Financial Times April 13, 2004 Money questions surround former UN weapons inspector's film: Arms expert's documentary was backed by financier who profited from the controversial oil-for-food programme for Iraq By Lionel Barber, Claudio Gatti and Mark Turner New York
Scott Ritter, formerly the top United Nations weapons inspector in Iraq, has long argued that claims that Saddam Hussein possessed biological, chemical and nuclear weapons programmes were massively exaggerated. His public campaign against the US-led invasion of Iraq made him a hate figure of the American right, which still demonises him as an apologist for the ousted Baghdad regime. Now, at the very moment when the absence of weapons of mass destruction in post-Saddam Iraq should make Mr Ritter feel vindicated, he faces new questions about his relationship with Baghdad after he quit his UN job in 1998. Mr Ritter has admitted accepting Dollars 400,000 from Shakir al-Khafaji, an Iraqi-born Detroit businessman, in order to finance a documentary film titled In Shifting Sands. The film's principal theme - highly controversial when it was released in 2001 - was that UN weapons inspectors had "defanged" Iraq. Today, an investigation by the Financial Times and Italian daily business newspaper Il Sole 24 Ore reveals that Mr Khafaji belonged to a select group to whom the Baghdad regime awarded "allocations" for millions of barrels of oil under the UN oil-for-food programme between 1995 and 2002. These allocations were then sold on to international traders for profit. The oil-for-food programme was set up in such a way that beneficiaries' names were not recorded by the UN. This allowed them to claim they had not received money from the Iraqi government. Mr Ritter insists he never received any money from the Iraqi government. "I would never take any money from anyone that was derived from any business relationship with the Iraqi government, whether a legal business relationship or an illegal business relationship," he added. There is no evidence Mr Ritter did receive any money from oil allocations. Mr Khafaji told the FT/Il Sole that he never mentioned the allocations to Mr Ritter. But, by his own admission, Mr Khafaji or his family did profit from the sale of oil allocations awarded at the same time that he was financing Mr Ritter's film. Without Mr Khafaji's money Mr Ritter's film would never have been made. Mr Khafaji told the FT/Il Sole that he sold allocations to Augusto Giangrandi, the head of an Italian company called Italtech. Italtech resold the oil to a Houston oil trading company called Bayoil, or its subsidiaries. Bayoil "lifted" - that is to say, collected from Iraqi oil terminals - almost 30m barrels from Italtech in only three months in 2001. The relationship between the two companies was the subject of an Il Sole/FT investigation published last week. The article also documented the ties between the owners of Italtech and Bayoil, and Carlos Cardoen, a renowned Chilean arms dealer who was involved in arms trafficking to Iraq in the 1980s. A copy of a fax from Italtech files, dated November 4 2000, shows that David Chalmers, the owner of Bayoil, entered into communication with "Mr Shakir" over fees related to the oil allocations. "As per my conversation with Augusto, you may indicate to your associates in Jordan we have an interest to purchase their allocations as follows: 1 million barrels Kirkuk destination Europe; 2 million barrels Basrah light destination US; 500,000 barrels Basrah light destination US," it reads. "We would indicate a premium of Dollars 0.26 per barrel for Kirkuk and Dollars 0.30 per barrel for Basrah light. Payment: Dollars 0.15 per barrel against nomination of vessel and date accepted by Somo (Iraq's state oil marketing organisation). Balance net 10 days after lifting." The deal would have earned Dollars 1.1m. Shakir al-Khafaji was a ruthless negotiator who aggressively pursued his pay ments when the company fell behind, according to Italtech executives. The Italians say that one day he arrived unannounced at Mr Giangrandi's office in Abu Dhabi, accompanied by bodyguards. "It was a surprise visit: he wanted his commission. It was, let's say, unusual," says Mr Giangrandi. Another Italtech executive adds: "He knocked at the door with two tough guys. Augusto was terrified and arranged for Shakir to be paid in Geneva." Mr Khafaji acknowledges that he had problems with the payment of the commission and that he went to Abu Dhabi, but says he went there alone. A copy of an Italtech accounting document shows that on November 17 2000, Bayoil transferred Dollars 1m to Italtech's Geneva account. On the same day, it records Italtech made a "payment" of the same amount; a note, hand-written by an Italtech executive, identifies the recipient as "Shaker Al Khafagi". The original docu ment is in the hands of the Italian authorities. Mr Khafaji says he worked alone when he sold the allocations and that he was selling them on behalf of his family. He also now says he did not have any associates in Jordan. But Mr Giangrandi says that Mr Khafaji introduced himself as Mr Ritter's "partner" and that he was "representing his allocations". Mr Giangrandi says he never met Mr Ritter. A copy of a handwritten fax dated July 10 2000, the same month that Mr Khafaji began funding Mr Ritter's film, shows Mr Giangrandi passing on Mr Khafaji's contact details to Mr Chalmers. The note says: "Dear David. This is the partner of S. R. with whom I am negotiating now the 5M B-L. He is a very influential person here, and we can do many things in the future with him. Regards, A. G." Mr Giangrandi confirmed that "S. R." referred to Mr Ritter. Mr Ritter insists he was never offered any allocations by the Iraqi government. But he does relate an incident when an Iraqi official from the UN mission in New York said he might be able to get funding for his film by "sending an oil contract through a French oil company". Mr Ritter says he "terminated the conversation at this point". Mr Ritter was having trouble finding a backer for his documentary until he met Mr Khafaji at a congressional hearing. Mr Ritter says it was agreed there would be no quid pro quo for the production. He says he told Mr Khafaji: "If you are willing to underwrite this film, the money can have no connection to the Iraqi government" and he agreed. Last January, a list of alleged beneficiaries of Iraqi oil allocations began to circulate widely, and Mr Khafaji's name was on it. He was one of only two US nationals mentioned. "I called him and asked him," says Mr Ritter. "He said he had never received any money. He said it's all BS. He said he doesn't know why his name is on there." "I choose to believe (him) over anyone else ... Until someone demonstrates this man has done something wrong, he is a hero in my book." Asked how he would characterise anyone suggesting that Mr Khafaji was offering allocations in his name, Mr Ritter replied: "I'd say that person's a fucking liar. Quote unquote. And tell him to come over here so I can kick his ass." "The concept of Khafaji running around saying that allocations belonged to me: that is bullshit. How could Shakir even say that?" However, he added: "If he received allocations in November 2000, I would be very upset. I would be extremely upset." Reporting by Mark Turner, Claudio Gatti and Lionel Barber in New York Claudio Gatti is a New York-based reporter with Il Sole 24 Ore, Italy's leading business daily
