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Advisor Cites Conflict Potential

Retired Shell CEO still has financial ties to firms that will bid on oil contracts in Iraq. But he vows to distance himself from the process.

May 16, 2003|Mark Fineman | Times Staff Writer

BAGHDAD — Retired Texas oil executive Philip J. Carroll, the Pentagon's hand-picked advisor overseeing the reconstruction of Iraq's oil industry, acknowledged Thursday that he faces potential conflicts of interest because of his financial holdings in U.S. companies planning to bid on Iraqi oil contracts.

"Absolutely," he said of potential conflicts during a wide-ranging interview with The Los Angeles Times, a week into his job as senior advisor to an emerging Iraqi Oil Ministry.

Carroll, however, said he will attempt to avoid any conflicts by distancing himself from the oil contracting process. He also has declared to the Defense Department all of his financial holdings in companies that may seek a role in rebuilding Iraq, he said.

"I know at this stage of my life I don't want my reputation tarnished," said the 65-year-old Houston resident. "And I will stay so far away from any consideration of the bidding process, evaluation process or even the administration and arbitration of things associated with any of those companies in which I have a financial interest.... Believe me, I will have absolutely nothing to do with it."

Carroll also vowed that he will not advise Iraqis to privatize their oil industry. Rather, he will present an array of alternatives, including continuation of the 100% state-owned system in place during the regime of Saddam Hussein.

"I would not be surprised if they pick something other than the American model," said Carroll, 65, who retired a year ago from Aliso Viejo-based Fluor Corp., an engineering and construction firm. "If they did pick that [American model], it might be a wonderful thing in some people's eyes. It probably would not be a wonderful thing in everyone in Iraq's eyes."

Even after a 32-year career with Shell Oil Co. in Texas, where he retired as its chief executive, and four years as head of Fluor, Carroll sounds like an advocate for keeping Iraqi oil as a national industry.

"You have to realize that oil occupies a very important and unique place in the minds of the Iraqi people. It constitutes the overwhelming, dominant economic force in the country," he said. "It provides the wherewithal of building a better life for the Iraqis.

"There are also feelings throughout the population that oil represents, in essence, the national heritage of Iraq."

Documents on file with the Securities and Exchange Commission show that Carroll continues to receive more than $1 million a year from Fluor in retirement benefits and bonuses pegged to the company's performance. He also owns about 1 million shares of the company's stock, according to its latest proxy statement. Fluor has said it plans to bid on a U.S. Army Corps of Engineers contract to rebuild Iraq's oil industry.

But, in a cavernous foyer of the former palace that houses the Pentagon agency set up to rebuild Iraq -- below former offices of Hussein's inner circle where Carroll and others sleep in simple dormitory beds -- the white-haired former executive insisted that his personal financial interests will not influence his work here.

"You have to, first of all, have a good sense of yourself not to do anything that even has the appearance of wrongdoing, and you have to rely on the general counsel at the Department of Defense [saying], 'Ah, you can't go there. Stay away from that.' You try to build a wall around you.

"I recognize that there will be undoubtedly someone who will at some point say, 'Aha!' " he added. But money "is the farthest thing from my mind."

Carroll said he began working for the Pentagon last fall, developing contingency plans for Iraq's oil sector in the event of war. He assumed his work was completed, he said, until Defense Secretary Donald H. Rumsfeld called him shortly after the U.S.-led invasion began and offered him the oil advisor's job.

"My response was, 'Well, this is not high on my hit parade list right now,' " Carroll said. "But under the circumstances, you just can't say no."

The former Laguna Beach resident said his most immediate concern is the oil crisis paralyzing a nation that owns an estimated 112 billion barrels of oil, reserves that are second only to those of Saudi Arabia. He said that he and the hand-picked Iraqis serving with him will ease the shortages of gasoline and natural gas by June 1, along with the mile-long lines at the gasoline pumps that have tormented Iraqis since the war ended.

Carroll said the U.S.-led coalition running Iraq is trading some of the massive stocks of fuel oil and diesel that are clogging Iraq's pipelines and storage tanks for Kuwaiti gasoline and natural gas.

Since the invasion in March, clogged oil pipelines have forced Iraq's refineries to produce only limited quantities of gasoline. The process generates fuel oil and diesel, which the refineries have no place to store.

But Carroll conceded that the barter arrangements with Kuwait and other countries in the region are stop-gap measures.

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