April 15, 2005
Low-Profile Texas Oilman Draws Spotlight for Iraqi Deals
By SIMON ROMERO 

HOUSTON, April 14 - Many people here were wondering who David Bay Chalmers Jr. was after the police arrested him on Thursday at his home in the exclusive River Oaks area on charges of directing kickbacks to the Iraqi government in exchange for access to lucrative oil contracts.
Since shifting the base of his oil-trading company, Bayoil U.S.A. Inc., here from Connecticut in the early 1990's, Mr. Chalmers, 51, has maintained a low profile in a city and in a business renowned for their swagger. Bayoil quietly developed a reputation for its expertise in acquiring oil from Iraq despite the difficulties of operating in that country.
Mr. Chalmers's success in Iraq's oil industry, though unusual for an American businessman, fits in with long history of doing business in the country. Mr. Chalmers was a broker for Iraqi oil as far back as the late 1980's, when Iraq was emerging from its eight-year war with Iran, and at one time promoted a $3 billion petrochemical complex in Iraq, which was never built.
Oil traders took note of Mr. Chalmers's connections with Baghdad in 1996 when Bayoil, as well as a company controlled by another Houston energy investor, Oscar S. Wyatt Jr., chartered some of the first ships allowed to transport Iraqi oil under the United Nations oil-for-food program relief program. Otherwise, Bayoil, owned entirely by Mr. Chalmers, remained virtually unknown.
It's of little surprise that we're learning about these guys now, said Prof. Michael J. Economides, an authority on the energy industry at the University of Houston. Oil trading is a deliberately murky world. It's no wonder the traders are based in places like the Netherlands Antilles, the Cayman Islands, the Bahamas and, yes, here in Houston.
Bayoil's modest offices in downtown Houston are on the second floor of the historic Rice Hotel building, a short stroll from the federal courthouse where Magistrate Judge Calvin Botley set bail at $500,000 for Mr. Chalmers. 
Frank Spagnoletti, Mr. Chalmers's lawyer in Houston, said Mr. Chalmers would plead not guilty. Referring to the Justice Department, Mr. Spagnoletti said, Their case appears to be vague.
But David N. Kelley, the United States attorney in Manhattan, where the indictment was unsealed, said, I don't think there's much of Bayoil left after this indictment. 
In addition to the charges against Mr. Chalmers and Bayoil U.S.A., the indictment asserts that he also owns an offshore company, Bayoil Supply and Trading Ltd. in the Bahamas, that was used in the transactions under scrutiny.
Mr. Chalmers's family has a long history in the international oil business. His great-uncle Charles Ulrick Bay founded Bay Petroleum in the 1930's before becoming a high-ranking intelligence official in the Office of Strategic Services and later a ambassador to Norway, Forbes reported in 1995. Mr. Chalmers's father, David Bay Chalmers Sr., became a well-known oil trader through the creation of another company, Coral Petroleum, which ultimately filed for bankruptcy protection in 1983.
More recently, Mr. Chalmers and Mr. Wyatt, whose own business experience in Iraq stretches back to the 1970's, teamed up in January to buy a small oil refinery in Lake Charles, La., for $9 million that produces jet fuel and asphalt. Refining experts said the facility had little value, perhaps other than to show access to refining capacity on paper in order to acquire oil cargoes from Nigeria, which sometimes requires such proof.