El Paso to pay fine to settle Iraq allegations

El Paso, the largest American natural gas pipeline operator, agreed to pay the US government $ 7.73 mm to settle allegations that it was involved in illegal payments under the United Nations-run oil-for-food program in Iraq. The company, based in Houston, will forfeit $ 5.48 mm under a settlement with US prosecutors in New York.
Michael Garcia, the US attorney for the Southern District, said the sum represented the amount of secret surcharges paid to Saddam Hussein's government by third parties from whom El Paso bought oil between mid-2000 and March 2003.

A civil penalty of $ 2.25 mm was simultaneously announced in Washington by the US Securities and Exchange Commission, which said that El Paso bought about 21.4 mm barrels of Iraqi crude oil from third parties participating in the program.
In a statement, Garcia said that his office would seek to transfer the $ 5.5 mm to the Development Fund for Iraq as restitution for the benefit of the people of Iraq. The $ 64 bn oil-for- food program was set up by the Security Council to help ease the effects of United Nations sanctions on 27 mm Iraqis by supplying food and medicines in exchange for letting Saddam's government export oil supplies.

Saddam steered the program to gain political advantage with countries in a position to cut back the sanctions, according to an exhaustive inquiry into the program conducted by Paul Volcker, the former Federal Reserve chairman.
Volcker also concluded that Saddam skimmed at least $ 1.8 bn in illicit profits for himself. Volcker estimated at the conclusion of his investigation in October 2005 that more than 4,500 companies participated in the program and that more than half of them paid kickbacks.

Garcia said his office had decided not to prosecute El Paso because the company had voluntarily ceased participating in the oil-for-food program in mid-2002 out of concern for possible illegalities, had given full cooperation to the various oil-for-food investigations, had pledged continuing cooperation and had confirmed that culpable employees were no longer working for the company.
An El Paso spokesman, Richard Wheatley, said that the company had not directly purchased oil from Iraq but had worked through third parties and had put in place procedures to eliminate surcharges, although they proved to be inadequate.