PDF《EXCHANGE COMMISSION,》

s sale of oil and its purchase of humanitarian goods. A special bank account was established at a bank in New York, New York (the Oil for Food Escrow Account ) to handle the transactions. The United Nations'

economicsanctionson Iraq remained in place for all trade and transactions not authorized by the Oil for Food Program. 11. The Government of Iraq, acting through SOMO, began sellingoil pursuant to the Oil for Food Program in December 1996. Under the Program, Iraqi government officialshad the power to select the companies and individuals who received the rights to .-* purchase Iraqi oil. During everyphase of the Oil for Food Program, high ranking Iraqi officials selected which companiesand individualswould receivethe rights to purchase certain quantitiesof Iraqi oil -- frequentlyreferred to as allocations of oil -- at a certain price per barrel. 12. A company that wished to buy oil could negotiate and enter into a contract with SOMO. The companythen sought approval of the contract fiom the United Nations. Once a contract was approved, the oil was loaded onto seagoingoil tankers. A company purchasing oil under the Program was required to pay the full amount of the contract price by means of a letter of credit from its bank in favor of the Oil for Food Escrow Account. No company was permitted to make payments for the oil, directly or indirectly,to Iraq outside the Escrow Account. Surcharge Demands by Iraqi Government Officials 13. From approximatelyAugust

2000 to March 2003, officials of the Iraqi government conditionedthe distribution of allocations of oil under the Oil for Food Program on the recipients'

agreement to pay kickbacks. The kickbacks were paid in the form of a surchargeon eachbarrel ocoil sold. If a companydid not agree to pay the required surcharge it did not receive oil allocations. 14. SOMOofficials directed where these surcharges were to be paid. Most of the surchargepayments were sent by wire to Iraqi-controlled accounts at banks in Jordan and Lebanon established in the names of SOMOofficials or other Iraqi individuals. Money from these accountswas subsequentlytransferred to the Iraqi Central Bank in Baghdad. 15. Iraqi officials demanded that oil customerspay surchargesranging from $0.10 to as much as $0.50 per barrel in November 2000. In 2001, however, the surcharge demand was for between $0.25 and $0.30 per barrel. In order to allow oil buyers to receive a sufficientprofit margin from which to pay the surcharge, SOMO proposed below-market prices for the oil. % / 16. In the Fall of 2000, the United Nations

661 Committeereceived reports of . Iraqi surchargedemands, which Iraqi government officials denied. The Committee advised oil traders that it was illegal to make any such payments. Chevron was notified as early as December

2000 that it was illegal to make any such payments. 17. To eliminateIraq'

s opportunityto demand surcharges, the

661 Committee imposed retroactive pricing on Iraqi crude oil sales beginningin October 2001. This entailed withholding approval of the pricing mechanism until after the oil had been lifted -- when it could be determined what the true fair market value of the oil was at the time of the actual lifting. Retroactivepricing made it less profitable for buyers to pay surcharges, and Iraq'

s gains from surchargesdecreased over time as fewer companies chose to lift oil. By the Fall of 2002, the surchargedemands ceased. Chevron'

s Purchases of Iraqi Oil on Which Surcharges Were Paid 18. Chevronpurchased oil fiom third parties that had access to Iraqi oil allocationsunder the Oil for Food Program. From April 17,2001through May 6,2002, Chevronpurchased approximately78 million barrels of crude oil from Iraq pursuant to