NEW YORK, April 14 -- A Texas oil executive, his two companies and two foreign associates were indicted Thursday on charges that they illegally paid millions of dollars to Iraqi officials in exchange for lucrative deals to buy discounted oil from the government of Saddam Hussein.
A separate criminal complaint charged Tongsun Park, a South Korean businessman who was at the center of a congressional influence-peddling scandal in the 1970s, with acting as an "unregistered agent" of Hussein's government and with trying to bribe a U.N. official for relief from economic sanctions imposed on Iraq after its 1990 invasion of Kuwait.
Oil executive David B. Chalmers Jr. of Houston leaves the federal courthouse in Manhattan after being indicted with two others in the U.N. oil-for-food investigation.
(David J. Phillip -- AP)
Thursday's action, announced by David N. Kelley, the U.S. attorney for the Southern District of New York, represents the largest round of criminal charges against individuals accused of abusing the $64 billion U.N. oil-for-food program. Samir A. Vincent, an Iraqi American businessman, recently pleaded guilty to illegally lobbying U.S. officials on behalf of Hussein's government and agreed to cooperate with Kelley's investigation.
The oil-for-food program was created in December 1996 to offset the consequences of sanctions by allowing Iraq to sell oil to buy food, medicine and other humanitarian goods; it ended after the United States invaded Iraq in 2003. The Iraqi government raised more than $2 billion illicitly through the program, which has become the focus of a U.N. probe, six congressional inquiries and a federal criminal investigation.
A federal grand jury in Manhattan charged that David B. Chalmers Jr., founder of Houston-based Bayoil USA Inc. and Bayoil Supply & Trading Limited; Ludmil Dionissiev, a Bulgarian citizen who lives in Houston; and John Irving, a British oil trader, funneled millions of dollars in kickbacks through a foreign front company to an Iraqi-controlled bank account in the United Arab Emirates. If convicted, the three men could each be sentenced to as long as 62 years in prison, $1 million in fines, and the seizure of at least $100 million in personal and corporate assets.
The federal complaint against Park charges that he received a total of $2 million in cash from Iraq, including a fee to "take care" of an unnamed U.N. official. It also states that Park invested $1 million in Iraqi money in a Canadian company owned by the son of another unknown, "high-ranking" U.N. official. Park could face as long as five years in prison and a fine of as much as $250,000 or twice the value of profits he earned as a result of his alleged activities.
"The individuals and corporate defendants charged today reaped huge benefits from the corruption of the oil-for-food program," said John A. Klochan, acting assistant FBI director, who accompanied Kelley at a news conference. "But they didn't merely participate in the illegal scheme. They helped further it."
Chalmers and Dionissiev were arrested at their homes in Houston on Thursday and were due to appear Friday before a federal judge in Manhattan. Kelley's office plans to seek Irving's extradition from England. A spokeswoman for Chalmers, Catherine M. Recker, issued a statement saying that he and his two Bayoil companies "will all enter pleas of not guilty."
"We will vigorously dispute the allegations of criminal conduct," she added.
David Howard, a lawyer representing Dionissiev, said his client "intends to plead not guilty because he is not guilty."
Robert D. Luskin, a lawyer at the firm Patton Boggs LLP who is representing Park, said, "Our client formally denies any wrongdoing."
Efforts to reach Irving in London were unsuccessful.
The federal complaint charges that Iraqi authorities reached an agreement with Park and an unnamed co-conspirator, who is cooperating with federal authorities, in October 1992 to lobby U.S. and U.N. officials to grant it relief from U.N. sanctions. Kelley declined to name Park's co-conspirator, but court papers released in January said that Vincent had also engaged in lobbying U.S. and U.N. officials from 1992 to 2003.
Over the next five years, Park presented Baghdad's case to U.N. officials and foreign delegates and solicited as much as $10 million from Iraqi authorities "to take care of his expenses and his people," the complaint said. Iraq ultimately paid Park $2 million, and Park's co-conspirator said some of that money was intended for a U.N. official, the complaint said.
Iraq's relationship with Chalmers predates the imposition of sanctions, and he held a privileged position in Iraq after it halted trade with other U.S. companies to protest U.S. policy against the government.
The indictment said Chalmers advised Iraq on how to keep its oil exports below market rates so that the government could collect more kickbacks. He also sought to persuade U.N. officials responsible for approving the price of Iraqi crude to agree to lower prices, the indictment said.
Chalmers "paid millions of dollars in secret illegal surcharges to the government of Iraq," the indictment states. The money went through a "foreign company" that Chalmers set up and sent to a bank account held by a company known as Al Wasel and Babel General Trading, an Iraqi front based in the United Arab Emirates, according to the indictment.
"Chalmers agreed to pay the foreign company inflated commission prices on the original oil transactions, with the knowledge and expectation that the foreign company would then make the surcharge payments to the Government of Iraq," the indictment says.
Staff writer Michael Dobbs in Washington contributed to this report.