Chevron to pay $30 million to settle Iraq oil-for-food charges

Chevron Corp. has agreed to pay $30 million in the largest of five settlements in the government’s investigation of illegal kickbacks made to Iraq in the U.N.’s oil-for-food program.

The Securities and Exchange Commission on Wednesday said Chevron settled charges brought under the Foreign Corrupt Practices Act without admitting or denying allegations that kickbacks were made as part of oil purchases in 2001 and 2002. But the U.S. attorney for the southern district of New York said the nation’s second-largest oil company still could be prosecuted for criminal tax violations.

Chevron agreed to give up $25 million in profit and pay a $3-million civil penalty. The company also will pay the Treasury Department’s Office of Foreign Asset Controls $2 million.

Four other companies have agreed to settle SEC corruption charges stemming from alleged kickbacks to Saddam Hussein’s regime: El Paso Corp. ($7.7 million), Textron Inc. ($4.6 million), Ingersoll-Rand Co. ($6.7 million) and York International Corp. ($22 million).

The SEC said in its complaint that Chevron found out in 2001 that Iraq’s State Oil Marketing Organization was demanding surcharges, and that the San Ramon, Calif.-based company adopted a policy prohibiting payment.

The company then purchased, through intermediaries, about 78 million barrels of crude oil from Iraq under 36 contracts between April 2001 and May 2002. But these traders failed to follow the company’s prohibition against kickbacks, and Chevron’s management did not ensure compliance, the SEC said.

One person whose company occasionally sold oil to Chevron said Chevron’s trader and his bosses always knew about the illegal surcharge demands by Iraq. The Chevron trader asked the seller to persuade Iraq to reduce the amount of its surcharges, according to the SEC complaint.

“There are no allegations that Chevron paid surcharges and the trader is no longer affiliated with Chevron,” company spokesman Donald Campbell said in a prepared statement.

The oil-for-food program, which ran from 1996 to 2003, was created to help Iraqis cope with U.N. sanctions imposed after Hussein’s 1990 invasion of Kuwait. It let the Iraqi government sell oil primarily to buy humanitarian goods.

It was later found that the program was often used as a means to funnel kickbacks.

Chevron will satisfy its $25-million profit obligation by forfeiting $20 million under an agreement with the U.S. attorney’s office for the southern district of New York and paying $5 million under an agreement with the Manhattan district attorney’s office.

Shares of Chevron fell 10 cents to $86.15.