Oil-for-Food figure gets 2 years
Houston trader schemed to funnel money to Saddam
By DAVID IVANOVICH
March 7, 2008
The Houston Chronicle 
Original Source: http://www.chron.com/disp/story.mpl/headline/biz/5603119.html
NEW YORK — Houston oil trader David B. Chalmers Jr. was sentenced Friday to two years in prison for scheming to funnel kickbacks to Saddam Hussein's regime, in a case where the judge was asked to decide who was more culpable: Chalmers or Houston oil tycoon Oscar Wyatt.
Each pleaded guilty to one count of conspiracy to commit wire fraud.
Each helped undermine the United Nations' Oil-for-Food humanitarian program for Iraq by paying under-the-table surcharges to Baghdad, and each made money off his illicit dealings with Saddam's regime.
But Chalmers, owner of Houston-based BayOil (USA), bought much more Iraqi crude than Wyatt did during the period when the regime was demanding surcharges, according to prosecution documents.
And he has conceded involvement in surcharges totaling more than $9 million, while Wyatt has formally acknow- ledged arranging only $200,000 in illicit payments.
U.S. District Judge Denny Chin made note of that Friday in sentencing Chalmers to two years. Wyatt is serving a one-year sentence that Chin imposed last year.
Chalmers attorney Andrew Weissmann argued that as wrong as David Chalmers' actions were in this case, other differences in the two men's conduct favored his client.
He wasn't close to Saddam Hussein's regime. He was not close to him personally, Weissmann argued, an apparent reference to testimony in Wyatt's trial last fall that in 1995, Saddam called Wyatt a friend of Iraq.
Chin agreed that Wyatt was more blameworthy in some respects — for example, in meeting with Saddam.
Prosecutors have presented no evidence Chalmers ever traveled to Iraq when Americans were forbidden to travel there, while testimony in the Wyatt case suggested several trips during the period.
But at age 54, Chalmers is substantially younger than the 83-year-old Wyatt. And Chin echoed comments he made when he sentenced Wyatt last year, that Wyatt has done many remarkable things in his life. Chin said at the time that he was influenced by the many letters of support he received from Wyatt's admirers.
Chalmers provided information to prosecutors after pleading guilty to the conspiracy charge last August.
But Chin said he wasn't convinced the information was useful.
And though Chalmers got a longer sentence than Wyatt, he still will serve substantially less time than the 37 to 46 months that federal sentencing guidelines had indicated.
Chin said he was taking into account Chalmers' cooperation with prosecutors after making his plea deal, as well as recognizing the strain the oilman's imprisonment would have on his family.
At Chalmers' request, Chin said he will ask the federal Bureau of Prisons to assign Chalmers to a federal facility in Beaumont, where Wyatt is serving his time.
Chalmers is scheduled to report to prison by April 30.
His company also will forfeit more than $9 million, while Wyatt — who was accused of paying millions in surcharges but in his plea agreement admitted only to orchestrating a $200,000 payment — agreed to hand over $11 million.
Toll on his personal life
Accompanied in court by his wife and father, an emotional Chalmers recounted the toll his public humiliation and pending incarceration have taken on his family and his professional life. 
I've also essentially lost my business, a business I had built up over many years, including my reputation, which I found was a difficult thing to lose, Chalmers said.
He expressed regret for his crime, saying: I accept responsibility for these actions. I am very sorry.
Prosecutors contend Chalmers helped jump-start Saddam's scheme to regain control of some of Iraqi's oil sales by agreeing to pay millions of dollars in surcharges in late 2000, breaking a psychological barrier that had dissuaded other oil companies from paying the surcharges.
Prosecutors say BayOil funneled more than $9 million in illicit payments to the Iraqi regime through an associate, Italian-Chilean businessman Augusto Giangrandi, and a front company called Italtech.
Food and medicine
The U.N. launched the Oil-for-Food program in 1996 to enable Iraq, which had been economically isolated since Sad- dam's 1990 invasion of Kuwait, to purchase needed food and medicine. Iraq was permitted to resume exporting crude, but the proceeds from the oil sales were to be kept beyond the reach of the regime in Baghdad. 
In the fall of 2000, after Saddam ordered his oil ministry to find a way to seize some of the oil proceeds, Iraq's State Oil Marketing Organization notified buyers of Iraqi crude that they would have to pay under-the-table surcharges.
In November 2000, BayOil had chartered a tanker that was docked in Iraq. And the Iraqis would not allow the vessel to leave until surcharge payments were arranged.
Giangrandi negotiated a deal to get the tanker loaded and under way and landed another contract in which the Iraqis awarded Italtech 25 million barrels of oil in exchange for an agreement to pay the surcharges.
BayOil didn't follow through on that agreement right away.
And in March 2001, Giangrandi met with Iraqi Oil Minister Amer Rashid in Baghdad and was warned not to leave Baghdad before arranging for payment of the surcharges, according to a special U.N. investigation led by one-time Federal Reserve Chairman Paul Volcker.
Giangrandi wrote out 17 personal checks to oil ministry officials to be deposited in a bank account in the United Arab Emirates secretly controlled by Iraq, but later tried to stop payment on the checks.
Eventually, BayOil funneled more than $9 million to Giangrandi and Italtech, which was then turned over to the Iraqis, prosecutors say.
Chalmers told Chin that he acquiesced to Giangrandi's request to pay the surcharges out of concern for him and his family.