GERMANY: UN Probes German Companies in Oil-for-Food Scandal

German companies are also involved in the kickback scandal looming over the oil for food program. United Nations investigators recently requested exports files on 50 German firms from the Foreign Ministry.

Saddam Hussein's affection for the Swiss financial metropolis Geneva had a long-running history and tradition. Many times over the past decades, Iraq's former dictator used the fancy and glitzy banking hub on the shores of Lake Geneva as a hiding place for his illegally earned billions. In the late 1980s, Saddam even sent his half-brother to Switzerland, ordering him to protect the money personally.

Bankers in the city along the Rhone River did brisk business with Saddam, even during the United Nations embargo. Saddam's followers secretly demanded their piece of the pie: those "pieces" were shares of inflated bills issued to corporations planning to supply goods to Baghdad as part of the oil-for-food program. As one of several channels, one account held at the tony Geneva private bank Safdie could be used to transfer these kickbacks.

The wheeling and dealing that took place between industry and the toppled Saddam clan has been under investigation since late 2003, when a high-profile commission started examining the matter. Paul Volcker, former head of the United States Federal Reserve Bank, South African judge Paul Goldstone and Swiss criminal law professor Mark Pieth are currently trying to find out how massive amounts of money could disappear through the Saddam regime's dark channels, even as the UN closely monitored the Iraqi dictator.

Between 1996 and the invasion of the American troops in spring 2003, Iraq was allowed to sell oil worth $64 billion. The money went into a UN trust account, and it was supposed to be used to pay for vital goods -- like food and medicines -- and old debt from the first Gulf war. Still, Iraq's ruling clique managed to skim approximately $20 billion off the top of that money -- filtering it into secret safes located in Iraq and abroad. Saddam's lackeys generated the money through manipulated oil sales and smuggling, but especially through large kickbacks from companies, which started in 2000 and were used to finagle large-scale contracts.

"Ten percent of the overall contract value -- that was the rule," recalled one former Middle East salesman working for a German corporation.

The numerous American, British, and French companies under investigation in the scandal are old news. The latest development, however, is that German industry has also come under the scrutiny of UN investigators. As far back as October, some of Volcker's staffers contacted Germany's Foreign Ministry in Berlin and submitted a list containing 50 German companies. According to government sources, that list "also included some very well-known companies."

Volcker's investigators demanded an inspection of German contract documents pertaining to the oil-for-food program. The Foreign Ministry first released the export files to investigators after it received written consent from the companies in question -- and investigators first began examining the files in November.

"In each instance in which we found great discrepancies between the market prices and suspiciously high transportation costs, we took a closer look," said Pieth, explaining why the 50 companies were chosen for scrutiny out of a total of 148 German suppliers active in Iraq under the oil-for-food program. There was no need to draw an automatic conclusion, said Pieth. Not all 50 companies whose files were requested paid money illegally to the Iraqis, the Swiss legal expert said. In some cases, though, "there are documents that already prove such payments," took place he said. The sensitive papers stem directly from the Iraqi ministries. The idea that inflated prices could be an indication of hidden kickback payments is nothing new: the U.S. Department of Defense already knew that much two years ago. At the time, its experts sifted through 10 percent of the contracts that were still pending when the war began. In 759 cases, they found massively inflated prices. One name which popped up in connection with medical technology offered via Russia was German engineering giant Siemens.

At Siemens, no one knows anything about any sales-promoting schemes to boost business in Iraq. "We do not know of any inconsistencies in processing these orders," said officials at the company's Munich-based headquarters.

In the case of German truckmaker MAN, which sold 950 vehicles worth €60 million to Iraq in 2001 alone, a spokeswoman confirmed that "the UN commission has requested access to (the company's) files in the Foreign Ministry." The spokeswoman, however, said the Iraqis had never asked MAN to "pay any premium" and the company had no knowledge of any such events.

In the wake of the scandal, most German companies are remaining tight-lipped. Officials at engine manufacturer Deutz, for example, refuse to comment on Iraq. So far, only Weir, a Scotland-based builder of pumps, has put its business practices out in the open. It first did so after a US Senate investigative committee exposed the company's operations. In 15 of the 37 contracts, Weir had tacked on a surcharge of up to 14 percent. After the UN trust bank BNP Paribas paid for the goods, the company transferred the agreed share to an agent. According to the US Senate, a total of $8 million was transferred to an account held by Corsin Financial Limited at Banque Safdie.

The whole case still remains enigmatic. Contrary to the U.S. version, insiders believe the Geneva-based account merely served as a way station for the corrupt Iraqis in their money-collecting scheme. And despite the investigation, Switzerland's banking commission, so far at least, hasn't applied any sanctions.

The private bankers are going out of their way to appear calm -- and, of course, they keep quiet.

Translated from the German by Patrick Kessler    

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