Yemengate

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

About the same time, according to later court records, the Hunt Oil Company was looking to expand its international holdings. A former colleague of one of Hunt Oil's executives alerted the company to the prospects in Yemen. Hunt Oil decided it, too, was interested in the Ma'rib field.

Arabian Shield hired a well-connected Yemeni businessman, Shaher Abdulhak, and promised him a cut of the profits if Abdulhak helped steer its proposal through the tricky waters of North Yemeni politics. Arabian Shield officials flew to San'a in February 1981 to discuss the deal with government officials. By the time they left, El-Khalidi thought his company was on the verge of winning the government's permission to explore for oil.

But the Arabian Shield proposal suddenly stalled, El-Khalidi recalls. When Arabian Shield officials asked for updates, the Yemeni government seemed to be holding them off.

El-Khalidi says he was stunned when word came from Yemen in the summer of 1981 that the government had signed an agreement with the Hunt Oil Company. Hunt later allowed Exxon and a consortium of companies from South Korea to invest in the project and share profits.

Several years later, El-Khalidi would claim in court documents, he was told by friends and contacts in the Middle East how Hunt managed to win the oil concession: Abdulhak, the Yemeni middleman retained by Arabian Shield, had turned double agent and fed information about Arabian Shield's proposal to Hunt Oil.

Abdulhak could not be reached for comment. In an affidavit filed during the lawsuit, he denied any wrongdoing.

In 1984, El-Khalidi began writing a series of increasingly combative letters to Hunt Oil, outlining his suspicions and asking for a cut of the Yemeni oil deal.

Hunt Oil denied the allegations, and said company officials did not even know Arabian Shield and Dorchester were vying for the contract until late in the game.

Hunt Oil considered it suspicious that El-Khalidi had not raised his protests until after Hunt actually struck oil in the Safir Basin. El-Khalidi's first letter to Ray Hunt, in fact, was written six days after Hunt Oil announced its success in Yemen, even though El-Khalidi stated in the letter that he had heard about Abdulhak's alleged treachery a year earlier.

In 1987, Arabian Shield filed suit against Hunt Oil in a Dallas district court, claiming that Hunt Oil used information from Abdulhak to win the oil rights. Arabian Shield lawyers hoped they could show that Hunt Oil wrongfully interfered with Arabian Shield's right to negotiate fairly for the oil contract. It was an argument similar to the one used by Pennzoil in winning a mammoth judgment against Texaco in one of Texas' most famous civil cases.

Hunt Oil executives not only were alerted to the prospects in Yemen by information from Abdulhak, Arabian Shield's lawyers argued, but may have bribed their way into the deal, using another Arabian businessman as a funnel for money. In the lawsuit, Arabian Shield accused Hunt Oil of using "wrongful and prohibited means" to win the oil contract.

During depositions and discovery, Arabian Shield attempted to show Hunt Oil's bribery. El-Khalidi says Abdulhak told him during the negotiations that Arabian Shield would have to provide up-front money to bribe government officials. El-Khalidi says he refused to provide any. Hunt Oil, he contends, must have greased the skids, given its success in winning the contract.

In response to the lawsuit, Hunt Oil vigorously denied all of the allegations, and described its dealings in Yemen as a straight-up business deal. The company said it received no inside information from Abdulhak or anyone else in the Arabian Shield camp.

Jim Oberwetter of Hunt Oil now calls El-Khalidi's allegations "garbage. They are as old as Methuselah and just as dead."

During the lawsuit, Arabian Shield was able to obtain copies of Hunt Oil documents that El-Khalidi says bolster his claims.

First and foremost, he claims, is the involvement of another man, Moujib Al-Malazi, in Hunt's quest for the oil. Al-Malazi, the documents show, was the one who tipped Hunt Oil off to the possibility of a deal in Yemen and helped negotiate with the government.

Ray Hunt, in a sworn deposition, described Al-Malazi's role as that of a "facilitator" in the negotiations with Yemeni officials.

But Arabian Shield contended that Al-Malazi obtained his information about the Ma'rib field, and Arabian Shield's proposal, from double agent Abdulhak.

"[Hunt Oil] knowingly and intentionally subverted [Arabian Shield's] business agent in the Yemen Arab Republic and, through him, obtained copies of Arabian Shield's proprietary geological information," the lawsuit argued.

Al-Malazi also became the funnel for bribes that Hunt Oil paid to win the Yemeni contract, Arabian Shield's lawyers claimed. After Hunt won the contract, a Panamanian company set up by Al-Malazi and his family received a $100,000 fee from Hunt Oil, according to company documents and depositions of company officials.

Al-Malazi's company was also promised one percent of Hunt's profits from the oil deal, and El-Khalidi claims the payments began before Hunt actually struck oil.

Al-Malazi did not return a phone message left by the Observer at his London office.

In its responses to the Arabian Shield lawsuit, Hunt Oil denied using Al-Malazi as a conduit for bribes. When he was deposed, Ray Hunt said the company's arrangement with Al-Malazi was a simple business deal, paying Al-Malazi for his work, which Hunt personally approved. "I was told that he [Al-Malazi] was a world-class geophysicist, a very competent person, and an honest person," Hunt said.

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