Nigeria’s federal government on Tuesday secured a major victory in its case against Malabu Oil and Gas after a United Kingdom High Court-ordered JP Morgan Chase, the bank in the middle of the alleged scandal, to release more documents to the lawyers representing Nigeria.
Nigeria had asked the UK court to force the United States bank to disclose more records ahead of a trial in which JP Morgan stands accused of enabling the misappropriation of almost $900 million in state funds.
The court granted the Nigerian application to secure records from top US executives and compliance officers involved in signing off $875 million in payments between 2011 and 2013 relating to the controversial OPL 245 oil licence deal.
Lawyers representing Nigeria said last week that there had been “serious issues” with the US bank’s approach to disclosure, adding that its focus on documents and interactions between staff in Europe was “unduly narrow.”
Delivering the order, Justice Neil Calver said: “A key issue in these proceedings is what JPMC knew and when it knew it,” a report in yesterday’s edition of Financial Times quoted him as saying.
Calver ruled that certain US compliance documents, the significance of which JP Morgan played down at last week’s hearing, were “likely to be relevant to the case on gross negligence.”
The trial is due to start next February after the bank failed in a 2019 attempt to have the lawsuit dismissed.
The 2011 deal was an attempt to end a multi-year battle over the ownership of the lucrative OPL 245 oil licence. However, it ensnared European oil majors Royal Dutch Shell and Eni in corruption investigations in Italy.
The licence, in the years prior, was shuffled back and forth between Shell and Malabu, a Nigerian oil company backed by a former Petroleum Minister, Dan Etete, that was first awarded development rights in 1998, when he was still serving under the late Head of State, Gen. Sani Abacha (rtd).
A Milan court in March cleared the oil companies and their senior and former executives of any wrongdoing, and Etete of corruption charges.
But Nigeria is pushing ahead with its case in London against JP Morgan and seeking compensation of $875 million-plus interest from the bank for facilitating two payments in 2011 totalling $801.5 million and one in 2013 for $74.2 million.
The country alleged that it was a victim of a “fraudulent and corrupt scheme” involving bribes paid to former and current Nigerian politicians and oil executives through the transfer of funds via Malabu accounts.
JP Morgan had argued that it received sufficient approvals from Nigerian authorities before allowing the transfer of funds from a government account to those controlled by Etete.
Nigeria had also argued that JP Morgan breached its duty of care by going ahead with payments out of the government account despite having reasonable grounds to believe they were intended to defraud it. JP Morgan, the government said in court, “took the irrevocable step of paying vast sums away to Malabu”.
It highlighted that JP Morgan had not only notified the UK’s Serious Organised Crime Agency of the proposed payments, it had filed four “Suspicious Activity Reports” in 2011.
A US-based compliance officer for JP Morgan also raised a red flag in 2013, saying in a memo revealed in court that “in light of Malabu’s reported connection to the alleged Nigerian corruption scheme, there would be a great risk presented if JPMC continues to process wires involving Malabu.”
The memo was intended to prepare Pamela Johnson, the bank’s global head of financial crime compliance, for a meeting with then Chief Operating Officer, Mr. Matt Zames, indicating the matter had escalated to the highest ranks of JP Morgan.
The bank is now obliged to share further documentation linked to Johnson and other top US executives, including Lester Pataki and John Gibbons.
In previous hearings, even as the bank said it had “no responsibility” to look behind any payment instructions, the judge said this was not consistent with the agreement the bank had with its client.
After the ruling, Financial Times quoted a representative of the Nigerian government to have said: “It is high time JP Morgan gave a clear and unambiguous account of exactly how the decisions to make these huge payments were made when it was on notice that to pay out risked its customer, Nigeria, being defrauded.”
Last week, fresh documents on the long-standing legal dispute between the federal government and Malabu Oil & Gas showed that JP Morgan may have been alerted by its internal control system that the transfers were questionable.
A report by Bloomberg indicated that JP Morgan Chase & Co. was warned by its compliance team over the “great risk” of corruption just days before it made the last of three transfers that totalled $875 million to Etete.
The federal government had alleged that most of the $1.3 billion purchase price for the licence for the offshore oilfield known as OPL 245 was siphoned off to politicians and middlemen under previous administrations.
Emmanuel Addeh in Abuja with agency report