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U.N. to pay fees for oil-for-food ex-boss

Report due next week on role of secretary-general, son

From Richard Roth and Phil Hirschkorn

U.N. Secretary-General Kofi Annan speaks to the world body's General Assembly Monday.
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Kofi Annan

UNITED NATIONS (CNN) -- U.N. Secretary-General Kofi Annan has agreed to have the United Nations pay some legal fees for the embattled chief of its defunct oil-for-food program in Iraq, Annan's spokesman said Tuesday.

The United Nations will pay legal bills incurred by Benon Sevan, a retired 67-year-old career U.N. employee from Cyprus who oversaw the program from shortly after its launch in 1996 to its end in 2003 with the fall of Iraqi dictator Saddam Hussein.

"We haven't paid for anything yet," Annan spokesman Fred Eckhard told reporters Tuesday. "Mr. Sevan has submitted some bills to us. We are reviewing them now."

The legal bills will be paid with money left over from the program Sevan is accused of mismanaging.

The United Nations recently decided to suspend Sevan after corruption allegations were contained in the first report by a U.N.-appointed commission investigating problems in the oil-for-food program. (Full story)

Until the suspension, which he is appealing, Sevan was kept on the U.N. payroll for a symbolic dollar-a-year salary to ensure his cooperation with the probe.

The U.N. payments will not cover legal fees incurred since the February 3 release of the report.

"It is not our intention to reimburse Mr. Sevan for any fees since the Volcker report laid charges against him," Eckhard said.

"The secretary-general decided in principle to reimburse Mr. Sevan for what we called 'reasonable legal fees' as determined by the United Nations for services in connection with his appearances before the [Paul] Volcker commission," Eckhard said.

Sevan's attorney, Eric Lewis, declined to discuss the nature of bills submitted.

Eckhard did not have a total dollar amount. He said Annan made the decision last October upon advice of the U.N. Office of Legal Affairs, following a request by Sevan.

The payments will come from the U.N. account that drew 2.2 percent of oil-for-food proceeds for administrative costs.

"I am not aware that in the past we've ever reimbursed staff for legal fees," Eckhard said. "It starts and stops with Benon Sevan."

Eckhard called the Sevan agreement an "exceptional" situation "for facilitating the work of the commission."

The commission, led by former U.S. Federal Reserve Chairman Paul Volcker, charged last month that Sevan had "placed himself in a grave and continuing conflict-of-interest situation" by recommending to Baghdad that it sell oil to a friend's company, which profited $1.5 million by reselling the Iraqi crude.

Under the oil-for-food program, Saddam's regime chose the buyers who spent $64 billion on oil. Most proceeds deposited in a U.N.-controlled bank account were earmarked for purchases of food and medicine to aid Iraqis adversely affected by international sanctions stemming from Iraq's 1990 invasion of Kuwait.

Investigators have estimated Saddam extorted billions by imposing surcharges on the oil sales and kickbacks on the goods Iraq bought. In addition, Iraq earned billions more in oil sales outside the program to neighboring Jordan, Turkey and Syria, according to the U.S. Government Accountability Office.

Volcker also reported that while running the program, Sevan received questionable cash payments of $160,000 from a late aunt in Cyprus not known to be wealthy.

The United Nations has not agreed to reimburse the one other employee implicated by Volcker, Joseph Stephanides, a Security Council staffer who improperly intervened in the bidding process to help a British firm win the contract to inspect humanitarian goods shipped to Iraq, according to Volcker.

Sevan is also the subject of a federal criminal probe in the United States.

Next report to focus on Kofi, Kojo Annan

Volcker's next report, on alleged conflicts of interest between Annan and a United Nations contractor that employed his son, Kojo, will be issued next Tuesday.

Kojo Annan worked from 1995 to 1998 for Geneva-based inspection firm Cotecna, which authenticated shipments of approved goods to Iraq.

The contact awarded by the United Nations to Cotecna in 1998 was worth $5 million a year initially and became worth $66 million over its lifetime.

U.N. officials deny Annan was aware of or involved in contract negotiations, while Cotecna and the younger Annan assert that his duties were limited to his native West Africa and that he had no role in U.N. business.

"Kojo Annan had nothing to do with Cotecna getting the contract," Cotecna attorney Evelyn Suarez told a House of Representatives subcommittee hearing last week.

The firm paid Kojo Annan a total of $125,000 through early 2004 as part of a non-compete agreement.

Kofi Annan said he did not know about those payments, which Cotecna says were required under Swiss law to enforce the agreement.

Kofi Annan has met with Volcker or his investigators at least three times and turned over thousands of pages of documents.

The commission and congressional investigators have also interviewed Kojo Annan, now 31.

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