El Paso Corp. has agreed to pay about $7.7 million to settle Securities and Exchange Commission charges stemming from the United Nations Oil for Food Program in Iraq.
The SEC, which first requested related documents from El Paso in December 2004, filed charges against the energy company under the Foreign Corrupt Practices Act. According to the commission, El Paso violated books and records and internal controls provisions when indirectly paid nearly $5.5 million in illegal surcharges.
Specifically, alleged the commission, between June 2001 and June 2002 El Paso purchased 21.4 million barrels of Iraqi crude oil under 15 contracts from third parties who participated in the program. Some 25 to 30 cents per barrel was illegally kicked back to Iraq in the form of a secret oil surcharge, stated the SEC, which also alleged that El Paso knew, or was reckless in not knowing, that illegal surcharges were being applied.
Without admitting or denying the allegations, El Paso agreed to disgorge $5,482,363 in profits, an obligation it will satisfy by forfeiting that sum pursuant to a non-prosecution agreement with the U.S. Attorney’s Office for the Southern District of New York. El Paso will also pay a civil penalty of $2.25 million.
“The Oil for Food kickback scheme in which El Paso participated is especially troubling because it systematically diverted millions of dollars from a humanitarian program intended to alleviate the suffering of the Iraqi people,” said Linda Chatman Thomsen, director of the SEC’s Division of Enforcement, in a statement.
“The books and records and internal controls provisions of the Foreign Corrupt Practices Act are important tools to combat illicit kickback schemes,” added associate director Cheryl Scarboro, in a statement.
The SEC stressed in its announcement that since being approached by the commission’s staff, El Paso has cooperated with the investigation, which continues.