Global Witness (London)

25 March 2014

Nigeria: Corrupt Nigerian Oil Deal Loot to Be Distributed By UK Court

press release

Funds should be frozen instead, says anti-corruption group

Today the Court of Appeal will rule on dividing up the proceeds of the sale of corruptly awarded Nigerian oil block OPL 245. This huge concession was awarded in 1998 during the rule of the military dictator Sani Abacha to a company secretly owned by the then oil minister Dan Etete and Sani Abacha's son Mohammed Abacha.

Last week Mohammed Abacha was found by US authorities to have participated in the embezzling of billions of dollars from the Nigerian state. Dan Etete was convicted of money laundering in France in 2007.

The oil block was sold in 2012 to the multinational oil companies Shell and ENI for over a billion dollars with the Nigerian government acting as a "straw man". Shell and ENI paid $1.1 billion to the Nigerian government, which then paid the same amount to Etete's company, Malabu Oil & Gas. Documents seen by Global Witness show that over US$801 million of this money was later transferred to a further five anonymous companies with hidden owners, raising concerns about who truly benefitted from this deal.

The UK legal case is being fought between Malabu and a middleman involved in the deal who sued for US$200 million for his part in arranging negotiations.

In July 2013, the court provisionally awarded him US$110.5 million, 8.5% of the money paid by Shell and ENI. Both Malabu and the middleman are attempting to appeal this outcome. An oral hearing is to be held todasy after which the case could see the US$200m paid out to the parties.

If as Shell and Eni have claimed, they purchased the oil block from the Nigerian Government, then the US$1.1 billion from the sale should have all been paid to the Nigerian Government's "Federation Account", as required under the constitution.

The alternative (as claimed by Nigeria's Attorney General Adoke, who was himself a broker of the deal), is that the Nigerian Government acted as an "obligor," or as a conduit to pass the payment from Shell and Eni to Etete's company Malabu. This latter scenario leaves the companies exposed as having purchased stolen goods and the Nigerian Government as having monetised an illegally expropriated state asset for a convicted felon.

For either scenario, the evidence suggests that Nigerian Government officials connived to divert funds from this lucrative deal away from the Nigerian people and into private bank accounts. Global Witness, together with other NGO's have written to the Nigerian Minister of Finance, Ngozi Okonjo-Iweala, urging her to take action to recover Nigerian state assets.

Investigations have been launched by UK's Proceeds of Corruption Unit and last week Italian prosecutors in Milan were reported to also be investigating the deal. In Nigeria an investigation by a committee of the House of Representatives found that the oil deal was "contrary to the laws of Nigeria" and "ceded away our National Interest". The House voted that "the Federal Government of Nigeria should cancel OPL 245".

Global Witness believes that the substantial funds held in relation to this case by the London court should frozen pending the conclusion of investigations into these serious allegations.

Global Witness director Simon Taylor said "It is disgraceful that the UK courts should be used as arbiters to carve up the loot from this highly suspicious and possibly illegal deal. This appears to be the equivalent of divvying up the proceeds from a bank robbery without considering the legitimacy of the funds in question."

The original case is 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. Energy Venture Partners sued for a US$200 million, a total of US$215 million was originally frozen in order to cover further costs.

The continuing Civil Appeals cases are: Malabu Oil and Gas Limited v Energy Venture Partners Limited and Energy Venture Partners Limited v Malabu Oil and Gas Limited, Case reference numbers A3/2013/2634 and A3/2013/2477.

Lady Justice Gloster of the UK High Court of Justice 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"

In a US legal case the Honorable Bernard J. Fried described the Federal Governmentof 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.

For any queries, please contact:

Simon Taylor, Director, Global Witness staylor@globalwitness.org +44 7957 142 121

Barnaby Pace, Oil Team, Global Witness bpace@globalwitness.org +44 207 492 5823

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