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
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).
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