Witness First to Tie Wyatt to Saddam Kickbacks

By David Ivanovich, Houston Chronicle

Sep. 21–NEW YORK — A former Iraqi oil company official took the stand Thursday in Oscar Wyatt’s fraud and conspiracy trial and gave the first testimony tying the Houston oilman to kickbacks demanded by Saddam Hussein’s regime.

Wyatt, 83, is accused of funneling millions of dollars in illegal surcharges or kickbacks to the regime under the United Nations’ oil-for-food program.

Mubdir Al-Khudhair, a former manager with Iraq’s State Oil Marketing Organization, or SOMO, told a federal jury in Manhattan that he attended a meeting in January 2001 where Wyatt was haggling with Iraqi officials over how much of a surcharge he would be willing to pay.

While Wyatt had expressed "his willingness to pay the surcharge," he objected to the 40-cent-per-barrel fee Iraqi officials were demanding, Al-Khudhair said.

"He said that the amount of 40 cents at that time was too high but that Coastal would be willing to pay between 20 to 25 cents per barrel," Al-Khudhair testified.

In exchange for his testimony, Al-Khudhair and his family have been permitted to emigrate to the United States, and he has been paid $115,000, Al-Khudhair said. He said it would not have been safe for him to remain in Baghdad once people learned he was cooperating with American authorities.

Wyatt is charged with fraud, conspiracy and violating U.S. sanctions governing dealings with Saddam’s regime. If convicted, he could be sentenced to up to 74 years in prison.

Wyatt contends all his dealings with Iraq were lawful.

The trial is scheduled to resume Monday with more testimony from Al-Khudhair, including cross-examination by Wyatt’s lawyers.

‘Discount’ was surcharge No one disputes Wyatt had been doing business with the Iraqis since the early 1970s. And when the U.N. Security Council, in December 1996, relaxed the sanctions that had been imposed against Iraq following Saddam’s invasion of Kuwait in 1990, Wyatt was Baghdad’s first customer, a U.N. investigation led by former Federal Reserve Chairman Paul Volcker found.

The U.N.’s oil-for-food plan was designed to allow Iraq to sell crude to buy much-needed food and medicine, while keeping the proceeds out of the hands of Saddam’s regime.

But in the fall of 2000, Saddam ordered his subordinates to figure out a way to keep 10 percent of the value of the crude, Al-Khudhair testified. Oil company officials scrambled to obey.

At that time, oil was trading on world markets for about $25 a barrel.

That meant Iraqi oil company officials would have to skim off $2.50 a barrel without U.N. oil overseers being aware of what they were doing.

Iraqi oil company officials huddled to devise a strategy.

In one meeting, Amer Rashid, then Iraq’s oil minister, noted: "Oscar Wyatt, the American, is ready to receive 100 million and give the required discount," according to Al-Khudhair’s notes from the meeting. The 100 million referred to barrels, Al-Khudhair said, while the "discount" was the surcharge.

But the oil company officials decided that Tariq Aziz, Iraq’s deputy prime minister, would not allow them to sell to just one buyer, Al-Khudhair’s notes showed. Oil company officials drew up a list of buyers they thought would be willing to pay a surcharge. Wyatt was among those on the list.

Realizing they could not charge a full 10 percent, the Iraqi oil officials tried to demand 50 cents a barrel in December 2000. By January 2001 they had dropped their fee to 40 cents a barrel and by February it was down to 30 cents for cargoes headed to North America and 25 cents for oil heading to Europe and the Far East, Al-Khudhair said.

Front companies alleged In January 2001, Houston-based El Paso Corp. purchased Coastal Corp., the company Wyatt founded.

That same month, Al-Khudhair testified, Wyatt was at SOMO offices in Baghdad and said he was going to establish companies in Cyprus "to replace Coastal" and to "purchase Iraqi crude oil and pay the surcharge."

Prosecutors have shown the jury documents linking Wyatt to two Cyprus-based entities, Mednafta and Nafta Petroleum, in which Wyatt is variously described as a "director" or "consultant." The government contends Wyatt set up the two entities as front companies to enable him to pay the surcharges.

Wyatt defense attorney Gerald Shargel has said that Wyatt did not own or control the operations.

The ‘Oscar Wyatt phone’ Besides the surcharge allegations, Wyatt is accused of providing satellite communications equipment to the Iraqi oil company, in violation of U.S. sanctions.

Al-Khudhair testified that Wyatt provided a system, which he said officials at SOMO referred to as "the Coastal or Oscar Wyatt phone."

After the U.S.-led invasion of Iraq in March 2003, portions of the SOMO offices were burned and ransacked by looters.

When U.S.-led forces occupied the country, Al-Khudhair testified, he helped organize and copy SOMO documents for American officials.

Documents related to Coastal and to Phoenix International were missing, Al-Khudhair said. Phoenix was owned by former Wyatt consultant Samir Vincent, now a government witness who testified earlier in the trial.

david.ivanovich@chron.com

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