UN Chief Awaits Fraud Report

The UN secretary general, Kofi Annan, is braced today for the publication of an interim report on the alleged mismanagement of the $64bn oil-for-food programme for Iraq.

An inquiry, set up by Mr Annan and headed by the former US federal reserve chairman Paul Volcker, is investigating claims of fraud and corruption by UN officials.

Mark Malloch Brown, Mr Annan's new chief of staff, said this week that he expected Mr Volker to land "some very heavy blows".

Another UN official admitted that the organisation was preparing itself for "a bad day" and said the initial expectation had been that Mr Volcker's interim report would be confined to flaws in the management system, but the UN now expected him to go further and "name names".

He feared that one or more officials might be made scapegoats.

Another official said individuals had been called in to be told of adverse findings,
adding: "If wrongdoing is found, the secretary general will proceed as necessary against individuals who have fallen down on the job.

"If there is wrongdoing, it will be for individual countries to proceed with criminal cases. He would waive their diplomatic immunity. He could also refer them himself."

Mr Annan has been criticised by Americans on the issue, mainly by those on the right. The White House, angry with him on several counts, including his description last year of the US invasion of Iraq as illegal, has been reluctant to back him.

The oil-for-food programme, a British idea, was set up in 1996 to try to alleviate the suffering of the Iraqi people as a result of the UN sanctions imposed after Saddam Hussein's invasion of Kuwait in 1990. The allegations are that billions were skimmed off the oil transactions.

Mr Annan is to receive the report at 11am New York time, allowing him four hours to study it before it is made public by Mr Volcker.

The UN's initial response may be to say it needs 24 hours to respond. After that, Mr Annan has several lines of defence, in addition to taking action against any individuals
named in the report. He has begun reforms to make the UN audits more transparent.

Mr Volcker is almost certainly be highly critical of past accounting systems.

Mr Annan could also argue that the programme, despite its flaws, helped to save lives.

The secretary general was embarrassed by his son Kojo, a businessman with the Swiss company Cotecna, which had a contract with the programme.

The UN said at first that Kojo Annan had left the company in 1999 and that his work had been in relation to Africa, not Iraq. But Mr Annan later corrected this, adding that his son had continued to be paid by the company until 2004, apparently so as not to join a rival company.

Kojo Annan has given written and oral evidence to the inquiry, but one of the UN official said he believed Mr Volcker's inquiry into Cotecna was incomplete and that he was more likely to report on it at a later stage.

Mr Volcker's team released internal UN audits last month showing that UN agencies had squandered millions in suspected overpayments to contractors and in the mismanagement of purchases and assets. His final report is not due until the summer.