Royal
Dutch Shell Plc and Eni SpA have become entangled in a $1.1 billion bribery
scandal involving a field in Nigeria that could potentially hold enough crude
to meet three months of the world’s demand. At least three countries are
probing the companies, and Italian prosecutors have named Eni’s Chief Executive
Officer Claudio Descalzi and Shell’s former head of exploration and production,
Malcolm Brinded, among people who could be prosecuted. Nigeria’s anti-graft
agency also filed charges against the companies in March.
1.
How did this begin?
In
1998, Nigeria’s military dictator Sani Abacha awarded Oil Prospecting License
245 in deep waters off Nigeria’s southern coast to Malabu Oil and Gas Ltd., a
Lagos-based company connected to then-Petroleum Minister Dan Etete. Under
successive governments, the license was canceled, awarded to Shell, and then
awarded to Malabu again. Finally, in 2011, Shell and Eni paid the government
$1.3 billion, including about $200 million as a signature bonus -- a onetime
fee charged by some oil-producing nations -- to nail down the contract once and
for all.
2.
Was that improper?
Not
on the face of it. The problem arose, according to prosecutors, when it became
clear that most of the money paid by Shell and Eni had been passed on, rather
than kept, by Nigeria’s government.
3.
Where did the money go?
Prosecutors
in Milan allege that Shell and Eni paid almost $1.1 billion -- everything but
the $200 million “signature bonus” -- into an escrow account for the Nigerian
government, from which about $800 million was later transferred to the Nigerian
accounts of Malabu to be distributed as payoffs. Almost half a billion dollars
was transferred to money changers around the Nigerian capital to convert into
cash to be divvied up among officials, including then-President Goodluck
Jonathan (who has denied wrongdoing), according to the court papers. They
include more than $50 million withdrawn by a single local businessman and
another $50 million in cash delivered to the Nigerian home of Eni executive,
Roberto Casula, the prosecutors allege.
4.
What does Shell say?
For
years Shell maintained it hadn’t known that any of the money would go to
Malabu. In April it made an about-turn, conceding it had known that Nigeria
“would compensate Malabu to settle its claim on the block” and that “the only
way to resolve the impasse through a negotiated settlement was to engage with
Etete and Malabu, whether we liked it or not.” The admission followed the
publication by Buzzfeed and Italian newspaper Il Sole 24 Ore of leaked internal
emails showing Shell staff discussing the risk that the money could ultimately
be used for payoffs. Still, Shell maintains its 2011 purchase was “fully
legal”; its legal director Donny Ching said the company believes there was “no
inappropriate conduct by any Shell company or its staff.”
5.
And Eni?
Eni
too denies any wrongdoing. The company said in February that an independent
investigation found no credible evidence of the involvement of Eni staff in
corrupt activities.
6.
Which executives might face charges?
Italian
prosecutors are targeting 11 people. They include five Eni executives, among
them Descalzi and Paolo Scaroni, the former Eni CEO who is now vice chairman of
NM Rothschild & Sons. Four Shell employees including Brinded, Nigerian
officials including Etete, and various others who acted as intermediaries are
also identified in the court papers. Eni shareholders re-elected Descalzi as
CEO in April. Scaroni didn’t immediately return a call to his mobile phone, and
Brinded didn’t return a call to his office. Etete’s lawyer, Antonio Secci, said
by phone: “We believe Malabu’s business is lawful and transparent.”
7.
What’s the status of the investigations?
Judge
Giuseppina Barbara in Milan is hearing arguments to decide whether the case
against Eni, Shell, Descalzi and 10 others should go ahead, with a final
decision due as soon as June. Prosecutors are bringing separate proceedings
against Shell employees including two former members of British intelligence
who acted as advisers and Brinded, now chairman of the Shell Foundation, its
charitable arm, according to the Milan court papers. In March, Nigeria’s
anti-graft agency filed new charges against Shell and Eni alleging they
“corruptly” paid the $800 million, according to court papers. Officials from
the Dutch Financial Intelligence & Investigation Service and public
prosecutor have also been investigating the matter, visiting Shell offices in
The Hague last year.
8.
What’s at stake?
The
9 billion barrels of potential resources in OPL 245 could be worth $450 billion
at a $50-a-barrel oil price. Though some of that will go to the Nigerian
government, the companies still stand to make a lot of money. If found guilty,
they face fines and revocation of licenses to do business. Descalzi, Brinded
and others could go to prison. There’s also the damage to the corporate
reputations. The Shell Foundation has poured millions into local development to
project an image of a good corporate citizen acting responsibly in the
developing countries where it does business. Violation of “anti-bribery and
corruption legislation or anti-money laundering legislation could harm our
reputation and have a material adverse effect on our earnings, cash flows and, financial
condition,” Shell said in its last annual report.
9.
How important is Nigeria to Shell?
Shell,
which first exported crude from Nigeria almost 60 years ago, has been selling
its leases in the country after militant attacks forced it to shut some operations.
Still, Shell remains Nigeria’s biggest producer, and it gets about 7 percent of
its global output from the country, according to the annual report. Its biggest
liquefied natural gas project is in Nigeria and is fed by gas from its fields
in the area.
Source: www.bloomberg.com
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