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El Paso pays $7.7 million in Iraq settlement
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Houston Business Journal - [2/8/2007]
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El Paso Corp. will shell out $7.7 million to settle charges filed by the U.S. Securities and Exchange Commission over illegal surcharges paid to Iraq related to the United Nations Oil for Food Program.
The SEC on Wednesday filed charges in the case under the Foreign Corrupt Practices Act.
The SEC said that during 2001 and 2002, Houston-based El Paso (NYSE: EP) bought about 21.4 million barrels of Iraqi crude oil from third parties participating in the Oil for Food program, but that as much as 30 cents per barrel was illegally kicked back to Iraq through oil surcharges, which El Paso knew about or was reckless in not knowing, the SEC alleged.
The SEC used recorded conversations between El Paso officials and oil traders to gather information, and said El Paso's accounting for its Oil for Food transactions failed to record the nature of the payments.
Without admitting or denying the allegations, El Paso will pay $5.48 million in disgorgement of profits and a $2.25 million civil penalty, according to the settlement. El Paso will forfeit the $5.48 million according to a non-prosecution agreement with the U.S. Attorney's Office for the Southern District of New York.
"The Oil for Food kickback scheme in which El Paso participated is especially troubling because it systematically diverted millions of dollars from a humanitarian program intended to alleviate the suffering of the Iraqi people, and violated the books and records and internal controls provisions of the Foreign Corrupt Practices Act," said Linda Thomsen, SEC enforcement director.
The Oil for Food Program was created to provide humanitarian relief for the Iraqi population in the face of international trade sanctions. The SEC said that officials with Iraq's State Oil Marketing Organization started demanding illegal kickbacks in 2000 through surcharges on barrels sold through the program.
El Paso ceased direct purchases from the State Oil organization, but continued purchases through third parties, who paid kickbacks on El Paso contracts to buy Iraqi oil, according to the SEC.
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