your testimony today?
Mr. Anderson. No, thank you.
Mr. Whitfield. If you would please rise and raise your
right hand, I will swear you in.
[Witness sworn.]
Mr. Whitfield. You are now under oath.
Mr. Anderson, you may give your 5-minute opening statement.
I didn't want Mr. Stupak----
Mr. Stupak. I am listening.
TESTIMONY OF GERALD C. ANDERSON, DIRECTOR, OFFICE OF
PEACEKEEPING, SANCTIONS AND COUNTERTERRORISM, U.S. DEPARTMENT
OF STATE
Mr. Anderson. Mr. Chairman and distinguished members of the
committee, 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.
The Oil-for-Food program was adopted in 1995 to alleviate
the serious humanitarian crisis while maintaining comprehensive
restrictive measures on items that Saddam Hussein could use to
then pose a threat to his neighbors in the region and this at a
time when many were calling for an end to those restrictions.
The 661 Committee monitored the implementation of the Oil-for-
Food program and through each of its members was also
responsible for reviewing humanitarian contracts, oil spare
parts contracts and oil pricing submitted on a regular basis by
Iraq to the U.N. for approval. The U.S. delegation was an
active participant in all such reviews.
However, the 661 Committee operated on a consensus basis as
a subsidiary body of the Security Council. The efforts of the
U.S. and the United Kingdom to counter or address noncompliance
were often negated by other members' desires to ease sanctions
on Iraq, often exacerbated by the actions of certain key member
states in advancing self-serving national economic objectives.
Clearly, the sanctions failed to force the regime of Saddam
Hussein to comply with international obligations, but they did
succeed in limiting Iraqi efforts to rebuild their military
capabilities. The major shortcomings of the OFF program have
been widely documented in recent months, but the program did
succeed in its basic humanitarian objective of ensuring that
the Iraqi people were adequately fed.
Much of what the U.S. Government could and could not
achieve with regard to monitoring the program was directly
related to the politics surrounding Iraq and the Security
Council. U.S. efforts to keep the comprehensive sanctions
regime in place were repeatedly challenged by Council members
whose national firms would derive economic benefit from the
lifting of sanctions.
Indeed, starting in the mid 1990's and continuing to 2001,
these pressures to lift sanctions grew. Violations with respect
to the Oil-for-Food program manifested themselves in a whole
pull-down menu of manipulative mechanisms in order to
circumvent the sanctions, including surcharges, topping off,
influence peddling, product substitution, product diversion,
phony service contracts, phantom spare parts, shell
corporations, illusory performance bonds, hidden bank accounts
and plain old-fashioned bribery and kickbacks to the tune of
several billion dollars.
Mr. Chairman, some members of the Security Council did not
take their international obligations seriously and either
directly or indirectly facilitated sanctions busting activities
by the Saddam 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; and, as the
recent Volcker Committee reports indicate, there are serious
charges that U.N. officials may have allowed Saddam to further
undermine their system.
When in late 2000 the U.N. Oil overseers reported excessive
premiums on oil experts, the 661 Committee, led by the U.S. and
the U.K., 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 oil companies approved to lift Iraqi oil,
evidence of the illicit surcharges continued during the spring
of 2001.
The U.S., 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, 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. As a result, by the spring of 2002, the oil price
variation or surcharge for market levels had been reduced from
as much as $.50 per barrel to an accepted industry variation of
$0.03 to $.05 per barrel.
Allegations of kickbacks to the Oil-for-Food program began
to surface in late 2000. The U.S. and British experts raised
this issue with the 661 Committee experts and the Office of
Iraq Programs representatives in 2000 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 the allegations,
and other committee members claimed that, without this
evidence, no action can be taken.
The United States frequently provided members of the 661
Committee and the Security Council with information and
evidence of sanctions violations by the Saddam regime,
including on Saddam's diverting funds to benefit Iraq's elite
and on his 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.
U.S. commanders of the multi-lateral interception force in
the Gulf briefed the committee each year starting in 1996 on
illegal smuggling of Iraqi crude oil, including through the
unauthorized use of ferry services from neighboring states.
An equally noteworthy source of oil smuggling was through
Iraq's pipeline with Syria which restarted in late November
2000. The U.S., in coordination with the U.K., repeatedly
raised concerns over this blatant noncompliance only to be told
by Syria that the pipeline was, quote, being tested.
Mr. Chairman, thank you for this opportunity to appear
before the committee. I now stand ready to answer whatever
questions you and your fellow committee members may have.
[The prepared statement of Gerald Anderson follows:]
Prepared Statement of Gerald C. Anderson, Director, Office of
Peacekeeping, Sanctions and Counter-Terrorism, Bureau of International
Organization Affairs, U.S. Department of State
Mr. Chairman, distinguished members of the Committee, 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.
Mr. Chairman, let me start by discussing why the Iraq sanctions
were imposed and why the Oil-for-Food Program was established. Four
days after Iraq invaded Kuwait in 1990, the Security Council adopted
Resolution 661, which imposed comprehensive trade and financial
sanctions against the former Iraqi regime. The United States government
supported this measure as part of a larger strategy to force Iraq to
cease hostilities and to withdraw its forces from Kuwait.
At the end of the Gulf War in 1991, the Security Council adopted
Resolution 687 that extended comprehensive sanctions on Iraq to ensure
that Saddam Hussein complied with the major provisions of the
ceasefire. By retaining the sanctions, the Council also sought to deny
Iraq the capability of rearming or constituting its weapons of mass
destruction and other military programs.
The sanctions were not anticipated to remain in place for more than
a year or two before Saddam complied. We now know that Saddam chose not
to comply. By 1995 in the wake of deteriorating humanitarian conditions
in Iraq, many in the international community called for an end to the
restrictions, reflecting concern that the impact of the sanctions was
being borne primarily by the innocent Iraqi civilian population.
In April 1995 the Security Council adopted Resolution 986,
establishing the Oil-for-Food Program to alleviate the serious
humanitarian crisis while maintaining comprehensive restrictive
measures to deny Saddam access to items that he could use to again pose
a threat to his neighbors in the region.
The sanctions committee that was established under Resolution 661
in 1991, the 661 Committee, monitored the implementation of the overall
sanctions regime on Iraq, and after the adoption of Resolution 986, it
also monitored the implementation of the Oil-for-Food Program.
The 661 Committee, like all sanctions committees, operated as a
subsidiary body of the Security Council. Unlike the Council, decisions
were made on a consensus basis requiring the agreement of all parties
and members. In addition to providing general oversight of the Oil-for-
Food Program and to monitoring member state compliance with the
sanctions, the committee, through each of its members, was also
responsible for reviewing humanitarian contracts, oil spare parts
contracts and oil pricing submitted on a regular basis by Iraq to the
U.N. for approval.
The U.S. delegation was an active participant in all such reviews.
The efforts of the U.S. and the United Kingdom to counter or address
non-compliance were often negated by other members' desires to ease
sanctions on Iraq. The atmosphere in the committee, particularly as the
program evolved during the late 1990s, became increasingly contentious.
The fundamental political disagreement between members over the
Council's imposition of comprehensive sanctions was often exacerbated
by the actions of certain key member states in advancing self-serving
national economic objectives. In retrospect, although the consensus
rule often stymied progress in the committee, that same consensus rule
helped the U.S. achieve its objectives in a number of critical ways.
The imposition of a retroactive pricing mechanism and our ability
to place holds on humanitarian contracts that contained potential dual-
use items were both made possible by the use of the consensus rule.
Judging the success or failure of the Iraq sanctions depends on the
view of their objectives. Clearly they failed to force the regime of
Saddam Hussein to comply with its international obligations. But they
did succeed in limiting Iraqi efforts to rebuild their military
capabilities after the Gulf War. As regards the Oil-for-Food Program,
similar considerations apply. The major shortcomings of the program
have been widely documented in recent months, but the Oil-for-Food
Program did succeed in its humanitarian objective of ensuring that the
Iraqi people were adequately fed, thus limiting the impact of sanctions
on them.
Much of what the U.S. Government could and could not achieve with
regard to monitoring the program and implementation of the sanctions
was directly related to the political situation surrounding the
contentious issue of Iraq in the Security Council and in the 661
Committee. U.S. efforts to keep the comprehensive sanctions regime in
place repeatedly were challenged by Council members who complained
about the humanitarian impact of sanctions on the Iraqi people, and
whose national firms would derive economic benefit from the lifting of
sanctions. Indeed, starting in the mid-1990s and continuing into 2001,
these pressures to lift sanctions grew.
Violations with respect to the oil-for-food program manifested
themselves in a whole pull-down menu of manipulative mechanisms in
order to circumvent the sanctions, including surcharges, topping off,
influence pedaling, product substitution, product diversion, phony
service contracts, phantom spare parts, shell corporations, illusory
performance bonds, hidden bank accounts and then plain old fashioned
bribery and kick backs to the tune of several billion dollars.
Let me provide examples in two key areas: manipulation of oil
pricing and kickbacks on the oil-for-food program.
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 committee members verified that the purchase price of the
petroleum and the petroleum products were reasonable in light of
prevailing market conditions. Evidence that the Iraqis were attempting
to impose excessive price premiums on oil exports to exploit
differences between oil prices approved by the 661 Committee and
subsequent fluctuations in global oil prices surfaced as early as the
fall of 2000, when the UN oil overseers informed the 661 Committee of
instances in which the GOI was requesting imposition of an additional
fee on the sale of Iraqi crude.
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 with 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 committee
and the goods shipped, the U.N. inspections agent, Lloyds 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. There were, in hindsight, substantial problems
related to all of these areas of responsibility. Some members did not
take their international obligations seriously and either directly or
indirectly facilitated sanctions-busting activities by the Saddam
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. And as the recent Volcker Independent Inquiry Committee
reports indicate, there are serious charges that U.N. officials may
have allowed Saddam 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.
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 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 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 3 to 5 cents.
Separately, allegation 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's 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 regime, during various briefings. The United
States briefed Security Council members in 2000 on the various ways the
Saddam 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 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 of 2002, a U.S. interagency team briefed the 661 Committee
on the regime's diversion of trucks. U.S. commanders of the
Multilateral Interception Force, or MIF, 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. MIF Commanders in
2001 and 2002 briefed the 661 Committee and highlighted the continued
attempts by Saddam Hussein to circumvent sanctions by illegally
exporting oil and illicitly importing materials into Iraq through the
unauthorized use of ferry services from neighboring states.
The MIF operating in the Persian Gulf enjoyed success from 2000-
2001 in significantly reducing the number of small vessels operating
out of Shatt al-Arab that were smuggling Iraqi oil along Iran's
southern coast. An equally noteworthy source of oil smuggling prior to
the 2003 Iraq war was the illegal flow of oil through Iraq's pipeline
with Syria, which restarted operations in late November 2000. The
United States, in coordination with the UK, repeatedly raised concerns
over such blatant non-compliance, only to be told by Syrian
representatives that the Iraq-Syria pipeline was ``being tested,'' but
was not operational.
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.
Mr. Chairman, thank you for this opportunity to appear before the
committee, I now stand ready to answer whatever questions you and your
fellow committee members may wish to pose.
Mr. Whitfield. Thank you, Mr. Anderson.
How long have you been with the State Department?
Mr. Anderson. I joined the State Department in August 1980.
Mr. Whitfield. How long have you been involved in this oil-
for-food issue?
Mr. Anderson. I became director of this office in July
2004.
Mr. Whitfield. Who was the U.S. representative on the 661
Committee?
Mr. Anderson. The 661 Committee was a committee of the
Security Council; and, therefore, our mission was represented
and our permanent representative was the senior representative.
But most committee sessions were attended by our sanctions unit
chief at the U.S. mission to the United Nations in New York.
Mr. Whitfield. Now, in your testimony, you talk about that
self-serving national economic objectives often worsened
fundamental political disagreements between members of the
Security Council. Can you provide a specific example of this?
Mr. Anderson. The reference there was, by looking at the
members of the Security Council and the 661 Committee with whom
we debated measures to deal with noncompliance, with sanctions
and with these various manipulative devices that I listed in my
statement, it was clear that countries that had an interest in
selling more of their products, their companies' products to
Iraq, tended to take positions more favorable to Iraq.
Mr. Whitfield. The oil surcharge would be one example?
Mr. Anderson. That would be one example.
Mr. Whitfield. When did the U.S. become aware that Saddam
was demanding an oil surcharge?
Mr. Anderson. The oil overseers first informed the 661
Committee in December 2000 about the blatant attempts to impose
the surcharges of up to $0.50.
Mr. Whitfield. Did the U.S. raise concerns about this with
the 661 Committee?
Mr. Anderson. Yes.
Mr. Whitfield. How many times did they attempt to address
the issue of oil surcharges with the 661 Committee?
Mr. Anderson. As I mentioned, over 40 times. I have a list
of a number of particular dates when those issues were raised,
and I would characterize it as an iterative process where we
sought to find a solution that would be acceptable to the
committee through a consensus of the committee and would also
be effective in ending the oil surcharges.
Mr. Whitfield. And the U.S--I assume you made written
requests about this or sent written documents to the committee
expressing their concern?
Mr. Anderson. We did submit a number of written documents
accompanying our various proposals on this issue over time.
Mr. Whitfield. And which states resisted American efforts
to eliminate the surcharge?
Mr. Anderson. Generally speaking, the U.S. and the U.K.
Were like-minded in general. Occasionally, we had some
differences of opinion on tactics, but we were generally with
them and the other permanent members of the Security Council
and some of the nonpermanent members of the Security Council
such as, for example, Syria who, during part of the program,
during one 2-year period was a member of the Council and a
member of the Committee.
Mr. Whitfield. Basically, France, Russia and China were
those----
Mr. Anderson. Those were the other three permanent members.
Mr. Whitfield. What were their stated reasons for objecting
to removing the surcharges?
Mr. Anderson. In general, the first type of reaction to
proposals to deal with the surcharges was challenging the
evidence that was available for the surcharges. Another common
argument was to claim that action on the surcharges would
affect the humanitarian situation in Iraq negatively or would
cause the net revenue coming into the program to decline, which
would therefore reduce the amount of funds under the program
available to procure humanitarian supplies.
Mr. Whitfield. And yet the surcharges themselves were
definitely reducing the amount of money, humanitarian aid going
to Iraq?
Mr. Anderson. That was clearly our argument, Mr. Chairman.
Mr. Whitfield. But you were never successful in getting
them to correct that, is that correct?
Mr. Anderson. That's correct. We did, however, de facto
implement a system of retroactive pricing that was referred to
in the first panel, which we implemented not by consensus in
the committee, because we never obtained a consensus, but
through the system of holds on oil prices. In other words, we
exercised our right under the consensus system to place a hold
on any oil contracts until the end of the month when it was
known what the market price for that oil was during that month.
And that was the mechanism that we used to implement
retroactive pricing. It was over the objections of other
members of the committee.
Mr. Whitfield. In some of our testimony, Dr. Gordon--my
impression was that everything decided at the 661 Committee had
to be unanimous and the fact that the U.S. was not objecting
seemed to indicate that the U.S. was going along with
everything that was happening. But what you have just described
is a little bit different than that.
Mr. Anderson. Mr. Chairman, I'm not sure which issue your
reference to objecting is, but I would just reiterate there
were many disputes within the committee over policy decisions
and the----
Mr. Whitfield. There were a lot of disputes, I take it?
Mr. Anderson. Yes.
Mr. Whitfield. In Exhibit 46, I notice that the U.S. was
willing to consider other alternatives to retroactive pricing
in order to get rid of the surcharges, is that correct?
Mr. Anderson. Yes, Mr. Chairman. Exhibit 46 is a document
that analyzes various responses from various members of the 661
Committee to the problem of surcharges. This is a matrix that
was drawn up at one point during the 6 months of debate within
the committee on how to deal with this problem, and it
illustrates the range of ideas that were under discussion. When
you add up the various positions, you can see why we were not
able to reach a consensus that we felt would be effective.
Mr. Whitfield. Why did the U.S. and Great Britain desire
proactive pricing to be conditioned on a mandatory lifting
requirement?
Mr. Stupak. This document number 46, could you tell us the
source of that document?
Mr. Whitfield. Came from the State Department.
Mr. Stupak. Does Mr. Anderson have that in front of him?
Mr. Anderson. Yes, I do.
Mr. Stupak. Do you recognize that as a State Department
document?
Mr. Anderson. I know from conversations with colleagues at
our mission to the United Nations that it is a United States
document. It was prepared in New York by our mission.
Mr. Whitfield. Can you explain why the U.S. and Great
Britain desired proactive pricing to be conditioned on
mandatory lifting requirements?
Mr. Anderson. Mr. Chairman, I'm not an expert by any means
on the oil market, but I understand from others who were--whose
reasoning was behind that decision that that method would be
more effective in eliminating the surcharges. Because, as I
believe we heard described in the first panel, if a company
that was going to lift oil was not aware at the time they
agreed to lift what the price would be, it would not be
possible to make an agreement with the Iraqi side for a
surcharge. And if they were able to get out of that lifting
obligation, then that arrangement would no longer apply.
Mr. Whitfield. Now you mention in your testimony that
members of the 661 Committee did not take their international
obligations seriously. Could you be more specific in terms of
particular countries and examples?
For example, with respect to holds placed on humanitarian
contracts, can you estimate what percentage of holds were
placed by the U.S. and British due to concerns over potential
dual-use capabilities?
Mr. Anderson. I would say the vast majority of holds placed
by the U.S. and U.K--over 99 percent of those holds were placed
because of concerns about potential dual uses. There were a
very small number of cases where some participants in the
interagency review process that took place in Washington of the
oil contracts signaled a concern about the pricing of the
contract as potential evidence of a kickback taking place. But
in almost every case, even contracts that had a pricing concern
were placed on hold officially because of concerns about dual
use.
Mr. Whitfield. So if--you are saying over 90 percent by
U.S. and Great Britain and 10 percent or less was for holds
placed by the countries only?
Mr. Anderson. If I understand the question, it goes to the
percentage of all holds placed by the committee and how many of
those were placed by the U.S. and U.K. And my understanding is
that, indeed, over 90 percent were placed by the U.S. and U.K;
and, therefore, all other members--the other 13 members of the
committee were only responsible for 10 percent of those holds.
Mr. Whitfield. I have no further questions at this time. I
recognize Mr. Stupak.
Mr. Stupak. Thank you.
Mr. Anderson, do you agree that there was a serious
humanitarian crisis in Iraq in 1995?
Mr. Anderson. I would say, sir, and all the evidence that I
have seen indicates that there was, indeed.
Mr. Stupak. I'm looking at page 3 of your testimony, first
main paragraph there. It says, the Oil-for-Food program did
succeed in its humanitarian objective of ensuring that the
Iraqi people were adequately fed, thus limiting the impact of
the sanctions on them. Is that correct?
Mr. Anderson. Yes, I think that's correct. And I would call
your attention to the precise wording. Adequately fed does not
mean luxuriously fed or any situation that we would all wish,
but adequate, yes.
Mr. Stupak. The illegal profits or sales of this oil and
commodities--let's just say oil--where Saddam Hussein received
these kickbacks or money to do what he wished outside the Oil-
for-Food program, it's been estimated that half of this illegal
money came from sales to countries like Jordan, Syria, Turkey,
is that correct?
Mr. Anderson. As I understand from studies that have been
done of the oil market from that period, for example, the GAO
study that I think you're familiar with, that is the case, yes.
Mr. Stupak. If the United States was pushing in the U.N. to
make sure that the Oil-for-Food program was properly followed,
as they should have, then why would the U.S. allow Saddam to
receive about half of his money through these illegal sales?
These sales were in violation of the sanctions against Iraq?
Mr. Anderson. Yes, sir. That's correct. That's the reason
that the U.S. Government under the Foreign Assistance Act
certified to the Congress that assistance to Jordan every year
starting in 1991 and to Turkey every year starting in 1996 was
in the national interest despite their violations of U.N.
Sanctions.
Mr. Stupak. Doesn't that send a mixed signal to everybody
else? Like the sales to Jordan and Turkey, we will say that is
in violation of the sanctions, but we'll look the other way.
But if anyone else comes up with anything where they receive
something that would be in violation of sanctions, we are going
to put a hold on it or we're going to try to enforce them in
the 661 Committee? Isn't that sort of a--how do you put
credibility into a program when you look the other way when
it's in your political interest and then yet you admonish
others for doing the same thing you are doing?
Mr. Anderson. Jordan came to the 661 Committee in 1991 with
a request for relief from the sanctions, alleging that the
enforcement of the sanctions and a ban on oil trade with Iraq
would cause severe economic hardship to Jordan. Turkey also
submitted a similar request for relief. The judgment of the
U.S. Government as reflected in those certifications to
Congress was that indeed there was--it was in the U.S. interest
to take that approach.
Within the U.N. system, the Jordanian request was never
granted officially, but the committee ``took note,'' was the
terminology that they used, of the trade between Jordan and
Iraq. And the U.S. in many bilateral diplomatic exchanges with
Jordan suggested that the trade with Iraq in the other
direction, in other words, the compensation that Jordan paid to
Iraq, should only be in barter terms with humanitarian goods.
In the case of Turkey, the 661 Committee never acknowledged the
request; and the U.S. also had many diplomatic exchanges with
Turkey about attempting to limit those purchases from Iraq.
Mr. Stupak. As I said in my opening, it's a geopolitical
decision, but I think we lose credibility when we start talking
about sanctions and what other countries can do. Even though
Jordan and Turkey did go to the standing committee, it sounds
like the standing committee did not approve it, but yet the
U.S. did as a matter of policy. We're supposed to be the big
enforcer, us and the United Kingdom, to say these sanctions
have to work; and if they work, we have to play by the same
rules. When it was to our interest, we forget the rules,
correct?
Mr. Anderson. What Jordan and Turkey were doing was not a
secret. It was known to the committee and made clear to the
world and U.S. Congress and it is of a fundamentally different
character than this list of under-the-table, secretive,
manipulative means of gaining illegal revenue that the Saddam
Hussein regime engaged in.
Mr. Stupak. There are numerous allegations that prohibited
items also went to Iraq through Jordan. What kind of controls
did the Security Council have over this trade?
Mr. Anderson. For a period of time, Jordan had an
inspection system at its port in Aqaba of goods that were
entering Iraq that was run by a private contractor. And the
Jordanians assured us--and again, we had many diplomatic
exchanges with them to make sure that they would police that
trade to make sure that only those humanitarian goods were
traded back to Iraq in exchange for the oil.
Mr. Stupak. But we know that wasn't the case now, right?
Mr. Anderson. Every regime has exceptions, it has
violations, including in this case.
Mr. Stupak. Did the U.S. relieve its inspector of those
duties--that was supposed to be doing these inspections along
the border there in Jordan? Did Jordan have an inspector that
was supposed to be looking at these commodities to make sure
they didn't violate the understanding that only certain
humanitarian things could move from Jordan to Iraq? Did Jordan
remove its inspector who was supposed to be head of this
program and make sure that only the proper commodities went
into--or humanitarian products went into Iraq.
Mr. Anderson. I am not familiar with the details of that. I
can get an answer back to you.
[The following was received for the record:]
This question should be directed to the Government of Jordan, which
had responsibility for its side of the border.
Mr. Stupak. If you would, please. Thanks. In June 1997, the
United States and the United Kingdom told the sanctions
committee that it was, ``beyond the committee's competence to
approve exports of Iraqi oil,'' to Jordan. Such approval raised
all sorts of questions which had been put aside over the past
few years, the U.S. stated. Is this your understanding of the
situation concerning illegal trade between Iraq and Jordan? Is
this your understanding?
Mr. Anderson. As I said earlier, the 661 Committee took
note of the trade, but the 661 Committee did not authorize it.
And the U.S. participated in that decision.
Mr. Stupak. You know, when we opened up the pipeline, and I
think it was you that said that, that it was supposed to be an
experiment at first just to make sure that it worked. But that
was their pipeline going up to Syria there.
Mr. Anderson. Yes, sir.
Mr. Stupak. After that, that pipeline never really shut
down. And that's where a lot of these illegal sales took place,
was through Turkey, and really outside the Oil-for-Food
program. Were any attempts made by the State Department to shut
that down?
Mr. Anderson. Many, many attempts, both by raising this
issue within the 661 Committee and also directly with Syria.
Mr. Stupak. And nothing ever happened. Right?
Mr. Anderson. That's correct.
Mr. Stupak. Okay. Was the State Department aware of all the
end use of all this oil that was being sold illegally, that the
end use was here in the United States?
Mr. Anderson. I believe the State Department received the
same kind of statistical reports on the oil industry that are
widely available to the industry. So I assume so. Yes, sir.
Mr. Stupak. I asked a question earlier that has been
bothering me. Maybe you can shed some light on it. I had asked
of the other witness, Mr. Fawcett, because he sort of raised it
in his report, that when we started in 1997, the first year of
the program, the United States was the biggest user of the
oil--Iraqi oil at 13 percent. By 1999, it rose to 35 percent.
And since September 11, the U.S. had been purchasing well over
50 percent of all Iraqi oil sold underneath the Oil-for-Food
program. And every year, it kept going up. And it's just not
clear why the U.S. would purchase such large quantities of
Iraqi oil under this program in the wake of September 11 and
the thoughts of going to war. Can you explain that? Was there
any State Department rationale why they would continue to buy
that oil?
Mr. Anderson. As far as I know, it wasn't a State
Department decision one way or the other on whether that oil
should be purchased. Those are transactions done by private
companies on the oil market within the framework of U.S. Law
and international law.
Mr. Stupak. Yeah, but still ended up here. Wouldn't you do
an investigation to try to enforce this so it did not end up on
the U.S. market? And if we are trying to be true to the spirit
of the sanctions, I would think you would not want Iraqi oil
coming in here since we have these sanctions against them.
Mr. Anderson. I think the simple answer to that is the oil
market is one big pool, and at one end, oil is put in.
Obviously, there are some limits on the particular qualities
that are for particular purposes. But if the oil is going into
that market from Iraq and the U.S. is purchasing oil, it really
doesn't matter whether a specific oil from Iraq ends up in the
U.S. or some other--it goes somewhere else and the U.S.
substitutes; it's one big pool.
Mr. Stupak. Thank you.
Mr. Whitfield. The gentleman's time has expired. At this
point, I will recognize Dr. Burgess for 10 minutes.
Mr. Burgess. Thank you. And thank you, Mr. Anderson, for
taking time to be with us here today. In your testimony, you
stated that, besides the surcharges and kickbacks, the United
States also brought to the 661 Committee evidence and
information concerning additional violations of the program,
the Oil-for-Food program. And we have got in our binder that
was provided to us Exhibit 45. And I guess, just like Mr.
Stupak, this is a document that is known to you. Correct?
Mr. Anderson. Yes, sir.
Mr. Burgess. Okay. Exhibit 45, an e-mail dated March 5,
2002, on truck briefing points. And this document describes a
situation where the United States apparently learned that Iraq
was diverting trucks imported under the program for military
purposes. Are you familiar with this?
Mr. Anderson. Yes, sir.
Mr. Burgess. Was this matter addressed within the 661
Committee?
Mr. Anderson. Yes, it was.
Mr. Burgess. And what was their feeling about this?
Mr. Anderson. This e-mail is dated 1 day before an
interagency group from the U.S. Government briefed the
committee on what we knew about the diversion of trucks that
were brought into Iraq ostensibly for humanitarian purposes and
were then diverted to military use. And this is precisely the
kind of concern that was uppermost in our mind within the
committee, in making sure that goods were not diverted to
military use. And that's why we went to the trouble of
presenting that briefing. And the result of that was a change
in the judgments of the committee on what types of trucks would
be considered humanitarian.
Mr. Burgess. Well, clearly, the United States and the State
Department were concerned. Were other members of the committee,
did they express concern or surprise that this diversion was
occurring?
Mr. Anderson. This is, sir, a rather typical exchange.
Typically, if someone presented information on a sanctions
violation of this sort, it was usually either the United States
or the United Kingdom. Typically, depending on the nature of
the evidence, if the evidence was very clear and compelling,
there wasn't too much that other committee members could say
about it. If the evidence was circumstantial, as sometimes was
the case when there would only be a newspaper article from the
press somewhere without any corroborating evidence, other
members of the committee would challenge that newspaper article
and would say that no action could be taken until there was
more substantial evidence. But in this particular case, the
evidence was quite compelling, and there was action taken.
Mr. Burgess. So the diversion of these trucks to military
use, I mean, what did France think was eventually going to
happen?
Mr. Anderson. Well, I think the position of other countries
on the committee typically was to react to the information that
was presented to them. And we've heard earlier described the
contract process, where contract documents would come to the
committee. They would look at that and approve the contract or
put the contract on hold. And then, if the--in this case, say a
truck contract said that it was going to be used for a hospital
or to transport food or just some civilian use, no one in the
committee would challenge that, they would accept that. But
then if you then subsequently showed them evidence that in fact
these trucks were going right from the port to the military
base being used by the Iraqi military and you have compelling
evidence of that, they then react to that and say, oh, well, of
course that's in violation of the sanctions, and that's not
acceptable.
Mr. Burgess. Well, then there's another--if we just skip
ahead to Exhibit 47 and let me ask the same question. Is this
an exhibit that is known to you? Is this an e-mail, internal e-
mail from the State Department as well?
Mr. Anderson. Yes, sir.
Mr. Burgess. This one describes the diversion of Ventolin
inhalers. Are you familiar with this incident?
Mr. Anderson. I'm familiar with the document, and I've also
had some conversations with colleagues who were involved in
dealing with it. Yes, sir.
Mr. Burgess. Now, did we, the United States, ever confirm
whether this medicine that was found in Syria actually came
from an Oil-for-Food shipment diverted from Iraq?
Mr. Anderson. We have initiated--since the staff of the
committee brought this particular document to our attention,
our mission in New York has been searching their records to
see, to get the answer to that question. As of today, they have
not found any indication that we did confirm that or that any
particular action was taken within the 661 Committee with
regard to this. But I would say, sir, that this is an example
of a fragmentary information on a possible sanctions violation.
We very frequently got such fragmentary information. It would
basically be a tip from a source, and we would take that
information as far as we could take it, and sometimes, it would
involve calling it to the attention of the U.N. Office of the
Iraq program and asking that they take particular care in
following such matters. In other cases, if it involved a
country that was a member of the Security Council on the
committee, raising--the fact of raising it in the committee
would mean that it was highlighted that it was going on, and we
would do that with the hope that that country would then
subsequently refrain from that type of behavior.
Mr. Burgess. But, of course, I mean, as you know, and we
have heard in this room this afternoon the United States has
taken a great deal of criticism from the United Nations and
from outside the United Nations from blocking the flow of
humanitarian goods into Iraq. Is it fair to conclude that the
Iraqi regime may have actually been cashing in on medicines
intended for its own people? And this is Ventolin; it's an
inhaler used for asthmatic children. And they were taking
this--it looks like they were taking this across the border,
turning it into cash for some other purpose. Do you think
that's a possibility?
Mr. Anderson. Absolutely.
Mr. Burgess. Well, given the obstacles for reform within
the United Nations, why didn't the United States, as Mr.
Fawcett has suggested, put public pressure on France, Russia
and others to eliminate this type of abuse? I mean, again, here
we have got a medicine to go to asthmatic Iraqi children we are
selling in the pharmacy of Damascus for whatever purpose, who
knows, and the money is coming back to the Saddam regime. Why
didn't--why wasn't more pressure put on France, Russia to--
Germany to stop this?
Mr. Anderson. I would say we certainly put tremendous
pressure on France and Russia, and then Germany of course
during the period that Germany is a member of the Security
Council, but certainly on France and Russia within the
framework of the council. And as far as public pressure, I
think, on the general issue of dealing with Iraq, there was a
tremendous amount of public pressure on France and Russia on
the overall issue of dealing with Saddam Hussein. With regard
to these specific violations, it would depend on the issue. I
mean, different countries could be involved at different times.
But certainly within the framework of the committee, it was
very clear that there was a struggle under way between the U.S.
and the U.K. On the one hand and the other three permanent
members, Russia, France and China, on the other, on a whole
range of issues. During the period before the smart sanctions
that were addressed earlier when we were reviewing every single
contract there was a lot of discussion about contract holds
that the U.S. and the U.K. placed because of weapons of mass
destruction or dual-use concerns. Many of those contracts were
from--were submitted by companies in Russia and France or
China. And we were under tremendous pressure from those
governments to release the holds. So it was very clear that
there was a lot of tension over those.
Mr. Burgess. And I'm certain there was. But, golly, this
looks pretty blatant. I mean, you have got a medicine that's
used for asthmatic children in the country of Iraq, and you are
selling it in Damascus on the black market. I mean, I fail to
see why that's--you know, just like the other stuff we heard
about, about the infant formula, paying 25 percent more than
you know you should be paying for it. It's almost as if there
was--well, I'm not going to say it. But it looks like this was
a premeditated act at so many levels that I just simply can't
shake that thought.
Mr. Chairman, I will yield back my time.
Mr. Whitfield. Thank you, Dr. Burgess. At this time, I will
recognize Mrs. Blackburn for 10 minutes.
Mrs. Blackburn. Thank you, Mr. Chairman. And I want to
thank Mr. Anderson, and two of our other witnesses are still in
the room. I want to thank them for their time today. This is
something that is of tremendous interest not only to us but to
our constituents. And I also want to thank the chairman and the
ranking member for their work on getting everything ready for
the hearing today.
Mr. Anderson, let me just ask you this as a matter of
background, and I think as we look at this and as our
constituents, I know we have many who are watching the hearing
and listening to the things that are going on here. Were you at
the State Department in 1991 when Resolution 661 was passed?
Mr. Anderson. I was at that time on assignment overseas,
and I was not dealing directly with Iraq or the United Nations
at that time.
Mrs. Blackburn. Okay. And then when Resolution 986, in the
mid 1990's, were you there at that point?
Mr. Anderson. No.
Mrs. Blackburn. You were not. Okay. And then for the
record, let's just go ahead. In 1991, who was our Secretary of
State and our U.N. Ambassador?
Mr. Anderson. 1991, that was the late Bush period. So that
would have been Mr. Baker as our Secretary of State at that
time.
Mrs. Blackburn. All right.
Mr. Anderson. And our U.N. Ambassador, I would have to
check the list. It was probably the period of Ambassador
Pickering, I believe.
Mrs. Blackburn. And then in the mid 1990's?
Mr. Anderson. Mid 1990's, I guess it depends which year,
whether it would be in the Clinton administration, or are you
referring to the----
Mrs. Blackburn. That would have been?
Mr. Anderson. Madam Albright was our representative, our
permanent representative at the U.N. And then Mr. Holbrook.
Mrs. Blackburn. All right. Okay. And so what I wanted to do
was be certain that we realize who was at the State Department
and who was our U.N. Ambassador during that period of time and
who was in charge of overseeing, and then as I said, for
clarification, I felt like it was important to notice to
whether you were there or you were involved. Because I think
it's important for people to realize, you know, we talk a lot
about--we use a lot of acronyms and a lot of numbers in DC, and
sometimes, it allows us to gloss over the importance of the
Iraq steering committee. And this group that was put in place
by Resolution 661 just simply by using numbers, you know, it
does not speak specifically to the mission that these folks
were given in looking at sanctions and looking at the oil and
the commodities and the proper use of those items and of the
proceeds from the sale of that oil.
And I think that, many times, as we go back and we are
looking hindsight, using the advantage of hindsight in looking
at this, we have a tendency to say, how did the wheels come off
of this? And how did it get to be so seemingly out of control?
And that is hard for us to get our arms around, what appears to
be just a blatant disregard for humanitarian aid and for the
welfare and well-being of people, not to mention respect for
the law.
You have mentioned in your testimony a couple of different
places on page 2 and 3 about the political debate and impeding
action against violators of the program. And you mentioned
earlier in your remarks, the U.K. Was generally with us.
Mr. Anderson. Yes.
Mrs. Blackburn. And then to Dr. Burgess' response you
mentioned against the French and Germans. And how much of the
pressure to turn a blind eye, if you will, to any actions
against the violators, how much of that came from the French
and Russian governments?
Mr. Anderson. I would say, ma'am, that I would turn that
image around.
Mrs. Blackburn. Okay.
Mr. Anderson. And I would say that the pressure from the
U.S. and U.K. To look into violations was quite strong. And we
got similar pressure back from countries that were most
interested.
Mrs. Blackburn. You got the push back from the French and
the Russians.
Mr. Anderson. Yes. That's correct.
Mrs. Blackburn. Considerable?
Mr. Anderson. Considerable pushback? In particular with
regard to contracts that involved companies from those
countries.
Mrs. Blackburn. Okay. During this period of time, the mid
1990's, do you know if there was a relationship between Kofi
Annan and Cotecna?
Mr. Anderson. I don't have any familiarity with that beyond
what I read in the second report of the Volcker Commission.
Mrs. Blackburn. Do you know if Kojo Annan was involved in
any way at that point? Are you aware of anything from there?
Mr. Anderson. I would refer you to the report. That's the
source of what I know. He was employed by Cotecna, and the
dates of his employment and the conditions are detailed in the
Volcker Commission's report.
Mrs. Blackburn. You also mentioned in your testimony that
there were regular briefings on the program that were given to
the Security Council Ambassadors.
Mr. Anderson. Yes.
Mrs. Blackburn. And what feedback did they give and how
receptive did they seem to be to negative information?
Mr. Anderson. The--if I understand, ma'am, you are
referring to briefings by the United States on knowledge that
we had.
Mrs. Blackburn. Right.
Mr. Anderson. And I would say the reaction was typically
negative from members of the Council, other than the U.K. It
was typically--pushback was a good word, challenging the
veracity of our information, challenging whether or not there
was evidence to support the assertions that we were making.
There was a tendency to question the information the U.S. was
presenting.
Mrs. Blackburn. Did they give you as much resistance on
accepting negative information as they did to any type of
action against the violators of the program?
Mr. Anderson. I just want to see if I understand the
question, ma'am. The violators, are you referring to companies
or----
Mrs. Blackburn. Correct. You know, as we have talked about
the violators on the aid, and you mentioned in your testimony
some of the disagreements that were there, the fundamental
disagreement over dealing with some of these folks. My--and
what I'm trying to get to, Mr. Anderson, is how strongly they
would resist, the negative information, and then turn around
and deal--how strongly they would resist dealing with anybody
who was trying to impede what they saw as a benefit to the
French and Russian governments.
Mr. Anderson. Well, I think in general everybody on the 661
Committee accepted that violations of the sanctions regime
should not occur, in principle. But when it came down to
specific cases of violators, there tended to be a lot of debate
about the evidence, whether an actual violation had occurred
and whether one could be sure, based on the available evidence,
that it had occurred.
Mrs. Blackburn. Okay. You know, in the last panel, one of
the questions that I asked was if members of this committee,
the 661 Committee, the Iraq steering committee, whatever we are
going to call it, if they should come in and testify before
this committee, if we should have them there. And I would be
interested to hear from you if the State Department, what the
State Department's opinion would be on having those members
come in. Because I find it very interesting that it seems as if
there was a denial, an awareness of what was probably
happening, but then a choice to possibly not take action. So I
would be interested in what the State Department's opinion is
on that.
Mr. Anderson. Well, the members of the 661 Committee of
course were the 15 countries who were members of the Security
Council. And the individuals who were sitting in that committee
were all diplomats just as I am. So if I served--you asked,
ma'am, where I was in 1991. I was in Poland, for example, and I
dealt with the parliament of Poland. And occasionally they
requested that a U.S. diplomat would come and talk to them in a
committee setting like this. And our response to that was
always that we are always happy to talk to a committee, but we
are not happy to be subpoenaed by a committee because we have
diplomatic immunity. And I would guess that most diplomats from
the 15 countries who were on the 661 Committee, on the Iraq
sanctions committee, would probably react in a similar way;
that you might get people to talk to you, but I'm not sure that
you would get them to testify under oath.
Mrs. Blackburn. You are probably correct. And I thank you
so much for your answers.
Mr. Chairman, I will yield back.
Mr. Whitfield. Thank you.
I will recognize the gentleman from Florida for 10 minutes.
Mr. Stearns. Thank you, Mr. Chairman. I don't have a full
length of questions here, but I just wanted to ask Mr.
Anderson: Has your career pretty much been at the State
Department?
Mr. Anderson. Yes, sir.
Mr. Stearns. From when you got out of school, college?
Mr. Anderson. I was in West Africa as a Peace Corps
volunteer for 2 years after college. And then I came back to
Washington, and I completed my graduate studies before I joined
the Foreign Service and also worked at the Commerce Department
for a period of time during those graduate studies.
Mr. Stearns. So you have been at the State Department how
many years, would you say?
Mr. Anderson. 25 years.
Mr. Stearns. In your 25 years of being there, have you seen
anything like this occur? Generally, you find these type of
arrangements, that Saddam Hussein used oil allocations to
undermine the sanctions. It's not brand-new. In your
experience, have you seen other cases where this paradigm, this
model has occurred in all of your experience? Is this unique in
all of your professional history?
Mr. Anderson. Well, sir, I would say this particular
program, the structure of the program, the breadth of it, is
certainly unique. But since you referred to my career, I will
permit myself to refer to my experience in the Middle East. I
served 5 years altogether in the Palestinian areas and in
Israel. And I must say that, in the kind of approach to dealing
with the rule of law that we observed in this procedure was--is
something that one can see in other areas in the Middle East
also. Not on this scale, but the idea that business
transactions are not transparent, that there may be double-
dealing or triple-dealing is certainly not unknown in that
region of the world.
Mr. Stearns. That is what I am trying to get at. It seems
to me we have oil here, but you could have food. You could have
housing. You could have health. I mean, you could have a whole
series of commodities that could be used like oil. And in the
Middle East, there is a climate of quid pro quo, whether it's
money or other things. So what I'm trying to establish, in your
professional opinion, is this unique and egregious and
something that people couldn't say, Well, this is just how the
Middle East is and this is how everybody does it there. So this
program is no different than they have done for eons. And so
for Mr. Volcker to come here and try and do a report, he might
have a difficult time because he can't separate what is the
custom and culture. And so I need to hear from your
professional experience whether we are talking about something
here that is totally separate from the argument, that's part of
the culture.
Mr. Anderson. I would respond, sir, that this program is
different from what is typically the case in the Middle East in
several aspects. One, the size, because, we were talking
about----
Mr. Stearns. Billions of dollars.
Mr. Anderson. Billions of dollars and comprehensive
sanctions on an entire national economy.
Mr. Stearns. Over a long period of time.
Mr. Anderson. Over a long period of time. There's nothing
on that scale.
Mr. Stearns. So the scale of it, with the amount of money.
And, two----
Mr. Anderson. Complexity.
Mr. Stearns. Complexity. And, three, that it is over a long
period of time. It wasn't just a one-time transaction.
Mr. Anderson. That's correct.
Mr. Stearns. Do you have--now, just I'm asking in your
professional opinion here. And you can also give me a personal
opinion. Do you think Volcker is going to be successful in
trying to get to all the nooks and crannies here and get to the
bottom of this, considering the extensive amount of
relationships between nations and third parties? How do you get
to the bottom of this? And do you feel confident that you can?
What is your professional opinion?
Mr. Anderson. Sir, I would refer you to the mandate for
Volcker's committee. We were quite careful in approving the
U.N. Resolution that accepted the creation of the committee to
make sure that the mandate of the committee was limited. And,
indeed, if you look at it, it is limited to investigating
wrongdoing by U.N. Officials in violations of the rules that
were established by the sanctions committee. And that means
that other bad things that happened that were outside the
functioning of that--the Oil-for-Food program and the
procedures are certainly bad, but they may not be within the
mandate of the Volcker committee. So when you ask me, do I
think whether he will succeed, in answering that, I try to look
at what it is, what the task that he was assigned to.
Mr. Stearns. The question is, can he succeed on the task
given to him?
Mr. Anderson. I think it is always a question in any
investigation on whether he can get evidence for any
assertions. I think that he is--if you look at his first two
reports, I think you will see that he has uncovered a range of
assertions. Some of them have been better documented; others
have been less well documented. But he has included in his
report even things that are less well documented, and he might
presumably be continuing to investigate as that investigation
proceeds.
So I would say, since the Volcker committee is not a
judicial institution, it's an investigative committee, and the
results of that committee's work could be and may be forwarded
to national authorities in the appropriate countries.
Mr. Stearns. Where would that go, to the international
court?
Mr. Anderson. No. I don't think so. I think it would go to
national judicial authorities in appropriate countries for
prosecution if----
Mr. Stearns. Because, see, when you do an investigative
report, you really don't have this subpoena under oath, and you
are just asking questions and people can say what they want.
And so my concern is the range of answers and range of
interpretations, and this whole thing gets so murky. And it
seems to me we need more of a judicial investigation where you
have subpoena powers that he can put them under oath and there
is a case where we could, if they suborned perjury, that we
could actually put them in jail, even minor people. But I just
don't have the feeling that he has that kind of authority. Is
that true?
Mr. Anderson. That's correct. He does not have that
authority.
Mr. Stearns. So how can you investigate if you don't have
the authority to extirpate the truth?
Mr. Anderson. Well, I think what Mr. Volcker stated is that
he is preparing the best information that he can based on the
access he has, granted by the United Nations, and that this
information will be made available to member states including
the United States and our judicial authorities who do have
subpoena power and investigatory authority, who can
investigate, if they deem it appropriate, any of the cases that
might be described in the report of the Volcker committee.
Mr. Stearns. Just as an outside observer, we see that the
implication of some high Russian officials that has been in the
paper this week. Now, how much confidence--and I am just
rhetorically putting this question out--do we think Russia is
going to institute judicial prosecution against these high
Russian political officials?
Mr. Anderson. That's obviously up to Russia to decide. And
I won't comment----
Mr. Stearns. But by opening up that, they open up a can of
worms for their own policy positions at their government at the
highest level.
Mr. Whitfield. If I could interrupt. They informed us that
they are not going to do anything.
Mr. Stearns. So we've already heard from Russia that, even
if their highest officials are implicated, they are not going
to do anything. So, you know, it's a little frustrating I think
for us to look at the Volcker Commission and think that we are
going to get some solid answers, and, more importantly, there
are going to be results from it.
So, Mr. Chairman, with that, I just appreciate your having
the hearing and want to encourage this continued investigation.
But I think Mr. Anderson pointed out some problems with the
ultimate jurisdiction of Volcker and getting the member country
to prosecute the individuals that are guilty.
Mr. Whitfield. Thank you, Mr. Stearns.
At this time, I will recognize Mr. Inslee for 10 minutes.
Mr. Inslee. Thank you. Mr. Anderson, I do have a question,
but I need to say something before I start. So if you can just
bear with me for a couple minutes.
Yesterday, in preparation for the Democratic-Republican
baseball game, I pressed into service a young man who is a
neighbor of ours to play catch. And this young fellow, I
haven't seen for a couple of years, he's been in the Army and
he is scheduled for deployment in Iraq here probably early next
year I think. And the reason I mention that is that, with all
due respect to this hearing, I really would rather be
investigating how we can make sure that young man has the tools
available to keep him safe and how we can make sure that our
taxpayer money is not being wasted on contracts that have been
squandered, and how we can make sure that $80 million gets
accounted for so that we can put that into armored HMMVWs
instead of some rat's nest of profiteering in Iraq. And I've
been very disturbed that our institution, the U.S. House of
Representatives, is not getting to the bottom of why
contractors are disposing of millions of dollars of taxpayers'
money instead of having armored HMMVWs for our soldiers like my
neighbor who is going there early next year. I really think
that is a fitting subject of inquiry that I would hope that our
committee at some time can get to. We have made numerous
attempts on the floor of the House to do that. We need a Truman
commission in this regard, which, frankly, is a lot more
important than this subject.
I would also like to see an investigation of some of the
things coming out now about why my neighbor has to go to war
and how that takes place--how that took place. I read a note
from a London paper the other day from a July 23, 2002,
memorandum that said, ``In high-level meetings between the Bush
administration and the British saying military action is now
inevitable, Bush wanted to remove Saddam through military
action justified by the conjunction of terrorism and WMDs, but
the intelligence and facts were being fixed around the policy.
The case was thin. Saddam was not threatening his neighbors,
and his WMD capability was less than that of Libya, North Korea
or Iran.''
This is a smoking gun about what happened, why my neighbor
has to go to Iraq and be subject to hostility when a war
started based on false, fraudulent information. And that's what
I would like to see the U.S. Congress investigating so that my
neighbor doesn't get in harm's way in Iraq. Instead, we are
fooling around with the history of some oil effort that,
frankly, I don't think is going to keep him safe. And I hope at
some point the U.S. House of Representatives does its duty,
which is to have a Truman commission to investigate the
fraudulent use of taxpayer money and how this war started based
on false information. That's an investigation worthy of this
Congress.
But I want to ask you a question about this regard now,
turning to the subject of this hearing. I was looking at some
of the language, earlier witnesses have talked about, on
kickbacks. And they submitted a document that said that while,
``While the practice has usually been associated with weapons
procurement, it was also a regular feature of the Reagan
administration's agricultural support program to Iraq as
administered by the U.S. Department of Agriculture's commodity
credit corporation.'' In this guise, it was known as, ``after-
sales service.''
Do you know how that happened and what was going on there?
Mr. Anderson. I believe that program was administered by
the Agriculture Department, and I would have to get you an
answer from them or refer you to them. I'm not familiar with
that.
This question should be directed to the Department of Agriculture,
which administered that program.
Mr. Inslee. Thank you. I'll appreciate it if you can do
that. Now, you're in the office--you're the director of the
Office of Peacekeeping Sanctions and Counterterrorism. That's
your current title?
Mr. Anderson. Yes, sir.
Mr. Inslee. And what were you doing back in July 2002?
Mr. Anderson. July 2002, I was the counselor to the U.S.
embassy in Warsaw, Poland.
Mr. Inslee. Okay. So could you give us any information
about this British memorandum that suggests that the Bush
administration had made a decision to take military action in
July 2002 based on flimsy evidence, on thin evidence based on
assertions that WMD had less capability in Iraq that Libya,
North Korea or Iran? Do you know anything about that?
Mr. Anderson. No, I don't.
Mr. Inslee. I wish you did, because that's the thing I
would like to see the U.S. Congress finally figure out, how
this war started based on false information. Thank you.
Mr. Whitfield. I will recognize the gentleman from Michigan
for a brief remark.
Mr. Stupak. Thank you, Mr. Chairman. And I just want--you
know, today's hearing got off a little bit there on the wrong
foot with some documents coming into the--or wanted to be
admitted into the record. And, you know, we have always worked
well on this committee in a bipartisan manner; I hope we can
keep that up. In my opening statement I indicated to you that I
thought that we should do further investigation along these
lines, especially some of the U.S. interests in some of the
U.S. oil companies that may or may not have benefited from this
Oil-for-Food program. So I would hope in the weeks ahead that
we can take another look at that. We have a couple subpoena
requests that we had asked and documents we wanted from certain
documents; hopefully, the majority would honor that and sign
the subpoenas so we can get the documents front and center.
I think what the committee has done today is sort of tip of
the iceberg, but you can sort of see the frustration on this.
We all have strong feelings on this, even the last questioner
there, my friend from Washington, there, mentioned the impact
of this. It's more than just Food-for-Oil program; it's the
whole Iraq war and everything else, which sort of gets energy
levels up around here. And no disrespect meant to the Chair or
anything like that, but we do have some strong feelings on this
side as I'm sure you do on your side, and we'd like to use this
committee as being as bipartisan as we are and that, that we
continue to work on this issue, but hopefully, we can have a
full investigation including the areas that the minority would
like to explore through subpoena or interviews of companies.
And we would hope you would join with us in that request.
Mr. Whitfield. Thank you, Mr. Stupak.
And, Mr. Anderson, thank you for your testimony today. As
we all know, the chairman of the full committee has a real
interest in this whole subject matter, and I know that there
will be additional discussions as we move forward in trying to
make some determinations about which ways to go in further
hearings on this subject. So, with that, this hearing is
adjourned. And I appreciate your testimony.
[Whereupon, at 5:42 p.m., the subcommittee was adjourned.]
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<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
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<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<GRAPHIC OMMITTED> See the end of the file for all omitted graphics
<all>