Turkish Salvage Tycoon in War-Torn Iraq Says U.N.D.P. Owes Him Millions

Wednesday, February 27, 2008

By Michael Y. Park


Kahraman Sadikoglu remembers the day in May 2003 when a U.N. agency asked him to move forward with a business deal that would make the world a better place — and help him earn a tidy profit.

"I was very proud to be working for the U.N., because the U.N. is the best in the world, and it solves the problems," the Turkish shipping tycoon said in a recent interview. "I thought we were going to help the Iraqi people."

Sadikoglu was asked by the U.N. to clear from the Iraqi port of Umm Qasr several sunken ships that were blocking this major supply artery into the war-torn country.


But nearly five years later, the colorful billionaire insists he’s out more than $50 million — with the meter running on another $100,000 a day in interest and expenses — and has been blocked from providing life-saving aid by the very agency charged with overseeing the project, the U.N. Development Program, or UNDP.

That’s not all. Dozens of crew members living on a virtual armada of Sadikoglu’s salvage ships — nine in all — remain stuck in limbo at an Iraqi port, unofficially held hostage, he claims, in a stalemate the UNDP seems uninterested in or unable to resolve.

The strange impasse may even have extended its reach into domestic Turkish politics and personalities. UNDP boss Kemal Dervis, a Turk, was a member of Turkey’s parliament from the center-left Republican People’s Party. Sadikoglu, meanwhile, has supported center-right causes in his country and was not a big supporter of Dervis’ political career.

Sadikoglu’s saga began in 2001, when his Tuzla Tersanecilik ve Turizm A.S., also known as Tuzla Shipyard, reached agreement with Saddam Hussein’s government to clear shipwrecks from Umm Qasr, the country’s largest commercial port. Most of the ships had been sunk there during the Iran-Iraq War of the 1980s.

The project languished before the invasion of Iraq in March 2003. But Sadikoglu says just two months after coalition forces landed, UNDP officials asked him to go forward with his plan to clear 19 sunken ships from the harbor. Salvaging Umm Qasr apparently had become a priority to coalition forces looking to bring in badly needed military and material supplies.

John Curley, the UNDP project director for Iraqi ports and salvage removal from 2003 to 2004 and overseer of Tuzla’s work, says Sadikoglu could not have been happier.

"It was like a children's storybook," Curley says. "All over the news at the moment was the war and the reconstruction program, and all of a sudden [the UNDP] calls Kahraman and says, 'We want you to come and work for the U.N. Will you come? We need your support for the reconstruction.' Kahraman was very excited. He said, 'John, when the U.N. calls, you go.'"

For a time, there was progress. Tuzla’s crews cleared the 19 wrecks at a pace that earned praise from the UNDP and the Coalition Provisional Authority, or CPA, the U.S.-led interim government in Iraq.

Umm Qasr "was the only United Nations project in Iraq at that time that was completed end to end. We were like movie stars in the U.N.," Curley recalls. At the request of the CPA, the UNDP in 2003 expanded the contract with Tuzla from 19 to 32 wrecks.

"It was of critical importance, because you can't bring everything in over land," says Peter Bingham, the ports and maritime adviser to the CPA at the time. The UNDP "ran it by us, and we said, 'Yes, it's fine,' and didn't expect to see any problems."

But there was a catch: UNDP higher-ups in New York never had provided Sadikoglu with an explicitly worded contract covering the expanded project; he says they told him one would be provided later. Curley, acting as the UNDP representative on the ground in southern Iraq, says he was instructed to make only an oral agreement with Sadikoglu.

Sadikoglu and the U.N. agree he was paid for the main part of the contract. But Sadikoglu says he hasn't been compensated for the millions of dollars in bills that piled up quickly thereafter because of what he calls UNDP incompetence and neglect.

From early on, he charges, the UNDP offered little more support than the supposed protection of a robin's-egg-blue flag. In fact, Sadikoglu and one of his ship captains were kidnapped in Iraq in December 2004; they were released only after his company paid a ransom of about $500,000.

The details of the kidnapping remain murky. Some reports speculated that Sadikoglu’s shadowy competitors — his company is well-known throughout the Middle East — were behind the plot. His detractors whispered that Sadikoglu himself had staged the affair in an effort to draw attention to his situation. He denies those charges.

Other problems had started piling up well before the kidnappings.

"There were literally people dying inside and outside of the ports every day," Curley says. "Lootings, kidnappings. Most of the transports that Kahraman sent to get fresh vegetables from Basra were all full of bullet holes. And the U.N. gave him no guarantees other than 'You can fly the U.N. flag on your mainmast.’ When Kahraman was footing the bill … he just looked at that U.N. flag and said, 'There's no way these guys are going to let me down.'"

But despite Sadikoglu's optimism, Iraqi officials complained in October 2003 that scrap metal the UNDP had ordered Tuzla to leave on a jetty had not yet been carted away. Sadikoglu says that job had been contracted out to a Kuwaiti company that he insists never showed up to do the job.

According to Curley, the Iraqi officials were little more than thugs who saw Sadikoglu as an easy mark for extortion and used their veneer of governmental authority as a useful bludgeon. They told Sadikoglu the scrap was his problem and refused to let his vessels and crew leave the port, under threat of imprisonment, while the mess remained.

Four years later, those ships remain in Iraq.

Yet more problems cropped up. Sadikoglu says it became clear the UNDP would not pay him for special services and equipment he says they had expressly ordered from him as part of the salvage operation.

He says these included the $600,000 cost of bringing in special anti-pollution equipment from Holland in June 2003 — another provision that wasn’t covered by any contract. Curley says unequivocally the UNDP had promised Sadikoglu it would "pay him directly" for the equipment. It never did.

At the time, Sadikoglu says, he chalked up the problems to post-war chaos and continued the work. But the security situation continued to deteriorate, and the cost of the job continued to skyrocket.

One of the ships Tuzla salvaged, the Medilli, had to be re-raised twice after looters kept re-sinking it. Once again, Sadikoglu says the UNDP promised to pay for the added service. And once again, he says, it didn’t come through.

Both Curley and Bingham — the officials directly responsible for oversight of Tuzla’s efforts — agree Sadikoglu always did everything he was asked to do by the UNDP. They also agree the UNDP never paid for the extra work.

"They owe him a huge amount of money," says Bingham, the Coalition Provisional Authority ports adviser. "They've owed him this money since 2004, for the best part of three, four years, and they keep prevaricating and making excuses. And still nothing."

Finally, in January 2006, Sadikoglu hired lawyers to force the UNDP into arbitration on three unresolved issues: the impounding of his nine ships in Umm Qasr, the cost of the $600,000 anti-pollution equipment and the re-raising of the Medilli.

Sadikoglu also sought relief from Dervis, his fellow Turk, who as UNDP administrator certainly has the authority to push through a settlement in the case. But Sadikoglu says his repeated efforts for a meeting with Dervis in New York were politely ignored.

Two years later, very little is resolved.

"They've responded in several ways, with a lot of delaying tactics," says George Irving, Sadikoglu’s New York attorney. "I just don't understand why it's taken this number of years to proceed to an arbitration when most of their standard contracts call for arbitration to commence in a six- or eight-week period. They're dragging their feet, and I don't know why."

Irving says he's gotten mixed messages from the UNDP. On one hand, he says, citing the lack of a properly written contract, the organization denies responsibility for the extra work. On the other hand, Irving maintains, they say they recognize Tuzla’s work and must address the claims.

UNDP attorney Lawrence Newman, in an e-mail to FOX News, argues that Sadikoglu’s contract was with the former government of Iraq, and not the UNDP. Further, Newman writes, because Sadikoglu's claims fall outside the scope of the original contract, the facts have to be assessed carefully, meaning the case will take time.

"As a publicly funded international organization accountable to its member states, UNDP has an obligation to scrupulously evaluate the merits of any claim brought against it," Newman writes.

"The claim of Tuzla is no different," he continues. "In accordance with the established practice of the organization, UNDP has retained the services of outside counsel that is assisting UNDP's analysis of Tuzla's claims and that is in regular contact with Tuzla's counsel."

Curley has his own theory about what’s taking so long to pay Sadikoglu for the millions he's owed for salvaging the additional ships and accruing costs.

"The U.N. just sat on him and said, 'This guy will go away and eventually give us no hassle,’" he says. "Three years down the line, he still hasn't received a penny of what he was supposed to get. It's a very sorry case."

Sadikoglu, meanwhile, says he won't give up.

"I still believe in the U.N.," he says. But, he adds, "I will go to the ends of the earth for this."