Transaction tax

Malabu Oil Scandal: Nigerian Government Lost to JP Morgan, But Can Get Former Justice Minister Adoke for Illegally Giving Taxes and Other Benefits to Shell, Eni – Report

The Federal Republic of Nigeria (FRN) sought damages of $875,740,000.03, in contract and tort, for sums paid into a “deposit account” by JP Morgan Bank (JPMC). These payments were made in August 2011 (for approximately $800 million) and August 2013 (for approximately $75 million).

The Payments were made by JPMC to an entity called “Malabu”. It was an oil prospecting permit called “OPL 245”.

Nigeria’s case is that these sums were paid as part of a fraudulent and corrupt scheme. The Nigerian government has therefore fallen victim to this scheme, Gbenga Oduntan and Akalemwa Ngenda, Coordinating Lawyers of the Global Anti-Corruption Research Network (WARN), Center for Critical International Law, UNIKENT, said on Sunday.

JPMC presented several technical defenses. These include the so-called “No Quincecare Duty” because – this duty has been excluded by contract. It was also claimed that JPM’s role in the filing agreement was intended to be “largely automatic or mechanical”. As JPM’s lead counsel put it in his oral submissions, the bank’s role was “to act like an ATM or robot.”

The judgment did not find fraud and the FRN case failed. Cockerill J however pointed to the presence of highly unattractive features in transactions and an association with past corruption.

Still, the judge found that was not enough to trigger the obligation with respect to a specific fraud in 2011.

Cockerill J maintains a highly artificial distinction between significant characteristics of a transaction which highlight high risks which are relevant for anti-money laundering procedures on the one hand and other general financial crimes and corruption larger on the other hand.

The Court concludes that JPMC was not “warned” of fraud regarding the 2011 payment. Although JPMC was notified of the 2013 payment, the gross negligence test was not met. The judgment will be studied by experts in banking law for years to come.

Meanwhile, the Nigerian government has been barred by the UK High Court from appealing last month’s ruling dismissing a $1.7bn (£1.4bn) claim against JP Morgan Chase Bank regarding the transfer of proceeds from the sale of OPL 245 in 2011.

The high court said there was “no real prospect” of overturning the decision, City AM reports.

The government lost its $1.7 billion claim against JP Morgan Chase Bank in June for the transfer of proceeds from the sale of OPL 245 in 2011, operated by Malabu Oil and Gas Limited.

According to the judgment of the Commercial and Property Courts of England and Wales, there was no evidence that Nigeria had been defrauded under the deal.

The government had sued JP Morgan on ‘Duty Quincecare’ grounds, alleging the bank ‘should have known’ there was corruption and fraud in the deal, which saw Malabu Oil and Gas Limited sell its 100% stake in OPL. 245 to Shell and ENI for $1.1 billion.

Nigeria argued there were enough “red flags” for JP Morgan to halt transfers. However, the bank rejected Nigeria’s claims, saying all due procedures were followed and money laundering checks were carried out, arguing that the allegations of fraud only arose after the arrival in power of a new government in Nigeria.

In the judgment, Sara Cockerill ruled that the Nigerian government could not prove that it had been the victim of fraud, saying it could be that, in hindsight, “JPMorgan would have done things differently” but “no of these things individually or collectively does not amount to triggering and then violating the bank’s duty of care towards its customer.

Citing the judgments of London and Milan, a former Attorney General of the Federation and Minister of Justice, Mohammed Adoke called on the current Attorney General (Abubakar Malami) to drop the charges against him. He suggests “refraining from wasting Nigeria’s hard-earned foreign currency on paying legal fees to local and foreign lawyers in a bid to prove a fraud that never existed.”

The report urged Nigeria to resist this siren and selfish appeal. “First, because many of the charges against Adoke are not related to fraud but depend on other alleged criminal offences.

“For example, there are issues regarding the illegal granting of tax and other benefits to Shell and Eni. of Milan,” the report said.

He further said, “Justice in Nigeria must not be allowed to rely on decisions outside Nigeria. It must be challenged in Nigeria under Nigerian law and the control of Nigerian courts. The London judgment will remain for a long time as additional proof of an imperialist and relativist English justice. This is particularly evident in international trade affairs and in relation to African and other developing states. This is what makes it imperative for Nigeria to pursue sovereign redemptive jurisprudence as an independent country. The imperatives are clear, the charges against Adoke and the other defendants must be pursued. The rule of law demands nothing less.

Meanwhile, there are many ramifications of this unsatisfactory judgment. Its effects on the fight against grand corruption in Nigeria are particularly worthy of analysis. Specifically, it may have negatively impacted ongoing and future prosecutions related to the notorious Oil Exploration License 245 scandal. Bello Adoke, deserve special attention.

The London judgment has caused sheer disappointment among anti-corruption campaigners both in Nigeria and abroad. This is especially true for those seeking to expose Adoke’s role in Nigeria’s most outrageous oil deal. It seems that in order to absolve JPMC of ultimate responsibility for Nigeria’s losses, the judge may have had to clear Adoke’s failings.

Curiously, the court’s reasoning rendered a very contrived and favorable view of Adoke’s official and personal actions and activities. In order for JPMC to avoid liability, an outraged Nigerian official facing multi-jurisdictional censorship is now almost completely exonerated in the eyes of British law.

It is important to discuss this unsatisfactory outcome because of the effects this judgment will have on anti-corruption and transparency law and practice in Nigeria. The judgment could also have implications for a few ongoing criminal and civil actions in Nigeria against the former lawmaker.

Mr Adoke has of course seized on this recent judgment of a London commercial court as exonerating him from any wrongdoing in connection with the controversial sale of the oil license OPL 245 to the multinationals Shell and Eni, which has ended with the payment of more than a billion dollars to Malabu Oil & Gas, a company owned by Dan Etete who had actually granted himself the license when he was oil minister under the notorious military regime of Ibrahim Abacha.

The Nigerian government alleged that the deal was corrupt and fraudulent. The FRN sued the bank JP Morgan Chase for negligence in its management of the funds of the agreement. Nigeria identifies three masterminds of the program. They are Mr. Dan Etete (1998), Mr. Bayo Ojo (2006) and Mr. Mohammed Adoke (2011). The judge in the London case controversially concludes that Adoke acted honestly in negotiating the deal. The judgment nevertheless describes the whole deal as an “unattractive” transaction with a “troubled” past mired in corruption.

The judgment apparently took a very liberal view of several actions and situations involving Adoke. There are significant cases where the court admits that the fact “seems sinister”. Nevertheless, through various contortions of logic, he excused things. Scholarly Mrs Justice Cockerill apparently does not fully understand the complexities and nuances of Nigeria’s serious corruption problems.

Much of the evidence of the corruption of Nigerian officials rested on questions and issues that the judge really could have taken judicial notice of if the court was familiar with the terrain of grand corruption in Nigeria. Indeed, the judgment seems to acknowledge a sheer lack of familiarity with the financial realities of Nigerian life.

For example, as the FRN alleged between 2011 and 2013, Mr. Adoke, as Attorney General, carried out real estate transactions for himself worth millions of dollars. Mr. Adoke received over $2 million in his cash account. Yet the judgment concluded that the mere fact that the house was purchased cannot suffice without more to conclude that Mr. Adoke was living above his income. A Nigerian judge will of course be in a better position to understand the kinds of sums that suggest a Nigerian civil servant is going beyond his means.

Adoke’s take on judgment is therefore in a sense understandable, even if it may be opportunistic. Indeed, he faces three sets of charges in Nigeria for corruption and other offenses related to the OPL 245 agreement. However, on an unbiased reading, the judgment does not provide Adoke with a safe haven. On the contrary, it provides grounds for new charges to be brought against the former Attorney General. It may also have complicated his defenses in a defamation suit that was filed against him. This lawsuit is brought by Olanrewaju Suraju, President of the Human and Environmental Development Program (HEDA).