report on programme manipulation - Independent Inquiry Committee

INDEPENDENT INQUIRY COMMITTEE INTO THE UNITED NATIONS OIL-FOR-FOOD PROGRAMME
REPORT ON PROGRAMME MANIPULATION
CHAPTER TWO
OIL TRANSACTIONS AND ILLICIT PAYMENTS
propose an oil allocation list prior to the phase’s beginning. Some officials within the ministry
and SOMO worried that the Oil Minister’s life would be in danger if SOMO could not impose the
payment of surcharges. The Ministry of Oil and SOMO scrambled to find customers willing to
pay the surcharges—either directly or through other companies. 19
E. THE COLLECTION OF SURCHARGES
The primary responsibility for tracking the surcharges imposed and collected fell on the SOMO
Accounting Department. Its employees created invoices for all oil shipments with a
corresponding debit note recording an internally assigned serial number, the amount of oil lifted,
and the surcharge owed on each shipment. They also maintained an electronic database that kept
track of surcharge payments collected. The database reflected the amount of the surcharge paid,
how it was paid, the name of the contracting company, and the name of the individual or entity
making the payment. Often partial payments, which did not necessarily correspond to any one
surcharge assessment, were made on a surcharge balance to keep it current. The Committee has
obtained a copy of this database. 20
Most surcharges were paid through deposits in designated SOMO bank accounts in Jordan and
Lebanon or through cash payments made at Iraqi embassies abroad. With a few exceptions, the
two banks used by SOMO to collect the surcharge amounts were Fransabank in Lebanon and
Jordan National Bank (Ahli Bank) in Jordan. Upon the instructions of the Economic Affairs
Committee, SOMO opened its accounts at Fransabank and at Jordan National Bank under the
names of two SOMO employees, the Executive Director of SOMO and the Director of the
Financial Department. According to a Jordan National Bank official, when individuals and
companies came to the bank to make their payments, they provided the bank agent with a copy of
the oil contract signed by SOMO and approved by the United Nations. For the bank, this was an
indication that the payments were occurring in conformity with the United Nations regulations. 21
19 Oil overseers fax to “Buyers of Iraqi Crude Oil” (Dec. 15, 2000) (informing oil purchasers that “1) The
sanctions committee has not approved a surcharge of any kind on Iraqi oil; 2) Payments for purchasing
Iraqi crude oil cannot be made to a non-UN account; 3) Therefore, buyers of Iraqi oil shall not pay any kind
of surcharge to Iraq”); Iraq officials interviews.
20 Iraq official interview; SOMO commercial invoices (1997-2003); Iraq official interview; Ministry of Oil
record, SOMO ledger of surcharge payments (translated from Arabic); Committee oil company table.
21 Iraq officials interviews; Ministry of Oil record, SOMO ledger of surcharge payments (translated from
Arabic); Committee oil company table; Jordan National Bank record, SOMO bank accounts, account
statements and advices (Sept. 9, 2001 to Mar. 10, 2003) (hereinafter “Jordan National Bank statements and
advices for SOMO accounts”); Fransabank record, SOMO bank accounts, account statements and advices
(Sept. 2, 2000 to Aug. 2, 2002) (hereinafter “Fransabank statements and advices for SOMO accounts”);
Saddam Z. Hassan interview (Sept. 29, 2005). The Economic Affairs Committee, headed by the Minister of
Finance and comprising all Ministers, was created to design the implementation of the surcharge and
kickback schemes. Ibid; Jordan National Bank official interview (Sept. 29, 2005).
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