Freshfields sucked into Iraqi row over Saddam’s lost gold

Magic circle firm sidelined on Oil for Food probe as Coalition Provisional Authority demands US advisers

Freshfields Bruckhaus Deringer’s investigation into corruption during the Oil for Food Programme in Iraq has ground to a halt after the firm has become embroiled in a political furore between the country’s two rival authorities.

In an extraordinary move, the US-dominated Coalition Provisional Authority (CPA), led by Paul Bremer, last Friday (14 May) decided to appoint Ernst & Young (E&Y) in New York to investigate and recover what could amount to tens of billions of dollars allegedly stolen by Saddam Hussein’s henchmen during the Ba’ath regime. At press time the US lawyers had not yet been announced.

The appointment is in direct conflict with the Arab-dominated Iraqi Governing Council (IGC), which had already instructed KPMG and Freshfields, led by partner Lindsay Marr.

IGC adviser Claude Hankes Drielsma said: “It’s totally unacceptable for the CPA to attempt to undermine the sovereignty of the IGC. The Oil for Food scandal directly affected the Iraqi people as it helped to finance Saddam’s regime. The new investigation is a smokescreen – it’s clearly politically motivated and has the purpose of creating confusion and delay.”

Freshfields and KPMG were barred from the CPA’s tender after a disagreement over contractual terms and conditions. These include a refusal by the CPA to protect the advisers if they were sued by anyone they investigated in relation to the Oil for Food inquiry.

As a result, last Friday, minutes after the CPA announced the appointment of E&Y, KPMG made clear its intention to appeal
the CPA’s tender process, claiming it had been incorrectly carried out.

KPMG’s appeal is in the hands of US Brigadier General Stephen Seay, a member of the CPA.

The CPA could not be reached for comment. E&Y did not return calls.