PATRICK SMITH and LUCY KOMISAR
In this exclusive report, we examine how international companies and politicians ran Africa’s biggest corruption scandal on the back of a $6bn gas export project
US Vice-President Dick Cheney is embroiled in Africa’s biggest corruption scandal following an admission of guilty by his business associate Albert Jackson Stanley in September for coordinating over $180m of bribes on behalf of a consortium led by Halliburton, the US’s biggest and most profitable oil and gas services company.
According to documents obtained by The Africa Report as well as eye-witness accounts, Halliburton and three other companies paid the bribes to win a contract to build a $6bn liquefied natural gas (LNG) export project on Nigeria’s Bonny Island . Run by Nigeria LNG (NLNG), this is Africa’s biggest industrial project and should be its most profitable.
Nigerian investigators have discovered that their country has lost hundreds of millions of dollars through over-priced contracts and bribes linked to the project. And in August, Nigeria’s House of Representatives heard evidence suggesting that the country could be losing billions of dollars through the under-pricing of its gas exports. The current average spot market price for gas is about $8 for a million British Thermal Units (MMBTU), with some customers paying as much as $23 per MMBTU. Yet consultants linked to the multinational companies involved in the gas project negotiated supply contracts for Nigeria to sell the gas at between 70 cents and $3 per MMBTU.
Stanley’s guilty plea to the US Department of Justice on 3 September states that many of the bribes on behalf of Halliburton were paid when Cheney was chief executive and chairman of the company from 1995-2000, immediately prior to his election as Vice-President of the US under George W. Bush. When asked about these payments in the 2004 election campaign, Cheney dismissed the allegations as a smokescreen and said the charges are false. Stanley has also admitted taking $10.8m from the bribe fund for his personal benefit.
It was Cheney who appointed Stanley as president of Halliburton’s wholly-owned Kellogg Brown & Root (KBR) subsidiary in 1998: We took Jack Stanley to head up the organization and that has helped tremendously, Cheney said at the time.
Stanley was number three in the Halliburton hierarchy beneath David Lesar (now chief executive) and Cheney.
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Cheney’s office in the White House was more taciturn about his relationship with Stanley , refusing to comment on pending litigation. It was only after Britain , France , Nigeria and the US launched investigations into Halliburton’s involvement in the corruption syndicate five years ago that the company tried to distance itself from Stanley .
In fact, Stanley’s decision to plead guilty on 3 September 2008 to offences under the US Foreign Corrupt Practices Act could prove to be very bad news for Halliburton. The US Department of Justice may charge other top Halliburton officials in the coming months. US investigators have already subpoenaed several officials from Halliburton and other companies in the syndicate.
US Justice Department officials have also questioned the willingness of the company to help the investigation. A Halliburton filing in April last year said: The government has expressed concern regarding the level of our cooperation.
How vulnerable is Cheney in this painstaking investigation into Halliburton’s corrupt operations in Nigeria ? The US’s rigorous anti-corruption laws cover cases where senior managers and directors of a company knew that bribes had been paid to individuals, or it is reasonable to suppose that they should have known. If convicted, companies face heavy fines and a bar on bidding for government contracts. Their senior executives risk substantial terms in jail.
No one has produced evidence showing that Cheney played an active role in running the corruption syndicate; that, according to US prosecutors, was Stanley’s role. However, given that Halliburton’s contract to build Nigeria’s gas plant was one of its biggest globally, the US prosecutors could argue that it was reasonable to suppose that Cheney should have been aware of the huge bribes being paid and the company’s links to a complex system of fraudulent financing and tax evasion schemes. It looks bad if Cheney knew and didn’t act, it could be worse if he didn’t know, according to one Washington lawyer.
For example, Cheney was chairman of Halliburton when the construction consortium it led paid $37.5m on 18 March 1999 to British lawyer Jeffrey Tesler for consultancy services on the Nigeria gas plant. Along with Stanley , Tesler was a central figure in the corruption syndicate on the Nigerian project.
It was Tesler who set up much of the international payments system, from his rundown office in London s Seven Sisters suburb. Setting up front companies in Madeira and bank accounts in Switzerland , Luxembourg and Monaco , Tesler moved money from New York to Amsterdam with much of it ending up in payments to Nigerian officials and a Nigerian political party, according to Stanley .
The US prosecutors said the bribe payments started in 1995 and continued until 2004. Nigeria’s former oil minister Don Etiebet told The Africa Report about commercial foul play in the award of the initial $3.6bnn construction contract for Nigeria’s LNG project in September 1994. That initial award was critical: it was almost inevitable that the successful consortium would win the subsequent contracts worth over $6bn to expand the project.
Although the LNG project was under Etiebet’s authority as minister at the time of this contract award, he says he was shunted out of the decision-making process after he had raised concerns about bidding procedures. Etiebet was sacked five months later by Nigeria’s military ruler, General Sani Abacha who, he claimed, then targeted him for elimination.
The successful construction consortium led by Halliburton and its subsidiary KBR include France’s Technip, Italy’s Snamprogetti and the Japanese Gas corporation forming an entity known as TSKJ. Their rivals for the contract were led by another US corporation Bechtel, in conjunction with Japan’s Chiyoda , France’s Spiel Batignolles and Italy’s Ansaldo.
Playing Favourites
In a letter to Muhammadu Dikko Yusufu, chairman of NLNG, dated 22 September 1994, Etiebet wrote that the NLNG board had seriously tinkered with the integrity of the pending contract award. The state-owned Nigerian National Petroleum Corporation (NNPC) has a 49% stake in NLNG, while foreign Royal Dutch/Shell, France’s Total and Italy’s ENI collectively hold 51%.
After a meeting with representatives of the rival consortium led by Bechtel in London in September 1994, Etiebet said he had concluded that there had been breaches of commercial confidentiality, which may have benefited the TSKJ consortium. Notes of meetings attended by the Halliburton-led consortium indicate they had the full political support of Gen. Abacha’s military regime. In another letter at the time, Etiebet said the board had been told from certain quarters which group was the preferred contractor.
Shortly after the contract was awarded to TSKJ, Etiebet says he had a call from a consultant claiming to work for the winning consortium who wanted to set up an arrangement for him. He told Etiebet his code name was London weather. I told him I would never trust London weather! Etiebet says.
With company officials ushered into meetings by Lebanese businessman Ely Calil (who as Technip’s agent had long promoted the LNG project in Nigeria ) and Abacha’s financial advisor Gilbert Chagoury at London’s Dorchester Hotel, Etiebet paints a picture of extravagant confusion among the rival consortia and their associates.
Bribery junction
The Africa Report spoke to Etiebet shortly after we obtained details of more than $180m of payments made by Tesler’s Gibraltar-based Tri Star. The central allegation is that the TSKJ consortium set up companies in Madeira , Portugal -LNG Servicos, TSKJ I, TSKJ II to divert commissions to Tesler’s Tri-Star, which he passed to Western and Nigerian businessmen and politicians. Tesler’s lawyer in Paris,Thierry Marembert, says that the French investigation into TSKJ and the Nigerian LNG project was sparked by KBR’s corporate rivals and fuelled by anti-American sentiment in French political circles.
The reality is more prosaic. The French investigations, which prompted the US Justice Department to investigate the role of multinational companies in the project, date back to what one Paris lawyer in the trial of Georges Krammer, a former director general of Technip, called a crossroads of corruption. French investigators probing the operations of the Elf-Aquitaine oil company had accused Krammer of paying 3m euros in illegal commissions in Africa and Asia . Krammer responded that the commissions weren’t illegal but were company policy and openly declared as such.
However, Technip’s management said Krammer wasn’t supposed to make such payments and left him to face charges of misappropriating the money.
Krammer’s detailed explanation of the payments system and the political and commercial beneficiaries suggested an international conspiracy. French judge Renaud Van Ruymbeke, who was already investigating a complex case involving another former Nigerian oil minister, Dan Etete, and the ownership of an oil block, was selected to lead the investigation into the LNG project.
In the early months of the investigation in 2003, Van Ruymbeke’s team led the way, interviewing Tesler at length, obtaining payment details from banks in Switzerland , Monaco and Luxembourg and receiving information from Nigerian officials. It was Van Ruymbeke’s discoveries that prompted the US Department of Justice to open its investigation into the affair in 2004; and Van Ruymbeke has had several meetings with top US investigator Mark Mendelsohn. At the same time Nigeria’s Independent Corrupt Practices Commission and the National Assembly launched their own investigations into the gas project.
Grounding capital flight
A division of labour has emerged in which French investigators target Technip, the US investigators target Halliburton, Britain’s Serious Fraud Office go for London-based Tesler and Nigerian investigators are looking at their nationals who received bribes, especially the family and business associates of Abacha, who is reckoned by Nigerian government lawyers to have stolen some $4bn from the Nigerian treasury between assuming power in November 1993 and his sudden death in June 1998. Bribes and other payments linked to the gas project made a substantial contribution to the Abacha fortune, investigators say.
The Swiss authorities extradited Abacha’s son, Abba, from Germany in 2005 and have charged him with money laundering and fraud amounting to several hundred million dollars, again some of the funds are linked to payments on the gas project. Swiss investigating judge Daniel Dumartheray said that his country had already returned $450m, which had been stolen by the Abacha family, to the Nigerian treasury. Some of those funds were also laundered through Kenya’s political banks (so called because they were under the control of former President Daniel arap Moi’s regime) on behalf of the Abacha family.
Since 2004, US investigators have broadened their remit to cover Halliburton’s operations in Nigeria over the past 20 years, and its relations with other multinational companies such as Shell. As a sign of how bad things could get for Halliburton, the company now says it is no longer able to estimate a range of its possible losses from a successful prosecution by the US authorities and subsequent claims against it by third parties.
The US and other investigations could result in third-party claims against Halliburton, the company admits, for special, indirect, derivative or consequential damages.
Halliburton’s filing with the New York-based Securities & Exchange Commission confirms that the Nigerian government has given notice that it has entered a civil claim as an injured party to the French investigation into the bribes surrounding the gas plant.
This opens up the possibility that Nigeria could reclaim some $180m from the slush-fund linked to the gas project and pursue broader claims for damages against the contractors, if the companies were found guilty of criminality in US and French courts. This would be a rare example of an African government taking action against multinational companies running corrupt operations with previous regimes. After years of legal wrangling and conferring with the World Bank, Lesotho has successfully prosecuted and fined Acres International for corruption linked to the Highland Water Project and the World Bank has put the company on its prohibited contractors list.
If Nigeria’s own case against Halliburton is successful, it would be a huge disincentive for multinational companies to organize corruption schemes in Africa , no matter how complacent the incumbent government may be. A successor government may see benefit in holding the deal up to scrutiny and going to law. With the required political will in Abuja and Washington , the prosecution of Africa’s biggest corruption scandal may just become a critical turning point in the continent’s battle against graft and capital flight.
