Malabu Oil: Why JPMorgan’s Compliance Team Raised Red Flags Over $875m Payment to Former Nigeria Oil Minister Etete
Fresh documents on the long-standing legal dispute between Nigeria’s Etete, who was minister under the Sani Abacha regime, has been in the eye of the storm concerning the sale of the oil block which triggered a number of court cases in Nigeria and in Europe.
A report yesterday by Bloomberg indicated that JPMorgan 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, in a London lawsuit, is pushing that the internal memo sent by the compliance unit to the bank’s managers should be scrutinised.
The US bank is accused of ignoring the red flags when it transferred funds between 2011 and 2013 to Dan Etete, whose private jet was seized by the Buhari government.
The memo disclosed at a London court hearing last Wednesday showed what JPMorgan managers knew about the oil contract and when, lawyers for the Nigerian government said in court documents. A spokesperson for the investment bank declined to comment.
According to court documents, by 2013, JPMorgan’s internal concerns over payments to Malabu Oil and Gas were escalated to more senior members of the bank.
“In light of Malabu’s reported connection to the alleged Nigerian corruption scheme, there would be great risk presented if JPMC continues to process wires involving Malabu,” a compliance officer based in the United States wrote in a memo dated Aug. 23, 2013 and quoted by Bloomberg.
Just six days later, JPMorgan made a payment of $75.2 million to the Malabu account, according to the report.
Lawyers for the federal government said in court last Wednesday that they wanted to know how the memo was compiled and asked a judge for more emails and documents from the compliance team.
The lawyers are seeking details of how the US bank’s compliance team monitored and placed controls over questionable payments including a so-called “interdiction list”, a tool to prevent transfers from being automatically cleared. Malabu was placed on the list in November 2013.
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.
In 1998, the government awarded OPL 245 for $20 million to Malabu Oil and Gas, which was later found to be owned by Dan Etete, who was oil minister at the time, in collaboration with people close to former military ruler, Sani Abacha.
Three years later, in July 2001, the then government under President Olusegun Obasanjo revoked OPL 245 licence, triggering legal disputes over its ownership that dragged on for years.
By 2006, Malabu reached a settlement with the federal government, agreeing to pay $218 million to Nigeria in return for the licence being fully reinstated, after it was given to Shell, which subsequently failed to pay.
The case became even more complex when Mohammed Abacha, son of the former ruler, launched a legal challenge arguing that Etete pushed him out of his partial ownership of Malabu.
In 2011, Malabu agreed to hand OPL 245 back to the government for $1.092 billion. In parallel, Shell and Eni agreed to pay the government $1.092 billion plus a signature bonus of $208 million, taking their payment for OPL 245 to $1.3 billion.
In the same year, $1.092 billion was placed in an escrow account opened by the Nigerian government with U.S. bank JP Morgan, from which $875 million was transferred to bank accounts in the name of Malabu.
In 2017, Nigeria filed a case at a London High Court against the bank alleging negligence for its role in transferring the $875 million to Etete’s Malabu, an allegation JP Morgan said it considered “unsubstantiated and without merit”.
In 2019, a Nigerian judge issued arrest warrants for Dan Etete, and an Eni manager over the sale of the oilfield.
European and Nigerian courts have been raking over the purchase by Eni SpA and Royal Dutch Shell Plc of the oil license in Africa’s largest crude producer, a decade ago.
While the energy giants were recently acquitted of corruption charges in Milan, in a decision prosecutors could appeal, Nigeria’s government is continuing to seek compensation from JPMorgan.
The Buhari administration claims Etete distributed a portion of the funds received via the bank from the oil majors to corrupt former and serving senior public officials.
The bank has denied any wrongdoing and says it is being held responsible for not protecting the Nigerian people from their own government.
As Nigeria’s oil minister in the last weeks of the corrupt Abacha military regime in 1998, Etete was said to have effectively awarded the prospecting rights of the huge OPL 245 block to the company he secretly controlled.
After Abacha’s sudden death, Etete retained the rights as a private citizen until he offloaded them to oil giants Shell and Eni in 2011, and they paid a combined $1.3 billion to the federal government.
The entire OPL245 deal was a subject of a corruption trial in Italy, where Etete was an accused, together with alleged middlemen, Eni and Shell, and several of their executives. The court recently acquitted the international oil executives.
The Nigerian authorities had also charged Etete and several others linked to Malabu with money laundering in connection with the onward flow of funds from the OPL245 deal.
He has denied any wrongdoing and dismissed the allegations as “political propaganda.”
Festus Akanbi and Emmanuel Addeh, with agency report