Texas Oilman Sentenced for Iraqi Oil for Food Fraud
Below is a long 2005 USA Today story about Texas Oilman Oscar Wyatt, and his indictment for fraud in the Oil for Food scheme where Iraqi officials were paid to get access to Iraqi Oil when Saddam Hussein was in power. It gives a good flavor of the type of person that gets business by paying bribes, and the Iraqi issue is near the end of the article.
Below that are two current articles where Wyatt is sentenced to one year in jail and he forfeited $11-million.
vj
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This if from
http://www.usatoday.com/money/industries/energy/2005-12-21-wyatt-cover_x.htm
Prison term could cap oil trader's legendary career
By David J. Lynch, USA TODAY
HOUSTON — Shattering the predawn quiet of the tony River Oaks neighborhood, an FBI agent rapped on Oscar Wyatt's door.
By Louis Lanzano, AP
A grand jury in New York had indicted the veteran Texas oil trader, along with five others, in an alleged scheme to pay Iraqi officials "millions of dollars in secret kickbacks" under the United Nations' controversial oil-for-food program. Now, at 6 a.m. on Oct. 21, it was time to bring him in.
When the 81-year-old Wyatt saw the eight agents waiting for him, he protested vigorously. "They had to put him up against the wall and handcuff him," says Ben Berry, head of the FBI's white-collar crime unit in New York. " ... I would say he was being less than respectful."
In more than 50 years in the oil and gas business, Wyatt has never gone quietly. Indeed, the feisty executive built a lucrative career defying convention and spotting commercial opportunities that others missed. Along the way, he cultivated a tough-guy image immortalized by the description "meaner than a junkyard dog" in a 1991 Texas Monthly profile.
From hardscrabble origins, he attained a billionaire's life of private jets, celebrity parties on the French Riviera and a $1.8 million home boasting 7½ bathrooms. But now, his wildcatter's mentality has landed him in legal trouble that threatens to cap his legendary career with a prison term.
In early 2003, as President Bush publicly warned that "time is running out on Saddam Hussein" and U.S. Marines girded for combat, Wyatt faxed letters to Iraqi officials scouting potential oil deals, according to federal prosecutors. For more than two years, Wyatt, and several accomplices, paid millions of dollars in illegal surcharges to Saddam's men to win access to Iraqi oil, the indictment alleges.
"He would always push hard and go to the limit of what he could do," says George Mitchell, 86, a Wyatt associate. "He was a shrewd trader; maybe sometimes he may have been too shrewd."
Texas Monthly
Texas Monthly helped Wyatt cement his tough-guy image with a profile in 1991.
As he awaits his June 20 trial, Wyatt is declining interviews. "People are playing hardball with this thing," says his attorney, Carl Parker. "We best just do our talking at the courthouse."
From an early age, Wyatt demonstrated a stubborn refusal to blindly follow rules dictated by others. An only child, he grew up poor in Navasota, an East Texas town hit hard by the Depression. His father abandoned the family when Wyatt was still young. To make ends meet, the young man picked cotton. Later, he flew bombers in the Pacific during World War II.
Graduating from Texas A&M in 1949 with a mechanical engineering degree, Wyatt sold drill bits. In 1951, he saw an opportunity to lay pipelines to gather all the unwanted natural gas being flared from oil wells and sell it to bigger pipeline operators. So he raised $800 by hocking his 1949 Ford and started building a multibillion-dollar business: Coastal States Gas Producing Co.
Mitchell was among those who sold Wyatt gas. "He's a tough person to do business with. ... A lot of people said, 'I just can't do business with him,' " Mitchell recalls.
Wyatt's first major misstep occurred in the 1960s when he signed 20-year contracts to provide natural gas to several cities. Assuming the gas price would remain low, he agreed to a fixed price of about 20 cents per 1,000 cubic feet, according to William Greehey, then a senior vice president for Coastal and now CEO of Valero Energy.
But in late 1972, as the first energy crisis dawned, natural gas prices ballooned. Wyatt didn't own sufficient gas reserves to meet his commitments, so he was forced to buy gas for much more than what the cities were paying him. As the crisis deepened, Wyatt cut the cities off. When regulators agreed to let him rip up the contract and raise prices, winter utility bills skyrocketed and tempers frayed.
"He fell down or reneged on his agreement," says Roy Butler, 78, then Austin's mayor. "... It put us in a terrible situation." The city sought criminal prosecution of Wyatt, saying that even as he claimed he lacked gas, he was selling it on the open market at $1.80 per 1,000 cubic feet, reaping huge profits. But the grand jury hearing the case expired without issuing indictments. A separate lawsuit ultimately forced Wyatt to refund $1.6 billion and spin off his Lo-Vaca subsidiary, which became Valero, a leading oil refiner.
"Mr. Wyatt does not have a very good reputation around Austin," says Butler. "... The indictment on him now does not surprise me at all."
Takeover artist
Even after shedding Lo-Vaca, Wyatt's empire grew. In the 1970s, he acquired a Colorado natural gas company, coal mines in Utah and a California refinery.
He also enjoyed the perks of wealth such as a sprawling South Texas ranch and excursions to Mexico to hunt white-winged doves. A favorite haunt was Brennan's, where the Texas redfish pontchartrain goes for $34.
His politics were those of the conservative Democrats who once dominated Texas. Asked why he backed the party, he once told an executive, Rod Erskine: "When Democrats are in power, there's usually chaos. And in chaos, there's opportunity."
Wyatt and the Iraqi oil-for-food program
Among the allegations in the U.S. Attorney's 37-page indictment:
2000
* In the fall, representatives for Coastal States Gas Producing Co. are told by Iraqi officials that any future allocations of Iraqi oil would be provided only on the condition that the recipients pay an illegal surcharge to the Saddam Hussein regime.
* 2001 In the second week of May, Wyatt and his Swiss partners Catalina Miguel, a longtime close friend, and Mohammed Saidji, arrange for $590,000 to be deposited in an Iraqi government account at the Jordan National Bank in Amman. It was one of several large payments.
* Over three days in August, Wyatt and two others arrange for more than $500,000 to be deposited into a Jordanian bank account.
2002
* From March 27 to April 1, Oscar Wyatt and two other individuals deposit more than 1 million euros into a Jordanian bank account controlled by the government of Iraq.
Source: U.S. Attorney's Office Southern District of New York
In recent years, he's contributed money to politicians in both parties, ranging from the state's Republican U.S. senators to Sen. Hillary Clinton, D-N.Y., according to Federal Election Commission records.
His fourth wife, Lynn Sakowitz, whom he married in 1963, is a glamorous fixture on the Houston social scene. The Wyatts, generous benefactors of the Houston Opera, also entertained at their home everyone from Liza Minnelli to the Duchess of York.
Despite his financial success, the crusty Wyatt remained something of an outsider. In 1980, he pleaded guilty to misdemeanor charges of violating federal oil price regulations. Four years later, he failed to complete a hostile takeover of Houston Natural Gas, a pipeline operator headed by a then-obscure executive named Kenneth Lay, later the founder and chairman of Enron.
In 1985, when he readied another hostile takeover, of American Natural Resources (ANR), he didn't get financing through traditional channels. Instead, he linked up with someone who was about to revolutionize corporate finance: junk-bond king Michael Milken.
"He had a lot of debt. He couldn't get any of the white-shoe Wall Street firms to back him," says Jim Parkman, then a First Boston vice president helping coordinate ANR's defense.
A sleepy pipeline company, ANR was ill-prepared to battle a corporate raider and ultimately surrendered. It was a milestone: Coastal's $2.5 billion acquisition of ANR marked the first use of junk bonds in a successful takeover, according to The Predators' Ball, Connie Bruck's 1989 account of Milken's rise.
Air conditioners in Africa
Impatient, smart and phenomenally hard-working, Wyatt routinely called subordinates at all hours to discuss the intricacies of the global oil market. "He loves the telephone. If he's overseas, you're not going to get much sleep," says Valero CEO Greehey.
Experienced as an engineer, pipeline operator, driller and refiner, Wyatt knew intimately every aspect of the business, former colleagues say. He'd quickly calculate complex contract details in his head or order changes in refinery operations based on telltale smokestack emissions.
Wyatt also excelled at sniffing out bargains. In the mid-1990s, he wanted to replace the air conditioners in a hotel that he owned in Sierra Leone. At the time, Red Roof Inn was upgrading its cooling units and looking to unload the old ones.
Wyatt's hotel had only about 400 rooms, but he still bought a couple of thousand of the air conditioners, says former Coastal executive Erskine. When Erskine asked why, Wyatt replied: "Did you ever try to find an air conditioner repairman in Sierra Leone?"
Yet, for all his acumen, Wyatt stumbled badly with the deal that should have crowned his career. Four years after retiring as Coastal's chairman in 1997, still a power as company founder and board member, he approved its sale to El Paso for $24 billion. The resulting combination was the USA's largest natural gas pipeline company.
But Wyatt missed the fact that El Paso had modeled itself on a highflying energy company across town called Enron. As investors figured that out, El Paso's stock sank from $74.01 in March 2001 to just $4.39 in October 2002. The dive cost Wyatt millions of dollars and nicked his pride.
In 2003, Wyatt and Selim Zilkha, another major El Paso investor, launched a bitter — though unsuccessful — proxy fight for control of the company. At the time, Zilkha publicly lavished praise on Wyatt. But last week a man who answered the phone at Zilkha's Los Angeles home, when told the call was about Wyatt, said abruptly: "No, sorry." And hung up.
Oil deals in the Middle East
Since entering the refining business in the early 1960s, Wyatt roamed the globe to secure supplies of crude oil. The burly Texan was a fixture at the Vienna meetings of the Organization of Petroleum Exporting Countries (OPEC). "He's probably the only U.S. oil and gas company executive invited to OPEC meetings. He knew everybody in the industry," Erskine says.
Since his U.S. refineries were optimized for high-sulfur, or "sour," crude, Wyatt was a natural customer for Iraqi oil, which he began buying in 1972. In fact, he had a history of diving into markets others avoided. In 1979, after the U.S. established diplomatic relations with Beijing, Wyatt began importing Chinese crude. In the 1980s, he traded with Libya even as its mercurial leader, Moammar Gadhafi, was involved in near-constant confrontations with the Reagan administration.
His close ties to Iraqi officials paid off in the run-up to the first Gulf War when he and former Treasury secretary John Connally flew to Baghdad, over the State Department's objections. After meeting Saddam, the men flew to safety with 21 American hostages who had been held as "human shields."
The United Nations had imposed economic sanctions on Iraq after its August 1990 invasion of Kuwait. By 1996, concerned that the sanctions were hurting Iraqi civilians more than their rulers, the world body authorized Iraq to sell oil so long as it used the proceeds to purchase food and medicine.
But in a decision that opened the way to fraud, the U.N. allowed Saddam to select the participating companies. Wyatt received the first allocation of oil.
By mid-1998, Iraq began denying oil contracts to American, British and Japanese companies to punish their governments for opposing the lifting of sanctions. Wyatt was a "rare exception," receiving a total of 74 million barrels over the life of the controversial oil-for-food program, according to the independent committee chaired by former Federal Reserve Board chairman Paul Volcker that investigated the program.
In the middle of 2000, Iraqi officials informed their customers that they would have to pay a "surcharge" to continue buying oil. Many buyers balked. But the illegal payments, or bribes, eventually totaled "several hundred million dollars" and were paid to front companies or Iraqi government bank accounts outside of Iraq, the indictment alleges.
"When asked directly at the end of 2000 if he would be willing to pay surcharges, Mr. Wyatt initially responded that he had to think about it," said the committee report, quoting Iraqi officials. Eventually, Wyatt agreed to pay the illegal fees, the report said.
In January 2001, Wyatt met with Oil Minister Amir Rashid and received an additional allocation of 4.5 million barrels of oil. After the 2003 invasion, Rashid, the former director of Iraq's missile programs in the 1990s, became the eight of diamonds in the playing card deck of "most-wanted" Iraq officials. His wife was the chemical weapons specialist nicknamed "Dr. Germ."
That same month in Cyprus, two new companies were incorporated, Nafta Petroleum Trading and Mednafta Trading, which Wyatt used to buy the oil once surcharges were required, the indictment says.
In the second week of May 2001, Wyatt and his Swiss partners Catalina Miguel, a longtime close friend, and Mohammed Saidji, arranged for $590,000 to be deposited in an Iraqi government account at the Jordan National Bank in Amman, the indictment says. It was just one of several large payments.
During this period, Wyatt also donated furniture to the Iraqi U.N. mission in New York and a car to the country's Washington embassy. When Nizar Hamdoon, a diplomat who had been the public face of the regime on U.S. television for much of the 1990s, developed non-Hodgkin's lymphoma, Wyatt arranged to pay some of his medical bills, the committee report says.
Six days before U.S.-led forces invaded Iraq in March 2003, he paid a $44,705 bill by credit card at New York's Memorial Sloan-Kettering Cancer Center, according to the report. Hamdoon died that year on the Fourth of July.
Last of a breed
Wyatt's addiction to the telephone may prove his undoing. El Paso, which acquired Coastal in early 2001, routinely taped its oil traders' phone conversations.
On Nov. 29, 2001, Wyatt was overheard telling an El Paso trader that he would have Miguel "make an illegal surcharge payment to the government of Iraq," the indictment says. Less than a month later, discussing a separate payment, Wyatt referred to "that $200,000 I've already paid to the bastards over there."
Wyatt's Iraqi dealings allegedly continued until Iraq and the United States were on the verge of war. On Jan. 15, 2003, as U.N. inspectors combed a presidential palace in Baghdad for outlawed weapons, Wyatt faxed a letter to an Iraqi official proposing a meeting in the Iraqi capital, the indictment says. Within weeks, the Oil Ministry was occupied by American soldiers.
Now, effectively accused of being Saddam's favorite customer, Wyatt prepares for trial. If convicted, he faces a possible sentence of 62 years in jail, a fine of up to $1 million and possible forfeiture of other assets.
Everyone agrees Wyatt is the last of a breed. Is he also a crook?
"He'll push close to the line. But ... I'd be surprised if he's done anything illegal," says Erskine. "I just think he's smarter than that."
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from BBC at:
http://news.bbc.co.uk/2/hi/americas/7116113.stm
US oilman jailed over UN scandal
Mr Wyatt is the most prominent figure jailed over the scandal
American oil tycoon Oscar Wyatt has been sentenced to one year and a day in prison for conspiracy in the UN oil-for-food programme scandal.
The Texas oilman, aged 83, had agreed last month to plead guilty to conspiracy to commit wire fraud.
He admitted he agreed to pay $200,000 (£97,000) into an Iraqi bank account.
Under the oil-for-food programme, some companies paid bribes to officials in Saddam Hussein's Iraq in order to secure contracts to buy oil.
The programme was established in the wake of sanctions imposed on Iraq after the country invaded Kuwait in 1990.
It allowed Iraq to sell oil in order to buy humanitarian provisions.
A UN-commissioned inquiry found that 2,200 companies in 66 countries paid $1.8bn in bribes to Iraqi officials to win oil contracts.
Under Mr Wyatt's plea bargain, prosecutors dropped four other charges against him and he agreed to the prison term and to forfeit $11m (£5.3m).
He is the most prominent figure to be jailed over the scandal.
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from the Houston Chronicle at:
http://www.chron.com/disp/story.mpl/front/5332693.html
Nov. 27, 2007, 5:12PM
Oscar Wyatt receives 12-month sentence
By DAVID IVANOVICH
Copyright 2007 Houston Chronicle
NEW YORK — Houston oilman Oscar Wyatt was sentenced today to 12 months and a day in prison on a criminal charge stemming from illicit payments to Saddam Hussein's regime under the United Nations Oil-for-Food program.
He pleaded guilty last month to conspiracy to commit wire fraud.
U.S. District Court Judge Denny Chin had been flooded with letters from supporters of the 83-year-old oil legend asking for leniency, and the sentence is shorter than the 18-to-24 month range called for in federal sentencing guidelines.
Wyatt can shave up to 55 days off his prison time for good behavior. The extra day on his sentence qualified him for that credit, Chin said. The judge recommended that Wyatt serve his time at a federal facility in Beaumont, but the final decision on that rests with the U.S. Bureau of Prisons.
Wyatt choked up as he addressed the court during an hour-long hearing in Manhattan, saying he loved the United States and never would do anything to hurt its interests. But his opinions about policy toward Iraq, he said, "caused me to skirt too close to the law. I was wrong and for that I am truly sorry."
Wyatt — the founder of Houston-based Coastal Corp., now owned by El Paso Corp., — was accused of funneling millions of dollars in kickbacks to Saddam's regime to purchase Iraqi oil under the Oil-for-Food program.
The program was designed to allow Iraq — then under international sanctions imposed after Saddam's 1990 invasion of Kuwait — to sell oil to provide food and medicine to a needy populace.
Charged with conspiracy, wire fraud and violating U.S. laws governing dealings with the Iraqi government, Wyatt — three weeks into his trial — pleaded guilty on Oct. 1 to the single conspiracy count.
Prosecutors had alleged Wyatt acceded to the demands of Iraq's State Oil Marketing Organization that customers wanting to buy Iraqi crude pay secret surcharges of 10-50 cents per barrel.
In the trial, the government argued Wyatt used a series of front companies, including Cyprus-based Nafta Petroleum Co. and Mednafta Trading Co., to buy Iraqi oil under the Oil-for-Food program and then pay the surcharges demanded into a bank account in Jordan secretly controlled by the Iraqi government.
Wyatt interrupted the trial with his guilty plea just as prosecutors were poised to zero in on a $200,000 surcharge payment they alleged Wyatt orchestrated in 2001. Prosecutors alleged Wyatt then tried to get officials at El Paso, as the successor company to Coastal, to reimburse him for that payment, only to be rebuffed.
In pretrial documents, prosecutors submitted transcripts of a Dec. 21, 2001, tape in which Wyatt asked a former El Paso oil trader, "Did you check to see whether they've approved that $200,000 I've already paid to the bastards over there?" The money, Wyatt said, "came out of my hip pocket," according to the transcript.
When entering his plea last month, Wyatt read a prepared statement:
''On or about December of 2001, I agreed with others to cause a surcharge payment of 220,000 euros, approximately 200,000 U.S. dollars, to be deposited in a bank account controlled by Iraqi SOMO officials at the Jordanian National Bank. This payment was in violation of the United Nations Oil-for-Food program, because it required that all payments be made directly to the United States escrow account in New York, and no money was to be paid directly to the Iraqi government,'' Wyatt said.
Earlier this year, El Paso, without admitting or denying guilt, agreed to pay more than $7.7 million to settle civil claims that it helped the former Iraqi regime receive kickbacks through the Oil-for-Food program.
david.ivanovich@chron.com
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