Iraqi insurgents 'using oil-for-food cash'
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WASHINGTON, Nov 14, 2004 (United Press International via COMTEX) -- A Senate committee Monday is scheduled to hear new details of how cash from kickbacks to Iraqi strongman Saddam Hussein paid by companies doing business with his regime under the U.N. oil-for-food program may be helping fund the insurgency being waged against U.S. forces there. The hearing, before the Permanent Subcommittee on Investigations of the Senate Government Affairs panel, will hear testimony from Charles Duelfer, the CIA official who led the fruitless hunt for weapons of mass destruction after the war, and from Juan Carlos Zarate, the deputy assistant secretary of the Executive Office for Terrorist Financing and Financial Crimes at the Department of the Treasury.

According to a committee statement, Zarate's testimony will focus on how cash from kickbacks that companies paid the regime, and from oil smuggled in violation of the sanctions, was used "for illicit purposes, including whether monies pilfered from the (oil-for-food) program are being used to fund the Iraqi insurgency or terrorist groups."

Two investigators from the committee staff will also give evidence about the findings of their seven-month investigation. "They will lay out the nuts and bolts," Ray Shepherd, the panel's staff director told United Press International, promising "the most detailed and substantive description (of the kickbacks and corruption surrounding the program) to date."

Zarate is expected to testify for the first time about the results of inquiries by a special team of Treasury officials who have been working with the military in Iraq to trace the origins of the cash being used to fund attacks on U.S. forces.

"It's 'follow the money,'" said a U.S. official familiar with the investigation.

Treasury officials say that the kickbacks and other illicit funds from the scheme were converted into cash and brought back to Iraq, were they were deposited in the central bank. Investigators have long suspected that some of it ended up in caches now being used by insurgents in Iraq to buy weapons and pay fighters.

Duelfer was expected to testify about "how Saddam Hussein manipulated the (oil-for-food) program to erode U.N. sanctions, generate billions of dollars of illicit funds, and procure conventional weapons," according to the committee statement.

The Government Accountability Office, Congress' investigative arm, reported in March that the regime took in more than $4 billion in kickbacks from companies, which were forced to pay a 10-percent surcharge for the right to sell humanitarian goods like formula for infants to Iraq.

Saddam and his close associates also made more than $5 billion by smuggling oil out of the country through Jordan, Turkey and Syria.

But Shepherd says that the committee will reveal Monday that the real figures were even higher than that. "It's a new number, and it's bigger," he told UPI, declining to give more details.

The GAO found that the funds were used to buy goods, including luxuries such as a fleet of Mercedes-Benz automobiles, which were banned under the sanctions.

But Duelfer's report, published at the end of September, revealed that cash was also used to fund Iraq's illegal missile program, and the purchase of missile guidance, propulsion and fuel processing technology from Chinese, Russian and Indian companies.

His report alleges that six governments and companies from a dozen other nations -- including France and coalition member Poland -- were willing to ignore sanctions prohibiting arms sales.

The committee has been investigating alleged corruption that surrounded the oil-for-food program. Billions of dollars was paid to hundreds of companies and individuals -- including many involved in the program itself -- through the use of special vouchers.

The vouchers, which guaranteed the right to buy Iraqi oil at a certain low price, were used when sales under the program were made to middlemen or traders.

They could be cashed in or traded and were worth between 5 and 50 or more cents. Some of those alleged to have received vouchers -- like the U.N. official who ran the program, Bevon Savan -- have no legitimate connection to the oil business and have been accused of accepting the vouchers as bribes.

Savan has denied receiving "oil or monies from the former Iraqi regime."

In the course of its investigation, the committee has issued eight subpoenas and 13 so-called chairman's letters demanding documents -- although it will not say to whom.

Last week, the committee wrote a strongly worded letter to U.N. Secretary-General Kofi Annan, accusing him of obstructing their probe.

The oil-for-food program, launched in December 1996, was designed to ease the impact of international sanctions on ordinary Iraqis by allowing Saddam's pariah regime to sell the nation's oil and use the proceeds to buy humanitarian supplies such as food and medicine. Proceeds from the sale of Iraqi oil were placed in special escrow accounts.

According to congressional investigators, the program did succeed in mitigating a humanitarian crisis in Iraq provoked by the sanctions, as well as providing a huge honey pot for the regime.