Eni's new CEO must explain his role in a corruption case in Nigeria

Civil society groups are asking for clarification from the Eni shareholders' meeting

Follow the live Twitter feed from the Shareholders' Meeting

Rome, 8 May 2014 – The apparent involvement of incoming Eni CEO Claudio Descalzi in a corruption case linked to a large oil contract in Nigeria raises serious questions about his suitability to run the Italian oil giant, Global Witness and Re:Common said at Eni's annual shareholders meeting in Rome.

Police investigations into the billion-dollar deal scandal reveal that senior Eni officials, led by Descalzi, were involved in negotiations with Chief Dan Etete, the former Nigerian oil minister believed to be one of the main beneficiaries of the deal. The OPL 245 transaction is currently being investigated by authorities in Italy and the United Kingdom.

“The story of this Nigerian oilfield is one of the most glaring examples of corruption in the oil sector and evidence in the UK court case suggests that it was at the center of efforts to acquire the OPL 245 block. The Nigerian people have lost more than a billion dollars, while foreign oil companies and dishonest individuals have profited. This deal represents a serious risk for shareholders, including the Italian government. Given that Descalzi is the new CEO, one should demand that Eni justify this decision and promote an independent investigation into its role in this scandal,” said Simon Taylor of Global Witness.

The deal, which dates back to 2011, saw subsidiaries of Eni and Royal Dutch Shell agree to pay $1.092 billion for one of Nigeria's most profitable oil blocks, OPL 245. The money was paid by Eni and Shell to the Nigerian government, which then forwarded the same amount to Malabu Oil and Gas, owned by former oil minister Chief Dan Etete. Etete had assigned the block to his company when he was oil minister under dictator Sani Abacha. He had thus come into possession of one of the most important oil fields in Nigeria and with the signed agreement he then proceeded to collect it.

Recently, Eni's lawyers reported at a hearing in the Italian Senate that the company had no relationship with Malabu. This statement contradicts what was said in a British court, namely that at the end of October 2010 Eni made a direct purchase offer to Malabu. The offer was then rejected. Both Eni and Shell have denied paying money directly to Malabu, but British court proceedings and evidence seen by Global Witness show how the two companies later purchased the block by funneling money through the Nigerian government. A ruling by a New York court established that the Nigerian state would thus have acted as a mere intermediary.

Evidence in the UK legal proceedings indicates that Eni knew and agreed that the deal would be for the benefit of Malabu and that Mr Descalzi was the person responsible for making decisions on behalf of the six-legged dog company. Some Eni representatives met Etete face to face on numerous occasions, while Descalzi had dinner with him in a 5-star hotel in Milan. There were also frequent contacts with an intermediary acting on behalf of Malabu, to whom Malabu subsequently paid $110,500,000 for his role in the deal.

According to the testimonies provided to the British court by those involved in this operation, other senior Eni officials were involved in the negotiations for the agreement. Among these Roberto Casula, the president of Eni's Nigerian subsidiary NAE, and Vincenzo Armanna, Eni vice-president for activities in the sub-Saharan African region.

In March 2014, the Italian press reported that the Milan Prosecutor's Office is investigating Eni's role in the OPL 245 negotiation, based on wiretaps from outgoing CEO Paolo Scaroni, Descalzi and Luigi Bisignani. The latter settled for 19 months for the P4 scandal. Evidence available to UK law enforcement authorities suggests that he communicated with Descalzi or Casula during the OPL 245 negotiations. While Global Witness and Re:Common do not believe these contacts contain anything illicit, there are legitimate questions about why Eni executives were in contact with Bisignani in relation to this deal.

The UK's Anti-Corruption Unit has confirmed it is investigating money laundering allegations linked to the oil blockade. Meanwhile in Nigeria a parliamentary inquiry determined that the deal was "contrary to the laws of Nigeria" in several respects. The lower house of the Nigerian Parliament has voted on a motion stating that the Eni subsidiary should be "formally censured for its role in the affair" and that "the federal government should cancel the OPL 245 agreement".

"There will be more and more fears until Eni provides a full explanation of its role and that of its executives in this affair. Eni has already been involved in a corruption case in Nigeria in 2010, a case which led to a so-called deferred prosecution agreement with the US authorities. As part of this agreement, the company committed to high ethical, risk management and due diligence standards," said Antonio Tricarico of Re:Common. “ Eni and its management must explain to shareholders the payment of 1.1 billion dollars to Malabu Oil and Gas, their links with Mr. Bisignani and how the new role given to Descalzi responds to the commitments made “.

In a letter addressed to Global Witness in response to questions previously posed by the association, Eni stated: "The agreements in question were executed with the Government of Nigeria and payments were made to the Government of Nigeria, at the time of granting the block and the relevant license (OPL) to Eni and Shell. We believe that the government of a sovereign country should not be mistrusted and that having dealt directly with the government and without the use of intermediaries has ensured full transparency of the transaction in question." No response was given to specific questions relating to the role of Descalzi and other Eni personnel.

Notes 1. When Global Witness uses the term “corruption” it is not referring to the fact that Eni or any of its executives have committed any crime. No police investigation has concluded that the OPL 245 deal is in violation of anti-corruption laws. However, in Global Witness's opinion, this deal is corrupt because it represents the monetization of a valuable asset of the Nigerian state that was corruptly assigned by a former oil minister to a company of which he himself was the hidden beneficiary at the time.

2. The case is Energy Venture Partners Versus Malabu Oil Gas, Commercial Court, Queen’s Bench Division, 2011-13. The lawsuit was filed by a broker who claimed that Malabu would not pay him for the work he did to secure a buyer for the OPL245. Shell and Eni were not party to the present proceedings. Energy Venture Partners requested compensation of $200 million and was awarded $110,500,000 in July 2013.

3. Dan Etete has stated on various occasions that he was only a consultant to Malabu. However, his version is widely disregarded, as it is believed that, through the use of frontmen, he has maintained a strong interest in the company. Lady Justice Gloster of the High Court of Justice Queen's Bench Division Commercial Court stated "I consider it to be an objective fact that Chied Etete has always had a substantial interest in Malabu", Case 2011 FOLIO-792 17 July 2013. http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWHC/Comm/2013/2118.html query=malabu+and+oil+and+gas method=boolean The Nigerian House of Representatives, after investigating the case, also established that Dan Etete owns 30% of Malabu.

4. In an American legal case, Judge Bernard J. Fried described the role played by Nigeria's federal government in the deal as that of "a knucklehead managing $1.1 billion in final payment for Malabu." Order to Show Cause with temporary Restraining Order, “In the Matter of Arbitration between International Legal Consulting Limited and Malabu Oil and Gas Limited and J. P. Morgan Chase and Co and all of its subsidiaries and affiliates, including but not limited to JP Morgan Chase Bank, NA,” Supreme Court of the State of New York, County of New York,” Index no 651733/2011, 22 July 2011, p.10. Edwards, Angell, Plamer and Dodge on on behalf of Malabu to Clifford Chance LLP, 15 July 2011.

5. Eni was summoned to a hearing before the Industry Commission of the Italian Senate on 3 April 2014.

For info: Luca Manes, Re:Common: 335 57 21 837