UNITED NATIONS (Reuters) - The former head of the U.N. oil-for-food program, Benon Sevan, was accused on Monday of receiving nearly $150,000 in kickbacks, and another U.N. official was arrested on charges of pocketing hundreds of thousands of dollars from U.N. contractors.
The U.N.-established Independent Inquiry Committee, headed by former U.S. Federal Reserve Chairman Paul Volcker, said in its third interim report that Sevan, who ran the $67 billion humanitarian program for Iraq, and Alexander Yakovlev, a former U.N. purchasing office, should be prosecuted.
U.N. Secretary-General Kofi Annan lifted both men's diplomatic immunity and Yakovlev was arrested on the orders of federal prosecutors of the U.S. Southern District of New York.
Yakovlev immediately pleaded guilty to wire fraud, conspiracy to commit wire fraud and money laundering arising from getting "several hundred thousand dollars," the federal complaint said.
He was released on bail. Quick guilty pleas are often an indication of cooperation with prosecutors.
The Volcker panel, in its report, accused Yakovlev of pocketing more than $950,000 from contractors not connected with the oil-for-food program. But it said he tried to solicit a bribe on one contract bid for the program.
The report was the first to accuse U.N. officials of outright corruption in connection with the program.
"These are senior officers of the United Nations," South African Judge Richard Goldstone, a commissioner on the panel told Reuters. "It is serious for any organization to have senior officials benefiting illegally."
Annan's chief of staff, Mark Malloch Brown, told a news conference that the United Nations last month had alerted the U.S. Attorney of wrongdoing by Yakovlev and was working with the Manhattan District Attorney's office on complaints against Sevan.
The Volcker report said Sevan's finances had been "precarious" before the alleged wrongdoing. Sevan has vigorously denied the charges.
The Volcker panel was commissioned by Annan to examine charges of corruption in the program, designed to ease the impact on ordinary Iraqis of U.N. sanctions imposed in August 1990 after Baghdad's troops invaded Kuwait.
The program began in December 1996 and ended in 2003, when the United States invaded Iraq and ousted President Saddam Hussein, who himself had skimmed off money on illegal oil sales and kickbacks, most of them outside the program.
Sevan, 67, who served in the United Nations for 40 years, has denied any wrongdoing and said in a letter to Annan on Sunday he was being made a scapegoat and that the charges were "false." He is in his native country of Cyprus.
The report said Sevan worked with a cousin of former U.N. Secretary-General Boutros-Ghali, Egyptian Fakhry Abdelnour, who owned a small oil trading firm, called African Middle East Petroleum (AMEP).
This firm transferred $580,000 to the account of Fred Nadler, the brother of Boutros-Ghali's wife Leia. Of this amount, Nadler then deposited in cash $147,184 to the New York bank accounts of Sevan and his wife, the report said.
Boutros-Ghali was secretary-general from 1992 to 1996 when the oil-for-food program was set up. He has been questioned by the Volcker panel but has not been accused of wrongdoing.
Yakovlev was accused of "participating in a corrupt scheme" to solicit a bribe from a contractor from the Swiss firm Societe General de Surveillance S.A. that bid on a contract it did not get. But the report said it did not have evidence the bribe was paid.
However, it said that Yakovlev had received "from various other United Nations contractors more than $950,000 in payments to an offshore bank account."
Volcker told a news conference Annan's own role would be investigated further, based on an e-mail disclosed previously from an official of the Swiss firm Cotecna, which employed the secretary-general's son, Kojo. He said another report would be forthcoming next month.
Yakovlev had worked on the Cotecna contract.
"He (Annan) very much looks forward to that report, not least in the strong expectation that it will clear up any remaining questions concerning his own conduct," Malloch Brown said.