Report Cites U.S. Profits in Sale of Iraqi Oil Under Hussein

By JUDITH MILLER and ERIC LIPTON

New York Times

October 9, 2004

WASHINGTON - Major American oil companies and a Texas oil investor were among those who received lucrative vouchers that enabled them to buy Iraqi oil under the United Nations oil-for-food program, according to a report prepared by the chief arms inspector for the Central Intelligence Agency.

The 918-page report says that four American oil companies - Chevron, Mobil, Texaco and Bay Oil - and three individuals including Oscar S. Wyatt Jr. of Houston were given vouchers and got 111 million barrels of oil between them from 1996 to 2003. The vouchers allowed them to profit by selling the oil or the right to trade it.

The other individuals, whose names appeared on a secret list maintained by the former Iraqi government, were Samir Vincent of Annandale, Va., and Shakir al-Khafaji of West Bloomfield, Mich., according to the report by the inspector, Charles A. Duelfer.

The fact that these companies and individuals received oil from Iraq does not mean they did anything illegal, experts on the program said. Such allocations may have been proper if the individuals and companies received appropriate United Nations approval.

In interviews on Friday, spokesmen for the oil companies and for the El Paso Corporation, which assumed control of the assets of a company, Coastal Corporation, once run by Mr. Wyatt, said the transactions had been legal. But each confirmed that they had received subpoenas from a federal grand jury in New York, which is investigating "transactions in oil of Iraqi origin" as part of the oil-for-food program, according to a federal financial filing by El Paso.

The largest of the allocations went to Mr. Wyatt, who the list said had received allocations totaling 74 million barrels. At the profit rates of 15 cents to 85 cents per barrel that were reported in the arms inspector's study, he could have earned $23 million. The names of the American companies and citizens who benefited from the vouchers were not included in the published report prepared by the Iraq Survey Group that was released Wednesday by the C.I.A., since the names of American individuals cannot be publicly disclosed under privacy laws. But the names were contained in unredacted copies given to the White House and to several Congressional committees. A copy of the unedited list was shown to The New York Times.

Tony Fratto, a Treasury Department spokesman, said United States sanctions on Iraq had prohibited American companies and individuals from interacting directly with Iraqi officials. But the oil dealers were permitted to get special authorization from the federal government to bid on United Nations contracts under the oil-for-food program. He said the agency was "actively investigating" whether the American entities and people circumvented that requirement.

Reid Morden, the staff director of the Independent Inquiry Committee, the United Nations-appointed panel headed by the former United States Federal Reserve chairman, Paul A. Volcker, said his committee too was "reviewing" the new report "to see if it helps us with our investigation."

The oil-for-food program, which was started in 1996, was intended to allow Iraq, in a closely monitored way, to sell enough oil so that the country would have the resources to buy food, medicine and to maintain certain critical public facilities.

The program was abused when Saddam Hussein intervened, personally selecting individuals and companies to receive oil allocations. The allocations, also called vouchers, could be sold so that the recipient approved by Mr. Hussein did not have to trade the oil but could simply profit from the transaction.

Ultimately, Mr. Hussein began to demand kickbacks in return for these oil allocations, a requirement that some oil dealers were willing to honor given the large profit margins associated with oil trade.

The proceeds may have been used by Mr. Hussein to pay for purchases of arms in violation of sanctions, the report says.

Among American companies and citizens, Mr. Wyatt, who did not respond to messages left on Friday at his Houston office, was by far the largest recipient of oil allocations, as recorded on the secret list maintained by the Iraqi government, the report says.

For decades, Mr. Wyatt has been a hard-driving - and controversial - oil merchant who did business with Col. Muammar el-Qaddafi of Libya and helped rescue hostages in Kuwait. In 2000, his Coastal Corporation merged with the El Paso Corporation. Mr. Wyatt is still a large shareholder in El Paso, but he is not an executive with the company, which last month received the subpoena related to the Iraqi oil deals.

Mr. Khafaji and Mr. Vincent, who both received much smaller allocations in the secret Iraqi list than Mr. Wyatt, could not be reached for comment. Mr. Vincent is an Iraqi-born businessman who headed Phoenix International.

Mr. Khafaji financed a controversial film about Iraq by Scott Ritter, the former United Nations arms inspector who opposed the American-led invasion of Iraq.

Rep. Christopher Shays, the Connecticut Republican who heads the subcommittee on government reform, which has been investigating the oil-for-food program, said his panel would "follow the list wherever it takes us."

"We want a full explanation of the involvement of all American oil companies and individuals who were involved in a thoroughly corrupt program," he said.

Representative Henry J. Hyde, Republican of Illinois, chairman of the International Relations Committee that is also investigating the seven-year oil-for-food program, said in a statement that the Iraq Survey Group's report showed the "full breadth of Saddam Hussein's corruption and manipulation of the U.N. Oil for Food program."