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Oil giants probed in oil-for-food case
Authorities look into U.S.-based companies for their dealings with the U.N.-administered program.
December 16, 2004: 5:07 PM EST

NEW YORK (CNN) - Prosecutors and regulators are investigating several U.S.-based companies for their dealings with Iraq under the U.N.-administered oil-for-food program.

The companies include the nation's two largest oil companies, Exxon Mobil and Chevron Texaco, which purchased millions of barrels of Iraqi crude oil in the 1990s.

The list also includes lesser-known oil producers, such as El Paso Corp. (Research), a Houston-based firm that bought Coastal Corp. in 2001. According to Iraqi Oil Ministry records, Coastal purchased more Iraqi oil than any other U.S. company when the Iraq program was in effect, from 1996 until the U.S.-led invasion that toppled Iraqi leader Saddam Hussein in 2003.

The oil-for-food program was aimed at supplying food and medicine to the 25 million Iraqis suffering from the impact of economic sanctions imposed when Iraq invaded Kuwait in 1990.

Iraq was permitted to export a limited amount of its oil, and the funds were deposited into a special bank account, monitored by the United Nations, to be used for those purposes and for oil supplies.

Coastal and its former CEO, Oscar Wyatt, have received subpoenas from federal prosecutors in New York who are probing for possible criminal wrongdoing in a program reputedly plagued by the illegal siphoning of billions of dollars by Saddam's deposed regime.

Exxon Mobil (Research) and Chevron Texaco (Research) have received federal grand jury subpoenas from the U.S. Attorney for the Southern District of New York, according to the companies.

Valero Energy, a San Antonio-based oil refiner, and Bayoil, a Houston-based distributor and trader of crude oil and petroleum-related products also have received subpoenas.

The U.S. attorney's office, which is handling one of several active investigations, would not comment on its probe.

The Manhattan district attorney, the Securities and Exchange Commission, a handful of Congressional committees and an independent panel led by former Federal Reserve Chairman Paul Volcker also are investigating the program.

Over seven years, Iraq sold 3.4 billion barrels of oil for $64 billion to 248 companies based in 61 countries, says an interim report prepared by Volcker.

A total of $46 billion of food and medicine and other goods were delivered to Iraq. Increased child vaccinations reduced deaths among children and better food decreased child malnutrition by 50 percent, according to the U.N. Foundation.

The SEC is seeking information on at least three publicly held companies that did business with Iraq -- El Paso and two suppliers of humanitarian goods to Iraq -- Wyeth and Tyco International, according to the companies.

A spokesman for Wyeth said the New Jersey-based company sold nutritional and pharmaceutical products to Iraq under a license granted by the U.S. government.

Tyco, also New Jersey-based, revealed in an quarterly filing on Tuesday that it received its SEC request last month. One Tyco subsidiary in Colorado, Valley Lab, which makes surgical devices, shipped $7.6 million worth of goods to Iraq, according to Volcker.

"We are gathering information responsive to the order and will fully cooperate in ongoing investigations," the Tyco filing said.

Eighteen other American companies are listed by Volcker as having sold Iraq humanitarian goods or oil production parts. The SEC would not disclose if any of these other firms have been asked for documents.

The U.S. firms supplied $236 million worth of goods, less than 1 percent of the total, shipped to Iraq. U.S. oil companies also directly purchased less than 1 percent of the Iraqi oil sold under the oil for food program.

Exxon Mobil, which merged in 1999, and Chevron Texaco, which merged in 2001, say they are cooperating with investigators. Exxon purchased no Iraqi oil, but Mobil said it bought 9.2 million barrels from 1997 to 1998.

"All Mobil contracts were reviewed and approved by the U.N. under detailed procedures established for the U.N. Oil-For-Food program. Mobil purchases of oil under the U.N. oil for food program were in full compliance with applicable U.S. laws," said Premlat Nair, an Exxon Mobil spokeswoman.

Chevron purchased 9.5 million barrels, according to Iraqi oil records summarized in the a CIA-sponsored report on the Iraqi regime by weapons inspector Charles Duelfer.

In the publicly released version of the Duelfer report, names of U.S. companies are blacked out, but CNN has obtained a clean copy.

The Volcker inquiry has found that Chevron purchased $140 million of Iraqi oil and Texaco, $28 million.

"We purchased Iraqi crude under the United Nations program principally for use in our West Coast refineries. We did so openly and with approval from the U.S. government, and from the United Nations as administrator of the program," said Stan Luckoski, a Chevron Texaco spokesman.

Coastal bought 44.4 million barrels of Iraqi oil from 1997 to 2000, according to Duelfer. The company says the oil was acquired for a refinery in Aruba the company has since sold it to Valero.

El Paso revealed in a SEC filing Nov. 23 that its subpoena from federal prosecutors "seeks various records relating to transactions in oil of Iraqi originating during the period from 1995 to 2003."

The company has also received an request for information related to a specific transaction in 2000 from the U.S. Senate's Permanent Subcommittee of Investigations led by Sen. Norm Coleman, R-Minn.

Coastal chief Wyatt, received 24.2 million barrels of Iraqi oil, according to the Duelfer report.

But a spokesman for Wyatt said, "Oscar S. Wyatt has never individually held a contract to purchase crude oil from Iraq nor has he ever purchased crude oil from Iraq."

Two Iraqi-Americans are listed in the Duelfer report as having taken possession of Iraqi oil during this period: Shakir al-Khafaji, who owns a real estate development business near Detroit, Michigan; and Samir Vincent, who runs Phoenix International, a northern Virginia-based firm.

Phoenix purchased more than 4 million barrels, and Vincent acquired nearly 4 million more, according to Duelfer. Phoenix's shipments were worth $162 million, according to Volcker.

Neither Phoenix, Vincent nor Khafaji have responded to requests for comment.

American companies participating in the program normally would receive a license to trade with Iraq from the U.S. Office of Foreign Assets Control and the United Nations.

Saddam's regime, which handpicked its oil buyers, was known to impose a 10-cent to 35-cent-per-barrel surcharge on oil exports, which some buyers were believed to deposit in bank accounts controlled by Iraq in Jordan and Lebanon, Duelfer concluded. Investigators said Saddam also extorted kickbacks on his purchases of humanitarian goods.

-- from CNN's Maria Gavrilovic, Phil Hirschkorn and Sara Lane  Top of page


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