Press Release / July 4, 2014

Italian authorities raid ENI in fresh investigation into billion dollar Nigerian oil scandal

Today it was reported that Italian financial police raided the headquarters of the oil company ENI, Italy’s largest company. The raid is part of a fresh investigation into the Italian oil giant's role in acquiring Nigerian oil block OPL 245, for which subsidiaries of Eni and Royal Dutch Shell agreed to pay US$1.1billion in 2011. The money was paid by Eni and Shell to the Nigerian government, which then paid the same amount to Malabu Oil and Gas, a company owned by former oil minister Chief Dan Etete.

Etete had awarded the oil block to his own company when he was oil minister under corrupt Nigerian dictator Sani Abacha. In effect, he gave himself one of the most valuable oil blocks in Nigeria and, with this deal was now cashing in.

“The Italian authorities decision to investigate Eni’s role in the corrupt OPL 245 oil deal is excellent news for the people of Nigeria. They deserve to know how $1.1bn was diverted away from the public purse, and what role companies and individuals may have played in this heist. This case shows precisely why the US needs to establish a strong transparency rule that requires oil companies to publish these kinds of payments so that they don’t go missing,” said Simon Taylor, Global Witness Director. 

Shell and Eni have denied paying money to Malabu, and it is true that they paid the money to the Nigerian government.  However court evidence has revealed that Shell and Eni knew that the payment was going to Malabu and that Shell had negotiated directly with Etete over “iced champagne”.

The details of the deal were undisclosed until middlemen who acted for Malabu, sued for unpaid fees in London and New York.  Evidence in the court cases between the middlemen and Malabu revealed the exact payments and arrangements between the parties and showed that the Nigerian government effectively acted as a “straw man”.  The High Court in London made a finding of fact that Etete was a real owner of Malabu at all material times.

Over coming months, the US Securities and Exchange Commission (SEC) needs to write an amended rule to implement Provision 1504 of the Dodd-Frank Act, which requires oil, gas and mining companies to disclose payments down to a project level.  Some oil companies and their lobby group, the American Petroleum Institute (API), have pushed for the SEC to aggregate these payments, an approach that would anonymise the companies and their payments from public view. 

“This case shows why secrecy around payments is a massive risk for investors – the SEC should treat the API’s demands for secrecy with the contempt they deserve,” said Taylor. “We need transparency in payments to governments on a project by project basis, so that citizens can really follow the money and scandals like this don’t happen.” 

The OPL 245 deal has been investigated over the past few years by Global Witness together with Corner House, Re: Common and the Nigerian anti-corruption campaigner Dotun Oloko.

Infographic:

'What Nigerians could have done with $1.1bn?' - Available here: http://www.globalwitness.org/shellagm/

Notes to Editor:

  1. Dan Etete has at various times claimed to be only a consultant for Malabu. However he was widely believed to be a major shareholder in Malabu, he did in fact maintain an interest in Malabu Oil and Gas through the use of nominees allowing Dan Etete to hide his interest in Malabu. Lady Justice Gloster of the UK High Court of Justice Queen’s Bench Division Commercial Court ruled “I find as a fact that, from its incorporation and at all material times, Chief Etete had a substantial beneficial interest in Malabu”, Approved Judgement, Case 2011 FOLIO-792 17 July 2013. The Nigerian House of Representatives investigation into the case similarly found Dan Etete is the 30% owner of Malabu.
  2. In a US legal case the Honorable Bernard J. Fried described the Federal Government of Nigeria’s role in the deal as that of “the proverbial ‘straw man’”, who was “holding $1.1billion for ultimate payment to Malabu”. Order to Show Cause with temporary Restraining Order, “In the Matter of Arbitration between International Legal Consulting Limited and Malabu Oil and Gas Limited and J. P. Morgan Chase and Co and all of its subsidiaries and affiliates, including but not limited to JP Morgan Chase Bank, NA”, Supreme Court of the State of New York, County of New York,” Index no 651733/2011, 22 July 2011, p.10. Edwards, Angell, Plamer and Dodge on behalf of Malabu to Clifford Chance LLP, 15 July 2011.

Contacts:

For any queries, please contact:

Simon Taylor, Director, Global Witness [email protected]globalwitness.org +44 7957 142 121

Barnaby Pace, Oil Team, Global Witness [email protected] +44 7969 295078