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 Table 2 – Surcharges Financed by Bayoil Through Al Wasel & Babel Date Bayoil Payment to Italtech Italtech Payments to Al Wasel & Babel Al Wasel & Babel Payments to SOMO Apr. 5, 2001 €342,162 – – Apr. 5, 2001 €761,311 – – Apr. 5, 2001 €1,024,721 – – Apr. 6, 2001 €3,608,016 – – Apr. 19, 2001 €432,872 €1,531,943 – Apr. 23, 2001 €557,147 €2,258,341 – Apr. 30, 2001 – €1,717,518 – May 6, 2001 – €1,364,678 – Sept. 30, 2001 – – €1,364,678.00 Sept. 30, 2001 – – €1,717,514.91 Sept. 30, 2001 – – €2,258,337.92 Sept. 30, 2001 – – €1,531,939.91 Approximate Totals $6,022,208 $6,153,151 $6.153,143.59 According to Mr. Giangrandi, to disguise the purpose for the money transfers, Italtech and Al Wasel & Babel created bogus backdated invoices and contracts for 17 nonexistent oil deals. Each fake contract included a standard provision taken from Bayoil and Italtech contracts guaranteeing that no surcharge payment had been made to SOMO outside the United Nations escrow account in obtaining the crude oil being sold. 234 Italtech still had an outstanding surcharge balance of over $2 million. Mr. Giangrandi stated that Italtech withheld a portion of the surcharge to ensure that the Iraqis cooperated and pressed the United Nations to compensate Bayoil for demurrage. Mr. Giangrandi also was disputing other outstanding surcharges on an oil contract that Mr. Giangrandi had obtained in Phase VIII from Shakir Al-Khafaji, who is discussed above in Section V.D. According to Mr. Giangrandi, Mr. Al-Khafaji initially had told him that Mr. Al-Khafaji would be exempt from surcharges because of his political connections. When Mr. Al-Khafaji discovered otherwise, Mr. Giangrandi had been forced to increase the premium to $0.40 so that Mr. Al-Khafaji could cover the surcharge. 234 Augusto Giangrandi interviews (Apr. 25 and 27-28, 2005); Bayoil record, “CONTRACT CLAUSES TO BE INCLUDED IN F.O.B. PURCHASES OF IRAQI CRUDE OIL FROM UN APPROVED ‘OIL FOR FOOD PROGRAM’” (Mar. 1, 2001); Bayoil record, Bayoil and Italtech contract (Dec. 27, 2000) (relating to M/09/07); Bayoil record, Bayoil and Al-Hoda draft contract (May 29, 2001) (relating to M/09/15). REPORT ON PROGRAMME MANIPULATION–OCTOBER 27, 2005 PAGE 122 OF 623
INDEPENDENT INQUIRY COMMITTEE INTO THE UNITED NATIONS OIL-FOR-FOOD PROGRAMME REPORT ON PROGRAMME MANIPULATION CHAPTER TWO OIL TRANSACTIONS AND ILLICIT PAYMENTS According to Mr. Giangrandi, Mr. Al-Khafaji did not pay the surcharge, and the Ministry of Oil unfairly held Italtech responsible for it. 235 5. Surcharge Payments through Al-Hoda Beginning in Phase IX, Italtech and Bayoil also used Al-Hoda as a conduit for paying surcharges. According to the founder of the company, Riyadh Al-Khawam, Al-Hoda was created in May 2000 for the purpose of executing oil and humanitarian contracts under the Programme. Mr. Al- Khawam stated that his family and the Government of Iraq, through the Ministries of Finance and Oil, shared ownership of the company. During the Programme, Al-Hoda received and sold its own oil allocations, as well as traded oil allocations granted in the names of other beneficiaries. 236 Beginning in Phase IX, Bayoil purchased four million barrels of oil that had been allocated to Al- Hoda. The oil was lifted, financed, and sold by Bayoil under contract M/09/15. As detailed below, Bayoil also financed other Iraqi oil contracts through Al-Hoda. Mr. Al-Khawam stated that Bayoil agreed to pay Al-Hoda a commission of $0.05 or $0.06 per barrel as well as additional funds to cover the surcharges owed on contracts. He admitted that Al-Hoda made the actual surcharge payments. According to Mr. Al-Khawam, he discussed payment of the surcharges with a Bayoil employee. Bank records show that, between July 2001 and February 2002, an Al-Hoda bank account received at least $4.7 million in wire transfers from Bayoil. Within days of each payment, funds totaling $3.4 million were transferred from the Al-Hoda account to SOMO bank accounts to pay for the surcharges owed on the oil contracts with Bayoil. 237 235 Augusto Giangrandi interviews (July 24-25, 2005); Italtech record, Augusto Giangrandi letter to Amer Rashid (July 21, 2002); SOMO letter to Amer Rashid (Oct. 10, 2000) (approving contract M/08/117 for five million barrels of oil for “Mix Oil Limited (Shakir Al-Khafaji)”) (translated from Arabic); SOMO sales contracts, nos. M/08/116 (Oct. 3, 2000), M/08/120 (Oct. 30, 2000); Italtech record, Shakir Al-Khafaji handwritten note to Augusto Giangrandi (Feb. 22, 2001). Contract M/08/117 was never executed. Committee oil company table. 236 Committee oil beneficiary table, contract nos. M/10/106, M/10/22, M/10/68, M/11/40, M/11/93; Committee oil company table, contract nos. M/09/15, M/11/20, M/12/36; Riyadh Al-Khawam interviews (Mar. 29 and May 12, 2005). 237 Committee oil financier table, contract nos. M/09/15, M/10/106, M/10/22, M/11/20, M/11/93 (combined); Al-Hoda letter to Crédit Agricole Indosuez Suisse S.A., Geneva (Jan. 21, 2002) (naming Bayoil as the backer for a letter of credit); Riyadh Al-Khawam interview (May 5, 2005); Arab Bank record, Al-Hoda account, credit advices (July 23, Aug. 16, Oct. 29, and Dec. 9, 2001, and Jan. 30 and Feb. 12, 2002); Bayoil record, Transaction detail by account (Jan. 1995 to Dec. 2003) (listing payment to Al-Hoda of $760,801 on February 11, 2002); Jordan National Bank record, SOMO account, credit advices (July 24, Aug. 19, Sept. 5, Nov. 1 and 28, and Dec. 30, 2001, and Jan. 21, Feb. 26, and Mar. 7, 2002). Al-Hoda was also responsible for paying the commissions to the beneficiaries on allocations: $85,000 to a Syrian government official; $180,000 to Faras Mustapha Talas, the son of the Syrian Minister of Defense; and $100,000 to the Society for Austro-Arab Relations. Riyadh Al-Khawam interview (May 5, 2005); Arab Bank record, Al-Hoda account, personal check (Feb. 26, 2002) and bank statement (Dec. 31, 2001) REPORT ON PROGRAMME MANIPULATION–OCTOBER 27, 2005 PAGE 123 OF 623
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report on programme manipulation - Independent Inquiry Committee

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