The Crown Prosecution Service (CPS) has failed to prevent more than US$110 million from a corrupt Nigerian oil deal leaving the UK, even though it had powers to do so, say Global Witness and Re: Common.
The anti-corruption watchdogs warn that by allowing such funds to pass through the UK unconstrained, London is acting as a conduit for corrupt money diverted from the citizens of Nigeria.
The funds were held in the UK pending the outcome of a case in the High Court in London[i]. Parties in the case disputed[ii] the amounts they should be paid from the proceeds of a deal for the Nigerian oil block, OPL 245.
The huge OPL 245 oil concession was awarded in 1998 by the then Nigerian oil minister, Dan Etete, to a company called Malabu Oil and Gas, of which he was a hidden owner[iii].
This took place during the rule of the notoriously corrupt military dictator Sani Abacha. Etete was convicted of money laundering in France in 2007[iv].
The oil block was sold in 2012 to subsidiaries of oil companies Royal Dutch Shell and ENI, by the Nigerian government. Shell and ENI paid $1.1 billion to the Nigerian government, which then paid the same amount to Etete's company, Malabu Oil & Gas.
The Nigerian government has been called a "straw man" between Shell, Eni and Malabu[v]. The deal effectively monetised an asset that Etete had illicitly awarded to his own company, depriving the Nigerian State of over a billion dollars.
A recent report by a Nigerian committee of the House of Representatives found that the oil deal was "contrary to the laws of Nigeria," "ceded away our National Interest"[vi], and recommended that the government cancel it.
A middleman acting for Malabu sued the company in the UK High Court for US$200 million for his part in arranging the deal. Last July, the court awarded the middleman US$110.5 million. The parties appealed but the High Court upheld the decision in March 2014.
At the end of the case, Global Witness called for the funds held to be frozen pending the conclusion of investigations under way in the UK, Italy and Nigeria[vii].
Despite these calls to restrain the funds, the CPS does not appear to have acted to freeze the money. According to reliable sources, the money was recently transferred to the Nigerian middleman's company.
"This case is extraordinary. The UK courts have been used to divvy up the loot from a highly suspicious and possibly illegal oil deal, and even though there has been plenty of time to intervene, and an abundance of evidence showing the corrupt nature of this deal, the CPS has not acted to freeze the money.
If London wants to avoid being labelled the global capital for laundering by state-looters, then the CPS needs to publicly explain its lack of action." said Simon Taylor, Director of Global Witness.
What could Nigerians done with the $1.1bn?
Simon Taylor, Director, Global Witness, +44(0)7957 142 121 begin_of_the_skype_highlighting +44(0)7957 142 121 FREE
Brendan O'Donnell, Oil Campaign Leader, Global Witness, +44(0)7912 517 128 begin_of_the_skype_highlighting +44(0)7912 517 128 FREE
[i] Energy Venture Partners Versus Malabu Oil & Gas, Commercial court, Queen's Bench Division, 2011-13. The case was brought by a broker who alleged that Etete failed to pay him for work he had done in obtaining a buyer for OPL245. Shell and Eni were not part of these proceedings.
[ii] For more details on the case see http://www.globalwitness.org/opl245
[iii] In the July 2013 UK High Court case of Energy Venture Partners Versus Malabu Oil and Gas, Lady Justice Gloster of the Queen's Bench Division, Commercial Court ruled, "I find as a fact that, from its incorporation and at all material times, Chief Etete had a substantial beneficial interest in Malabu", Approved Judgement, Case 2011 FOLIO-792 17 July 2013.
The Nigerian House of Representatives investigation into the case also found Dan Etete is the 30% owner of Malabu. See also Global Witness, 25 November 2013, "The Scandal of Nigerian Oil Block OPL 245", http://www.globalwitness.org/library/scandal-nigerian-oil-block-opl-245
[iv] Dan Etete, a former Petroleum Minister of Nigeria, was convicted of money laundering in France in 2007.
[v] In a US legal case the Honorable Bernard J. Fried described the Federal Government of Nigeria's role in the deal as that of "the proverbial 'straw man'", who was "holding $1.1billion for ultimate payment to Malabu". Order to Show Cause with temporary Restraining Order, "In the Matter of Arbitration between International Legal Consulting Limited and Malabu Oil and Gas Limited and J. P. Morgan Chase and Co and all of its subsidiaries and affiliates, including but not limited to JP Morgan Chase Bank, NA", Supreme Court of the State of New York, County of New York," Index no 651733/2011, 22 July 2011, p.10. Edwards, Angell, Plamer and Dodge on behalf of Malabu to Clifford Chance LLP, 15 July 2011.
[vi] On 18 February 2014 the Nigerian House of Representatives voted on the recommendation of an investigation into the deal, calling for the deal's cancellation and criticised the deal for being contrary to the laws of Nigeria, committing the country to unacceptable indemnities and liabilities while acting as an obligor, ceding away the Nigerian national interest and censured and reprimanded Shell and Eni's subsidiaries for their actions; House of Representatives Federal Government of Nigeria, Votes and Proceedings, 18 February 2014, p994
[vii] In March 2014 it was reported that Italian prosecutors in Milan are investigating ENI's role in the OPL 245 deal. The UK's Proceeds of Corruption Unit has also confirmed that it is investigating allegations of money laundering related to the oil block.
Following a complaint in February 2012 by Mohamed Sani Abacha (son of former President Abacha) and Pecos Energy limited the Nigerian Economic and Financial Crimes Commission began investigating Malabu Oil and Gas and the OPL 245 deal; Wall Street Journal, 22 July 2013, "UK Investigates Money Laundering Allegations Relating to Nigerian Oil Block", http://online.wsj.com/article/BT-CO-20130722-706581.html;; Report by the Ad-Hoc Committee on the transaction involving the Federal Government and Shell/AGIP companies and Malabu Oil and Gas Limited in respect of the sale of oil bloc OPL 245, 9 July 2013