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 relationship between Mastek’s three shareholders deteriorated in August 2001. According to Mr. Shareef, he felt increasing pressure from SOMO to pay the outstanding surcharges on Vitol’s oil lifts under the Mastek contract. 331 He urged Mr. Sudhir to make the payments, and Mr. Sudhir eventually agreed to assist in paying the outstanding surcharge balance in August 2001. In an August 3, 2001 e-mail to Mr. Shareef, Mr. Sudhir wrote: I am prepared to sign and give a letter of apology to whom it may concern as to the delay in the payments which had to be made. I am also willing to say that this matter had nothing to do with you, as the premium was handled by me. . . . I will undertake to clear all outstanding balances owed to the people concern [sic] within 10 days from today, which includes the last 2 loadings. I would think it will be in the region of US$1.5 mil. 332 Three days after the e-mail, Mr. Sudhir sent a letter to SOMO asserting that he took “full responsibility for the delay in meeting the Company’s obligations to SOMO.” On the same day as the letter, Keppel Oil transferred €1,999,859 to a SOMO account at Jordan National Bank, followed by another payment of approximately €500,000 on August 29, 2001. 333 Mr. Sudhir did not explain how he was able to cover the surcharge payments on the Mastek contract with the premium that Vitol purportedly paid Mastek. SOMO assessed an average surcharge of $0.28 per barrel on Mastek’s Phase IX contract. Under their written agreement, Vitol paid a commission of $0.21 to $0.25 per barrel to Mastek. Mr. Sudhir stated that the highest premium Mastek received from Vitol in Phase IX was $0.27 per barrel. According to Mr. Shareef, he and Ms. Mahmood thought that Mr. Sudhir and Vitol were cheating them by concealing the real premium that Vitol was paying Mr. Sudhir and by not paying them the money needed for Mastek to cover its surcharge payments. 334 Oil” in the amount of €199,950.22), (May 17, 2001) (wire transfer by “Keppel Oil” in the amount of €299,960.22), (July 9, 2001) (wire transfer by “Keppel Oil” in the amount of €269,948.50), (July 9, 2001) (wire transfer by “Keppel Oil” in the amount of €299,948.50), (July 16, 2001) (wire transfer by “Keppel Oil” in the amount of €499,946.50), (July 18, 2001) (wire transfer by “Keppel Oil” in the amount of €279,946.50), (Aug. 2, 2001) (wire transfer by “Keppel Oil” in the amount of €199,946.50), (Aug. 6, 2001) (wire transfer by “Keppel Oil” in the amount of €1,999,859), (Aug. 29, 2001) (wire transfer by “Keppel Oil” in the amount of €499,946.50) (each translated from Arabic). 331 Faek Ahmad Shareef interviews (Aug. 15-18, 2005). 332 Faek Ahmad Shareef record, Jaya Sudhir e-mail to Faek Ahmad Shareef (Aug. 3, 2001). 333 Faek Ahmad Shareef record, Jaya Sudhir letter to Saddam Z. Hassan (Aug. 6, 2001); Jordan National Bank record, SOMO account, credit advices (Aug. 6, 2001) (wire transfer by “Keppel Oil” in the amount of €1,999,859), (Aug. 29, 2001) (wire transfer by “Keppel Oil” in the amount of €499,946.50) (each translated from Arabic). 334 Jaya Sudhir interview (Aug. 19, 2005); Vitol Asia record, Iraqi crude oil purchase/sale agreement between Vitol Asia and Mastek (undated) (regarding purchase of oil under Phase IX) (hereinafter “Phase IX agreement between Vitol and Mastek”); Vitol Asia record, Addendum no. 1 to Phase IX agreement REPORT ON PROGRAMME MANIPULATION–OCTOBER 27, 2005 PAGE 166 OF 623
INDEPENDENT INQUIRY COMMITTEE INTO THE UNITED NATIONS OIL-FOR-FOOD PROGRAMME REPORT ON PROGRAMME MANIPULATION CHAPTER TWO OIL TRANSACTIONS AND ILLICIT PAYMENTS In September 2001, Mr. Shareef met with Ian Taylor, the President of Vitol, and Kho Hui Meng, the President of Vitol Asia. According to Mr. Shareef, he told them that Vitol owed money to Mastek for the surcharges that Mastek owed the Iraqi regime. When interviewed by the Committee, Mr. Hui Meng stated that, at a meeting in September 2001, Mr. Shareef demanded additional compensation from Vitol. However, he stated that he did not recall Mr. Shareef telling them that the money was for the payment of surcharges. He stated that Mr. Shareef was complaining about being cheated by Mr. Sudhir. 335 Ms. Mahmood notified Vitol that she planned to bring a lawsuit to recover the money owed to Mastek. Vitol Asia and Mastek eventually reached a written settlement on February 26, 2002, under which Vitol agreed to pay Mastek $2 million. The settlement agreement provided that the payment would settle all of Mastek’s claims against Vitol arising from the SOMO contracts. A month after the settlement, Mr. Shareef transferred approximately $1.5 million from the account of Cosmos Capital Group Limited, a company that he and Ms. Mahmood had formed, to a SOMO account in Jordan to satisfy the surcharge obligation on the oil lifted by Vitol under the Mastek contract. 336 Vitol Asia denied that the $2 million was given to Mastek for the purpose of paying the outstanding surcharges. Mr. Hui Meng explained that Vitol’s decision to sign the settlement agreement was a business decision driven by their perception that Ms. Mahmood was politically well-connected in Malaysia and their desire to avoid the potential business repercussions of upsetting her. In addition, Mr. Hui Meng indicated that he was not aware that Mastek had paid surcharges, and he added that he had not suspected such payments by Mastek as the premium that Vitol was paying Mastek was lower than the surcharge level that he had heard about in media <strong>report</strong>s. 337 In two letters sent to the Committee, Mr. Sudhir contends that Mr. Shareef “was primarily and solely instrumental in establishing the entire series of oil transactions and that all . . . amounts to be paid . . . were undertaken by Faek in conjunction with SOMO.” While Mr. Shareef played a key role in arranging the transactions and paying the surcharges, the evidence collected by the between Vitol and Mastek (Jan. 15, 2001); Committee oil company table, contract no. M/09/18 (indicating that SOMO levied $9,731,652 on 34,307,522 barrels, which corresponds to a $0.28 surcharge per barrel); Faek Ahmad Shareef interviews (Aug. 15-18, 2005). 335 Ibid.; Kho Hui Meng interview (Aug. 19, 2005); see also Jaya Sudhir interview (Aug. 19, 2005) (recalling that Mr. Shareef met Ian Taylor at the Asian Oil and Gas Conference held in Singapore in 2001 to ask him about the premiums paid by Vitol to Mastek). 336 Kho Hui Meng interview (Aug. 19, 2005); Faek Ahmad Shareef interviews (Aug. 15-18, 2005); Jaya Sudhir interview (Aug. 19, 2005); Vitol and Mastek settlement agreement; Faek Ahmad Shareef record, Faek Ahmad Shareef letter to Maybank International (L) Ltd. (Mar. 27, 2002) (asking Maybank to remit the euro equivalent of $1.5 million from the account of Cosmos Capital Group to SOMO’s account at Jordan National Bank); Jordan National Bank record, SOMO account, credit advice (Apr. 1, 2002) (showing wire transfer by Cosmos Capital Group in the amount of €1,708,428.25) (translated from Arabic). 337 Kho Hui Meng interview (Aug. 19, 2005). REPORT ON PROGRAMME MANIPULATION–OCTOBER 27, 2005 PAGE 167 OF 623
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