UN fires first staffer over oil-for-food role

NEW YORK - Secretary-General Kofi Annan, himself under attack for mismanagement of the Iraq oil-for-food programme, has dismissed the first United Nations official connected to the scandal-tainted humanitarian plan, the United Nations said today.

Joseph Stephanides, a veteran mid-level official who contends his actions were approved by his superiors, was accused by a UN-appointed inquiry of steering a lucrative contract under the oil-for-food programme to a British firm.

Annan concluded Stephanides committed "serious misconduct" and "was separated from service with immediate effect," UN spokesman Stephane Dujarric said.

Stephanides, through his lawyer, said he would appeal. His actions were proper under UN rules and authorised by his superiors, attorney George Irving said.

Under the US$67 billion oil-for-food programme, Iraq was allowed to sell oil to buy civilian goods in order to ease the impact on ordinary Iraqis of UN sanctions imposed after Iraq invaded neighbouring Kuwait in 1990.

After the US-led invasion of Iraq in 2003, Iraq's new leaders disclosed ways Iraqi President Saddam Hussein had undercut the programme by bribing and soliciting bribes in exchange for contracts.

As a result the entire UN-administered programme is being investigated and Annan himself has come under heavy criticism for failing to root out corruption and mismanagement.

Paul Volcker, the former US Federal Reserve chairman and head of an Independent Inquiry Commission looking at oil for food, has cleared Annan of interfering in the award of a separate contract to Cotecna, a Swiss firm that employed his son, Kojo Annan.

But Volcker faulted Annan for a lax investigation into possible conflicts of interest in granting that contract.

Volcker in a February 3 report accused Stephanides, a Cypriot who helped set up the programme in 1996, of colluding with Britain's then-UN ambassador, John Weston, by revealing details to him of a rival bid for a contract in Iraq.

Stephanides was not accused of enriching himself through his actions but of violating UN staff rules.

The British firm Lloyd's Register Inspection Ltd ended up winning the US$4.5 million contract until 1998 - when it was awarded to Cotecna - for verifying that goods purchased under the programme had arrived in Iraq.

Although French firm Bureau Veritas was the low bidder, UN officials decided they could not select a French company because they had recently given another contract to a French bank and hired a Frenchman as a UN oil overseer for the programme, Volcker's report said.

Stephanides' lawyer said a superior "who made the decision on the awarding of the contract" had authorised Stephanides to convey the bidding information to the British.

"As a result of his efforts he saved the organisation some US$900,000" because Lloyd's lowered its initial bid by that sum, the lawyer said.

Annan has fired 40 UN staff members since he became secretary-general in January 1997, for a range of serious staff rules violations ranging from procurement irregularities to sexual abuse, Dujarric said.

In a second case related to the Iraq programme, the United Nations decided to suspend disciplinary action against Benon Sevan, the former director of the oil-for-food programme, until the Volcker inquiry completed its work, Dujarric said.

"There are indications that Mr Volcker is continuing to look into his activities," he said. "If administrative action is to be taken, it would be taken as a whole instead of piecemeal."

Sevan, also a Cypriot, ran the oil-for-food programme from October 1997 until its end in 2003. He remains suspended from any UN duties until the Volcker investigation is concluded.

Volcker accused Sevan of a grave conflict of interest in steering an allocation of Iraqi oil to a relative of Boutros Boutros-Ghali, the UN secretary-general from 1991 to 1996. The relative, who owned a small Panamanian-registered trading company, earned US$1.5 million from the transaction.

- REUTERS