Saddam's oil schemes include secret accounts, suitcases of cash

NEW YORK -- Suitcases full of cash, secret bank accounts, covert operatives, corrupt politicians on the take. A report detailing alleged illicit U.N. oil-for-food deals with the former Iraq government paints a portrait of Saddam Hussein as an international gangster -- not a nuclear terrorist.

The financial schemes propped up Saddam's regime for more than a decade and involved cloak-and-dagger efforts to hide the alleged graft by dealing in front companies, untraceable accounts, cash sales and smuggling, the report by the top U.S. arms inspector said.

The report, delivered Wednesday by Charles Duelfer, who was charged to investigate the extent of Iraq's weapons programs, relies on internal Iraqi documents and extensive interviews with members of the former regime now imprisoned in Iraq.

Although Saddam opposed the program at first, he quickly realized it could be exploited and did so with mendacious verve until the U.S.-led invasion in 2003, former Iraqi officials report.

Saddam was able to "subvert" the $60 billion U.N. oil-for-food program to generate an estimated $1.7 billion in revenue outside U.N. control from 1997 to 2003, Duelfer's report says.

In addition to oil-for-food schemes, Iraq brought in more than $8 billion in illicit oil deals with Jordan, Syria, Turkey and Egypt through smuggling or illegal pumping through pipelines during the full period that sanctions were in place from 1991 to 2003, the report says.

While the United Nations focused on delivering humanitarian goods to an Iraqi population suffering from international sanctions and the totalitarian regime, Saddam's government devised elaborate ways to skim money from deals sending oil out and goods in. The report spells out how kickbacks were solicited and how money got to Baghdad.

Iraq tried to manipulate foreign governments, including members of the U.N. Security Council, by awarding contracts -- and bribes -- to foreign companies and political figures in countries who showed support for ending sanctions, in particular Russia, France and China, the report says.

The former head of the oil-for-food program, Benon Sevan, also is accused of receiving bribes in the form of vouchers allowing him or companies tied to him to purchase 7.3 million barrels of oil, which would have netted $700,000 to $2 million, depending on oil prices.

Sevan is among hundreds of companies, groups and individuals on 13 secret lists kept by the Iraqi Vice President Taha Yasin Ramadan and the Oil Minister, Amir Rashid Muhammad al-Ubaydi.

"Saddam himself would recommend a specific recipient," the report says, "and the recommended amount of the allocation."

Russian and French companies were singled out by the regime for special treatment, according to the report, with politicians close to French President Jacques Chirac appearing on the list, among them former French Interior Minister Charles Pasqua and businessman Patrick Maugein, "whom the Iraqis considered a conduit to Chirac," according to the report.

The report says this allegation is unproven and the governments and officials deny it.

Some of the bribes allegedly paid by Iraq involved cash to covert operatives. Saddam's former secretary and ambassador to Moscow, interviewed by Duelfer's group, claims former Iraqi Deputy Prime Minister Tariq Aziz paid a cash bribe of $15-to-20 million to a female colonel in the Russian Intelligence Service.

"She wanted Aziz to accommodate the companies nominated by the Russian Intelligence," according to the official, said Abd Hamid Mahmud Al Khatab al Nasiri.

The most lucrative exploitation of the program involved kickbacks from companies executing legal sales of oil. Under the terms of the U.N resolution establishing the program, Iraq maintained the right to determine who got contracts for oil being exported and the humanitarian goods being imported and to determine market prices.

In what the report calls, "an open secret," the Iraqi government demanded illicit surcharges of 25-to-30 cents on all barrels of oil bought, which buyers had to secretly pay before the deals were sealed. They complied because the Iraqis were selling slightly below market prices.

One of the most prolific purchasers of the oil was Swiss-based Glencore run by one-time fugitive American financier Marc Rich, which the report alleges paid over $3.2 million in kickbacks to the Iraqi government. Rich, formerly wanted for tax-evasion was pardoned by President Clinton in his last days in office.

The report says that the company denies any inappropriate deals.

Most of the kickbacks were transferred to the Iraqi government through secret bank accounts in Jordan and Lebanon, from which "trusted Oil Ministry employees" withdrew an estimated $2 billion, the report said. They hand delivered the cash to Baghdad.

"Oil suppliers and traders, who sometimes brought large suitcases full of hard currency to embassies and Iraqi Ministry offices, so that the payments would be untraceable, filled these illegal bank accounts," according to senior Iraqi officials, the report says.

An additional $750 million was recovered in the accounts after the war and returned to Iraq. The report alleges Iraqi embassies in Moscow, Hanoi, Ankara and Bern were also used to collect kickbacks from oil companies with the money shipped back to Iraq in diplomatic pouches.

The Iraqis exploited deals for importing goods in a similar manner. It cites the case of a Jordanian company, the Al-Aman Group, which was made to deposit 10 percent of the value of some deals in a Jordanian account before they were signed.

"When the goods were delivered to Iraq, the U.N. Iraq account would pay the full contract price to Al-Eman," the reports says. "At that point, the Jordan National Bank would automatically kick back the performance bond to an Iraqi account instead of returning it to Al-Eman, as would normally be the case."

Elaborate methods were used to hide the secret accounts in Jordan and Lebanon. Temporary accounts set up under false names by Iraqi ministries were used for initial transactions before money was spirited into accounts held by the Central Bank of Iraq at the same banks. Iraq also used front companies in Jordan and the United Arab Emirates to transfer kickbacks.

Once the money returned to Baghdad, the government had a standard scheme for dividing the spoils. The government routinely allocated 5-to-10 percent of the kickbacks to the ministries who distributed the money to bureaucrats to encourage them to continue soliciting bribes.

Another Iraqi scheme involved signing deals with foreign companies for inferior or spoiled goods, while paying premium prices. The Iraqi government often did this knowingly, according to the report, under the understanding that the differential would be paid in kickbacks.