ENI, Shell $1.1B Malabu Oil Bribe Scandal Gets 1st Verdict

by Ike Obudulu Posted on September 21st, 2018

Milan, Italy : An Italian judge on Thursday sentenced two defendants to jail in the first leg of trials of the biggest graft scandal in the global oil industry: the Malabu Oil $1.1 billion bribery scandal involving Eni, Royal Dutch Shell.

The next hearing of the main trial for Eni, Royal Dutch Shell and 13 people is set for Sept. 26.

Nigerian Emeka Obi and Italian Gianluca Di Nardo were found guilty of international corruption and each given four-year jail sentences, three sources with knowledge of the ruling said.

The long-running case revolves around the 2011 purchase by Italian oil company Eni and Anglo-Dutch peer Royal Dutch Shell of Nigeria’s OPL 245 offshore oilfield for about $1.3 billion.

Milan prosecutors allege bribes totaling around $1.1 billion were paid to win the license to explore the field which, because of disputes, has never entered into production.

The main trial – which besides Eni and Shell also involves Eni CEO Claudio Descalzi and four ex-Shell managers including former Shell Foundation Chairman Malcolm Brinded – is expected to drag on for months.

But Obi and Di Nardo, accused of being middlemen and taking illegal kickbacks, had asked for a separate fast-track trial which, under Italian law, allows sentences to be cut by a third.

Thursday’s ruling will not tie the court’s hand in the main trial.

But Barnaby Pace, anti-corruption campaigner at Global Witness, said: “This judgment will send shivers down the corporate spines of the oil industry.”

In an emailed statement, a spokeswoman for Shell said neither Obi nor Di Nardo worked on behalf of the company, adding it was waiting to see the fast-track judge’s written decision.

“Based on our review of the Prosecutor of Milan’s file and all of the information and facts available to us, we do not believe that there is a basis to convict Shell or any of its former employees of alleged offences,” it said.

Also in emailed comments, Eni reiterated it had acted correctly in the purchase of OPL 245, saying it had worked directly with the Nigerian government.

Nigeria’s OPL 245 is one of the biggest sources of untapped oil reserves on the African continent with reserves estimated at 9 billion barrels.

Eni, the biggest foreign oil producer in Africa, has been doing business in Nigeria since 1962 and last year produced 109,000 barrels of oil equivalent per day.

Shell is the biggest foreign investor in the country, producing 266,000 barrels of oil equivalent per day in 2017.

The sources said the Milan judge had ordered the seizure of $98.4 million from Obi and more than 21 million Swiss francs ($21.9 million) from Di Nardo.

Prosecutors had alleged Obi received a mandate from former Nigerian oil minister Dan Etete to find a buyer for OPL 245, collecting $114 million. Di Nardo, they said, took $24 million of that amount for putting Obi in touch with Eni.

The next hearing of the main trial involving Eni, Shell and 13 people is set for Sept. 26.

EARLIER : Pass The $1.1B OPL 245 Envelope – Shell, Eni Brace For Possible Trial In Italy

This Thursday a Milan court is to decide whether to go ahead with criminal proceedings against the oil giant Shell and its Italian partner ENI in connection with the purchase of the rights to a Nigerian oil field.

“Etete can smell the money. If, at 70 years old, he does turn his nose up at 1.2 bilion he is completely certifiable.”

That’s a quote from a confidential email which is embarrassing the oil giant Shell. For years, Shell had strenuously denied that it knew anything about the involvement of convicted money launderer and former Nigerian oil minister Dan Etete in its purchase of the rights to one of Nigeria’s biggest oil fields.

But last week, the British environmentalist and anti-corruption organization, Global Witness, published confidential emails written by a Shell employee. This correspondence, which went right to the top of the Shell management hierarchy, proves that there was a direct link to the convicted Nigerian. After publication, Shell then decided that further clarification of its correspondence was needed. One had to negotiate with Etete “whether one wanted to or not,” it said.

Etete alleged to have distributed bribes

The case, which could soon be the focus of a corruption trial in Italy, dates back to 2011. Shell and the Italian oil giant ENI transferred $1.3 billion (1.2 billion euros) to a back account owned by the Nigerian government. With this payment, the two concerns wanted to secure the rights to one of Africa’s largest oil fields. But a huge share of the money did not end up in Nigeria’s state coffers, it went instead to a company called Malabu which was controlled by Dan Etete. The former oil minister under Nigerian military ruler Sani Abacaha was convicted of money laundering in a separate case in France in 2007.

According to Italian prosecutors and research conducted by Global Witness, Etete was obliged to hand over a substantial fraction of the bribes his company received to high-ranking Nigerian politicians and there is one name that crops up repeatedly. It is Goodluck Jonathan, the former Nigerian president.

Global Witness activists believe that the oil concerns did not only break the law with their deal, they also swindled the Nigerian population. “Five million people are going hungry in Nigeria at the moment. At the same time, money has been taken away from those who are entitled to it – more than a billion dollars. That is one and a half times the sum which the United Nations says is needed to combat Nigeria’s current humanitarian situation,” Pace said.

Environmentalists counting on the Italian courts

Authorities in six countries are involved in investigations into the activities of Shell and ENI. More than $100 million in assets has been frozen in Switzerland and the UK. Court proceedings are expected in Nigeria as well as in Italy. Nigeria’s lower house of parliament has already set up a committee to investigate the award of the rights. The oil field in question is OPL 245 and it is estimated to hold 9 billion barrels of crude.

Pace is placing his hopes in the court case in Italy and says Italian prosecutors have been particularly thorough in their preparation of the case.

“They have been able to assemble a lot of evidence,” he said. Cases of this sort in Italy are generally fought through to the very end rather than being settled out of court. “It is one of those rare cases when we could see manager being forced to account for his action in a court of law,” Pace said.

Shortly before the purchase of the rights to OPL 245, Shell agreed to a payment of $30 million to avoid conviction in another case of suspected corruption. At the time, the concern promised to bolster its internal defenses against corruption. That was just a few months before Shell management received the emails about Dan Etete.

Author

Ike Obudulu

Ike Obudulu

Versatile Certified Fraud Examiner, Chartered Accountant, Certified Internal Auditor with an MBA in Finance And Investments who has both worked for and consulted with some of the world's largest companies on main street and wall street in over 20 countries, Ike brings his extensive reporting and investigations experience to bear on his role as Chief Editor.
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