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 the surcharge payments on the three Glencore and Petrogaz contracts. For example, between January and April 2001, Glencore transferred a total of approximately $4.8 million to Mr. Abu- Reyaleh’s account at the Arab Bank Geneva. During that time period, approximately $4.0 million was then wire transferred from Mr. Abu-Reyaleh’s account to SOMO accounts. 295 Between May and September 2001, Glencore transferred a total of approximately $2.1 million to Mr. Abu-Reyaleh’s account at the Commercial Bank. During that time period, approximately $1.9 million was then transferred from Mr. Abu-Reyaleh’s account at Commercial Bank to a SOMO bank account for the payment of surcharges on the contracts. 296 With respect to these three contracts, Glencore’s payments to Mr. Abu-Reyaleh do not appear to correspond with the agreed-upon commission of $0.20 to $0.22. The agreement provided that Mr. Abu-Reyaleh’s company, Al-Khaled Engineering, would receive $0.20 per barrel of oil lifted under Petrogaz contracts and $0.22 per barrel under Glencore France contracts. An analysis of the Glencore records show that the $0.22 per barrel commission was paid only on the initial lifts in the Phase IX contracts. During this time, Mr. Abu-Reyaleh made periodic surcharge payments 295 Credit Suisse record, Glencore International AG and M&M Finance Company Ltd. account, debit advices (Jan. 3, 2001) (transferring $200,000 to Mr. Abu-Reyaleh’s account at Arab Bank Geneva), (Jan. 29, 2001) (transferring $385,302.60 to Mr. Abu-Reyaleh’s account at Arab Bank Geneva), (Feb. 5, 2001) (transferring $386,383.40 to Mr. Abu-Reyaleh’s account at Arab Bank Geneva), (Mar. 29, 2001) (transferring $600,534 to Mr. Abu-Reyaleh’s account at Arab Bank Geneva), (Mar. 29, 2001) (transferring $2,088,396.20 to Mr. Abu-Reyaleh’s account at Arab Bank Geneva), (Apr. 6, 2001) (transferring $1,023,000 to Mr. Abu-Reyaleh’s account at Arab Bank Geneva), (Apr. 12, 2001) (transferring $100,000 to Mr. Abu-Reyaleh’s account at Arab Bank Geneva); Arab Bank Geneva record, Talal Hussein Abu-Reyaleh account, debit advices (Feb. 7, 2001) (transferring $566,704 to SOMO account at Fransabank), (Mar. 30, 2001) (transferring $1,746,322 to SOMO account at Fransabank), (Apr. 10, 2001) (transferring $474,870 to SOMO account at Fransabank), (Apr. 10, 2001) (transferring $785,076 to SOMO account at Fransabank), (Apr. 19, 2001) (transferring $399,353 to SOMO account at Fransabank) (hereinafter “Abu-Reyaleh surcharge payments from Arab Bank”); Committee oil surcharge table, contract nos. M/08/91, M/09/44, M/09/60 (tying the payments made by Mr. Abu-Reyaleh to surcharge payments on specific contracts). 296 Committee note-to-file (Aug. 30-31, 2005) (detailing the review of Glencore records that reflect the following transfers from Glencore’s account at UBS Bank Zurich to Mr. Abu-Reyaleh’s account at Commercial Bank Dubai: (May 18, 2001) (reflecting transfer of $486,532 and referencing “Spezial”), (May 23, 2001) (reflecting transfer of $242,915 and referencing “Spezial”), (June 27, 2001) (reflecting transfer of $348,079.36 and referencing “Spezial”), (June 27, 2001) (reflecting transfer of $356,079.64 and referencing “Spezial”), (Aug. 13, 2001) (reflecting transfer of $213,481.00 and referencing “Spezial”), (Aug. 27, 2001) (reflecting transfer of $118,496.00 and referencing “Spezial”), (Aug. 29, 2001) (reflecting transfer of $232,856.00 and referencing “Spezial”), (Sept. 4, 2001) (reflecting transfer of $225,678.00 and referencing “Spezial”), (Sept. 13, 2001) (reflecting transfer of $150,474.00 and referencing “Spezial”); SOMO account, credit advices (May 30, 2001) (reflecting a credit of $158,865 from Mr. Abu-Reyaleh’s account at Commercial Bank), (July 10, 2001) (reflecting a credit of $608,746 from Mr. Abu-Reyaleh’s account at Commercial Bank), (July 27, 2001) (reflecting a credit of $593,406 from Mr. Abu-Reyaleh’s account at Commercial Bank), (Sept. 25, 2001) (reflecting a credit of $561,834 from Mr. Abu-Reyaleh’s account at Commercial Bank) (hereinafter “Abu-Reyaleh surcharge payments from Commercial Bank”)). REPORT ON PROGRAMME MANIPULATION–OCTOBER 27, 2005 PAGE 148 OF 623
INDEPENDENT INQUIRY COMMITTEE INTO THE UNITED NATIONS OIL-FOR-FOOD PROGRAMME REPORT ON PROGRAMME MANIPULATION CHAPTER TWO OIL TRANSACTIONS AND ILLICIT PAYMENTS on Phase IX contracts, even though the surcharge rate exceeded his commission rate from Glencore. 297 By April 2001, the surcharges assessed on liftings under all three contracts were either overdue or coming due. Glencore records show that, on April 6, 2001, the company paid approximately $1 million to Mr. Abu-Reyaleh as a commission in “advance” of lifting the oil. The money was applied on April 13, 2001 to pay outstanding surcharges on all three contracts. After April 2001, Glencore paid Mr. Abu-Reyaleh amounts that generally did not correspond to the agreed upon commission or were often labeled “Spezial.” 298 Mr. Abu-Reyaleh has refused to answer the Committee’s questions regarding the surcharge payments. Glencore and Mr. Alvarez denied that Glencore was involved in the payment of surcharges or that Glencore “knowingly funded payments of surcharges to the Government of Iraq.” Mr. Alvarez stated that he specifically told Mr. Abu-Reyaleh not to pay surcharges. In a letter to the Committee, Glencore’s counsel emphasized that Glencore consistently made it clear to “all concerned - employees, agents, counter parties - that it expected full compliance with UN regulations.” 299 When asked about the increased commissions paid to Mr. Abu-Reyaleh, Mr. Alvarez stated that Glencore had agreed in May 2001 to increase Mr. Abu-Reyaleh’s commission to between $0.32 and $0.34 per barrel. Mr. Alvarez stated that Mr. Abu-Reyaleh had insisted that market premiums to intermediaries had increased and should be matched by Glencore. Glencore did not 297 Committee note-to-file (Aug. 30-31, 2005) (detailing the review of Glencore International AG and Al- Khaled Engineering agreement (Dec. 7, 1999), which stipulated that the premium paid to Al-Khaled Engineering would be $0.20 per barrel of oil lifted if the contract was signed with Petrogaz and $0.22 per barrel of oil lifted if the contract was signed with Glencore France); Committee note-to-file (Aug. 30-31, 2005) (detailing the review of summary of payments related to contracts M/09/44 and M/09/60, which showed that payments made by Glencore to Mr. Abu-Reyaleh on March 29, 2001 amounted to $0.22 per barrel); Committee surcharge table, contract nos. M/08/91, M/09/44, M/09/60. 298 Committee note-to-file (Aug. 30-31, 2005) (detailing the summary of terms for contract no. M/09/44, which evidenced an advance payment of $1,023,000 to Mr. Abu-Reyaleh’s account at Arab Bank Geneva, on April 6, 2001, calculated on the basis of $0.22 per barrel for 4.65 million barrels of oil to be lifted in April 2001 (projected to be lifted in two lifts of two million barrels and one lift of 0.65 million barrels)); Credit Suisse record, Glencore International AG and M&M Finance Company Ltd. account, debit advice (Apr. 6, 2001) (transferring $1,023,000 to Mr. Abu-Reyaleh’s account at Arab Bank Geneva); Arab Bank Geneva record, Talal Hussein Abu-Reyaleh account, debit advices (Apr. 10, 2001) (transferring $474,870 to SOMO account at Fransabank), (Apr. 10, 2001) (transferring $785,076 to SOMO account at Fransabank); see also Luis Alvarez interview (Sept. 13, 2005) (indicating that payment of premiums generally occurred after the issuance of the bill of lading but that there may be special occasions in which a contracting party would ask to be paid the premium earlier than that). 299 Talal Hussein Abu-Reyaleh interview (May 9, 2005); Committee e-mail to Talal Abu-Reyaleh (June 18, 2005) (sending a list of questions to Mr. Abu-Reyaleh), Committee e-mail to Talal Abu-Reyaleh (July 8, 2005) (following up on the request sent in the e-mail dated June 18, 2005); Luis Alvarez interview (Sept. 13, 2005); Glencore counsel letter to the Committee (Oct. 21, 2005). REPORT ON PROGRAMME MANIPULATION–OCTOBER 27, 2005 PAGE 149 OF 623
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