Federal investigators are focusing on four American oil companies and
three U.S. citizens who allegedly received vouchers for oil from Saddam
Hussein as he sought to flout United Nations sanctions.
The U.S. attorney's office in Manhattan also is investigating
corruption allegations against the former head of the U.N. Oil-for-Food
program, Benon Sevan, according to a person familiar with the case.
The U.S. companies -- including Exxon Mobil Corp., ChevronTexaco Corp.
and El Paso Corp. or their predecessors -- and individuals were
identified in the Central Intelligence Agency's 1,000-page report on
the Hussein regime's campaign, though their names were redacted from
the publicly released version. While confirming that sanctions had
prevented Iraq from obtaining weapons of mass destruction, the report
by arms inspector Charles Duelfer, released last week, described
efforts by the Hussein regime to manipulate the Oil-for-Food program in
its favor, circumventing U.N. mandates, and possibly U.S. law.
A federal grand jury in Manhattan is investigating whether there was
corruption in the Oil-for-Food program. Exxon, El Paso, and Chevron
previously confirmed that they were among companies to receive
subpoenas. Others identified in the Duelfer report as receiving the
vouchers include Bayoil, a closely held Houston oil company, and three
individuals who campaigned to end the Iraq sanctions: Oscar Wyatt, of
Houston; Shakir al Khafaji, of West Bloomfield, Mich.; and Samir
Vincent, of Annandale, Va. Together, the companies and individuals
received vouchers valued at 111 million barrels of oil, according to
the Duelfer report.
Officials stressed that the allocation of vouchers -- negotiable
instruments that could be traded for Iraqi oil -- wasn't necessarily
criminal and that no one has been charged with an offense.
In May 2002, a page one article in The Wall Street Journal reported
that the Hussein regime had skimmed hundreds of millions of dollars and
that several U.S. companies had been major consumers of Iraqi oil. The
Duelfer report, which relied on captured Iraqi documents and
interrogations of Mr. Hussein and officials of his regime, estimated
the former Baghdad government had illegally collected $11 billion, in
part by selling the oil below market price and receiving the difference
through kickbacks. It also says Mr. Hussein gave oil vouchers to
influential people and organizations overseas.
The U.N. Security Council blocked Iraqi oil sales to punish Mr. Hussein
following his 1990 invasion of Kuwait. During the 1990s, however,
Security Council members such as France and Russia sought to end
sanctions, contending they were harming Iraq's civilian population. As
a compromise, the U.S. and Britain agreed to the Oil-for-Food Program,
which was intended to allow carefully monitored sales of Iraqi oil to
pay for humanitarian supplies. A U.S. Treasury spokeswoman said the
department is reviewing the license it granted to those who
participated in the Oil-for-Food program.
A Chevron spokesman said yesterday that the San Ramon, Calif., company
was cooperating with the investigation and added that "all purchases of
Iraqi crude by ChevronTexaco were made in full compliance with all
El Paso, of Houston, in 2001 took over the assets of Coastal Corp., a
company once run by Mr. Wyatt. It has since sold off all its refining
assets, according to an El Paso spokesman, who said the company is
cooperating with the investigation. Exxon, of Irving, Texas, couldn't
be reached; it previously said it was "responding appropriately" to the
subpoena. In recent days, a lawyer for Bayoil, John Kotelly, wouldn't
say whether that company had received a subpoena.
The individuals named couldn't be reached for comment.
It is unclear how the investigation will affect the companies named.
Big publicly traded oil companies have been under increasing pressure
to line up new supplies as reserves in more-stable regions have
declined, and this search often puts them in contact with countries
with unstable political systems and histories of corruption. It isn't
unusual for the companies to face subpoenas and investigations as a
result. Major oil companies have extensive written policies prohibiting
bribing officials or violating international sanctions.
The Duelfer report lists hundreds of foreign companies and individuals
who allegedly received Iraqi oil vouchers -- including Mr. Sevan -- but
not the U.S. companies and citizens. The names were included in
versions sent to congressional committees, however, and officials
confirmed their accuracy. Many of the names were disclosed in January,
when documents purportedly taken from Iraqi oil-ministry files were
published in an Iraqi newspaper.
Mr. Sevan, a Cypriot and a career U.N. official, has denied wrongdoing.
Although high-ranking U.N. officers enjoy diplomatic immunity from
prosecution, U.N. Secretary-General Kofi Annan has said he will waive
the immunity for any U.N. employee an independent panel appointed by
Mr. Annan and headed by Paul Volcker, former chairman of the Federal
Reserve, finds has broken the law.
Citing former Iraqi officials, the Duelfer report says Mr. Sevan
received vouchers for 13 million barrels of oil and redeemed 7.3
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