emerged Wednesday that the China Petroleum and Chemical Corp., known as Sinopec,
is being investigated by the United States’ authorities over allegations of
bribe payments totalling $100 million to Nigerian officials to resolve a
business dispute.
According to Bloomberg investigations, the U.S.
Securities and Exchange Commission and Justice Department, are investigating
claims that lawyers acting as middlemen for Sinopec allegedly funnelled illicit
payments to the yet-to-be-named Nigerians from its Swiss unit through New York
and California.
The report noted that the
payments were allegedly meant to resolve a $4 billion dispute between Addax
Petroleum unit in Geneva and the Nigerian government over capital costs like
drilling, tax breaks and royalties between the company and Nigeria’s oil
corporation, Nigerian National Petroleum Corporation, NNPC.
Sinopec
bought Addax in 2009 for about $7.8 billion in order to build a corporate
presence in Geneva and expand its oil production in Africa.
Earlier,
beginning in 2001, Addax had been operating in Nigeria under a deal with the
Nigerian government which saw it benefit from a Side Letter agreement that
granted it tax breaks and reimbursement for capital costs.
But trouble
started in 2014 when the Nigerian government decided that the Side Letter should
no longer apply and demanded repayment of $3 billion of past benefits from
Addax.
By the end of 2014, details of the investigations revealed that
Addax had filed a lawsuit against the government to protest the decision as it
also sought reimbursement of at least $1 billion from the Nigerian authorities,
contending that the NNPC, in a practice known as “overlifting”, had taken more
than its share of crude allotments.
Little was known about the case until
allegations of bribery surfaced in January of this year after Deloitte, an
auditing firm, resigned as Addax’s auditor because it couldn’t obtain
“satisfactory explanations” for $80 million paid to an engineering company for
Nigerian construction projects in 2015.
The auditing firm said that
amount appeared excessive for the work performed “and their purpose and timing
raise issues which have not been resolved.”
Investigations, however,
revealed that on May 25, 2015, shortly after many of those payments were
allegedly made, Addax and the Nigerian government reached a settlement that was
approved by the Nigerian High Court.
Sahara Reporters, a Nigerian online
platform, reported that former President Goodluck Jonathan, with just three days
left in office, approved the settlement at the urging of the then Attorney
General, Bello Adoke. Mr. Jonathan’s agreement validated the original terms of
the Side Letter, effectively nullifying Nigeria’s demand that Addax repay $3
billion, a source told Bloomberg.
Meanwhile, the administration of
President Muhammadu Buhari, left the original terms of the Side Letter intact
but planned to revoke its terms effective Jan. 1, 2016, a decision that would
deny Addax at least $1 billion in future benefits and end reimbursement
claims.
It is, however, unclear if there’s any other litigation pending
between Addax and Nigeria.
When contacted, officials of the Nigerian
government and the NNPC declined comments.
Payments details
In
its filing, Deloitte revealed additional payments made by Addax from 2015
exceeding $20 million, ostensibly to “legal advisers” in Nigeria and the U.S.
from bank accounts in Nigeria and the Isle of Man, a British crown
dependency.
“(Deloitte) received a number of whistle-blowing allegations
from within and outside Addax, some of which allege that such payments have been
made to bribe foreign government officials and that certain amounts have been
embezzled by certain members of management within Addax Petroleum Group,” the
firm said.
Trouble started in February when Geneva prosecutor Yves
Bertossa began a probe into Deloitte’s allegations, prompting Swiss law
enforcement officials to conduct a raid on the Geneva offices of Addax in
March.
Addax CEO Zhang Yi and Chief Legal Officer Guus Klusener were
jailed under preventative detention, as allowed under Swiss law. They were,
however, released three weeks later.
Barely four months later, Mr.
Bertossa closed the probe but neither the company nor its executives were
charged. Although he criticised the company for what he called sloppy
accounting, he said that no criminal intent could be established, adding that
Addax had taken steps to overhaul its staffing and anti-corruption
processes.
But the U.S. authorities are looking into whether payments
handled by an unidentified Nigerian lawyer who is a member of the California bar
were used to pay some of the alleged bribes. A source told Bloomberg that the
lawyer was hired to advise Addax executives on the terms of the settlement with
the Nigerian government.
According to a Bloomberg’s source, the U.S.
probes are in their early stages, and no action is imminent. The SEC is handling
its inquiry through its Los Angeles office, and the Justice Department
investigation is being led by the U.S. attorney’s office.
Earlier in
November 2012, Total of France agreed the $2.5 billion sale of a minority stake,
put at about 20 per cent of its stake in a Nigerian oilfield, to
Sinopec.
The OML 138 oil block includes the Usan oilfield, which began
producing in February 2012, and is jointly owned with Chevron, Exxon and
Canada’s Nexen.
In January 2017, the NNPC awarded its 2017 crude oil term
contracts to 39 companies.
The contracts covering about 1.31 million
barrels per day (bpd) of crude oil were awarded to 18 Nigerian companies, 11
international trading houses, five foreign refineries, three national oil
companies and two “NNPC Group trading arms,” the firm said in a statement.
Sinopec was among the winners.
