Yemengate

In a tiny Middle Eastern country, government officials have accused Dallas oilman Ray Hunt's company of cheating them out of millions.

Yemen is a meager country, cobbled together from rock and sand on the southern tip of the Arabian peninsula. A sporadically volatile confederation of tribes that predates recorded history, Yemen still is not sure of its exact borders. It is a bit player in the Middle East, a political punk compared to its rich northern neighbor, Saudi Arabia.

Great wealth last graced the area before Christ was born, farther north on the peninsula. When there was still a bustling trade in frankincense and myrrh, the region that is now Yemen had trees producing the fragrant resins.

The rise of the Roman Empire knocked the legs out from under the frankincense trade, when Christians eschewed pagan rituals involving the once-precious incense. For Yemen, centuries of occupation, assassination, civil war, and political unrest ensued. Throughout it all the country has remained mostly poor, not as impoverished as Ethiopia, just across the Red Sea, but worse off than the bulk of the world.

That was supposed to change when Yemen decided to follow the lead of its Middle Eastern neighbors and cash in on the oil and gas that lie under its unforgiving deserts.

In 1981, Yemen awarded the Hunt Oil Company rights to drill for oil in a patch of desert that seemed to hold riches for both the Dallas-based company and the country's government.

Landing the Yemen agreement was a coup for the company headed by Ray Hunt, a son of one of legendary Texas wildcatter H.L. Hunt's three families. The family-owned company was no heavy hitter in the international oil business, yet it won the contract to pump oil into the next century from the deserts around Ma'rib. All it had to do was share the profits with the Yemeni government.

But almost 15 years later, Yemen's people are still relatively poor, and some factions within the country apparently believe that Hunt Oil bears at least a small share of the blame. Hunt's company did indeed find oil, and has been pumping it out for more than a decade.

For almost a year now, newspapers in Yemen and other Arab countries have been publishing stories accusing Hunt Oil of shortchanging the country of millions of dollars. The government, according to the Arab press reports, claims that the company owes $36 million in back taxes that it failed to pay on the salaries of non-Yemenis working for Hunt.

In addition, auditors who have looked at Hunt Oil's books, according to internal Yemeni government records, found that the company has overstated its expenses, allowing Hunt Oil to keep revenue that should have been counted as profits and shared with the country.

Amid the turmoil, the circumstances of Hunt Oil's efforts 15 years ago to win the oil contract are being revisited. Lengthy published stories, based largely on documents uncovered as part of an unsuccessful lawsuit litigated in Texas against the company, are reviving old allegations that Hunt Oil used treachery, bribes, and a mysterious double agent to land the oil contract in the first place.

Hunt Oil's methods of securing the oil agreement are also the subject of a complaint filed with the U.S. Department of Justice by another Dallas company that lost out in a bid for the oil rights. The complaint, which has been pending for more than four years, charges that Hunt Oil violated U.S. laws that prohibit companies from cheating in international trade.

In 1994, one senior Yemeni government official recommended that Hunt Oil be denied an extension when its oil agreement expires in 2005. The minister of petroleum and mineral resources also charged that Hunt Oil is purposely pumping oil out of the field too quickly. The rapid depletion, he said, could damage the oil field and Yemen's long-term prospects of profiting from its own reserves.

The allegations, contained in two government memos written by minister Fayssal Othman ben Shamlan, fueled reports in Arab newspapers that Hunt is falling out of favor with some factions in Yemen. (Shamlan, who has since retired, could not be reached for comment.)

A NovembR>er 1994 column in one Yemeni newspaper alleged that Hunt Oil won its contract through "seductions and presents," and is now "looting" the country's wealth "and transforming it into a mirage."

Al-Wahdawi, a newspaper published in the Yemeni capital of San'a, has called on the government to investigate corruption allegedly involving Hunt Oil. (All newspaper quotes have been translated from Arabic.)

"In spite of the suspicious relationship between those in power in our country with 'Hunt,' the smell of these exposures has become unbearable," the newspaper wrote in July of this year. "The Yemen Government has become intolerant of the Company's (Hunt) disrespectful behavior toward its officials, and its disregard for the agreements, to the extent that the government is looking for legal cause to terminate its agreement with the company before 2005 so as to be finished with these problems."

A London-based journalist with extensive experience covering Yemen cautions that the country's newspapers are notoriously biased, not to mention opportunistic. With a sufficient bribe, an individual or business with an axe to grind can usually place stories in news columns, he says. "It is not untypical of a person to buy editorial space in a paper," he says. "They [Yemeni papers] all tend to be bought, either in whole or in part."

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