Investigators probing the U.N.-run Iraq oil-for-food program say more than two thousand firms from 66 countries paid illegal surcharges and kickbacks to Saddam Hussein. The final report of the Volcker oil-for-food commission has touched off new calls for sweeping U.N. reform.

Paul Volcker

The commission led by former U.S. central bank chief Paul Volcker wrapped up its 18-month, $38-million oil-for-food investigation Thursday with a final 620-page report. The document adds detail to earlier reports explaining how former Iraqi leader Saddam Hussein corrupted the humanitarian program, earning billions of dollars in illicit revenue and directing lucrative contracts to influential U.N. Security Council members.

In all, the report says nearly half the 45-hundred companies doing business under the program made illegal payments totaling one-point-eight-billion dollars.

Russia and France were the countries with the largest number of firms on the list. Russia's Zarubezhneft, or "foreign oil company" was singled out as the most active oil-for-food contractor, paying more than eight million dollars in surcharges, much of it to the Iraqi embassy in Moscow.

Groups and individuals from 66 countries were named. Several have denied making or receiving illegal payments, others have admitted their roles, and in some cases, prosecutions have already begun.

Speaking to reporters, Mr. Volcker said he was taken not only by the corruption of oil-for-food contractors, but by how Saddam was able to turn the program to his political advantage.

His report notes that as the oil-for-food program progressed, Iraq increasingly favored friendly countries in awarding oil allocations. Eventually, he says, U.S., British and Japanese companies were frozen out of the process, while French, Russian and Chinese firms were given preferential treatment because these countries were permanent members of the U.N. Security Council and were viewed as more favorable to lifting sanctions against Iraq. "One overriding theme is the politicization of the process. Saddam plainly chose to favor those nations, companies that he felt, rightly or wrongly, would assist his efforts to end the sanctions imposed at the end of the Gulf War," he said.

Mr. Volcker said the findings of this final report re-emphasize the conclusions of earlier installments that point out the failures of the United Nations. He said political differences within the world body frustrated any effective response to the manipulation and corruption of

the program, grievously damaging the United Nations' reputation and credibility. "What I do want to emphasize is that the corruption of the program by Saddam and many of its participants, and it was substantial, could not have been nearly so pervasive if there had been more disciplined management by the United Nations and its agencies," he said.

Washington's U.N. Ambassador John Bolton called the latest Volcker report "devastating". He said the findings again point out the need for sweeping reform of the United Nations, including a restructuring of senior management.

"Chairman Volcker's own earlier report said that there was substantial lack of management oversight at all levels of the U.N. What that tells us is the importance of the decision on the next secretary-general," he said.

Secretary-General Kofi Annan admitted Thursday there are lessons to be learned from the findings of the Volcker Commission. But he bristled at a reporter's suggestion that further management changes might be needed. "I think I've taken all the action necessary, and I have nothing further to add," he said.

Mr. Annan earlier accepted responsibility for management failures, but brushed aside suggestions he might resign. Other senior U.N. officials have been fired or resigned under suspicion, including the former head of the oil-for-food program, Benon Sevan.