It appears a new legal front may well open in the international fight against bribery and corruption as Dutch prosecutors have announced to Royal Dutch Shell PLC (Shell) that they are nearing the conclusion of an investigation into a case and is preparing to prosecute the company criminally. Chloe Taylor, reporting in a CNBC piece entitled “Shell facing multiple charges over corruption, emissions, and an explosion, said, “Shell will be prosecuted for criminal charges relating to a $1.3 billion settlement for an oil exploration licence in Nigeria”. This is not a situation where a bribe was paid directly from a company to a foreign government official or employee of a state-owned enterprise, which is illegal under the Foreign Corrupt Practices Act (FCPA)

This is a situation where monies where paid, which may or may not have constituted a bribe, to a foreign government. This was is a situation where Shell paid monies to the government of Nigeria that prosecutors claim was a bribe. Global Witness reported the story, in a report entitled “Shell Knew”. It involves a potentially very lucrative development block known as OPL-245. According to Global Witness, “In 2011, Shell and the Italian oil company Eni paid $1.1. billion in a murky deal for this lucrative asset located off the coast of Nigeria.” However, Global Witness has alleged, “this money didn’t go to benefit the Nigerian people as it should have done. Instead it went to convicted money launderer and former oil Minister, Dan Etete, who had awarded himself ownership of the block in 1998 via a company he secretly owned, Malabu Oil and Gas.” Moreover, Etete would use this money to pay bribes to other Nigerian government officials and even make political contributions to the political party then in power.

Global Witness cited to internal Shell emails and leaked transcripts of wire-taped conversations of Shell executives to allege, “Shell executives knew the money would go to Malabu and Etete, and was then likely to flow to some of the most powerful people in the country. Senior Shell officials were also briefed that funds could flow on to then President Goodluck Jonathan.” The emails cited to by Global Witness included the following, ““Etete can smell the money”, says one newly leaked email forwarded to then CEO Peter Voser. “If at nearly 70 years old he does turn his nose up at nearly $1.2 bill he is completely certifiable. But I think he knows it’s his for the taking.” Another email to Shell’s exploration chief stated, “the President is motivated to see 245 closed quickly – driven by expectations about the proceeds that Malabu will receive and political contributions that will flow as a consequence.””

As noted, the Italian oil company ENI SpA was a joint venture (JV) partner of Shell in obtaining the rights to OPL-245. In conjunction of the claims against it, ENI said, ““No illegal conduct was identified,” claiming that it, “concluded the transaction with the Nigerian government, without the involvement of any intermediaries”. Shell said it had shared key findings of its OPL 245 investigation with relevant authorities and that “we do not believe that there is a basis to prosecute Shell”.”

In a separate proceeding in Italy, Italian prosecutors have brought criminal charges against individuals at both companies over this transaction. Ben Chapman, reporting in a 2018 The Independent article, entitled “Shell and Eni face one of the biggest corruption cases in corporate history over $1.3bn Nigerian oil field”, noted, “defendants include Eni’s current chief executive Claudio Descalzi and his predecessor Paolo Scaroni as well as former Shell board member Malcolm Brinded and Peter Robinson, a former Shell vice president for sub-Saharan Africa.” As reported by Sarah Kent and Eric Sylvers in a 2018 Wall Street Journal article, entitled, “Inside the Bribery Scandal Sweeping Through the Oil Industry”, stated the Italian “case turns on allegations that Claudio Descalzi, now CEO of ENI and high-level Shell officials approved an arrangement that allowed them to pay the government while knowing most of the money would be transferred to a company controlled by Dan Etete —a former Nigerian oil minister, who the executives knew “would pay off Nigerian officials and send kickbacks to Eni executives.”

The responses of both companies say quite a bit about their culture and ethos. Both Descalzi and then Chief Executive Officer (CEO) of ENI, Paolo Scaroni, have been criminally charged. Both have adamantly denied they did anything wrong, that the payment was made to the Nigerian government and anything Nigeria did with the payment was Nigeria’s own business. Shell officially denied the charges as well but internal company emails, obtained through raids of Shell’s offices in the Netherlands, clearly indicated the company suspected the money paid by the oil giants could well have been used to pay bribes to Nigerian government officials. Further, from a wire-tap at the home of the now CEO of Shell, who has not been individually charged, came the following “I wonder who gets the payoff here.”

It is rare that such high-level executives are individually prosecuted. This the first such prosecution in Italy. If the Dutch proceed, it will be the first such one in The Netherlands based on this fact pattern. There does not appear to be much dispute that a payment was made to the Nigerian government. There is not much dispute that the money was then transferred to the former Nigerian energy minister Etete. The US government traced some of the monies and it showed up in widely disparate locations, all of which may or may not indicate both corruption and money-laundering. However, if monies paid to a foreign government itself are now subject to scrutiny, this could open an entirely different exposure to liability for international organizations. All of this certainly bears watching for US companies with offices in these jurisdictions.

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© Thomas R. Fox, 2019