Chevron to pay $30 million to settle Iraq bribe charges

Nov. 15, 2007
Chevron agreed to pay $30 million to settle charges that it violated the FCPA by allowing kickbacks to be paid to the Iraqi government during 2001-02, the US SEC said on Nov. 14.

Nick Snow
Washington Editor

WASHINGTON, DC, Nov. 15 -- Chevron Corp. agreed to pay $30 million to settle charges that it violated the Foreign Corrupt Practices Act by allowing kickbacks to be paid to the Iraqi government during 2001-02, the US Securities and Exchange Commission said on Nov. 14.

The payments allegedly occurred in connection with 78 million bbl of oil purchased under the United Nations' Oil-for-Food program from Apr.17, 2001, through May 6, 2002. The charges were the fifth action by the agency against a company for allegedly paying kickbacks under the program, which was in effect during 1996-2003 to help Iraqis cope with sanctions imposed after Saddam Hussein's 1990 invasion of Kuwait.

"Despite all cargoes purchased by Chevron having all appropriate US government and United Nations approvals, the settlement recognizes that certain third-party merchants from which Chevron purchased Iraqi crude oil paid illegal surcharges to the government of Iraq," Chevron said in a Nov. 14 statement.

SEC said in its complaint that third parties under contract to Chevron paid about $20 million directly to Iraqi-controlled bank accounts in Jordan and Lebanon, bypassing the Oil-for-Food escrow account. It said Chevron knew, or should have known, that third parties were using parts of the premiums they received from the company's oil purchases to pay illegal surcharges to Iraq.

Chevron learned of surcharge demands by Iraq's State Oil Marketing Organization in January 2001 and adopted a company-wide policy prohibiting such payments, according to the complaint filed in US District Court for the Southern District of New York. The policy required traders to obtain prior written approval for proposed Iraqi oil purchases and charged management with reviewing each proposed Iraqi oil deal.

The company said it previously ceased purchases under the Oil-for-Food program in 2000 when rumors surfaced that third-party suppliers were paying illegal surcharges. "From the very beginning, Chevron intended to comply fully with the trade sanctions then in force against Iraq and with the requirements of the Oil-for-Food program," Chevron said.

It said the US government advised the company that one former Chevron crude trader participated in transactions where he knew or should have known that surcharges were to be paid by the third party merchants from which Chevron bought the crude. "There are no allegations that Chevron paid surcharges, and the trader is no longer affiliated with Chevron," the company said in its statement.

SEC, however, alleged that Chevron failed to devise and maintain a system of internal accounting controls to detect and prevent such illicit payments. The company's accounting for its Oil-for-Food transactions failed to properly record the true nature of its payments to third parties, SEC said.

Chevron, which cooperated in this investigation, neither admitted nor denied the charges in the settlement. Other investigations of the Oil-for-Food program are continuing, according to SEC.

Contact Nick Snow at [email protected].