Friday, February 4 2005 17:59 Hrs (IST) - World Time -

United Nations: UN Secretary General Kofi Annan has ordered disciplinary action against head of the now defunct oil-for-food programme for Iraq after an independent inquiry finding that he solicited and received allocations of oil from the Saddam Hussein regime for a trading company thus "undermining the integrity" of the world body.

In a strong indictment of Benon Sevan, a Cypriot, who had served the world body for more than 40 years, the inquiry panel, headed by former US Reserve Chairman Paul Volcker, said that his conduct was "ethically improper" and showed "grave conflict of interest".

Releasing the report, Volcker said that former UN Secretary-general Boutros Bourtos Ghali and Annan's son, Kojo, were also under investigation.

The panel has not so far found any criminal wrongdoing but is still investigating "the scope and extent of benefit" that Sevan received for his requests.

Annan's new Chief-of-Staff Mark Malloch Brown told reporters that the Secretary-General would waive Sevan's diplomatic immunity should it be established that there was a criminal wrongdoing on his part and the prosecutors conclude that it was hindering their investigations.

Annan also decided to initiate disciplinary action against another official Joseph Stephanides, who was chief of UN Sanctions Branch, on the basis of finding of the inquiry panel appointed by him after allegations of corruption in the programme surfaced.

The panel did not explicitly accused Sevan of receiving kickbacks but questioned his assertion that he had received from his aunt in his native Cyprus, now deceased, $ 160,000 in cash between 1999 and 2003.

It noted that she was a Government photographer living on modest pension for about 20 years and quoted a family friend as saying that she "never had shown signs of having access to large amounts of cash."

But the trading firm made a profit of $ 1.7 million, the report found

In a statement, Sevan's lawyer Eric Lewis slammed the inquiry panel for making a "scapegoat" of his client. Denying that Sevan ever received any money, Lewis said, "The IIC (Independent Inquiry Panel) has turned its back on the principles of due process, impartiality and fairness."

It has caved in to the pressure of those opposed to the mission of the United Nations, he added.

But Brown said that Annan was shocked and "terribly dismayed" at the findings against Sevan and that he doubts that there can be any "extenuating circumstances."

Volcker told reporters that the "most disturbing finding is the accumulation of evidence that the Executive Director of the programme Benon Sevan did in fact solicit oil allocations for a small trading company. The Iraqis, who were assigning such allocations, certainly thought that they were buying the influence."

The report says there is "convincing and uncontested evidence" that selection process for each of three contractors selected in 1996; Banque Nationale de Paris, Saybolt Eastern Hemisphere BV and Lloyd's Register Inspection; did not conform to the established financial and competitive bidding rules.