The indictment of Houston oil executive David Chalmers Jr. and a Houston-based Bulgarian oil trader serves notice that the probe of irregularities in the U.N.-supervised oil-for-food program will likely ensnare more energy industry figures before it is finished.
The program was intended as a humanitarian way to provide food and medical supplies to an embargoed Iraq during the last years of Saddam Hussein's regime. But Iraqi officials manipulated the now-defunct program to circumvent its stated purposes. As a result, Saddam and his cronies received billions to pay for luxurious living and extreme repression, while Iraqi children did without the food and medicine and schooling that money would have provided.
Revelations that the son of U.N. Secretary-General Kofi Annan was employed by a Swiss firm contracted to supervise the program led to calls for Annan's resignation. Annan refused.
Chalmers and fellow oil trader Ludmil Dionissiev were arrested at their Houston homes Thursday. A third defendant, John Irving, resides in England. The kickbacks that are the subject of the federal indictments allegedly occurred from 2000 to 2003.
Chalmers is a business associate of Coastal Corp. founder Oscar Wyatt. Both were linked previously to the oil-for-food probe. Coastal Corp. and BayOil were both mentioned in a CIA report on purchases of Iraqi oil. Neither company nor their officials were accused of wrongdoing.
Chalmers and Wyatt teamed up to form Pelican Refining, which stunned local energy analysts three months ago when it purchased a bankrupt and inactive asphalt refinery at Lake Charles, La., for $9 million. The Wyatt-Chalmers connection also goes back a generation. Chalmer's father and Wyatt both pleaded guilty in 1980 to a misdemeanor charge of manipulating oil prices and agreed to pay $40,000 fines. A Coastal spokesman later told the Chronicle the charges were found to be unconstitutional.
Wyatt also has a long and well-publicized history of dealing with the Hussein regime, the most famous incident occurring when he and the late former Texas Gov. John Connally flew to Iraq to help negotiate the release of American hostages on the eve of the first Gulf War.
The federal grand jury in New York that indicted Chalmers and two BayOil employees probably won't stop there. In a city that has been rocked by the Enron collapse and subsequent prosecutions, it would seem there are yet more energy executives who have reason to be nervous.
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