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April 14, 2005, 6:52PM
2 Houston businessmen arrested
in U.N. oil-for-food scandal By DAVID IVANOVICH
Copyright 2005 Houston Chronicle RESOURCES AP U.S. Attorney David N. Kelley announces arrests in the U.N. oil-for-food scandal. • U.S. attorney's statement: News release on indictment of David Chalmers Jr. and others in U.N. oil-for-food scandal.
• The indictment: Accusations of kickbacks and fraud.
• More accusations: U.S. attorney's statement on Tongsun Park.
• Complaint against Park: Accused of helping Iraq. Documents require the Adobe Acrobat reader A New York grand jury has accused two Houston oilmen of paying illegal kickbacks to Saddam Hussein's regime when buying Iraqi crude under the United Nations' oil-for-food program. Federal agents arrested David B. Chalmers Jr., head of Houston-based Bayoil USA, and Bulgarian-born businesss associate Ludmil Dionissiev at their homes in Houston today, said David Kelley, the U.S. attorney for the Southern District of New York. Another Bayoil business associate, British citizen John Irving, was also indicted, and prosecutors said they will seek his extradition to the United States. Chalmers and Dionissiev appeared before Magistrate Judge Calvin Botley in chains this afternoon where details of their bonds were set. Chalmers was expected to be released either late today or early Friday after depositing a $150,000 check to secure his $500,000 bond. In court Dionissiev said he was only able to raise $50,000 in cash to secure his bond, meaning he would likely stay in custody. Neither men entered pleas before the court but outside the courthouse Chalmers' attorney, Francis Spagnoletti, said his client denies the charges and looks forward to contesting them in New York on Monday, where he and Dionissiev are scheduled to appear. Bayoil's accused of paying millions of dollars in secret surcharges to Saddam's regime in order to acquire Iraqi oil. Prosecutors say the secret payments were not made to the U.N. bank account from which food and medical supplies could be purchased for the people of Iraq. While the United Nations was overseeing the oil-for-food program and was supposed to be controlling the proceeds, Saddam's regime was allowed to chose who would purchase the oil. The buyers would then resell the crude to oil companies or traders. Saddam's regime required the recipients of its oil to pay kickbacks into secret bank accounts controlled by Baghdad. The recipients of the crude would then pass along the cost of those kickbacks to their customers. Prosecutors say from 2001 until just before the start of the war in Iraq in March 2003, Chalmers and his associates at Bayoil "paid inflated commissions to allocation-holders or oil-industry brokers — with the knowledge and understanding that some portion of these commission payments would be used to satisfy the allocation-holders' kickback obligations to the government of Iraq." The indictment also alleges that, in order to hide the cost of the illegal kickbacks, the defendants conspired with Iraqi officials to reduce the selling price of Iraqi oil. If convicted on all charges, Chalmers, Dionissiev and Irving could each face a maximum 62 years in prison. The government also hopes to force the defendants to forefeit at least $100 million worth of assets. A criminal complaint also unsealed today charged Tongsun Park, a South Korean citizen, with conspiracy to act in the United States as an unregistered government agent for the Iraqi government's effort to create the oil-for-food program. Prosecutors announced the indictments on the 10th anniversary of the U.N. Security Council vote that created the oil-for-food program. Findings of an independent investigation into the program - expected in midsummer - will likely lead to dozens of criminal prosecutions by legal authorities in various countries for bribery, sanctions busting, money laundering and fraud, officials told The Associated Press last month. On Jan. 18, an Iraqi-born American businessman accused of skimming money from the program pleaded guilty in New York to being an illegal agent of Saddam's government. Samir A. Vincent, 64, a naturalized U.S. citizen from Annandale, Va., was the first person to be charged in the Justice Department's investigation. Among those who have come under fire over the handling of the program is U.N. Secretary General Kofi Annan. Investigators last month criticized Annan for not pressing to learn details of his son Kojo's employment by a Swiss company that won a contract under the oil-for-food program. Chronicle reporter Tom Fowler and the Associated Press contributed to this story. ADVERTISEMENT Return to top
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Two Houston residents were arrested at their homes today as a Federal indictment was unsealed in U.S. District Court in Manhattan.

David Chalmers Jr, a Houston oilman, and a Bulgarian citizen, Ludmil Dionissiev, a permanent U.S. resident, were taken into custody. A third man, John Irving, was also indicted. He is a British citizen whom prosecutors hope to extradite to the U.S.

U.S. Attorney David N. Kelley announced that most charges focus on Chalmers. At a New York news conference, authorities accused the men of plotting to pay secret kickbacks so Chalmers’ oil companies could sell oil under cover of the Iraqi oil-for-food program.

The funds were intended for humanitarian relief, not oil revenues.

The three men face a maximum of 62 years in prison and fines totaling $1 million (US) if convicted. Additionally, the court could force them to make restitution. 

The indictment says the government seeks forfeiture of at least $100 million (US) in assets from the three.

The same news story said an indictment on another case was unsealed in that court today. Tongsun Park, a South Korean, was charged with conspiracy to act as an unregistered government agent for Iraq in the United States to create the oil-for-food program.

Lawyers for the defendants were not immediately available.

The oil-for-food program began in December 1996 as a humanitarian effort to support the people of Iraq, and ended after the US-led invasion in 2003. Many scandals and kickbacks are documented and criminal prosecutions for bribery, sanctions busting, money laundering and fraud are expected to lead to dozens of arrests in many countries. Reporters were told that it is likely that the enforcement actions will occur in mid-summer, 2005.