report on programme manipulation - Independent Inquiry Committee

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INDEPENDENT INQUIRY COMMITTEE INTO THE UNITED NATIONS OIL-FOR-FOOD PROGRAMME REPORT ON PROGRAMME MANIPULATION CHAPTER TWO OIL TRANSACTIONS AND ILLICIT PAYMENTS well as a commission of $0.05 per barrel. Neither Montega Trading nor its directors ever paid SOMO the required surcharge on the contract executed with Sopak. 205 2. Imvume Management (Pty) Limited After the shipping incident, Mr. Majali continued to receive oil allocations through a new company, Imvume. Because Montega Trading had failed to pay the outstanding surcharges, SOMO refused to sell oil to Mr. Majali in Phase X. When Mr. Majali complained to Iraqi officials, SOMO was ordered to allocate oil to Mr. Majali in Phase XI. Imvume managed to obtain two Iraqi oil contracts in Phases XI and XII. 206 Prior to the renewal of his oil allocations, Mr. Majali had been very involved in strengthening ties between South Africa and Iraq. In September 2001, as Chairperson of both the SAIFA and the South African Business Council for Economic Transformation (“SABCETT”), Mr. Majali led a South African delegation to Baghdad, which included officials from the South African Strategic Fuel Fund Association and South African Department of Minerals and Energy. The delegation was involved in discussions on strengthening ties between the ANC and the Iraq Friendship Association and Arab Ba’ath Socialist Party (“Ba’ath Party”), as well as building better oil trade relationships between the two countries. Mr. Majali undertook the trip as a recognized representative of the ANC. In a letter to the Iraq Friendship Association, Mr. Motlanthe stated that Mr. Majali’s position as Chairperson of SAIFA had the ANC’s “full approval and blessing.” He also confirmed the ANC’s approval of Mr. Majali “as a designated person to lead the implementation processes arising out of our economic development programmes.” 207 205 SOMO fax to Montega Trading (Mar. 2, 2001); SOMO fax to Montega Trading (Feb. 26, 2001); Rodney Hemphill interview (July 4, 2005) (confirming the original price of €22.125/barrel, which is the original price based upon a United States destination); Paul Major fax to Rod Hemphill (Feb. 27, 2001) (stating that “[a]s shippers we confirm that the final destination of this cargo is the US Gulf coast”); Montega Trading fax to Sopak (Feb. 28, 2001); George Poole letter to Paul Major and Kirk Lazarus (Mar. 5, 2001); Paul Major fax to Rodney Hemphill (Mar 7, 2001); Clyde & Co. letter to Bell Dewar & Hill (Mar. 7, 2001); Glencore letter to Strategic Fuel Fund Association (Jan. 28, 2002); Sopak record, Montega Trading and Sopak agency agreement (Jan. 29, 2001) and settlement agreement (Apr. 26, 2001); George Poole letter to Rodney Hemphill (Apr. 17, 2001); Majali sales contract; Approval letter for Majali contract; Sandi Majali interview (June 30, 2005); Iraq official interview. 206 Committee oil beneficiary table, contract nos. M/11/72, M/12/78; Iraq official interview; Committee oil company table, contract no. M/09/06. 207 Sandi Majali letter to Iraq Friendship Society (Sept. 10, 2001) (writing on behalf of SAIFA); Sandi Majali letter to Khalid Tabra (Sept. 20, 2001) (writing on behalf of SABCETT); Sandi Majali letter to Saddam Z. Hassan (Sept. 20, 2001) (writing on behalf of Imvume); Sandile Nogxina, “Official (Technical) Visit to Iraq By Minerals and Energy Delegates From 10 to 14 September 2001,” Annexure A (Sept. 7, 2001); Kgalema Motlanthe letter to Khalid Tabra (Sept. 10, 2001). Mr. Nogxina was the Director-General of the South African Department of Minerals and Energy. Sandile Nogxina, “Official (Technical) Visit to Iraq By Minerals and Energy Delegates From 10 to 14 September 2001,” (Sept. 7, 2001). REPORT ON PROGRAMME MANIPULATION–OCTOBER 27, 2005 PAGE 108 OF 623
INDEPENDENT INQUIRY COMMITTEE INTO THE UNITED NATIONS OIL-FOR-FOOD PROGRAMME REPORT ON PROGRAMME MANIPULATION CHAPTER TWO OIL TRANSACTIONS AND ILLICIT PAYMENTS After these meetings, Mr. Majali wrote two letters to the Iraqi authorities in which he referred to a request for oil allocations that had been made to support South Africa’s political activities in connection with Iraq. In a letter to the President of the Iraqi Friendship Association, dated September 20, 2001, in his capacity as “Chairman” of SABCETT, Mr. Majali expressed the view that a “joint effort between the ANC and the Arab Ba’ath Party will add a lot of value towards achieving the common political objectives” and “will result in an effective strategy geared towards campaigning for the lifting of sanctions.” He went on to advise the President that, as had been discussed in their meeting in Baghdad, a letter had been sent to SOMO requesting an allocation of 12 million barrels of oil and requested that the transaction be facilitated: with particular attention to the competitive advantage pricing of this transaction for the benefit of both parties in order to build financial resources to support political programmes. I am convinced that you do appreciate that such financial resources are crucial for the long term sustainability of the political programmes that [the ANC and Ba’ath] parties will be implementing and to run seminars, workshops in order to develop effective political development strategies. 208 A second letter dated September 20, 2001, with Imvume letterhead, was sent to Saddam Z. Hassan, thanking Iraq’s newly appointed Deputy Minister of Oil for his hospitality towards the South African delegation. In the letter Mr. Majali requested allocations of 12 million barrels to be lifted in December 2001 and February 2002, noting that the order for oil “is required by the South African government for its strategic reserves and . . . it will be undertaken by Imvume on behalf of the South African Department of Minerals and Energy.” Mr. Majali also expressed an interest in attending the conference in Baghdad in support of lifting the Iraq sanctions held in November 2001 and that the “ANC will be sending a high level delegation.” These increased allocations do not appear to have been granted. 209 A couple of months later, Imvume obtained a contract to supply two million barrels of oil to the South African Strategic Fuel Fund Association. This association is responsible for the procurement and management of the strategic crude oil and petroleum products of South Africa. Because of concerns raised during the comprehensive due diligence of Imvume in the bidding process, Glencore sent a letter to the South African Strategic Fuel Fund Association (“SFF”) representing that it backed Imvume “as its strategic partner.” As part of the contract conditions, Glencore was liable for performance of the contract, and Imvume needed approval to lift oil from SOMO by March 2002. 210 208 Sandi Majali letter to Khalid Tabra (Sept. 20, 2001) (writing on behalf of SABCETT). 209 Sandi Majali letter to Saddam Z. Hassan (Sept. 20, 2001) (writing on behalf of Imvume); Committee oil beneficiary table, contract no. M/11/72. 210 R. Mokate letter to M. Mandela (Jan. 18, 2002); ANZ letter to SFF (Jan. 25, 2002) (attaching draft performance bond); Dr. Mokate letter to Imvume (Jan. 28, 2001); ANZ Bank Performance Bond, no. GTEE 02/05 (Feb. 7, 2002); SFF record, SFF and Imvume (operating as Imvume Resources) supply REPORT ON PROGRAMME MANIPULATION–OCTOBER 27, 2005 PAGE 109 OF 623
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