US: Oil-for-Food Scandal Broadens With New Charges

Dramatically broadening the scandal surrounding the United Nations Oil-for-Food program, federal authorities in New York today charged David B. Chalmers, a Houston oil trader, and his company, Bayoil, with making millions of dollars in illegal kickback payments to Iraq while trading oil under the program.

Separate charges were brought against Tongsun Park, a South Korean businessman who figured in a Washington influence-peddling scandal some 30 years ago, accusing him of acting as an unregistered agent for Iraq in behind-the-scenes negotiations in the United States to set up and administer the program.

The authorities charge that Mr. Park received at least $4 million in secret payments from the government of Saddam Hussein for serving as a liaison between Iraqi and United Nations officials.

Mr. Park was a partner in the lobbying effort with Samir Vincent, an Iraqi-American businessman who pleaded guilty in January to similar charges that he lobbied illegally for Iraq. According to the criminal complaint announced today, Mr. Vincent, who is cooperating with federal investigators, said that Iraqi officials agreed in 1996 to pay him and Mr. Park $15 million for their lobbying, in part "to take care of" a high-ranking United Nations official.

Mr. Park and Mr. Vincent met at least twice in 1993 with the United Nations official, and received cash payments from Iraq for at least $1 million, according to the federal criminal complaint. The authorities did not reveal the name of the United Nations official, nor has the official been charged.

David N. Kelley, the United States attorney in Manhattan, said the evidence shows that Mr. Park planned to pay the United Nations official, but does not confirm that the official received bribes.

The complaint also charges that Mr. Park met with a second, unnamed senior United Nations official and made a substantial investment in a company belonging to the official's son.

Mr. Park was implicated in an earlier lobbying scandal in the United States Congress in the 1970's. Mr. Park was indicted then, but the charges were dropped in return for his testimony about Seoul's influence-buying efforts.

Bayoil is the first American company to be indicted in the widening scandal over the program, which was established in 1996 by the United Nations to sell Iraqi oil and use the proceeds to buy food, medicine and other humanitarian goods for the Iraqi people.

Also named in the indictment filed yesterday were two associates of his company, Bayoil (USA) Inc : John Irving, a British oil broker based in London, and Ludmil Dionissiev, a Bulgarian living in Houston.

Mr. Chalmers and Bayoil were accused of making deals to trade Iraqi oil knowing that Mr. Hussein's regime had imposed an illegal secret surcharge on all oil purchases after 2000. Mr. Chalmers is charged with devising a plan with Iraqi officials to artificially deflate the official price of Iraqi oil, which was determined by United Nations monitors, so that traders could pay the illegal surcharge to the regime and still reap profits on the sales.

Bayoil is also accused of transferring millions of dollars in illegal commissions through a foreign company, which was not named, to a company in the United Arab Emirates, Al Wasel and Babel General Trading LLC. The authorities charged that both companies were fronts sent up to channel at least $2 million that would be used to pay the illegal commission to officials in Iraq.

"Motivated by greed, they flouted the law, made a mockery of the stated aims of the Oil-for-Food program, and willingly conspired with a foreign government with whom our country was on the brink of war," John Klochan, the F.B.I.'s acting assistant director in New York, said of the Bayoil defendants.

But a lawyer for Bayoil and Mr. Chalmers, Catherine M. Recker, said today that her clients would plead not guilty and added, "we will vigorously dispute the allegations of criminal conduct."

Michel Tellings, one of the three oil overseers who monitored Iraq's oil sales for the United Nations, played down the significance of the government's charge that Mr. Chalmers and Bayoil "conspired" to deflate the sales price that the United Nations' overseers set for Iraqi oil.

"Most oil companies and brokers said the price could be lower," he said from London in a telephone interview. "All the oil companies wanted that and Bayoil was no exception. I don't think if you say to the oil overseers that oil should be cheaper that it is a crime."

Mr. Tellings, who served as an overseer from September 2000 until the program's end, acknowledged that "some were a bit more aggressive" than others in pushing for lower prices." But he declined to say whether Mr. Chalmers or Bayoil were among those who pushed most actively for lower prices.

"I don't want to discuss individual cases," he said, noting that he had not yet read the complaint filed today in New York.

Mr. Chalmers and Mr. Dionissiev were arrested this morning at their homes in Houston and will be arraigned Monday in Federal District Court in Manhattan, Mr. Kelley said. An arrest warrant and extradition proceedings have been filed for Mr. Irving.

The government is seeking $100 million in forfeiture from Bayoil. If convicted, Mr. Chalmers and the other two Bayoil defendants each face a maximum sentence of 62 years in prison and fines of up to $1 million, and the Bayoil companies face fines of $2 million.

A warrant has been issued for Mr. Park, who is believed to be in South Korea. He faces up to five years in prison and a fine of up to $250,000.

Many member countries at the United Nations have refused to cooperate fully with a separate, independent inquiry by investigators looking into waste, fraud and mismanagement in the program, which was approved by the Security Council in 1995, allowing Iraq to sell limited quantities of oil in return for essential goods.

The Independent Inquiry Committee, led by Paul A. Volcker, former head of the Federal Reserve, has issued two interim reports of its findings, and a final report is due in midsummer.

In its first interim report, on Feb. 4, the commission found that the former head of the program, Benon V. Sevan, had a "grave and continuing conflict of interest" in helping a friend obtain valuable Iraqi oil contracts and said a second United Nations official, Joseph Stephanides, had violated procurement rules. Both men have been suspended and are in the process of answering United Nations charges against them.

Questions have also been raised about the participation of Kojo Annan, son of the United Nations secretary general, Kofi Annan. The elder Mr. Annan was criticized in the most recent interim report on the grounds that he failed to perceive the appearance of a conflict of interest when Kojo Annan was employed by a contractor employed by the program.

Kofi Annan told 1,600 employees gathered in the General Assembly hall on April 6 that there had been "troubling lapses" in the management of the Iraq program but that he was making changes to prevent any recurrence.

The Volcker committee issued a statement today saying it was "well aware of the conduct alleged in today's indictments."

"Bayoil is one of many companies and individuals to do business under the Oil-for-Food program," said the statement by the committee's spokesman, Michael Holtzman.

"The committee will release information to the public when it can offer definitive findings and recommendations and when consistent with a fair and independent investigation."

Terence Neilan contributed reporting for this article.

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