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IRAQ: French Bank Caught Up in Oil-for-Food Probe

The chief executive officer of BNP Paribas-North America acknowledged the bank had committed "avoidable errors" in handling some of the vast program's accounts, but said an extensive internal probe had uncovered no outright fraud related to questionable transfers.

by David R. SandsThe Washington Times
April 29th, 2005

    The U.S. arm of French bank BNP Paribas approved hundreds of payments to unauthorized third parties under its contract with the United Nations' scandal-plagued Iraq oil-for-food program, bank officials told Congress yesterday.
    Rep. Dana Rohrabacher, the California Republican who chairs the House International Relations subcommittee on oversight and investigations, said the bank had been lax in monitoring who received the billions of dollars in transfers it processed under the seven-year program that ended in 2003. 
  "It makes me wonder if the bank cared at all about the risk it placed on its investors in running the oil-for-food program," Mr. Rohrabacher said.
    Everett Schenk, chief executive officer of BNP Paribas-North America, acknowledged the bank had committed "avoidable errors" in handling some of the vast program's accounts, but said an extensive internal probe had uncovered no outright fraud related to questionable transfers.
    "The bank has seen no indication that any assignment of proceeds or payment to any so-called 'third party' is causally linked to any corruption that may have occurred in connection with the oil-for-food program," he said.
    The money trail is critical because Saddam Hussein is accused of skimming about $10 billion in funds from the program, in part through kickbacks and inflated deals and in part from bribes to politically influential parties around the globe.
    Committee investigators focused on the case of Saudi-based Al Riyadh International Flowers Co., an approved supplier of humanitarian goods to Iraq under the U.N. program. At Al Riyadh's instruction, BNP Paribas officials reassigned its letter of credit to a Malaysian import-export firm, East Star Trading Co.
    BNP's U.N. contract specified that such letters of credit could be transferred only to the supplier's bank, and congressional investigators say they have been unable to obtain key information on the Malaysian firm or its holding company.
    "This really smells; it stinks," Mr. Rohrabacher said.
    But Mr. Schenk said it was not the United Nations' job, nor the bank's, to determine the legitimacy of oil-for-food contractors. He argued that the original U.N. contract was ambiguous about such third-party transfers, a point sharply disputed by U.S. investigators.
    A U.N.-appointed independent inquiry headed by former Federal Reserve Chairman Paul Volcker has raised serious questions about all of the main contractors hired by the United Nations to implement and monitor the oil-for-food program.
    Mr. Volcker's panel found no evidence that Secretary-General Kofi Annan had steered a major customs inspection contract to Cotecna, a Swiss firm that at the time employed his son Kojo.
    Mr. Annan last month said the findings "exonerated" him of the charge he interfered in the contract award, but did not contest findings that his internal investigation failed to uncover serious irregularities in Cotecna's contract.
    Mr. Annan told reporters yesterday there were no grounds to discipline Iqbal Riza, his former chief of staff. The Volcker panel criticized Mr. Riza for shredding three years of files related to the oil-for-food program last year.
    U.N. officials say the files were duplicates, and Mr. Annan said Mr. Riza had not violated staff rules.




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