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 VII. TRAFIGURA, IBEX AND THE ESSEX TOP-OFFS In September 2001, a sea captain of an oil tanker wrote to a United Nations oil overseer to warn of a smuggling scheme involving his ship. The captain alleged that his tanker—the Essex—had been “topped off” on two separate occasions with more oil than authorized under the Programme while loading at Mina al-Bakr in May and August 2001. To support his claim, the captain furnished copies of duplicate bills of lading substantiating the fact that excess oil had been loaded beyond what was authorized under the Programme. 355 In both instances, 1.8 million barrels of Basrah light crude oil were officially contracted and approved for loading under the Programme. But each time these UN-approved quantities were loaded, more than 200,000 barrels were added. The addition of oil cargo beyond the UNapproved oil contract was forbidden without the prior notice and approval of the United Nations oil overseers. 356 As set forth below, the parties complicit in this top-off scheme were: (1) Ibex Energy/Multi- Prestation S.A.R.L. (“Ibex”)—a French oil services company that contracted for the purchase of oil from Iraq; (2) Trafigura Beheer B.V. and its London branch, Trafigura Limited (collectively “Trafigura”)—a large oil and commodities trader that agreed to purchase the oil to be loaded onto the Essex; (3) the Government of Iraq; and (4) Armando Carlos Oliveira—Saybolt’s lead inspector at the Mina al-Bakr offshore oil platform. The smuggled oil was bought through a complex financial scheme involving Ibex Energy and Trafigura. Both companies used off-shore companies in an effort to disguise the payments between them. The Government of Iraq earned nearly €9.4 million on the two smuggled loads of oil. 357 A. TRAFIGURA AND IBEX ENERGY–THE OIL TOP-OFF SCHEME Trafigura was among the first contractors under the Programme and directly purchased over 31 million barrels of oil from Iraq. This trade was facilitated in large part by Rui Cabeçadas de Sousa, an independent businessman in the oil industry, who arranged for meetings between the 355 Theofanis Chiladakis letter to Morten Buur-Jensen (Sept. 21, 2001). Annexed to this written statement, Captain Chiladakis provided copies of four bills of lading—two for a lifting on May 16, 2001, and two for a lifting on August 27, 2001; see also Shamkhi H. Faraj <strong>report</strong> to Minister of Oil, “Allocations and Sales of Crude Oil in the phases of the Memorandum of Understanding 1996-2003,” app. 7 (Feb. 19, 2004) (translated from Arabic) (summary by SOMO officials of Iraq’s oil allocation and sales practices during the Programme and describing the Essex “top off” scheme) (hereinafter “SOMO Summary Report”). 356 Theofanis Chiladakis letter to Morten Buur-Jensen (Sept. 21, 2001). 357 Banque Audi record, Windmill Trade Ltd (hereinafter “Windmill”) account, statement (June 30 to Oct. 31, 2001) (June 30 to Oct. 31, 2001); Banque Saradar record, Windmill account, statement (June 30 to Oct. 31, 2001) (June 30 to Oct. 31, 2001); SOMO Summary Report. REPORT ON PROGRAMME MANIPULATION–OCTOBER 27, 2005 PAGE 176 OF 623
INDEPENDENT INQUIRY COMMITTEE INTO THE UNITED NATIONS OIL-FOR-FOOD PROGRAMME REPORT ON PROGRAMME MANIPULATION CHAPTER TWO OIL TRANSACTIONS AND ILLICIT PAYMENTS company and SOMO. During much of the 1980s, Mr. de Sousa worked at Vanoil Inc. (“Vanoil”), an oil trading firm that also employed Mr. Cayre. In 1987, Mr. de Sousa and Mr. Cayre both departed Vanoil to found Toro Energy S.A.M. (“Toro”) in Monaco. Mr. Cayre eventually left Toro to form Ibex, but continued to work with Mr. de Sousa through Toro Refining Inc, a related company. Toro participated indirectly in the Programme through a joint venture with Trafigura. Under this arrangement, Trafigura received sixty-five percent of the proceeds from its contracts with SOMO, and Toro Energy received thirty-five percent. 358 During the first three phases of the Programme, Trafigura only lifted oil allocated in its own name. Beginning in Phase IV, Trafigura contracted with SOMO for the purchase of oil allocated to Patrick Maugein, another prominent oil trader. In connection with these allocations, Mr. Maugein and Mr. de Sousa met with Iraqi officials, including Tariq Aziz. By Phase VI, 14 million barrels of oil had been allocated to Mr. Maugein, most of which Trafigura lifted and sold. Today, Mr. Maugein and Mr. de Sousa are the Chairman and Director, respectively, of SOCO International plc (“SOCO International”), a United Kingdom energy investment firm. Trafigura denies having any contractual arrangement with Patrick Maugein and states that it does not know what arrangements, if any, Patrick Maugein or Mr. de Sousa had with Ibex Energy. 359 In December 1999, Trafigura entered into a contract with SOMO to lift two million barrels of oil. That same month, SOMO sent a fax to Trafigura canceling the contract. This decision had significant economic consequences for Trafigura, which had already chartered a vessel for the contract and preemptively “sold” the oil it intended to purchase to a third party. In total, SOMO’s cancellation cost Trafigura over $690,000. To make matters worse, Trafigura was now barred from any future contracts under the Programme. Hoping to rectify the situation, Trafigura 358 Graham Sharp telex to SOMO (Apr. 1, 1999); SOMO sales contract, no. M/03/33 (Jan. 18, 1998) (contracting with Trafigura); Rui de Sousa letter to SOMO (Sept. 16, 1997); Rui de Sousa letter to Oil overseers (Apr. 15, 1997) (signed by Mr. de Sousa for and on behalf of Trafigura); Trafigura letter to SOMO (signed by Mr. de Sousa on behalf of Trafigura); Trafigura letter to the Committee (Jan. 31, 2005); Jean-Paul Cayre interview (Dec. 1, 2004); Jean-Paul Cayre curriculum vitae (July 6, 1999); Confidential witness interview; United Kingdom H.M. Customs and Excise interview of Andy Summers (June 10, 2002). Mr. Sharp was a Director of Trafigura during the Programme. SOMO sales contract, no. M/03/33 (Jan. 18, 1998) (contracting with Trafigura). Mr. Summers was employed by Trafigura as a senior crude marketing consultant. United Kingdom H. M. Customs and Excise interview of Michele Sloan (June 11, 2002). Ms. Sloan was employed by Trafigura to oversee the logistics of crude oil operations after they had been successfully traded. Ibid. Mr. Cayre is the General Manager of Ibex Energy, an oil consulting services and equipment company. Jean-Paul Cayre interview (Dec. 1, 2004). 359 Committee oil company table, contract nos. M/01/03, M/02/14, M/03/33, M/04/30, M/05/10, M/06/47; Committee oil beneficiary table, contract nos. M/04/30, M/06/47; Amer Rashid interview (Feb. 20, 2005); Iraq official interview; SOCO International, “Board of Directors,” http://www.socointernational.co.uk/corp.php; Trafigura letter to the Committee (Jan. 31, 2005). REPORT ON PROGRAMME MANIPULATION–OCTOBER 27, 2005 PAGE 177 OF 623
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