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Analysis: UK court fingers Jonathan in Malabu deal, how $1.1b was stolen from Nigeria


Goodluck Jonathan

The Southwark Crown Court in London on Tuesday said the President Goodluck Jonathan-led government was culpable in the corruption scandal surrounding the sale of the Nigerian offshore oil block, Oil Prospecting Licence (OPL) 245.

The UK court stated while rejecting a request by Malabu Oil & Gas (MOG) to unfreeze part of the proceeds from its sale of a deep-water block off Nigeria to Shell and Eni, according to resources watchdog Global Witness.

The block, which is said to hold probable reserves of 9.23 billion barrels of oil, was sold to Shell and Eni for $1.1bn in 2011.

Prosecutors alleged that “fronts for President Goodluck Jonathan” received $523m in proceeds of what they described as “smash and grab” deal, with the Crown Prosecution Service, acting at the behest of the Public Prosecutor for Milan, describing OPL 245 as a case of “grand corruption”.

The court recently rejected an attempt by a company owned by a former Nigerian Petroleum Resources Minister, Dan Etete, to unfreeze $85m (N16.7bn) in proceeds of the corrupt deal for the block. The court turned down Malabu Oil & Gas application to discharge the freezing order, rejecting its arguments that the Crown had failed to follow proper procedures in securing the freezing order.

“$1.1bn was diverted from the public purse, this needs to be recovered and we must get to the bottom of the role companies and individuals played in this heist.” – Dotun Oloko, Nigerian activist

In 2011, Shell and Eni paid US$1.1bn for one of West Africa’s largest oil fields, situated off the coast of Nigeria. The payment was equivalent to 80% of Nigeria’s proposed 2015 health budget, but the money did not benefit the country’s citizens. Instead it went to a company called Malabu Oil and Gas, which was secretly owned by the former oil minister who had granted his company rights to the oil field in 1998. Like many others, this deal for a massive state asset was conducted behind closed doors, without the knowledge of the public or investors.

Shell and Eni denied paying anyone other than the Nigerian government but there is clear evidence that they knew their payment would be diverted into private pockets. By doing business with corrupt politicians, Shell and Eni exposed their shareholders to enormous risk. The case is currently under investigation by authorities in the UK, Italy and Nigeria and there is a real chance the companies will lose their rights to the block, which is a critical plank in their strategy to replenish their reserves.

The OPL 245 case provides a clear and compelling example of why laws mandating greater transparency over company ownership, and the payments companies make for oil, gas, and minerals, are needed. Laws requiring companies to disclose such payments already exist in draft form in the U.S., but Shell and other major oil firms including BP, Chevron and Exxon, are blocking their implementation. As OPL 245 shows, such obstructiveness goes against their own interests.

As the case of Nigeria’s missing billion shows, there is no moral or economic argument for doing these deals in secret. The tide is turning towards transparency, and companies like Shell should champion this rather than trying to protect a redundant and outdated business model.

For decades, corruption in the oil, gas and mining industries has helped keep poor countries poor, propped up dirty regimes and created risks for investors. 

Take Nigeria. Despite a 50 year oil boom that helped it grow into Africa’s largest economy, 8 out of 10 citizens still live on less than $2 a day. An estimated $400bn in oil revenues has gone missing because the deals were done behind closed doors, while international aid too often pays for things like schools and hospitals. 

Sadly, this situation is far from unique. Payments for natural resources need to be brought into the open so that citizens, journalists and MPs know how much money is going in, and can hold their governments to account for how it has been spent. 

Global Witness has campaigned for this kind of transparency for many years. Our investigations and advocacy first led to the establishment of the Extractive Industries Transparency Initiative (EITI), a voluntary scheme which requires companies operating in member countries like Nigeria to declare what they pay to governments and governments to declare what they receive.

shell umbrellaThe Nigerian House of Representatives called for the deal to be cancelled, saying that it “ceded away our national interest”. They condemned Shell’s lack of transparency and described the deal as “contrary to the laws of Nigeria.”*

What Shell has been up to in Nigeria – Global Witness

In 2011 Shell and the Italian company Eni agreed to make a payment of US$1.1 billion to acquire an oil concession from the Nigerian government. At the same time, the Nigerian Government agreed to pay precisely the same amount to Malabu Oil & Gas, a company known to be controlled by Dan Etete, a former Nigerian oil minister and convicted money launderer.

Details of the US$1.1 billion payment only came to light by chance through court cases in New York and London that focused on a different aspect of the oil deal. The New York court judgement and subsequent statements by the Nigerian Attorney General suggest that Shell and Eni must have been aware that the money would ultimately be transferred to the company controlled by the former oil minister.

This case raises such big corruption questions that the deal is being investigated by authorities in the UK, Italy and Nigeria.

In the aformentioned court case, Justice Edis of the Southwark Crown Court turned down Malabu Oil & Gas application to discharge the freezing order, rejecting its arguments that the Crown had failed to follow proper procedures in securing the freezing order.

“I cannot simply assume that the Federal Government of Nigeria, which was in power in 2011 and subsequently until 2015, rigorously defended the public interest of the people of Nigeria in all respects. Mr. Fisher QC, who appeared for the CPS, used the phrase ‘grand corruption’ to describe the form of corruption in which the state itself is culpable,” the judge said.

According to the statement, evidence from the US authorities presented to the court and included in the judgement “shows payments following circuitous routes, which totalled $523m, and arrived at Abubakar Aliyu, aka ‘Mr. Corruption’… Aliyu’s companies are allegedly fronts for President Goodluck Jonathan.”

Justice Edis said, “The suggestion from the wiretaps is that ‘Fortunato’ was implicated and I am told that this was a reference in code (not subtle) to the former President of Nigeria, Goodluck Jonathan. Aliyu is said to be associated with him and Aliyu received, in a way which was not transparent, $523m of the money paid for the OPL 245 licence in August 2011.”

The $85m funds were restrained at the request of the Italian authorities, who are investigating the sale of the block by Malabu, a company allegedly secretly owned by Etete, to the international oil companies, the statement said.

It added that the Federal Government under Jonathan acted as a middleman in the deal, and the court received evidence based on wiretaps that prosecutors alleged showed that the then President, Jonathan, was directly involved.

“In light of these allegations in a UK court, the role of the senior Nigerian officials involved in this deal, including Goodluck Jonathan, must now be fully investigated,” a Nigerian anti-corruption campaigner, Dotun Oloko, was quoted as saying.

What is Shell up to? Is this good for business?

Shell’s AGM is today. Do investors think it’s good for business to be dealing with crooked politicians? Is it good for business relations – in a country with one of the world’s highest rates of maternal mortality – if Nigerian citizens watch as billion dollars are diverted from the public purse and into the hands of an ex minister? Is it good for business to keep the details of these sorts of payments secret? Is it good for business for Shell to risk losing such a valuable asset and potentially billions of dollars’ worth of future production?

There’s a way to stop this happening.

Over the past few years, Global Witness and others have campaigned for laws to make these deals wholly visible to the public. That way, people can see who pays, how much they pay, and where the money goes. Initially people laughed at us – we weren’t being realistic. But gradually the consensus has swung, and now there are laws in the EUand the US to make sure companies declare the payments they make for oil and gas deals.

This is really promising not least because companies are getting behind it alongside governments. The only problem is that a group of big oil companies keep trotting out the same rhetoric to try and block the laws, or weaken them to the point of uselessness.

This is starting to feel like a Groundhog Day of bankrupt arguments repeated by an ever dwindling group of oil companies. But this group is shrinking – with giants like Statoil now pushing for transparency. Others like Tullow Oilare disclosing even before the requirements kick-in. But a stubborn group of nay-sayers continue to resist, despite publicly claiming to support the shift towards transparency.

Shell is foremost amongst the blockers, and seems determined to protect the status quo. While the laws were being proposed in the EU, its lobbyists were hard at work behind the scenes, pushing for changes that would result in the kind of payments they made in Nigeria remaining hidden.

Shell and its partners need to face facts. The world has recognised that secret payments are bad for business. They are fighting to keep payments for deals like OPL 245 hidden – with much needed money funnelling out of poor countries and chunks of their business at risk.

Their desperation to keep fighting a losing battle begs questions about what Shell and its partners in the counter-reformation have to hide?

With so much at stake, Shell should say exactly what they knew about where the money for OPL 245 was going, and should stop lobbying to try to weaken laws in the US that require these sorts of payments to be made public.


*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.


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