Two Houston Men Held in Oil-for-Food Scandal

A U.S. oil trader, a South Korean once accused of bribing U.S. congressmen and two other businessmen were charged Thursday with crimes in which they allegedly made millions of dollars in illegal profits by cutting secret deals with Saddam Hussein through the United Nations oil-for-food program.

David B. Chalmers Jr., 51, and a business associate, Ludmil Dionissiev, 58, a Bulgarian national, were arrested at their homes in Houston shortly before the Justice Department announced its indictments on charges of paying bribes to the Iraqi government. Authorities were seeking the extradition of a third business partner, John Irving of Britain.

Also indicted was South Korean Tongsun Park, who is accused of receiving illegal payments from the Iraqi government for arranging deals between Iraq and U.N. officials. In the 1970s, Park allegedly channeled bribes to Democratic lawmakers in the “Koreagate” scandal.

The businessmen are the latest targets of a wide-ranging investigation by the Justice Department into the program, which was set up in the 1990s to allow Hussein to swap oil for humanitarian goods to help the Iraqi people while the country was under U.N. sanctions.

“We’re going to wring the towel dry,” David N. Kelley, the U.S. attorney for the Southern District of New York, who is overseeing the investigation, told reporters. One Iraqi-American businessman, Samir A. Vincent, pleaded guilty in January and is believed to be cooperating.

Several members of Congress, which is conducting various investigations into the scandal, said the indictments were further proof of the depth of corruption at the U.N.

“These disturbing indictments illustrate a continuing pattern of corruption that we have found in numerous instances involving the United Nations,” said Rep. Henry Hyde (R-Ill.), who is leading one of five congressional inquiries.

Sen. Norman Coleman (R-Minn.) has called on U.N. Secretary-General Kofi Annan to resign. Annan has rejected such demands, blaming the U.S. and Britain for ignoring oil smuggling by Hussein.

Chalmers, owner of Houston-based Bayoil USA, and his associate Dionissiev both denied wrongdoing Thursday. Irving and Park could not be reached.

“We will vigorously dispute the allegations of criminal conduct,” Catherine M. Recker, a lawyer for Chalmers and for Bayoil, said in a statement.

“Mr. Dionissiev intends to plead not guilty because he is not guilty,” said David Howard, Dionissiev’s attorney.

The indictments shed light on the early days of the program, suggesting that high-ranking U.N. officials may have received payments from the Iraqi government for helping set up the program the way Baghdad wanted.

The indictment describes Park and another man, identified as a cooperating witness, as having illegally received millions of dollars from the Iraqi government for setting up a series of meetings in Manhattan in the mid-1990s between a U.N. official and an Iraqi administrator.

According to the indictment, in late 1995 Park told the cooperating witness that he needed $10 million to “take care” of his expenses and his people -- an apparent reference to the U.N. official. At the time, the U.N. was in the final stages of approving details of the oil program.

The witness traveled to Iraq in 1996, where he was given a bag containing $450,000. Later, he was given $1 million in cash. The cooperating witness later gave some of the money to Park, the indictment says.

The South Korean told another witness that he received $1 million on a 1997 trip to Baghdad, which he invested in a Canadian firm owned by the son of a U.N. official, the indictment says. The firm later went bankrupt. None of the U.N. officials are identified in the document.

Park is perhaps best known for his role in the 1977 scandal in which he allegedly acted on behalf of the Korean government to bribe congressmen, several of them from California.

Rep. Richard Hanna, a Democrat from Orange County, pleaded guilty in 1978 to receiving $200,000 from Park. Several other California lawmakers -- Reps. John J. McFall, Edward R. Roybal and Charles H. Wilson -- were disciplined by the House Ethics Committee. Park, who had been indicted, agreed to testify before the committee in exchange for immunity.

A congressional official called Park’s alleged involvement in the current case “breathtaking.” “It’s the same people doing the same business using the same practices,” he said.

After long negotiations with the U.N. on the oil-for-food program, Hussein was awarded the right to determine who could do business with Iraq. He gave favored companies and individuals coupons that allowed them to buy oil. The revenue was then put in an account for the purchase of humanitarian goods. Hussein also chose which companies supplied those goods.

Chalmers and his associates allegedly funneled millions of dollars in bribes to Iraqi officials in exchange for the right to get the coupons and act as middlemen in oil trades.

Chalmers is the son of David Chalmers, a legendary Texas oilman who once worked with Oscar S. Wyatt Jr., another Texas oil tycoon. Wyatt has not been charged with wrongdoing, although a CIA report listed him and his firm, Coastal Corp., which merged in 2000 with El Paso Corp., as having received 71.8 million barrels of Iraqi oil between 1996 and 2003.

In August 2001, Chalmers and his associates paid about $2.4 million to a firm to carry out a deal to trade 37 million barrels of oil, the indictment says. A month later, they paid $839,000 for a coupon for 2 million barrels of oil. The coupon holder, who was not named, then paid $629,000 to the Iraqi government.

Chalmers and his associates face up to 62 years in prison if convicted. Park faces up to five years.