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
Although it did not receive any further allocations directly, Glencore remained a major oil trader
in Iraqi crude oil as it financed and lifted over 82 million barrels of oil during Phases X through
XII. During this period, Glencore entered into an agreement with Incomed Trading Corporation
(“Incomed Trading”) to purchase oil. Incomed Trading, a Panama-registered company, was
closely held by members of Mr. Alvarez’s family, the main Glencore trader for Iraqi crude oil.
Glencore purchased 11 million barrels of oil through Incomed Trading in Phases X through XIII.
Glencore’s agents, Mr. Abu-Reyaleh and Mr. Lakhani, paid the surcharges imposed on Incomed
Trading contracts in Phases X and XI. 305
On Incomed Trading’s contract in Phase X, both Glencore agents were involved in paying the
levied surcharge of $800,821. An advance surcharge payment was made on the contract and the
balance was paid through Glencore agents. Glencore records show that it paid Incomed Trading
approximately €1,421,168 on the contract, which amounted to a premium of $0.40 to $0.45 per
barrel. Incomed Trading, however, returned most of the money to Glencore’s agent, Mr.
Lakhani, and kept an amount that would have corresponded to a lower agent commission of $0.08
per barrel. Business records show that Incomed Trading directed the payment of €1,167,479 to
Mr. Lakhani’s bank account in Cyprus. Shortly thereafter, Mr. Lakhani transferred €1,015,000
from his account in Cyprus to Mr. Abu-Reyaleh’s bank account in Dubai. In turn, Mr. Abu-
Reyaleh transferred the funds into a bank account in Beirut that he appeared to have opened to
transact short-term transfers. A total of $710,822 was wire transferred from Mr. Abu-Reyaleh’s
of the situation, and asking the Swiss authorities to investigate Glencore’s activities highlighted in the oil
overseers’ <strong>report</strong>); 661 Committee Chairman letter to oil overseers (May 10, 2001) (asking oil overseers to
bring to the attention of Glencore International AG that “[t]he Oil Overseers will examine thoroughly the
performance by Glencore International AG under future applications for the purchase of Iraqi oil”); Amer
Rashid interview (Oct. 9, 2004) (stating that SOMO was incensed by Glencore’s diversion of oil); Iraq
official interview (stating that there was a problem with Glencore because it was caught diverting oil to a
different market than the one designated). Mr. Buur-Jensen served as an oil overseer under the Programme.
Morten Buur-Jensen interview (Sept. 9, 2004).
305 Committee oil financier table; Committee note-to-file (Aug. 30-31, 2005) (detailing the review of
Incomed Trading and Glencore International AG operating agreements (Oct. 25 and Nov. 22, 2002)). Mr.
Alvarez’s father was the main shareholder in Incomed Trading and his mother was the chair. Panama
Permanent Representative to 661 Committee Chairman (Mar. 27, 2000) (nominating Incomed Trading
Corporation to participate in the Programme); Luis Alvarez interview (Sept. 13, 2005) (indicating that his
father owned shares in Incomed Trading and that his mother was the Chairman); Murtaza Lakhani
interview (Aug. 7, 2005) (indicating that Mr. Lakhani’s understanding was that the owner of Incomed
Trading was the father of Luis Alvarez); Committee oil financier table, contract nos. M/10/26, M/11/22,
M/11/112, M/12/60, M/12/124, M/13/63; Committee oil surcharge table, contract nos. M/10/26, M/11/22,
M/11/112. Incomed Trading was incorporated in 1983 in Panama and is operated from an office in Spain.
At the time of incorporation, it was owned by British Petroleum (“BP”). However, its shares were
purchased in 1993 by certain former BP managers, including Mr. Alvarez’s father. Incomed Trading
Corporation general information document (undated); Luis Alvarez interview (Sept. 13, 2005).
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