UNITED NATIONS – The U.N. Security Council and Secretary-General Annan failed to adequately manage and police the $64 billion U.N. oil-for-food program, creating a permissive environment that enabled Saddam Hussein’s government in Iraq to take billions of dollars in illicit kickbacks, according to the findings of a U.N. investigation to be released today.

The report by the former U.S. Federal Reserve chairman who heads the U.N. Independent Inquiry Committee, Paul Volcker, will portray a largely dysfunctional, leaderless international effort to send humanitarian relief to Iraq between December 1996 and the American-led invasion of March 2003. Mr. Volcker will urge world leaders attending a September 14 summit on U.N. reform to support steps to strengthen the quality of independent oversight of the organization’s spending.

“To settle for less, to permit delay and dilution, will invite failure, further erode public support, and dishonor the ideals upon which the United Nations is built,” the preface of Volcker’s report says.

The document, which is expected to run more than 700 pages, is the fourth and most comprehensive report by Mr. Volcker’s panel and will summarize previously published findings while offering new details of abuses in the program.

Among those new conclusions, the report will say that Iraq’s neighbors, including Jordan, Turkey, and Syria, violated U.N. sanctions by smuggling billions of dollars of Iraqi oil from Saddam’s government, U.N. sources said. The report will also fault key Security Council members, including France and Russia, for impeding efforts to reform the oil-for-food program. And it will criticize America for doing too little to discourage allies in the region from violating the sanctions and by abetting the smuggling of Iraqi oil by Jordan immediately before the invasion, the sources said.

“The committee report documents how differences among member states impeded decisions, tolerated large-scale smuggling, and aided and abetted grievous weaknesses in administrative practices within the Secretariat,” says the preface, which was released yesterday. “As the years passed, reports spread of waste, inefficiency, and corruption, even within the United Nations itself. Some was rumor and exaggeration, but much – too much – has turned out to be true.”

The U.N. program was established to allow Iraq, which was then the subject of a U.N. trade embargo following its 1990 invasion of Kuwait, to sell oil and use the proceeds to buy food and medicine and to pay billions of dollars in war reparations. The report to be issued today says the program achieved “important successes” by improving nutritional and health standards and by undermining Saddam’s efforts to build weapons of mass destruction. But it concludes that the United Nations allowed Saddam to abuse the program by bribing U.N. officials and by forcing hundreds of companies to pay kickbacks in exchange for the right to trade in oil and humanitarian goods. The abuses cast a “dark shadow” over the program, Mr. Volcker’s report says.

The oil-for-food scandal has triggered federal criminal investigations and several congressional probes of the United Nations’ management of the program. The U.S. attorney for the Southern District of New York has charged two Russian nationals with wire fraud and money laundering. One of them, a U.N. procurement officer who has pleaded guilty, was cited in a previous Volcker report for soliciting a bribe from a Swiss company seeking to do business in the oil-for-food program and for receiving more than $950,000 in bribes from contractors in other U.N. programs.

Mr. Volcker’s new report will sharply criticize Mr. Annan’s oversight of the oil program as lax, citing “serious instances of illicit and corrupt behavior” by U.N. officials under his watch. The report will draw attention to administrative shortcomings by the nine U.N. humanitarian agencies, including the U.N. Development Program and the main housing agency, Habitat. It also will accuse the 15-nation Security Council of providing “uncertain, wavering direction” to U.N. officials running the program. “Neither the Security Council nor the Secretariat was clearly in command,” the preface states.