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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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