MALABU: JP Morgan replies Nigeria, faults corruption allegations against Jonathan, Adoke

American bank, JP Morgan Chase, has faulted the allegations leveled against it by the Nigerian government in the controversial Malabu scandal.

The bank also faulted the claim put forward by the government against former President Goodluck Jonathan and a former Nigerian Attorney-General and Minister for Justice, Mohammed Bello Adoke.

PREMIUM TIMES reported how a London high court last week began hearing a lawsuit filed by the Nigerian government against the bank in the long-running case.

In the suit, Nigeria is claiming more than $1.7 billion for the bank’s role in the controversial deal. The nation alleges JP Morgan was “grossly negligent” in its decision to transfer funds paid by oil giants Shell and Eni into an escrow account owned by Malabu, a company controlled by a former Nigerian oil minister, Dan Etete.

Nigeria’s lawyer, Roger Masefield, argued that the nation’s case rested on proving that there was fraud and JP Morgan was aware of the risk of fraud but took no action to prevent it.

Reports claimed that the government equally informed the court that Mr Adoke contacted JP Morgan through telephone call and email, and “acted while he was no longer in the ministerial position, an act linked to impersonation and fraud.”

In a letter written to the attorney General of the Federation, Abubakar Malami, by his counsel, Paul Erekoro, Mr Adoke denied any complicity in the case.

The former minister argued that the Nigerian government’s argument that he contacted JP Morgan and sent an email using the mail of Aliyu Abubakar’s shell company was “baseless and false”.

JP Morgan’s Defense

In details of its opening submission for trial, seen by PREMIUM TIMES, the bank argued that the Nigerian government cannot establish a fraudulent and corrupt scheme in the matter as alleged.

The bank also said that it did not breach the Quincecare duty, neither did it act with gross negligence as claimed by the Nigerian government. The purpose of Quincecare duty is to protect a bank’s customers from misappropriation by the customer’s authorised agents, for example where a company director acting dishonestly within the account mandate directs a company’s funds to his personal use.

The bank said that the release of Malabu’s claims over OPL 245 was a vital part of the transaction, because without this Shell and Eni would not have been prepared to take on the block, and it would therefore have continued to languish in an unproductive state.

“The Resolution Agreements were subject to detailed scrutiny by a large number of senior ministers and officials within the FGN, most of whom are not accused of any wrongdoing,” the bank said.

“The agreements were personally approved by President Jonathan, and represented the policy of his administration.”

The bank said it had no involvement in the settlement discussions, and the Resolution Agreements contemplated that short-term escrow accounts would be used to make the payments which fell due under them.

“JPMC agreed to provide the Depository Account for this purpose, and charged a fee of $25,000 for its services. Its role was thus intended to be discrete and limited – although, as will be explained, in the event JPMC deployed very substantial resources to the account and to the consideration of the instructions that it received to make payments from it.”

The bank said that although the Muhammadu Buhari government has denounced the 2011 settlement, it has never taken any steps in Nigeria to have the Resolution Agreements set aside, and has been content to retain the significant sums of money and other benefits that it received under them.

“The government has even positively relied on the agreements in other litigation when it has suited its purposes to do so,” it argued.ⓘ

“Nor has anyone ever been convicted of any crime in connection with the supposed fraud. Furthermore, the FRN (Nigeria) seems to have taken no steps in Nigeria to recover its alleged losses from the principal beneficiaries of the alleged fraud, such as Mr Jonathan and his associates. Instead, it has authorised “recovery agents”, remunerated based on a percentage of any amounts recovered, to pursue foreign defendants such as JPMC.”

The bank said by its pleadings, the Nigerian government failed to provide proof or call witnesses to back its claim that the settlement agreement and the release of funds to Malabu were tainted by fraud.

“The FRN bears the burden of proving the facts on which its claim depends,” the bank argued. “On the face of the pleadings at least, these include very serious allegations of fraud and corruption against a number of senior ministers and officials in the democratically elected government of its own country, as well as against senior officers and employees of Shell and Eni. The FRN continues to allege that a former President of the FRN – Mr Jonathan – was a key participant in the alleged scheme.

“When pleading fraud, full and specific details of the allegation must be clearly set out. As to the evidence required to prove such allegations, the standard of proof is the ordinary civil standard of the balance of probabilities. However, the more serious an allegation, the more convincing is the evidence required to prove it.

“The courts have repeatedly emphasised that cogent evidence is required to justify a finding of fraud or other discreditable conduct, reflecting the court’s conventional perception that it is generally not likely that people will engage in such conduct.”

JP Morgan wondered why the Nigerian government is reluctant to call key witnesses (comprising key officials who either participated in producing the settlement agreement or approved payment instructions) to testify in favour of its claims.

The bank said, “The Resolution Agreements and/or the payment instructions issued to JPMC were therefore known about and/or authorised by (at least) President Jonathan, two successive Ministers of Finance (Mr Aganga (who was in post until approximately June 2011) and Dr Ngozi Okonjo-Iweala (who succeeded him)), the Minister for Petroleum Resources (Ms Alison-Madueke), the Attorney-General and Minister of Justice (Mr Adoke), the Permanent Secretary of the Ministry of Finance (Mr Kifasi), the Minister of State for Finance (Dr Ngama), the Accountant-General (Mr Ogunniyi), the Director of Funds (Mr Shehu), the Nigerian High Commissioner to the UK (Dr Dalhatu Tafida), the Director of the DPR (Dr Obaje), the Secretary to the FGN (Senator Anyim), and a number of officials and legal advisers from relevant ministries and departments.

“Of these, allegations of impropriety are only made against President Jonathan, Ms Alison-Madueke and Mr Adoke. None is made against any of the individuals who issued payment instructions to JPMC under the Depository Agreement, namely Dr Ngama and Mr Ogunniyi (who issued the payment instructions in both August 2011 and August 2013 by which the payments to Malabu were made), and Mr Aganga and Mr Kifasi (in relation to other payment instructions).

“The request for information from the FGN made by David Steel J during the EVP proceedings was escalated to the highest levels of the FGN, including to President Jonathan. Mr Kifasi, the Permanent Secretary of the Ministry of Finance also sent a detailed letter dated 4 July 2011 seeking the President’s approval of further payment instruction after the first payment was returned from BSI, which the President approved.

“The detailed scrutiny to which the agreements were subject is clearly incompatible with the theory that the agreements were concluded as part of a corrupt arrangement. The repeated suggestion in the FRN’s skeleton that there was no bona fide reason for the deal is, in the face of all of this evidence, completely unsustainable.

“The FRN is not calling a single witness to support its case or explain any of this. This is despite the fact that there are many individuals, against whom no allegations of misconduct have been made, who could have given material evidence on behalf of the FRN as to the conclusion of the Resolution Agreements and the issuing of the payment instructions to JPMC. In particular: (a) Perhaps most significantly, Dr Ngama and Mr Ogunniyi, who actually issued the relevant instructions pursuant to which JPMC made the payments to Malabu, are not accused of any wrongdoing; yet no explanation has been provided for why they are not giving evidence.ⓘ

“The absence as a witness of Dr Okonjo-Iweala is also particularly striking. She was announced as the FGN’s new Minister of Finance in July 2011, replacing Mr Aganga (although it seems that she was not formally sworn in until approximately 17 August 2011). She would have relevant evidence to give about both the 2011 and the 2013 payments. In particular, in 2013 she personally intervened to stop any instructions being issued to JPMC until she had been able to investigate allegations of corruption that had been made to her by certain NGOs.

“Having considered the matter and having been provided with a written explanation from Mr Adoke, she permitted the payments to be made. She is a respected international figure and evidently still close to the FGN, having recently become Director-General of the World Trade Organisation with its support. Mr Shehu, who was involved in relevant events in 2011, apparently co-operated with the FRN for the purposes of its disclosure exercise, but is not being called as a witness. Mr Kifasi gave evidence in the Italian proceedings but is not being called as a witness in this case.

“In the third place, the FRN has rowed back considerably from its case that President Jonathan took bribes to conclude the Resolution Agreements or to approve the payments to Malabu. This was only ever pleaded in the most vague and generic terms. For example, it is alleged that President Jonathan received “illegal payments”, 266 and that he approved the Resolution Agreements because he “understood” that he would receive bribes.

Case Against Jonathan weak, unproven Adoke

JP Morgan said in its defence that while the Nigerian government “still seems to maintain its case as regards President Jonathan, it has now accepted (as was always obvious) that ‘it is impossible to demonstrate conclusively that President Jonathan benefitted from the OPL 245 transaction’.”

The bank said, “However, no particulars were provided of any amounts said to have been received, of when or under what arrangements he received them, or of his precise role in bringing about the conclusion of the Resolution Agreements. There does not appear to be any evidence directly supporting the case that President Jonathan received bribes, or that his approval of the Resolution Agreements was prompted by an understanding that he would do so. The case amounts to nothing more than unsubstantiated allegations and rumour.

“The FRN has nevertheless sought to keep its case against President Jonathan alive, submitting that “the evidence shows” that it is “probable” that he took bribes, although this cannot be demonstrated “conclusively”.

“The only evidence to which the FRN has referred (at skeleton [163] and [164]) is very thin; the same material also provided the only support for the now abandoned case against Ms Alison-Madueke and General Gusau. It consists largely of snippets of internal communications between representatives of Shell, rather than anything directly implicating President Jonathan or anyone else. For example: (a) The FRN refers to an e-mail apparently sent by Peter Robinson to John Copleston (both of Shell) on 16 July 2010, in which Mr Robinson reported on the view of an unnamed “source” that President Jonathan expected to receive “significant revenues” from the sale of OPL 245, and expressed his own view that the approach of President Jonathan and Ms Alison Madueke was “about personal gain and politics”.

“It is further alleged that an internal Shell briefing note prepared for Malcolm Brinded (a senior Shell manager) on 23 August 2010 said that President Jonathan wanted to see a deal closed in relation to OPL 245 because of the “political contributions that will flow as a consequence”.

“These documents, which date from nearly a year before the Resolution Agreements were concluded, do not come close to proving that President Jonathan agreed to accept, and in fact accepted, bribes in relation to OPL 245 or the Resolution Agreements. They contain nothing more than the unsubstantiated opinions of the Shell personnel who wrote them or their anonymous sources, none of whom are giving evidence.

“The FRN also relies on a text message apparently sent by Mr Agaev of ILCL to Mr Obi of EVP on 8 May 2011, in which Mr Agaev said: “Now I shall receive only if Chief receives, and I am not sure how much and if at all he will receive. Everything is at hands of the FGN, in particular AG and M of Finance, and of course The Big Boss.” Even on its face this text message is obviously compatible with other explanations than corruption. When it is said to have been sent, the Resolution Agreements had only recently been concluded but Malabu had not yet received the money due to it.

“The point that Mr Agaev seems to have been making is that he (or rather his company, ILCL) would only receive commission payments from Malabu if Malabu itself received payment for disposing of its interest in OPL 245. Whether or not that happened was up to the FGN, because it was responsible for paying Malabu under the Resolution Agreements. The message does not suggest that President Jonathan, Mr Adoke and Mr Aganga (the Minister of Finance) were behaving corruptly, and the FRN has not in any event made any such allegation against Mr Aganga.

“Neither Mr Agaev nor Mr Obi will be giving evidence in these proceedings to explain this remark, so it is hard to see how the FRN will make good this point. But in any event, even if Mr Agaev’s message could be read as casting aspersions on the persons mentioned, his apparent opinion in this respect would obviously not provide any proper basis for a finding that such persons were involved in the alleged scheme.

“The fourth point is that the FRN’s case that the Resolution Agreements were the product of bribery is now based more or less exclusively on the allegation that Mr Adoke was corrupted into bringing them about. He is effectively the last man standing after the case against each of the other alleged participants in the scheme has been either abandoned or soft-pedalled. That is therefore the focus of the next section.”

Evidence concerning Mr Adoke

The bank also challenged the claim by the government that former Minister Adoke behaved dishonestly or benefited from bribes following the execution of the settlement agreement and transfer of funds to Malabu.

The bank said, “”In order to make out its case that the Resolution Agreements and the payment instructions issued to JPMC were the product of corruption on the part of Mr Adoke, it is common ground271 that the FRN must prove both: (a) that Mr Adoke caused the Resolution Agreements to be concluded and the payment instructions to be issued; and (b) that he did so in exchange for bribes.

“As to the first of these requirements, the evidence concerning the conclusion of the Resolution Agreements has been considered in paragraphs 158-162 above. As was seen, the conclusion of the agreements was a substantial piece of government business which involved dozens of FGN ministers and officials who are not alleged to have done anything wrong. Against this background, it is very hard to see how the FRN can prove that Mr Adoke “caused” the conclusion of the agreements by himself. As Mr Adoke himself said in the letter that he wrote to David Steel J, the agreements were approved by the Nigerian Cabinet.

“The more pertinent issue is anyway whether Mr Adoke “caused” the issuing of the payment instructions to JPMC. Quincecare requires the claimant to establish that one of its trusted agents caused the issuing of payment instructions to the claimant’s bank for the agent’s own dishonest purposes. Mr Adoke is now the only candidate for the position of the necessary dishonest agent. 175. Here there is a vacuum at the heart of the FRN’s case. The FRN has not alleged in any of its pleadings that Mr Adoke had anything to do with the issuing of the relevant payment instructions to JPMC, either in 2011 or in 2013.

“The relevant instructions were issued by Dr Ngama and Mr Ogunniyi, who (unlike Mr Adoke) were the officers authorised under the Depository Agreement to issue instructions to JPMC. No allegations of impropriety are made against either of them. Importantly, there is no plea – and no evidence – that when Dr Ngama and Mr Ogunniyi issued the instructions they were acting on the directions of Mr Adoke. Nor can the Court just assume that this was the case in the absence of any evidence.

“The FRN is not calling Dr Ngama or Mr Ogunniyi (or any other witnesses) to explain how and why they came to issue the instructions when they did. The notion that they would just have done what Mr Adoke told them without challenge is inherently improbable. Dr Ngama was the Minister of State for Finance, and Mr Ogunniyi was the Accountant-General, a high-ranking civil servant in the Ministry of Finance. These were very senior members of the FGN, not simply clerical staff who would just have done as directed by Mr Adoke if not otherwise satisfied that issuing the instructions was appropriate and in accordance with their own obligations as members of the government.

“The FRN appears to be alive to this problem. In its skeleton at [138] the FRN has referred to the fact that there is evidence that Mr Adoke requested Mr Aganga (then the Minister of Finance) to issue the instruction to JPMC to pay Petrol Service on 24 May 2011.273 There is also a rather unconvincing attempt to attribute some of the later abortive instructions (to pay the funds to BML) to the intervention of Mr Adoke, on the basis that these were actually issued by Mr Kifasi who told the EFCC that he had “relied on Adoke’s advice that the Resolution Agreements were ‘in the interests of all concerned’”.

“This statement falls well short of Mr Kifasi saying that Mr Adoke actually directed him to issue the instructions, and in any event Mr Kifasi was a senior civil servant within the FGN who would not just have taken Mr Adoke’s “advice” if he did not otherwise believe that it was appropriate to do so. But even if Mr Adoke had told Mr Kifasi to issue the instructions (which seems not to have been the position), it is irrelevant because these are not the instructions against which JPMC actually paid the money to Malabu in either 2011 or 2013. What is conspicuously absent, however, is any evidence at all that the relevant payment instructions (i.e. the ones issued on 16 August 2011 and 3 July 2013, which caused the payments to Malabu) were issued by Dr Ngama and Mr Ogunniyi at the instigation of Mr Adoke.

“That is the end of any case that Mr Adoke was the cause of the issuing of the payment instructions. As to whether Mr Adoke received bribes in exchange for causing the conclusion of the Resolution Agreements, the FRN’s pleaded case contains no particulars at all of any agreement or understanding pursuant to which he is alleged to have taken, or agreed to take, bribes. All that is said is that Mr Adoke played a part in brokering the agreements because he “understood” that he would receive bribes out of the purchase price of OPL 245.

“There is, in fact, a wealth of evidence which is inconsistent with the argument that Mr Adoke “brokered” the Resolution Agreements to assist Mr Etete as part of a conspiracy in exchange for bribes. For example: (a) As set out in paragraph 161 above, Mr Adoke had actively involved the DPR and NNPC (as well as other government agencies) in the negotiation of the Resolution Agreements and indicated that unless the NNPC was satisfied, the deal could not proceed. (b) There was evidence in the Italian criminal proceedings that Mr Adoke had put considerable pressure on Mr Etete to accept the offer of $1.3bn – a price which Mr Etete was not happy with – by threatening to revoke Malabu’s licence in November 2010. Indeed, in its report on OPL 245 in 2013, the House of Representatives found that Malabu had been “forced” to relinquish its interest in OPL 245. That is not the action of a coconspirator.

“The FRN also relies, as against Mr Adoke, on evidence said to show that he received money representing the proceeds of the funds paid to Malabu from the Depository Account. The FRN makes two principal allegations in this regard: (a) That MrAdoke received a number of cash deposits in his bank account between February 2012 and September 2013, and that the sums received by Mr Adoke “were made out of the purchase price of OPL 245”. Reference is made to what appears to be a bank statement showing some cash deposits into Mr Adoke’s bank account. The FRN has not identified any evidence to support the inference that these cash deposits came from the proceeds of the payments made to Malabu. Most of the payments were not made until October 2012, over a year after the 2011 payments from the Depository Account.

“But in any event, even if the FRN is able to prove that these payments came indirectly from Malabu, that does not come close to justifying an inference that Mr Adoke received bribes, let alone bribes paid pursuant to a prior understanding of corrupt assistance in relation to the Resolution Agreements or payment instructions to JPMC.

“That the cash payments to Mr Adoke “appear to have related to a commercial property transaction” pursuant to which Mr Adoke received a valuable property from Mr Aliyu at no cost or a heavy discount.278 In essence it is said that: (i) Mr Adoke purchased a property from a company controlled by Mr Aliyu; (ii) the price was lower than a recent purchase price for the property; (iii) Mr Adoke funded the transaction by way of an overdraft; (iv) he then paid off the overdraft with cash deposits which were the “proceeds of the Scheme”; and (v) the property at some point thereafter reverted to Mr Aliyu who divided it into two plots which he then sold to the Central Bank of Nigeria for a combined sum which was more than Mr Adoke had paid.

“This falls far short of evidence of bribery with the proceeds of the Malabu payments: (i) The allegations are based on a selection of documents apparently assembled for the failed Italian prosecution but without full disclosure in these proceedings or any witness evidence (see paragraph 21 above). The Court has little visibility of what took place, and no way of testing the FRN’s hypothesis. (ii) There might be many reasons why Mr Aliyu’s company (and for that matter Mr Adoke) would buy a property at one price and sell for another. For example the prices paid could vary for reasons related to the property market, the condition of the property, planning consents, or the fact that it was under- or overvalued to begin with. This Court cannot assess these factors.

“There might also be other reasons why Mr Etete, if he was indeed involved, would be willing to confer benefits on Mr Adoke. There was evidence before the Italian court that Mr Adoke was a creditor of Mr Etete, having provided legal services to him. There appears to be no evidence to link the subsequent cash deposits to Mr Aliyu or Mr Etete. Even more significantly, there appears to be no evidence that the cash deposits resulted from the Malabu payments.

“In short the assertion that these deposits represented “the proceeds of the Scheme” is completely unsubstantiated. In any event, there is no evidence of what, if anything, Mr Adoke received when the property was transferred to other companies and on-sold.

“The other evidence on which the FRN relies is another internal Shell e-mail, this time sent by John Colegate to Mr Robinson on 13 June 2010.280 In that message Mr Colegate recounted information that he had apparently obtained from an anonymous source in Nigeria, including that “Chief has bought off chief justice”.

“The FRN says that the reference to the “Chief Justice” should be read as a reference to the Attorney-General. Even if that is right, this is unsubstantiated double hearsay evidence dating from 10 months before the Resolution Agreements were concluded and is based on information received from anonymous sources. That is plainly insufficient to justify a finding that Mr Adoke was involved in any fraudulent and corrupt scheme.

“Finally, it should be recalled that it is not alleged that JPMC knew or should have known any of the above facts and matters, which are alleged only to have come to light (or, in the case of the alleged money flows from Malabu’s accounts, only to have happened) after the payments from the Depository Account were made.”

On the controversial email the government accused Mr Adoke of sending to the bank while he was no longer minister, JP Morgan said, “There is also a separate point that in 2011 JPMC had received an e-mail from Mr Adoke from a personal e-mail address agroupproperties@yahoo.com. “A Group” is alleged to be associated with Mr Aliyu, and it is said that JPMC “ought to have known” that there was a connection between Adoke and Mr Aliyu as a result of the e-mail and that this “ought to have” constituted a further red flag486 (although it is not pleaded as one in Schedules 2 or 3).

“This point goes nowhere: (a) It is not alleged that JPMC actually knew that there was a connection between Mr Adoke and A Group or Mr Aliyu, whether in 2011 or 2013. (b) The argument appears to be that JPMC should, in 2013, when it became aware of the allegations about Mr Aliyu and A Group, have cast its collective mind back two years to recall an e-mail apparently sent by Mr Adoke from a Yahoo e-mail address which might have been associated with A Group. That is far-fetched.

“Anyway, Mr Adoke apparently denies sending the e-mail and has claimed it is a forgery.

“Curiously, this allegation has triggered a criminal prosecution in Nigeria against the director of HEDA Resource Centre, a Nigerian NGO, for allegedly circulating the A Group e-mail on Twitter and Facebook knowing it to be false.

“This prosecution has been specifically authorised by the department of attorney-General Malami, who has also authorised the present proceedings in which the e-mail is positively relied on by the FRN. 488 JPMC is not able to take a position on whether the e-mail is genuine, but the inconsistent positions adopted by the FRN call out for an explanation.”

The bank also dismissed the Nigerian government’s argument that it breached its Quincecare duty, adding that the nation reached this conclusion despite the fact that it was directly contradicted by what it was told by Mr Adoke and other members of the Nigerian government at the time. In particular, the bank said it received express written confirmation from Mr Adoke that the Resolution Agreements had been approved by the Nigerian Cabinet.

“There is no suggestion by the FRN that this was untrue,” the bank said of Mr Adoke’s claim.

“Mr Adoke explained that the agreements were designed to bring an end to ‘the acrimonious and multiple disputes’ which had plagued Block 245 for over 10 years, and to ‘bring the oil-field on tap and achieve very substantial taxation revenues for the Nigerian people’. He explained that the FGN believed that the agreements were a ‘good result for the Nigerian people’ and wanted to have them fully performed to prevent yet further disputes.”

JP Morgan noted that Nigeria’s argument that it should have “disregarded these express assurances from a senior minister (and most senior law officer) in the Nigerian government” and refused to make the payments that the government instructed it to make in satisfaction of its obligations under the Resolution Agreements was wholly unrealistic.

The trial is expected to end on April 7.

Credit: Premium Times