US authorities said they would request the arrest and extradition of John Irving, the London-based trader, to face charges of fraud and trading with a state sponsor of terrorism. If convicted he faces a jail sentence of up to 60 years and a fine of £530,000.

Mr Irving was indicted with David Chalmers, owner of the Houston-based Bayoil, and a US-based Bulgarian oil trader named Ludmil Dionissiev, of channelling the money through an unnamed foreign firm to a front company for the Saddam regime. Mr Chalmers and Mr Dionissiev were arrested yesterday in Houston. Representatives for the men said that they would plead not guilty.

“By participating in this surcharge scheme and bypassing the Oil-for-Food programme, David Chalmers Jr, John Irving and Ludmil Dionissiev, and the Bayoil companies diverted funds from the Oil-for-Food bank account that otherwise would have been available to purchase humanitarian goods under the Oil-for-Food programme,” the indictment said.

Prosecutors also indicted a controversial South Korean lobbyist for allegedly arranging pay-offs for “high-ranking UN officials” in the mid-1990s to ensure that the Oil-for-Food system was favourable to Iraq from the outset. The charge sheet alleged that Tongsun Park held meetings with two high-ranking UN officials on Iraq’s behalf and invested about $1million (about $530,000) he got from Iraq “in a Canadian company established by the son of a UN official”.

Prosecutors said Iraq agreed to pay millions of dollars into two bank accounts in London and the Channel Islands and also delivered more than $2.55million in cash to the Iraqi mission in New York in its diplomatic pouch.

The charges are the latest salvo in a wideranging criminal investigation into the Oil-for-Food scandal by federal prosecutors in New York, which is running in tandem with the UN’s own independent investigation, and inquiries by several congressional committees.

“It’s a broad investigation and we are going forward actively and aggressively,” David Kelley, the attorney for the Southern District of New York, told reporters.

The Oil-for-Food programme allowed Iraq, while under UN sanctions, to export about $64 billion of oil under UN supervision in order to buy imports of humanitarian supplies. But the system was manipulated by Saddam’s regime.

According to the indictment, Mr Irving worked with Mr Chalmers, the Texas oilman, to buy Iraqi oil for the Bayoil companies. Mr Irving is married and a father of two. The first Briton to be indicted in the Oil-for-Food scandal, he said last night from his home in the village of Sherborne St John near Basingstone, Hampshire: “I cannot say anything about this, but it has come as a very great shock to me.”

British police were surprised to learn that US authorities were seeking his extradition without first asking for him to be detained. One senior source said: “You would think if they were going to unseal documents regarding a figure they wish to extradite from the UK, then they might wish to inform the authorities here first before going public with the name.”

Court papers say the defendants bought Iraqi oil from people who were given “oil allocations” by the Iraqi Government. Other investigations have shown that such allocations were given to politicians and prominent personalities.

The charges, however, focused on the period after the middle of 2000 when Iraq began demanding “illegal surcharges”, or bribes, from companies buying Iraqi crude. “The defendants agreed to pay, did pay, and caused to be paid millions of dollars in secret illegal surchages to the Government of Iraq,” the indictment said. Prosecutors said Bayoil had handled at least $100 million of Iraqi crude under the programme.

SCANDAL-HIT PROGRAMME

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