Counterterrorism Blog

A UN Joint Disciplinary Committee, comprised of three UN Secretariat members, including one selected by Secretary General Kofi Annan, has unanimously vindicated Stephanides with regard to charges that he �tainted� the competitive bidding process that led to the selection of Lloyd's Register to oversee the humanitarian Oil for Food contracts. The UN panel found that Stephanides was innocent of charges that he violated UN rules by divulging confidential bidding information to the United Kingdom Mission for the benefit of Lloyd's Register. Those charges were based, in turn, on adverse findings in the first interim Volcker Commission report that stated that �... the regular competitive bidding process was tainted by Mr. Stephanides�s contacts with a member state mission and preempted for political reasons dictated by the Iraq Steering Committee.�

Blog readers may recall that back in February 2005 when the Volcker Committee's (IIC) first interim report was issued, I argued that Joseph Stephanides had been given a raw deal. Despite the fact that the Volcker Report made no suggestion that Stephanides had acted for personal benefit, Secretary General Kofi Annan decided to make an example of him and directed that he be summarily fired. But the case against him never really held any water.

Let�s start with the Volcker report inconsistencies: The IIC report never specified exactly what it meant by �tainted,� but claimed that Stephanides had passed confidential bidding information to the British Mission. This allegedly occurred during the first part of August, 1996. According to the IIC report this information provided Lloyd�s an opportunity to lower its bid and win the Contract. But, it is now clear that this charge cannot stand. In fact, the Volcker report itself refutes this finding. Let me explain. Page 67 of the IIC�s first interim report states::

"To ensure an open and competitive bid process, no information of a material nature, such as the number of bids received, the names of bidders or the amount of bids could be revealed to any individual or to the general public prior to the time of the bid opening. Consistent with these principles, the bids or proposals received were required to be "publicly opened at the time and place specified in the invitation to bid, and an immediate record" was to be made." (emphasis added)

On Page 14 that same report indicates that this is exactly what occurred. It says::

"five companies responded with bids that were accepted for consideration, and the procurement department conducted an open reading of the bid prices on July 30, 1996." (Emphasis added)

Let me be clear: The IIC report itself says that the bids for the contract were publicly opened on July 30, 1996. Each bid was read out loud publicly � well before Stephanides is alleged to have divulged that information to the British!

But, the inconsistencies in the IIC report don�t end here. As I first wrote back in February 2005 it is difficult to understand why the Volcker Commission would find it improper that the Oil for Food contract selection process would be subject to intense political scrutiny. In 1996, Iraq and the Oil for Food program were viewed as major highly charged international security issues and they engaged intense scrutiny at the highest levels. The negotiation of each aspect of the program was closely watched by all the members of the Security Council, and the selection of each contract component closely analyzed and considered. When the bids were opened on July 30, 1996 and a French company, Veritas came in with the lowest bid, an impossible situation was created. A French bank had already been selected to administer the OFF Escrow Account, and a Frenchman had already been chosen to serve as an oil contract overseer. It was crystal clear to all Security Council members, including the French, that another French company could not be awarded the humanitarian goods oversight contract. Under these circumstances, Lloyd�s was the obvious choice. Apparently the only persons surprised by this were the Volcker investigators. In fact, if they had checked with the representatives of the concerned countries, including France, they would have been told straight out that despite its low bid Veritas could never have been accepted once BNP Paribas received the Escrow Account. This is why the Steering Committee decided that it had no choice but to abandon the bidding process. That decision was not influenced by Stephanides or anything that Stephanides did. Rather, Stephanides became an instrument for implementing this solution. His mission was to get Lloyd�s to lower its price. Lloyd�s did lower its price, but even with this, it was not the lowest bidder. This fact further undercuts the Volcker Commissions assertion that Stephanides �tainted� the bidding process.

Since the Volcker report was issued, direct participants in the events surrounding the selection of Lloyd�s, including key senior US, British and German diplomats, and Secretariat personnel, provided written statements to the Volcker Commission vindicating Stephanides. These statements all indicate that Stephanides acted on instructions from higher up the chain of command.

In its ruling the Joint Disciplinary Committee concluded that the �conduct in question, ie, 'divulging information to the United Kingdom Mission to the United Nations on the amount of the bid submitted by Lloyd's competitor before the United Kingdom submitted its letter, dated 8 August 1996, to the Iraq Steering Committee transmitting Lloyd's revised bid� was completely legal as the relevant information had moved into the public domain on 30 July 1996. Accordingly, by this particular action the Applicant could not and did not taint and did not actively participate 'in prejudicing and preempting, the procurement process for the award of the humanitarian goods inspection contract to Lloyd's and did not violate 'The requirement for equal treatment of and fairness to all bidders in the competitive process>' Thus, the Panel concluded that the {Secretary General's} decision to summarily dismiss {Stephanides} for such legitimate conduct was illegal, wrong, unfounded and unjustified.�

Following the Panel's ruling, Secretary General Kofi Annan acted to re-instate Stephanides, provide him back pay, and allow him to retire honorably. But Annan refused to accept the Panel's finding that Stephanides had been wrongly charged. That matter will now have to be resolved by an appeal's panel whose decisions, unlike the Joint Disciplinary Committee, will be binding on the Secretary General and the UN Secretariat.