Congress Probes Routing of Funds To Suspect Firms

Investigators looking into the U.N. oil-for-food program, poring over documents provided to Congress here, are discovering that vast sums intended for humanitarian purposes in Iraq were rerouted through a global web of companies with links to terrorist funding and arms trafficking.

The fresh clues to the money trail are emerging from a House hearing that focused last week on BNP Paribas, the French bank picked by the United Nations to service the bulk of the U.N.-supervised deals. At the hearing, one of its officers acknowledged a number of what he characterized as “mistakes” in the handling of funds under the oil-for-food program.

But the documents provided by BNP under congressional subpoena and examined by The New York Sun suggest to congressional investigators that some of these mistakes involved the rerouting of money through a global web of companies linked not only to terrorist funding and arms trafficking but also to anti-sanctions campaigning and front operations for the Iraqi regime itself.

Even in the context of an oil-for-food program that encompassed more than $110 billion of Saddam's oil sales and relief purchases, these payments to third parties were not small change. Payments rerouted inside BNP – against U.N. rules but evidently without protest from Turtle Bay – totaled at least $470 million, documents in the possession of Congress indicate.

Until last week's hearing by the House Subcommittee on Oversight and Investigations, this maze of meandering money remained hidden from public view. The transfers took place by way of proceeds from letters of credit, with which BNP was supposed to guarantee payment from the U.N.-managed oil-for-food account to a given contractor, but instead sent the money to a third party, apparently with the consent of the contractors thus deprived of funds due to them. Whatever the aim, the effect was the secret transfer of money, in contravention of the strict controls oil for food was meant to impose on Saddam's business.

These breaches were obscured by a double-wall of BNP confidentiality and U.N. secrecy during its program, which ran from 1996 to 2003. Even today, not one of the ties associated with this money trail has yet been brought to light by the U.N.-authorized investigation launched almost a year ago by a former Federal Reserve chairman, Paul Volcker.

At last week's hearing, it turned out that BNP's New York branch redirected at least 403 payments from the U.N.-held oil-for-food account, sending funds in these cases not to the contractors approved by the United Nations for specific deals but to third parties. Why exactly BNP did so, and why the United Nations did not stop it, are questions into which investigators are still delving.

Other questions were raised by Rep. Dana Rohrabacher, a Republican of California, who led the hearing. Mr. Rohrabacher asked not only whether BNP was in breach of its U.N. contract, but whether in light of the large sums transferred to some of the obscure or even, as the congressman put it, “shady” companies on the list, the bank had complied with know-thy-customer rules. BNP's chief executive for North America, Everett Schenk, defended the bank's actions, testifying that under the vast oil-for-food program, involving the processing of some 20,000 letters of credit, “mistakes are perhaps inevitable.”

Mr. Schenk further noted that some of the third-party payments went to companies, or to “affiliates” of companies, authorized by the United Nations via separate contracts to sell goods to Saddam's regime under oil for food, and that BNP had relied on the United Nations to vet such companies. He added, “We do not believe that any of these departures from procedures that we've identified today have caused or contributed to corruption under the program.”

There are 80 as-yet-undisclosed third-party payments still under review by BNP that, according to Mr. Rohrabacher, “BNP does not fully understand.” The bank's own auditors found that the flow of oil-for-food paperwork was “irrational.”

While some of the companies may be innocent and some of the transfers may have been simple mistakes, there are also signs that this list provides a map to at least part of the financial network Saddam used to evade U.N. sanctions and corrupt the U.N. program meant to contain him – as he was doing, according to testimony last fall of the Central Intelligence Agency's chief weapons inspector, Charles Duelfer.

The number of companies involved was relatively small, a few dozen out of the more than 3,000 contractors tapped by Saddam under U.N. terms that let him choose, subject to U.N. veto, his own business partners. Among several of this band, the rerouted payments were copious. In some cases, they form a latticework of disturbing associations. These include such U.N.-approved dealers as Al Wasel & Babel General Trading, based in Dubai, United Arab Emirates, which sold $384 million of goods to Saddam under oil for food.

Last April, the U.S. Treasury designated Al Wasel & Babel as a front for officials of the Saddam regime. Ac cording to the Treasury, Al Wasel & Babel – under the guise of selling Saddam humanitarian goods – not only tried to buy a surface-to-air missile system for Iraq when it was under U.N. sanctions, but also “played a key role in the former Iraqi regime's schemes to obtain illicit kickbacks in goods purchased through the oil-forfood program.”

As it turns out, BNP, by its own account, rerouted more than $5.7 million due to Al-Wasel & Babel to another company, Al Douh, in 2002. BNP's report to Congress describes this company as a Jordanian company with U.N.-approved affiliates, although Al-Douh itself was not a U.N.-approved dealer. But Al-Douh had other connections: BNP's roster of third-party payments shows that in the final year of oil for food, just before the American-led coalition overthrew Saddam in April, 2003, Al-Douh received more than $29 million redirected by BNP from funds that Saddam's regime owed to a South African company, Falcon Trading.

Falcon Trading belonged to a Detroit businessman, Shakir al-Khafaji. According to a Wall Street Journal report last year, Mr. al-Khafaji, a campaigner against U.N. sanctions on Iraq, not only brought American and South African political delegations to Baghdad to denounce American policy, but also funded an anti-sanctions documentary by a former U.N. weapons inspector, Scott Ritter.

The BNP record also shows in 2002 yet more money due to Falcon Trading under oil for food, totaling $2.5 million, was rerouted by the bank to a company called East Star Trading Company. East Star was not a U.N.-approved dealer, but received more than $100 million in third-party payments rerouted from a variety of U.N.-approved contractors. In BNP's report to Congress, East Star is described as registered in 1990 in the Cayman Islands and affiliated with a Malaysia-based company called Pacific Inter-Link.

Both companies are reported by BNP as 100% owned by yet another company, Commodities House Investment. Asked by Mr. Rohrabacher for details of who owns Commodities House Investment and who runs East Star, BNP's Mr. Schenk was unable to supply answers. “This stinks,” Mr. Rohrabacher said.

BNP was able, however, to supply Mr. Rohrabacher with the information that whoever might have been in charge of East Star, the company over the period 2000-03 received more than $80 million in BNP rerouted oil-for-food payments that were officially due to a Saudi Arabia-based supplier, Al Riyadh International Flowers, which BNP described as “reportedly” owned by a member of the Saudi royal family, Prince Bandar Bin Mohammed Bin Abdulrahm Al Saud. He is not the Prince Bandar who is the Saudi ambassador to America.

The Prince Bandar in question also turns up personally on the list of BNP's third-party payments, as having received, in 1999, $353,500 rerouted from another of his companies, Zahrat Al-Riyadh. This in turn shows up on the BNP list as having had about $29 mil lion in oil-for-food payments rerouted by BNP in 1999-2000 to the Saskatchewan Wheat Pool.

Along with receiving funds redirected from Al-Riyadh, East Star received third-party payments via BNP totaling at least $8 million from its U.N.-approved affiliates, Malaysia-based Pacific Inter-Link and three related companies in Southeast Asia (and more third-party payments reassigned from dealers in places such as Russia and Ukraine).

BNP's report to Congress notes that Pacific Inter-Link “is a member of the Yemen-based Hayel Saeed Anam Group, one of the oldest and most noted business conglomerates in the Arab world.” The Hayel Saeed Group, with affiliates in places such as Malaysia and Indonesia, supplied hundreds of millions of dollars of goods to Saddam's regime via oil for food.

What BNP did not mention to Congress, though it was reported last fall by Fox News, in an article by this reporter and Fox News's executive editor, George Russell, is that both Pacific Inter-Link and the Hayel Saeed Anam Group have on their boards of directors a member of the family, Hayel Saeed Abdul Rahman, who was a charter member in 1984 of a business chamber founded in Lugano, Switzerland, by members of the terrorist Muslim Brotherhood – the Malaysian, Swiss Gulf, and African Chamber, or MIGA. Shortly after the September 11, 2001, attacks on America, MIGA was named by the United Nations as a terrorist-financing outfit, and added to the U.N. watch-list of entities belonging to or affiliated with Al Qaeda.

Pacific Inter-Link has denied any connection between MIGA and Mr. Abdul Rahman, who has recently been based in Jeddah. His name as of last fall was still on MIGA's Swiss registry documents, along with that of U.N.-designated terrorist financier, Ahmed Idris Nasreddin – with whom Mr. Abdul Rahman, via his family company, has stated he has had no dealings since 1984.

Amid this tapestry of multimillion dollar “mistakes” is a small, stray thread worthy of further attention. The BNP list includes a payment of $64,900, redirected in 1999 from a U.N.-approved dealer, Jugo Import Atera, to a Dutch company, BV Chemie Pharmacie. Jugo Import – or Yugo Import, as the name appears on the company's Web site, has been for decades the leading arms exporter of the former Yugoslavia, now Serbia. Yugo Import's Web site mentions not only that it specializes in military equipment and transfers of military technology, but that from 1975-90, more than three-quarters of its business abroad, or more than $7.5 billion, was done with Iraq – indicating weapons deals with Saddam's regime prior to sanctions. Why Yugo Import, during Belgrade's era of rule by U.N.-sanctioned Slobodan Milosevic, was approved by the United Nations to sell Saddam's U.N.-sanctioned regime such goods as “anti-snake venom” and “veterinary supplies” under oil for food is an intriguing question. Also intriguing is why it has only now emerged, under pressure from congressional investigators, that Yugo Import proceeds were diverted to a third party.

The BNP list of third-party payments goes on at great length, and more details will no doubt emerge. At least half a dozen of the companies involved in the rerouted payments were among the biggest 40 suppliers selected by Saddam under oil for food – all doing well over $100 million of business. That alone should sound alarms because Saddam's regime doled out contracts as favors, overpaying for relief supplies in order to skim funds by way of kickbacks. At least two of the U.N.-authorized companies from which payments were redirected, Al-Riyadh International Flowers and Pacific Inter-Link, showed up in a 2003 Pentagon study as having sold overpriced goods to Saddam – vegetable ghee overpriced by 28% or more, and palm oil overpriced by 15%.

It is possible all these connections are coincidental, or perhaps matters of benign convenience or accident, and that investigating them at leisure is reasonable. But on the chance that any part of this labyrinth might offer insight into the flow of funds with which Saddam bought or blackmailed pals who might even today be supporting terrorists in Iraq who are killing both American troops and Iraqi civilians, it seems worthwhile for other investigators – maybe even Mr. Volcker – to follow up quickly on the clues Mr. Rohrabacher and his colleagues have uncovered.