Report Critical Of U.N. Chief

Investigators probing the U.N. oil-for-food program in Iraq said in a report Tuesday there is insufficient evidence to show that U.N. Secretary-General Kofi Annan knew of a contract bid by his son's employer and criticized the U.N. chief for not determining the exact nature of his son's relationship with the Swiss firm.

The report obtained by The Associated Press also accused the company, Cotecna Inspection S.A., and Annan's son, Kojo, of trying to conceal their relationship after the contract was in place.

The conclusion from the report, scheduled to be released later Tuesday, was not the clear vindication that the secretary-general had wanted, though the investigation led by former U.S. Federal Reserve Chairman Paul Volcker did not accuse the U.N. chief of corruption.

The report said "there is no evidence" that the selection of Cotecna for an inspection contract under the oil-for-food program "was subject to any affirmative or improper influence of the secretary-general in the bidding or selection process."

Weighing all the evidence in the 144-page report and the credibility of the witnesses, the investigators said "the evidence is not reasonably sufficient" that Annan knew about Cotecna's bid in 1998.

The report found that Kojo Annan was not forthcoming with either his father or the committee and accused him of consistently trying to hide the nature of his relationship with Cotecna.

It said there were still "significant questions" about Kojo Annan's business dealings with respect to the program, and said an investigation was continuing.

"Although the new Volcker report stops short of accusing the Secretary General of financial gains in the scandal, it makes damaging accusations about Kofi Annan's failure to prevent his own son from being involved in corruption and conflicts of interest," said CBS News Foreign Affairs Analyst Pamela Falk from the U.N. on Tuesday.

"Stacked up with the recent admission by Kofi Annan that he met on several occasions with officials from Cotecna -- the Swiss company involved in the scandal -- and that incriminating documents were destroyed by Annan's staff, the report is yet another blow to U.N. credibility," Falk said.

In a letter annexed to the report, Kojo Annan's lawyer, William R. Taylor, rejected any claim that Kojo Annan had not been wholly cooperative with the committee. But Taylor admitted he had not told his father the entire truth.

"Mr. Annan has consistently acknowledged that he was not completely candid with his father when the Cotecna-U.N. contract first attracted publicity in late January 1999," Taylor wrote. "He regrets the embarrassment that omission caused to his father and to the United Nations and accepts responsibility for it."

The report is the second issued by the team of investigators led by Volcker. It comes a week after Annan called for the biggest overhaul of the United Nations in its 60-year history. It also coincides with allegations of sex abuse by U.N. peacekeepers and of sexual harassment and mismanagement by senior U.N. staff.

The oil-for-food program was the largest U.N. humanitarian aid operation, running from 1996-2003. Saddam Hussein's government was allowed to sell limited amounts — and eventually unlimited amounts of oil in exchange for humanitarian goods as an exemption from U.N. sanctions imposed after Iraq's 1990 invasion of Kuwait.

In a bid to curry favor and end sanctions, Saddam allegedly gave former government officials, activists, journalists and U.N. officials vouchers for Iraqi oil that could then be resold at a profit. U.S. congressional investigators say Saddam's regime may have illegally made more than $21 billion by cheating the program and other sanctions-busting schemes.

Senior U.N. officials insist the secretary-general has no intention of stepping down, and U.N. spokesman Fred Eckhard dismissed reports describing the secretary-general as weak and depressed.

Kofi Annan, his son, and Cotecna all deny any link between Kojo Annan's employment and the awarding of the U.N. contract to the company.

The officials said Volcker still has questions about Kojo Annan and his investigation of the secretary-general's son is continuing. So is his investigation of Benon Sevan, who headed the oil-for-food program.

Volcker has promised a final report in mid-summer.

In his first report in February, Volcker accused Sevan of a "grave conflict of interest," saying his conduct in soliciting oil deals from Iraq was "ethically improper and seriously undermined the integrity of the United Nations." He also questioned where Sevan got $160,000 in cash, calling it "unexplained wealth" despite Sevan's claim it came from his aunt. Sevan's attorney has said he did nothing wrong.

Kojo Annan worked for Cotecna in West Africa from 1995 to December 1997 and then as a consultant until the end of 1998 — just when it won the oil-for-food contract. He remained on the Cotecna payroll until 2004 on a contract to prevent him from working for a competitor in Nigeria or Ghana, but that was only disclosed in November.

At the time, the secretary-general said he was "very disappointed and surprised" that his son continued to receive money.

Cotecna initially said Kojo Annan was only employed until 1998. It released details of his payments only last week, after a report in the Financial Times and the Italian business daily Il Sole 24 said he received over $300,000, double the amount previously reported.

Cotecna spokesman Seth Goldschlager told The Associated Press last week that Kojo Annan got more than $365,000 from the company — about $200,000 as a full-time employee and consultant from 1995-1998 and more than $165,000 from 1999 until February 2004 under the so-called "non-compete" contract.

He also disclosed that Volcker sought payment records from five companies linked to the firm for the years 1996 to 2004. The Swiss accounting firm BDO Visura is currently conducting an audit, expected to be completed at the end of April.

Goldschlager also confirmed reports in the two papers of three meetings between Kofi Annan and Cotecna executives and disclosed a fourth contact. Two were in social settings, one in Annan's U.N. office, and one after the Cotecna contract was signed.

As for Sevan, the United Nations on Monday reversed its decision to pay his legal fees related to the investigation. The plan to pay Sevan's fees had stirred controversy because of the seriousness of the allegations against him and because U.N. officials said the reimbursements would be paid with money from Iraqi oil sales used to finance the oil-for-food program itself.