Iraq scandal taints 2,000 firms

Paul Volcker delivered the findings of his final report

More than 2,000 firms linked to the UN oil-for-food programme in Iraq were involved in making illicit payments to the Iraqi government, a report says.

It found Saddam Hussein received $1.8bn (£1bn) from firms including Daimler Chrysler and Volvo, and it also named individuals said to have benefited.

Some of those issued denials or declined to comment at this stage.

The UN report said the firms would not necessarily have known about the bribes and surcharges.

Paul Volcker, who led the inquiry, said corruption would not have been so pervasive had there been better discipline by UN management and he emphasised the need for wide-ranging UN reforms.

Report summary: The manipulation of the oil-for-food programme

This is the fifth and final report into the $60bn (£32bn) programme, which was set up to ease the effect of sanctions on Iraq following the invasion in Kuwait.

Mr Volcker told a news conference the programme had been the "mother of all UN humanitarian programmes", presenting the UN with a unique set of challenges.

But he said the degree of success the programme achieved came at a high price, "grievously wounding the confidence and integrity of the UN".

'Unjustified'

Under the programme, Saddam Hussein's government could sell oil as long as the proceeds were used to buy humanitarian goods.

The scheme was supposed to ease the burden of sanctions on Iraqis

Companies buying oil at cut prices would funnel extra money to Iraq through "surcharges" while those receiving money from Iraq for humanitarian goods and services would return a portion in "kickbacks", the report found.

Mr Volcker said the Iraqi government had taken advantage of divisions within the UN to "politicise" the programme.

Corruption "could not have been nearly so pervasive if there had been more disciplined management by the UN and its agencies", he said.

More than half of the 4,500 companies - from 60 countries - involved in the oil-for-food programme paid kickbacks or surcharges to the Iraqi government, Mr Volcker reported.

PROMINENT NAMED FIRMS Daimler Chrysler AG, Germany Siemens, Germany Volvo, Sweden Daewoo, South Korea Wier Group, UK Bayoil, US UK firm on payments list Firms in the spotlight

The single largest bribe came from a Malaysian trading company, Mastek, which paid Iraq $10bn over a prolonged period, the report found.

Other prominent names on the list include German manufacturing giant Siemens, the construction arm of the Swedish group Volvo and the German-US car firm Daimler Chrysler - which made relatively small payments, amounting to a few thousand dollars.

DaimlerChrysler said it was aware of the report but declined to comment because of ongoing investigations while a Volvo spokeswoman, Beatrice Cardon, told AP she had not been aware the company was included in the report.

French bank Paribas, which the report criticises for the way it handled the oil-for-food account, has rejected the criticism as unjustified.

Offer of evidence

Individuals named in the report include a former French UN ambassador, Jean-Bernard Merrimee, who has admitted receiving one oil allocation only.

Russian parliamentarian Vladimir Zhirinovsky and British MP George Galloway are also both named but have denied the allegations.

Mr Volcker stressed that the identification of a particular company's contract did not necessarily mean that company "made, authorised or even knew about the illicit payment".

He went on to say his team would provide information to countries who might want to take legal action against firms or individuals named in the report.

As he spoke, Switzerland's economic ministry announced it was launching criminal proceedings against four people in connection with the report.

Thursday's report is the final word in what has been an inquiry on a mammoth scale - a budget of $35m paid 100 investigators to comb through mountains of evidence located in many different countries.

Previous reports by the inquiry panel have already reprimanded UN Secretary General Kofi Annan, other UN officials and the UN Security Council for turning a blind eye to the mismanagement of the programme.

The investigation also accused Benon Sevan, the former head of the oil-for-food programme, of taking $147,000 in illegal payments. He denies any wrongdoing.