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NEW YORK---On the same day the former Federal Reserve Chairman Paul Volcker issued his final report on the $64 billion scandal in the UN's Oil-for Food Program, Texas oilman Oscar Wyatt pleaded not guilty to federal charges that he allegedly paid millions of dollars in kickbacks to Iraq to buy oil from Saddam Hussein.
The Volcker report says Wyatt, 81, the former chairman of Coastal Corporation, balked at paying the surcharges -- but then agreed to go along.
U. S. District Court judge Denny Chin set a trial date of June 20. Wyatt remains free on bail and Chin told him that he must obtain special permission to travel outside the U.S.
Wyatt was arrested in Houston, Texas on Oct. 21. Two Swiss business executives named with him in the indictment have not yet been arrested. Previously indicted defendants David Chalmers of Bayoil Inc. of Houston, and Ludmit Dionissiey, a Bulgarian oil trader, also pleaded not guilty in the case Thursday and a lawyer representing Bayoil Inc. and Bayoil Supply & Trading Ltd., entered a not guilty plea for the corporations.
Chalmers and Dionissiey are also free on bail.
Paul Shechtman, chairman of the New York State Ethics Commission and newly named state Medicaid Inspector General by the Pataki administration, is representing Chalmers and said that he would be asking that Chalmers be tried separately from the other co-defendants. Shechtman, a partner in the law firm of Stillman & Friedman of New York City, is a former federal prosecutor, former prosecutor with the Manhattan District Attorney's Office and former director of the State's Division of Criminal Justice Services. He was chief of the criminal division for the U.S. Attorney's office for the Southern District of New York from 1993 until 1995.
More importantly in this case, Shechtman was counsel to Robert Morgenthau, Manhattan district attorney, from 1987 until 1993.
Morgenthau and the Manhattan district attorney's office has already secured one guilty plea in the UN Oil-For-Food Program from a Reston, Va., based oil trading company.
Midway Trading pleaded guilty in New York State Court to grand larceny in the first degree in connection with the Oil-For-Food Program. According to the charges, Midway and one of its trading partners, Bulf Oil, paid more than $440,000 in kickbacks to Iraqi officials in connection with oil purchased but falsely represented to the UN that no kickbacks were paid. Relying on those false representations, UN officials approved the contracts and authorized millions of dollars in payments for the benefit of Iraq from the program.
In the plea deal negotiated by Morgenthau, Midway will pay a fine of $250,000 with $100,000 due by Dec. 1 and the Manhattan district attorney's office is continuing its investigation into the Oil-for-Food Program, an investigation which began as the result of the office's cooperation with the Independent Inquiry Committee headed by Volcker.
Through its attorney, Midway Oil admitted in court that in late 2000, the company purchased the right to lift oil from Iraq under the United Nations Oil-for-Food Program from Bulf Oil, a Romanian oil company. Under United Nations resolutions, all money paid for the purchase of Iraqi crude oil was deposited into a UN trust account at a branch of BNP Paribas, a French bank, in Manhattan. Payments from the trust account, including payments for so-called "humanitarian goods" to be sent to Iraq, had to be authorized by United Nations officials. No money for the purchase of crude oil from Iraq was to go directly to Iraq.
Under its initial $42 million agreement with Bulf, Midway was to provide financing for the purchase cost of the Iraqi crude oil and to share any profits from Midway's subsequent sale of that crude oil. An employee of Bulf Oil asked Midway to pay him an additional 25 cents per barrel, an extra payment that Midway did not make, at first.
Midway sold the Iraqi crude oil lift to Texaco Corp., which, in turn, sold the crude oil lift to British Petroleum ('BP'). Midway provided BP with a price guarantee. On March 28, 2001, a ship chartered by BP arrived at the Turkish Port of Ceyhan, but was not allowed to lift the oil. On April 1, 2001, Midway wired $225,000 from an account at SunTrust Bank in Virginia to the Jordan National Bank's correspondent bank account at Chase Manhattan Bank in New York for the benefit of an account in name of the Bulf employee. The $225,000 was the approximate equivalent of the 25 cent per barrel kickback that the Bulf employee had asked for. On April 2nd and 3rd, the oil was loaded onto BP's ship. Midway later learned that the money wired to the Jordan National Bank was for the benefit of Iraqi government officials and that the 'surcharge' had to be paid as a precondition for oil to be loaded. As a consequence of the price guarantee given to BP and the delay in lifting the oil, Midway lost $ 1 million on this initial transaction.
In September, 2001, Midway acquired the remainder of Bulf Oil's allocation of oil, at a purchase price of $22 million, under the Oil-for-Food Program. This time, prior to the lift of oil, Midway wired $215,442.25 to Jordan National Bank's correspondent account at Chase Manhattan Bank in New York in the name of an agent of Midway's. Midway knew that, as in the first transaction, the money wired to the Jordan National Bank account was, in fact, a kickback to be paid to Iraqi officials, in violation of United Nations Security Council Resolution 986. Midway did not inform the UN about its payment to the Jordan National Bank. And, as Midway knew, Bulf Oil's contract for the purchase of Iraqi oil falsely represented that all of the United Nations Security Council resolutions had been complied with. The second lift went smoothly and Midway profited approximately $375,000 from the sale of the crude oil.
The contract purchase price for the oil, $22 million, was paid into the United Nations trust account for the Oil-for-Food Program. Subsequently, relying on the false representations that no kickbacks had been paid, United Nations officials authorized the disbursement from the account of a like amount, less fees and administrative costs, for various purposes in accordance with program regulations. This included $13 million in payments for goods to be sent to Iraq.
The Oil-for-Food-Program allowed Iraq to sell oil in order to pay for food, medicine and other civilian goods to ease the impact of UN sanctions imposed in 1990 after Saddam's troops had invaded Kuwait.
According to the Volcker report, Wyatt was the first person who agreed to buy oil and move it through his company and after that other major world oil companies followed suit, Volcker said.
Just prior to the Gulf War, Wyatt allegedly met Saddam and other senior Iraqi officials in December, 1990 to obtain the release of 32 American hostages who were then flown back to the U.S. in a jet chartered by Wyatt's Coastal Corp.
The Oil-For-Food Program broke down when the UN allowed Saddam to choose who could purchase Iraqi oil and by 2000, Saddam had allegedly begun insisting that those who participated in the program had to be willing to pay kickbacks.
According to the indictment, Wyatt discussed his participation in the kickback scheme in telephone calls with an oil trader which were recorded by El Paso Corp. which purchased Coastal Corp. for $24 billion in 2001.
Volcker's report released Thursday said that more than 2,200 companies including such major firms as DaimlerChrysler and Volvo made payments totaling $1.8 billion to Iraq during the Oil-For-Food Program and Volcker named Russian, French, British and Italian politicians and others who received favors from Saddam in his effort to get the 1990 sanctions lifted.
A total of $64.2 billion of oil was sold to 248 companies, 139 of which paid kickbacks and illegal surcharges. Volcker's report says that some 3,614 companies sold $34.5 billion of humanitarian goods to Iraq, 2,253 of which paid kickbacks. The report says that Iraq realized over $1.8 billion in the deal.
The report blames UN officials for a lack of oversight and that preferential treatment was given to companies in France, Russia and China, permanent members of the Security Council who were more favorable to lifting the 1990 sanctions.
Volcker's report says that "the need for stronger (UN) executive leadership, thoroughgoing administration reform and more reliable controls and auditing within the UN is underscored.
10-27-05
© 2005 North
Country Gazette
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