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Financial Times: Money, politics and oil make murky mix

By MIchael Peel, Legal Correspondent

Published: August 8 2006 03:00 | Last updated: August 8 2006 03:00

The Serious Fraud Office investigation into an alleged Nigerian bribery scandal involving a Halliburton subsidiary is the latest twist in a case that exemplifies the lucrative, murky and highly political world of western oil interests in Africa.

The affair has spawned investigations in four countries and has raised big questions about both the conduct of one of the US’s most high-profile companies and the seriousness of Britain’s anti-corruption credentials.

The SFO probe comes after criticism that London was doing little on the case even though a British-based company and a British lawyer were allegedly at the centre of a plot to pay more than $170m of bribes to win $7bn of building contracts.

Halliburton declined to comment other than to say it continued to co-operate with the authorities investigating its Nigerian operations.

At the heart of the case are allegations made to a French judge by a former executive of an international consortium known as TSKJ, which has for the past decade been building and expanding a giant natural gas liquefaction plant in southern Nigeria.

The plant, one of Africa’s biggest industrial projects and a natural gas supplier of global significance, is owned by the Nigerian government, Royal Dutch/Shell, Total of France and Eni of Italy.

The French former executive said the consortium, which includes MW Kellogg, a British company 55 per cent owned by Kellogg Brown & Root, had set up a slush fund to channel pay-offs to help it win a series of building contracts since the mid-1990s.

According to documents from the French investigation, the payments in question relate to four separate contracts under which the consortium agreed to pay a total of just over $170m to an offshore company controlled by a London-based lawyer called Jeffrey Tesler. Mr Tesler declined to comment, although his lawyer has in the past denied the payments constituted bribes.

Investigators in the US, France and Nigeria have looked with particular interest at handwritten meeting minutes surrendered by Halliburton, in which consortium partners use highly suggestive language about how they plan to do business. One note from December 1994 says that “all services” will cost the consortium $180m, with a further $60m allocated to “culture”.

Elsewhere in the notes, KBR and its consortium partners – Technip of France, Italy’s Snamprogetti and JGC of Japan – discuss the pros and cons of a series of possible “secret” and “open” payments to agents.

Halliburton itself has admitted the notes show the building consortium had “considered payments to Nigerian officials”.

The company has cut ties with two former employees, including Jack Stanley, former KBR chairman, for taking “improper personal benefits” from the project. His lawyer declined to comment on the allegations.

The big political dimension of the case is it relates in part to the period between 1995 and 2000 when the company was headed by Dick Cheney, the US vice-president. Halliburton became involved in the Nigerian consortium through its 1998 takeover of Dresser Industries, after the first gas plant building contract was signed but before later project expansion deals were agreed.

A further source of political controversy is the government’s role in underwriting work at the plant through over $200m of trade insurance it supplied to MW Kellogg in 2002 as part of a plant expansion project.

The Export Credit Guarantee Department, a government agency that supports UK companies operating overseas, insists it is proper for it to continue to offer the insurance. It said it would pass on material relevant to the corruption allegations to investigators such as the SFO. But the ECGD’s position seems to some anti-corruption campaigners to sit uncomfortably with appeals by Tony Blair for western countries to help tackle graft in Africa and adopt more progressive policies towards the continent.

The big money, high politics and strategic oil interests involved in the SFO’s new case could make it a quintessential test of the credibility of Britain’s anti-corruption pledge.

Copyright The Financial Times Limited 2006

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