- The Washington Times - Thursday, October 20, 2005

A Reston trading firm yesterday pleaded guilty to paying more than $440,000 in kickbacks to the regime of Iraqi dictator Saddam Hussein under the United Nations’ fraud-ridden oil-for-food program.

Midway Oil Trading Inc. agreed to pay a fine of $250,000 for its part in the scheme, which involved two purchases of about 1.7 million barrels of Iraqi oil in 2001.

Investigators from the office of Manhattan District Attorney Robert M. Morgenthau said the kickbacks were paid to Iraqis from Tikrit, the deposed dictator’s hometown.

“It is reasonable assumption that [the payments] went to members of Saddam’s family,” investigator Dan Castleman told a New York press conference yesterday.

Officials for Midway Oil could not be reached for comment, and an answering machine at the company’s Reston office was not accepting messages.

The district attorney’s investigation is one of several into the $64 billion oil-for-food program, begun in 1996 to ease Iraq’s humanitarian crisis brought on by international sanctions through a program of strictly controlled sales of the country’s oil.

Partly because of the poor design and oversight of the U.N. program, Saddam was able to skim off an estimated $12.8 billion through smuggled oil sales, kickbacks and bribes over the seven years of the program, said Paul A. Volcker, the former Federal Reserve chairman who heads the U.N. probe of the scandal.

“The oil-for-food program was set up as way for the Iraqi people to receive humanitarian goods and not to line the pockets of the ruling party,” Mr. Morgenthau said.

The district attorney’s office said it found no evidence that U.N. officials had profited from the Midway Oil sales, but several senior U.N. officials are being investigated for accepting bribes from Saddam’s regime.

Mr. Morgenthau said his office has opened a criminal investigation into Benon Sevan, the U.N. official who oversaw the oil-for-food program. Mr. Volcker’s investigators have charged the Cypriot diplomat with accepting about $160,000 in questionable payments related to oil-for-food transactions.

Mr. Sevan has denied the charges.

As the scheme was laid out in the New York courtroom yesterday, it appears Midway at first might not have intended to pay kickbacks when it made its first oil-for-food deal in March 2001.

Prosecutors said Midway struck a deal with Romanian-based firm Bulf Oil. The Bucharest company, owned by prominent businessman Cornel Bulf, appeared on a list published by a Baghdad newspaper in 2003 of about 270 companies, political parties and public figures secretly given lucrative rights to buy and resell Iraqi oil under the U.N. program.

The rights were seen as a way for Saddam to buy influence abroad and to demand kickbacks for his own needs at home.

Bulf Oil was listed as having the right to purchase as much as 1 million barrels of Iraqi oil at discounted prices.

Court papers say Midway agreed to buy $42 million in Iraqi crude oil from Bulf, and split the profits from the resale to major refiners. But the first shipment of about 900,000 barrels was held up at the Turkish port of Ceyhan in late March when Midway initially refused to pay an additional 25 cents per barrel surcharge — Saddam’s kickback — demanded by Bulf Oil.

Three days later, Midway wired $225,000 to a New York bank account controlled by Bulf, and the money was passed on to an account at the Jordan National Bank. The oil shipment was allowed to proceed instantly.

Midway “later learned that the money wired [to Jordan] was for the benefit of Iraqi government officials and that the ‘surcharge’ had to be paid as a precondition for oil to be loaded,” the district attorney’s office said.

As a result of the extra payment and the shipping delay, Midway lost about $1 million on the March deal.

In a second deal in September 2001, Midway agreed upfront to pay a $215,442.25 surcharge to the Jordan bank account for the remainder of the Bulf allocation, earning a profit of about $375,000.

This article is based in part on wire service reports.

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