Panama Papers show how a prominent Nigerian oil mogul was brought down

The luxurious Galactica Star yacht was at the centre of an investigation after its owner was accused of defrauding the Nigerian government.

In September last year, Beyoncé and her husband, Jay Z, paid a reported $900 000 to sail the Mediterranean Sea on the Galactica Star, a 65m private superyacht.

Just after their trip, the yacht’s owner, Kolawole Aluko, was accused of defrauding the Nigerian government, including allegations that the yacht was bought with profits from crude oil sales that had been illegally diverted.

Held through a shell company created by the law firm at the heart of the Panama Papers scandal, Mossack Fonseca, the yacht became caught up in a huge investigation in Nigeria.

Aluko, a petroleum and aviation mogul, is one of four defendants accused of helping to cheat the Nigerian government out of $1.76-billion it was owed from oil sales.

In a separate investigation, Nigerian authorities are reportedly investigating whether Aluko helped smuggle millions of dollars out of the country as kickbacks to Nigeria’s former petroleum minister, Diezani Alison-Madueke.

Aluko is part of a constellation of Nigerian oil executives, state governors, Cabinet ministers, military officials and tribal chiefs exposed by the Panama Papers leak. Mossack Fonseca, a law firm with its headquarters in Panama and offices around the world, worked for three former Nigerian oil ministers, who used companies to buy boats and homes in London, the records show.

Research by anti-corruption organisations indicates that Nigeria loses more money from illicit activity, including graft and corporate tax abuse, than any other African nation. According to Oxfam, as much as 12% of Nigeria’s annual gross domestic product is lost to illicit financial flows.

“Our firm, like many firms, provides worldwide registered agent services for our professional clients [for example, lawyers, banks and trusts] who are intermediaries,” Mossack Fonseca told the International Consortium of Investigative Journalists (ICIJ).

“As a registered agent, we merely help incorporate companies and, before we agree to work with a client in any way, we conduct a thorough due-diligence process, one that in every case meets and quite often exceeds all relevant local rules, regulations and standards to which we and others are bound.”

Mossack Fonseca declined to answer specific questions and said that, in providing its services, “we follow both the letter and spirit of the law. Because we do, we have not once in nearly 40 years of operation been charged with criminal wrongdoing.”

Aluko and Alison-Madueke
In October 2015, London police questioned Alison-Madueke, Nigeria’s oil minister between 2010 and 2015, as part of investigations into allegations of bribery and money laundering. The investigations are ongoing.

The former minister, who graduated with a degree in architecture from Howard University in the United States in 1992, is in London undergoing cancer treatment, her lawyers said.

Media reports have described Aluko as a key ally of Alison-Madueke, a relationship both have previously denied. He rose to prominence around 2011 when Nigeria’s government awarded valuable oil blocks on a no-bid basis to two companies he founded or owned. One of his companies, Atlantic Energy, was created the day before the deals to acquire multimillion-dollar oil licences were signed.

Aluko is part of a circle of oil traders who are the subject of frequent media speculation in Nigeria. His lifestyle has earned him the reputation of being Nigeria’s playboy. He bought an apartment in Manhattan for $8.6-million and, according to The New York Times, paid a combined $70-million for four homes in Santa Barbara and Beverly Hills.

The Nigerian government won a court order in May this year to freeze assets linked to Aluko, two companies he directed and one of his business partners. The Lagos High Court order listed Aluko’s yacht, property in London, four homes in California, two penthouses in Manhattan, one in Dubai, 132 houses and apartments in Nigeria and land in Canada and Switzerland. In addition, the court ordered Aluko not to sell or dispose of more than $67-million in four bank accounts in London and Switzerland, an assortment of watches, or his collection of 58 cars and three planes.

Through a representative, Aluko told the ICIJ: “I have never been prosecuted and convicted in any country. I am aware that a criminal investigation was started in the  United Kingdom. However, to date, I have not been made aware of any law enforcement action to be undertaken against me.”

He added that the information relating to the award of oil contracts to his company was “misguided” speculation.

“As a private citizen, I organise my business and family matters to maximise convenience, as well as operational and administrative efficiency. My companies operate in accordance with the laws and regulations of the relevant jurisdictions and, insofar as tax liabilities arise, they pay taxes in the jurisdictions in which taxes are due to be paid.”

Criminal charges for alleged crude oil fraud against Aluko were dropped in July. Media reports indicate that this was as a result of authorities’ inability to locate and serve a summons on the Swiss resident.

Despite repeated efforts, the ICIJ was unable to reach Alison-Madueke. In previous statements published online and attributed to the former minister, she has denied all wrongdoing.

International investigations
News reports in Nigeria and the UK indicate that the FBI, the UK’s National Crime Agency and Switzerland’s attorney general are investigating Aluko for his role in companies and transactions that were allegedly used to conceal Alison-Madueke’s transfer of wealth outside Nigeria.

The office of the Swiss attorney general confirmed that it had received a request from the UK in relation to Aluko. British authorities and the FBI did not confirm or deny the existence of an investigation.

Mossack Fonseca’s internal records show that Aluko owned four companies in the British Virgin Islands, one of the world’s busiest offshore havens. He was the director of another, Fragola Limited, in the Seychelles. In May 2013, Aluko paid $11.5-million to buy Almaty United Investors, a company registered in the British Virgin Islands that owned property in Dubai.

Another of Aluko’s companies, Earnshaw Associates, was directed on paper by a succession of three companies in Nevis, Switzerland and the British Virgin Islands, all financial hubs renowned for their secrecy and light tax legislation. The company was incorporated three weeks after Alison-Madueke was appointed as head of Nigeria’s ministry of petroleum resources in April 2010.

In March 2014, Earnshaw Associates registered a Bombardier Global Express jet in Malta, according to documents sent through Mossack Fonseca. The 18-seat Bombardier is the same model of aircraft that Nigerian media reported Alison-Madueke used during her time in office.

Slippery oil deals
Long before Aluko, Mossack Fonseca had faced questions about its Nigerian customers. In 2007, when the firm’s employees realised that an offshore company was being used by a former adviser to Olusegun Obasanjo, Nigeria’s president between 1999 and 2007, Jürgen Mossack reminded his staff: “In this firm, everyone knows that dealing with Nigerians always gives you headaches. It’s inevitable that this case involves a crime or fraud.”

One crude oil sale contract between three offshore companies, for example, provided for commissions so high that, one expert consulted by ICIJ said, the most obvious explanation is that the oil was stolen. Another leaked file shows a $12-million loan from a shell company to a Nigerian typed on half a sheet of paper.

In 1995, 15 years before Alison-Madueke became Nigeria’s first woman petroleum minister, chief Dan Etete held the post.

Etete, a moustachioed power player from the oil-rich Bayelsa State, served as petroleum minister until 1998. His tenure became the subject of investigations after he left office. He was convicted of money laundering in France, and authorities in three countries continue to examine allegations that parts of a billion-dollar oil deal involving a company linked to Etete were transferred or pocketed as bribes by political figures and middlemen.

The Panama Papers reveal that Etete and the company Malabu Oil & Gas signed a consultancy agreement with an offshore company created by Mossack Fonseca to negotiate the sale of oil blocks to China, a deal that never proceeded. Other documents appeared under Etete’s reported alias, Omoni Amafegha. Amafegha’s company, Pentrade Securities, featured the signature of Richard Granier-Deferre, a French oil trader who was fined about $200 000 in 2007 by a Paris court for being an accessory to Etete’s money laundering. The company was incorporated in 1998 when Etete was oil minister and opened a bank account in Gibraltar. Amafegha also owned Henkel Investments, which bought a boat in January 1998.

Etete denied using Amafegha as an alias and said he had never heard of Pentrade Securities or Henkel Investments. He denied owning or having owned Malabu.

“It’s all just enemies that created this misinformation,” he said.

“I have nothing to do with any Panamanian companies,” Etete told the ICIJ.

“I have never been there or sent anyone there to open an account.”

Fall from grace
At his peak, Aluko was a globetrotter whose face regularly graced celebrity Instagram pages and entertainment tabloids. In 2013, he launched a $500-million infrastructure development fund alongside Hollywood actor Jamie Foxx and partied in New York at Leonardo DiCaprio’s 39th birthday bash. He was also photographed with rapper P Diddy in Ibiza, Spain, the following summer. The music star tweeted a photo of himself alongside a smiling Aluko with the caption “Nigeria I love you”.

At the time, Aluko was regularly cited in Nigerian media as one of “the minister’s men”, a clique of Nigerian oil traders who had secured a string of oil licences from Alison-Madueke’s office with startling ease. In 2011 and 2012, Aluko’s Atlantic Energy, which boasted of “strong government relationships”, was awarded eight crude oil licences in the western Niger Delta. Atlantic Energy sent tens of millions of dollars of crude oil to Italy, the US, Germany and the Netherlands throughout 2012 and 2013, according to documents seen by the ICIJ.

But, in September 2014, rumours in the Nigerian media suggested that Aluko and his companies had fallen out of favour with Alison-Madueke. By September, Atlantic Energy defaulted on its loans and owed Nigeria $1.3-billion in cash and other obligations. The Nigerian government and banks sent out confidential pleas to potential angel investors in the hope they would be willing pay the $700-million deficit left by Atlantic Energy’s bankruptcy.

Mossack Fonseca cuts ties
Two months later, during a routine background check on Aluko, Mossack Fonseca employees discovered online news articles claiming that Nigerian authorities might ask Interpol to help extradite the businessperson. Interpol has denied that he was in its sights and Mossack Fonseca continued to provide services to Aluko.

It wasn’t until June last year that Mossack Fonseca took a second look at Aluko, after it received a demand from the British Virgin Islands Financial Investigation Agency to produce documents about Earnshaw Associates.

Mossack Fonseca told British Virgin Islands authorities that it did not have information about any bank accounts or assets held by Earnshaw, despite having signed documents more than a year earlier to help Aluko’s company register a private jet.

In August 2015, the situation grew worse when the law firm realised it had no contact or personal documentation for Aluko. One Mossack Fonseca employee was worried that this was a potential breach of the requirement that offshore middlemen keep such information for at least five years after a company is mothballed.

An employee sought help from Aluko’s Swiss wealth manager, Johnnie Ebo Quaicoe, and shared links to four unflattering online news articles.

“I’m dumbfounded that Mossack Fonseca will print excerpts from tabloids,” Quaicoe wrote from Geneva.

“If Mr Aluko is truly a wanted person,” Quaicoe chided Mossack Fonseca, “he would not be difficult to find because he is a resident in Switzerland”.

Brushing the concerns aside, Quaicoe instead asked Mossack Fonseca to assist with a “major” $30-million mortgage with a Luxembourg bank. The loan was to be provided by Banque Havilland SA. The collateral securing the loan would include the Galactica Star, the boat that Beyoncé and Jay Z had rented for their Mediterranean cruise.

Mossack Fonseca agreed to process the paperwork needed to secure the loan.

But concerns continued. In September last year, a Mossack Fonseca employee discovered new media reports that alleged Aluko was “on the run from the law over several controversial and fraudulent dealings in the petroleum industry”. Employees handling the loan deal asked colleagues for “comfort to proceed without being seen as facilitators to money-laundering activities and corruption”.

By October, Mossack Fonseca had had enough – almost. It finally cut its ties with three of Aluko’s four companies, which had been inactive since 2014, and prepared a memo for British Virgin Islands authorities outlining the law firm’s concerns about Aluko’s activities.

But, before sending the memo, Mossack Fonseca certified the $30-million loan for Earnshaw Associates. A Mossack Fonseca employee justified the decision to help push the paperwork through by noting that the firm had already been working on the loan transaction for months.

Quaicoe told the ICIJ he could not discuss his work with Aluko.

“I conduct business in accordance with the laws of the relevant jurisdictions pursuant to the contracts of services concluded with my clients,” he said.

Corruption red flags
Ross S Delston, an attorney and anti-money-laundering expert in the US, said, in general, banks, other financial institutions and financial intermediaries such as law firms, real estate agents and trust and company service providers should be sceptical whenever they’re dealing with clients who are involved in the oil business, are rumoured to have close connections to politicians, have been the subject of negative news stories and come from countries such as Nigeria that are considered high-risk geographies for corruption, money laundering and other financial crimes.

“Taken together, these indicators and risk factors present not just red flags for money laundering or other financial crime but rather can be characterised as fireworks,” Delston said.

As Aluko was securing his loan, the pressure on Alison-Madueke and her associates was building up. In October, a small number of Alison-Madueke’s family members appeared in a London court on bribery and corruption charges, and police seized some of the minister’s assets, including $39 000 in cash. Nigerian authorities have continued to arrest and arraign other alleged Alison-Madueke confidants.

In July 2016, Nigeria’s Economic and Financial Crimes Commission laid charges in court against several Nigerians with alleged ties to Alison-Madueke. In a last-minute change, Aluko’s name was dropped from the charge sheet after government prosecutors admitted they had been unable to serve him with documents.

Source: http://mgafrica.com