Oil-for-Food Scandal—American Indictment

This Summer, a great amount of attention was paid to the Cypriot citizen, Benon Sevan, and the Russian citizen, Alexander Yakovlev, for their alleged roles in the UN’s Oil-for-Food Scandal.^[1] Over this weekend, it came to light that Americans have been indicted for their role in the scandal. The flamboyant and legendary Houston oil tycoon Oscar Wyatt Jr., along with two other individuals, has been indicted for allegedly paying millions of dollars in illegal kickbacks to purchase oil from Saddam Hussein.^[2] Mr. Wyatt is accused of funneling cash to front companies and bank accounts “controlled by the deposed Iraqi strongman’s government.”^[3] He was arrested in Houston, appeared before a US Magistrate Judge, and was released after posting a US$2.5 million bond; he is scheduled to be arraigned in New York this week.^[4]

Mr. Wyatt’s Coastal Corporation is thought to have received the first shipments of Iraqi crude oil under the program starting in 1996.^[5] In 2000, Saddam Hussein apparently decided to require that oil recipients would have to pay a secret surcharge for the privilege of purchasing Iraqi oil.^[6] In addition to the kickbacks, Mr. Wyatt is accused of conspiring with David Chalmers of BayOil to manipulate the selling price of oil sold under the Oil-for-Food regime; their apparent goal was to buy Iraqi oil for slightly less than market price, “allowing them to earn a profit on the sales that covered the cost of the surcharges paid to Mr. Hussein’s government.^[7]

According to the indictment, Mr. Wyatt has been charged with wire fraud, conspiracy and conspiracy to commit wire fraud, acts of terrorism (prohibited financial transactions), and violating export controls under the International Economic Powers Act.

Wire Fraud
We have previously discussed wire fraud here.

Conspiracy and Conspiracy to Commit Wire Fraud
We have previously discussed conspiracy here, and conspiracy to commit wire fraud here.

Acts of Terrorism (Prohibited Financial Transactions)
Under 18 U.S.C. § 2332d(a), it is a crime for a US person, who knows that a country is designated as a country supporting international terrorism, to engage in financial transactions with the government of that country.

The punishment for a violation of section 2332d is a fine, imprisonment for up to 10 years, or both.

International Emergency Economic Powers Act
Under 50 U.S.C. § 1702(a)(1)(B), the President has the authority to “investigate … prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States.” Under 50 U.S.C. § 1701, the President has the authority to exercise this power upon declaration of a national emergency. Beginning in August of 1990, and continuing through all the time relevant to the charges, the President had declared Iraq to be a threat and had maintained these emergency economic powers. The part of the International Emergency Economic Powers Act that applies to Mr. Wyatt and his associates is 50 U.S.C. § 1705(b), which states that any person who willfully violates, or attempts to violate, any order issued under the Act can be fined not more than US$50,000, imprisoned for not more than 10 years, or both.

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[1] We have previously discussed Mr. Sevan here, and Mr. Yakovlev here.
[2] David Ivanovich, Texas Oil Mogul Indicted in Scam, Houston Chronicle, Oct. 21, 2005, available here.
[3] Id.
[4] Id.
[5] Id.
[6] Id.
[7] Id.