FRONTLINE/World: The Business of Bribes

Cameroon: Pipeline to Prosperity?

Mon, 07 Jun 2010 18:46:31 -0800

This project was produced in partnership with the Pulitzer Center on Crisis Reporting, with additional support from the Center for Investigative Reporting.

Ten years ago this month, the World Bank Group approved financing for the controversial Chad-Cameroon Petroleum Development and Pipeline Project. Despite an international campaign to stop the project that brought together more than 80 environmental and human rights groups, the Board of Directors of the Bank voted unanimously to support it, arguing that oil development represented Chad's best -- perhaps only -- chance at escaping its crushing poverty. Both Chadians and Cameroonians would benefit from Chad's oil, the promoters promised, and the project would show the world that the resource curse could be lifted.

Map showing location of oil field and pipeline.

With World Bank participation secured, ExxonMobil, the project operator, and its consortium partners, Chevron and Petronas (Malaysia), undertook the $4.2 billion project. The consortium drilled hundreds of wells in the Doba basin area of southern Chad and constructed a 650-mile pipeline to carry the oil from land-locked Chad to an offshore loading terminal on the Atlantic coast of Cameroon.

Chad's oil began to flow in October 2003 amid great fanfare. The World Bank drew up an elaborate revenue management plan for Chad; expectations were high. ExxonMobil placed a full page ad (pdf) in the New York Times. "Voila," the ad proclaimed, "with the first oil loaded, an extraordinary project begins to supply energy to the world as well as a better life and a cargo of hope to the people of Chad and Cameroon."

That cargo of hope leaves Africa from Kribi, a small beach town and one of Cameroon's prime tourist attractions. Here, the dense equatorial rainforest stretches almost to the water's edge; a strip of golden sand beach is all that separates the greens of the forest from the turquoise waters. Just south of town the famous Lobe waterfalls tumble over black volcanic rocks directly into the ocean. Market women sell and prepare fish right off the boats at the town's small port.

Kribi is a small beach town and one of Cameroon's prime tourist attractions.

When I first visited Kribi 15 years ago, I was surprised to hear about plans to bring an oil pipeline from Chad to Kribi. This wasn't like bringing a pipeline to the port of Los Angeles. The port of Kribi was filled with pirogues, not tankers. There wasn't even an industrial zone in the area; Kribi was surrounded by forest.

In 2007 I returned to Kribi. The tourist trade had grown; there were new bars and hotels around Kribi. But the town seemed as poor as ever. There were no signs of petroleum-related jobs and Kribi seemed untouched by any new oil wealth.

That trip prompted me to look further at the Chad-Cameroon pipeline. The project, which received a fair amount of press coverage during its construction phase, has since dropped from the radar. Two years later, I traveled once again to Cameroon, this time to learn what has become of the "model" project. In future reports, I plan to follow stories along on the pipeline from Kribi to the Doba fields of Chad. In this first piece, I report from the marine terminal to the capital of Cameroon, Yaoundé.

Read Christiane Badgley's blog for additional reporting, photos and related links on this project.

Learn more about the project at the Pulitzer Center on Crisis Reporting website.

BAE: How Good a Plea Deal Was It?

Tue, 09 Feb 2010 17:33:14 -0800

Last week, BAE Systems, Britain's largest defense contractor agreed to pay $450 million to settle long-running corruption allegations in the United States and Britain. Mark Pieth, chairman of the OECD anti-bribery convention, talks with reporter Siri Schubert about what message the settlement has sent across both sides of the Atlantic.

This case casts a shadow on Britain's ability to react to corruption. I don't share the opinion that this is a triumph for the British justice system as SFO-director Richard Alderman has stated.

In the British agreement, Britain's Serious Fraud Office settled with BAE for £30 million in a Tanzania bribery case for accounting irregularities. Were you surprised by the outcome of that investigation and the settlement amount?
Indeed. The settlement sent a strange message. Nobody talks about corruption and bribery and that is, of course, the nature of any deal where both parties agree to not talk about what really happened. But the amount that Britain settled for is very small compared to the sums that are reportedly involved in each of the seven to eight cases [the SFO was also investigating the company for in several other countries. The SFO decided to settle the Tanzania case and close the other cases.] I have seen evidence in one of the cases alone where the illicit payments reached £60 million, and that clearly exceeds the amount they settled for.

Why did the SFO agree to such a small amount?
The figures reflect deficiencies in Britain's existing anti-bribery legislation. A better, stronger law is in Parliament right now. This case is one more example of why it is so important that the UK finally adopts a credible anti-corruption statute.

The SFO also dropped the charges against the former BAE consultant Count Alfons Mensdorff Pouilly, who was charged with corruption just days before the settlement.
Why the SFO halted the prosecution remains unclear. It is especially peculiar since there are reports by the SFO detailing flows of money going through Mensdorff to the Czech Republic and Hungary. I have seen parts of the report. I don't remember the exact amount of money but it was in the millions of dollars.

[Editor's Note: In late January, Mensdorff, an Austrian national, was charged by the SFO with conspiracy to corrupt in connection with defense contracts between BAE and the Czech Republic and Hungary. He was released on £1 million bail on February 4. His lawyer did not comment on the latest proceedings but has said previously that his client acted as a marketing adviser for BAE and was innocent of any charges. Mensdorff was also under investigation in his native Austria but the proceedings were delayed because prosecutors were waiting for information about bank accounts reportedly held by Mensdorff in Liechtenstein.]

The SFO also stopped its investigations of BAE relating to arms contracts in the Czech Republic, Hungary, Romania and South Africa. What does that mean for efforts to combat bribery in those countries?
I will quote former South African president Thabo Mbeki's reaction to the SFO's dropping of the BAE case regarding the Al-Yamamah deal with Saudi Arabia in 2006. Thabo Mbeki said: "This is a blatant expression of a double standard." I think his words apply in this case, too. We expect South Africa, Hungary, the Czech Republic and other countries to investigate and prosecute the bribe takers, but it is hard to make that case when those who led them into temptation will not be brought to justice.

Britain has been criticized before by the OECD for inadequate anti-bribery laws and for closing down the Al-Yamamah investigation. What does the OECD plan to do in reaction to the recent settlement?
The OECD has not had time to react to the most recent developments, therefore, I am speaking as a private person. But I expect the OECD at its meeting in March to seek extensive briefings by all countries involved -- the UK, the U.S., Switzerland, Austria, Hungary, the Czech Republic, and South Africa. All of these countries are members of our group.

What does the settlement mean for the OECD anti-bribery convention?
The OECD has been pushing very hard for Britain to adopt more effective anti-bribery laws. I threatened to blacklist British companies if Britain didn't change the laws. This case casts a shadow on Britain's ability to react to corruption. I don't share the opinion at all that this is a triumph for the British justice system as SFO-director Richard Alderman has stated.

The other part of the plea deal was a settlement with the U.S. Department of Justice for $400 million. The settlement related to a wider range of corruption cases but BAE was not charged with corruption but with conspiring to make false statements to the U.S. government. Will there be any consequences for BAE after this settlement?
It is the nature of a plea bargain that nobody calls a spade a spade. If BAE had pleaded guilty to corruption charges, the company would have been banned from public procurement, and BAE makes about half of its revenue from sales to the Pentagon. The company would probably have paid an extra half a billion dollars just to prevent it from being debarred. [Because the U.S. Foreign Corrupt Practices Act is far stronger than existing antibribery laws in Britain, the U.S. fine in the joint settlement was higher and BAE settled on terms that would not harm its ability to continue to do business in the U.S.]

To be fair, the U.S. settlement was adequate, and $400 million is a lot of money for the American taxpayer. The U.S. came in to help bring BAE to court, but it is essentially a UK case and the UK should have dealt with it.

Did BAE get off too easily?
This is my personal opinion but I have the feeling that BAE got too good a deal.

BAE Will Pay $450 Million to Settle Long-Running Bribery Case

Fri, 05 Feb 2010 10:22:00 -0800

In a corruption case that has spanned multiple countries and more than two decades, BAE Systems, Britain's largest defense contractor, has pleaded guilty to two criminal charges and agreed to pay several hundred million dollars in penalties.

In settlements announced simultaneously in Washington and London, the defense giant and a major contractor to the Pentagon, agreed to pay $400 million in the U.S. and nearly $50 million in Britain.

BAE will plead guilty to conspiring to make false statements in its failure to comply with tough U.S. antibribery laws.

In charges brought by the U.S. Department of Justice, BAE will plead guilty to one count of conspiring to make false statements in its failure to comply with tough U.S. antibribery laws. The charge relates to a multibillion-dollar arms deal with Saudi Arabia, and smaller deals with the Czech Republic and Hungary.

The Justice Department delivered its most stinging criticism of BAE's efforts to undermine U.S. laws in criminal court documents released Friday. It accused the British manufacturer of "intentionally failing to put appropriate anti-bribery preventative measures in place," even though the company had assured the government it was taking significant new steps to meet the highest ethical standards.

While making those assurances, court documents said, the company proceeded to make "hundreds of millions of dollars in payments to third parties," despite knowing there was "high probability" the money would be passed on to influential foreign officials who would "favor BAE" in awarding defense contracts. The DOJ said some of those payments were made through intermediaries using offshore shell companies set up by BAE.

In a much smaller UK settlement involving a 1999 contract to supply Tanzania with a radar system, BAE denied there was corruption but admitted it failed to keep accurate accounts of the contract. The British case ends a long and politically charged inquiry into the company's business dealings.

BAE's stock jumped on the news as many observers had expected the penalty to be much closer to $1 billion in fines. But the plea bargain dismayed some advocates who have long fought to bring BAE to court.

The social justice group Cornerhouse and the Campaign Against Arms Trade both said they were extremely disappointment that BAE would not face a criminal trial and was charged with only one violation in Tanzania under the UK deal.

In 2003, Britain's Guardian newspaper was the first to expose allegations of systematic bribery at BAE to win worldwide contracts.

"This settlement means that the truth about these serious allegations against BAE may never be known," said Cornerhouse spokesperson, Nicholas Hildyard. "The UK fine may well be unprecedented, but will easily create the perception that alleged bribers can simply pay their way out of trouble."

In 2003, Britain's Guardian newspaper was the first to expose allegations of systematic bribery at BAE to win worldwide defense contracts. During the 1980s, under a Thatcher government, the company signed the biggest arms deal in British history to supply fighter jets and other military equipment to Saudi Arabia.

Known as the Al-Yamamah deal and worth an estimated $80 billion, the Guardian began pursuing the legitimacy of the deal, negotiated over 20 years, and the role played by the British government and justice system.

The paper reported growing evidence of bribery involving billions of dollars in alleged payments to members of the Saudi royal family to sweeten the deal, including Prince Bandar bin Sultan, the kingdom's former ambassador to the U.S.

Prince Bandar bin Sultan was a key negotiator in the Al-Yamamah arms deal.

The controversy and secrecy around Al-Yamamah also became the subject of a major FRONTLINE investigation "Black Money" broadcast last year in the U.S. and Britain.

No Saudi officials were named Friday in information released by the DOJ.

As allegations mounted against BAE, Britain's Serious Fraud Office began investigating the arms deal in September 2003 but dropped the case in late 2006 after then prime minster Tony Blair directly intervened.

Blair defended his decision to shut down the inquiry for national security reasons on the grounds that the Saudis could stop cooperating with Britain on vital terrorism intelligence. The decision came a year after Britain suffered its worst coordinated terrorist attack on London's transit system that killed 56 people. Robert Wardle, who was leading the SFO's investigation, left his position feeling stymied by the government's action.

His successor Richard Alderman said he was pleased with Friday's outcome and the work between British and U.S. prosecutors to reach a settlement: "This is a first and it brings a pragmatic end to a long-running and wide-ranging investigation," he said.

Sources close to the U.S. investigation became frustrated by the Blair government's decision to discontinue the probe of the Saudi payments, and the decision not to allow U.K. investigators to share their files with the Justice Department. Normally the relationship between U.K. law enforcement and their counterparts in the U.S. is seamless. But from the beginning, the investigation of BAE touched a raw nerve in Britain.

The SFO announced it was also dropping proceedings against Austrian Count Alfons Mensdorff-Pouilly, the only individual facing prosecution in the BAE probe.

The SFO announced it was also dropping proceedings against Austrian Count Alfons Mensdorff-Pouilly, a long-time consultant with BAE, and the only individual facing prosecution in the probe. "This decision brings to an end the SFO's investigations into BAE's defence contracts," the fraud office said in a statement.

Cornerhouse's Hildyard challenged the decision saying that "given BAE's admission of guilt today in the U.S. concerning the Al-Yamamah contract, the UK should re-open its own Saudi Arabian investigation immediately."

Responding for BAE, Chairman Dick Oliver said the company very much regretted and accepted its "past shortcomings," but added that since those illegal activities took place, BAE has undergone major internal ethical reforms of how it does business.

The terms of the settlement leave the company free to continue bidding for contracts in the U.S. and the EU because it has not admitted to any bribery charges, only to false accounting and making misleading statements.

Nuhu Ribadu: Nigeria's Relentless Corruption Hunter

Thu, 28 Jan 2010 12:57:34 -0800

Nuhu Ribadu was on his way to Abuja, the Nigerian capital, one morning when he noticed a small car that appeared to be trailing him. As Nigeria's top financial crimes prosecutor, he'd made a habit of looking over his shoulder. And so, he pulled his Honda Accord into a gas station to let the other car pass by.

When it was no longer in sight, he pulled back onto the road. But suddenly the car was racing at him from the opposite direction. A man in the back seat was pointing a pistol out the window. He took aim and fired.

Nigeria's former top prosecutor, Nuhu Ribadu.

Between 2003 and 2007, Ribadu was chairman of Nigeria's Economic and Financial Crimes Commission (EFCC). Suffice it to say, during his tenure, he made a lot of powerful enemies. Under his leadership, the newly created EFCC sent prominent businessmen and high-level government officials, including Ribadu's own boss, the inspector general of police, to jail.

In a country whose ruling class has shamelessly plundered hundreds of billions of dollars in oil profits, Ribadu's record also made him a national hero -- not to mention the great hope of many outside observers. In recent years, development experts in the West have come to regard corruption as one of the critical underlying problems of Sub-Sahara Africa.

During a speech in Ghana last summer, President Obama underscored this point, recalling the "tribalism and patronage and nepotism" faced by his Kenyan father. "We know that this kind of corruption is still a daily fact of life for far too many," he said.

One of the first big international criminal cases to test Ribadu's new agency involved the Houston oil services conglomerate KBR.

When it comes to fighting corruption, the United States has a legitimate claim to the moral high ground. With the Foreign Corrupt Practices Act of 1977, it became the first country in the world to ban the bribing of foreign officials. Yet, the American private sector has often fallen short of the ideals enshrined in the law. Nowhere is this more apparent than in Nigeria.

One of the first big international criminal cases to test Ribadu's new agency involved the Houston oil services conglomerate KBR, which orchestrated a brazen $180 million bribery scheme that over the course of a decade reached into the highest levels of three successive Nigerian administrations. Ribadu's pursuit of the Nigerian officials who took KBR's money, he says, would later contribute to his undoing.

"Bang!" he says, recalling what happened at the gas station that day in September 2008. Bulletproof glass "Is what saved my life," he says. Ribadu is one of the big stories of the last decade in Nigeria - one full of hope, intrigue and ultimately heartache.

Taking on Nigeria's Elite

In 2003, Nigerian President Olusegun Obasanjo, who had run for office on an anti-corruption platform, picked Ribadu from relative obscurity to run the country's highest anti-corruption office. As head of the EFCC, Ribadu, who had climbed the ranks of the Nigerian police as a prosecutor, took his country by surprise, fighting its pervasive corruption with unprecedented success.

For four decades of postcolonial history, Nigerian law enforcement had turned a blind eye to bribery and embezzlement. But Ribadu ushered in a new era; under his leadership, the EFCC managed one corruption conviction after another.

I met Ribadu last spring at a conference at U.C. Berkeley. Following the attempt on his life, he had fled Nigeria, bolting in disguise via a remote border crossing.

I met Ribadu last spring at a conference at U.C. Berkeley. Following the attempt on his life, he had fled Nigeria, bolting in disguise via a remote border crossing, and was about to begin a new job as a fellow with the Center for Global Development, a think tank in Washington, D.C.

Ribadu, who looks much younger than his 49 years, is slender, bespectacled and unfailingly polite. I was struck by his soft-spoken demeanor. His exile means he is separated from his wife and six children; but despite this, he betrays little bitterness, even when talking about the kleptocrats he took on.

"It wasn't personal," he tells me more than once.

That combination of fierceness and detached professionalism made Ribadu a trusted ally of other law enforcement agencies. Tom Fuentes, the recently retired assistant director of international operations at the FBI, and Helen Garlick, a former assistant director at the UK's Serious Fraud Office, were also at the conference, and greeted Ribadu like an old friend.

"I was very struck by his passion, his dedication, his absolute commitment to make his country better," Fuentes said, and to ensuring that the country's natural resources went to toward helping the Nigerian people and improving the country.

By taking on these powerful individuals, Ribadu "knew that he was making very dangerous enemies," he said, "and his life was in danger in conducting those investigations."

It was about the time Ribadu was getting going at the EFCC, in late 2003, that news of the KBR bribery scheme began to leak out of France. A French magistrate, while investigating another matter, stumbled on evidence that KBR, formerly known as Kellogg, Brown & Root, along with three other companies belonging to an international consortium, had set aside $180 million to pay off Nigerian officials. Their objective: to win and hold onto a multibillion-dollar contract to build a huge liquefied natural gas plant.

"Right from the moment it came out, I understood it must be a very big deal," Ribadu says. "It was the biggest of all the big contracts that took place in Nigeria in the 1990s."

Ribadu flew to France to meet with the magistrate and assigned a team of EFCC investigators to the case (PDF). One of the suspected bribe takers interviewed by his team was M.D. Yusuf, who in the mid-1990s was the Nigerian government-appointed chairman of the liquefied natural gas project.

Ribadu says Yusuf did not deny getting money from a KBR consultant, but described the payment as a loan. (Some reports in the Nigerian press put the size of purported loan at $75,000.)

Today, much of what KBR was up to in Nigeria is a matter of public record. Both KBR and its former chief executive officer, Albert "Jack" Stanley, last year pleaded guilty to violating the Foreign Corrupt Practices Act. Stanley, who promised to cooperate with investigators, faces up to seven years in prison. (His sentencing, which has been repeatedly delayed, has been rescheduled for February.)

And KBR, along with its former parent, Halliburton, was fined more than $500 million - a record for a U.S. company in a Foreign Corrupt Practices Act case.

But back in 2003, Ribadu had little concrete evidence to work with. He flew to France two more times, and to Britain and the U.S., but was unable to get access to key documents and witnesses, including Stanley. "We had allegations that (Yusuf) took money, but nothing in support of it," Ribadu says. "There was no way for me to have taken them [Yusuf and other suspects] to court."

Unable to pursue this investigation, Ribadu turned his attention to other matters. His agency shut down the Nigerian email scammers that had long plagued computer users in the U.S. and elsewhere. It convicted the inspector general of police on charges of embezzling more than $121 million in public funds; and investigated the vice president for his alleged roll in a bribery scheme involving a U.S. politician.

Ribadu didn't have enough evidence to convict the vice president, but Louisiana Congressman William Jefferson was found guilty in a U.S. court in 2009 of conspiring to bribe, racketeering and money laundering and using his office to benefit a number of personal business ventures in Africa. (Infamously, $90,000 in marked bills was found wrapped in tinfoil bundles inside Jefferson's freezer.)

Critics accused Ribadu of only going after President Obasanjo's political enemies. They also said he was abusing his powers and called him a hatchet man for the president. But the crackdown was wildly popular with Nigeria's long-suffering public and the Nigerian press crowned him "Man of the Year."

Watch a clip of Ribadu interviewed by correspondent Lowell Bergman.

Ribadu also took on Nigeria's powerful governors, known for treating their states as personal fiefdoms (PDF). He announced that 31 of Nigeria's 36 governors could face corruption charges once they left office. (Nigerian law prevents sitting governors from being prosecuted.) One of those figures, James Ibori, governor of the oil-rich Delta State and believed to be one of the wealthiest and most powerful politicians in the country, was high on Ribadu's list.

By all accounts, the 51-year-old Ibori is charismatic and savvy. Born into the family of a tribal chief, he was educated at some of Nigeria's best schools and the University of Benin, where he studied economics and statistics. According to one pro-Ibori website, he worked for Mobile Oil and the Nigerian National Petroleum Corp. before entering politics. He was first elected governor of Delta State in 1999 and re-elected in 2003 -- a period during which his lavish lifestyle seemed to far exceed his official salary of roughly $25,000 a year.

By the summer of 2007, authorities had taken notice (PDF). The Metropolitan Police in London, working with Ribadu's team, accused Ibori's British lawyer, and Ibori's wife and mistress, both of whom were living in Britain at the time, with helping the governor launder tens of millions of dollars.

The money, which British police put at more than $100 million, went to buy an armor-plated Mercedes, a posh London residence and a Bombardier jet, among other things, according to British newspaper reports. (The three have since been formally charged, and the first of their trials, began last September, is scheduled to resume in February.)

The money, which British police put at more than $100 million, went to buy an armor-plated Mercedes, a posh London residence and a Bombardier jet.

Back in Nigeria, feeling the net closing in, Ibori allegedly tried to buy his freedom.

As Ribadu recounts events, he and Ibori met at the house of a mutual associate. The two men chatted for a while, then Ibori, who had no idea that Ribadu was wearing a hidden recorder, brought out two large bags stuffed with $15 million in stacks of one-hundred-dollar-bills. "We took the money [to the Central Bank of Nigeria]. We allowed him to go," Ribadu says. "We were building up the case."

Those recordings have not been made public. But last year, Mrs. Farida Waziri, Nigeria's current anti-corruption chief, reportedly confirmed that $15 million was received by Nigeria's Central Bank.

Ribadu says his team kept tabs on Ibori's whereabouts by monitoring his cell phone signal. When he was eventually brought in, Ribadu says, "He was begging, pleading... He wanted to give me another $15 million," he says. He recalls what he said next to the former governor: "I'm just doing my job, James. It's the right thing to do. You must understand, it's not personal."

Ribadu's Final Act

Arresting James Ibori on 103 counts of corruption in late 2007 turned out to be one of Ribadu's last acts as chairman of the EFCC.

Two weeks later, he was abruptly dismissed by Nigeria's newly elected president, Umaru Yar'Aduaa, a close ally of Ibori. Indeed, the former governor was rumored to have bankrolled Yar-Aduaa's campaign.

"The removal of Nuhu Ribadu is not about the removal of one individual... an effective agency has been tampered with. The trust of the nation has been abused."

The move shocked many Nigerians. The country's Nobel laureate Wole Soyinka captured the public's mood in one scathing editorial: "The removal of Nuhu Ribadu is not about the removal of one individual... an effective agency has been tampered with... The trust of the nation has been abused."

At first, it was unclear what would become of Ribadu, leaving hope he would be reinstated. Officially, he was being sent to a school for government bureaucrats. In theory, he could return to the EFCC once he graduated.

But then President Yar-Aduaa appointed M.D. Yusuf to lead a commission on reforming the Nigerian police, the same man Ribadu's agency had questioned years earlier in the KBR bribery case, and who had described the payment as a loan. According to Ribadu, this left Yusuf free to install a new EFCC chair, thereby ensuring Ribadu would never complete his investigation into which Nigerian officials received KBR's bribes.

A Life in Exile

In Washington, DC, I met Ribadu at the Center for Global Development, where he was settling into his new job. We stepped out for a coffee and he reflected on what he had gone through back home on the other side of the world.

He said he was "knocked out" by his enemies and mentions two by name: Yusuf and Ibori. Ibori, the powerful former Delta State governor, it appears, had also emerged from Ribadu's anti-corruption era in tact. In a controversial ruling in December 2009, a Nigerian federal judge dismissed all charges against Ibori, saying there was no clear evidence against him.

"We are back to square one," Ribadu told me. "Corruption has taken over the engine of government in Nigeria. It's what runs everything."

Although he is now living in exile, Ribadu's name continues to come up in discussions of potential candidates in the next presidential election in 2011. Ribadu is clearly intrigued by the idea. He says he has broad support among Nigeria's diverse ethnic groups, which could propel him to victory in a fair election -- provided he could somehow get such an election in a country where votes are bought and sold.

The former prosecutor has a term for what he believes plagues his country and his continent. He calls it "grand corruption." It starts with political leadership and big business and spreads into every corner of society, he says. AIDS, terrorism and civil war are but some of the symptoms. If you really want to help Africa, he says, put an end to corruption.

Chasing the Ghosts of a Corrupt Regime

Fri, 08 Jan 2010 13:37:00 -0800

In July 2004, police lay in wait at an airfield in the far northeastern corner of Nigeria. Gilbert Chagoury, a Lebanese businessman and one-time adviser to the late dictator Sani Abacha, was set to touch down in his private jet. Nuhu Ribadu, then the country's top anti-corruption prosecutor, says that Chagoury was a kingpin in the corruption that defined Abacha's regime.

"You couldn't investigate corruption without looking at Chagoury," Ribadu tells me in a recent interview in California.

Six years after Abacha's death, Ribadu's officers stood ready to take Chagoury down. Ribadu says that Chagoury made it possible for Abacha to steal billions of dollars and lined his own pockets in the process. The prosecutor says he indicted Chagoury and ordered his arrest for relatively minor violations related to Chagoury's businesses so that he could later bring additional charges for his activities in the Abacha era.

Gilbert Chagoury attending a benefit in Beverly Hills, California, in 2008. Photo: Getty Images.

But, no sooner had Chagoury's plane hit the ground, than it took off again. Ribadu says it's likely that an airport official tipped him off, and Ribadu's big catch slipped away, literally into thin air.

Chagoury was among the last of the all-powerful middlemen who served the heads of oil-rich African states, says Philippe Vasset, longtime editor of Africa Energy Intelligence, one of a series of influential energy industry newsletters. "He [Chagoury] was the gatekeeper to Abacha's presidency," Vasset says.

In many African countries, a Western entrepreneur might hand over money to a fixer or middleman, who would then pass it on to a political leader in exchange for support for a business venture. In Nigeria, Vasset explains, Chagoury was just such a figure in the mid-1990s, when Abacha ruled the country and held the key to much of the country's oil wealth.

Today, Chagoury is a diplomat representing the tiny island nation of St. Lucia. He is also a friend of former President Bill Clinton and a generous philanthropist, who, since the Abacha years, has used his money to establish respectability. He appeared near the top of the Clinton Foundation donor list in 2008 as a $1 million to $5 million contributor, according to foundation documents. (His name made the list again in 2009.)

Chagoury's contribution to the Louvre in Paris some years back was large enough for the museum to name a gallery for him and his wife. In recent years, he has put up $10 million for the construction of medical and nursing schools in Lebanon, his parents' country of origin, that also bear the Chagoury name.

Unlike his friend, the former president [Clinton], Chagoury conducts his affairs largely out of public view. He rarely talks to reporters.

Unlike his friend, the former president, Chagoury conducts his affairs largely out of public view. He rarely talks to reporters.

But on a cool day in late 2008, I headed up a gently winding road in Beverly Hills, where Chagoury's Moorish-style villa sprawls across the top of a steep canyon. The home once belonged to entertainer Danny Thomas, and Richard Nixon, Raquel Welch, and Michael Caine have all lived in the neighborhood.

After a written request for an interview and many follow-up phone calls, Chagoury invited me to meet him. "We'll see if we can get along," he said. Chagoury's home is packed with art, antiques, and crystal chandeliers, and offers a staggering view across West Los Angeles to the Pacific Ocean.

As I'm taking it all in, Chagoury climbs a thickly carpeted, winding staircase to the living room to greet me. He's a stout man, dressed in a navy blue sport coat with buttons that strain against a barrel chest. His fingernails are buffed and manicured, and he has a full head of salt-and-pepper hair.

Almost immediately, he has a proposal: Do your story, but don't sell your work to a media outlet. "Do it for me," he says, offering me access and contacts -- even the chance to write a book. In exchange, I would get cash, and he would get full control of the product. I politely turn him down, but he brings up the offer several times during the interview.

"I am an industrialist," he says in lightly accented, near-perfect English. "I spend a lot of time with my family. I don't have time to do all that people say I do."

As we talk, I learn that much of what Chagoury says about himself is so out of sync with the public record and what others have told me -- even those who are friendly toward him -- that it seems he's not just in the market for positive spin, but for all-out reinvention.

When I bring up his days in Nigeria, he tells me that he detests his reputation as Abacha's middleman. "I am not in that business," he says. Rather, he has worked hard since he was a teenager, building a conglomerate called The Chagoury Group, which employs 20,000 people in Nigeria in construction, real estate development, telecommunications, and other sectors.

"I am an industrialist," he says in lightly accented, near-perfect English. "I spend a lot of time with my family. I don't have time to do all that people say I do."

"I have never bribed anyone," he says, looking me straight in the eye. "I have never had to make a crooked deal." He is absolutely sure of himself, even though he has offered me a bribe of sorts just minutes earlier.

As for Ribadu, the Nigerian investigator who says his officers nearly made that 2004 arrest on corruption charges, Chagoury says, "He's not such hot stuff." He tells me that Ribadu -- who until 2007 headed the Economic and Financial Crimes Commission, an agency similar to the FBI -- was an attack-dog set against the enemies of President Olusegun Obasanjo, who appointed him.

Olusegun Obasanjo was elected president of Nigeria in 1999 on an anti-corruption platform.

Ribadu was pushed out of his job after Obasanjo left office, and says he was given the freedom to act independently during his tenure and was ousted because of his zealous prosecution of high-level officials.

Chagoury, who turns 64 this month, was born in Lagos and is the eldest of eight children. He has dual citizenship in Lebanon and the United Kingdom because of his parents' heritage and because he was born in Nigeria while it was still under British rule.

His father came to West Africa in the 1930s from the northern Lebanese town of Miziara. The elder Chagoury followed what was by then a well-worn migrant trail to Nigeria, where he traded in textiles and helped his brother in a small trucking operation.

Chagoury is part of the Lebanese diaspora, which is by some estimates several times larger than the population of Lebanon, and includes such influential members as Mexican businessman Carlos Slim, the world's third richest man, Columbian entertainer Shakira, and American activist Ralph Nader.

Like their Palestinian and Jewish neighbors, the Lebanese have scattered about the world, and Chagoury seems equally at home in Lagos or Beverly Hills. He has also maintained close ties to his parents' home town of Miziara.

Today, Miziara survives -- and even thrives -- because of Chagoury and his brothers, says Gilbert Aoun, who was Lebanon's ambassador to Nigeria during Abacha's rule. Still, nine months of the year, the mountainous settlement of some 15,000 is a ghost town, Aoun says, because most Miziarans old enough to work are employed by the Chagourys in Nigeria.

Chagoury didn't grow up rich, but he says that he always wanted the security and prestige that money brings. He went into business with his father-in-law, and later with his brother. The family established several flour mills in Benin and Nigeria, a construction company in Nigeria, and a club in Lagos.

An Indispensable Adviser

Chagoury says he met Abacha by chance on a flight to the Niger Delta city of Port Harcourt, when the future dictator was a young officer. The two struck up a friendship, and when Abacha seized power in a 1993 coup, Chagoury became the general's indispensable adviser.

General Abacha was an eccentric man and a brutal leader, who consolidated his power by declaring martial law and jailing political rivals. He kept a menagerie of exotic animals and rarely removed his sunglasses. The regime drew worldwide condemnation in 1995, when activist playwright Ken Saro-Wiwa and eight other men who had campaigned against the environmental degradation of the oil-rich Niger Delta were executed for what most observers say were trumped-up murder charges.

From his earliest days in power, Abacha set the tone for an administration that would become the most corrupt in Nigeria's history. Today, more than a decade after the dictator's death, investigators from Washington DC to the Nigerian capital of Abuja are still unraveling the web of shady dealings around Abacha's rule.

Within months of taking office in 1993, Abacha began to divert money from Nigeria's central bank to the overseas bank accounts of his family members and associates, including Chagoury's. A lawsuit brought by the Nigerian government against Abacha's heirs and associates in the United Kingdom shows that the dictator fraudulently ordered the bank transfers for national security purposes.

By the time of Abacha's death in 1998, those so-called security payments would total $2 billion, but they would represent less than half the funds that money-laundering investigators around the world estimate that Abacha and his associates stole from their country.

However, Abacha found other ways to pad his bank accounts. A $180 million bribery scheme -- the largest ever discovered as part of a U.S. Justice Department investigation -- was hatched the first year Abacha was in office.

Halliburton's Nigerian Bribes

The scheme began in the early 1990s, when Kellogg, Brown and Root (KBR), at the time a subsidiary of the Halliburton Corporation, led a joint venture that bid for a $6 billion contract to build a sprawling liquefied natural gas facility in the Niger Delta.

The group won the bid, but not before Abacha had agreed to accept a $40 million bribe that he would share with other Nigerian officials, according to Department of Justice court papers. It was the first installment of $180 million in bribes that KBR would pay, not only to officials of the Abacha regime, but to officials of the two heads of state who succeeded him.

A few months before I interviewed Chagoury, former KBR CEO Jack Stanley had pleaded guilty in a Texas courtroom to charges related to organizing the bribery scheme that went on for a decade in Nigeria, and to taking millions in kickbacks for himself. Since then, two more KBR contractors have been indicted, and Halliburton entered a guilty plea and paid the government a record fine of more than $500 million.

Chagoury denies any involvement in the bribery case, but his name surfaces in notes taken by one of the indictees, William [Wojciech] Chodan [Chaudan].

Chagoury denies any involvement in the bribery case, but his name surfaces in notes taken by one of the indictees, Chodan, who kept detailed records of so-called cultural meetings, where bribes were discussed.

One entry reads, "$250 ... to IPCO via Chagoury."

When I ask Chagoury about these records, he doesn't dispute that the note refers to a sum of $250 million, but he argues that it refers to a contract, which, he says, was legitimately awarded to one of his companies, IPCO Nigeria Limited, for construction related to the liquefied natural gas plant.

Chagoury has not been named by the Department of Justice or charged with any crime related to the KBR affair.

His work as an intermediary for Abacha went beyond business affairs. He was also deeply involved in diplomacy, even though he held no official government post. In the mid-1990s, when Nigeria came under increasing pressure from Washington to hold elections, Chagoury gained access to high-level U.S. emissaries like Jesse Jackson and Bill Richardson as well as to a number of senior State Department officials, according to Donald McHenry, a former American ambassador to the United Nations, who worked in U.S.-Nigeria diplomacy at the time.

The Clinton Connections

Chagoury, along with his wife and three of his children, were guests at a the Clinton's White House holiday dinner shortly after Chagoury gave nearly half a million dollars to a voter registration committee, Vote Now '96, according to a report in The Washington Post. (Chagoury would have been barred from donating directly to the Clinton campaign because he is not a U.S. citizen.) Since then, Chagoury and Clinton have traveled together and seen each other socially.

"Every one knows I'm friends with the Clintons," Chagoury says.

As Abacha's health began to fail in the late 1990s, Chagoury made major efforts to prop up the dictator. A State Department memo obtained under the Freedom of Information Act, entitled "The Health Watch on the Head of State Continues," shows that Chagoury appeared to have brought medical specialists and sophisticated medical equipment to the presidential residence in Abuja, while publicly downplaying the seriousness of Abacha's condition.

When Abacha died in June 1998, a second State Department memo notes that Chagoury placed an in-flight call from his private plane to the U.S. embassy in Nigeria to report that he was in touch with Nigeria's Provisional Ruling Council, which would be meeting later that day to discuss a successor to Abacha. In the phone call, Chagoury asked what governmental structure would be acceptable to U.S. officials, according to the memo.

Immediately after Abacha's death, Ribadu, then a young police investigator, says he began looking into the dictator's financial affairs. "It wasn't uncommon for Nigerian leaders to put money elsewhere," Ribadu says. "But the magnitude was beyond anybody's comprehension."

Nigeria's former chief prosecutor, Nuhu Ribadu, who unsuccessfully tried to indict and arrest Chagoury in 2004.

The money -- estimated at more than $4 billion -- was stashed in Switzerland, Luxembourg, Liechtenstein, and the Isle of Jersey in the names of dozens of individuals and companies. Ribadu argues that it was Chagoury who vouched for Abacha's sons at banks where the source of their assets might otherwise have been questioned.

Indeed, Chagoury's Swiss attorney, Luc Argand, told me that his client served as a reference for Abacha's sons at Credit Suisse. The Nigerian government eventually requested help from law enforcement around the world in tracking the stolen assets. In 2000, Chagoury was convicted in Geneva, Switzerland, of laundering money and aiding a criminal organization in connection with the billions of dollars stolen from Nigeria during the Abacha years.

Argand has insisted that Chagoury used the money for diplomatic missions on behalf of Abacha. Asked if he had records to substantiate that claim, Argand said he couldn't produce any. He also conceded that the money was "stolen by Abacha, and had to be returned."

However, Argand says that Chagoury had already decided on his own to return it. In the end, he says, his client agreed to a plea deal: Chagoury would pay a fine of a million Swiss francs and hand over $66 million to the Nigerian government. Swiss authorities promised to expunge the conviction after two years, which they have done.

In 1999, Chagoury won immunity from prosecution in a separate looted-assets case in Nigeria by agreeing to return money that he held in Swiss bank accounts. The precise amount that Chagoury returned is unclear.

Meanwhile, the hunt for Nigeria's stolen treasure continues. A panel appointed by Nigeria's current president, Umaru Yar'Adua, is currently investigating which Nigerian officials took bribes in the Halliburton case and has reportedly requested U.S. Department of Justice cooperation in the probe. However, some Nigeria watchers, including Ribadu, doubt the seriousness of the inquiry.

The Clinton Foundation did not respond to emailed questions and repeated phone calls about the nature of Bill and Hillary Clinton's relationship with Chagoury.

While the Nigerian government struggles to recoup the losses it suffered under Abacha, Chagoury has prospered and continued to win acceptance from influential people around the world.

Last year, he was knighted by the Catholic Church and inducted into the Order of St. Gregory the Great, an honor bestowed upon those who serve the church, including many who are big donors to the institution. Bob Hope, Ricardo Montalban, and Rupert Murdoch are among past recipients.

The Clinton Foundation did not respond to emailed questions and repeated phone calls about the nature of Bill and Hillary Clinton's relationship with Chagoury. Former Democratic Party chairman Terry McAuliffe, who, according to The Washington Post, was a sponsor of Chagoury's invitation to the White House in 1996, also failed to return phone calls. A spokesman for former Clinton political advisor James Carville, also a Chagoury acquaintance, said that Carville could not comment on the relationship.

And Chagoury hasn't stopped earning his fortune. Knowledgeable sources say that Chagoury controls South Atlantic Petroleum, a company that was awarded a choice oil exploration license before Abacha's death. Three years ago, the company sold a portion of its government-granted concession to the Chinese oil company, China National Offshore Oil Corporation, for $2.7 billion.

In our interview, Chagoury didn't deny that he profited from the deal, but he said rumors that former President Clinton helped make the deal happen were untrue.

Chagoury is unfazed by the crackdown by the U.S. Justice Department on foreign bribery, exemplified by the Halliburton case, and waves off the recent spate of prosecutions like an elder statesman: "You have lobbyists; we have agents," he says.

"You are never going to stop corruption," because it's favoritism, and that's human nature, which laws won't change, he tells me.

It's no wonder he is so confident. He is now free to come and go in Nigeria, while his nemesis, corruption hunter Nuhu Ribadu, left the country last year, he says, after an attempt on his life.

Robin Urevich is a reporter in Monterey County, California. Her work has appeared on NPR, Marketplace, NPR affiliates KQED and KPCC, the San Francisco Chronicle, and the Las Vegas Sun. She is a graduate of the University of California Berkeley School of Journalism.

Global Corruption Roundup

Mon, 04 Jan 2010 14:07:50 -0800

Tax Justice Network ranks most secret financial places in the world
When foreign officials are bribed, the money is almost always channeled through a maze of offshore accounts to obscure the money trail, so that prosecutors have to work across several jurisdictions to prove a crime took place. And countries like Switzerland and the Cayman Islands, with their bank secrecy laws, are generally considered to be the first places people go to hide their money.

But according to recent research from the non-profit Tax Justice Network (TJN), there are other locations that are even more financially secretive. TJN's Financial Secrecy Index was calculated using 12 key financial secrecy indicators, including public records of ownership, formal bank secrecy treaties and bilateral treaties regarding the exchange of banking information with other countries. The index showed that the U.S. state of Delaware and Luxembourg are more secretive than Switzerland and the Caymans. These were followed on the list by the city of London and the island of Bermuda.

Former Willbros consultant pleaded guilty to paying bribes in Nigeria
Although a subsidiary of the Houston-based oil and gas services company Willbros agreed in May 2008 to pay more than $22 million in a deferred prosecution agreement after accusations of violating the Foreign Corrupt Practices Act (FCPA), the individuals who arranged and paid the bribes are still facing punishment.

In November 2009, former Willbros consultant Paul G. Novak pleaded guilty to paying $6 million to Nigerian government officials between 2003 and 2005 to help obtain a $387 million contract for a natural gas pipeline system in the Niger delta. Two of Novak's co-conspirators, Jim Bob Brown and Jason Steph, also pleaded guilty in 2006 and 2007 respectively. All are scheduled to be sentenced in early 2010. Three employees of the German construction company Julius Berger are also accused of paying bribes, as is the U.S. citizen Kenneth Tillery, the former president of Willbros International, who remains a fugitive in Nigeria.

Controversial Blackwater case dismissed
The shooting in Nisour Square was one of the most controversial and deadly incidents in he Iraq War involving the private security firm Blackwater. On September 16, 2007, the company's security guards opened fire in a crowded square. Seventeen Iraqis were killed and many more injured. The attack caused a wave of anti-American sentiment and put the private contractor and its role in Iraq under intense scrutiny.

In November, The New York Times reported that former Blackwater executives claimed company officials subsequently authorized bribe payments of about $1 million to Iraqi government officials to silence criticism regarding the shooting. Blackwater needed the support of Iraqi officials to secure business licenses so that it could continue to operate in Iraq as a U.S. government contractor, the report said.

Just before New Year, a federal judge dismissed all charges against the U.S. contractor in the Nisour killings saying that the Justice Department had built evidence on statements given under the promise of immunity, and called the government's explanations of events "contradictory, unbelievable and lacking in credibility."

Not long after the attack, the prosecution came under criticism for how it was building the case against Blackwater and the admissibility of the evidence. Last week's 90-page ruling leaves open the possibility of bringing new indictments against Blackwater, now called Xe Services, and gives the prosecution 90 days to appeal.

Global Corruption Roundup

Fri, 30 Oct 2009 14:07:49 -0800

BAE to be prosecuted in Britain
The British arms manufacturer BAE Systems is going to be prosecuted for alleged bribery in Africa and Eastern Europe, Britain's Serious Fraud Office (SFO) announced in early October. The announcement came after BAE missed the October 1st deadline the SFO had set for a plea agreement regarding arms deals in Tanzania, South Africa, the Czech Republic, and Romania in which BAE allegedly paid millions of dollars in bribes. The decision to prosecute BAE marks a sea change for the SFO, which has come under harsh criticism for dropping the long-running investigation into the Al-Yamamah deal, BAE's biggest arms deal with Saudi Arabia. As The Guardian reports, the SFO still needs approval from Britain's Attorney General and is not yet ready to submit a report. This leaves the door open for a possible plea bargain past the October 1 deadline.

First major British company convicted of foreign bribery
Mabey & Johnson, a major manufacturer of steel bridges, has become the first large British company to be convicted of bribery, The Guardian reports. The company admitted paying bribes to foreign officials in six countries -- Angola, Bangladesh and Jamaica among them -- to obtain construction contracts, and has agreed to pay a penalty of more than $10 million to the Serious Fraud Office (SFO). The allegations against Mabey & Johnson, owned by one of Britain's wealthiest families, were first revealed five years ago by The Guardian and the British anti-corruption watchdog, "The Corner House."

L.A. film executives paid bribes for Bangkok Film Festival contract
Behind the glitz and the glamor, the film industry also has its shady side. This became clear when evidence surfaced that a Los Angeles couple paid approximately $1.8 million in bribes for the rights to run the Bangkok International Film Festival. According to the indictment, Gerald Green, 77, and Patricia Green, 52, paid the former governor of the Tourism Authority of Thailand, his daughter and a friend the estimated $1.8 million through bank accounts in Singapore, Britain and the Isle of Jersey.

The bribes netted more than $13.5 million in revenue for the Greens. The two executives were convicted in September and face a maximum of 25 years in prison for money laundering, violating the Foreign Corrupt Practices Act (FCPA), and conspiracy charges. Their sentencing is scheduled for December 17.

TI: Fewer than half of international businesses monitor compliance practices
The anti-corruption watchdog Transparency International says that bribes paid to politicians and government officials in developing or transition countries amount to between $20 million and $40 million annually, according to its Global Corruption Report 2009: Corruption in the Private Sector. While some corruption cases, including the recent Siemens bribery scandal, have motivated many companies to adopt business ethics codes, monitoring these codes remains weak. According to the report, 90 percent of the 200 largest businesses worldwide have adopted codes of conduct but fewer than half follow up with effective monitoring and enforcement practices.

Siemens wants former execs to pay damages in bribery case
Matthew W. Friedrich, the acting chief of the Justice Department's criminal division, called corruption at Siemens "systematic and widespread," yet no top-level executive at the German engineering giant has been held personally responsible for the scandal that cost the company more than $2 billion in fines and other penalties.

But this could soon change. Siemens' current management has taken steps to reclaim some of those costs from executives in charge at the time. The company gave 11 former executives, including former CEO Klaus Kleinfeld and former chairman Heinrich von Pierer, a mid-November deadline to pay part of the costs of the scandal. If they fail to do so, Siemens says it will sue for damages. Kleinfeld and von Pierer resigned in 2007 and have not been charged with any crime. Both have denied being involved in the bribery scandal.

Former Peruvian president Fujimori receives additional prison sentence for bribery
Peru's former president, Alberto Fujimori, was sentenced to 6 years in prison for bribery and wiretapping in a Lima courtroom in September. Already convicted of crimes against humanity for authorizing military death squads, the 71-year-old faces the rest of his life in prison.

During his rule of the country from 1990 to 2000, Fujimori secretly wiretapped politicians, businessmen and journalists. He was also found guilty of paying off a TV station and a newspaper to support his 2000 re-election campaign. Fujimori's chief of security, Vladimiro Montesinos, was earlier found guilty of bribing a congressman. The hand-over of the money was filmed with one of his own video cameras. When these videos surfaced (you can watch the secretly filmed deals on this website), Fujimori fled to Japan. He was arrested in Chile in 2005 while attempting to return to Peru to resurrect his political career.

Global Corruption Roundup

Fri, 11 Sep 2009 14:47:25 -0800

BAE Systems given deadline for a plea bargain in bribery case
Citing sources close to the British arms manufacturer BAE Systems, The UK's Mail on Sunday reported that the aerospace giant has to negotiate a plea-bargain with the Serious Fraud Office before the end of the month to avoid a criminal trial for paying bribes to obtain multi-billion-dollar contracts in the Czech Republic, Tanzania, and South Africa. The SFO -- the British government's fraud investigation and prosecution unit -- had come under severe international criticism by the OECD working group on bribery and others for dropping its investigation in December 2006 into allegations that BAE bribed members of the Saudi Arabian government to secure the Al-Yamamah arms deal. The investigation was stopped by the British government, which expressed concern that the case could damage the relationship with Saudi Arabia and could threaten national security.

Prince Bandar's plane classified as "civil aircraft"
The U.S. Department of Justice, along with criminal investigators in Africa and Europe, also continues to investigate the British defense company BAE Systems for bribery. Sources report that there are ongoing negotiations between BAE and prosecutors as well as between the different countries involved over what a settlement might look like concerning the payments to the Saudi Royals.

As we reported for the FRONTLINE film "Black Money", Prince Bandar bin Sultan's receipt of $2 billion into the accounts he controlled in Washington and the delivery by BAE for his use of an Airbus 340 remain matters of interest to investigators. In an interview in March 2009 with FRONTLINE correspondent Lowell Bergman, Prince Bandar's attorney, former FBI Director Louis Freeh insisted that the Airbus 340, painted in the colors of Prince Bandar's favorite football team, the Dallas Cowboys, was a military aircraft, rather than Prince Bandar's private plane. Recently, we were directed to statements by then British Secretary of State for Defense, Des Brow, who in a written answer to a parliamentary inquiry in June 2007 stated that:

"Since 1 July 2006, aircraft HZ 124 has landed 15 times at RAF Brize Norton. The aircraft operated in accordance with the MOD regulations for civil aircraft use of military airfields. The regulations also cover the applicability and level of landing, housing, parking and insurance fees charges. The regulations have been adhered to for each flight."

The Airbus, HZ 124, is registered to the Saudi Arabia Ministry of Defense and Aviation. For over a decade it has been used by Prince Bandar. Last seen by "plane watchers" this past July in Germany, both it and Prince Bandar have been out of public view for quite some time.

A bribe for access to Brazilian markets costs U.S. nutritional company
Six years after Nature's Sunshine Products (NSP), a manufacturer of vitamins and herbal supplements from Provo, Utah, opened a Brazilian subsidy in 1994, Brazil had became NSP's largest foreign market, with annual revenues reaching $22 million. But when the Brazilian government agency in charge of regulating nutritional supplements, ANVISA, reclassified many of their supplements as medicines in 2000, NSP's sales in Brazil dropped to $2.3 million, as the stricter regulatory controls prevented NSP from registering and selling many of its popular products.

According to the complaint by the U.S. Securities and Exchange Commission (SEC), NSP made cash payments totaling over $1 million in 2000 and 2001 to so-called customs brokers in Brazil to circumvent the new regulations. The brokers used portions of the payments to bribe Brazilian government officials, who then allowed the unregistered products into the country. NSP later falsified its books to make the illicit payments seem like proper business expenses.

The CEO and the former CFO of Nature's Sunshine Products Inc., without admitting or denying the allegations, each agreed to pay a $25,000 fine to the SEC to settle the case. The company is also paying an additional civil penalty of $600,000.

KPMG survey: British companies lack corruption risk awareness
Many British companies are not fully aware of the necessary steps to take to minimize the risk of corruption and bribery, according to a survey by the consultancy KPMG. While two-thirds of the 100 companies taking part in the survey said it is impossible to do business in some countries without engaging in corruption and bribery, only one third said they have actually stopped doing business in those countries. Forty-three percent of the companies said they had no anti-bribery or corruption compliance program in place, which leaves them vulnerable to violations of anti-bribery laws. In a subsequent editorial, the Financial Times (FT) urged British companies to bring "fair play back to Britain." The FT writes with reference to the U.S. Foreign Corrupt Practices Act (FCPA) that "UK authorities seem finally to begin feeling embarrassed that other countries deter UK corporate wrongdoing more effectively than do Britain's own laws."

Bribery investigations focus on China's richest
China is cracking down on corruption inside the country -- and the super-rich are not immune. According to a report in the newspaper China Daily, nearly 30 of China's wealthiest people are either under investigation or charged with bribery. The investigations span all kinds of industries -- from power generation to medical devices to the flower business. But the motives for the most recent anti-corruption campaign may not be completely pure, writes New York Times reporter David Barboza, who cites several experts that see the recent investigations and arrests as symptom of the power struggle within the communist party.

Bangladesh: The Blowback of Corruption

Fri, 21 Aug 2009 14:36:49 -0800

This past January, Niko Resources Limited, a Calgary-based energy company, made what must have been an embarrassing announcement: the Royal Canadian Mounted Police (RCMP), the company said, was probing the possibility that Niko had made illegal payments to government officials in Bangladesh.

The Canadian investigation constituted a kind of deja vu for Niko. Two years earlier, from its offices in Calgary, Niko executives had watched a similarly disquieting event unfold: Bangladesh's Anti-Corruption Commission (ACC), a government regulatory body, arrested about a dozen people connected to Niko, including two former Bangladeshi prime ministers and several high-ranking government officials. In what has become one of the country's largest scandals, they were all indicted for helping Niko to obtain a natural gas contract through bribery.

A Company on the Rise
Founded in Alberta in 1987, Niko made a name for itself by developing natural gas fields in difficult to work places such as India and Bangladesh. The company became something of a darling to the financial press; between 2001 and 2006, its market cap grew from $220 million to $2.5 billion. In the late 1990s, hoping to repeat its success in India, Niko moved into Bangladesh. But the Bangladeshi government disqualified the company from bidding on gas projects, saying it lacked the technical expertise and financial resources.

And yet somehow, by 2003, Niko had signed a lucrative joint venture agreement with the Bangladesh Petroleum Exploration and Production Company (BAPEX), a state-owned gas company. The agreement, negotiated behind closed doors, gave Niko control of two vast fields -- Tengratila, near the Indian border, and Feni, in the south -- with a potential value of roughly $750 million.

Citizens groups and the local press were aghast. "Breaching its policy, the government last month secretly awarded the company an unexplored gas field..." Bangladesh's Daily Star newspaper reported. More controversies soon followed.

In January 2005, as Niko started drilling a gas well in Tengratila, it accidentally set off an explosion that blew up the field. (The video story above shows the impact of the disaster on local schools and villagers and the environmental damage still evident today.) No one was killed, but the fires destroyed billions of cubic feet of gas and forced thousands to evacuate.

Children at a school close to the blast site in Tengratila.

Then, in June 2005, as Niko was trying to contain the first blowout, it set off another explosion. The accidents caused massive protests around the country.

How Niko handled the crisis only added fuel to the fire. At first, it refused to pay for damages, and a legal dispute with the government ensued. Then, in the middle of the dispute, Niko gave BAPEX, its government partner, a $100,000 Land Cruiser. BAPEX, in turn, presented it to the energy minister, AKM Mosharraf Hossain. As it happened, Hossain was in charge of overseeing the explosion compensation claims.

Given the timing, the vehicle immediately caused a stir.

Newspapers, quoting anonymous government sources, reported that Hossain received the car in return for delaying the multimillion-dollar compensation claims then confronting Niko. An editorial in The Daily Star questioned: "The point is -- was it a gift? If it was, how and why was it?"

Days after the scandal broke, Bangladesh's prime minister at the time, Khaleda Zia, forced Hossain to resign. And over the course of the next year, Niko eventually paid out $525,000 in compensation to roughly 620 families affected by the disaster, and another $100,000 to plant trees. The outcry over the "gifted" Land Cruiser and Niko's other controversies seemed, for now, to have gone away.

Rather, a new chapter of trouble was just beginning.

Corruption Out of Control
During the reign of the Bangladesh Nationalist Party (BNP), in power between 2001 and 2006, Transparency International ranked Bangladesh as the most corrupt country in the world for several years in a row. In fact, by 2006, corruption had become so bad that basic services like water and electricity had broken down, leading to violent protests.

The unrest, coupled with political infighting, threatened to destabilize Bangladesh's democracy. So the army stepped in and took control of the government. One of its first acts was to declare a war on the graft committed by the BNP government. Some 1,200 agents of the country's Anti-Corruption Commission (ACC) were given special powers to investigate, indict and arrest.

In 2007, they opened a case file on Niko.

During its investigations, the ACC uncovered a trail of allegations: According to statements recorded by magistrates in January, Niko had hired businessmen to pay off corrupt officials to win its natural gas contract. The evidence also implicated a former law minister, Moudud Ahmed. To date, none of these allegations has been proven, and the charges are still pending in court.

An arrest warrant was issued for the Niko's vice president in Bangladesh, Kashem Sharif. He has since fled the country and is now a fugitive.

Among those arrested was the former energy minister, Hossain. (The allegations that Niko gave him a car as a bribe were never proven. But several cases of corruption are currently pending against him in Bangladesh's high court.) Niko has denied any illegal conduct.

Two former prime ministers were also arrested in the case, but the evidence against them was scant, and the charges were dropped. No Canadian executives of Niko were charged, but an arrest warrant was issued for the company's vice president in Bangladesh, Kashem Sharif. He has since fled the country and is now a fugitive.

Lawsuits have piled up. After the Tengratila explosions, the Bangladesh Environmental Lawyers Association (BELA), a public interest law firm, estimated the true scope of damage in Tengratila at more than $100 million. In 2006, it sued Niko for failing to pay adequate compensation to local people. As a result of the case, the Supreme Court was petitioned to freeze Niko's bank accounts in Bangladesh and withhold payments on gas revenues, causing the company to incur at least $27 million in arrears as of June 2009.

The case brought by the environmental lawyers stalled during the political unrest in 2006. But this year, following the election of a new government, the Supreme Court has called for the case to be concluded as soon as possible. Final hearings are now underway.

In 2008, the Bangladeshi government tried to settle out of court with Niko to pay damages in the two explosions. When Niko failed to respond, the government filed another lawsuit seeking more than $100 million in compensation for lost gas and environmental damages. That case is also pending in court.

Niko's chief financial officer told the press in January, "We believe we behaved ethically and are unaware of anything illegal that the company's been involved with."

Five Years On
Today, five years after winning its controversial contract, Niko maintains only a marginal presence in Bangladesh. Most of its foreign executives have vacated the company's office in Dhaka. The field at Tengratila remains suspended. Only the equipment remains, watched over by a single manager and a few guards.

It remains to be seen how the Canadian government's probe of Niko will play out. Other than confirming that a formal investigation is underway, neither Niko nor the Canadian government has said any more on the matter; it is unclear which allegations of bribery the RCMP may be looking at.

There are concerns, meanwhile, that the Canadian government may not act on whatever evidence it finds. In June, Transparency International described Canada as being one of several governments 'laggard' in cracking down on companies that commit bribery abroad -- a charge Canadian authorities deny.

Niko, in the meantime, would not comment for FRONTLINE/World but in the past has publicly denied any wrongdoing. "We have a code of conduct...," Niko's chief financial officer, Murray Hesje, told the press in January. "We believe we behaved ethically and are unaware of anything illegal that the company's been involved with."

Global Corruption Roundup

Wed, 19 Aug 2009 22:56:18 -0800

Protest as Switzerland returns plundered assets to African dictator's family
The Swiss government is set to return $6.6 million to the family of Mobutu Seke Seso, the former dictator of the Democratic Republic of Congo (DRC). The decision marks the end of a 12-year fight to return the assets directly to the Congolese people and not to Mobutu's heirs to help address the country's deep social problems.

Mobutu came to power after a coup in 1965 and ruled the country for more than 30 years. During his oppressive rule, it's believed he took $5 billion out of the mineral-rich country, while large parts of the population lived on less than $1 a day. Millions of Mobutu's plundered assets were frozen in Swiss bank accounts after the dictator was ousted from office by Laurent Kabila in 1997 under a slew of bribery and money laundering allegations.

When the new Congolese government asked for legal assistance from Switzerland to repatriate the assets, Swiss prosecutors began confiscating bank accounts linked to Mobutu; they also auctioned off Mobutu's luxury villa overlooking Lake Geneva for an additional $2.5 million in 2001.

While the DRC initially showed interest in taking the money and returning it to the people of Congo, political will has since waned. Even a trip by the Swiss foreign minister, Micheline Calmy-Rey, to the DRC in 2007 failed to spur negotiations.

In April, the Swiss Federal Department of Justice announced its decision to close the case. According to Swiss law, prosecutors are required to confiscate money acquired by illegal activities -- including drugs deals, extortion and the proceeds from bribery. But the Swiss Department of Justice argued that the statute of limitations of five years had expired because Mobutu fled the Congo in 1997.

Mark Pieth, a Basel law professor and chair of the OECD working group on bribery, launched a citizen's complaint against the decision saying that closing the case violated Swiss law. Pieth argued that the criminal network represented by Mobutu and his descendants continued to exist until at least 2004 through one of his sons, Manda Mobutu, who officially acted as his father's deputy before the dictator's death. Mobutu's two eldest sons, Manda and Nzanga, founded a political party financed by money left to them by Mobutu, Pieth wrote in the complaint.

Pieth requested that the assets remain frozen until the remaining legal questions were answered and the money could be returned to the people of the DRC. The late dictator's family still holds considerable political influence in the country, most directly through Mobutu's son, Nzanga Mobutu, who serves as the deputy prime minister and minister of agricultural affairs.

When Pieth's complaint was rejected on appeal in July, the Swiss anti-corruption organization Aktion Finanzplatz said the Congolese people were hurt most by the decision. "The population of the DRC was cheated out of Mobutu's money, which obviously was of criminal origin," the group said in a statement.

Pieth was equally disappointed: "The last chance to forfeit and repatriate the funds stolen by the Mobutu Clan has been lost," he said. Even the Swiss Foreign Ministry signaled frustration releasing a statement saying that the outcome had ended "12 years of keeping the assets frozen and attempting to find a fair solution," and called for legal reform.

China's anti-corruption efforts gain momentum
In one of China's most high-profile bribery convictions, the former head of Sinopec, China's state-owned oil and petroleum company, received a suspended death sentence. The Financial Times reported in July that Chen Tonghai was convicted of taking $28.8 million in bribes between 1999 and 2007 when he was a senior executive with the company. Tonghai hid some of the money in his home inside fish tanks, the toilet and under roof tiles.

Siemens saga continues
Siemens bribery troubles continue, despite the fact the company paid a record $1.6 billion in fines to U.S. and German authorities last December to settle a slew of international corruption charges. One case being pursued by Greek prosecutors has resulted in an arrest and a confession in Germany. According to the German daily Sueddeutsche Zeitung, Michael Christophorakos, the former head of Siemens Greece, admitted to paying bribes to political officials in Greece for services connected with the 2004 Olympic Games held in Athens.

Christophorakos fled Greece in May but was recently arrested in Munich. The report says Christophorakos is likely to provide Munich prosecutors with information about other Siemens executives who may have been involved in criminal activities in return for the chance of a lighter sentence. Meanwhile, prosecutors have charged a former member of the Greek parliament with taking a bribe of about $500,000. The politician, a member of the Socialist Pasok party, reportedly admitted taking the bribe but said he forwarded the money to the party -- a claim party officials deny. Greek prosecutors have indicted nine other suspects accused of bribery in connection with the Games.

Bangladesh: Where Corruption Flows

Thu, 13 Aug 2009 16:50:42 -0800

When Siemens spent $5million bribing the Bangladesh government in 2004 to secure a mobile phone contract, one of the beneficiaries was Aminul Haque, the country's telecommunications minister. Rather than face 31 years in jail, Haque went on the run.

It turned out the minister was not only taking kickbacks in office but patronizing one of the country's most violent extremist group, Jamat'ul Mujahadeen Bangladesh, or JMB, an Islamic group responsible for scores of political killings, many of them in Haque's home constituency of Rajshahi in the north.

While investigating Haque's connections to JMB earlier this year, reporter David Montero traveled to Rajshahi where villagers told him that they had been tortured by the militants and family members killed simply because they belonged to JMB's political opposition.

David Montero (left) with the Daily Star's Julfikar Ali Manik.

Although no one has established that Haque used his Siemens bribe payments to directly support the militants, his patronage brings home some of the dismal consequences of doing graft in one of the poorest, most corrupt countries in the world.

In December, Siemens was fined a record $1.6 billion for violating the Foreign Corrupt Practices Act in an audacious web of corruption that spanned the globe, including Bangladesh.

After the settlement, acting U.S. Assistant Attorney General Mathew Friedrich reminded corporations of the real costs of their actions: "Corruption is not a gentleman's agreement where no one gets hurt. People do get hurt," he said in a press conference. "And the people who get hurt the worst are often residents of the poorest countries on the face of the earth."

The story took a new twist this summer when Haque turned himself in at a Dhaka courtroom after more than two years on the lam.

Figuring out what the next chapter is in this convoluted story and why Haque would surrender now while still facing 30 years in prison, Montero talked over webcam with Julfikar Ali Manik, a journalist who has been following the case for Bangladesh's leading English-language newspaper, The Daily Star.

Global Corruption Roundup II

Thu, 02 Jul 2009 13:06:11 -0800

With corporate bribery a common practice around the world, we check in with the latest on companies and cases in the news.

First prosecution in BAE-related case possible
After Great Britain and Sweden shut down investigations of suspected multimillion-dollar-bribes by the British arms manufacturer BAE within the last year, at least one investigation seems to be going forward. As the British Guardian reports, the Austrian prosecutor could soon indict Count Alfons Mensdorff-Pouilly for his actions as a consultant for BAE.

Mensdorff-Pouilly is suspected of having paid bribes on behalf of BAE to convince decision makers in Austria, Hungary and the Czech Republic to buy Gripen fighter jets made by Saab Aerospace. BAE was Saab's business partner and a minority shareholder. Mensdorf-Pouilly was arrested in March 2009 on money laundering charges and taken into investigative custody for a month. He had claimed in an Austrian parliamentary investigation in May 2007 that he had no connection to BAE and was not involved in the Czech Gripen fighter deal, according to several press reports. But in 2009, Gerhard Jarosch, a spokesman for the Austrian prosecutor in Vienna, told a Swedish TV documentary producer that Mensdorff-Pouilly had given false testimony according to information that has since emerged, including a report from the Serious Fraud Office in London. Jarosch added: "The suspicion still is that Mr. Mensdorff used black money to bribe decision makers, politicians, authorities in several European countries concerning their fighter jet deals." Mensdorff's lawyer, Harald Schuster, defended his client in the same documentary: "Count Mensdorff does not bribe anyone."

Count Alfons Mensdorf-Pouilly, who referred to himself as a "farmer" in the Austrian parliamentary investigation, used to be seen with the rich and famous in Austrian society. His wife, Maria Rauch-Kallat, is the former health minister of Austria. Mensdorff-Pouilly was known to invite influential politicians, among them the former Austrian Secretary of State, Ernst Strasser, and businessmen to his hunting estates in Austria and Scotland.

Fight against international bribery faces serious hurdles
Only four of the 37 countries that signed on to the OECD anti-bribery convention are enforcing it adequately, according to a new report prepared by the anti-corruption watchdog organization Transparency International (TI). "The uneven enforcement of this convention is dangerous, especially in the current global recession where businesses face acute pressure to win orders," said TI Managing Director Cobus de Swart, who emphasized that political will has to be at the center of all anti-bribery efforts. "The failure of the OECD convention would arguably be the single most serious setback to the fight against international corruption," de Swardt said. The four countries that TI lists as having fulfilled the requirements of the convention are Germany, Switzerland, the U.S. and Norway.

Swedish investigation into SAAB/BAE dropped
The Swedish prosecutor Crister van der Kwast closed three investigations into suspected bribes in export deals with the Czech Republic, Hungary and South Africa, shortly before he retired from his post. While he said in a Swedish documentary film that his findings support the suspicion that Gripen fighter jets were sold with the help of bribes, he told the Swedish television program "Uppdrag Granskning" that he "can not fully verify that Saab participated in the bribery payments." However, he said, the evidence seems to clearly point in one direction: "It is very serious, both in terms of the systematic approach and the amount. It involves hundreds of millions of Swedish crowns in hidden payments in several countries, and there is strong reason to believe that bribery also has occurred."

The British weapons manufacturer BAE was Saab's partner in the arms deals and has come under strong suspicion for participating in corrupt deals in a number of countries.
One complicating factor in this inquiry is the fact Swedish law does not allow prosecution for bribes that were paid before July 2004, because of the statute of limitations. Saab claims to have followed the laws and rules in regard to the fighter-jet deals. "The decision is completely in line with what we have always claimed," the company said in a press release.

Mark Pieth, chairman of the OECD anti-bribery working group, is concerned about the halt of the investigation. "It raises the question whether Sweden is really committed to the OECD convention," he told FRONTLINE/World. The OECD working group on bribery had criticized Great Britain last year after it stopped the investigation into BAE and suspected bribes to Saudi Arabian officials. "It is important for us to see whether the OECD convention holds up in cases of international arms deals," he says. "This is where the conventions faces the greatest threats."

Two Miami businessmen bribed Haitian telecom officials
Juan Diaz, 51, and Antonio Perez, 51, of Miami pleaded guilty to having paid more than $1 million in bribes to secure contracts and business advantages for private U.S.-based telecommunications companies in Haiti between 2001 and 2003. Diaz set up a front company with the sole purpose of hiding and laundering bribes for Haitian officials in charge of contracting at the state-owned national telecommunications company, Telecommunications D'Haiti. According to court documents, Diaz would fabricate invoices and write checks for under $10,000 to avoid Currency Transaction Reports, which are required for foreign currency transactions of more than $10,000. Diaz also pocketed $73,824 as commissions for laundering the bribes. Perez was the controller for one of the three U.S.-based companies involved in the conspiracy. The company, whose name was not released, paid more than $670,000 in bribes to Haitian officials. The bribes were paid to Telecommunications D'Haiti's ex-director general and ex-director of international relations. Diaz and Perez each face up to five years in prison and a fine of up to $250,000. The government's investigation is ongoing.

Danish pharmaceutical company Novo Nordisk is fined $18 million for illegal payments during the Iraqi Oil-for-Food Program
Novo Nordisk used a classical scheme to kick back money to the former Iraqi regime under Saddam Hussein. To obtain contracts with the Iraqi ministry of health to supply insulin and other medicines, Novo Nordisk inflated the price quote by ten percent before submitting it to the United Nations to be approved under the Oil-for-Food Program. The extra ten percent was then kicked back to Iraqi health officials and recorded as commissions in Novo Nordisk's books. Between 2001 and 2003, these payments amounted to approximately $1.4 million. Novo Nordisk accepted a fine of $9 million as part of a deferred prosecution agreement. The agreement requires the company to implement strict compliance measures to prevent further wrongdoing and to cooperate fully with the U.S. Department of Justice's ongoing Oil-for-Food Investigation. The company was fined an additional $9 million in criminal and civil charges by the Securities and Exchange Commission.

Novo Nordisk is not the first pharmaceutical company implicated in the Oil-for-Food Scandal. In late 2007, the Dutch company Akzo Nobel (later acquired by Schering-Plough) agreed to pay $3.8 million as part of a settlement with the U.S. Department of Justice.

The Oil-for-Food Program was designed to alleviate human suffering during the economic sanctions imposed against Iraq after the invasion of Kuwait and to allow Iraq to sell oil for food and humanitarian aid. The program was later investigated by former Federal Reserve chairman Paul Volcker who found that about 2,200 companies had made suspicious payments of up to $1.8 billion to the former Iraqi dictator. The U.S. Department of Justice continues to investigate these cases.

U.S. military man is charged with soliciting bribes in Iraq
Joselito Domingo, 45, was a project manager for the U.S. Army Corps of Engineers in Iraq and Afghanistan. According to the complaint filed in the Northern District Court of Illinois, he supervised several construction projects in and around Kirkuk from 2005 to November 2008. These projects -- with contracts estimated to be worth between $50 and $100 million -- included oil pipeline barriers, water projects, schools and roads. Domingo was in charge of evaluating proposed projects and processing payments -- a position he allegedly abused for personal gains. When a contractor submitted a bid for a city park in Kirkuk, Domingo allegedly asked for a bribe of $50,000, which he later reduced to $40,000 when the contract volume was smaller than expected. Domingo was arrested when he left a Western Union Office after collecting $4,770 that he believed was sent to him by the contractor who was, in fact, cooperating with the F.B.I. and the U.S. Department of Defense throughout the investigation.

Companies are increasingly concerned about foreign bribery
Seventy-five percent of high-level managers and executives reported increased concern over possible violations of the anti-bribery provisions of the Foreign Corrupt Practices Act, according to a survey by the consultancy Deloitte Financial Advisory Services. The survey addressed 216 senior professionals from companies with revenues ranging from $100 million to more than $1 billion. Ninety-four percent of the participants were especially worried about bribery occurring in Russia and the Commonwealth of Independent States, 92 percent expressed concerns over bribery when doing business in China and 91 percent were concerned about corrupt payments in Africa and the Middle East. More than half of the respondents said their companies had renegotiated contracts or cancelled potential investments when the proposed deal lacked transparency, included unusual third party arrangements or used agents to help obtain business.

Transparency International released its 2009 Global Corruption Barometer
The anti-corruption watchdog organization Transparency International has asked citizens of 69 countries, including Argentina, Georgia, Nigeria, Uganda, the United States and Zambia about their everyday experiences with corruption in the private sector as well as in political institutions. People around the world were invited to submit their stories, views and experiences regarding corruption via email, on Twitter or Facebook in addition to scheduled surveys.

Shell to Pay $15.5 Million in Nigerian Human Rights Case

Wed, 10 Jun 2009 18:49:53 -0800

A much anticipated human rights trial concerning oil giant Shell's conduct in Nigeria ended this week before it began.

The Nigerian plaintiffs, who accused Shell of complicity in the execution of Nobel Peace Prize nominee Ken Saro-Wiwa and other environmental activists, agreed to settle the case for $15.5 million. Shell admitted no wrongdoing, characterizing the settlement as a "humanitarian gesture."

Saro-Wiwa gained international renown in the 1990s as an outspoken opponent of the pervasive poverty and pollution in his native Ogoni land, part of the oil-rich Niger Delta. The grassroots campaign he inspired challenged the relationship between Western oil companies and President Sani Abacha, whose military regime marked one of the darkest chapters in Nigeria's history.

Abacha ordered the execution of Saro-Wiwa and the other activists in 1995, after a cursory military trial on trumped-up charges.

"We believe this settlement will assist the process of reconciliation and peace in Ogoni land, which is our primary concern." -- Shell's Malcolm Brinded

The suit against Shell, which survived more than a decade of legal challenges, accused the company of, among other things, conspiring to bribe two witnesses to testify against Saro-Wiwa during his trial.

"We believe this settlement will assist the process of reconciliation and peace in Ogoni land, which is our primary concern," Malcolm Brinded, Shell's director of exploration and production, said in a statement.

Money from the settlement will go to the plaintiffs, including Ken Saro-Wiwa's son, and to a trust in the name of the Ogoni people, supporting initiatives in education, agriculture and business development.

"Shell has always maintained the allegations were false," Brinded said. "While we were prepared to go to court to clear our name, we believe the right way forward is to focus on the future for Ogoni people, which is important for peace and stability in the region."

Although Shell admitted no wrongdoing, the plaintiffs' lawyers, led by the Center for Constitutional Rights, said they were satisfied with the outcome.

Money from the settlement will go to the plaintiffs, including Ken Saro-Wiwa's son, and to a trust to help support the Ogoni people.

"The settlement represents one more step towards holding corporations accountable for complicity in human rights violations, wherever they may be committed," their statement read. "We hope that this settlement provides another building block in the efforts to forge a legal system that holds violators accountable wherever they may be and prevents future violations."

The suit against Shell was based on the controversial, once nearly forgotten Alien Tort Statute, signed into law more than two centuries ago by President George Washington.

To plaintiffs' lawyers, the statute helps to level the playing field for the poor and disenfranchised in a world dominated by powerful business interests. Defendants tend to view the law differently, regarding it as an unreasonable burden on American companies (or on foreign companies such as Shell that have a significant presence in the United States).

The Shell suit would have been the third corporate Alien Tort Statue suit to make it all the way to trial. In both of the first two such cases, including one involving Chevron last fall, the jury decided in favor of the defendants.

Haiti: The Long Road to Recovery

Fri, 22 May 2009 12:25:40 -0800

During the 15-year reign of Haiti's former president Jean-Claude "Baby Doc" Duvalier, extreme poverty strangled the island nation. Ninety percent of the population subsisted on less than $150 annually. Eighty percent of children under 5 suffered from malnutrition. And almost a third of Haitian children died before they reached the age of five.

While international aid organizations tried to help, Duvalier pocketed much of the relief money for himself. According to documents, shortly after the International Monetary Fund granted $22 million to Haiti on December 5, 1980, $20 million of that money was withdrawn from the government's bank accounts. Former U.S. Secretary of State Alexander Haig received a cable saying that approximately $4 million may have been diverted to Haiti's secret police, the Tonton Macoutes, while the remaining $16 million disappeared into Duvalier's personal accounts.

At the same time, Duvalier was making lavish purchases, like the eighty-six foot luxury yacht, named "Nikki," that he bought for $1 million. Even after he fled the country in 1986 to escape an imminent coup, the spending continued. In 1988, a journalist from the St. Petersburg Times in Florida described Duvalier's luxurious villa in the French Riviera (monthly rent: $40,000) as having "Ferrari sports cars parked in the driveway."

While it is hard to link specific bank accounts or purchases to specific incidents of corruption or bribes, the rate at which money flowed out of the public coffers was staggering. All told, Jean-Claude Duvalier, his ex-wife Michelle Bennett Duvalier, and three people acting as agents are believed to have taken $504 million from the Haitian public treasury between 1971 and 1986.

But after two decades of tireless work by lawyers, prosecutors and government officials, some of that money -- $6.5 million frozen in the Swiss bank accounts of Duvalier -- is finally about to be returned to Haiti.

Jean-Claude "Baby Doc" Duvalier

"The return of the money [to Haiti] is a victory in the fight against impunity and corruption, although it is of a rather symbolic nature," says Pierre-Yves Morier, a lawyer at the Swiss Federal Department of Foreign Affairs in charge of asset return.

While the sum seems small compared to what Duvalier is suspected of stealing from Haiti's public budget, officials from government agencies and NGOs stress that even minor victories send an important message. "We need corrupt leaders to realize that they can't get away with crimes," says Marilyn Allien, Haiti's representative for the anti-corruption watchdog Transparency International in Port-au-Prince. "The return of these illicit assets demonstrates that despite the time lapsed, dictators continue to be responsible for their crimes and cannot benefit from their stolen assets," adds Morier.

The recovery of assets obtained through bribery, corruption, embezzlement and theft has become increasingly important in the international fight against corruption. The United Nations Convention against Corruption (UNCAC), which 132 countries have signed and ratified, has made it a priority, and a 2007 World Bank initiative, the Stolen Asset Recovery Program (STAR), provides legal and practical assistance to developing countries trying to get stolen money back. Before the initiative, efforts were often stymied because new governments -- frequently emerging from the chaos of tumultuous transitions -- were ignorant of the processes to ask for mutual legal assistance or had difficulties filing legal documents in the language of the countries where the money was suspected to be hidden. The STAR initiative now allows all legal documents to be filed in English.

These initiatives, including the efforts to get the money back to the people of Haiti, are designed to alleviate poverty but also to inspire other countries to seize the money that dictators have spirited away into secret bank accounts. They come at a time when an increasing number of developing countries are demanding that stolen assets be returned, at least in part to help fund development programs that aid in reaching the United Nations' Millennium Development Goals. With more international investigations into terrorist financing and money laundering, as a consequence of the 9/11 terrorist attacks, stolen assets are also more difficult to hide.

The efforts to return the money to Haiti started in 1986, shortly after Duvalier -- the notorious self-proclaimed "president for life" -- fled the country. The new Haitian government asked Switzerland for mutual legal assistance to track down any money Duvalier had stolen from public funds and hidden in Switzerland. It took several months, but they located $6.5 million in a suspicious Swiss bank account of the Liechtenstein-based Brouilly foundation, set up by Duvalier's mother through a Panamanian company.

It was difficult to establish that the money didn't rightfully belong to the Duvaliers but was instead pilfered from the state's budget or obtained by taking bribes. "The illicit origin of such funds is often difficult to prove," says Valentin Zellweger, Deputy Director of the Directorate of International Law in the Swiss Federal Department of Foreign Affairs. Corrupt leaders have been known to go to extensive lengths to obscure the money trail, often using middlemen and front companies in different countries. Electronic transfers can also move money with lightening speed from one country to another before law enforcement has a chance to freeze the assets.

Corrupt leaders have been known to go to extensive lengths to obscure the money trail, often using middlemen and front companies in different countries.

If the country of origin does not cooperate and does not provide bank records, financial documents and witness statements, determining which funds are illegitimate can become almost impossible. "In many countries, there are supporters of the old government who don't want the whole story to come out," says Randi Ryterman, senior manager at the World Bank.

Haiti's case proved to be no different. When the investigation in Haiti came to a halt in 2002, Swiss authorities froze the money after declaring Haiti a "failing state." Over the next five years, the Swiss Foreign Ministry extended the deadline for Haiti's statement of cooperation -- a legal necessity in such cases -- several times, but it wasn't until May 2008 that the new Haitian government supplied evidence of a criminal investigation against former president Duvalier. With the governments on both ends of the money trail involved, efforts to return the money to the people of Haiti ramped up.

While the return of the money to Haiti had been ordered by the Swiss Federal Department of Justice on February 12, 2009, a last minute appeal by Duvalier's family stalled the process once more. Lawyer Enrico Monfrini, who represents the Haitian government against the Duvalier family, is confident that this is just a minor hiccup. "I think it will be a matter of months before the money is returned," he says.

The $6.5 million is designated to go to social and humanitarian projects, most likely to a hospital or a water treatment facility. "Making sure that the money helps the poorest of the poor is very important to us," says Allien of Transparency International. "We want to see direct effects on the living conditions of the people who suffered rather than having it go to infrastructure projects with uncertain benefits."

Anti-bribery experts hope that the efforts in Haiti and elsewhere will help alleviate poverty and social injustice in the countries where public funds were plundered. UN experts estimate that public officials in developing countries receive tens of billions in bribes every year. Even if only a fraction -- an assumed $100 million -- were returned, it could pay for full immunization for 4 million children, AIDS treatment for 600,000 people for a year or provide running water to some 250,000 households, UN experts calculate.

While the UN and World Bank initiatives are still in their infancy, Switzerland has had some success in returning money hidden in secret bank accounts. Over the last 20 years, the Swiss government ordered the return of a total of $1.7 billion dollars to Nigeria, Kazakhstan, the Philippines and Peru. "No other government has returned a comparable amount of illicitly acquired assets," says Swiss lawyer Morier, confident that Duvalier's assets will be added to the list of successful repatriations soon.

In the case of Haiti, which had languished for 20 years, the Swiss government even provided the Haitian government with a lawyer, Enrico Monfrini, to help finish the case. Monfrini had been instrumental in returning more than $500 million dollars to Nigeria in 2006, money that resulted from corrupt deals and bribery.

In that case, using an inventive legal maneuver, Monfrini was able to show that former Nigerian president Sani Abacha and his clan operated like a criminal organization comparable to the Mafia. Monfrini proved before the Swiss Supreme court in 2005 that Abacha and his people had been secretive and used money laundering mechanisms and extortion, all characteristics of criminal organizations. This allowed him to reverse the burden of proof: Abacha's heirs had to provide evidence that Abacha obtained his wealth legally. They could not, so the money went back to Nigeria.

Monfrini has been using the same strategy in the case against the Duvalier family, the Federal Office of Justice confirmed. "This can really serve as a symbolic case and encourage other countries to come forward," says Monfrini.

Lowell Bergman Investigates...

Fri, 15 May 2009 12:09:33 -0800
Lowell Bergman's career spans nearly four decades and has been recognized with dozens of major journalism awards, including a Pulitzer Prize for his work with The New York Times. In 1999, he was portrayed by Al Pacino in the movie The Insider for his expose of the tobacco industry on CBS's 60 Minutes.

Bergman is a producer/correspondent for FRONTLINE and also the Reva and David Logan Distinguished Professor of Investigative Reporting at the Graduate School of Journalism at the University of California at Berkeley, where he has taught a seminar dedicated to investigative reporting for more than 15 years.

His career began in the late 1960s when he worked for a weekly newspaper in San Diego, as a freelancer for Ramparts Magazine and then as an editor of Rolling Stone. In 1976, he was part of a group of reporters who investigated the assassination of Don Bolles, a reporter for The Arizona Republic, and in 1977 he was a co-founder of the Center for Investigative Reporting.

In 1983, Bergman joined CBS News as a producer for the weekly news magazine 60 Minutes, where over the course of 14 years he produced more than 50 stories on subjects ranging from organized crime, international arms and drug trafficking to terrorism and corporate crime.

After leaving CBS News as its senior investigative producer, he forged an alliance between The New York Times and FRONTLINE. Stories as part of this alliance included investigations into: corruption in Mexico [Murder, Money and Mexico (1998)]; the East Africa embassy bombings [Hunting bin Laden (original broadcast 1999; updated Sept. 13, 2001)]; the California energy crisis and the role of Enron [Blackout (2001)]; a series on the roots of 9/11 [Looking for Answers (2001); Gunning for Saddam (2001); Saudi Time Bomb? (2001)]; and subsequent stories on the terrorist threat inside the United States and Europe [The Enemy Within (2006), Al Qaeda's New Front (2005) and Chasing the Sleeper Cell (2003)].

He has received honors in both print and broadcasting, including the Pulitzer Prize for Public Service, awarded to The New York Times in 2004 for A Dangerous Business, which detailed a record of egregious worker safety violations coupled with the systematic violation of environmental laws in the iron sewer and water pipe industry. That story, which appeared as both a print series and a documentary, is the only winner of the Pulitzer Prize to also be acknowledged with every major award in broadcasting.

The recipient of numerous Emmys, Bergman, as a reporter and producer, has been honored with five Alfred I. duPont-Columbia University Silver and Golden Batons, three Peabodys, a George Polk Award, a Sidney Hillman award for labor reporting and the James Madison Freedom of Information Award for Career Achievement from the Society of Professional Journalists. Bergman graduated with honors from the University of Wisconsin-Madison in 1966 and was a graduate fellow in philosophy at the University of California, San Diego until 1970.

Al Pacino as Lowell Bergman in the film The Insider

Bangladesh: Bribery's Dangerous Beneficiary

Mon, 11 May 2009 22:10:12 -0800

In 2004, the German industrial giant Siemens was keen to land a telecom deal with the government of Bangladesh, a country of 150 million, where mobile phone use was soaring. Taking no chances, the company paid $5 million in bribes to government officials to secure the bid. There was certainly nothing unusual about that: bribery is a way of life in Bangladesh, which was ranked the most corrupt country in the world between 2001 and 2006 by Transparency International.

But in January, while investigating the country's chronic corruption problems [I spent a year reporting in Bangladesh in 2005], I noticed something unusual and potentially alarming about the Siemens bribe.

During the time Haque was receiving bribes from Siemens, he was also patronizing Jamat'ul Mujahadeen Bangladesh, or JMB, an Islamic militant group in Bangladesh.

According to court documents [PDF] filed by prosecutors at the U.S. Department of Justice, Siemens had bribed the former telecommunications minister in Bangladesh.

The documents didn't name the minister, but further investigation revealed that he was Aminul Haque. I also discovered that during the time Haque was receiving bribes from Siemens, he was also patronizing Jamat'ul Mujahadeen Bangladesh, or JMB, an Islamic militant group in Bangladesh.

The revelation was surprising enough to get me on a plane back to Dhaka, Bangladesh's capital. The day after I arrived, a national tragedy erupted that would have profound implications for my story: In events that made headlines around the world, soldiers in the Bangladesh Rifles, or BDR, the country's border security forces, staged a bloody mutiny killing scores of their own senior officers and burying bodies in shallow graves inside their military headquarters. It soon emerged that some of the mutineers had belonged to JMB and that logistics of the attack further suggested the imprint of the extremist group.

David Montero (left) with the Daily Star's Julfikar Ali Manik reporting in the district of Rajshahi in northwest Bangladesh.

As investigators probed links between the soldiers and JMB, I headed to Rajshahi, a district in northwest Bangladesh where Haque was born and where the JMB first emerged as a militant threat. When I asked residents about Haque's involvement with extremists, local prosecutor Ekramul Haque told me that the former minister and barrister had formed a deadly alliance with the JMB, which has been charged with a wave of abductions and killings in the region.

Haque was a powerful politician in the Bangladesh Nationalist Party (BNP), one of the country's two political parties. Its main rival is the Awami League. According to victims, Haque allegedly used JMB militants to kill Awami League members to ensure his party's supremacy in the area. In return, Haque provided the group with political cover to continue its Islamist agenda.

A newspaper clip of the former telecommunications minister Aminul Haque, currently at large.

Breaking down in tears, one villager told me that his son was tortured and beheaded by JMB for no other reason than that his son belonged to Awami League. The boy's body was later left as a warning.

The JMB has become a nationwide menace in Bangladesh. Although six of its leaders were arrested and hanged in 2007, it continues to operate underground. Every week the police arrest new cells and seize weapons stockpiles. The mutiny in Dhaka that shocked Bangladeshis may prove to be JMB's most devastating attack to date.

Although Haque was sentenced to 31 years in prison in 2007 for supporting JMB, he fled Bangladesh before he could be apprehended. At the time of sentencing, Public Prosecutor Ekramul Haque said, "The JMB came into being, flourished and continued criminal activities with the finance and assistance of barrister Aminul Islam [Haque], Shish Muhammad [a BNP party official in Rajshahi] and other ruling party men of the BNP-Jamaat alliance."

Today, Haque's whereabouts is unknown. Although, this week, through his lawyers, Haque petitioned the government to withdraw five cases filed against him.

Although there is no evidence that money paid to Haque by Siemens made its way to JMB, it underscores how bribe money can easily fall into the wrong hands.

Global Corruption Roundup

Mon, 11 May 2009 17:40:12 -0800

With corporate bribery a common practice around the world, this week we begin a regular digest following companies and cases in the news.

Sun Microsystems Discloses Possible FCPA Violation
In its most recent SEC filing, Silicon Valley software company Sun Microsystems revealed that it may have violated the Foreign Corrupt Practices Act, a suspicion it has reported to the U.S. Department of Justice and the SEC. While Sun hasn't disclosed the amount of the suspected bribe or where it took place, the company has warned shareholders that fines, criminal sanctions and debarment from doing business with the U.S. government could follow.

The revelation comes at a sensitive time for Sun as the company announced a merger in April with another software giant, Oracle. Under the terms, Oracle has agreed to buy Sun for $7.4 billion.

Does the United Nations' Corruption Convention Have Teeth?
A number of leading CEOs, among them GE's Jeffrey Immelt, Shell's Jeroen van der Veer and Chinese industrialist Tianwen Huan, sent a joint letter to U.N. Secretary Ban Ki-moon this month voicing their support for the United Nations Convention against Corruption (UNCAC). However, the business leaders urged a more effective review of how the convention is implemented. Otherwise, they say, there is no clear way to measure the success of anti-corruption efforts around the world. The group put forward a number of proposals in the letter.

So far,140 countries have signed on to the convention and 136 have ratified. But with countries like Afghanistan and Zimbabwe among the signatories, some member states face an uphill battle.

The letter comes in advance of the next UNCAC meeting in Dohar, Qatar, in November when business leaders hope these issues will be hashed out among delegates. Although there are a number of global initiatives already working to fight corruption, the CEOs said these efforts will be "greatly strengthened by working under the umbrella of an effective U.N. Convention."

Germany May Face Its Next Big Bribery Scandal
Just a few months after German engineering giant Siemens agreed to pay a record $1.3 billion fine to U.S. and German authorities, one of Germany's leading truck manufacturers MAN is also under investigation for bribery. Reported by Deutsche Welle, the company is suspected of paying millions in bribes to sell and lease its vehicles around the world. German prosecutors have searched MAN's Munich headquarters and 39 other offices across Germany. According to press reports, prosecutors are looking at $15 million in bribes paid in Europe and Africa and dispersed in a style similar to the scheme unveiled in the Siemens case -- using a complex network of front companies and consultants to make the payments. MAN has launched its own internal inquiry. Meanwhile, the investigation has extended to more than 100 people, according to an AP report in The Wall Street Journal.

KBR Caught Bribing. But Who Got the Cash?
The recent U.S. Department of Justice case against Halliburton subsidiary Kellogg Brown and Root (KBR) revealed that the company spent more than a decade bribing Nigerian officials to win a massive natural gas contract. KBR was fined $579 million by the DOJ and its former CEO Albert "Jack" Stanley was sentenced to seven years in prison.

Yet, the saga is far from over. While $150 million of the $180 million KBR admitted to paying officials has reportedly surfaced in a Swiss bank account, prosecutors have not revealed who received the payments or who made the deposits. There is gowing speculation that a number of bribe recipients may soon be named. The UK Guardian reports that Nigerian President Umaru Yar'Adua has set up a special panel to investigate the scandal and reveal who pocketed the cash.

Britons Face Possible Extradition to U.S. in KBR's Corruption Case
In further fallout from KBR's corrupt dealings in Nigeria, extradition hearings began this week in London against British attorney Jeffrey Tesler, thought to be a key figure in the case. Facing possible extradition to the U.S. and years in prison, Tesler is accused of being KBR's "bagman," ensuring the delivery of millions in bribe payments to Nigerian officials on behalf of the U.S. consortium over a number of years.

The allegations against the 60-year-old attorney, a dual Israeli-British citizen, are outlined in an indictment published in The Guardian. A second Briton, 71-year-old Wojciech Chodan, also faces extradition. The London Evening Standard reports that the proceedings against the two men, whose alleged violations date back to the mid-1990s, "demonstrate the long arm of U.S. anti-corruption laws."

Hong Kong Toy Manufacturer Sentenced for Bribing Mattel Execs
The director of a Hong Kong toy company was sentenced to 18 months in prison this month for offering $10 million in bribes to two directors of Mattel Asia. According to Hong Kong's Independent Commission Against Corruption (ICAC), 71-year-old Wong Hong-Leung set up a front company and issued fake invoices to bribe the two Mattel employers. Mattel Asia is a subsidiary of the U.S. toy giant. Between1998 and 2003, the payments received by the executives ranged from several thousand dollars to several hundred thousand dollars a month. The commission also reported that Wong Hong-Leung took part of the bribe money himself.

Corrupt U.S. Military Contract in South Korea
Between 2003 and 2007, Henry Lee Holloway worked for the U.S. Army and Air Force Exchange Service (AAFES) in South Korea. Holloway was responsible for a $206 million contract with the Samsung Rental Company (SSRT) that provided telecommunication services to U.S. armed forces based there. When Holloway arrived at his post, he considered canceling the contract because the services seemed substandard. But after meetings with the contractor CEO, Gi-Hwan Jeong, Holloway approved the deal. His about-face came at a price.

According to court documents released by the U.S. Justice Department in April, Holloway collected about $70,000 in bribes over a two-year period. He received the payments as stock offerings, travel expenses, entertainment and cash, none of which he declared on his tax returns. In addition to five years in prison and a $250,000 fine for accepting bribes, Holloway also faces up to three years in prison and a $100,000 fine for filing a false tax return. The Army officer has pleaded guilty but a sentencing date has not yet been set.

Meanwhile, his co-conspirator, Gi-Hwan Jeong, has also been indicted in a U.S. court after he was arrested in Texas in November 2008. His trial is scheduled to start on June 24, 2009.

Niger Delta: More Reports on the Region

Wed, 29 Apr 2009 21:45:55 -0800

PHOTO: ED KASHI

The Curse of the Black Gold
After shooting with National Geographic in the Niger Delta in 2007, award-winning photographer Ed Kashi said Nigeria was the toughest place he had ever worked. Kashi returned with striking images of ecological destruction, omnipresent energy companies, and many Nigerians grinding out an impoverished existence. More of Kashi's photographs are on view in "The Curse of the Black Gold," a powerful slideshow co-produced by MediaStorm and Talking Eyes Media. The project is part of a book by the same name edited by UC Berkeley professor and Nigeria expert Michael Watts.

Spotlight: Nigerian Corruption
In this video, Professor Watts, along with Nigerian prosecutor Nuhu Ribadu and former Nigerian President Olusegun Obasanjo, discuss how corruption has undermined Nigeria's progress.

Oil War: Nigeria
This 2005 feature from Journeyman Pictures explores Nigeria's resource curse. The reporter hears from various stakeholders in the Delta, including rebel leaders, state governors, and Royal Dutch Shell [a major funder of FRONTLINE/World], the energy company with one of the longest and most controversial histories in the region.

Rebels in the Pipeline
Current TV's Mariana Van Zeller and Darren Foster travel across the Delta to investigate a rise in kidnappings, pipeline sabotage, and militancy, and their destabilizing effects on Africa's most populous country.

Seattle-based filmmaker Sandra Cioffi recounts her arrest in the Niger Delta last year while making the documentary "Sweet Crude." She was held for several days before a blitz of media coverage helped secure her release. The segment from Democracy Now! also reports on the militant group MEND (the Movement for the Emancipation of the Niger Delta) and its recent demands for international mediation in the troubled region.

Aerial view of Total's Amenam Kpono oil platform, 25 miles off the coast of Nigeria in the Atlantic Ocean. PHOTO: Ed KASHI.

Reforming Nigeria's Oil Industry [Subscribers only]
Known for corruption and inept management for decades, the Nigerian National Petroleum Corporation (NNPC) appeared high on Nigeria's reform agenda in 2007 when president Umaru Yar'Adua took office. For years, transnational energy companies have operated in the Delta under a joint agreement with the NNPC, in a roughly 60-40 percent revenue split between national and oil company interests. This Economist article reports on how Nigeria's oil industry has been mismanaged for years on all sides, and the chances for economic reform while corruption greases every wheel.

Oil Companies on Trial
In a lawsuit filed by the Center for Constitutional Rights and EarthRights International, Shell is to appear in a Federal District Court in New York on May 26 to answer charges of complicity in human rights abuses in Nigeria, including the death of environmental activist and author Ken Saro-Wiwa.

During the 1990s, Saro-Wiwa began a peaceful campaign in his home state of Ogoniland in the Niger Delta claiming that the region had suffered from years of ecological damage, poverty and human rights violations due to oil exploration. Shell began drilling in Ogoniland in the late 1950s. Saro-Wiwa was also a vocal opponent of President Sani Abacha, whose military regime marked one of the darkest chapters in Nigeria's history.

After a cursory military trial on trumped-up murder charges, Abacha ordered Saro-Wiwa's execution along with several other activists in1995. Since then, Saro-Wiwa's death has become a decades long international human rights campaign for justice.

The suit against Shell, which has survived more than 10 years of legal challenges, claims the energy company collaborated with the Nigerian authorities and attempted to bribe two witnesses to testify against Saro-Wiwa during his trial. More of the allegations against Shell are outlined on the plaintiff's website, Wiwa v. Shell.

Shell has consistently denied any involvement in Saro-Wiwa's death and accusations that it operated in Nigeria behind a military shield. In a statement on its website, the company contends that during Saro-Wiwa's trial, it pressed publicly for a fair and legal hearing, and appealed against the death penalty warning that the decision would "damage the process of reconciliation" between the Nigerian government and the Ogoni people.

The suit has been filed under the Alien Tort Claims Act, a law that has been used in a number of cases against transnational companies in recent years, allowing non-citizens to seek damages in U.S. courts for alleged human rights abuses, regardless of where in the world they took place.

In another human rights case against Chevron in Nigeria, involving the shooting deaths of two activists at an offshore oil platform in 1998, the company was cleared last year in a federal court in San Francisco. The outcome of the trial is now on appeal.

Separately, Shell is under investigation by the U.S. Department of Justice and the Securities and Exchange Commission for violations of the Foreign Corrupt Practices Act. The oil company first disclosed it was under investigation in its 2007 Annual Report. The ongoing probe involves Shell's dealings in Nigeria with a freight forwarding company called Panalpina. In March 2009, Dow Jones reported that Shell's Chief Financial Officer Peter Voser told reporters at a press conference, "We have started an internal investigation, looking at potential payments made by Panalpina on our behalf to customs [officials] in Nigeria." Shell is one of 11 companies contacted by the DOJ about its relationship with Panalpina and allegations of bribery at Nigeria's ports.

Corporate Social Responsibility
Social responsibility has become a corporate byword in recent years as leading energy companies have developed social, educational and environmental programs as part of doing business in the developing world. These efforts, along with greater transparency, internal reviews, whistleblower helplines, and unofficial websites tracking oil company activity have helped improve the industry's image and practices.

In this video interview with Shell's Nigeria Chair Basil Omiyi, he answers questions about Shell's environmental record in the region and how it operates in a country plagued by violence and corruption. Omiyi calls Shell "a corporate citizen of Nigeria," adding, "We do more good by being present and being part of that solution than to walk away."

Chevron's New Approach to Development
2006 Corporate Responsibility Report
Addressing what it says are "long-standing and complex development issues in the region," Chevron signed a Global Memoranda of Understanding (GMOUs) in 2006 with eight community groups and state governments in the Niger Delta. It is part of Chevron's long-term aim to cede control of community development projects to local governance through a network of Regional Development Councils.

Another view of the slaughter house in the Delta's capital, Port Harcourt. Animals are killed in the open, where blood is spilled into waterways and skins burned by the flames of old tires. The burning produces a constant cloud of thick black smoke.

Delta Suffering from Neglect, Abject Poverty
UNDP Human Development Report on the Niger Delta
This bleak assessment by the United Nations Development Programme (UNDP) describes the Delta as a region in crisis, "suffering from administrative neglect, crumbling social infrastructure and services, high unemployment, social deprivation, abject poverty, filth and squalor, and endemic conflict." The 2006 report also examines the practices of oil companies and the ecological effects of oil spills, gas flaring and the dredging of mangrove forests.

Delta Spills Equivalent of 50 Exxon Valdez Disasters
Niger Delta Natural Resource Damage Assessment and Restoration Project
Up to 13 million barrels of oil have spilled in the Niger Delta ecosystem over the past 50 years, representing about 50 times the estimated volume spilled in the Exxon Valdez disaster in Alaska in 1989, according to this 2006 report assembled by an independent team of experts from Nigeria, the United States and Britain.

This environmental damage has occurred in a place the report describes as "one of the 10 most important wetlands and marine ecosystems in the world." The study also examines the threatened livelihoods of millions of people who depend on the region's natural resources for survival. These are not only Nigerians, but also many living in surrounding West African countries, who rely on migratory fish from the Delta for food and support.

Oil on the Brain: Adventures from the Pump to the Pipeline
In her entertaining book Oil on the Brain, journalist Lisa Margonelli follows the trail of the petro-dollar from her local gas station in Oakland, California, to the oil fields of Texas, Africa and South America. Currently a Fellow at the New America Foundation, Margonelli engages U.S. consumers, pumping an average of 10,000 gallons of gas every second, to pause and consider, "Where does it all come from and at what cost?"

Nigeria: KBR's Bribery, Who Pays the Price

Wed, 29 Apr 2009 06:03:24 -0800
In a Federal courtroom in Texas last September, Albert "Jack" Stanley, the former CEO of KBR, pleaded guilty to bribery. The scheme he masterminded to secure a massive natural gas contract in Nigeria's Bonny Island, involved $180 million in bribe payments to grease the deal. Stanley now faces seven years in prison, while KBR, then a subsidiary of Halliburton, was fined more than half a billion dollars earlier this year by the U.S. Department of Justice. It became the largest fine ever handed down to a U.S. company for bribing overseas.

While the penalties for bribery are hitting record highs, the cases are also revealing how devastating large-scale corporate corruption can be to a country like Nigeria. In this report, which aired on PBS NewsHour on April 24, Lowell Bergman investigates the complex web of fraud and self-enrichment around the KBR deal, and who is ultimately paying the price.

Nigeria: The Hidden Cost of Corruption

Fri, 24 Apr 2009 23:46:08 -0800
PHOTOS: ED KASHI

If any company knew how to get business done in Nigeria's Niger Delta, it was Willbros Group. The Texas contractor had been laying pipe through the Delta's mangrove forests since shortly after the discovery of oil there 50 years ago. And so it is telling that in February 2005, Jim Bob Brown, head of Willbros' Nigerian operations, showed up in the teeming tropical city of Lagos to hand off a suitcase filled with $1 million in cash.

So rampant is corruption in Nigeria that the list of those recently accused of engaging in bribery there includes a U.S. Congressman (indicted after $90,000 of marked money was found in tinfoil-wrapped bundles in his freezer) and a Fortune 500 energy company (then run by soon-to-be Vice President Dick Cheney). Indeed, the Berlin-based group Transparency International has consistently ranked Nigeria among the world's most corrupt countries.

Much of the shady business takes place in or is related to the Delta -- a part of Nigeria that has earned an unfortunate superlative of its own: one of the five most-polluted spots on Earth, according to a recent assessment by a team of international experts. Up to 50 times as much oil as that of the Exxon Valdez disaster has been spilled there over the past 50 years -- one Valdez a year. And flaring -- how oil companies get rid of unwanted gas, a byproduct of drilling -- is blamed for making rain so acidic that corrugated iron roofs quickly turn to rust.

Even so, pollution is not the top concern for the average Delta inhabitant. Hunger is. Nigeria supplies one-tenth of the United States' oil, more than Iraq and Kuwait combined, yielding billions of dollars in oil revenue every year. Yet in the Delta most people survive on less than a dollar a day, well below the World Bank's threshold for extreme poverty.

Jim Bob Brown probably didn't think of their desperation as he let go of that suitcase. Nor, it seems, did the government officials who pocketed its contents. But it is not mere coincidence that one of the word's most corrupt places is also one of its most polluted -- and one that, despite a wealth of oil and natural gas, can barely feed itself. If bribe money has bought anything in the Delta, it is a culture of pervasive, profound neglect.

Aerial view of Total's Amenam Kpono oil platform, 25 miles off the coast of Nigeria in the Atlantic Ocean.

A Rare Ecosystem Under Assault In satellite images of Africa's western flank, the Niger River looks like a blue artery that, after arching across 2,600 miles of Sahel, blossoms into a tangled network of smaller veins. The veins, in turn, work their way though a greenish mass before meeting the Atlantic Ocean. This is the Niger Delta. "It is a land of heat and steam... muddy rivers and wastes of quaking swamps," wrote the British novelist Harold Blindloss after traveling by steamship through the Delta during the 1890s.

About the size of Connecticut and Rhode Island combined, it is a rare ecosystem of mangrove forests that has long protected the coast from erosion and supported what is, even by African standards, an unusual diversity of marine life and other plants and animals, as well as human beings. The Ijaw, Ogoni, and Ilaje are but a few of dozens of indigenous tribal groups.

Oil spills have poisoned creeks, killing off fish and fowl. The flares, meanwhile, tower over the mangroves like giant roman candles burning day and night.

Today, both the wildlife and the people are under siege. Oil spills have poisoned creeks, killing off fish and fowl. The flares tower over the mangroves like giant roman candles burning day and night. So numerous and intense are the flares that their light is believed to disrupt the nesting patterns of nocturnal sea turtles. The smoke and soot, meanwhile, not only cause acid rain, which can kill fish lucky enough to have escaped the oil spills, but also contain a stew of toxins, including mercury, lead and benzene. Little wonder life expectancy in the Delta -- 40 years -- is seven years less than that of Nigeria as a whole.

And if all that weren't enough, there's also the dredging -- which is what oil companies do to make creeks accommodate their barges and rigs. In a federal trial in San Francisco last fall, a Chevron vice president was called to testify about the controversial practice. "In the process of dredging, yes, the mangroves would be cleared," he testified, shifting in his chair. The vice president described "a barge... with a big suction device on it, " adding, "You would suck mud out and then it would pile the mud behind it on the sides of the canal." An Ilaje elder then testified to the environmental impact. Seawater, he said, seeped into freshwater creeks, killing the plants and animals that had long sustained his people. "It led to starvation in some areas," he said.

Indeed, much of the vitality that Blindloss described a century ago -- those "quaking swamps" -- has simply disappeared. Blow up those satellite images of Africa and you'll see entire chunks of Delta mangrove forest either underwater or dried-up. A recent survey, led by the geosciences department at the University of Missouri-Kansas City, found a three percent loss of prime wilderness habitat between the mid-1980s and the beginning of this decade. At this rate, a fifth of the mangroves' historical range could be gone by 2050.

Gas flaring can been seen in the distance at the Nembe Creek flow station operated by Agip Oil.

Two Ways Corruption Hurts Society Who or what is to blame for the degradation and impoverishment of the Delta? Certainly many factors are at play, including population growth and ethnic tensions. Nigeria's ruling class, mostly Muslim, has a long history of heavy-handed rule over the predominately Christian oil-producing region, fueling on-again, off-again armed resistance.

But talk to just about anyone who knows anything about Nigeria, and one of the first words you'll hear is "corruption." To get a sense of its impact on governance, consider a basic public service such as education. The schools are "absolutely non-functional" throughout most of the Delta, says Michael Watts, a University of California-Berkeley geography professor who has studied Nigeria for three decades. "There are no teachers, no desks."

A million dollars could employ a lot of teachers, buy a lot of desks. But though it may seem like a significant sum when put in such terms, Jim Bob Brown's bribe money was really just a small part of a much larger pot, intended to curry favor with a wide range of officials. In 2006, after an investigation by the FBI, Brown, who was 45 and had worked for Willbros for nearly his entire career, pleaded guilty to violating the U.S. Foreign Corrupt Practices Act.

The most obvious way corruption hurts society is its neutralizing effect on public servants, be they police or politicians, or anyone in between.

The details of his activities emerged in legal documents for the Justice Department's criminal case, and for a related lawsuit by the U.S. Securities and Exchange Commission. Much of the money, it turned out, went to officials at the Nigerian National Petroleum Corp. to win a $388 million contract to build a natural gas pipeline. But Brown also admitted he and his co-conspirators at Willbros spread money around lower levels of government too, including tax agencies and the courts.

The most obvious way corruption hurts society is its neutralizing effect on public servants, be they police or politicians, or anyone in between. Nigerians have their own word for when that happens; those on the take are said to be "settled." Not much is known about whom Willbros was paying off -- or settling -- in the Nigerian judicial system, or why. The law under which Brown was brought to justice in this country forbids only the giving of bribes; if foreign recipients are to be punished, it must be by their own governments.

We can only imagine what Willbros was up to, then, based on the little that has been made public -- which is that the company, working on a massive construction project in an environmentally sensitive area, gave money, as the SEC put it, "in exchange for favorable treatment in pending cases."

But the other and perhaps more significant way corruption hurts is its impact on the government's bottom line -- and those teacher-less, desk-less schools only hint at the extent of the problem in Nigeria. An estimated $400 billion of the country's oil revenue has been stolen or misspent since the country's independence in 1960. That's a sum approaching all the aid the West has pumped into the whole of Sub-Saharan Africa during the same period. And while oil accounts for about 90 percent of the value of Nigeria's exports, 80 percent of that money ends up in the hands of one percent of the population, according to the World Bank.
Olusegun Obasanjo was elected president of Nigeria in 1999 on an anti-corruption platform.

These are statistics that do not go unnoticed by Nigerians. In 1999, Olusegun Obasanjo was elected president on an anti-corruption platform. "Corruption is a cancer ," says Obasanjo, who after two terms left office in 2007. "It hinders development in any country." Such talk helped get Obasanjo re-elected -- and to his credit, the president's reforms included the creation of a powerful new government agency called the Economic and Financial Crimes Commission, which soon put hundreds of people, including prominent businessmen and politicians, behind bars. But corruption was so deeply rooted, so widespread, that it was in effect a way of life, one that could not be quickly overturned. And, in fact, a bribery scheme dwarfing that of Willbros took place in part during the Obasanjo administration.

At the center of this international scandal -- for that is exactly what it would become -- was Jack Stanley, the hard-charging, heavy drinking head of KBR, to which he was appointed in 1999 by Dick Cheney when Cheney was still the chief executive of KBR's parent, Halliburton. When Nigeria needed a contractor to build a $6 billion natural gas plant on the Delta's Bonny Island, Stanley cemented his reputation as someone with an uncanny ability to win big contracts in the Third World.

Stanley, who in a Houston courtroom in September pleaded guilty to violating the Foreign Corrupt Practice Act... faces up to seven years in prison.
The intricacies and cast of characters of the deal he orchestrated are worthy of a John Le Carre novel. Yet in its essence the story, as it has been laid out in court documents, is surprisingly simple: A consortium of four companies, of which KBR was one, paid out $180 million in bribes to win the Bonny Island contract.

Stanley, who in a Houston courtroom in September pleaded guilty to violating the Foreign Corrupt Practice Act, is to be sentenced later this year. Now in his mid-60s, he faces up to seven years in prison, though this offers little solace to Nigeria.

Obasanjo, who claims he had no knowledge of what Stanley was up to until after the fact, speculates that because bribery so thoroughly compromised bidding on the Bonny Island contract, the project may have ended up costing Nigeria an extra billion dollars or so. "You can see the loss," he says, "a direct loss... to the country."

Nuhu Ribadu was a crusading prosecutor in Nigeria before an attempt on his life forced him to leave the country.

Corruption Fighter Becomes Casualty The crowning achievement of Obasanjo's reforms was the appointment of career prosecutor Nuhu Ribadu as chair of the newly created Economic and Financial Crimes Commission. Much to the surprise of many Nigerians, not to mention the outside world, the soft-spoken Ribadu, who assisted American investigators in both the Willbros and Halliburton cases, proved to be dogged in his pursuit of those involved in bribery, embezzlement and self-dealing.

A Delta governor once tried to bribe Ribadu, giving him two bags loaded down with $15 million in cash. Ribadu promptly turned the money over to the authorities and had the governor thrown in jail. And, although critics accused him of going after Obasanjo's political adversaries, among his targets was Obasanjo's own vice president, who allegedly was the intended recipient of the money found in the freezer of former Louisiana Congressman William Jefferson.

More than once, when Ribadu boarded an airplane in Nigeria, his fellow passengers rose to their feet to applaud him. He was named man-of-the-year by the Nigerian press. Unfortunately, the hope he inspired proved fleeting.

Shortly after Obasanjo left office, Ribadu was stripped of his authority; the inspector-general of police under newly elected President Umaru Yar'Adua ordered him to attend a one-year training at the National Institute for Policy and Strategic Studies. In a show of support for Ribadu, the World Bank honored him with its Outstanding Public Service award. But the gesture was of little help. After completing his training in November, the police refused to let him participate in the graduation ceremony.

Last fall, Ribadu says, he was at a gas station when a gunman in passing traffic opened fire, missing him but leaving bullet holes in his car. He has since moved to London. "When you fight corruption, it fights you back," he says matter-of-factly. Still, despite the obvious risks, he talks of returning to Nigeria and picking up where he left off. The Niger Delta -- its pollution, its poverty -- suggests just what's at stake, and why Ribadu believes he must go back. "Unless we address the problem of corruption," he says, "there is no hope, there is no future."

Spotlight: Nigerian Corruption

Thu, 23 Apr 2009 15:47:23 -0800

More on the Al-Yamamah Arms Deal

Tue, 07 Apr 2009 14:08:07 -0800
In 1985, the British and Saudi governments began negotiations on an unprecedented oil-for-arms contract that would last more than 20 years. Known as Al-Yamamah, which means "The Dove" in Arabic, the deal involved massive orders for British Tornado fighter planes, helicopters, tanks and ammunitions, most of which were built and supplied by BAE, formerly British Aerospace. In return for the arms, the Saudi's agreed to supply hundreds of thousands of barrels of oil a day to the British to finance the deal.

British Prime Minister Margaret Thatcher and Saudi Prince Bandar bin Sultan played a key role in the negotiations for the deal, which in the end totaled more than $80 billion. It was the largest arms deal in UK history.

From the start, the contract was shrouded in secrecy, and although little could be substantiated, suspicions began to surface that kickbacks and bribery were central to the deal.

The public first saw some details about the unusual structure of the deal in the early part of this decade when the non-profit group Campaign Against Arms Trade (CAAT) came across classified documents between the British and the Saudi negotiators that had been improperly archived by the British government.

Prince Bandar bin Sultan, a key negotiator in the Al-Yamamah arms deal.

Below are links to important documents in the deal.

From the beginning, the Saudi government indicated that it intended to pay for the contract in oil sales rather than in hard currency from Saudi Arabia's Ministry of Defense and Aviation budget. In this early correspondence, British negotiators admitted: "Nor have the Saudis told us yet exactly how the deal is to be financed."

In 1985, the British government and the Saudi Arabian government signed the initial Memorandum of Understanding (MOU) for the Al-Yamamah deal, but there were secret Letters of Agreement (LOA) that were attached to this MOU that have never been publicly released.

Since the oil had to be shipped out of Saudi Arabia and sold on the world market, BP and Royal Dutch Shell became part of the negotiations and were asked, with a commission, to ship the hundreds of thousands of barrels of oil per day from the Saudi peninsula and sell it on the world market. The oil companies then deposited the proceeds from the oil sale into a specially created British Ministry of Defence (MOD) account. From this account, BAE was paid for the arms and support services. It was reported in the British press and later confirmed by our reporting, that the British government took a 2 percent fee from the Al-Yamamah accounts, which amounts to close to $1.6 billion over the life of the 20-plus year contract.

According to reports in The Daily Telegraph, an audit of the Al-Yamamah account at the British Ministry of Defence, conducted by the U.K. government in 1992, was considered so secret that members of the House of Commons on the relevant oversight committee were not allowed to see it.

The Al-Yamamah deal and the sale of Saudi oil thus created a large fund of money in the British account that was separate from the normal budget of the Saudi Ministry of Defense and Aviation. And the Saudis were apparently able to request that some of these Al-Yamamah funds be used for arms purchases from other countries.

This 2004 cable from the U.S. State Department indicates that part of those Al-Yamamah funds were used to buy helicopters from France for the Saudi government. The State Department document also makes reference to overcharges, commissions and kickbacks as part of the French helicopter deal. (See page 3 of the document.)

The original deal listed the cost of each Tornado at £16.3 million. But after further talks in Saudi Arabia, the price went up to £21.5 million per aircraft, raising the price of the whole deal by £600 million.

In an interview with FRONTLINE, Louis Freeh, Prince Bandar's attorney, admitted that approximately $2 billion was sent from the Al-Yamamah account in the United Kingdom to bank accounts of the Saudi Ministry of Defense and Aviation at Riggs Bank in Washington, DC.

Prince Bandar then Saudi Ambassador to the U.S. had control over the accounts and signatory authority. Freeh claims that these monies were sent to purchase arms through the offices of BAE and the U.K. Ministry of Defence in a way that would circumvent "objection" by the U.S. Congress. Freeh did not supply any example of such a transaction.

Financing the deal with oil sales was not the only unusual feature of the contract. This correspondence toward the end of negotiations revealed that the price of the fighter planes had increased by more than 30 percent by the time terms were agreed with Prince Sultan, the Saudi's chief negotiator, in January 1986. Prince Sultan is the head of the Saudi Ministry of Defense and Aviation and is also Prince Bandar's father.

The original deal listed the cost of each Tornado at £16.3 million. But after further talks in Saudi Arabia, the price went up to £21.5 million per aircraft, raising the price of the whole deal by £600 million. One explanation for this is that the Saudi's demanded additional expensive equipment be added to the aircraft. Others concluded that the overcharge was a way of hiding kickbacks. The Arabic-language newspaper Sourakia alleged that the additional £600 million was the same amount paid in commissions to the Saudi Royal Family and intermediaries in London.

The Sourakia story was published in October 1985, just after the Al-Yamamah deal was negotiated. Shortly after, it was translated from Arabic by the British Foreign Office and forwarded to the British Ministry of Defence (MOD) with the advice that the MOD should refuse all comment if it were asked questions about the allegations of large secret commissions in the Al-Yamamah deal.

Extended Interview With Louis Freeh

Tue, 07 Apr 2009 13:39:46 -0800

As the head of his own global consulting firm, Freeh Group International, Louis Freeh has been hired by Prince Bandar as his legal representative on issues surrounding the Al-Yamamah arms deal. Lowell Bergman interviewed Louis Freeh on March 19, 2009 about allegations -- that Freeh insists are untrue -- that his client received approximately $2 billion and a wide-body Airbus 340 from arms company BAE Systems as part of the massive arms contract. Freeh finally agreed to be interviewed just weeks before our airdate, following months of requests by FRONTLINE for interviews with both Freeh and Prince Bandar.

Freeh was interviewed for the FRONTLINE film Black Money, which details the allegations of bribery leveled at BAE Systems and the Prince. This video contains extended excerpts of Bergman's interview with Freeh -- the first time anyone has spoken publicly on behalf of Prince Bandar about these allegations. Throughout this interview, there are markers referring to the footnotes below, which provide added context and corrections.

FOOTNOTE 1: Flow of Money to Riggs Bank

Over a period of 10 years, approximately $2 billion was transferred to accounts that Prince Bandar signed off on at Riggs Bank in Washington. Louis Freeh insisted that the transfers to the Saudi Ministry of Defense and Aviation (MODA) accounts at Riggs Bank, controlled by Prince Bandar, came directly from the UK Ministry of Defense (MOD). Freeh denied that the arms company, BAE Systems, had any role in disbursing funds to the accounts.

After the interview FRONTLINE continued its investigation of the flow of money to Riggs Bank and followed up with Freeh by email to clarify his statements.

Friday, March 20, 2009 To: Judges Freeh and Gene Sullivan (Freeh Group International) From: Lowell Bergman

"Our information is that the payments to the Riggs accounts was made via Lloyds, BAE's bank, and sent to Riggs Bank in Washington. These cash transfers were made every three months for more than 10 years.

Are you saying that there were no transfers via Lloyds? I believe you said that all the transfers took place directly from the [UK] MOD at the Bank of England to [Saudi] MODA accounts at Riggs.

Please let me know if our understanding differs. If so, can you share documentation of the transfers coming directly and exclusively from the Bank of England. If not, on what basis do you believe this to be true.

LB [Lowell Bergman]"

Friday Mar 20, 2009 From: Judge Gene Sullivan To: Lowell Bergman

"Louie is back on Intl travel (difficult to reach) but asked me to respond to what is the last Q for us. Louie never mentioned the 'Bank of England' in his IV so please check your transcript. Therefore we don't agree to that reference. Whatever accounts were used at whatever banks, these were intergovernmental bank account transfers--approved by the KSA [Kingdom of Saudi Arabia] MODA and the UK MOD--from UK to the KSA government ministry bank accoint [sic] pursuant to the treaty [Al-Yamamah]. BAE had nothing to do with the requests for, approvals of, decisions to transfer and move any of the Riggs funds"

FOOTNOTE 2: Personal Expenditures

When asked about what appears to be personal expenditure of Al-Yamamah money by Prince Bandar, Freeh says, "If His Majesty, the King of Saudi Arabia and the Minister of Defense and Aviation and the Minister of Oil and the Minister of Finance, if they all agree and are aware of what's being expended by whom, there can't be any foul ball called by the United States because we think they should be applying another governance method."

That is not the way the U.S. Department of Justice sees the situation. Although he would not comment on the BAE investigation, Mark Mendelsohn, the chief prosecutor for international bribery at the Department of Justice clarified U.S. anti-bribery law: "Under U.S. law, it's absolutely irrelevant whether a foreign government acknowledges awareness that one of its officials was being corrupted or even endorses or approves of the corruption. So long as the bribe payment is for a corrupt purpose and goes to personally benefit the foreign official and the other elements of the statute are satisfied we can and will bring a prosecution."

FOOTNOTE 3: Swiss Accounts

Freeh says he has not investigated the Swiss accounts that prosecutors in the United Kingdom wanted access to as part of their investigation of alleged bribes to Saudi officials by BAE Systems.

Published accounts and FRONTLINE interviews with sources in the U.K. stated that the accounts the Swiss authorities were prepared to hand over to the U.K. were accounts of BAE Systems entities registered in the British Virgin Islands. One of these companies, "Red Diamond Ltd," has allegedly been used as part of BAE's worldwide system of companies to make payments to its agents. Another one, called "Poseidon," was used for transactions related to Al-Yamamah.

The U.K. also requested accounts in the name of Panamanian companies, which are believed to be controlled by Wafic Said, a Syrian-Saudi of great wealth. Said has acknowledged in press reports that while he was not an "agent" in the Al Yamamah deal, he was involved in ancillary construction projects known as "offsets." Said has denied receiving a penny in commission from Al-Yamamah, but he added: "I have, however, advised British Aerospace in relation to the offset program, which it established as part of Al-Yamamah." Lord Timothy Bell, who is a media advisor to Said, acknowledged in an interview with FRONTLINE that his client was involved in those projects.

FOOTNOTE 4: Covert Arms Sales

Freeh says, "The way the treaty [Al-Yamamah] was set up, if the Ministry of Defense and Aviation [of Saudi Arabia] wanted to purchase U.S. arms, U.S. arms could be purchased through BAE and DESO [the UK Defence Export Services Organization], which was the U.K. Ministry that did the purchasing, and that was sort of a way to purchase arms -- transparent way to purchase arms, but in a way that did not deal with the objection of the U.S. Congress to the selling of American equipment to the Saudis." FRONTLINE was unable to find any arms deals where BAE Systems or the UK government acted in such as way as to obtain U.S. arms for Saudi Arabia in a way that "did not deal with the objection of the U.S. Congress." Freeh was asked to provide specific details of cases where U.S. arms were purchased using Al-Yamamah funds, but did not provide any.

When approached by FRONTLINE, BAE Systems denied Freeh's allegation that the company is involved as a cut out to covertly buy U.S. arms for Saudi Arabia:

"Supplies of military equipment made by BAE Systems in the performance of its obligations as a contractor to the United Kingdom government in connection with the treaty were made only following the obtaining of all requisite national and international approvals."

FRONTLINE has obtained a State Department document dated May 07, 2004, which describes the use of Al-Yamamah funds to acquire helicopters from Canada and France, but makes no reference to U.S. arms being purchased with Al-Yamamah money.

FOOTNOTE 5: Exoneration?

Freeh says that when the FBI investigated Riggs Bank accounts under the control of Prince Bandar, "...they exonerated our client, Prince Bandar and his family with respect to any money laundering or any terrorist financing, because you remember that was really the focus as to whether two individuals who were Saudis who had connections with two of the [9/11] hijackers were using any monies from those [Riggs Bank] accounts to finance it."

"It was very unusual. In the public statements what they said is they found there was no activity, in the accounts that showed any wrongdoing by my client or members of his family. It's an extraordinary conclusion to make. But the government found no money laundering and no evidence of any terrorist financing and absolved my client and his family, which is a very extraordinary result."

FRONTLINE inquired to the FBI and the U.S. Department of Justice about the "public statements" that "exonerated" Prince Bandar. The FBI responded saying it was unable to locate anything that matched what the former Director was referring to. Inquiries with the Department of Justice were met with instructions to contact the FBI. When asked to provide a copy of a statement or a private letter that may have been sent to him or his client, Mr. Freeh did not respond.

The 9/11 Commission found "no evidence that Saudi Princess Haifa al Faisal [wife of Prince Bandar] provided any funds to the [9/11] conspiracy, either directly or indirectly," but made no further reference to the Riggs Bank accounts or to accusations of money laundering.

FRONTLINE Louis Freeh Interview: Read the full transcript.

Corruption in the Crosshairs

Tue, 07 Apr 2009 10:38:57 -0800

TEXT AND RESEARCH: MATTHEW VREE, ZOE WOODCRAFT, SIRI SCHUBERT, MARLENA TELVICK, JACKIE BENNION AND SHARON TILLER. FLASH DESIGN & PRODUCTION: SAM BAILEY AND REBECCA GRAY

Bangladesh: Following the Siemens Bribery Trail

Wed, 01 Apr 2009 09:22:45 -0800

For years, corporate corruption has thrived as an open secret in this poor congested nation, a force as destructive as the cyclones that ravage the coastline and the arsenic that poisons people's drinking wells. Last month, Bangladesh's newly elected government took its first high-profile swipe at the problem.

Arafat "Koko" Rahman, the son of former Prime Minister Khaleda Zia and a prominent businessman, was formally charged with laundering nearly $2 million in kickbacks, including $180,000 from Siemens Corporation, the German electronics giant.

Arafat and his brother Tarique, although allegedly at the center of many corrupt deals in Bangladesh, were considered untouchable between 2001 and 2006, when their mother held office. The charges against Arafat Rahman are the first involving foreign bribery and could result in a jail sentence of seven years if he is found guilty.

The case highlights a determined move by Bangladesh's government to root out corruption at the highest levels, while tracing its sources through financial institutions and multinational companies abroad. In so doing, it also sheds light on the little studied dark-side of international business: the practice of foreign bribery, whereby some of the world's richest companies directly contribute to instability in the developing world by paying off corrupt governments.

"This issue of foreign companies using bribery to get contracts has been a kind of public knowledge," says Iftekhar Zaman, Executive Director of Transparency International Bangladesh, the Bangladesh chapter of the Berlin based anti-corruption watchdog. "It's a failure of the companies to oblige the rules and regulations, but it's also incumbent on the government to be able to prevent those avenues of corruption."

Siemens and its dealings with Arafat Rahman show how bribery can typically play out in Bangladesh.

Siemens and its dealings with Arafat Rahman show how bribery can typically play out in Bangladesh. Between 2004 and 2006, as mobile phone use soared in Bangladesh, Siemens was pushing for a $40 million telecom contract with the Bangladeshi government, according to a case filed by U.S. investigators against Siemens.

To outbid its competitors, it hired a Bangladeshi consultant with links to the prime minister's son, as well as a government minister and at least four others. A payment of $180,000 was arranged and sent to Arafat Rahman's Singapore bank account, according to public statements made by Siemens as well as the case filed by Bangladesh's Anti-Corruption Commission (ACC), which is tasked with investigating bribery and preparing charges.

"Over a period of time, as we were investigating some of our cases, we could see that, yes, Siemens ... was paying money to some of our people here. This was all put into a bank account in Singapore, so we had to get the cooperation of that government," says Hasan Mashhud Chowdhury, the chairman of the ACC.

Hasan Mashhud Chowdhury, chairman of Bangladesh's Anti-Corruption Commission (ACC).

It is not a problem specific to Bangladesh. Corporate foreign bribery is a thriving global business, according to studies by the World Bank, which estimates that foreign companies annually pay $1 trillion in kickbacks to corrupt government officials. Last month, as Bangladesh brought charges against Arafat Rahman, Royal Dutch Shell Corporation reported that it was under investigation by U.S. authorities over allegations that it bribed officials in Nigeria.

There is growing awareness that bribery can have a direct, destabilizing impact on countries in the developing world. In the case of Siemens, court documents revealed that the company admitted to paying bribes not only to Arafat Rahman, but to Bangladesh's former telecommunications minister.

That minister was Aminul Haque, who served in the government between 2001 and 2006. Haque, in turn, was sentenced in 2007 to 31 years in prison for patronizing the Islamic terrorist group, Jama'tul Mujahideen Bangladesh (JMB).

"Many of the [multinational companies] don't care who they're giving money to. They don't try to find out what effect it will have on the life of ordinary people."

According to cases filed by the government against Haque, the court ruled that he used JMB as a political tool to eliminate members of political opposition groups beginning in 2004. By 2005, JMB had evolved from a political group and launched a national campaign of violence that left dozens dead.

Although Haque was sentenced, he was never apprehended and remains at large. JMB, the group he supported, continues to operate underground, and is suspected of involvement in the bloody mutiny that rocked Bangladesh last month.

While there is no direct evidence showing that Siemens' bribe money went to JMB, observers in Bangladesh contend that the possibility of a link underscores the dangers of foreign corporate bribery.

"Many of the [multinational companies] don't care who they're giving money to. They don't try to find out what effect it will have on the life of ordinary people," contends Sultana Kamal, the director of Ain O Salish Kendra, a leading human rights group based in Dhaka. "They should be very careful about it."

Thanks to growing public awareness and public outrage, Bangladesh's government has finally acted with force. In the last two years, the ACC has launched hundreds of investigations into some of the most prominent ministers and businessmen in the country -- including the sons of Khaleda Zia. Both brothers were arrested in 2007, and are currently on bail as more charges are framed against them.

"To have Khaleda Zia's two sons and powerful higher ministers accused ... was really the first major cleansing process that started," says Mahfuz Anam, the editor of The Daily Star, Bangladesh's most influential English language newspaper. "Now, we are far from the end of it, but it's gotten started."

Spotlight: Siemens -- Getting Caught

Tue, 17 Mar 2009 16:24:36 -0800

The International Fight Against Bribery

Fri, 13 Mar 2009 10:36:40 -0800

You'll need Flash 9 or later to see this feature

Sweden: Uncovering the Secret Deals

Tue, 10 Mar 2009 16:02:14 -0800

More than five years ago, a team of Swedish investigative journalists got a tip from an anonymous source that there was something illegal at the heart of one of Sweden's biggest arms deals. The Swedish aerospace company, Saab (unrelated to the car manufacturer of the same name) and the British defense contractor, BAE Systems, had been negotiating to sell a number of Gripen jet fighters to the Czech Republic. Rumors of improprieties had surfaced around previous Gripen deals, but nothing had ever been proven. The source that came forward had worked on the Gripen deal in The Czech Republic, and claimed that he had intimate details of how a systematic campaign of illegal payments had been used to influence politicians.

The subsequent deal to lease Gripen jet fighters was important not only for the aircraft manufacturers, but also for the Swedish government. The Gripen project has become the largest industrial venture in Sweden, costing Swedish taxpayers an estimated $15 billion, and the government was anxious to offset some of the financial burden. With the Czech deal, it was also a chance for Sweden to break into the NATO market for the first time.

The reporters' investigation culminated in the documentary series, "Gripen: The Secret Deals," which uncovered a massive network of alleged bribes, shell corporations and secret contracts around the marketing of the Gripen aircraft. Using hidden cameras, the reporters posed as business intelligence agents and were able to capture what seems to be an on-air confirmation from Jan Kavan, a prominent Czech politician and former president of the United Nations General Assembly, describing how Czech politicians across the political spectrum had accepted bribes to approve the Gripen deal. The reporters also tracked down an array of contracts signed by the then-marketing director of Saab, which detailed multimillion dollar commissions promised to agents if the deal was successful.

When it aired in 2007, the documentary caused an international outcry and prompted prosecutors in at least seven countries to open investigations into the suspected bribery.

When it aired in 2007, the documentary caused an international outcry and prompted prosecutors in at least seven countries to open investigations into the suspected bribery. Investigations are ongoing in Sweden, the Czech Republic, Britain, South Africa, Switzerland, Austria and the United States. Last week, the international investigations yielded its first arrest. Count Alfons Mensdorff-Pouilly, a BAE lobbyist profiled in the film, was arrested in Austria for alleged money laundering and bribery in the Gripen deals.

Both SAAB and BAE Systems have denied any wrongdoing and say that they continue to cooperate with investigators. Kavan, the Czech politician who described the bribery that allegedly occurred in his country, has said that he was just passing on his personal speculations and that he has no evidence any corruption took place.

Reporters Joachim Dyfvermark, Sven Bergman and Fredrik Laurin (Laurin is interviewed in the accompanying video) won the "Stora Journalistpriset," Sweden's most prestigious journalism award, for their work on "Gripen: The Secret Deals."

PHOTO CREDIT: Peter Karlsson, Photo Copyright Gripen International

Spotlight: Gaining World Support

Sat, 07 Mar 2009 17:58:47 -0800
The United States was the first country in the world to make bribing foreign officials a crime when it passed the Foreign Corrupt Practices Act (FCPA) in 1977. But it took 20 years before other developed nations followed suit to adopt an anti-bribery convention in 1997 under the auspices of the Organization for Economic Cooperation and Development (OECD).

Why it took so long is a story that spans Watergate, the collapse of the Soviet Union and the increasing globalization of the world economy. Despite U.S. overtures to the United Nations to follow its lead, a movement to ban international bribery went nowhere. Then 11 years after the FCPA was passed, the law faced its first crisis. In 1988, under pressure from U.S. businesses, the Republican administration, under President Reagan, considered watering down the anti-bribery law arguing that it put U.S. companies at a competitive disadvantage. But instead of weakening the law, the U.S. reached out to its international competitors to find out if they were prepared to level the proverbial playing field by implementing their own anti-bribery laws. It proved to be a good time to ask.

The Eastern bloc was beginning to crumble and new markets were opening up. Businesses all over the world feared that bribery and unfair business practices would determine who could sell soft drinks to Russia or computers to Latvia. This growing unease about unfair, corrupt competition, particularly in accessing these new markets, led 37 countries, including most of the European Union, Canada, Australia and Japan, to sign the original OECD Anti-Bribery Convention, which all member countries ratified between 1999 and 2001.

Even though a broader legal framework is in place, many officials in charge of investigating international corruption cases report that enforcing the convention continues to be uneven. Japan, Canada and Britain, in particular, have been repeatedly criticized by watchdog groups for being too lax on their own corporations and their practices overseas to secure lucrative contracts. Economic powerhouses such as China and India have refused to join the convention. Despite setbacks, the U.S. Department of Justice has been aggressively pursuing more than 100 corruption cases under the FCPA, and the OECD currently has over 200 ongoing investigations worldwide.

More Indictments in KBR Bribery Scheme

Fri, 06 Mar 2009 17:51:19 -0800

Indictments against two key players in a massive bribery scheme that resulted in Kellogg Brown & Root (KBR) securing a $6 billion contract in Nigeria were unsealed Thursday in Federal District Court in Houston, Texas. The indictments are the first to be announced by the Justice Department since Albert "Jack" Stanley, the mastermind of $182 million in payments, pleaded guilty last September and agreed to cooperate with authorities.

One of those charged, Jeffrey Tesler, a British attorney, was taken into custody by the London Metropolitan Police at the request of the Department of Justice, which has asked for him to be extradited to the United States to stand trial. Tesler is identified in court documents and press reports as the agent used by Stanley to carry out the delivery of millions to Nigeria's late President Sani Abacha and other senior Nigerian officials.

Jeffrey Tesler in his London office, September 2008.

The other defendant is Wojciech Chodan, also known as William Chaudan. He worked as a salesman and consultant to KBR when Stanley was the CEO and the company was a subsidiary of the Halliburton Corporation. Like Tesler, Chodan's name has also been linked in the past to the scheme. A resident of Maidenhead, west of London, Chodan is believed to be still at large.

According to the unsealed indictment, Tesler and Chodan are charged with one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and 10 counts of violating the FCPA, the 1970s'-era law that forbids paying anything of value to retain or obtain business overseas.

Included in the indictment are allegations that Telser, using a subcontractor, delivered a briefcase containing $1 million in cash to a Nigerian National Petroleum Corporation official.

Both have been implicated for their alleged participation in a decade-long scheme to bribe Nigerian government officials to obtain engineering, procurement and construction (EPC) contracts in the construction of the Bonny Island liquefied natural gas facility beginning in the 1990s.

Included in the indictment are allegations that Telser, using a subcontractor, delivered a pilot's briefcase containing $1 million worth of one-hundred dollar bills to a Nigerian National Petroleum Corporation official.

Less than a year later, a vehicle containing $500,000 in Nigerian currency was left in the parking lot of a hotel in Abuja, Nigeria, for a government official to "remove."

If convicted on all charges, each defendant faces a maximum prison sentence of 55 years and the forfeiture of $130 million plus interest.

Related Story

KBR Hit With Record Bribery Fine
Former Halliburton subsidiary agrees to pay $579 million
Read more about the KBR case, the culmination of a five year multi-jurisdictional investigation that resulted in KBR paying a record fine of $579 million.

Bangladesh: The Mystery of a Mutiny

Fri, 06 Mar 2009 12:36:28 -0800

David Montero is no stranger to Bangladesh -- he lived and reported there between 2004 and 2005. But he had only been back in the country for a few hours earlier this week when a full-scale mutiny by a branch of the Army brought the already chaotic capital of Dhaka to the verge of civil war.

Montero was in Bangladesh to report for FRONTLINE/World on corruption and bribery, a problem that he describes as epidemic there. Why rank and file soldiers of the Bangladesh Rifles went on a killing spree that left at least 56 of their senior officers dead, many hastily buried in mass graves, is still shrouded in mystery. But as Montero explains over webcam from the newsroom of The Daily Star in Dhaka, resentment over the alleged lavish and corrupt lifestyles enjoyed by the Rifles' leaders was at the root of the violence.

Others reasons are surfacing as to why this happened, says Montero, who describes a nation shocked and perplexed by the attack.

Spotlight: The Victims of Corruption

Tue, 24 Feb 2009 15:29:16 -0800
According to a 2004 study by the World Bank Institute, $1 trillion is paid every year in bribes worldwide. Many agree that the victims of bribery are often those living in poverty in the developing world, in countries rich in resources but dominated by corrupt governments. While the vast majority of these citizens remain very poor, often living on $1 a day, their elected officials accumulate enormous personal wealth, taking millions in bribes from corporations looking to secure lucrative contracts. Research by Transparency International shows that bribery not only stymies development, it also impacts health services, literacy rates and the environment. In the above video clip, experts talk about some of the countries hardest hit by a culture of corruption.

Spotlight: History of the FCPA

Fri, 13 Feb 2009 10:34:01 -0800
Up until 1977, no country in the world considered the bribing of foreign officials for business purposes to be illegal. That changed with the passage of the Foreign Corrupt Practices Act, when the United States became the first country to explicitly outlaw the practice.

It all started in the wake of the Watergate scandal, when an investigation into illegal contributions to President Nixon's re-election campaign lead to the discovery of cash slush funds in hundreds of U.S. corporations. The Securities and Exchange Commission (SEC), which regulates publicly traded companies, revealed that 400 American companies had spent hundreds of millions of dollars bribing everyone from prime ministers to police overseas.

It turned out, however, that bribing foreign government officials to obtain or retain business was not illegal. In some European countries, a foreign bribe could be deducted from corporate tax returns as an expense. It was simply considered the cost of doing business in the international market.

Despite protests from the business community that this would put U.S. companies at a competitive disadvantage, in late 1977, Congress passed the Foreign Corrupt Practices Act. President Carter signed it into law.

The FCPA makes it illegal for any company or person in the U.S. to bribe or even offer to bribe a foreign official with anything of value to gain or retain business. The law also gives the Justice Department the ability to prosecute a company -- domestic or foreign -- that uses the U.S. financial system in any way in furtherance of a bribe, even if the infraction takes place entirely outside of territorial U.S. The law targets only those who give bribes, not the foreign officials who take them.

It was more than 20 years before other countries followed suit and outlawed foreign bribery through the creation of the Organization for Economic Cooperation and Development's Anti-Bribery Convention. Today, 37 countries have ratified the OECD agreement. There are currently 245 active cases being pursued worldwide.

At Siemens, Bribery Was Just a Line Item

Fri, 13 Feb 2009 08:46:34 -0800

Editor's Note: This reporting is the result of a joint investigation of international bribery by PBS FRONTLINE, ProPublica and the Investigative Reporting Program at UC Berkeley. A FRONTLINE documentary, Black Money, will air on April 7, 2009 at 9 P.M. ET on PBS.

This story was published by The New York Times on Sunday, Dec. 21, 2008.

MUNICH - Reinhard Siekaczek was half asleep in bed when his doorbell rang here early one morning two years ago.

Still in his pajamas, he peeked out his bedroom window, hurried downstairs and flung open the front door. Standing before him in the cool, crisp dark were six German police officers and a prosecutor. They held a warrant for his arrest.

At that moment, Mr. Siekaczek, a stout, graying former accountant for Siemens A.G., the German engineering giant, knew that his secret life had ended.

"I know what this is about," Mr. Siekaczek told the officers crowded around his door. "I have been expecting you."

To understand how Siemens, one of the world's biggest companies, last week ended up paying $1.6 billion in the largest fine for bribery in modern corporate history, it's worth delving into Mr. Siekaczek's unusual journey.

A former midlevel executive at Siemens, he was one of several people who arranged a torrent of payments that eventually streamed to well-placed officials around the globe, from Vietnam to Venezuela and from Italy to Israel, according to interviews with Mr. Siekaczek and court records in Germany and the United States.

What is striking about Mr. Siekaczek's and prosecutors' accounts of those dealings, which flowed through a web of secret bank accounts and shadowy consultants, is how entrenched corruption had become at a sprawling, sophisticated corporation that externally embraced the nostrums of a transparent global marketplace built on legitimate transactions.

Mr. Siekaczek (pronounced SEE-kah-chek) says that from 2002 to 2006 he oversaw an annual bribery budget of about $40 million to $50 million at Siemens. Company managers and sales staff used the slush fund to cozy up to corrupt government officials worldwide.

Mr. Siekaczek says that from 2002 to 2006 he oversaw an annual bribery budget of about $40 million to $50 million at Siemens.

The payments, he says, were vital to maintaining the competitiveness of Siemens overseas, particularly in his subsidiary, which sold telecommunications equipment. "It was about keeping the business unit alive and not jeopardizing thousands of jobs overnight," he said in an interview.

Siemens is hardly the only corporate giant caught in prosecutors' cross hairs.

Three decades after Congress passed a law barring American companies from paying bribes to secure foreign business, law enforcement authorities around the world are bearing down on major enterprises like Daimler and Johnson & Johnson, with scores of cases now under investigation. Both companies declined comment, citing continuing investigations.

Albert J. Stanley, a legendary figure in the oil patch and the former chief executive of the KBR subsidiary of Halliburton, recently pleaded guilty to charges of paying bribes and skimming millions for himself. More charges are coming in that case, officials say.

But the Siemens case is notable for its breadth, the sums of money involved, and the raw organizational zeal with which the company deployed bribes to secure contracts. It is also a model of something that was once extremely rare: cross-border cooperation among law enforcement officials.

Reinhard Siekaczek was interviewed by PBS FRONTLINE in Munich in September 2008.

German prosecutors initially opened the Siemens case in 2005. American authorities became involved in 2006 because the company's shares are traded on the New York Stock Exchange.

In its settlement last week with the Justice Department and the Securities and Exchange Commission, Siemens pleaded guilty to violating accounting provisions of the Foreign Corrupt Practices Act, which outlaws bribery abroad.

Although court documents are salted throughout with the word "bribes," the Justice Department allowed Siemens to plead to accounting violations because it cooperated with the investigation and because pleading to bribery violations would have barred Siemens from bidding on government contracts in the United States. Siemens doesn't dispute the government's account of its actions.

Matthew W. Friedrich, the acting chief of the Justice Department's criminal division, called corruption at Siemens "systematic and widespread." Linda C. Thomsen, the S.E.C.'s enforcement director, said it was "egregious and brazen." Joseph Persichini Jr., the director of the F.B.I.'s Washington field office, which led the investigation, called it "massive, willful and carefully orchestrated."

Mr. Siekaczek's telecommunications unit was awash in easy money. It paid $5 million in bribes to win a mobile phone contract in Bangladesh, to the son of the prime minister at the time and other senior officials, according to court documents. Mr. Siekaczek's group also made $12.7 million in payments to senior officials in Nigeria for government contracts.

In Argentina, a different Siemens subsidiary paid at least $40 million in bribes to win a $1 billion contract to produce national identity cards. In Israel, the company provided $20 million to senior government officials to build power plants. In Venezuela, it was $16 million for urban rail lines. In China, $14 million for medical equipment. And in Iraq, $1.7 million to Saddam Hussein and his cronies.

The bribes left behind angry competitors who were shut out of contracts and local residents in poor countries who, because of rigged deals, paid too much for necessities like roads, power plants and hospitals, prosecutors said.

Because government contracting is an opaque process and losers don't typically file formal protests, it's difficult to know the identity of competitors who lost out to Siemens. Companies in the United States have long complained, however, that they face an uneven playing field competing overseas.

All told, Siemens will pay more than $2.6 billion to clear its name: $1.6 billion in fines and fees in Germany and the United States and more than $1 billion for internal investigations and reforms.

Ben W. Heineman Jr., a former general counsel at General Electric and a member of the American chapter of Transparency International, a nonprofit group that tracks corruption, says the enforcement of some antibribery conventions still remains scattershot. "Until you have energetic enforcement by the developed-world nations, you won't get strong antibribery programs or high-integrity corporate culture," he said.

Afghanistan, Haiti, Iraq, Myanmar and Somalia are the five countries where corporate bribery is most common, according to Transparency International. The S.E.C. complaint said Siemens paid its heftiest bribes in China, Russia, Argentina, Israel and Venezuela.

"Crimes of official corruption threaten the integrity of the global marketplace and undermine the rule of law in the host countries," said Lori Weinstein, the Justice Department prosecutor who oversaw the Siemens case.

All told, Siemens will pay more than $2.6 billion to clear its name: $1.6 billion in fines and fees in Germany and the United States and more than $1 billion for internal investigations and reforms.

Siemens's general counsel, Peter Y. Solmssen, in an interview outside a marble-lined courtroom in Washington, said the company acknowledged that bribes were at the heart of the case. "This is the end of a difficult chapter in the company's history," he said. "We're glad to get it behind us."

Mr. Siekaczek, who cooperated with German authorities after his arrest in 2006, has already been sentenced in Germany to two years' probation and a $150,000 fine. During a lengthy interview in Munich, a few blocks from the Siemens world headquarters, he provided an insider's account of corruption at the company. The interview was his first with English-language news outlets.

"I would never have thought I'd go to jail for my company," Mr. Siekaczek said. "Sure, we joked about it, but we thought if our actions ever came to light, we'd all go together and there would be enough people to play a game of cards."

Mr. Siekaczek isn't a stereotype of a white-collar villain. There are no Ferraris in his driveway, or villas in Monaco. He dresses in jeans, loafers and leather jackets. With white hair and gold-rimmed glasses, he passes for a kindly grandfather -- albeit one who can discuss the advantages of offshore bank accounts as easily as last night's soccer match.

Siemens began bribing long before Mr. Siekaczek applied his accounting skills to the task of organizing the payments.

World War II left the company shattered, its factories bombed and its trademark patents confiscated, according to American prosecutors. The company turned to markets in less developed countries to compete, and bribery became a reliable and ubiquitous sales technique.

"Bribery was Siemens's business model," said Uwe Dolata, the spokesman for the association of federal criminal investigators in Germany. "Siemens had institutionalized corruption."

Before 1999, bribes were deductible as business expenses under the German tax code, and paying off a foreign official was not a criminal offense.

Before 1999, bribes were deductible as business expenses under the German tax code, and paying off a foreign official was not a criminal offense. In such an environment, Siemens officials subscribed to a straightforward rule in pursuing business abroad, according to one former executive. They played by local rules.

Inside Siemens, bribes were referred to as "NA" -- a German abbreviation for the phrase "nutzliche Aufwendungen," which means "useful money." Siemens bribed wherever executives felt the money was needed, paying off officials not only in countries known for government corruption, like Nigeria, but also in countries with reputations for transparency, like Norway, according to court records.

In February 1999, Germany joined the international convention banning foreign bribery, a pact signed by most of the world's industrial nations. By 2000, authorities in Austria and Switzerland were suspicious of millions of dollars of Siemens payments flowing to offshore bank accounts, according to court records.

Rather than comply with the law, Siemens managers created a "paper program," a toothless internal system that did little to punish wrongdoers, according to court documents.

Mr. Siekaczek's business unit was one of the most egregious offenders. Court documents show that the telecommunications unit paid more than $800 million of the $1.4 billion in illegal payments that Siemens made from 2001 to 2007. Managers in the telecommunications group decided to deal with the possibility of a crackdown by making its bribery procedures more difficult to detect.

So, on one winter evening in late 2002, five executives from the telecommunications group met for dinner at a traditional Bavarian restaurant in a Munich suburb. Surrounded by dark wood panels and posters celebrating German engineering, the group discussed how to better disguise its payments, while making sure that employees didn't pocket the money, Mr. Siekaczek said.

"It had nothing to do with being law-abiding, because we all knew what we did was unlawful." Mr. Siekaczek said. "What mattered here was that the person put in charge was stable and wouldn't go astray."

To handle the business side of bribery, the executives turned to Mr. Siekaczek, a man renowned within the company for his personal honesty, his deep company loyalty -- and his experiences in the shadowy world of illegal bribery.

"It had nothing to do with being law-abiding, because we all knew what we did was unlawful." Mr. Siekaczek said. "What mattered here was that the person put in charge was stable and wouldn't go astray."

Although Mr. Siekaczek was reluctant to take the job offered that night, he justified it as economic necessity. If Siemens didn't pay bribes, it would lose contracts and its employees might lose their jobs.

"We thought we had to do it," Mr. Siekaczek said. "Otherwise, we'd ruin the company."

Indeed, he considers his personal probity a point of honor. He describes himself as "the man in the middle," "the banker" or, with tongue in cheek, "the master of disaster." But, he said, he never set up a bribe. Nor did he directly hand over money to a corrupt official.

German prosecutors say they have no evidence that he personally enriched himself, though German documents show that Mr. Siekaczek oversaw the transfer of some $65 million through hard-to-trace offshore bank accounts.

"I was not the man responsible for bribery," he said. "I organized the cash."

Mr. Siekaczek set things in motion by moving money out of accounts in Austria to Liechtenstein and Switzerland, where bank secrecy laws provided greater cover and anonymity. He said he also reached out to a trustee in Switzerland who set up front companies to conceal money trails from Siemens to offshore bank accounts in Dubai and the British Virgin Islands.

Each year, Mr. Siekaczek said, managers in his unit set aside a budget of about $40 million to $50 million for the payment of bribes. For Greece alone, Siemens budgeted $10 million to $15 million a year. Bribes were as high as 40 percent of the contract cost in especially corrupt countries. Typically, amounts ranged from 5 percent to 6 percent of a contract's value.

The most common method of bribery involved hiring an outside consultant to help "win" a contract. This was typically a local resident with ties to ruling leaders. Siemens paid a fee to the consultant, who in turn delivered the cash to the ultimate recipient.

Siemens has acknowledged having more than 2,700 business consultant agreements, so-called B.C.A.'s, worldwide. Those consultants were at the heart of the bribery scheme, sending millions to government officials.

Mr. Siekaczek was painfully aware that he was acting illegally. To protect evidence that he didn't act alone, he and a colleague began copying documents stored in a basement at Siemens's headquarters in Munich that detailed the payments. He eventually stashed about three dozen folders in a secret hiding spot.

In 2004, Siemens executives told him that he had to sign a document stating he had followed the company's compliance rules. Reluctantly, he signed, but he quit soon after. He continued to work for Siemens as a consultant before finally resigning in 2006. As legal pressure mounted, he heard rumors that Siemens was setting him up for a fall.

The Siemens scheme began to collapse when investigators in several countries began examining suspicious transactions.

"On the inside, I was deeply disappointed. But I told myself that people were going to be surprised when their plan failed," Mr. Siekaczek recalled. "It wasn't going to be possible to make me the only one guilty because dozens of people in the business unit were involved. Nobody was going to believe that one person did this on his own."

The Siemens scheme began to collapse when investigators in several countries began examining suspicious transactions. Prosecutors in Italy, Liechtenstein and Switzerland sent requests for help to counterparts in Germany, providing lists of suspect Siemens employees.

German officials then decided to act in one simultaneous raid.
The police knocked on Mr. Siekaczek's door on the morning of Nov. 15, 2006. Some 200 other officers were also sweeping across Germany, into Siemens's headquarters in Munich and the homes of several executives.

In addition to Mr. Siekaczek's detailed payment records, investigators secured five terabytes of data from Siemens's offices -- a mother lode of information equivalent to five million books. Mr. Siekaczek turned out to be one of the biggest prizes. After calling his lawyer, he immediately announced that he would cooperate.

Officials in the United States began investigating the case shortly after the raids became public. Knowing that it faced steep fines unless it cooperated, Siemens hired an American law firm, Debevoise & Plimpton, to conduct an internal investigation and to work with federal investigators.

As German and American investigators worked together to develop leads, Debevoise and its partners dedicated more than 300 lawyers, forensic analysts and staff members to untangle thousands of payments across the globe, according to the court records. American investigators and the Debevoise lawyers conducted more than 1,700 interviews in 34 countries. They collected more than 100 million documents, creating special facilities in China and Germany to house records from that single investigation. Debevoise and an outside auditor racked up 1.5 million billable hours, according to court documents. Siemens has said that the internal inquiry and related restructurings have cost it more than $1 billion.

Siemens worked hard to purge the company of some senior managers and to reform company policies... Klaus Kleinfeld, the company's C.E.O., resigned in April 2007.

Siemens officials "made it crystal clear that they wanted us to get to the bottom of this and follow it wherever the evidence led," said Bruce E. Yannett, a Debevoise partner.

At the same time, Siemens worked hard to purge the company of some senior managers and to reform company policies. Several senior managers have been arrested. Klaus Kleinfeld, the company's C.E.O., resigned in April 2007. He has denied wrongdoing and is now head of Alcoa, the aluminum giant. Alcoa said that the company fully supports Mr. Kleinfeld and declined to comment further.

Last year, Siemens said in S.E.C. filings that it had discovered evidence that former officials had misappropriated funds and abused their authority. In August, Siemens said it seeks to recover monetary damages from 11 former board members for activities related to the bribery scheme. Negotiations on that matter are continuing.

Earlier this year, Siemens's current chief executive, Peter Loscher, vowed to make Siemens "state of the art" in anticorruption measures.

"Operational excellence and ethical behavior are not a contradiction of terms," the company said in a statement. "We must get the best business -- and the clean business."

Siemens still faces legal uncertainties. The Justice Department and German officials said that investigations were continuing and that current and former company officials might face prosecution.

Legal experts say Siemens is the latest in a string of high-profile cases that are changing attitudes about corruption. Still, they said, much work remains.

"I am not saying the fight against bribing foreign public officials is a fight full of roses and victories," said Nicola Bonucci, the director of legal affairs for the Organization for Economic Cooperation and Development, which is based in Paris and monitors the global economy. "But I am convinced that it is something more and more people are taking seriously."

For his part, Mr. Siekaczek is uncertain about the impact of the Siemens case. After all, he said, bribery and corruption are still widespread.

"People will only say about Siemens that they were unlucky and that they broke the 11th Commandment," he said. "The 11th Commandment is: 'Dont get caught.'"

This article is a joint report by ProPublica, PBS FRONTLINE and The New York Times.

KBR Hit With Record Bribery Fine

Thu, 12 Feb 2009 18:40:01 -0800

After five years of multi-jurisdictional investigations, the U.S. Department of Justice announced on Feb. 11 that Kellogg, Brown, and Root (KBR) - until recently a subsidiary of the Halliburton Corporation - agreed to pay a total of $579 million in fines for their part in a decade-long scheme to bribe government officials in Nigeria in exchange for construction contracts.

The fine is the largest ever for a U.S. company under the Foreign Corrupt Practices Act (FCPA), which forbids the bribing of foreign government officials to obtain or retain business overseas. It is in fact more than ten times the previous record bribery fine for a U.S. corporation -- $44 million paid by Baker Hughes in 2007.

KBR entered guilty pleas to a five-count criminal information in federal court in Houston, Texas, and agreed to pay $402 million in criminal fines.

KBR entered guilty pleas to a five-count criminal information in federal court in Houston, Texas, and agreed to pay $402 million in criminal fines. (KBR Inc. and Halliburton jointly agreed to pay $177 million in forfeited profits to the SEC in a concurrent civil action without admitting wrongdoing.) According to the Justice Department, KBR also agreed to cooperate with the Department in its ongoing investigations.

The plea is the partial culmination of no less than five international investigations, including French, American, Swiss, Nigerian and British authorities who have spent years unwrapping what happened behind the scenes of one of the most expensive construction projects in African history.

The guilty pleas come two weeks after Halliburton first announced in a press release that it expected to pay a settlement of more than half a billion dollars.

PBS FRONTLINE reporter Lowell Bergman spoke with NPR's All Things Considered the day of Halliburton's initial statement to discuss the settlement, an interview available online.

The settlement stems from a $180 million bribery scheme orchestrated by Albert "Jack" Stanley, the former CEO and Chairman of KBR, as first revealed in a joint PBS FRONTLINE/ProPublica report last year. Mr. Stanley's sentencing is scheduled for May 6, 2009.

The bribes were paid to well-placed officials in the Nigerian government from 1995 until 2004, and resulted in KBR and its partners winning contracts to build liquefied natural gas facilities on Bonny Island, Nigeria - contracts valued at more than $6 billion.

Former Nigerian president Olusegun Obasanjo, who was in power from 1999 until 2007, acknowledges that corruption is endemic in his country, but denies receiving any bribe money himself. Obasangjo told FRONTLINE he welcomes the Justice Department's investigations. "The fact a country like the United States of America is investigating the corruption deals that took place in Nigeria gives confidence to Nigerians who want to fight corruption that they are not doing it alone," he said.

Obasanjo believes the Nigerian people are the real victims of corporate corruption and objects to the Halliburton settlement being collected by the U.S. Treasury. "I believe it should go to Nigeria. We have a saying in my part of the world: if you lose property and cry out and somebody chases the robber and gets the property, he doesn't appropriate that property to himself."

Editor's Note: This report is part of a year-long investigation of international bribery by PBS FRONTLINE and the Investigative Reporting Program at the UC Berkeley Graduate School of Journalism. A documentary will air on FRONTLINE on April 7, 2009 at 9 P.M. ET on PBS.

Portrait of a Whistleblower

Wed, 11 Feb 2009 19:21:10 -0800

In 2003, Per Yngve Monsen, chief-controller at Siemens Business Services in Norway, noticed some irregularities in the invoices Siemens sent to the Norwegian Department of Defense as part of a large contract for a communications system.

Monsen detected an extra $6 million on the bills for the contract that didn't correspond to any of the services provided. He alerted his superiors in Norway but was told not to worry. Frustrated by their lack of interest in what appeared to be fraud, Monsen sent the documents anonymously to Siemens' headquarters in Germany.

Rather than correct the error, the company allegedly intimidated Monsen and eventually dismissed him. But Monsen's disclosures ultimately led Norwegian prosecutors to investigate Siemens and their Norwegian Defense Department contacts. In 2005, Siemens was prosecuted in Norway and ordered to pay Monsen approximately $240,000 for wrongful termination, in addition to a $1.6 million fine to the government and $19.5 million back to the Norwegian Army.

For Siemens, the Monsen case was only one in a series of allegations of bribery and corrupt practices around the world. By December 2008, Siemens agreed to pay a record total of $1.6 billion in fines in the U.S. and Germany after law enforcement agencies in both countries uncovered a network of illegal payments to officials in Italy, Venezuela, Bangladesh and Nigeria, among others.

To read the verdict from Per Monsen's suit against Siemens, as translated from Norwegian by Elisabeth Undall Styren, click here (PDF).

RELATED STORY

At Siemens, Bribery Was Just a Line Item
The unusual journey of Reinhard Siekaczek, a former midlevel executive at the German engineering giant Siemens, helps explain how the company ended up paying $1.6 billion in the largest fine for bribery in modern corporate history.

U.S. Targets Overseas Bribery

Tue, 10 Feb 2009 15:34:35 -0800

In the world of Big Oil, Albert "Jack" Stanley was legendary for winning billion-dollar contracts in third world countries, the Halliburton executive who knew all the secrets of deals in places like Malaysia, Egypt and Yemen.

Albert "Jack" Stanley

In the wake of his admission in a guilty plea (PDF) last September that he resorted to bribes, kickbacks and high-level corruption to secure deals in Nigeria, however, Stanley now lies at the center of a widening scandal in the oil industry that has implications for corporations and governments across the globe.

Stanley's case is the first in what federal officials believe will be a string of indictments in coming months against U.S. corporate executives who have participated in bribing foreign officials in recent years.

For the full story, produced in partnership with FRONTLINE, visit ProPublica online. The story first appeared on MSN Money.