When U.S. energy giant Enron first reported a $24 billion discrepancy in assets, it led to the largest U.S. bankruptcy scandal in history, to multibillions of dollars in losses for stockholders, to at least one suicide, and to criminal charges against 33 principals with over 20 now serving criminal sentences or awaiting punishment.
With UN Oil for Food discrepancies now standing just over the $21 billion mark, and with the illegal proceeds now linked to financing terrorism and weapons production, prompting at least one assassination, the key figures in what could become the world's largest financial fraud scheme have thus far-with the possible exception of Saddam Hussein-kept up an exacting charade of business as usual.
Secretary-General Kofi Annan last week presided over a conference denouncing Islamophobia and received a standing ovation before UN delegates. Such choreographed appearances are designed to counter growing calls for his resignation.
The 66-year-old native of Ghana and career UN executive steadfastly downplays the rumble beneath his feet, but critics say he is ignoring the manmade lava flow it actually is-billions in oil revenues unaccounted for, millions in aid to Iraqis undelivered, and documented kickbacks on oil contracts to interests connected to permanent Security Council members France and Russia.
"We need to continue with our work," Mr. Annan told London's Financial Times in a Dec. 5 interview, admitting only a "perception problem" and vowing to serve out his term. But Mr. Annan's Oil for Food administrator, Benon Sevan, is named in government documents retrieved from Baghdad, suggesting he received oil contract kickbacks from Saddam. And Mr. Annan's son Kojo worked for a Swiss-based contractor, Cotecna, that held a lucrative Oil for Food contract to monitor goods arriving in Iraq. The firm paid Kojo Annan through February 2004.
Nearly a dozen U.S. lawmakers are calling for Mr. Annan's resignation. They also threaten to withhold 10 percent of U.S. contributions to the UN-or about $40 million-starting next year and doubling in 2006 unless Mr. Annan releases Oil for Food records to Congress.
Mr. Annan's most persistent challenger is Minnesota Sen. Norm Coleman, chairman of the Senate's Permanent Subcommittee on Investigations. UN officials have denied his committee access to Oil for Food records. U.S. officials, on the other hand, have uncovered Saddam's Oil for Food records in Baghdad. Based on those records, subcommittee investigators say the size of the fraud "is staggering" and plan to release fuller details early next year.
Mr. Coleman began calling for the secretary-general's resignation last month, saying, "The most extensive fraud in the history of the UN occurred on his watch." As long as Mr. Annan remains in charge, he said, "the world will never be able to learn the full extent of the bribes, kickbacks, and under-the-table payments that took place under the UN's collective nose."
As secretary-general Mr. Annan has presided over all but the earliest days of the Oil for Food program. Even as undersecretary-general, he traveled to Baghdad to cobble the humanitarian program to provide needed goods to Iraqis using limited oil revenues. As UN chief he supervised the program's key administrators and lobbied for the program's expansion, even as evidence grew that billions in oil revenues were misused.
Mr. Annan is the UN's seventh secretary-general. He took office in 1997 from a then-embattled Boutros Boutros-Ghali. He earned broad support as an African who resonated with the needs of poor member-states yet could hold his own with the wealthiest. U.S. educated, Mr. Annan lives with his second wife, who is Swedish, in a mansion reportedly once owned by the family of J.P. Morgan.
Mr. Annan received initial endorsement from the U.S. delegation, even persuading the United States to pay $1 billion in withheld dues. That relationship lost its shine, however, as he failed to make headway with Saddam Hussein, even as the UN was presiding over Iraq's economy and oil production. Mr. Annan supervised first one, and then another, weapons inspection regime booted by Saddam. At one point Mr. Annan borrowed a private jet from French President Jacques Chirac, flew to Baghdad, smoked cigars with Saddam, and hailed him as a man of "courage." The coddling ended with the Iraqi dictator kicking UN weapons experts out of the country. In 1998 that led to a U.S. bombing campaign ordered by President Bill Clinton; in 2002, it tipped the scale toward U.S. invasion.
Inside the UN's New York headquarters, despite Mr. Annan's outward composure, the tone is far from business as usual. Close-at-hand observers say "a crisis atmosphere" had begun to build even before lawmakers demanded Mr. Annan's resignation. The financial scandal looms over other pressing problems: an overdue plan to restructure the world body's budget process, sexual scandals involving two prominent senior officers (both exonerated by Mr. Annan), and the UN's inability to adequately oversee upcoming elections in Iraq. Last month the UN employees union passed a no-confidence resolution against UN senior management.
Dwarfing the internal chaos, however, is Oil for Food mismanagement. The Iraqi government first uncovered evidence of oil contracts amounting to kickbacks to over 100 foreign entities. Discoveries of detailed accounts by Saddam's British-trained bureaucrats led to the death of Iraqi accountant Ehsan Karim, whose car was wired to explode last July. Congressional investigators then announced that theft under the program was at least twice as high as previously estimated, nearly $22 billion. And questions remain outstanding about interest earned on Iraq's oil revenues deposited in French banks, about the UN's $1.5 billion in administrative costs, and about senior official kickbacks from Saddam.
"UN agencies are almost completely unaccountable. They don't even know how they spend their money and how programs are run," said Austin Ruse, a UN lobbyist and president of the Culture of Life Foundation. "One thing we are looking for is transparency, and it's the one thing you don't get. There is a complete and utter lack of transparency."
Reformers hope that investigations will be a blunt instrument to extract both political and administrative change at UN headquarters-with or without Mr. Annan. Security Council members, including the United States, aren't likely to openly ask Mr. Annan to step down. But a new and more conservative Congress isn't likely to be so polite. "This is gasoline on the fire for a lot of members of Congress who don't like the UN, " said Mr. Ruse, "and those numbers are growing."