U.S. Co. Admits Iraq Oil Kickbacks

A Virginia oil trading company has pleaded guilty to grand larceny in the United Nations oil-for-food scandal, prosecutors said Thursday.

Midway Trading of Reston, Virginia, is accused of being part of a scheme to pay kickbacks to Iraq in connection with oil purchases made under the program, Manhattan District Attorney Robert Morgenthau said.

Midway has already pleaded guilty to first-degree grand larceny, prosecutors said.

Midway and a trading partner, Bulf Oil, are accused of paying more than $440,000 in kickbacks to Iraqi officials in connection with oil purchases, but falsely told the U.N that no kickbacks were paid.

Midway will pay a $250,000 fine, Morgenthau said.

Midway attorneys admitted in court that in late 2000, the company bought the right to lift oil from Iraq under the U.N.'s oil for food program from Bulf Oil, a Romanian company, Morgenthau said.

Under U.N. resolutions, all money paid for the purchase of Iraqi crude oil was deposited into a U.N. trust account at a branch of a French bank in Manhattan, said Morgenthau. Payments from the trust account, including payments for humanitarian goods, had to be authorized by U.N. officials, according to Morgenthau.

Mike Holtzman, spokesman for the U.N.-backed Independent Inquiry Committee, which has been investigating oil-for-food, would not say whether it had worked with Morgenthau on the case. IIC chief Paul Volcker, the former U.S. Federal Reserve chairman, has spoken highly of Morgenthau's office in the past.

"We are aware of this situation, and while we can't comment specifically on this case, as Mr. Volcker has said in the past, the district attorney and the IIC have been cooperative on a range of issues," Holtzman said.

The Volcker-led committee is expected to release its final report later this month on the companies involved in the $64 billion program which was launched in December 1996 to help ordinary Iraqis cope with U.N. sanctions imposed after Saddam Hussein's 1990 invasion of Kuwait.

Former Yugoslav war crimes prosecutor Richard Goldstone, a member of Volcker's committee, told The Associated Press in August that about half the 4,500 companies that took part in the program allegedly paid kickbacks or illegal surcharges on oil purchases.

He said a substantial amount of evidence of kickbacks came from Iraqi files, "a lot from U.N. documents," and some from the committee's investigations. The companies that allegedly paid kickbacks or surcharges were being notified and given a chance to respond to the accusations, he said.

The oil-for-food program was one of the largest humanitarian programs in history. By most accounts, it achieved what it set out to do, becoming a lifeline for 90 percent of the country's population of 26 million.

Under the program, Saddam's regime could sell oil, provided the proceeds went primarily to buy humanitarian goods or pay war reparations. Saddam allegedly sought to curry favor by giving former government officials, activists, journalists and others vouchers for Iraqi oil that could then be resold at a profit.