(Adds quotes from hearing, background) By Christine Kearney NEW YORK, March 7 (Reuters) - Texas oilman David Chalmers was sentenced to two years in prison on Friday after admitting to paying millions of dollars in kickbacks to Iraq in connection with the U.N. oil-for-food program. Chalmers, 54, and his two corporations, Bayoil Supply and Trading Ltd. and Bayoil USA Inc., were sentenced in federal court in Manhattan. Chalmers and his companies were ordered to forfeit $9 million dollars. He pleaded guilty to one count of conspiracy to commit wire fraud in August, weeks before he was due to go on trial with Texas oil tycoon Oscar Wyatt. Wyatt was sentenced to a year in prison in November for his role in the oil-for-food scandal. "I feel horribly remorseful for this," a sniffling Chalmers told U.S. District Judge Denny Chin. "Because others were doing it I thought it was OK. But I was wrong." Chalmers' lawyer told Chin that Chalmers deserved a lighter sentence than Wyatt, who met directly with Saddam Hussein and became the most prominent figure jailed over the scandal. Chin disagreed, saying Chalmers had agreed to buy many more barrels of oil than Wyatt that represented "money that should have gone to the Iraqi people." Prosecutors said they could prove Wyatt paid at least $200,000 in kickbacks, compared to Chalmers, whom they said played a leading role in corrupting the program by agreeing to pay at least $9 million while other oil companies refused. FRONT COMPANIES The $67 billion oil-for-food program -- begun in 1996 and ended in 2003 -- was aimed at easing the impact of sanctions imposed on Saddam Hussein's government after Iraq invaded Kuwait in 1990. The charges against Chalmers, Wyatt and others stemmed from Iraq's requirement from 2000 to 2003 that recipients of oil pay a secret surcharge, in violation of U.N. sanctions and U.S. law, to front companies and bank accounts controlled by the Iraqi government. The secret payments were not made to the United Nations's monitored bank account from which humanitarian goods could be purchased for the Iraqi people, but in a secret deal with Baghdad outside of the program. Bayoil USA Inc., based in Houston, and Bayoil Supply and Trading Ltd., based in the Bahamas, were also sentenced to three years of probation. Besides Wyatt, other convictions in the case include South Korean lobbyist Tongsun Park and Bulgarian oil trader Ludmil Dionissiev, who worked as a consultant to Chalmers. Chin sentenced Park to five years in prison in February last year. Dionissiev was sentenced to two years' probation in December. Chalmers was ordered to surrender to a federal prison in Texas by April 30. The $9 million forfeiture will be paid into the Development Fund for Iraq, set up to aid reconstruction. (Editing by Daniel Trotta and Xavier Briand)
A patrol member from a local citizen's group marches with demonstrators chanting slogans during a protest in Baghdad's Adhamiya district March 3, 2008. Hundreds took to the streets in Adhamiya district ...
