20 years ago, during the regime of Sani Abacha, some top government officials looted billions of dollars from Nigeria’s treasury through JPMorgan Chase.
J.P. Morgan Chase & Co. is an American multinational investment bank and financial services company headquartered in New York City. JPMorgan Chase is the largest bank in the United States, and is ranked by S&P Global as the sixth largest bank in the world.
Now the Nigerian government is demanding some of its money back.
Claimant counsel filed a suit against the bank, accusing it of facilitating extraction of nearly $900 million between 2011 and 2013 by corrupt former officials from a government bank account in London.
The bank defends its actions saying it was following instructions it received from senior Nigerian government officials. They claimed to have received a letter by the then Attorney general attesting the legitimacy of the instructions.
Failed no case submission
A JPMorgan spokesman said it would fight Nigeria’s legal claim, which “is completely without merit.”
Attempt by the bank to persuade a British judge to throw out the case failed, in part because of the unusual circumstances surrounding the money transfers — including the fact that two banks to which JPMorgan wired the money rejected the transfers because of concerns that they might violate money-laundering laws.
Under British law, banks are required to act in their customers’ best interests, even if someone connected to a customer tries to get them to do otherwise.
The bank has argued in court processes that its agreement with the Nigerian government specified, at the time it was signed, that JPMorgan would follow whatever instructions it received, even if it had reason to believe that the instructions were “not in the best interests” of the account holder.
According to reports, JPMorgan Chase argued that Nigeria’s case should be dismissed on the grounds that it received sufficient approvals from Nigerian authorities before allowing the transfer of funds from a government account to those controlled by the former Minister of Petroleum Resources, Mr. Dan Etete who has been convicted outside Nigeria of money laundering.
It is the latest example of a major American bank getting caught up in a foreign corruption scandal. In Malaysia, Goldman Sachs and some former executives have been accused of participating in a multibillion-dollar fraud involving a government investment fund.
The Federal government is seeking damages from JPMorgan of nearly $900 million.
The go-ahead ruling
The high court presided by Justice Andrew Burrows had in a 26-page verdict in February ruled that Nigeria had “reasonable grounds” for bringing a claim to the commercial division of the high court.
Referring to payments made to some officials by the bank for which the Nigeria government is claiming the bank did illegally, the judge said the bank ought to have suspected the payments were fraudulent and therefore had a duty to protect the Federal Republic of Nigeria until its concerns were cleared up.
“That duty of care entails that the defendant bank could not simply follow the mandate of abiding by the instructions given by the claimant because the bank’s duty of care, as its core, was to protect the claimant against being defrauded by not paying out unless and until it was ‘off inquiry”. The Judge ruled.
How it began
In 1998 when late General Abacha, awarded a license to drill oil near the Niger River Delta to Dan Etete, Nigeria’s oil minister. Mr. Etete paid just $2 million for the license, which was expected to generate billions of dollars in revenue.
Mr. Abacha’s successors accused Mr. Etete of corruption and tried to revoke the license. They were unsuccessful. Mr. Etete has denied wrongdoing.
In 2007, though, Mr. Etete was convicted of money laundering in an unrelated case in France, and two oil companies, Royal Dutch Shell and Eni, offered to buy the drilling license. In 2011, they struck a deal to pay the Nigerian government, then led by Goodluck Jonathan, more than $1 billion for the license.
However, under the agreement, according to Italian and Dutch prosecutors, most of the money was slated to go to Mr. Etete and Mr. Jonathan’s friends, and not the Nigerian government.
Nigerian officials opened an account at JPMorgan in London, and an Eni subsidiary deposited about $1.1 billion on May 25, 2011. Within days, the Nigerian officials instructed the bank to transfer the money to an account at a Swiss bank, Banca Svizzera Italiana, BSI.
When JPMorgan sent the funds, BSI officials sent them right back, telling JPMorgan that they were “not comfortable” with the transfer, citing “compliance reasons.” Emails among BSI employees, published in Italian court filings, show that the Swiss bank suspected that the funds were bound for Mr. Etete.
After BSI rejected the transfer, JPMorgan told British regulators that it, too, harbored concerns about whether the money was headed to Mr. Etete. It was the first of six suspicious activity reports that JPMorgan sent to British regulators in relation to the Nigerian account that summer. While JPMorgan was suspicious, it did not close or freeze Nigeria’s account.
Aside: Swiss authorities in 2016 forced BSI to sell itself or shut down after finding that the bank had helped Malaysian officials illegally siphon money out of the government investment fund 1MDB.
In July 2011, Nigerian officials requested that JPMorgan transfer the entire $1.1 billion to a Lebanese bank.
JPMorgan submitted a letter to a British judge from Nigeria’s attorney general attesting to the legitimacy of the planned Lebanese transfer. The judge released $800 million, but told JPMorgan lawyers he was concerned that “the court was about to become if not a participant in at least an aide to a money-laundering exercise,” according to a court filing.
JPMorgan transferred the $800 million to Lebanon’s Banque Misr Liban. But the Lebanese bank sent the money back, saying it could not accept it without more information about the purpose of the transfer, according to a judge’s ruling in Italy and a London court filing made on behalf of Nigeria’s government.
Raymond Baker, the president of the Washington-based nonprofit advisory group Global Financial Integrity, who has followed the case of Mr. Etete’s oil license, said JPMorgan at that point should have sought a detailed explanation from Nigeria about the purpose of the wire transfers.
“There is a culture of ‘take the money, handle the money,’ regardless of other issues that might come up,” Mr. Baker said.
After the Lebanese bank rejected the money transfer, the Nigerian government asked JPMorgan to send $400 million each to accounts at two Nigerian banks held by Mr. Etete. JPMorgan again flagged the transactions as suspicious to British regulators. The regulator, Britain’s Serious Organised Crime Agency (now called the National Crime Agency), consented to the transfers, although it cautioned that the consent did not mean JPMorgan would be legally off the hook if problems with the transfers later arose, according to London court filings that cite the suspicious-activity reports.
The money transfers went through.
Two years passed, during which the Financial Times and The Economist published reports on the alleged scheme to pocket the oil money. In in2012, an investigator for the anti-corruption group Global Witness wrote a letter to JPMorgan’s chief executive, Jamie Dimon, asking questions about the money transfers.
In 2013, acting on another set of instructions from Nigerian government officials, JPMorgan sent the remaining $74 million in the account to one of Mr. Etete’s corporate accounts in Nigeria, according to the London court filing. The JPMorgan account had been set up as a “single purpose” account, established only to handle the money from the drilling-license agreement. Now that it was empty, it ceased to exist.
Global Witness, Re:Common and The Corner House together with Nigerian group,Human and Environmental Development Agenda, HEDA, have campaigned to expose the corruption around the OPL 245 deal for several years.
Lanre Suraju of HEDA said, “The exploits of fantastically corrupt politicians would not be possible without international financial institutions collaborating or turning a blind eye. It is vital that they are held to account.”
Nick Hildyard of the Corner House said, “Nigeria is right to try to seek justice in this case from all parties involved and tackle the ‘fantastic corruption’ that the Global North promotes and benefits from”
“A head of state known or alleged to be corrupt is the riskiest type of client, both because of potential civil and criminal liability and because of reputational damage should details of the relationship come out, as they often do when there is a change in power in the relevant country,” said Joshua Kirschenbaum, a former director at the Treasury Department’s anti-money-laundering agency, FinCEN.
Nigeria is ranked 144th out of 180 countries on Transparency International’s corruption list.
How far President Muhammadu Buhari’s tact to recover these huge monies stolen by a few people will go…. May Nigeria succeed.
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