“Corruption isn’t just a developing world issue, and it’s time Western leaders did more” – World Economic Forum 2016 Agenda on Corruption
In 2011, two foreign energy giants – British-Dutch Royal Dutch Shell and Italian multinational oil and gas company, Eni reached an agreement with the Nigerian government to purchase the offshore Oil Prospecting License (OPL) 245 oilfield.
The license for the offshore block was previously owned by Malabu Oil and Gas Limited, a company controlled by a former Minister of Petroleum Resources in the country, Dan Etete.
The deal, which has resulted in one of Nigeria’s largest corruption scandals in the oil industry, has provoked a pair of lawsuits from the government against Shell and Eni for $1.1 billion. While the other party, American multinational investment bank JP Morgan Chase faces another suit with claims of over $875 million, for its role in the disputed deal that is stamped by money laundering and bribery.
Principal to the case is the $1.3 billion payment from Shell and Eni that was deposited into a Nigerian government escrow account managed by JP Morgan to secure the oil block.
Money laundering
On its part, JP Morgan was accused of negligence in transferring funds from the oilfield deal, which belonged to the government.
The lawsuit revealed that the bank moved the funds to two accounts controlled by Etete after it received a request from finance ministry workers to transfer more than $800 million of the funds to accounts controlled by the previous operator of the block, Malabu.
Without sufficient due diligence to ensure the money did not leave accounts controlled by the Nigerian government, the filing accused JP Morgan of gross negligence by allowing the transfer of the money without further checks.
“If the defendant acted with reasonable care and skill and/or conducted reasonable due diligence it would or should have known or at least suspected … that it was being asked to transfer funds to third parties who were seeking to misappropriate the funds from the claimant and/or that there was a significant risk that this was the case,” the filing said, as reported by Reuters.
In a court document seen by Reuters, JP Morgan Chase acknowledged that it knew the former Nigerian oil minister convicted of money laundering would benefit when it transferred government funds to a company he controlled.
Bribery charges
Late last year, an Italian judge found that Eni and Royal Dutch Shell were fully aware that their purchase of Nigeria’s OPL 245 would result in corrupt payments to Nigerian politicians and officials.
The trial in Milan, where Eni is headquartered, was for a separate legal case in which prosecutors alleged bribes were paid to Etete and others as part of the same oilfield deal, including sums that went to Malabu. It is alleged that about $1.1 billion of the total sum was syphoned to agents and middlemen.
“The management of oil companies Eni and Shell … were fully aware of the fact that part of the $1.092 billion paid would have been used to compensate Nigerian public officials who had a role in this matter and who were circling their prey like hungry sharks,” judge Giusy Barbara said.
“It was not mere connivance, but a conscious adhesion to a predatory project damaging the Nigerian state,” she said, adding that money was given to some managers of state-controlled Eni, the biggest foreign energy company in Africa.
The Milan judge made the comment in her written reasons for the September conviction of Nigerian Emeka Obi and Italian Gianluca Di Nardo, who were both middlemen in the OPL 245 deal, for corruption.
Obi and Di Nardo, both sentenced to four years imprisonment apiece, were tried separately from Eni and Shell, which also face corruption allegations over the same deal in a hearing that is expected to drag on for months.
Socioeconomic costs of the deal
According to a report published by campaign group Global Witness, the Shell and Eni deal could cost Nigeria $6 billion in lost revenue.
Global Witness, which has spent years investigating the deal said the allegedly corrupt contract terms were altered in favour of the energy companies and would stop the African nation from accessing its share of the profits from oil extracted from its offshore block.
“We discovered that Shell had constructed a deal that cut Nigeria out of their share of profit oil from the block,” Ava Lee, a campaigner at Global Witness told the BBC’s World Business Report.
As a result, campaigners are calling for the deal to be cancelled as it deprived Nigeria of double its annual education and healthcare budget.
“This amount of money would be enough to educate six million teachers in Nigeria. It really can’t be underestimated just how big a deal this could be for a country that right now has the highest rates of extreme poverty in the world,” Lee added.
A question of foreign transparency
As part of efforts to recover funds lost by the country through the controversial Malabu Oil deal, the federal government initiated two suits against the foreign culprits in the deal – JP Morgan Chase, Royal Dutch Shell Plc and Eni, with total claims of $1.975 billion dollars.
However, it is vital to point out the contrast between the way the Western world (with developed countries) paints African nations as corrupt (especially Nigeria), and the actions of three of its biggest, most reputable companies depicts a somewhat ironic and hypocritical scene.
Governments, development bodies and multinationals in developed countries are always at the forefront, championing a transparent and accountable African society, but Italy’s biggest multinational (Eni) which is partly owned by the state, is accused of scamming billions from the Nigerian people.
The blatant truth is, despite antiquated stereotypes, only Nigeria or even Africa at large does not make up the corruption supercycle, even though acts of corruption are more apparent, and its effects often much more devastating in the continent.
The many forms of corruption in the continent are complemented by the ways Western companies are in conspiracy in them. Some of the notable issues are dodgy arms deals, illicit financial flows and money laundering which are aided by international businesses and professionals alike.
Nigeria ranks among countries with the highest incidences of illicit financial outflows (IFFs). A recent report by the Nigeria Extractive Industries Transparency Initiative (NEITI) revealed that up to $218 billion flowed out of the country between 1970 and 2008, with the oil and gas sector making up 92.9 percent of the total IFFs.
Much of this fraud would not be achievable without the help of those able to deploy a range of techniques to make corruption look credible. A joint report by the African Development Bank (AfDB) and Global Financial Integrity revealed that up to 65 percent of Africa’s annual lost revenue of over $50 billion disappears in commercial transactions by multinational companies.
The outcome of the court cases in Milan and Britain could force Nigeria’s oil industry to change how the nation conducts its business, ensuring more transparency in contracts and payments to discourage fraudulent practices by multinationals in Nigeria.
Albeit, the whole scenario proves that corruption, in one form or another, has perverted virtually all human societies and it is not just a developing world issue alone.
