Houston trader admits guilt in oil for food scam

NY Times:

A Houston oil trader pleaded guilty yesterday in New York to federal fraud charges in connection with illegal profits and kickbacks involving the United Nations oil-for-food program in Iraq during Saddam Hussein’s rule.

The trader, David B. Chalmers Jr., admitted that he and two companies he ran, Bayoil USA and Bayoil Supply and Trading, made millions of dollars in kickbacks to the Iraqi government — as well as huge profits — while trading oil under the $65 billion aid program.

In April 2005, Bayoil USA became the first American company to be indicted in the wide-ranging criminal investigation of the program, which was established by the United Nations in 1995 to ease some aspects of the sanctions imposed on Iraq after it invaded Kuwait in 1990. Under it, Mr. Hussein’s government could use the money from limited oil sales to buy supplies like food and medicine.

The authorities said Bayoil and Mr. Chalmers not only made illegal payments to get Iraqi oil but also conspired to artificially lower its price, thus depriving the Iraqis of money for items they sorely needed. A man described by the authorities as an associate of Bayoil, Ludmil Dionissiev, a Bulgarian oil trader living in Houston, also pleaded guilty yesterday to charges of fraud and conspiracy in the case.

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Mr. Chalmers faced 20 years in prison on his guilty plea, but under an agreement with federal prosecutors, his recommended sentence has been reduced to 37 to 46 months. He also agreed to forfeit $9.1 million in profits.

Another Texas oil man, Oscar S. Wyatt Jr., has also been charged in the case, accused of paying kickbacks to Mr. Hussein’s government.

It would be surprising to see Wyatt enter a guilty plea. He has a rough and tumble reputation that includes bailing on contracts with Texas utilities when the price of oil and gas shot up in the 1970's. There was considerable litigation and the Texas Railroad Commission held weeks of hearings before the matter was finally settled. Austin and San Antonio were among some of the angry clients. He survived the battles and went on to prosper. Some of his former clients would not be surprised to learn he was doing business with Saddam.

The Houston Chronicle reports that Wyatt trail date is in September.

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Wyatt attorney Carl Parker said today that his client is not guilty and intends to proceed to trial. Parker said he does not believe today's guilty pleas will affect Wyatt's prospects.

"I don't think it will mean anything to Wyatt," Parker said. "I think the government made a stretch trying to tie them together in the first place. They're not partners. They haven't acted together."

The charges stemmed from oil sales conducted under the United Nations' scandal-plagued oil-for-food humanitarian program for Iraq.

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Chalmers and Wyatt also were accused of trying to persuade U.N. oil overseers to lower the official selling price of Iraqi crude, so they could pay kickbacks to Baghdad and still turn a profit when reselling the oil, as well as engaging in prohibited financial transactions with Saddam's regime and violating U.S. sanctions rules.

Chalmers admitted to the kickbacks in his guilty plea today.

Chalmers plea was taken in a New York courtroom and I expect that Wyatt's trial will also be there. It should be very interesting for those following the prewar maneuvers of Iraq in the sale of its oil.