Two former top executives of energy
firm, Afren, were on Wednesday convicted after they were found guilty of
money laundering offences in the United Kingdom.
Osman
Shahenshah and Shahid Ullah were found guilty of fraud and money
laundering offences from which prosecutors said they personally received
more than $17 million in a case involving Oriental Energy, founded by
Nigerian billionaire oil magnate Muhammadu Indimi.
Prosecutors
said Mr Shahenshah, 55, the former chief executive of Afren and Mr
Ullah, 58, the oil company’s Texas-based former chief operating officer,
laundered $45 million by deceiving the Afren Board into agreeing a $300
million business deal.
Following a shareholder revolt which
objected to their £6.6 million and £3.8 million salary packages and
faced with the possibility of lower remuneration in future, the two
hatched a fraudulent scheme to secretly increase their pay
Details
seen by PREMIUM TIMES from the U.K Serious Fraud Office (SFO) showed
that Messrs Shahenshah and Ullah created a side deal with one of Afren’s
Nigerian oil partners, Oriental Energy, that would allow them to
benefit from payments Afren would make.
The men recommended a
transaction to the Afren Board, who then approved payments of hundreds
of millions of dollars without knowing that Messrs Shahenshah and Ullah
stood to personally benefit. The transaction was claimed to be necessary
to maintain the business partnership, but the fact that Messrs
Shahenshah and Ullah stood to benefit personally remained hidden.
In his comments, Lisa Osofsky, Director of the Serious Fraud Office, said greed motivated the crime.
“Osman
Shahenshah and Shahid Ullah failed in their duties as company
directors, abused their positions and lied to their board,” he said.
“Instead
of acting in their company’s best interests, they used Afren like a
personal bank account to fund an illicit deal, with no regard for the
consequences.
“Fraud corrodes confidence, undermines trust and
damages the reputation of the UK at home and abroad. It is our mission
to bring those committing this crime to justice.”
Details
showed that the criminal investigation into the former CEO and COO of
the collapsed oil and gas exploration company began in June 2015
following a self-report by the company, with the defendants charged with
four offences in September last year.
The SFO said Messrs
Shahenshah and Ullah recommended that the Afren Board agree to a $300
million payment to Oriental Energy Resources Ltd, the company’s oil
field partner in Nigeria. But SFO said that unknown to the Afren board,
Messrs Shahenshah and Ullah had struck a side deal with Oriental which
led to 15 per cent of the $300 million was then paid out to a Caribbean
shell company controlled by the defendants. The men then used the $45
million to purchase luxury properties in Mustique and the British Virgin
Islands.
The UK prosecutors said a smaller portion of the $45
million laundered was split between Oriental employees and a close
network of Afren staff dubbed ‘The A Team’.
Oriental’s Position
In
2014, Afren dismissed the two officials after an independent review by
law firm Willkie Farr & Gallagher LP (WFG) alleged that the duo
received more than $17 million in unauthorised payments from Oriental,
its Nigerian joint-venture partner and 60 percent equity owner operator
of the Ebok assets, offshore Nigeria.
In the law firm
review, WFG alleged that Ntiti is owned and controlled by Messrs
Shahenshah and Ullah, and that they had used the vehicle to pay special
bonuses to themselves and other Afren employees.
But Oriental in its reaction dismissed allegations of unauthorised payments made to its employees.
Earlier
in 2012, the company said, Oriental and Afren initially entered into
the Oriental Ebok Forward Sale of Crude Oil Agreement. Through the deal,
Oriental said it agreed to sell approximately one million barrels of
its future oil production to Afren thereby permitting Afren to book
those reserves in 2012. The reason the $100 million payment to Oriental
was included in Afren’s balance sheet for 31 December 2012 under the
line “Prepayment and Advances to Partners” is because it was a
prepayment for Oriental’s future oil production, it said.
The
company argued that in October 2013, it entered into an agreement with
NTITI, the Oil Field Development Optimization Services Agreement,
represented by senior executives of the Ebok Joint Operating Team
(“JOT”).
The statement by Amina Indimi, the company’s media
contact, added that there was an agreement to pay 15 per cent of the
cash flows from its joint venture with Afren into a special purpose
vehicle called Ntiti BVI, which was intended to reward and retain key
employees connected to the project.
“Under the
Optimisation Agreement Oriental agreed to pay up to 15% of its annual
net Ebok Profit Oil proceeds to NTITI for the purpose of providing
incentive compensation and retention of key employees who had proven
themselves to be essential members of the Ebok JOT, a group reporting to
the Ebok Operating Committee and comprised of employees seconded by
both Oriental and Afren, as provided by the JOA,” the company said in a
press statement.
“The Optimisation Agreement provided financial
compensation to select key employees of both companies upon attainment
of annual performance goals set by the Ebok Operating Committee.
Oriental had every reason to believe that the Optimisation Agreement had
been disclosed, at least in conceptual form, to members of the Afren
Board.
“Oriental utterly refutes Afren’s use of the term
“ostensibly” in describing the intent of the Optimisation Agreement. It
was clear to everyone privy to the Optimisation Agreement that its
intent and anticipated effect in rewarding and retaining key employees
of the Project was in fact the sole purpose of that Agreement and would
be wholly to the benefit of the Ebok Joint Venture participants, Afren
and Oriental equally.”
Afren’s troubled history
Afren Plc
is an oil company in which a former Nigerian oil minister, Rilwanu
Lukman, was a former chairman and founder. Mr Lukman, who served under
late President Umaru Yar’adua, died in July 2014.
When he
held sway as minister, Mr Lukman was exposed as having a stake in the
company while also supervising the oil ministry, in a clear case of
conflict of interest. The defunct 234NEXT newspaper ran series of
stories on the scandal.
Reports said the company owns subsidiaries in various African countries of which Nigeria is one of them.
The
major owners of Afren are various institutional investors and mostly
banking and asset management groups, quoted on the London Stock Exchange
as AFR. The company, a British firm, operates in Nigeria through its
Nigerian subsidiary.
JP Morgan Asset Management Holdings, Blackrock, HSBC and AXA are said to own shares in the company, including other banks.
Alongside
Mr Lukman, Constantine Ogunbiyi and Egbert Imomoh are two other
individuals believed to have ownership stake in the firm.
The company has since gone into receivership.
On
Wednesday, Messrs Shahenshah and Ullah were found not guilty on a
separate charge relating to a management buyout of another of Afren’s
business partners.
But in a detailed disclosure seen by
PREMIUM TIMES, they were both found guilty of one count of fraud by
abuse of position, contrary to sections 1 and 4 of the Fraud Act 2006;
one count of money laundering, contrary to section 328 of the Proceeds
of Crime Act 2002; and one count of money laundering, contrary to
section 329 of the Proceeds of Crime Act 2002.
They were
acquitted, however, on one count of fraud by abuse of position, contrary
to sections 1 and 4 of the Fraud Act 2006 and the SFO said sentencing
has been scheduled at Southwark Crown Court for Monday 29 October at
10.00am.
Oriental Energy
Oriental Energy Resources
Limited, according to details on its website, was founded by the
Chairman, Mr Indimi, in 1990. In September of that year, the company was
awarded OPL 224 by the Federal Government of Nigeria, with a mandate
requirement to acquire a minimum of up to 1000 km of seismic data and to
drill at least three exploratory wells. Work began on OPL 224 in 1991
as the company entered into a Technical Services Agreement with DuPont
Nigeria Ltd, acquired the committed 2D seismic survey as well as drilled
four wells including the Ufon discovery well. This continued until the
Nigerian Department of Petroleum Resources gave an approval to convert
OPL 224 to OML 115 on 20 May 1999, as a result of the successful work
done on the Block.
In early 2000s, the growth of Oriental
Energy proceeded quickly. Ebok marginal field (May 2007) and Okwok
marginal field (2006) were awarded to Oriental Energy Resources Limited
from ExxonMobil’s OML 67, through a Joint Venture Agreement (JVA)
between the Nigerian government and ExxonMobil under the Marginal Fields
Scheme, as a compensation for the loss of acreage to ExxonMobil
Equatorial Guinea.
The company said it had had strategic
alliances with Addax Petroleum (Okwok), Nexen E&P Services Nigeria
Ltd. (OML 115), and Energy Equity Resources Oil & Gas (OML 115).
In
2008, Oriental Energy announced its Technical Services Agreement with
Afren Energy Resources to appraise the Ebok Field and the partnership
expanded with Afren signing a JVA with Oriental Energy and Addax for the
development of Okwok (2009), as well as Afren signing a JVA with
Oriental Energy and EER for the exploration and appraisal of OML 115
(2010). The company says it is currently producing an average of 19, 000
barrels of oil per day from 27 producer wells and has produced over 60
MMbbls from inception to date.
The company’s chairman, Mr Indimi,
is in-law to President Muhammadu Buhari. In 2016, Mr Buhari’s daughter,
Zahra, got married to Mr Indimi’s son, Ahmed Indimi.
Following
the conviction of the two officials, it is unclear whether Mr Indimi’s
Oriental Energy has any case to answer in the deal. The oil firm’s
official contact could not be immediately reached Wednesday night.
It
is however unclear whether the case is on the radar of Nigeria’s
anti-graft agencies. PREMIUM TIMES’ efforts to reach the spokesperson of
the Economic and Financial Crimes Commission, EFCC, also proved
abortive Wednesday night.
0 Comments