Wyatt, Saddam and oil for food at trial in New York

Houston Chronicle:

What did Oscar Wyatt do to win oil contracts from Saddam Hussein's Iraq?

How a jury answers that question could determine where the 83-year-old Houston oil legend spends the rest of his days.

Wyatt is set to stand trial in a New York federal court starting Wednesday, accused of funneling millions of dollars in illegal kickbacks to Saddam's government to buy crude under the United Nations' oil-for-food program.

The founder of Houston's Coastal Corp. — which was sold in 2001 to El Paso Corp. — Wyatt is charged with fraud, conspiracy and violating U.S. sanctions laws governing dealings with the former regime.

His actions, prosecutors contended in a recent court motion, were intended to curry favor by demonstrating "loyalty and worthiness" to Saddam's government.

To try to prove their case, prosecutors have indicated they'll present testimony from a one-time oil consultant who claims to have accompanied Wyatt to meet with Saddam; a former El Paso executive who rebuffed Wyatt's attempts to get reimbursed for an alleged $200,000 payment to the Iraqis, according to allegations in prosecution documents; and a former Iraqi oil company official whose alleged notes suggest Wyatt supplied troop figures and dates for an attack to the Iraqis just weeks before the start of the U.S.-led invasion.

If convicted, Wyatt could be sentenced to 74 years in prison.

Wyatt doesn't dispute he had dealings with the Iraqis dating back years, nor that he purchased crude from Baghdad under the oil-for-food program.

But he "acted in a completely lawful way," said his attorney, Gerald Shargel.

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On Aug. 17, co-defendant David Chalmers, owner of Houston-based BayOil, pleaded guilty to one count of conspiracy, while Chalmers' business associate Ludmil Dionissiev admitted to a related smuggling charge.

Another BayOil official, John Irving of London, will face extradition proceedings this fall.

Shargel, who leads the defense team, is a celebrated New York defense attorney perhaps best known for representing reputed mobster John Gotti.

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Wyatt was the first customer(in the oil for food program), according to a special U.N. investigation led by Paul Volcker, a former Federal Reserve chairman.

After the first few years, the Iraqis mostly stopped selling to U.S. companies and individuals. Wyatt was "a rare exception" to that rule, the Volcker report said.

Starting in 2000, the Volcker report said, the Iraqis began insisting their customers pay bogus "port fees" or "surcharges" of 10 to 50 cents a barrel in violation of the regulations stipulated under the U.N. sanctions. U.S. law required American companies to abide by those regulations.

Eventually, 139 companies from around the world paid surcharges totaling $229 million to Saddam's government, the Volcker committee found.

The indictment against Wyatt accuses him of funneling more than $3 million in such payments between May 2001 and March 2002 to a secret bank account in Jordan controlled by the Iraqi government.

During that same period, the indictment alleges, companies Wyatt allegedly controlled bought more than 30 million barrels of oil.

Besides making secret payments to the Iraqi regime, the indictment alleges, Wyatt conspired to persuade U.N. officials to set artificially low prices for the Iraqi oil, as a way to allow Wyatt to pay the surcharges and still turn a profit.

Wyatt's lawyers will argue their client never paid surcharges. "They will not trace one nickel to Wyatt's pockets," Parker said.

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Carl Parker is a Texas politician who spent years in the Texas Senate, as well as a lawyer for clients like Wyatt. The indictment suggest that the government has traced the flow of funds to Saddam that the government claims was illegal. If he was lining Saddam's pockets that will probably be enough for a conviction. Parker's statement seems like he is arguing a different case. The government is not alleging that the surcharge went into Wyatt's pocket. It seems pretty clear that any surcharge went to Saddam's palaces program.