PRESS BRIEFING - RESPONSE TO QUESTIONS ON OIL-FOR-FOOD INQUIRY BY SECRETARY-GENERAL’S CHEF DE CABINET

RESPONSE TO QUESTIONS ON OIL-FOR-FOOD INQUIRY

BY SECRETARY-GENERAL’S CHEF DE CABINET

Mark Malloch Brown:  I want to remind you all that we have visitors here today, so show your manners.  Who would like to start?

Question:  First, your reaction to the joint-investigation story by The Financial Times and Il Sole 24 Ore on the Secretary-General’s dealing and his son’s dealings with Kotecna.  Secondly, your reaction to the statement just issued by the Volcker Committee criticizing the Volcker statement yesterday on Benon Sevan.

Mark Malloch Brown:  Let me first say that the essential question raised by The Financial Times/Il Sole, is:  had the Secretary-General fully disclosed to the Volcker Commission these meetings that he had held with Volcker.  The answer to that is a resounding “yes”.  All of them were fully disclosed, they have been the subject of intense investigative effort by the Committee to make sure that meetings in the FT (one a social encounter, the second with a slightly more serious purpose to it:  a query about an international lottery, but one that had nothing to do with Cotecna’s later bidding for and winning of a contract for oil-for-food), that neither of those meetings or the third one, reported by the FT, had anything to do with Cotecna’s bid.

I am not going to speak for the Panel, because I don’t know what it will conclude, but the Secretary-General believes that it will clearly vindicate him, in that it will describe these meetings in great detail and no doubt, in his mind, confirm the fact that they were innocent encounters.

On the second issue you raised, of the Volcker statement today correcting our statement of yesterday:  we boobed, we got it wrong.  I would say, though, that I was a little surprised, actually, that all of you relied only on the statement, given the fact that we released at the same time a letter signed by me to Benon Sevan, explaining the terms and circumstances under which we would pay for a portion of his legal fees.  I say that because there is no effort at buck-passing here, there is no effort to dump this all on Riza, as this morning’s Sun seems to suggest.  The letter has my signature on it.  It makes very clear, in the first line, that this was a decision of both the Secretary-General and the previous Chief of Staff.  While I think that our statement, which was written extremely hurriedly to try to respond to all of you as quickly as possible, was inaccurate in that it misrepresented the position of the Panel through a poor syntax and juxtaposition of sentences.  The attached letter from me, which was indeed the basis of the statement, made no such mistake.

Question:  I am glad that you acknowledge that yesterday’s statement is inaccurate, and that is putting it lightly.  It said that Mr. Sevan was a retired official and that is incorrect, isn’t it.  He got a $1 a year salary.  He is not a retired official, he is on salary, isn’t that correct?

Mark Malloch Brown:  He is a retired official who was kept on a salary of $1 a year to make him available to the panel.

Question:  The rationale was that you don’t have any sanction or control over him because he is retired and that is why you have to pay his legal fees.

Mark Malloch Brown:  Mr. Sevan made it clear that, if he could not avail himself of legal counsel, he was going home to Cyprus.  He did not see why he should subject himself to this continuous indignity of leaks in the media, of trial by whatever, without even the basic legal needs available to him to clear his name.  Let me elaborate further.  The reason this decision was made, was that he was at the centre of this web that the Panel was seeking to unravel; that his role came about because of his official responsibilities as head of the oil-for-food programme,  and that, therefore, any transgressions that had occurred were related to his official duties.  We just felt that the range of questions he was being expected to answer and the range of subjects he needed to respond to was just too great for him to be able to organize himself and to present himself on those issues properly before the Panel without legal advice.

While you are right that yesterday’s statement was inaccurate in the way that it appeared to suggest that the Panel was endorsing the payment of those fees, which they did not endorse -– that was our decision –- they did agree that he should be represented by counsel because of the complexity of issues that he had to address.  That is confirmed by the statement this morning and that is the point we are trying to make regarding the Panel.

Question:  Why is it that the Volcker feels it has to pay a UN official in order to cooperate with an inquiry?  Why is it that, given that he did not cooperate with the inquiry -– he said he had lied on a number of points in the inquiry -– that the UN still was even considering his request for reimbursement of legal fees?

Mark Malloch Brown:  The key point there is, considering I am dealing with a situation where a commitment had been given last year, based on legal advice, and where my predecessor and the Secretary-General had both confirmed to Mr. Sevan that, until proven guilty, he could be helped with his first presentation to the Panel.  The fact is, you are correct.  The Panel concluded that he had not fully cooperated with them.  It is also the case that our offer was limited to his representation before the Panel.  Those two issues -- and therefore not other legal matters such as, for example, advice on other legal proceedings he might later face -– are exactly why he is not currently being paid.  I want to be clear:  you asked, we disclosed.  There has been no effort to cover this up.

Question:  I find it impossible to believe that the chief UN legal officer would recommend that this decision be taken in the best interest of the Organization.  I believe that the case is that the Secretary-General, the Chief of Staff, or whoever, took the decision that they wanted to pay the legal fees and asked the legal officer how that could be done.  I would like you to release the legal advice to make it clear that it was actually the Secretary-General who took the decision, rather than the chief legal officer.

Mark Malloch Brown:  You would like me to release the legal advice to prove that there was no legal advice, you seem to be saying.  It was just not a matter of policy in any organization that I know of, any government, any company, any client-lawyer situation, where you release the legal advice given to somebody.  It is a client-attorney privilege, if you like.  I am sure that the Office of Legal Affairs would be happy to confirm to you that it was indeed their advice that these fees be paid at that period.

Frankly, I think it is a great pity that the Organization did not heave itself into action to do it when it said it would.  What had complicated the whole thing was the fact that, while the commitment was given to Mr. Sevan, it was not acted on, which is something that happens a lot to much around here.  The issue became much complicated by the fact that it had not been acted on at the point of the release of the report, which materially changes the situation.  Because now we know that, indeed, he had not fully cooperated and is accused of major breaches of the Staff Rules.  That is why this thing is stuck at the moment as we review it.

Question:  It is not that easy for us to get afternoon tea with the Secretary-General.  Can you give us some indication as to how it was initially arranged with Kojo and all involved in setting up the meeting.  Was he present at any of those meetings?  Did the Secretary-General know about the fact that his son was working for this company.  Also, in your letter yesterday, you talk about the decision to consider withholding the legal payments to Sevan on the basis of the Volcker decision being vindicated by... somebody.  Are you talking about the UN Administrative Tribunal?  That body has received a lot of criticism.

Mark Malloch Brown:  On the first point –- afternoon tea in Davos is easily done.  There are a lot of bored, important people milling around waiting for someone to have a cup of tea with.  I am afraid I just can’t tell you how the meeting was arranged, because I quite simply don’t know.  But I think that any of you who are familiar with Davos would be inclined to believe the “bored, rich people” theory of efforts to set it up.  Mr. Volcker will make that clear, no doubt, next week.  We will hear how and who organized the meeting.  My basic answer to all of this is:   Wait for Volcker.  He has looked into this extensively, he will have the answers.  I am very much a “Johnny-come-lately” to all of this and, therefore, I am not going to expose myself to answers on details like that, which might be proven wrong next week.  One screwed-up press release is enough for the week, thank you.

On your second point -- that really is a matter for the lawyers.  I want you to understand that this is being dealt with as a legal issue, not a political issue; the terms and circumstances under which either payments to Mr. Sevan or reclaiming payments from him is possible.  In the case of reclaiming, I think that the practical fact is it would need some criminal conviction, which then allowed funds to be reclaimed through a civil court proceeding of our own.  Reclaiming is different from paying, which is the state we are currently in.

Question:  Would you rather have a vindication by an outside judicial party, not by the United Nation’s internal...

Mark Malloch Brown:  It is ultimately a matter of the lawyers, but I am pointing out that, as a practical matter of fact, it would need some kind of civil action, which, in turn, would be likely to be hinged on some previous criminal action.  It might be possible to hinge it on an Administrative Tribunal finding.  Again, the lawyers would have to determine that.

Question:  How was the decision made to effectively use Iraqi oil money to pay for the defence of somebody accused of stealing money from the people of Iraq?

Mark Malloch Brown:  The “2.2 account” that would be charged for any payments finally made was set up for the management of that oil money by the UN.  As you know, it was used in an exchange which was endorsed by the Security Council over the objections of the Iraqi Permanent Representative for the payment of the Volcker Panel and its costs.  We look at proper representation before that Panel to secure the truth from Benon Sevan as an extension of that same process.  It is ensuring that the great bulk of those oil moneys were properly used, and that corrective action is taken where they were not.  That was the purpose of the “2.2 account”, to ensure good management of the other
98 per cent of the oil revenues.

Question:  This is where the real outrage is being expressed by the Iraqis themselves.  It is like if an employee steals from funds from a bank, it is like asking the depositors whose funds are stolen to pay for his legal fees.  Does it not seem to be at least a political misjudgement to use that particular money?

Mark Malloch Brown:  If you take that example, it might be very likely that that employee of the bank was a senior manager of the bank and was sued as result of a criminal investigation of having stolen from accounts of people at that bank.  It would be normal corporate practice that, initially, the bank would indeed underwrite a senior executive’s legal costs.  As soon as the executive was found guilty in any proceeding, that financial support would stop.  Check with normal legal practice here in the United States, and you’ll find that that is the case, whether it is Enron or any of the other scandals.  These kinds of legal support are initially available, but as soon as there is proof of wrongdoing by the senior manager, any legal support of the company is withdrawn.  It is there in the first stages, again, because as an officer of the company, that individual is being charged because of activities they have undertaken in the course of their official duties.

Question:  The bank would not pay those fees if the funds of the...

Mark Malloch Brown:  Well, they would pay it out of their resources.  Let me make it clear that the money of the “2.2 account” is moneys given to the UN for the management of the other 98 per cent.

Question:  Are you fully confident that the Volcker report will vindicate the Secretary-General’s son?

Mark Malloch Brown:  I can’t speak for a father towards his son.  That is exactly the kind of issue where you will see what Volcker has to say and then no doubt the Secretary-General will have comments.  That is way beyond my official duties.

Question:  We were given the impression that, when the investigation began and the dollar-retainer was organized, that would be a mechanism by which Sevan would have a direct conversation with Volcker.  Now we have learned about a lawyer.  Of course, that creates a kind a scepticism in the press corps and around the world.  Even with these confusions, we still have not been able to put to sleep those feelings of scepticism that by having a lawyer you never are going to get to the bottom of the truth here.  Can you please address that and try to put that to sleep.  Secondly, can you explain what the relationship is between Mr. Sevan’s current lawyer and the UN is, if there is such a link.  Thirdly, does the Secretary-General have a similar type of legal arrangement now that he is also under investigation?

Mark Malloch Brown:  On the first two, let me just say that the idea of an accused being represented by counsel in an investigative procedure is as old as the notion of justice itself.  While it is to ensure the accused their rights to defend themselves, which becomes enormously important in complex commercial investigations or legal proceedings, it has a second element too.  The lawyer’s job in a situation like this is to ensure that the proceeding moves smoothly, to the extent that, if Mr. Sevan has answers to the questions the Volcker Panel raises, those answers are organized and documented.  That there is not an individual on the defensive reluctantly answering and not being able to make his case effectively.  That is the essence of any system of justice.

Secondly, as regards the Secretary-General -– I am glad you asked -- the Secretary-General has indeed sought private legal advice in making his own response to the queries that the Volcker Panel had put to him.  He has not sought, and he will not seek, any financial support from the UN in regard to that.  It is entirely a private matter between him and a lawyer he has consulted on these matters.  Nobody else is paying for it.

Question:  Are you sure the Secretary-General will cooperate with Volcker?  Also, you have used several times the term “found guilty”.  To my knowledge, Benon Sevan has been found guilty of nothing, as of yet.  Secondly, if it was important to ensure his cooperation so much that you needed to reimburse his lawyer fees, you need to address that, too.  Was that only lawyer fees or also travel costs or other things?  Has Benon Sevan since the 3 February findings appeared before the Volcker Commission.  If the Volcker Commission asks him to reappear, do you assume that now he will not cooperate?  Thirdly, since he was not found guilty of anything, why stop payments?

Mark Malloch Brown:  Let me take the third first.  We have always said that the Volcker Panel, while independent, if it makes allegations against people, we consider those to have the full force of the UN’s own investigation.  Therefore, they have alleged serious misconduct against Mr. Sevan and I, as now Chief of Staff, feel a clear fiduciary responsibility to stop any payment for any legal services after those findings.

Mr. Sevan is now engaged in his right of rebuttal, because we took action against him, sent a letter of charges based on the Volcker findings.  Obviously, if he is able to rebut all the allegations against him, and that rebuttal is accepted by the internal justice system of the UN, and no criminal charges came –- despite all we have heard out of Congress and out of different District Attorney’s Offices –- and he was completely vindicated by the justice system, then the situation is very different.  At the moment, we consider him, because of the Volcker investigation, to be the subject of very serious charges.  It would be utterly inappropriate, in my view, to allow further payments for work after 3 February. 

As to your question on the Secretary-General, while it is a mischievous question, let me give it a straightforward answer.  There is total and utter cooperation by the Secretary-General with the Volcker Panel.  He has met with them, as you know, on several occasions, he has responded fully to any questions they had, he has made sure that the staff of his office, like the staff of the whole UN, have been equally forthcoming.  The proof in that would be in what Mr. Volcker has to say next week.

Question:  As for the other expenses...

Mark Malloch Brown:  These legal bills are subject of discussion between the Office of Legal Affairs and Mr. Sevan’s lawyer.  It is not money going to Mr. Sevan.  As I understand it, it is reimbursement of the lawyer for a yet-to-be-agreed-upon scope of services because of the disputes we raised earlier.  I am sure that if there are non-billable hours and expenses, that they are going to be subject to the same scrutiny.  I have not seen the bills, but we are very clear that the terms are for his representation and his preparation for his representation before the International Inquiry Commission.  That was what would be paid subject to the other issues we have discussed.

I can’t confirm the numbers, but I will acknowledge that it was a big number, because it was very difficult for a staff member alone to meet those legal bills on that scale because of the extensive questioning and scope of investigation to which he was subjected.  That was one of the reasons that made the Office of Legal Affairs deem it an exceptional circumstance.  It is beyond the few thousand dollars that a staff member might incur in other legal proceedings.  It is exceptional for that reason, that it was beyond the means of a staff member -– unless that staff member enriched himself –- to meet.  Secondly, it is exceptional because the Volcker Panel is exceptional.  There has been no justice device of that kind before.

Spokesman:  Marc Carnegie, did you have a question?

Question:  Given the lawyers, the extent legal advice was involved in consultations with lawyers, why, can you tell us, was assurance given to Mr. Sevan only orally that you would pay the fees, or was there in fact some kind of document?  And secondly, you just spoke about clear fiduciary responsibility to stop payment immediately.  If that was the case, why did it take three weeks to send Mr. Sevan a letter to that effect?  And thirdly, you’ve spoken now of him being accused of major breaches.  As I recall, I don’t know the language exactly, but the day after the report came out you [inaudible] here saying that the Secretary-General was shocked and did not see any way that Mr. Sevan could be vindicated, or that his behaviour could be improved.  Now you seem to be taking a step back, you’re saying, he’s only accused of major breaches and [inaudible] if he’s vindicated, we might pay.  Has there been any shift on your part in how you feel about Mr. Sevan’s [inaudible]?

Mark Malloch Brown:  No, Benny was taking the unusual role of being the champion of Mr. Sevan’s rights.  So I was acknowledging that, of course, somebody is ultimately innocent until proven guilty, but we believe that the Volcker Panel has shifted the burden of proof to Mr. Sevan.  It makes very serious allegations, which we at this point believe.  And let me be very, very clear about that.  As to why this letter took three weeks -- the issue, you know this a very controversial and difficult issue where my own instinct was to just give a one word reply to the whole issue -- “Nyet, No” -- in any language you like, because I was so concerned about the issues raised by it.  But finally came to conclude, based on the advice I was given, that the prior commitments required us to honour them up to the period of 3 February.

But the point is, action on payment anyway had to be taken in terms of bills being cleared and paid.  And there was no question of that happening.  So this was a matter of serious, urgent, high-level review, and the choices that I faced and my predecessor before me faced were not palatable choices.

Question:  Why were we told for the longest time that this arrangement didn’t exist?

Mark Malloch Brown:  Because I believe, and you, Benny, seem to suggest in your question yesterday to Fred that you had asked this of him sometime last year.  And I imagine at the time you asked him, it was not true.

Correspondent:  I asked him last week, as well.  It took five days to prepare a hurried statement.

Mark Malloch Brown:  Well let me tell you, within hours -- no, Benny -- you came and asked him for it yesterday.

Correspondent:  I came and asked him last week.

Mark Malloch Brown:  The day that Fred raised this with me I gave the statement to Fred that he used with you the day before yesterday or whenever this was.  You -- and I checked with him -- that you had only come to see him the day before yesterday –- Monday, I suppose.  You had not come to see him at the end of last week.  It was there waiting for you.  There has been on my watch full disclosure of this.  The moment you asked, you got the answer.

Correspondent:  But then you say that three days later your response was hurried.

Mark Malloch Brown:  No, we’re talking about the first response that led you to filing a story on Monday.  That would have been available to you at the end of the previous week.  It was sitting with Fred, and you did not come and ask for it.  You had other more important leads to follow, no doubt, at that time.

Spokesman:  Mark, you had -- Louie, don’t jump in.  We have a long list here.  You’ve got to wait your turn.  Mark, did you get all your questions answered?

Question:  Can you shed any light on why the decision was made to only give oral assurance that his legal fees would be paid.  And secondly, please correct me if I’m wrong, but you said it’s a very old idea that those who are accused should be represented by counsel, and you raised a parallel with the private sector when people in companies are charged with what not they should have counsel.  But those cases, unless I’m misunderstanding, those cases have to do with employees in companies that are accused of violating of outside federal law or sometimes State law.  In this case, are we not talking about an official who is also basically on the dock for breaking United Nations rules and you pay his legal fees when he’s being investigated for breaking United Nations rules?  And in fact now that you say [inaudible] shifted the burden of proof and you at this point believe that he may be guilty of these things, then at the moment when he is actually facing the outside possibility of being charged with United States law or some kind of outside law, you cut off the legal support.

Mark Malloch Brown:  I mean, look, I don’t think the issue is material about an internal versus external justice system –- justice.  The point is that this man was clearly at the centre of the Volcker investigations.  He was being asked to respond over a wide web of commercial actions and a long period of time when he was being cross-examined for events and actions taken over whatever it was -– a three- or four-year period.  And a decision was made that he was not going to be able do this effectively without legal counsel and that the scale of the legal support he would need was beyond his means as a United Nations staff member to finance alone.  And we’re getting a little repetitive here.  I am only going to be able to take one or two more, because I’m very, very late for a meeting at the moment.

Spokesman:  Maggie, do you still have a question?

Correspondent:  Eddy covered it in his –

Spokesman:  I’m going to skip the people we called on before.  Richard Roth?

Question:  Very briefly.  Quick points.  Can you have the Secretary-General here next Tuesday if possible at 3:00 in light of the Volcker report and, possibly on speaker phone, his son, though it’s a separate issue, but it’s a request.  Two, when it all ends, it’s always about the children.  And we have students here.  Is the damage, and they’re probably wondering and readers of papers, is the damage done?  The day after the reform report the headlines are about this case again.  And no mater what Volcker says, as the former labour Secretary of the United States Ray Donovan once said, where do I go to get my reputation back?  Is it all really too late?

And maybe at the end of the briefing, a brief sum up on the Dileep Nair case.  Did you ever meet with him?  Is he here?  Where is that going?

Mark Malloch Brown:  First, I don’t do TV logistics.  I’m not your booking agent yet, Richard.  I probably will be the end of this and pleased for even that source of employment.  But we’ll have to see what happens next Tuesday.  I just don’t know what the media arrangements will be.  I’m sure we will want to respond to whatever is in the report, but how and by whom and when, I can’t tell you at this point.

On the second, I mean, you will all be the judge.  I think you can imagine my personal dismay and that of many of my colleagues when we had worked so hard on this report.  And for many of us it represents a vital effort to reinvigorate and relaunch our Organization.  First, to be undone by Maggie’s successful investigative journalism, for which, again, as I say, I have no quarrel with her -– she did a very good job -– but some frustration with the governments who had made this possible.  And then, a day after, when I thought we maybe would be allowed a little bit of a honeymoon on this, to be back in the midst of this story, causes me, as you can imagine, absolutely no pleasure.  It does make me realize that this story is firmly manacled to our ankles and it’s hard to escape from, and that there are many who will continue to make sure we don’t escape from it. 

But I think the issue is to whether or not this does lasting damage to the Secretary-General or others will be very much -– we will see next week with Volcker.  He continues to believe he will be fully vindicated and cleared of the allegations.

Question:  Mark, just a couple of things.

Spokesman:  Raghida, I have six people before you.  The next person is Joe.  Joe has been waiting very patiently before you even came in, he had his hand up.

Question:  The third meeting between the CEO and Secretary-General that, I believe, happened in January 1999 after the Sunday Telegraph first raised the issue of possible negligence –- why did the CEO offer an apology to the Secretary-General if nothing was wrong?  Why did Kojo change the payment arrangements?  Has there been an appearance of wrongdoing, at least?

Marc Malloch Brown:  No. I think, the apology was for the embarrassment of a newspaper story, which was -– I think everybody at the time will recall -– in its own right embarrassing.  You do not like a Secretary-General to read a story saying that your son, through his company he works for, appears to put you in a bad light.  So I don’t... again, this goes to the heart of this, which is:  the Secretary-General has consistently maintained that he himself is not guilty of any wrongdoing, and that Kojo -– he believes the undertakings that his son has given him, that Kojo’s work for Cotecna had nothing to do with its contract.  That’s something, which, no doubt, Volcker will have a view on and which, I imagine, Kojo will be pressed to answer.  The fact is that Kojo has confirmed himself, as you know, that he misled his father.  He told him that his relationship with Cotecna had ended at the time of the Sunday Telegraph article.

Question:  [inaudible]

Marc Malloch Brown:  I certainly am, but again, you know, wait for Volcker to offer the vindication that the Secretary-General certainly expects from this.

Question:  You have said, the allegations, which “we, at this point, believe”.  Now, at what point did you start to believe the allegations?  What was the catalyst for your belief and why don’t you disbelieve that Kojo is involved, as well?  And finally, when does the buck stop with the Secretary-General?  Is it his son?

Marc Malloch Brown:  Well, let us be very clear.  Benon has been subject to the interim findings of a $30 million 65-investigator investigation, which says, in its view, he is guilty.  Not necessarily of criminal wrongdoing, but guilty of major breaches of the staff rules.  If an investigation commission by us says that, well, until he is able to prove otherwise...  As I made clear, the day the Volcker report came out, we now... our presumption is that this investigation, which the Secretary-General commissioned, is right.  The burden is on Mr. Sevan to prove otherwise, and he has an internal justice process to allow him to do that.  And we are giving him every opportunity to avail himself of that.

In the case of Kojo, no such findings by the Volcker Panel have been issued.  Wait till Tuesday.  The situation will probably, no doubt, be very different.  If some of what we see in today’s The Financial Times is confirmed, that’s going to create a very different situation, but for Kojo –- not for the Secretary-General.  And here is my final assertion again -- you know, I sometimes joke with the Secretary-General about this, and I may have joked with some of you -- I am very glad my son is eight years old, because I will be well out of this business before he goes to work.  But, at the moment, we have a story of a son, who is being investigated for his actions, which have to be judged on their own right as to whether they are appropriate or not. The second phase of the story is, are they in any way linked to wrongdoings by the Secretary-General?  And we stand by it -- we believe on Tuesday the Secretary-General will be exonerated of any wrongdoing.  But, like you, we have to wait for the report.  That is the Secretary-General’s solemn confidence and faith.  But we haven’t seen the report, either, so we’ll have to see that confirmed.

Thank you very much, ladies and gentlemen.  Thank you.

Oh, what I can say on Dileep Nair... Mr. Nair has requested a meeting with the Secretary-General to appeal the decision we have reached, and so that meeting will take place on Thursday, and once it has happened, no doubt, we’ll have something to tell you.

* *** *