|South Africa link to US bribes scandal|
25 September 2007 11:59 - Mail & Guardian
A little-known South African firm that once had a shot at the oil sector big league has found itself embroiled in one of the United States’s most sensational corruption trials.
Procura Financial Consultants, effectively dormant now, was a close corporation owned by five friends. It won, but then lost, preferential rights to some of West Africa’s most promising oil acreage, potentially worth billions.
Now a 2002 agreement between Procura and a brother of US congressman William Jefferson is important evidence in the congressman’s pending corruption trial.
The Jefferson affair has grabbed headlines in the US, not unlike those attracted locally by Jacob Zuma. A Louisiana Democrat, Jefferson last year became the first US lawmaker to have his congressional office raided for evidence. He was indicted on 16 corruption and related counts this June. He denies guilt.
Among the more salacious allegations in the indictment is that Jefferson obtained $100 000 in 2005 from a businessperson in the telecommunications field in order to bribe “Nigerian official A”. Most of the money was found stashed in a freezer during a subsequent raid on Jefferson’s Washington residence.
“Nigerian official A” is clear reference to Atiku Abubakar, Nigeria’s then vice-president. Abubakar, who has been under investigation in Nigeria, has denied complicity.
After Jefferson’s indictment, US prosecutor Chuck Rosenberg was quoted: “The schemes charged are complex, but the essence of this case is simple: Mr Jefferson corruptly traded on his good office … to enrich himself and his family.”
Jefferson allegedly demanded “things of value” — kickbacks — to advance the interests of companies doing business in Africa.
The agreement between Procura and Jefferson’s brother appears to fit that pattern, and is prominent in the indictment. Procura itself is not accused of wrongdoing.
Procura’s remaining member, Petrie du Rand, this week said his company had not known it was dealing with Jefferson the politician: “These were just more guys who [we thought] could help us.” Procura was trying to win settlements in a dispute over oil rights in the deep waters off São Tomé and Principe, the tiny Gulf of Guinea island state.
While the indictment does not identify Procura, calling it only “Company B”, a counter-action by Jefferson has placed the full agreement and Procura’s identity in the public domain. Like Zuma, Jefferson has challenged the legality of raids on his premises.
In the agreement, Procura ceded to a Louisiana company called Pipco and lobbyist James Creaghan 50% of any rights to three Santomean oil blocks that Pipco and the lobbyist could salvage for Procura. The agreement was signed by Mose Jefferson, the congressman’s brother, on behalf of Pipco, by Du Rand on behalf of Procura, and by Creaghan.
Though Mose Jefferson signed, the indictment alleges that congressman Jefferson set up Pipco; that he was behind the agreement; and that in return for Pipco sharing in the proceeds he would have performed “official acts, which included intervening with a high-ranking official in the government of São Tomé and Principe”.
The indictment values the disputed oil rights at $300-million to $500-million (between R2,1-billion and R3,5-billion).
Riches to rags
Ultimately, Procura did not get these oil rights. But how did a virtually unknown South African company get a shot at such massive oil wealth in the first place?
“The guys pawned their stuff to carry the costs to get it all going in the first place. They lost it all,” Du Rand said, referring to his partners.
He said that in the mid-1990s Procura investigated opportunities in the rest of Africa, following a trail from Congo-Brazzaville to Cameroon to São Tomé. In the latter they looked at opportunities related to agriculture and a free trade zone.
São Tomé is in the Gulf of Guinea, where countries like Gabon, Equatorial Guinea and Nigeria have struck huge oil wealth. Another South African, Chris Hellinger, investigated the island nation’s oil potential in the late 1980s, but nothing came of it then. Hellinger, owner of the Chamonix wine farm in Franschhoek, is a big investor there.
In 1997 São Tomé entered the radar screen of the international oil and gas community when a small listed US company, now called ERHC Energy, announced a wide-ranging deal with the Santomean government to develop its oil sector, in exchange for São Tomé ceding a good chunk of its rights to ERHC. In regulatory filings, ERHC named Procura as its partner.
While the deal helped highlight São Tomé’s potential as a major future oil producer it seemed stacked in favour of these two companies, one little known and the other unknown on the international oil scene.
A headline in industry publication Platt’s Oilgram summarised it thus: “The mouse that roared: small company grabs a whole nation’s rights.”
The agreement, signed by Procura, ERHC and the Santomean prime minister, indeed gave extraordinary rights to ERHC and Procura: they would, on behalf of the government, negotiate with oil majors interested in Santomean oil concessions; get a 5% royalty on all production; and operate tax free.
In addition, ERHC and Procura would help set up and own, jointly with the government, São Tomé’s national oil company, which would get the pick of the best concessions.
While some writers have assumed it was Hellinger who had introduced ERHC to São Tomé, the structure of the deal and Procura’s place in it suggests otherwise.
Du Rand said it was Procura that got the ball rolling: while he and his partners were in São Tomé they became aware of the oil potential. They went to the US searching for partners who knew the oil business and chanced on ERHC, whom they introduced to the deal.
But Procura’s lack of brawn counted against it. “We didn’t have the resources and the knowledge then. We went to one of the merchant banks and said we had an oil contract. They laughed at us.”
Du Rand said Procura understood that it was in a 50-50 partnership with ERHC, but the latter started treating it as a minority partner. By 1998, Procura and ERHC were in dispute over their respective shares.
As Procura had no resources to pursue the dispute, it ceded part of its claim to further partners, in return for them pursuing the claim.
But Procura and the new partners threw in the towel in early 2001 when Emeka Offor, a well-connected Nigerian then buying a majority stake in ERHC, offered a settlement of $550 000. Du Rand says Procura saw only $300 000, which went to debt.
When Procura’s partners, by then with Equator Exploration, now a London AIM listed company, paraded potentially very lucrative Santomean oil rights themselves, Procura filed suit against them in the US, claiming they had not acted in good faith. Procura wanted a share.
Du Rand said that when Procura found it difficult to pursue the US litigation, the January 2002 agreement that now forms part of the Jefferson indictment was entered in an attempt to get help winning a settlement.
The agreement was negotiated by others and Procura, he said, did not know who it was ultimately dealing with. US authorities have not contacted Procura as part of the investigation.
ERHC, whose only real assets are what it could retain of its 1997 Santomean rights, now has a market capitalisation of $188-million (R1,3-billion), and Equator Exploration of £74-million (about R1-billion).
Additional reporting by Sam Sole.