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
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).
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