The Regulator for Charities in England and Wales
1. This is a statement of the results of an inquiry under section 8 of the Charities Act 1993 (‘the 1993 Act’).
2. The Mariam Appeal (‘the Appeal’) was established in 1998. The objects of the Appeal as stated in its Constitution were: “to provide medicines, medical equipment and medical assistance to the people of Iraq and to arrange for the medical treatment of a number of Iraqi children outside Iraq.”
3. The Appeal was a charitable appeal that never registered as a charity.
4. The Commission commenced formal inquiries under section 8 of the 1993 Act in June and November 2003 to establish whether or not the Appeal was charitable and how the funds of the Appeal were spent.
The Commission concluded that the Appeal should have been registered with the Commission and placed on the Central Register of Charities. It also concluded that those persons who founded the Appeal were unaware that they had created a charity.
The inquiries found that, although some charity trustees had received unauthorised benefits, in general, the funds of the Appeal had been applied in furtherance of its charitable purposes. The Commission also found that some of the activities of the Appeal were political by nature, in particular a campaign to end sanctions on Iraq imposed by the U.N. Security Council (‘the Security Council’). A statement of the results of these inquiries was published in June 2004 and is annexed to this report.
5. These inquiries also found that the Appeal’s Constitution placed the control and management of the administration of the Appeal with the members of the Executive Committee of the Appeal, who, in accordance with the 1993 Act, were the charity trustees. As the charity trustees did not realise that the Appeal was a charity, no accounts were submitted to the Commission.
6. The trustees of the Appeal who were known to the Commission were Mr George Galloway MP, Mr Fawaz Zureikat, Dr Aminah Abu-Zayyad (also referred to at the time as Mrs Galloway), Mr Sabah Al-Muktar, and Mr Stuart Halford.
7. Mr Galloway founded the Appeal and was its first Chair. Mr Zureikat, a Jordanian businessman and friend of Mr Galloway, became Chair of the Appeal in mid-2001 and we were advised that the books and records of the Appeal were taken to Mr Zuriekat’s offices in Amman and Baghdad at this time.
8. The charity’s known total income, since its creation in 1998 until it ceased operating in early 2003, was just under £1,468,000.
9. In 1990 the Security Council passed Resolution 661. This Resolution imposed comprehensive economic sanctions on Iraq (‘the Sanctions’). It also established the Security Council Sanctions Committee, also known as the 661 Committee, to monitor the operation of the Sanctions regime.
10. The U.N. Oil-for-Food Programme for Iraq (‘the Programme’) was established by the U.N. to enable Iraq to sell its oil to the world market in the period of the Sanctions. The Programme ran from December 1996 to March 2003. The sale of Iraqi oil was carried out through the State Oil Marketing Organisation (‘SOMO’), the marketing arm of the Ministry of Oil in Iraq which reported on the Programme to the 661 Committee.
11. The rules of the Programme required that oil sale proceeds be paid into a U.N. controlled account. The funds in this account were made available to the then Iraqi Government to be used only for the humanitarian and other purposes permitted by the Security Council.
12. In October 2005 Reports were published by the Independent Inquiry Committee appointed by the U.N. (‘the IIC’) and the U.S. Senate Committee on Homeland Security and Governmental Affairs-Permanent Sub-committee on Investigations (‘the PSI’) on the Programme (‘the Reports’). The Reports concluded that, amongst other matters, certain allocations of contracts in the Programme had involved the payment of “illegal surcharges” to the then Iraqi Government (‘the Surcharges’).
13. Both Reports also concluded that the Appeal had received donations resulting from contracts made under the Programme.
14. In December 2005, the Commission opened a new inquiry into the Appeal as a result of the allegations detailed in paragraph 12 above.
15. The purpose of the inquiry was:
16. The inquiry was closed in April 2007.
17. The Inquiry required sourcing and independently examining a large volume of sensitive evidence obtained from international sources, in conjunction with the evidence previously gathered by the Commission. This included a fact-finding visit by Commission officials with other UK agencies and regulators to the IIC in New York.
18. In carrying out the inquiry the Commission needed to address the following issues:
19. Following the fact-finding visit to the IIC in New York, we assessed and considered the information contained in the PSI and IIC Reports to satisfy ourselves as to the accuracy of their respective findings in so far as they related to the Appeal. We examined the various evidence and testimonies obtained by the PSI and IIC together with the responses to the Reports made under oath and in writing by Mr Galloway to the PSI and the IIC and other public statements made by some of the charity trustees.
20. We obtained further information to assist our analysis and reviewed the information already held, together with the previous findings of our earlier section 8 inquiries in respect of the Appeal.
21. We exchanged information with various agencies and regulators under the powers available to us under section 10 of the 1993 Act.
22. We considered the large quantity of evidence available and undertook a detailed analysis of its impact on the Appeal and the issues we were considering in our inquiry.
23. Using powers under section 8 of the 1993 Act the Commission issued directions to the former charity trustees of the Appeal who were resident in the United Kingdom, George Galloway M.P., Stuart Halford and Sabah Al-Mukhtar, to answer certain questions. The responses we received are detailed in paragraph 38 below.
24. Letters requesting information were also sent to the other former charity trustees of the Appeal, Mr Zureikat and Dr Abu-Zayyad. Neither provided the Commission with any response and we have no power to compel trustees living abroad to respond to requests for information.
25. Having analysed all the evidence available, the Commission has now reached its own conclusions in respect of the issues raised by this inquiry.
26. Under the Programme, various oil companies entered into agreements with SOMO for the allocations of Iraqi oil. Two of these companies were Aredio Petroleum Ltd (‘Aredio’) and Middle East Advanced Semi-Conductor Inc. (‘MEASI’). The Commission has concluded that Mr Zureikat must have had knowledge of the execution of these contracts. He signed the contracts between SOMO and MEASI in his capacity as President of MEASI. He gave his written authorisation to SOMO for Aredio to contract for the oil allocation specified by him to be for himself and the Appeal. He further gave authority to a signatory of Aredio to sign the contract in question.
27. Our previous inquiries concluded that Mr Zureikat was a major funder of the Appeal. The financial records we obtained during these inquiries confirmed that Mr Zureikat donated over £448,000 to the Appeal. These funds were donated to the Appeal in eleven separate payments. The first donation was made on 4 August 2000 and the last on 17 July 2002. The largest single donation to the Appeal made by Mr Zureikat amounted to $340,000 (£224,996.31)1 on 4 August 2000.
28. Our examination of the evidence has led us to conclude that this donation was made from funds held by Mr Zureikat substantially deriving from payments resulting from a contract made between Aredio and SOMO under Phase VIII of the Programme. The money flowed through to the Appeal in the following way:
29. Subsequently, Mr Zureikat made four further donations out of funds resulting substantially from contracts under the Programme. These further donations totalled over £73,000. The first such donation was made in July 2001 and the last was made in February 2002.
30. The Commission concluded that at least $376,000 donated by Mr Zureikat to the Appeal resulted from contracts made under the Programme.
31. The evidence that the Commission examined confirmed that Surcharges were paid on contracts executed over the period July 2000 to June 2002 between SOMO and Aredio Petroleum and between SOMO and MEASI in Phases VIII-XII inclusive of the Programme. The IIC report concluded that under the Programme, the Surcharges amount to “illicit income… paid on crude oil contracts under the Programme. The Iraqi regime demanded that payments be made to Iraqi–controlled bank accounts and Iraqi embassies abroad2.
32. The IIC further explained that “Some beneficiaries sought the assistance of intermediaries to arrange for oil sales. Others used front companies to enter into United Nations’ contracts and then sold the oil to established oil companies or traders who bought the oil for a premium over the United Nations’ official selling price for the oil. The premium covered the commissions owed to intermediaries and beneficiaries3.”
33. As Mr Zureikat made his donations to the Appeal from commissions and other payments derived from the Programme, the Commission has concluded that these donations came from improper sources.
34. The Commission examined a wide range and quantity of evidence in the course of its inquiry. This included evidence of the Appeal’s connections with the campaign to end sanctions on Iraq imposed by the UN Security Council (‘the Campaign’), the then Iraqi Government and the Programme. The evidence is diverse in source, content and reliability.
35. We considered the context in which the Appeal was operating, and that one of its activities was the support of the Campaign. In the Register of Members’ Interests at the UK Parliament, Mr Galloway has confirmed that he attended national and international conferences and other meetings on behalf of the Appeal and in furtherance of the Campaign.
36. We also considered the denials and statements made by Mr Galloway to the PSI and IIC in 2005, in relation to the Programme.
37. We considered all of this evidence and followed various lines of inquiry to establish the knowledge of and actions taken by the charity trustees in respect of the funds raised for the Appeal and their connection with the Programme.
38. Taking all this into account, the Commission issued separate directions to Mr Galloway, Mr Halford and Mr Al-Mukhtar. Each of them separately and specifically confirmed in writing that, to the best of their knowledge and belief, both before and during the period that funds were donated by Mr Zureikat to the Appeal, no trustee or representative of the Appeal whether personally or through another person acting on their behalf:
39. As previously stated, Mr Zureikat and Dr Abu Zayyad were also asked for this information. Neither of them provided or could be compelled to provide the Commission with any response.
40. In their responses to the Commission’s directions, Mr Galloway, Mr Halford and Mr Al-Mukhtar continued to deny that the Appeal was a charity, despite the Commission’s findings in its previous inquiries that the Appeal was a charity.
41. In those previous inquiries, the Commission has accepted that the members of the Executive Committee of the Appeal, who in accordance with the 1993 Act were the charity trustees, were unaware that they had created a charity. Consequently, the Commission accepts that they may not have been aware that they had the duties of charity trustees. However, even if they did not realise that they were in a charity trustee relationship with the Appeal, they ought to have been aware that they had created a trust; they appealed to the public for and administered funds on trust for the benefit of others. The fact that they were unaware that they had created a charity does not in law absolve them from their duties and responsibilities as trustees.
42. As with all trustees, charity trustees must be vigilant in accepting donations of large sums of money, particularly from overseas sources.
43. The charity trustees knew about the Sanctions and the Programme. Given the complex setting within which the Appeal had to work, the Commission’s view is that they should have been extremely vigilant in their acceptance of donations. In consequence, the Commission is of the view that the charity trustees of the Appeal did not make sufficient further enquiries as to the source of the funding from Mr Zureikat to assess whether it was proper and in the interests of the Appeal to accept these funds.
44. The Commission confirmed that donations made to the Appeal by Mr Zureikat were made using funds that derived from contracts made under the Programme and Mr Zureikat knew of the origin of these funds. Following its investigations the Commission has concluded that at least $376,000 donated by Mr Zureikat resulted from contracts made under the Programme (paragraphs 25 - 29).
45. The Commission has concluded that the donations made by Mr Zureikat came from improper sources. This calls into question whether these funds were properly donated and there is risk to the Appeal and to the trustees that claims could be made to recover funds improperly given (paragraphs 31 – 33).
46. In accepting the donations from Mr Zureikat, the charity trustees of the Appeal, as with all trustees, should have fully considered their legal duties and responsibilities given the particular circumstances prevailing referred to in paragraph 43 above. Although Mr Galloway, Mr Halford and Mr Al-Mukhtar have confirmed that they were unaware of the source of Mr Zureikat’s donations, the Commission has concluded that the charity trustees should have made further inquiries when accepting such large single and cumulative donations to satisfy themselves as to their origin and legitimacy. The Commission’s conclusion is that the charity trustees did not properly discharge their duty of care as trustees to the Appeal in respect of these donations.
47. Had the charity trustees done so, they almost certainly would have discovered that there was a connection between the Appeal and the improper transactions conducted under the Programme. The Commission is satisfied, on the information before it, that Mr Zureikat had actual knowledge of the connection between the Appeal and the Programme. The Commission is also concerned, having considered the totality of the evidence before it, that Mr Galloway may also have known of the connection between the Appeal and the Programme. Mr Galloway has continued to deny that he was aware of any such connection (paragraphs 34 – 43).
48. The Charity Commission is a civil regulator and does not have any powers of criminal prosecution. Whether or not, under national or international law, there is illegality in these transactions and breaches of the Sanctions are matters for other agencies and regulators to determine. The Commission has fulfilled its statutory duties in this regard by liaising with other relevant agencies.
49. The Appeal is not on the Central Register of Charities, has not operated since early 2003, has no active trustees and holds no assets requiring the protection of the Commission. In the circumstances, the Commission will not be taking any additional action on its findings and conclusions other than the publication of this report.
Annex to Statement of the results of an inquiry into the Mariam Appeal
(1) $340,000 was transferred by Mr Zureikat and its value when converted to £sterling was nearly £225,000. During this report, the choice of whether a figure is given in US$ or £sterling will depend on the documentary source relied upon.