CORRECTED-CEO denies knowing Total bought illegal oil in UN scandal

Tue Feb 5, 2013 3:31pm EST

(In sixth paragraph, corrects figure to $228.8 million, instead of "billion")

* Total head says didn't know about illegal allocation system

* Vitol in spotlight, accused of corrupting foreign agents

By Chine Labbé and Alexandria Sage

PARIS, Feb 5 (Reuters) - The chief executive of Total told a French court on Tuesday he had no knowledge that the French oil giant was buying illegally procured oil during the United Nations oil-for-food programme over a decade ago.

CEO Christophe de Margerie - who before taking the top post at Total headed its Middle East operations and its exploration and production unit - is accused of complicity in the misuse of corporate assets. He risks up to five years imprisonment and a fine of 375,000 euros ($499,300).

De Margerie, 61, is one of 18 individual defendants, along with Total and Swiss top oil trader Vitol, to face French criminal charges in the far-ranging corruption scandal.

"I have a great memory," de Margerie calmly told the three magistrates in the Paris criminal court. "I dispute this completely, I'm ready to state it yet again."

The 1996-2003 oil-for-food programme, which was intended to allow Iraq to buy humanitarian goods through U.N.-controlled sales of oil despite international economic sanctions, was undermined by kickbacks and influence peddling, according to an independent inquiry led by former U.S. Federal Reserve head Paul Volcker.

Some 139 companies that bought oil from Baghdad paid illegal surcharges or kickbacks that reaped $228.8 million for the Iraqi government between 2000-2002, according to the report. French companies were the top buyers after Russia.

Baghdad also allocated oil to influential individuals it believed could lobby on its behalf to reduce sanctions.

The non-transparent system relied on little-known companies as intermediaries that entered into contracts with Iraq or political beneficiaries who held oil allocations and subsequently sold oil to traders or oil companies, it found.

Prosecutors accuse de Margerie of introducing a Lebanese attorney with connections to the Iraqi government and to its oil, Elias Firzli, to Total's trading unit.

They say de Margerie could not have ignored the fact that Firzli was selling his illegal allocations of oil in violation of the oil-for-food programme's rules.

While de Margerie did not deny having introduced Firzli, now deceased, to Total, he told the court he knew nothing about Baghdad's system of oil allocations to influential individuals.

"I must be an idiot, but I didn't know the word 'allocations,'" de Margerie said, adding that Firzli never told him he was the recipient of such illegal supplies of oil.

De Margerie was placed under formal investigation in his role in the oil-for-food scandal in October 2006, just four months before being appointed to the top post at Total, now France's second-largest company by market capitalization.

VITOL IN SPOTLIGHT

Total, which faces up to a 1.88 million euro ($2.55 million)fine, has denied corruption and influence-peddling allegations.

The case also comes at an awkward time for Vitol, which has recently made headlines for dealing in Iranian fuel oil .

While Vitol's Iran deal was not illegal since it was executed by a trading branch outside the jurisdiction of European sanctions, it raised scrutiny of the traditionally secretive company and its British CEO, Ian Taylor.

In the Iraq-related case, Vitol is accused of corrupting foreign public agents between 2000-2003 and faces a fine of 750,000 euros ($1.02 million).

Two weeks ago, a judge overruled a constitutional challenge brought by Vitol's attorney, who had argued the company could not be judged in France as it had already been convicted of oil-for-food offences in a New York court.

According to the investigation, Vitol paid about $582,000 to Serge Boidevaix, a French ex-diplomat and former Total executive, to presumably procure oil allocations from Iraq.

The investigation found that Taylor asked that payments for the oil be made through an intermediary named Peakville which prosecutors say was intended for "discreet payments."

Vitol declined further comment on the case.

The trial is scheduled to run until Feb. 20. ($1 = 0.7376 euros) (Writing By Alexandria Sage; Editing by Leslie Adler)