WHEN Iraq invaded Kuwait in 1990, strict embargoes were imposed on Saddam Hussein's regime. In 1996, to try to alleviate the impact of sanctions on ordinary Iraqis, the UN Security Council allowed Iraq to sell oil and use the money for food, medicine and other goods.
Baghdad drew up its own contracts, which left the £34.7bn oil-for-food programme open to abuse.
Saddam's government manipulated the programme and between 1991 and 2003 took more than £11.5bn in kickbacks.
The Weir Group admitted in July to £4.3m worth of irregular payments amounting to an 11.5% mark-up on contracts worth £36.5m.
It is still unable to account for the money, which is suspected of having lined the pockets of go-betweens and may have ended up in the hands of Saddam Hussein.
Disciplinary action was taken against a number of Weir Group executives and the firm's agent in Dubai was dismissed earlier this year.
At a hearing in the US Senate yesterday, Weir's alleged involvement was outlined by Steven Groves, counsel to the sub-committee on investigations on the UN oil-for-food programme. The Weir Group, according to Mr Groves, was involved in 15 so-called kickback contracts.
To illustrate how Weir's contracts were approved when they were regularly priced 30% or 40% higher than the cost of the goods, Mr Groves gave step-by-step details of one contract.
He showed that the transaction for contract number 1030484 involved an initial tender from Weir to Iraq, then a meeting between the firm and the South Oil Company, followed by a revised tender from Weir which inflated the previous tender by 13.17%.
The total price of an initial tender made on August 15, 2001, for an oil project, was just over £1.5m. After the Iraqis received the offer, the Weir representative had to visit Iraq to negotiate the final contract.
According to Mr Groves, at that meeting the kickback was demanded and was agreed to by the Weir representative.
The price of every part was inflated by 10% in a second offer made on September 15, 2001. Because the kickback demanded on the contract was 13%, Mr Groves said Weir manipulated the quantity of the parts so the final revised price was £1.71m.
Iraq agreed to sign the revised contract with Weir for the inflated price on December 8, 2001. The contract was then submitted to the office of UN oil-for-food programme, which approved it.
The goods were then shipped from Scotland to the Iraqi port of Umm Qasr, where they were supposed to be independently inspected. Had they been, then it would have been discovered that the quantities in the bill of lading did not match those shipped.
Nevertheless, the shipment was issued with a certificate of authentication after which the French bank BNP Parisbas wired the payment for the contract to Weir in Glasgow.
Mr Groves said Weir then paid the inflated amount back to Iraq by paying the kickback into an account in the name of Corsin Financial Limited at a bank in Geneva.
He added: "Weir is not the type of company one would normally associate with shady Iraqi middlemen. . . Yet that is what occurred here."
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