Though Halliburton made history recently when Halliburton and its former subsidiary Kellogg Brown & Root (KBR) agreed to the largest corruption settlement ever paid by a U.S. company under the U.S. Foreign Corrupt Practices Act (FCPA)—$579 million—their historic guilty plea is only the latest in a string of high-level bribery cases involving payments from multinationals to secure contracts in Nigeria and elsewhere around the globe.1
The scandal concerned $180 million that was funneled to officials to secure a construction contract for a liquefied natural gas plant in Bonny Island in the Niger Delta. The case raises fundamental questions about the recurring incidence of corporate corruption in an increasingly globalized world, where resource-rich developing countries are the most vulnerable actors. Likewise, it draws concern about the unremitting level of official corruption in Nigeria, despite the claims of successive governments that they show "zero-tolerance" for corruption.
It is noteworthy that the Halliburton-KBR case is not alone in the recurring tally of scandals involving multinationals and corporate corruption in contemporary Nigeria. German industrial conglomerate Siemens recently agreed to pay a $1.6 billion settlement to U.S. and European authorities for bribery of officials around the world, including Nigeria,2 and German courts have convicted company officials of criminal offenses for their roles in the misdeeds. Another top executive at Willbros Inc., an oil services company, pled guilty to criminal corruption offenses under the FCPA, and the company consented to pay $32 million in penalties and disgorgement of profit for involvement in the bribery of Nigerian government officials for pipeline contracts in the country, as well as additional contracts outside of Nigeria.3 In October 2008, Swiss oil services and logistics company Panalpina announced its withdrawal from Nigeria following a bribery probe by the U.S. Department of Justice. And prior to the Panalpina pullout was a case concerning Nigeria's national identity card scheme, wherein a French company, SAGEM, allegedly dispensed more than $200 million to senior government officials as bribes.4
While all of these cases speak to the efforts by corporations' home governments to shine a spotlight on interactions with corrupt politicians and public officials in Nigeria, it remains bewildering and disturbing that the situation did not, until recently, spark any serious reaction from the appropriate Nigerian authorities whose "zero-tolerance" claims have been defied so blatantly. Not even the sentencing of Nigeria's former minister of petroleum, Dan Etete, for laundering Halliburton bribes in France was sufficient to attract the attention of Nigeria's government.5 Thus, in the midst of the indictment and conviction of foreign companies and their top executives in Europe and America for graft in Nigeria, the country's own government has not, until very recently, taken any action against its erring public officials or the foreign companies linked to these deals. This failure to act has persisted in spite of the government's 2004 assurances that its then newly-inaugurated Economic and Financial Crimes Commission (EFCC) would aggressively pursue corruption cases. If the Nuhu Ribadu-led EFCC is accused of not doing enough to deliver on its responsibility to Nigerians on the corruption scandal involving Halliburton, the Farida Waziri-led phase of the Commission should be condemned for not acting at all, barring a recent statement that "investigation into the matter would be professionally executed, without prejudice to the caliber of those involved."6
Indeed, one unfortunate message of Halliburton's and KBR's guilty pleas seems to be that, while corporate executives who bribe foreign officials for lucrative contracts may face prosecution and conviction at home, their partners in crime in Nigeria can enjoy the benefits of corruption and graft without fear of being brought to book. It's no wonder that the companies, after facing conviction and fines in their home countries, don't hesitate to return for a second gamble, buying more contracts from the same Nigerian system that they have defied with impunity.
Among these flagrant violations were contracts for the building of the Topsides of the FPSO for Agbami Deep offshore field, owned by NNPC, ChevronTexaco, Petrobras and Statoil, which was awarded to KBR, as well as the contract for the construction of the Escravos Gas to Liquid Project owned by NNPC and ChevronTexaco, which was awarded to Halliburton's KBR and other partners in the scandal: Snamprogetti SpA and Japanese Gasoline Corporation (JGC).7 Painfully, this represents a clear refusal by the Nigerian government to implement the findings of the House of Representatives Committee on Public Petition that investigated the Halliburton scandal in August 2004, and unanimously recommended in September, 2004 that "all companies forming part of the TSKJ consortium and all Halliburton companies in Nigeria should be excluded from new contracts and new businesses, pending the outcome of the ongoing investigation."8 The Committee, which was headed by Chudi Ofodille, lambasted Halliburton for its refusal to cooperate, describing its attitude as a contemptuous "hide-and-seek game" to avoid answering government investigators.9
Background to the Bubble Bust
The Halliburton scandal began with an inquiry, following a preliminary probe by French Police in October 2002, by French Judge Renaud van Ruymbeke into allegations of corruption during the construction of a liquefied natural gas plant in Bonny Island. The construction was undertaken by a consortium of four companies dubbed TSKJ, which included then Halliburton subsidiary Kellogg Brown & Root (KBR).10 The other companies in the consortium, whose operational process is dominated by KBR, are France's Technip SA, Italy's Snamprogetti SpA and Japan's Japanese Gasoline Corporation (JGC). The dominant role of Halliburton in the consortium was not unexpected, despite the fact that it joined the group late through a $7.7 billion merger deal between its Brown & Root subsidiary and Dresser's M.W. Kellogg to become Kellogg Brown & Root (KBR), given its status as the second-largest oil field services company in the world, with a 92,000-member workforce as of 2003.
French authorities' choice of van Ruymbeke to conduct the inquiry was likely tied to his reputation for probity and the independence with which he handled earlier bribery accusations against French petrol giant Elf, which was found to have violated the the 1997 Organisation for Economic Cooperation and Development (OECD) Convention barring "corruption of foreign public officials in commercial negotiations," which became French law in 2000.11 The corresponding law in the United States is the Foreign Corrupt Practices Act (FCPA), passed in 1976, after a post-Watergate scandal investigation exposed a culture of rampant corruption and overseas bribery by American multinational corporations. Under the FCPA, any company sharing any connection with the US, whether by virtue of being listed on the New York Stock Exchange or using a US bank account, faces prosecution for suspected bribery or improper payments.
NLNG and Actionable Bribes
Nigeria's liquefied natural gas project was conceived to build the world's largest gas export plant, in Bonny Island in the eastern part of the Niger Delta. Its purpose was to mitigate the waste and pollution created by gas flaring during oil production and to increase the country's export earnings and revenue base. The initiative, known as the Nigeria Liquefied Natural Gas (NLNG) project, was incorporated in 1989 as the Nigeria Liquefied Natural Gas Limited. It has four main shareholders: Nigerian National Petroleum Corporation (NNPC) with 49%, Shell Production Development Company (SDPC) with 25.6%, TotalFinaElf with 15%, and Agip International-ENI with 10.4%. The contract for the construction of the gas export project was awarded in 1995, while the work was undertaken between 1996 and 2004.
Under Nigeria's statutory requirements, the contract should have been opened for competitive bidding, but this never occurred as the bidding process was manipulated to favor the TSKJ consortium over another consortium, BCSA, led by the San Francisco-based Bechtel Group, Inc.12 A source reports that the rivalry between the two consortiums for the contract bid was "so intense that it nearly derailed the project."13 Having succeeded with the 1995 contract award that built Trains 1 and 2 of the NLNG complex, it was easy for the TSKJ consortium to continue to undermine due process during the expansion phases of Train 3, Trains 4 and 5 and Train 6, which lasted from 1999 to 2004.
This corner-cutting process was enabled by Halliburton-supported UK consultant, Jeffery Tesler. Tesler, who was hired—despite Technip SA's preference for another candidate and Snamprogetti's opposition—to administer a slush-fund created "to maintain favorable relationships with government officials,"14 and thereby ensure that "the construction companies (TSKJ) are hired to build the latest phase of the gas plant … on a negotiated basis as opposed to participating in competitive bidding, in a competitive bidding process."15 Tesler was allegedly contracted for the job over Technip SA's choice due to his vast network of contacts in the region—the result of Tesler's thirty years of work in Nigeria, where he reportedly counseled many prominent people. Tesler was paid the outrageous sum of $32.5 million for his services: an amount that underscores the true purpose of his role in administering the consortium slush-fund via two personal bank accounts held in Switzerland and Monaco. An investigation into the true beneficiaries of the money revealed that Tesler had told the account number for his holdings in the UBP branch in Geneva to LNG Servicos—formed by the TSKJ Consortium on the Portuguese island of Madeira, where businesses are exempted from corporate taxes—before reverting to his Monaco account. Evidently, the switch was intended to evade the Swiss government-judicial procedure that targeted the assets of the late Nigerian dictator, General Sani Abacha.16
While the US Federal Bureau of Intelligence (FBI) is close to concluding an investigation of the corruption scandal, which is alleged to have reached the highest levels of the administration of former President Olusegun Obasanjo,17 information already in the public domain reveals that Tesler's Gibraltar-based firm, Tri Star, paid TSKJ bribes to Nigerian government officials in several installments: $40 million in 1994, $60 million in 1995, $37.5 million in 1999, $21 million in 2001 and $23 million in 2002.18 From these amounts, there have also been revelations about the recipients of some of the payments: $40 million to Gen. Sani Abacha in November 1994; $2.5 into Swiss bank accounts held by a Petroleum Minister under Gen. Abacha under a false name between 1996 and 1998;19 $75,000 (in two installments) to a former Inspector General of Police;20 $2.4 million to officials of Nigeria's Federal Inland Revenue Service (FIRS) in 2001 and 2002 to obtain favorable tax treatment;21 $1million to officials of Nigeria National Petroleum Company (NNPC) in August 2002; $500,000 worth of Nigerian Naira to an official of NNPC;22 and in excess of $1.8 million for visas between approximately 1997 and 2004.23
The possible implication of President Obasanjo, under whose government a huge chunk of the slush-fund was paid, raises fundamental questions about the credibility of his anti-corruption campaign in addition to the myriad other revelations of corrupt practices during his tenure as President of Nigeria from 1999-2007. Already, the former Nigerian leader has taken umbrage at the remarks about his indictment by various committees of Nigeria's National Assembly as emblematic of the corruption under his rule as president.24
While at present no one can conclusively state that Obasanjo had a direct hand in the corruption, including the Halliburton scandal, perpetrated during his time in office, his offended protestations are not sufficient explanation of his role. The onus lies with him in convincing Nigerians that he was truly uninvolved with these high profile corruption cases. It is also time for Nigerians with evidence of corruption against Obasanjo or anybody that served in his government to come forward. Already, the Nigerian Senate has, through a motion sponsored by Senator Bassey Ewa-Henshaw and ten others, passed a resolution on March 24, 2009, requesting the Federal Government take all necessary steps to expose and prosecute citizens involved in the Halliburton bribery scandal, with a view toward reclaiming the money. The concern of the upper legislative chamber is that "since the news of the bribery scandal became public, the government or its officials have not commented or taken a firm public stand to expose and prosecute those involved."25
The executive arm of government has also responded, with the Attorney-General and Minister of Justice, Michael Aondoakaa, threatening to sue Halliburton and its TSKJ partners both in their home countries and in the global financial centers where they do business, for $10 billion in damages. The sum, Aondoakaa argued, would go a long way towards helping the country deliver on its infrastructural needs as well as remedying the harm to Nigeria's reputation and stature, business discrimination, and economic and financial losses. The Attorney-General has since travelled to the UK and the US in pursuit of this effort, despite reports that "no mutual legal assistant requests have yet been filed from the Attorney General's office to give substance to his stated desire."26 This, if true, will only be confirming earlier pessimism from certain quarters that Attorney General Aondoakaa's strategy is "empty braggadocio couched in legal phraseology."27
Notwithstanding Attorney-General Aondoakaa's wrongheaded reasoning and strategies in seeking damages for Halliburton's actions, an internal inquest into the Nigerian side of the scandal is worth undertaking. This is all the more important in view of the assertion of Chudi Ofodille, Chairman of the House of Representatives Committee on Pubic Petitions, which investigated the matter in 2004, that "the forces of reaction in Government and NNPC were bent on shielding Halliburton and by extension, themselves." Ofodille continued, "And every attempt to seek collaboration with the Executive branch failed."28 At the height of such frustration was the June 8, 2005 proposed meeting with President Obasanjo, during which Hon. Ofodille was barred from participating in a meeting with the Halliburton team (led by Andy Lane) and the NNPC team (led by then-Group Managing Director, Funsho Kupolokun) to present the position of the House of Representatives.
Thus, while the current display of Nigeria's Executive and Legislative branches investigating the Halliburton affair is a step in the right direction, in light of the popular perception that Nigerian probes rarely succeed in uncovering wrongdoing, it is imperative that the hearings not be reduced to business as usual. Beyond refunding the money, where found guilty, the culprits should be prosecuted and punished accordingly.
Putting Nigeria On Trial?
Having pled guilty to the DOJ and SEC charges, and agreeing to the staggering $579 million settlement, Halliburton's KBR and corporate partners—as well as the Nigerian government officials whom they bribed—have also, by implication, admitted to violating Nigerian anti-graft laws. These laws, enshrined in Sections 9, 10, 12, 17 of the Corrupt Practices and Other Related Offences Act (2000), have been described by Paul Ocheje as "the most comprehensively drafted and tightly worded anti-corruption piece of legislation in the history of Nigeria."29 Offences against the Act, where guilt is established, are punishable by five years imprisonment under Sections 18 and 19 of the Act. Additionally, Sections 21 and 22 of the EFCC Act provide that all the properties (both within and outside the country) of "a person convicted of an offence under this Act and shown to be derived or acquired from such illegal act and already the subject of an interim order shall be forfeited to the Federal Government."
While appropriate legal measures may have been taken by the US, it is yet to be seen how this will play out in Nigeria, where the issue does not seem to be on the agenda of President Yar'Adua's administration. If anything, it poses a litmus test to the credibility of the rule of law and anti-corruption credentials of the administration. If nothing comes out of the EFCC investigation into the large-scale corruption allegations against a former Halliburton subsidiary and other partners in the TSKJ Consortium, it will illustrate the extent to which Nigerian leaders have lost their capacity for self-regulation and exposed the country as a place where "anything goes" in terms of business practices. While law enforcement officials and governments around the globe are cooperating to combat corporate corruption as a severe impediment to global economic growth, the Halliburton-KBR case in Nigeria begs the question of how aggressively that anti-corruption war is being fought at the local and national level of countries on the receiving end of corporate bribes.
Conclusion: The Way Forward
The discussion thus far points to the clear and abundant evidence of corruption among multinationals in Nigeria and around the world. A well-coordinated global war on corporate corruption is focusing in on what might be termed "the Nigeria corruption industry." In the face of international scrutiny and action, Nigeria faces an existential question: Where can the country show its face if it fails to join this worthy fight? Not long ago, cooperation in investigating transnational bribery was impossible, largely because the practice was considered acceptable—and indeed, in pre-FCPA days was even made tax-deductible in Germany as Schmiergeld, or "grease money." That level of official sanction has passed away in today's common consensus that corruption not only undercuts democracy and stifles economic growth, but also creates an uneven playing field for national and international business development.
There are now laws in the West (such as FCPA in the US and the Convention of OECD, barring corruption of foreign public officials in commercial negotiations, which has been adopted in many countries) that are taught in virtually all management and corporate ethics classes. However, it remains the duty of the authorities in resource-rich countries such as Nigeria, where multinationals sponsor official corruption, to be alert to their responsibilities for proper regulation of business conduct through collective efforts with the rest of the world. A starting point for that fight is for Nigeria to revisit the TSKJ bribe scandal with a view to identifying and bringing to justice culpable Nigerian officials. Such actions would be consistent with the ICPC and EFCC Acts, as well as the UN Convention against Corruption, which requires countries to take proactive steps to investigate allegations of corruption, prosecute suspected perpetrators and fully recover the money involved. To achieve this, it will be necessary to revisit the House of Representatives' TSKJ Consortium report and coordinate with international sources for additional information and evidence, as well as seizing the opportunity of the new Petroleum Industry Bill currently before the National Assembly to tighten institutional weaknesses made clear by the Halliburton scandal. Such efforts will not only demonstrate the extent of President Yar'Adua's commitment to re-brand Nigeria as truly harboring "zero-tolerance for corruption," but will also prove that it takes more than being the good man Yar'Adua is often touted as to be an efficient and effective president.
1 Securities and Exchange Commission, "SEC Charges KBR and Halliburton for FCPA Violations," February 11, 2009. Available here. Prior to this case, the highest fine ever paid by a US company for such an offence was $44 million, paid by Baker Hughes Inc., an oilfield services firm, in 2007 for improper payments in Kazakhstan.
2 Eric Lichtblau and Carter Doughterty, "Siemens to Pay 1.34 Billion in Fines," The New York Times, December 15, 2008. Linda Chatman Thompson, "Speech by SEC Staff: Statement at News Conference Announcing Siemens AG Settlement," December 15, 2008.
3 U.S. Department of Justice, "Willbros Group Inc. Enters Deferred Prosecution Agreement and Agrees to Pay $22 Million Penalty for FCPA Violations," May 14, 2008. U.S. District Court, Southern Division of Texas – Houston Division, "United States v. Jason Edward Steph – Plea Agreement," November 11, 2007.
4 BBC News, "Nigeria Ministers on Bribe Charge," December 30, 2003.
5 Etete, Nigeria's former Petroleum Minister, 1993–1998, was convicted by a French criminal court on November 7, 2007 and sentenced In absentia to three years in prison with a fine of 250 million euros to both French and Nigerian governments for money laundering charges. The money laundered is reportedly part of the $180 million bribes obtained from Halliburton's KBR. The court ruled that Etete exhibited a pompous and lavish taste underwritten by a 15 million euro bankroll which he obtained fraudulently to purchase a string of posh properties in France between 1999 and 2000. The properties include a luxury villa in the Paris suburb of Neuilly, a chateau in northwest France and a Paris apartment. Etete appealed the judgment. The Appeals court ruled on the case on March 18, 2009, lifting the prison sentence and the international warrant of arrest on Etete, but only reducing the fine by 8 million euros. See Idris Akinbajo, "France Slams $10.5m fine on Etete," Next,March 19, 2009; Davidson Iriekpen with Agency Report, "French Court Fines Etete $10.5m," This Day, (Lagos), March 19, 2007; "French court fines Etete $10.5m," The Punch, March 19, 2009; "Money laundering: Paris court fines Dan Etete $10.5m," Vanguard, March 19, 2009.
6 Ise-Oluwa & Bukola Ojeme, "Nigeria: EFCC to Probe Halliburton Bribery Scandal," Vanguard, April 2, 2009.
7 Chudi Ofodille, "Halliburton Scandal: The Chodan Notes Expose," The Guardian, March 30, 2009, p.9. The three are partners in the notorious Consortium of four companies, TSKJ, involved in the Nigeria Liquefied Natural Gas (NLNG) project.
9 See Halliburton and Nigeria: A Chronology of Key Events.
10 The Renaud Van Ruymbeke Inquiry itself stemmed from an earlier, separate, and years-long investigation into former French state-run oil giant Elf, which tarnished the reputations of many former executives and former Foreign Minister, Roland Dumas. See Alexander's Gas and Oil Connections (as cited in the Associated Press), Volume 8, Issue 21, October 30, 2003.
11 Eric Decouty, "A Nigerian Contract at the Heart of a Corruption Affair," Le Figaro, December 20, 2003. Available here.
12 The rival BCSA consortium comprised Bechtel, Chiyoda, Spibat and Asaldo.
13 Chudi Ofodille, "Halliburton Bribery Scandal: The Chodan Notes Expose," The Guardian, March 30, 2009 p.9.
14 Interview conducted by Steve Inkeep with Ibrahim Magu, Nigeria's EFCC Investigating Officer of Halliburton scandal, NPR, Morning Edition, August 26, 2005. Available here.
16 LNG Servicos, which was owned by partners in the TSKJ on equal share basis, was officially charged with the responsibility of the "administrative follow-up" of the Consortium's file and signing a series of commercial support contracts with Tri Star, three of which took effect in 1995, 2001 and 2002. See Decouty, "A Nigerian Contract at the Heart of a Corruption Affair," Le Figaro, December 20, 2003. Available here.
17 Ike Nnamdi, "Wanted: FBI Launches Fresh Manhunt for Nigerians Indicted in Siemens, Halliburton Bribery Scandals," The Sun, January 29, 2009.
18 See Halliburton and Nigeria: A Chronology of Key Events.
20 Ken Silverstein, "Investigation Widens in Nigeria Oil Case Involving Halliburton," Los Angeles Times, October 13, 2004.
21 Alexander's Oil & Gas Connection, "France Investigates into Corruption at Nigeria Gas Complex," Vol. 8, Issue 21, October 30, 2003.
22 Zachary A. Goldfarb, "Halliburton, KBR Settle Bribery Allegations," February 12, 2009.
23 Brian Smith, "Criminal Investigation of Halliburton's Nigeria Operation Widens: Evidence of Corruption during Cheney's Tenure," May 26, 2008. Available here.
24 See Paul Ohia, "Obasanjo: I'm Ready to Face More Probes," This Day, March 20, 2009, pp.1-2.
25 Sufuyan Ojeifo, "Senate to Wade into Halliburton Bribery Scandal," This Day, March 20, 2009, p.7.
26 Chudi Ofodilli, "The Halliburon Scandal: The Chodan Notes Expose," The Guardian, March 30, 2009, p.9.
27 The Chodan Notes have been linked to Wojciech Chodan, a top executive of Halliburton's KBR, who has become a central figure to the entire bribery scandal in Nigeria for having attended and recorded key meetings where various bribery and tax evasion schemes were discussed by the TSKJ consortium. See Chudi Ofodille, "The Halliburton Scandal, The Chodan Notes Expose," The Guardian, March 30, 2009, p.9.
28 Brian Smith, "Criminal Investigation of Halliburton's Nigeria Operation Widens: Evidence of Corruption during Cheney's Tenure," May 26, 2008. Available here.
29 Paul D. Ocheje, "Law and Social Change: A Socio-legal Analysis of Nigeria's Corrupt Practices and Other Related Office Act, 2000," Journal of African Law, 45 (2), 2001, p. 177.