Yesterday the share price of Cobalt International Energy Inc. dropped nearly 11% after it revealed to investors both second quarter losses and the news that it has received a notice from US authorities.
The US Securities and Exchange Commission (SEC) has told Cobalt they are recommending legal action relating to Cobalt’s dealings in Angola, three years after a Global Witness report exposed Cobalt’s joint venture with a company which turned out to be secretly owned by Angolan officials. Shortly after the SEC investigation became public in February 2012, over US$1 billion was wiped off Cobalt’s market value.
Also yesterday, Global Witness revealed how Cobalt and its partners are paying $350m for a mysterious research centre in Angola, but no evidence can be found that the centre has actually been built. These stories show precisely why the SEC should complement its enforcement effort with stronger transparency regulation to make these payments visible and to reduce the threat of corruption.
Global Witness has long argued for such measures, which are now coming online in the EU as well as the US. The intellectual argument has been won, but US efforts are still being blocked by the oil industry lobby, American Petroleum Institute (API), of which Cobalt is a member. Other API members have even called for Angola to be exempt from the law.
How much more will investors and Angolan citizens lose before companies stop making payments in the dark?
Zorka Milin is a Yale Gruber Fellow at Global Witness.