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USA/Nigeria: Halliburton Fallout

AfricaFocus Bulletin
Apr 14, 2009 (090414)
(Reposted from sources cited below)

Editor's Note

Fallout is continuing from the long-drawn-out case of Halliburton and Kellogg Brown & Root bribery of Nigerian officials for contracts for a liquefied natural gas plant in Nigeria. In February the two companies agreed to a settlement with the U.S. Department of Justice and Security Exchange Commission, including payment of a total of $579 million in fines. Further investigations are under way in five countries; and a detailed expose in Nigeria's Next newspaper has accused three former heads of state of being involved with the payments.

This AfricaFocus Bulletin continues excerpts from the Next investigative report (http://tinyurl.com/dfyb7m), as well the February statement from the U.S. Security and Exchange Commission (http://www.sec.gov/news/press/2009/2009-23.htm) Additional details and updates can be found on the Next website (http://www.234next.com) and on http://allafrica.com/nigeria

For previous AfricaFocus Bulletins on Nigeria, visit http://www.africafocus.org/country/nigeria.php

++++++++++++++++++++++end editor's note+++++++++++++++++++++++

The Halliburton bribe takers

By Dapo Olorunyomi and Musikilu Mojeed

April 1, 2009

[Excerpts only. Full text available at the Next website - http://www.234next.com - link directly to article at http://tinyurl.com/dfyb7m]

Our so-called leaders are nothing but common bribe takers, according to US investigators who have got to the bottom of the Halliburton scandal.

The fingered personalities include three former presidents; Obasanjo, Abacha,and Abubakar- as well as a who's who of Nigeria's political and business elite.

At least three of our former presidents, Sani Abacha, Abdusalami Abubakar, and Olusegun Obasanjo, received millions of dollars in bribes from American and European contractors retained to build Africa's first liquefied natural gas plant in Bonny, Rivers State, according to US law enforcement officials.

Also enmeshed in the vast and formalized bribery scheme is a long line of ministers, bureaucrats, top politicians, state and local officials and former oil minister Dan Etete, according to American investigators.

This cast of characters, charged with running the affairs of 150 million people in the heart of Africa received stacks of US dollar bills in briefcases and sometimes in bullion vans.

In other cases they received their payoffs via electronic bank transfers involving such financial institutions as Citibank.

In all, these eminent Nigerians accepted at least N27 billion in bribes from the oil services companies in exchange for billions of dollars in contracts to build our liquefied natural gas plant, US investigators say.

American authorities are now pursuing their own citizens and corporations, notably the oil services company Halliburton, in connection with the scandal.

Halliburton has agreed to pay $579 million in fines and many of its agents face long jail terms.

Our law enforcement authorities, notably Attorney General Michael Aandoaka, have lately been making noises but have in reality done little to pursue those indicted in this scandal, which reveals us as a nation that fully justifies its reputation as one of the world's leading cesspits for corruption and unrestrained graft.

How it all started

The origin of the Nigerian Liquified scandal can be traced back to 1994, when bids were submitted to build Africa's first liquefied natural gas plant in Bonny, Rivers State, at a cost of $6 billion.

A joint venture company, TSKJ, formed in equal partnership between a French engineering company, Technip; an Italian engineering company, Snamprogetti; a US engineering company, KBR,of the Halliburton group; and the Japanese engineering and construction company, JGC, amplified corruption in Nigeria to unprecedented levels.

Soon after TSKJ was formed, it set up three companies registered in Madeira, Portugal to recruit two "consulting companies," Tri-Star Investment Ltd, and Marubeni Inc, with the mandate to bribe Nigerian "officials of the executive branch of government, NNPC and NLNG officials, and political party leaders," according to a sealed indictment filed at the United States District Court in Houston, Texas.

Three early decisions taken by TSKJ were: hiring a British lawyer, Jeffery Tesler, to coordinate the affairs of TriStar; signing up Wojciech Chodan, an American deal maker resident in the UK to assist him and contracting Messrs Matsuda, Endo, and Lida to run Marubeni.

According to the court deposition of Mr.Tesler, in a clinical application of the principles of division of labour,TSKJ mandated the Tri-Star team, which it disingenuously called "cultural advisors," to focus only on bribing the "senior level officials", while the Marubeni team was instructed to restrict itself to bribing the "lower level Nigerian officials."

Thus while Tristar was incorporated in Gibraltar and had a budget of $130 million; Marubeni, incorporated in Japan, had a budget of $50 million.

Our investigations in the United States, France, the UK and in Nigeria spanned a three week period and were based on court indictments, depositions and interviews.

Bribery in a customary manner

Sani Abacha, Nigeria's late Head of State, was the first significant point of contact for the TSKJ team, according to lawyers of the United States department of justice, who claimed in court depositions that, in August 1994, the CEO of KBR, Albert Jackson Stanley, and top executives of TSKJ struck an agreement with Abacha "to do business in a customary manner."

Towards this end, a "cultural committee" of the sales and senior personnel officers of the four joint venture companies, as well as agents of Marubeni was put together to "consider how to implement, but hide, the scheme to pay bribes" to Nigerian officials.

The "cultural committee" in October 1994 worked out a programme of what it called "the downloading and offloading of payments through subcontractors and vendors."

According to the U. S. Department of Justice, once a plan of how to distribute the bribes and a scheme to evade US bank monitors were resolved, the "cultural committee" gave Mr. Tesler the green light to meet the then petroleum minister, Dan Etete, to discuss and agree on the modalities.

This meeting held on November 02 1994, when Mr. Tesler handed Mr. Etete the bribe schema to secure Train 1 and Train 2 of the Liquified Natural Gas(LNG) contract.

It was made clear that $60 million was available to be shared. Out of this, $40 million would go to Mr. Abacha, while others would have to scramble for the remaining $20million.

...

What happened after Trains 1 and 2

Having put the Train 1 and 2 contracts in the can, TSKJ turned its gaze on the Train 3 contract. For this, Stanley flew to Abuja again in the second quarter of 1997, with the sole mission of asking Mr.Abacha to recommend a trusted front man to collect his bribe.

Shortly after he died on June 8, 1998, Mr.Tesler promptly erased him from the list of bribe beneficiaries, substituting him with the new helmsman, Abdulsalami Abubakar.

To keep the entire scheme on the rails, Stanley flew back to Abuja on February 28 1999, asking Mr. Abubakar, to recommend a trusted front man to collect his bribe.

Anxiety about the election

With an election already fixed for May 1999, TSKJ was anxious to wrap up the Train 3 contract before a change of power in Abuja.

Another meeting was held in London on March 05 1999, to come up with a strategy to achieve this objective.

One week after, TSKJ won the Train 3 contract for $1.2 billion. On March 18, 1999, TSKJ paid a kickback of $32.5 million into TriStar's account, to bribe the Nigerian officials who facilitated the award of the contract.

Even though the lower class officials were eventually catered for in the bribe scheme, they always got the short end of the stick.

Thus, while the senior Nigerian officials had their bribes promptly paid, it took one year after TSKJ had signed the Train 3 contract before Marubeni lined the pockets of the lower class officials.

Computing the pay-offs up to January 2001, American prosecutors believe that a $2.5 million bribe was "off loaded" directly to the Swiss account of Mr. Abubakar's frontman.

For four days last week, NEXT sought unsuccessfully, through his media consultant, to reach the former Head of State, sending him details of the court indictments but he declined to comment.

After the transition to civil rule in 1999, the United States Department of Justice attorneys stated that Mr.Stanley met with the new President, Olusegun Obasanjo and the then Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Gauis Obaseki, in Abuja on November 11, 2001, to designate "a representative with whom the joint venture [TSKJ] should negotiate the [obligatory] bribes in support of the award of the [forthcoming] Trains 4 and 5 contracts."

One month later, on December 20 in London, Mr. Obaseki met Mr. Chodan and Mr.Stanley over lunch, to discuss the details of the Trains 4 and 5 contracts.

On Christmas Eve, TSKJ signed a $51 million deal with TriStar, to bribe Nigerian officials for the Trains 4 and 5 contracts.

Three months later, in March 2002, TSKJ won the Train 4 and 5 contract for $3.6 billion. Mr. Obaseki declined to respond to these charges when NEXT spoke to him on the phone.

,,,

Bullion van bribery

Both the Department of Justice and the Security and Exchange Commission's attorneys, corroborated each other's claim that $1million in $100 bills was deposited "to the NNPC official" at the NICON Hilton Hotel in a "pilot's briefcase" for onward delivery to the PDP before the 2003 general elections.

The remaining $4 million was, according to the court filings, delivered in naira in a bullion van.

Audu Ogbe who was the PDP chairman at the time denied any knowledge of this and loudly called for an investigation.

A spokesman for Vincent Ogbulafor, the current chairman, said in Abuja last week that Ogboluafor also discounted this claim.

Phenomenal greed and sleaze

The planning, the scale and the sophistication of TSKJ's web of corruption and its capacity to ensnare three successive heads of state, coupled with the elaborate scheme to set up corrupting agencies for lower and senior officials, stands out in the annals of official corruption in Nigeria.

The ruling class was identified and broken down into its constituent parts: political, bureaucratic, and technocratic so as to isolate the beneficiaries of the graft.

TSKJ came fully prepared and well primed to sustaining this code named scheme over the decade it would take to come to fruition.

The multijurisdictional impact of the corruption is still unprecedented in Nigeria.

...

Investigating KBR

KBR or its principal officers are facing investigation and prosecution in at least five countries today.

Officers from Britain's Serious Fraud Office(SFO), arrested Mr. Tesler, now 60, at his offices in Tottenham, London, on March 05.

He is to be extradited to the USA to face further questioning by the Department of Justice.

Also arrested with Mr.Tesler was Mr.Chodan, 71, who as an agent for Halliburton, wrote detailed diaries, describing meetings with the bribe consortium and representatives of the international oil companies.

From the United Kingdom, Britain's Serious Fraud Office confirmed that there is an on-going investigation into the allegations of bribery and corruption against British businesses in Nigeria.

Since 2004, the Economic and Financial Crimes Commission has been investigating the conduct of Halliburton/KBR.

The investigation is ongoing, according to sources in Abuja.

Recently, the Swiss Justice department followed the steps of the Police Judiciare of France, which in 2003, started an investigation which revealed fraudulent Halliburton payments to Jeffery Tesler.

In their home country, the United States, KBR and Halliburton admitted last month to violations of the Foreign Corrupt Practices Act, by engaging in a decade-long bribing scheme to secure contracts in Nigeria.

The companies also agreed to pay a combined fine of $579 million to settle criminal and civil charges brought by both the United States Securities and Exchange Commission (SEC), and the United States Department of Justice (DOJ) for violation of the Foreign Corrupt Practices Act (FCPA).

The indictment of Mr.Tesler and Mr.Chodan, in all likelihood, will also open a floodgate of other suits.

This month the president gave full backing to the Attorney General, Michael Aondoakaa, to again investigate Halliburton for tarnishing the image of the country by bribing its officials.

Mr. Aaondoaka has assembled a team of local lawyers and briefed American-based financial crimes experts, to institute a suit against KBR and Halliburton for soiling the name of the country through the bribery schemes.

Also last Tuesday, the Nigerian Senate called on the Federal Government to identify the Nigerians involved and proceed to prosecute them.

Smart Adeyemi,one of the eight senators who sponsored the Bill said "the matter is so huge it can erase the prestige of the Senate and indeed of the Nigerian government to be legitimate, if this is swept under the carpet."

...

In the 2003-2007 House of Representatives, when Chudi Offodile, as chairman of the House committee on pubic petitions, investigated the Halliburton scandal, he said he repeatedly ran into a brick wall. The Offodile committee, however, recommended that all companies in the TSKJ consortium, as well as Halliburton be excluded from future contracts in the country.

The House sitting of September 2004, approved the committee's recommendations.

In his response to the current phase of the scandal, Mr.Offodile, in a pained response, lamented how the NNPC and the Federal Government subverted all the best intensions of the legislature.

In spite of the legislators recommendations, NNPC went ahead to give KBR the contract to build the "topsides of the FPSO for Agbami Deep offshore field, owned by NNPC, ChevronTexaco Petrobras and Statoil... [and that the] same KBR formed a Joint Venture with Snamprogetti, and JGC, all three Companies were members of the notorious TSKJ consortium and still won a $1.7Billion EPC contract to build the Escravos Gas to Liquids Project, owned by the NNPC and Chevron-Texaco,'' said Mr. Offodile.

He recounted a meeting in June 2005 when he accompanied then House Speaker Aminu Bello and Deputy Speaker Austin Opara, to brief President Obasanjo on the true situation of the Halliburton/KBR.

"We were all seated at the President's conference room, the Halliburton team led by Mr. Andy Lane, the Chief Operating Officer, the NNPC team, led by the Group managing Director, Funsho Kupolokun , " a few minutes later, one of the presidency staff walked up to the Deputy Speaker and informed him that I would not be part of the meeting."

Offodile said adding that he was thrown out of the meeting. He described the situation as frustrating and painful because "once again, the Halliburton enforcers had their way."

...


SEC Charges KBR and Halliburton for FCPA Violations

http://www.sec.gov/news/press/2009/2009-23.htm

[For more information, contact:

Antonia Chion Associate Director, SEC's Division of Enforcement (202) 551-4842

Kara Novaco Brockmeyer Assistant Director, SEC's Division of Enforcement (202) 551-4767

See also the Department of Justice press release at http://www.usdoj.gov/opa/pr/2009/February/09-crm-112.html]

Washington, D.C., Feb. 11, 2009 - The Securities and Exchange Commission today announced settlements with KBR, Inc. and Halliburton Co. to resolve SEC charges that KBR subsidiary Kellogg Brown & Root LLC bribed Nigerian government officials over a 10-year period, in violation of the Foreign Corrupt Practices Act (FCPA), in order to obtain construction contracts. The SEC also charged that KBR and Halliburton, KBR's former parent company, engaged in books and records violations and internal controls violations related to the bribery. Additional Materials

KBR and Halliburton have agreed to pay $177 million in disgorgement to settle the SEC's charges. Kellogg Brown & Root LLC has agreed to pay a $402 million fine to settle parallel criminal charges brought today by the U.S. Department of Justice. The sanctions represent the largest combined settlement ever paid by U.S. companies since the FCPA's inception.

"FCPA violations have been and will continue to be dealt with severely by the SEC and other law enforcement agencies," said SEC Chairman Mary L. Schapiro. "Any company that seeks to put greed ahead of the law by making illegal payments to win business should beware that we are working vigorously across borders to detect and punish such illicit conduct."

Linda Chatman Thomsen, Director of the SEC's Division of Enforcement, said, "This case demonstrates the close and cooperative working relationships that have developed in FCPA investigations among the SEC, the U.S. Department of Justice, and foreign law enforcement agencies and securities regulators."

Antonia Chion, Associate Director of the SEC's Division of Enforcement, added, "The SEC will not tolerate violations of the FCPA, regardless of the lengths to which public companies will go to structure their corrupt transactions to avoid detection. Multi-national companies should take heed that attempting to conceal bribes by funneling them through intermediaries or offshore entities will not be successful."

Acting Assistant Attorney General Rita M. Glavin of the Criminal Division at the Department of Justice said, "Today's guilty plea by KBR ends one chapter in the Department's long-running investigation of corruption in the award of $6 billion in construction contracts in Nigeria. This bribery scheme involved both senior foreign government officials and KBR corporate executives who took actions to insulate themselves from the reach of U.S. law enforcement. The successful prosecution of KBR, and its agreement to pay a more than $400 million fine, demonstrates that no one is above the law, and that the Department is determined to seek penalties that are commensurate with, and will deter, this kind of serious criminal misconduct."

Kellogg Brown & Root LLC's predecessor entities (Kellogg, Brown & Root, Inc. and The M.W. Kellogg Company) were members of a four-company joint venture that won the construction contracts worth more than $6 billion. In September 1998, Halliburton acquired Dresser Industries, Inc., the parent company of The M.W. Kellogg Company.

The SEC alleges that beginning as early as 1994, members of the joint venture determined that it was necessary to pay bribes to officials within the Nigerian government in order to obtain the construction contracts. The former CEO of the predecessor entities, Albert "Jack" Stanley, and others involved in the joint venture met with high-ranking Nigerian government officials and their representatives on at least four occasions to arrange the bribe payments. To conceal the illicit payments, the joint venture entered into sham contracts with two agents, one based in the United Kingdom and one based in Japan, to funnel money to Nigerian officials.

The SEC's complaint alleges that the internal controls of Halliburton, the parent company of the KBR predecessor entities from 1998 to 2006, failed to detect or prevent the bribery, and that Halliburton records were falsified as a result of the bribery scheme. In September 2008, Stanley pleaded guilty to bribery and related charges and entered into a settlement with the SEC.

The SEC alleges that officials of the joint venture formed a "cultural committee" to decide how to carry out the bribery scheme. The committee decided to use the United Kingdom agent to make payments to high-ranking Nigerian officials and to use the Japanese agent to make payments to lower-ranking Nigerian officials. As the joint venture was paid for work on the construction project, the joint venture in turn made payments to the Japanese agent and to the Swiss and Monaco bank accounts of the United Kingdom agent. The total payments to the two agents exceeded $180 million. After receiving the money, the United Kingdom agent made substantial payments to accounts controlled by Nigerian government officials, and beginning in 2002 paid $5 million in cash to a Nigerian political party.

The SEC's complaint further alleges that, after the Dresser acquisition, Halliburton failed to devise and maintain adequate internal controls to govern the use of foreign sales agents and failed to maintain and enforce the internal controls it had. Halliburton's due diligence investigation of the United Kingdom agent failed to detect or prevent the bribery scheme. Halliburton conducted no due diligence on the Japanese agent. As a result of the scheme, numerous Halliburton records contained false information relating to the payments to the agents.

Without admitting or denying the SEC's allegations, KBR and Halliburton have consented to the entry of a court order that (i) permanently enjoins KBR from violating the anti-bribery and records falsification provisions in Sections 30A, 13(b)(5) and Rule 13b2-1 of the Securities Exchange Act of 1934, and from aiding and abetting violations of the record-keeping and internal control provisions in Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act; (ii) permanently enjoins Halliburton from violating the record-keeping and internal control provisions of the Exchange Act; (iii) orders the companies to disgorge $177 million in ill-gotten profits derived from the scheme; (iv) imposes an independent monitor for KBR for a period of three years to review its FCPA compliance program, and (v) imposes an independent consultant for Halliburton to review its policies and procedures as they relate to compliance with the FCPA. The proposed settlements are subject to the court's approval.

In the related criminal proceeding announced today, the U.S. Department of Justice filed a criminal action against Kellogg Brown & Root LLC, charging one count of conspiring to violate the FCPA and four counts of violating the anti-bribery provisions of the FCPA. Kellogg Brown & Root LLC has pled guilty to each of these counts. Under its plea agreement, Kellogg Brown & Root LLC is required to pay a criminal fine of $402 million and to retain a monitor to review and evaluate KBR's policies and procedures as they relate to compliance with the FCPA.

The Commission acknowledges the assistance of the U.S. Department of Justice, Fraud Section; the Federal Bureau of Investigation; and foreign authorities in Europe, Asia, Africa and the Americas. The Commission's investigation is continuing.


AfricaFocus Bulletin is an independent electronic publication providing reposted commentary and analysis on African issues, with a particular focus on U.S. and international policies. AfricaFocus Bulletin is edited by William Minter.

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