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FCPA Blog Daily News

Entries in Coastal Corporation (1)

Monday
Oct012007

Oscar Wyatt, Founder Of Coastal Corporation, Pleads Guilty To Iraq Bribes

Guilty Plea Follows El Paso's Settlement of FCPA Violations Earlier This Year

Oscar Wyatt Jr., 83, pleaded guilty on October 1, 2007 to one count of conspiracy to commit wire fraud in connection with the U.N. oil-for-food program. The U.S. Government accused him of paying millions in illegal surcharges directly to Iraqi officials in return for oil allocations from 2000 to 2002. He faces 18 to 24 months in prison under a plea agreement and will forfeit $11 million. He founded and ran Coastal Corporation, which he sold to El Paso Corporation in 2001.

In February this year, El Paso settled violations of the U.S. Foreign Corrupt Practices Act related to illegal surcharges it paid to Iraqi officials under the oil-for-food program. It disgorged $5,482,363 in profits and paid a civil penalty of $2,250,000. It also entered into a non-prosecution agreement with the U.S. Attorney’s Office for the Southern District of New York and cooperated in providing evidence relating to Wyatt's role. Violations under the anti-bribery provisions of the FCPA carry potential prison sentences of 5 years, while under the oil-for-food program, which ran from 1996 to 2003, Wyatt could have faced 20 years for his role.

The Securities and Exchange Commission's February 7, 2007 litigation release said, “El Paso failed to maintain an adequate system of internal controls to detect and prevent the illegal payments. Although El Paso inserted a provision in some contracts requiring the third party to represent that it had not paid surcharges, El Paso failed to conduct due diligence to ensure that surcharges were not paid. Recorded conversations reveal El Paso’s knowledge that the provision was entirely ineffective. In one conversation, a third party that indicated he was willing to pay illegal surcharges to Iraq indicated that he would be equally willing to sign a false certification denying the payment. El Paso’s accounting for its Oil for Food transactions failed properly to record the nature of the company’s payments. In at least fifteen transactions, a portion of the company’s price for oil constituted kickbacks to Iraq. The company failed to so designate those payments, characterizing them instead simply as part of the cost of goods sold.”

During Wyatt's trial, which ended mid-way with his guilty plea, prosecutors played tapes for the jury of conversations between him and Saddam Hussein.

El Paso Corporation trades on the New York Stock Exchange under the symbol EP.

View the SEC's Litigation Release No. 19991 / February 7, 2007 Here.

View the SEC's Complaint Against El Paso Corporation Here.

View the DOJ's 2005 Press Release About Wyatt's Indictment Here.