Incoming Eni CEO Claudio Descalzi's apparent personal involvement in a corrupt oil deal in Nigeria raises serious questions about his suitability for his role managing the Italian oil giant, said Global Witness as shareholders gather in Rome for their annual meeting.
Police investigations into the billion dollar scandal reveal top Eni officials led by Mr Descalzi were centrally involved in negotiations with Chief Dan Etete, the former Nigerian oil minister believed to have been one of the deal's main beneficiaries. The OPL 245 transaction is currently being investigated by authorities in Italy and the UK.
"The story of this Nigerian oil block is one of the most flagrant examples of corruption the oil sector has seen, and the evidence from a UK court case suggests Mr Descalzi was at the heart of efforts to buy the block. Over US $1 billion has been lost to the Nigerian people, while a few foreign oil companies and crooked individuals have profited. This deal represents a major risk for shareholders, including the Italian Government. Given Descalzi's role, they should demand that Eni justify its decision to make him its CEO, and establish an independent investigation into his role in this toxic scandal," said Simon Taylor of Global Witness.
The 2011 deal saw subsidiaries of Eni and Royal Dutch Shell agree to pay US$1.092 billion for one of Nigeria's most lucrative oil blocks, OPL 245. The money was paid by Eni and Shell to the Nigerian government, which then paid the same amount to Malabu Oil and Gas, owned by former oil minister Chief Dan Etete. Etete had awarded the oil block to his own company when he was oil minister under corrupt Nigerian dictator Sani Abacha. In effect, he gave himself one of the most valuable oil blocks in Nigeria and, with this deal was now cashing in.
Recently, Eni's lawyers told the Italian Senate that the company had no dealings with Malabu. This claim flies in the face of evidence heard in UK court that Eni itself made a direct offer to Malabu in late October 2010. The offer was rejected. Both Eni and Shell have denied paying any money directly to Malabu, but UK High Court proceedings and other evidence seen by Global Witness show Eni and Shell subsequently bought the block by passing money through the Nigerian government. A New York Court judgment concluded the Nigerian state had thus acted as a "straw man".
Evidence from the UK court proceedings indicates that Eni knew and agreed that the deal was for the benefit of Malabu and that Mr Descalzi was a main decision maker for Eni. Eni representatives met Etete face-to-face on numerous occasions, with Mr Descalzi sharing a luxurious dinner at a 5-star hotel in Milan with him. There was also frequent contact with a middleman acting on behalf of Malabu, who was recently paid US$110.5 million by Malabu for his role in the deal.
According to the accounts of those involved in the deal in the UK court other senior Eni officials closely involved in negotiations for the deal include chairman of Eni's Nigerian subsidiary NAE, Mr Roberto Casula, and Mr. Vincenzo Armanna, Eni's Vice-President for upstream activities in the sub-Saharan African region.
In March 2014 prosecutors in Milan were reported by the Italian press to be investigating Eni's role in the OPL 245 deal using recordings of outgoing Eni CEO Mr Paulo Scaroni, Mr Descalzi and Luigi Bisignani. Mr Bisignani is a businessman who struck a plea bargain submitting to 19 months under house arrest for his role in a major Italian commercial and political scandal known Italy as P4. UK court evidence suggests that Mr Bisignani was communicating with Mr Descalzi or Mr Casula at key points during the OPL 245 negotiations. Whilst Global Witness is not alleging illegality in this contact there are legitimate questions about why senior Eni managers were in contact with Mr Bisignani about this deal that need to be answered.
The UK's Proceeds of Corruption Unit has confirmed that it is investigating allegations of money laundering related to the oil block. In Nigeria, meanwhile an investigation by a committee of the House of Representatives found that the oil deal was "contrary to the laws of Nigeria" in a number of respects. The House voted that Eni's subsidiary should be "formally censured or reprimanded by the House for its role" and that "the Federal Government of Nigeria should cancel OPL 245".
"Concerns will only continue to grow, the longer Eni takes to provide a full explanation of its role and that of its officers in this deal. Eni has already had its fingers burned for corruption in Nigeria in 2010, which led to a deferred prosecution agreement with US authorities. As part of that agreement, it committed to a high standard of ethics, risk management and due diligence," said Taylor. "Eni and its senior management must explain to shareholders their payment of US$1.1 billion to Malabu Oil and Gas, its links with Mr Bisignani, and how Mr Descalzi's own role square with such commitments."
In a letter to Global Witness in response to questions put previously, Eni said: "The relevant agreements were executed with the Government of Nigeria and the payments were made to the Government of Nigeria at the time of the award of the block and the relevant license (OPL) to Eni and Shell. We believe that the Government of a sovereign country should not be mistrusted and that dealing with the Government directly and without the use of intermediaries ensures full transparency in that transaction." Specific questions relating to the role of Mr Descalzi and other Eni staff were not answered.
The Eni shareholders meeting is being held on 8th May 2014 in Rome.
NOTES TO EDITOR:
1. When Global Witness refers to "corruption" it is not alleging that Eni or any of its managers have committed any crime. No police investigation has concluded that the OPL 245 deal is in breach of anti-corruption laws. However Global Witness' view is that this deal is corrupt because it represents the monetisation of a valuable Nigerian state asset which was corruptly awarded by a former oil minister to a company he was a hidden beneficial owner of at the time.
2. The UK High Court 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 Malabu 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 US$200 million and was awarded US$110.5 million in July 2013.
3. Dan Etete has at various times claimed to be only a consultant for Malabu. However he was widely believed to be a major shareholder in Malabu, he did in fact maintain an interest in Malabu Oil and Gas through the use of nominees allowing Dan Etete to hide his interest in Malabu. 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", Approved Judgement, Case 2011 FOLIO-792 17 July 2013. The Nigerian House of Representatives investigation into the case similarly found Dan Etete is the 30% owner of Malabu.
4. 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.
5. Eni appeared at a Hearing before the Industry Committee of the Italian Senate on 3rd April 2014.
6. Shell are one of the leading companies attempting to prevent payments like those for OPL 245 having to be made public under new transparency laws in the United States and Europe.
For any queries, please contact:
Simon Taylor, Director, Global Witness firstname.lastname@example.org +44 7957 142 121
Barnaby Pace, Oil Team, Global Witness email@example.com +44 7969 295078