If found guilty, top executives in two big oil companies could go to jail and the companies risk enormous penalties, including relinquishing an oil-rich region.

In what is now one of the biggest corporate corruption scandals in history, Shell and Eni, both of which are global oil giants, are on trial in Milan, Italy. The two have been implicated for fraudulently paying $1.1 billion for a block of oil off the coast of Nigeria. None of the money would benefit the Nigerian people but instead went to bribe officials, and Shell knew it from the start.

An investigation by Finance Uncovered and Global Witness found that the two corporations in 2011 closed a bribery deal that would help them acquire OPL 245, one of Africa’s most promising oil blocks.

The investigators tracked down the documents of the deal only to realize the money ended up in the hands of a few people, including Dan Etete, a former oil minister in Nigeria, who is also a convicted money launderer. Former president of Nigeria Goodluck Jonathan and some other top government officials were also expected to receive at least $520 million in cash.

Location of OPL 245, off the coast of Nigeria. Source: Global Witness

Some of the money was also wired to executives from both Shell and Eni with $50 million having been delivered in cash to the home of Roberto Casula, Eni’s head of African Operations at the time.

Nigerian Population Struggles Despite Oil Riches

According to the United Nations, Nigeria is the most populous nation in Africa and produces more than 1.5 million barrels of oil per day. If well managed, revenue from the oil could significantly benefit the 190 million people living in the country – including the third of the population living in abject poverty with no access to water and electricity.

In northern Nigeria, more than 5 million people face starvation with more than 450,000 children already suffering from acute malnutrition. The amount paid for OPL 245 is more than the country’s health budget; a budget and health sector already crippled by corruption and resulting in the death of one child in every ten before the age of five.

Shell Knew

As Global Witness and Finance Uncovered reported, Shell has for six years denied any wrongdoing but was privy to the illegal motives behind the deal from the beginning. Meaning the company fully knew the payout for OPL 245 would end up in private accounts but still went ahead to close the deal anyway.

Emails leaked to the investigators, which they published in the report, reveal Shell’s top brass was informed beforehand that the money would flow to Dan Etete and other top government officials, including the then president. Etete, who used some of the money to acquire a private jet, armored cars and shotguns, had awarded ownership of OPL 245 to Malabu Oil and Gas in 1998 when he was Nigeria’s minister of Oil. Malabu Oil and Gas was secretly owned by Etete and one other partner, and the company was only set up days before obtaining the rights to OPL 245.

Flow chart showing the channels the money followed to the end. Source: Global Summit

In February 2016 Dutch and Italian police raided Shell offices looking for information on the $1.1 billion deal. At the time, Shell said it was cooperating with the authorities because it “takes allegations of bribery seriously” and that it “attaches the greatest importance to business integrity.” But immediately after the raid, CEO Ben Van Beurden called the then-CFO Simon Henry telling him to “not volunteer any information that is not requested.”

According to Global Witness’ report, the two also agreed to keep shareholders in the dark concerning the raid with Van Beurden saying, “The last thing you want, of course, is some sort of request to issue a stock exchange release. There’s nothing to be said other than that we are being asked to provide information.”

Following Global Witness’ expose, Shell, in a twist, admitted to having known the money went to private accounts. Through Andy Norman, the company’s vice president for global media relations, Shell said, “Over time, it became clear to us that Etete was involved in Malabu and that the only way to resolve the impasse through a negotiated settlement was to engage with Etete and Malabu, whether we liked it or not.”

This admission shed light on the deal and paved the way for prosecution proceedings against the two companies.

What Consequences Do Shell and Eni Face?

If found guilty, top executives in both companies could go to jail and the companies risk enormous penalties, including relinquishing OPL 245. It may also trigger a wave of changes in the oil sector – a sector the Organization for Economic Cooperation and Development (OECD) has dubbed as the most corrupt on the planet.

As Shell and Eni’s trial takes place another big oil battle takes place in Ecuador where Chevron’s nine-year battle with indigenous communities continues. Ecuadorians sued Chevron for poisoning their environment and water and trying to cover it up.

 

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