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 pleaded its case to SOMO, but after Phase VI, Trafigura was involved in the Programme only as a secondary purchaser and trader, not a primary contractor with SOMO. 360 One year later, in January 2001, Trafigura wrote a letter to the Iraqi Deputy Minister of Oil requesting a meeting. The request was granted, and Mr. de Sousa and Mr. Cayre went to Baghdad to meet with Iraqi officials. At these meetings, Iraqi officials initially offered to compensate Trafigura by selling oil to the company at a discount. During subsequent discussions, however, the officials proposed a top-off scheme. Under this arrangement, eighty percent of the proceeds generated from the sale of the smuggled oil would go to Iraq and the remaining twenty percent to Ibex. 361 As a part of this scheme, Ibex entered into two contracts under the Programme to lift Iraq Kirkuk crude oil from Ceyhan and Basrah light oil from Mina al-Bakr in March and July 2001, respectively. Under the first contract, M/09/81, 600,000 barrels of Kirkuk crude oil and 1.8 million barrels of Basrah light crude oil were lifted. The second contract, M/10/08, initially stipulated the sale of 2 million barrels of Basrah light crude oil, but was later reduced to 1.8 million barrels at Ibex’s request. While Kirkuk crude exported from Ceyhan was measured by flow meters and monitored by Saybolt, at Mina al-Bakr there was no metering, and Saybolt inspectors were the sole means of validating quantities of loaded oil. 362 360 SOMO sales contract, no. M/05/10 (Dec. 6, 1998) (contracting with Trafigura) (not executed); Editorial, “French Stalling on Iraq,” New York Times, Dec. 16, 1999; Edith M. Lederer, “France Pushes for Iraq Resolution,” Associated Press, Dec. 15, 1999; SOMO fax to Oil overseers (Dec. 17, 1999) (copied to Trafigura); Trafigura letter to the Committee (Jan. 31, 2005); Amer Rashid interview (Feb. 20, 2005); Iraq official interview; Confidential witness interview; Michele Sloan telex to SOMO (Dec. 20, 1999); Italia Chartering invoice to Trafigura for $690,300 charterparty cancellation (Dec. 30, 1999). 361 Amer Rashid interviews (Oct. 29, 2004 and Aug. 21, 2005); Iraq official interview; Andy Summers e- mail to Michele Sloan (Jan. 16, 2001); Graham Sharp fax to Jean-Paul Cayre (Jan. 19, 2001) (attaching letter to Faiz A. Al-Shaheen); United Kingdom H.M. Customs and Excise interview of Michele Sloan (June 16, 2002); Confidential witness interview; SOMO Summary Report (containing Amer Rashid letter dated April 12, 2002, to Deputy Prime Minister of Iraq); Jean-Paul Cayre affidavit, Trafigura v. Ibex Energy, claim no. 2001 folio 1232, para. 13 (United Kingdom High Court of Justice, Jan. 2002) (hereinafter “Jean- Paul Cayre Affidavit”). In his affidavit, Jean-Paul Cayre implicated Ibex and Trafigura in the top-off scheme. Ibid. 362 SOMO sales contracts, nos. M/09/81 (Mar. 4, 2001), M/10/08 (July 11, 2001) (contracting with Ibex); Oil overseers memorandum to United Nations Treasury (Aug. 20, 2001) (referencing an amendment to SOMO sales contract M/10/08); “Report on Technical Reconnaissance Mission to Iraq,” (June 17, 1996) (hereinafter “1996 Technical Report”); “Report of the Group of United Nations Experts established pursuant to Paragraph 30 of the Security Council Resolution 1284 (2000)” (Mar. 2000) (hereinafter “2000 Experts Report”). Ibex Energy sold Kirkuk crude oil to an Italian refinery through a business owned by Mr. de Sousa, Mediterranean Oil Supply and Trading Ltda (“MOST”) of Monaco. Confidential witness interview. REPORT ON PROGRAMME MANIPULATION–OCTOBER 27, 2005 PAGE 178 OF 623
INDEPENDENT INQUIRY COMMITTEE INTO THE UNITED NATIONS OIL-FOR-FOOD PROGRAMME REPORT ON PROGRAMME MANIPULATION CHAPTER TWO OIL TRANSACTIONS AND ILLICIT PAYMENTS B. BRIBERY OF SAYBOLT INSPECTOR By April 2001, with the approval of Ibex contract M/09/81, SOMO, Ibex and Trafigura were poised to smuggle oil on the vessel chartered for the contract: the Essex. In order to implement the scheme, however, the parties needed to ensure that Saybolt would not <strong>report</strong> any irregularities involving the Essex to the United Nations. It was the Government of Iraq that accomplished this objective by bribing Saybolt’s team leader in Mina al-Bakr, Mr. Oliveira. Although Mr. Oliveira has consistently denied allegations of bribe-taking and repeatedly stated that he had no involvement in or knowledge of the Essex top-offs at the time they occurred, evidence obtained by the Committee suggests this was not the case. 363 Several Iraqi officials stated that the Government of Iraq agreed to make payments to Mr. Oliveira in return for his assistance in concealing the Essex top-offs. According to Amer Rashid, the Iraqi Minister of Oil, SOMO staff persuaded Mr. Oliveira to disregard unauthorized oil loadings by offering him cash payments. In addition to these bribes, the Government of Iraq also agreed to pay Mr. Oliveira two percent of the proceeds from the smuggling operation. Mr. Rashid authorized the cash payments to Mr. Oliveira in foreign currency and facilitated his exit from Iraq with the cash. 364 363 Amer Rashid interviews (Oct. 29, 2004 and Aug. 21, 2005); Iraq official interview; Peter Boks interview (Oct. 6, 2004). In October 2001, Benon Sevan asked Saybolt to conduct an investigation into the allegations of the Essex top-offs on behalf of the United Nations. Bruce Rashkow note to Benon Sevan (Oct. 31, 2001). Saybolt’s conclusions relied in large part upon the statements of their team leader in Mina al-Bakr, Mr. Oliveira. “Report on alleged loadings of Crude Oil from Mina al-Bakr outside the United Nations Oil for Food Program” (Oct. 17, 2001); Armando Carlos Oliveira interview (May 14, 2005). Mr. Oliveira is also referred to in SOMO and Ministry of Oil records as “Armando Carlos.” See, e.g., Amer Rashid letter to Central Bank of Iraq (Mar. 5, 2002). Mr. Oliveira’s full name is Armando Carlos Costa Oliveira. Armando Carlos Costa Oliveira Portuguese passport (July 4, 2000). 364 Amer Rashid interviews (Oct. 29, 2004 and Aug. 21, 2005); Iraq official interview; SOMO Summary Report. According to Oil Minister Rashid, Saybolt and its managers did not know about Mr. Oliveira’s arrangement with the Government of Iraq. Amer Rashid interview (Aug. 21, 2005). REPORT ON PROGRAMME MANIPULATION–OCTOBER 27, 2005 PAGE 179 OF 623
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