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 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). REPORT ON PROGRAMME MANIPULATION–OCTOBER 27, 2005 PAGE 120 OF 623
INDEPENDENT INQUIRY COMMITTEE INTO THE UNITED NATIONS OIL-FOR-FOOD PROGRAMME REPORT ON PROGRAMME MANIPULATION CHAPTER TWO OIL TRANSACTIONS AND ILLICIT PAYMENTS Over a three week period, Bayoil provided the funds to Italtech to cover well over half of the surcharges owed. Bank records show that in April 2001, Italtech received in its bank account a series of transfers totaling €6,726,232 from a Bayoil account at BNP. Mr. Giangrandi then transferred a total of €6,872,470 to an Al Wasel & Babel account at the Abu Dhabi Commercial Bank. Ministry of Oil records show that Al Wasel & Babel then made four deposits totaling €6,872,470 into SOMO accounts on behalf of Italtech. These payments were used to satisfy outstanding surcharges on the Italtech oil contracts. A bank record shows that, on May 6, 2001, Al Wasel & Babel received one additional payment in its bank account, a €1,364,678 wire transfer from Mr. Giangrandi’s company, United Management. According to Mr. Giangrandi, payments made by Italtech and United Management to Al Wasel & Babel were surcharge payments on behalf of Bayoil. 233 233 BNP record, Italtech account, credit advices (Apr. 5-6, 19, and 23, 2001) and debit advices (Apr. 19, 23, and 30, 2001); Abu Dhabi Commercial Bank record, Al Wasel & Babel account, bank statement (May 31, 2001); Ibrahim Lootah interview (Mar. 3, 2005); Abdullah Lootah interview (Dec. 12, 2004); Committee oil surcharge table, contract no. M/09/07. United Management is based in Santiago, Chile. Augusto Giangrandi interviews (Apr. 25 and 27-28, 2005). Approximate totals are as per the exchange rate used by SOMO. REPORT ON PROGRAMME MANIPULATION–OCTOBER 27, 2005 PAGE 121 OF 623
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report on programme manipulation - Independent Inquiry Committee

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