Nigerian firm owned by Buhari’s billionaire in-law named in UK criminal conviction

Two former top executives of energy firm, Afren, were on Wednesday
convicted after they were found guilty of money laundering offences in
the United Kingdom.

Osman Shahenshah and Shahid Ullah were found guilty of fraud and money
laundering offences from which prosecutors said they personally received
more than $17 million in a case involving Oriental Energy, founded by
Nigerian billionaire oil magnate Muhammadu Indimi.

Prosecutors said Mr Shahenshah, 55, the former chief executive of Afren
and Mr Ullah, 58, the oil company’s Texas-based former chief operating
officer, laundered $45 million by deceiving the Afren Board into
agreeing a $300 million business deal.

Following a shareholder revolt which objected to their £6.6 million and
£3.8 million salary packages and faced with the possibility of lower
remuneration in future, the two hatched a fraudulent scheme to secretly
increase their pay

Details seen by PREMIUM TIMES from the U.K Serious Fraud Office (SFO)
showed that Messrs Shahenshah and Ullah created a side deal with one of
Afren’s Nigerian oil partners, Oriental Energy, that would allow them to
benefit from payments Afren would make.

The men recommended a transaction to the Afren Board, who then approved
payments of hundreds of millions of dollars without knowing that Messrs
Shahenshah and Ullah stood to personally benefit. The transaction was
claimed to be necessary to maintain the business partnership, but the
fact that Messrs Shahenshah and Ullah stood to benefit personally
remained hidden.

In his comments, Lisa Osofsky, Director of the Serious Fraud Office, said greed motivated the crime.

“Osman Shahenshah and Shahid Ullah failed in their duties as company
directors, abused their positions and lied to their board,” he said.

“Instead of acting in their company’s best interests, they used Afren
like a personal bank account to fund an illicit deal, with no regard for
the consequences.

“Fraud corrodes confidence, undermines trust and damages the reputation
of the UK at home and abroad. It is our mission to bring those
committing this crime to justice.”

Details showed that the criminal investigation into the former CEO and
COO of the collapsed oil and gas exploration company began in June 2015
following a self-report by the company, with the defendants charged with
four offences in September last year.

The SFO said Messrs Shahenshah and Ullah recommended that the Afren
Board agree to a $300 million payment to Oriental Energy Resources Ltd,
the company’s oil field partner in Nigeria. But SFO said that unknown to
the Afren board, Messrs Shahenshah and Ullah had struck a side deal
with Oriental which led to 15 per cent of the $300 million was then paid
out to a Caribbean shell company controlled by the defendants. The men
then used the $45 million to purchase luxury properties in Mustique and
the British Virgin Islands.

The UK prosecutors said a smaller portion of the $45 million laundered
was split between Oriental employees and a close network of Afren staff
dubbed ‘The A Team’.

Oriental’s Position

In 2014, Afren dismissed the two officials after an independent review
by law firm Willkie Farr & Gallagher LP (WFG) alleged that the duo
received more than $17 million in unauthorised payments from Oriental,
its Nigerian joint-venture partner and 60 percent equity owner operator
of the Ebok assets, offshore Nigeria.

In the law firm review, WFG alleged that Ntiti is owned and controlled
by Messrs Shahenshah and Ullah, and that they had used the vehicle to
pay special bonuses to themselves and other Afren employees.

But Oriental in its reaction dismissed allegations of unauthorised payments made to its employees.

Earlier in 2012, the company said, Oriental and Afren initially entered
into the Oriental Ebok Forward Sale of Crude Oil Agreement. Through the
deal, Oriental said it agreed to sell approximately one million barrels
of its future oil production to Afren thereby permitting Afren to book
those reserves in 2012. The reason the $100 million payment to Oriental
was included in Afren’s balance sheet for 31 December 2012 under the
line “Prepayment and Advances to Partners” is because it was a
prepayment for Oriental’s future oil production, it said.

The company argued that in October 2013, it entered into an agreement
with NTITI, the Oil Field Development Optimization Services Agreement,
represented by senior executives of the Ebok Joint Operating Team

The statement by Amina Indimi, the company’s media contact, added that
there was an agreement to pay 15 per cent of the cash flows from its
joint venture with Afren into a special purpose vehicle called Ntiti
BVI, which was intended to reward and retain key employees connected to
the project.

“Under the Optimisation Agreement Oriental agreed to pay up to 15% of
its annual net Ebok Profit Oil proceeds to NTITI for the purpose of
providing incentive compensation and retention of key employees who had
proven themselves to be essential members of the Ebok JOT, a group
reporting to the Ebok Operating Committee and comprised of employees
seconded by both Oriental and Afren, as provided by the JOA,” the
company said in a press statement.

“The Optimisation Agreement provided financial compensation to select
key employees of both companies upon attainment of annual performance
goals set by the Ebok Operating Committee. Oriental had every reason to
believe that the Optimisation Agreement had been disclosed, at least in
conceptual form, to members of the Afren Board.

“Oriental utterly refutes Afren’s use of the term “ostensibly” in
describing the intent of the Optimisation Agreement. It was clear to
everyone privy to the Optimisation Agreement that its intent and
anticipated effect in rewarding and retaining key employees of the
Project was in fact the sole purpose of that Agreement and would be
wholly to the benefit of the Ebok Joint Venture participants, Afren and
Oriental equally.”

Afren’s troubled history

Afren Plc is an oil company in which a former Nigerian oil minister,
Rilwanu Lukman, was a former chairman and founder. Mr Lukman, who served
under late President Umaru Yar’adua, died in July 2014.

When he held sway as minister, Mr Lukman was exposed as having a stake
in the company while also supervising the oil ministry, in a clear case
of conflict of interest. The defunct 234NEXT newspaper ran series of
stories on the scandal.

Reports said the company owns subsidiaries in various African countries of which Nigeria is one of them.

The major owners of Afren are various institutional investors and mostly
banking and asset management groups, quoted on the London Stock
Exchange as AFR. The company, a British firm, operates in Nigeria
through its Nigerian subsidiary.

JP Morgan Asset Management Holdings, Blackrock, HSBC and AXA are said to own shares in the company, including other banks.

Alongside Mr Lukman, Constantine Ogunbiyi and Egbert Imomoh are two
other individuals believed to have ownership stake in the firm.

The company has since gone into receivership.

On Wednesday, Messrs Shahenshah and Ullah were found not guilty on a
separate charge relating to a management buyout of another of Afren’s
business partners.

But in a detailed disclosure seen by PREMIUM TIMES, they were both found
guilty of one count of fraud by abuse of position, contrary to sections
1 and 4 of the Fraud Act 2006; one count of money laundering, contrary
to section 328 of the Proceeds of Crime Act 2002; and one count of money
laundering, contrary to section 329 of the Proceeds of Crime Act 2002.

They were acquitted, however, on one count of fraud by abuse of
position, contrary to sections 1 and 4 of the Fraud Act 2006 and the SFO
said sentencing has been scheduled at Southwark Crown Court for Monday
29 October at 10.00am.

Oriental Energy

Oriental Energy Resources Limited, according to details on its website,
was founded by the Chairman, Mr Indimi, in 1990. In September of that
year, the company was awarded OPL 224 by the Federal Government of
Nigeria, with a mandate requirement to acquire a minimum of up to 1000
km of seismic data and to drill at least three exploratory wells. Work
began on OPL 224 in 1991 as the company entered into a Technical
Services Agreement with DuPont Nigeria Ltd, acquired the committed 2D
seismic survey as well as drilled four wells including the Ufon
discovery well. This continued until the Nigerian Department of
Petroleum Resources gave an approval to convert OPL 224 to OML 115 on 20
May 1999, as a result of the successful work done on the Block.

In early 2000s, the growth of Oriental Energy proceeded quickly. Ebok
marginal field (May 2007) and Okwok marginal field (2006) were awarded
to Oriental Energy Resources Limited from ExxonMobil’s OML 67, through a
Joint Venture Agreement (JVA) between the Nigerian government and
ExxonMobil under the Marginal Fields Scheme, as a compensation for the
loss of acreage to ExxonMobil Equatorial Guinea.

The company said it had had strategic alliances with Addax Petroleum
(Okwok), Nexen E&P Services Nigeria Ltd. (OML 115), and Energy
Equity Resources Oil & Gas (OML 115).

In 2008, Oriental Energy announced its Technical Services Agreement with
Afren Energy Resources to appraise the Ebok Field and the partnership
expanded with Afren signing a JVA with Oriental Energy and Addax for the
development of Okwok (2009), as well as Afren signing a JVA with
Oriental Energy and EER for the exploration and appraisal of OML 115
(2010). The company says it is currently producing an average of 19, 000
barrels of oil per day from 27 producer wells and has produced over 60
MMbbls from inception to date.

The company’s chairman, Mr Indimi, is in-law to President Muhammadu
Buhari. In 2016, Mr Buhari’s daughter, Zahra, got married to Mr Indimi’s
son, Ahmed Indimi.

Following the conviction of the two officials, it is unclear whether Mr
Indimi’s Oriental Energy has any case to answer in the deal. The oil
firm’s official contact could not be immediately reached Wednesday

It is however unclear whether the case is on the radar of Nigeria’s
anti-graft agencies. PREMIUM TIMES’ efforts to reach the spokesperson of
the Economic and Financial Crimes Commission, EFCC, also proved
abortive Wednesday night.

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