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
In March 2001, Mr. Giangrandi was summoned to a meeting at the Ministry of Oil. According to
Mr. Giangrandi, prior to the meeting, he met with Mr. Chalmers to prepare a list of discussion
points in response to what they expected to be a demand by Iraq that surcharges be paid on the
Italtech contracts. At the meeting, Mr. Rashid, while making clear his appreciation for the oil
purchases made by Italtech and Bayoil during a difficult period for Iraq, warned Mr. Giangrandi
that their outstanding surcharges had to be paid. Mr. Giangrandi offered a series of excuses for
his inability to pay surcharges, including insufficient profits, fluctuating oil prices, significant
demurrage, and a lack of safe channels to pay the surcharges. Mr. Rashid warned Mr. Giangrandi
that Saddam Hussein himself had directed that Italtech pay the surcharges. Mr. Rashid
commiserated with Mr. Giangrandi about the imposition of surcharges on oil exports, but implied
that he himself would suffer consequences if they were not paid. 230
Afterwards, Mr. Rashid warned Mr. Giangrandi not to leave Baghdad before arranging for the
payment of the surcharges. Mr. Rashid suggested that Mr. Giangrandi use his time in Iraq to
contact Al Wasel & Babel for assistance in disguising the surcharges owed. Al Wasel & Babel
was owned by Ibrahim Lootah and the Government of Iraq. The following day, in a meeting with
Iraqi officials, Mr. Giangrandi provided Al Wasel & Babel with a series of checks totaling
$8,026,089, from a bank account with insufficient funds. According to Mr. Giangrandi, the
checks were considered a guarantee to cover the surcharges. 231
4. Surcharge Payments by Italtech and Bayoil
According to Mr. Giangrandi, he had no intention of paying the surcharges until he discussed the
matter with Mr. Chalmers. Upon his return, Mr. Giangrandi consulted with lawyers about the
legality of the surcharges. Despite being advised of their illegality, Mr. Giangrandi admitted that
he discussed the surcharges with Mr. Chalmers, and they concluded that they had no choice but to
pay them. He explained that they both wished to continue their commercial activities in Iraq, and
he also had safety concerns. According to Mr. Giangrandi, they decided that Bayoil would fund
the surcharge payments and Italtech would arrange to have them paid. 232
230 Augusto Giangrandi interviews (Mar. 11-12, Apr. 25 and 27-28, and July 24-25, 2005); Iraq official
interview; David Chalmers letter to Augusto Giangrandi (Mar. 11, 2001).
231 Confidential witnesses interviews; Augusto Giangrandi interviews (Mar. 11-12, and Apr. 25 and 27-28,
2005); Iraq official interview; SOMO record, Surcharge payment schedule by lift, contract no. M/09/07
(Mar. 12, 2001) (including a list of 17 individual check serial numbers, along with a receipt from SOMO).
Mr. Rashid told Mr. Giangrandi that he could not leave Baghdad, but that he could contact Mr. Chalmers
from his hotel or from the Minister’s office. Mr. Rashid took and withheld Mr. Giangrandi’s passport. Mr.
Rashid told Mr. Giangrandi quite plainly that he was not going to leave Baghdad without definite
arrangements for the payment of the surcharges being agreed between them. Confidential witness
interview; Augusto Giangrandi interviews (Apr. 25 and 27-28, 2005).
232 Augusto Giangrandi interviews (Apr. 25 and 27-28, 2005) (stating that he also feared incurring criminal
charges for not honoring the checks, loss of business reputation in the Arab international market, and a
threat to his and his family’s safety); Hunton & Williams letter to Augusto Giangrandi (Mar. 21, 2001)
(containing legal advice).
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